Daily market update: FTSE left behind, OpenAI, GSK, LBG

The wind keeps changing direction on the Iran war, meaning investor sentiment is running hot and cold depending on the rhetoric. 

The Brent crude oil price has become a proxy for whether markets think the Middle East conflict will soon be resolved or not, and today’s 1% drop to $93.32 per barrel would suggest renewed optimism.

Markets have bounced back after a major sell-off last Friday on Wall Street, although the FTSE 100 is a laggard thanks to being dragged down by BP and Shell amid a lower oil price, and by investors trimming positions in the pharma space.

Space-themed investor Seraphim has rocketed by 18% after its biggest holding, ICEYE, said it would raise new money that should lead to a chunky valuation uplift for the investment trust. This comes off the back of a stellar run for Seraphim’s share price, which more than doubled between March and May.

Barclays’ latest card spending report showed that consumer confidence is picking up, albeit households recognise the risks of higher costs linked to the Middle East conflict.

Entertainment spending is on the rise as the cinema draws people in, but spending has fallen in travel. That’s likely to be individuals in ‘wait and see’ mode on events in the Middle East before committing to their summer holiday. Concerns around fuel shortages have prompted people to be more cautious about booking too far in advance, and that is backed up by remarks from airlines and holiday sellers in recent weeks about last-minute booking trends.

OpenAI

Having been beaten to the stock market starting line by Claude-owner Anthropic, the company which lit the touch paper on the whole AI theme with the launch of ChatGPT has filed for its own listing.

OpenAI’s plans for a 2026 IPO were one of the worst kept secrets on Wall Street, but it is still a significant moment to see the business formally start the process of becoming a public company.

Reportedly seeking a valuation upwards of $1 trillion, the listing looks set to provide a useful barometer of market sentiment. It will also test investors’ willingness to back businesses like OpenAI which are chalking up huge losses as they invest heavily in data centres and other infrastructure. When the prospectus is published, expect scrutiny to be applied to the details of OpenAI’s financial position.

A recent wobble in AI-related stocks offered a reminder there’s no guarantee that appetite for all things artificial intelligence will be as strong when OpenAI goes public – which is likely to be in the autumn – as it is today.

The path to joining the market was helped by the decision of a California court to throw out a case brought against the company by Elon Musk, in which it had been argued OpenAI had betrayed its original not-for-profit mission. But that might not be the last hurdle for the company to clear as it looks to make a successful market debut.

GSK

New GSK chief executive Luke Miels isn’t hanging around as he puts his mark on the business. Less than six months into his tenure he has committed to the company’s largest acquisition in more than a decade.

The takeover of US cancer specialist Nuvalent fits with the group’s strategy of focusing on oncology as a key engine of growth for the business. It could also help support an ambitious target of achieving £40 billion in revenue by 2031.

The initial share price response indicates some trepidation among investors which is understandable given the size of the takeover. GSK is paying a hefty premium to get the deal over the line and the two big lung cancer products flagged by Miels in heralding the takeover still await regulatory approval. Any acquisition of this size will always face challenges around integration.

With GSK having fallen behind its UK counterpart AstraZeneca in share price terms in recent years, Miels clearly felt a slow and steady approach wasn’t going to get the job done. In rolling the dice on such a big transaction, he is undoubtedly taking a risk.

LBG Media (Ladbible)

Shifts in the media landscape have led Ladbible-owner LBG to issue a profit warning. It has revenue-sharing agreements with social media platforms that display adverts near its content and owned websites.

Unfortunately for LBG, this part of its business is declining at a worse than expected rate as third parties shift away from websites and focus more on social platforms and video content.

Changes to Facebook’s algorithm are also causing problems for LBG as it means the publisher is scrambling to make tweaks to its system so that its content is still getting millions of eyeballs. This goes to show that content creation is not always an easy ticket to riches.

LBG is down but not out. Its core business of creating content for brands and media agencies to reach young adults is doing well. The challenge now is to convince the market that the problem areas of its business can be managed, and that the core growth engine is still purring away.