Among active managers, value group is on a roll

Active management is still looking good in 2015 after years of misery, though the picture isn’t quite as rosy as it was a few months ago.

The group is outperforming its benchmarks at levels not seen in six years, according to an analysis from Fundstrat Global Advisors that showed things are going particularly well in 2015 for those who focus on value stocks. (Tweet this)

However, the second quarter overall marked a bit of a momentum slowdown as market conditions changed.

It’s been an odd year for the stock market, with investors wary over what the Federal Reserve will do with interest rates now that itsquantitative easing program has been put on hiatus. Major indexes outside of tech have wobbled, with every rally met with a pullback and little conviction in either direction.

“While still better than last four years, fund managers slipped in past two months,” founder and strategist Thomas J. Lee said in a report. “Active managers saw some weakening in performance in the past two months … which we attribute in part to heightened market volatility in the past few months.

“The mixed signals from QE and rising rates, have made indices stall, which in turn, eroded some performance gains. What has been impressive is the fact that global managers still outperformed, even as global indices generally put in stronger performance.”

Read MoreThe strange reason why stocks may soon surge

Overall, 52 percent of large-cap managers are beating their benchmarks (such as the S&P 500 or Russell 1000), 48 percent by at least 0.1 percentage point (see chart).

Bu the performance is especially strong for value managers, or those who focus on stocks they feel are trading substantially below where they should be. That group has shown a 73 percent beat rate this year.

The benchmark-beating trend come as many of those indexes managers used to gauge performance have turned in lackluster performances.

The S&P 500 is up about 1.9 percent year to date and is negative 0.5 percent for June. The small-cap focused Russell 2000 has done substantially better, with a 5 percent gain on the year. The large-capRussell 1000 Value index, however, is up just 0.2 percent while the broader Russell 3000 Value has gained only 0.3 percent.

Investors remain torn over the active vs. passive debate.

Equity-based mutual funds, which are mostly actively managed, have taken in $21.3 billion year to date, though funds focusing on U.S. stocks have surrendered $39.3 billion, according to the Investment Company Institute. Actively managed bond funds have attracted a whopping $49.6 billion.

Money is gushing into mostly passive managed exchange-traded funds, however. The $2.1 trillion industry had attracted a net of $67.5 billion through April, according to the ICI. ( puts the year-to-date net total at $94.4 billion.)

Proponents for active management cite the ability to achieve gains that can’t be realized through simple index tracking, as is the practice for passive managers. The other side believes that underperformance and high fees make active management too difficult.

Read MoreStocks that may break out while market drags

The ability to continue to outperform, then, will go a long way to determining whether the move toward ETFs is a permanent one.

Fundstrat said small-cap managers have outperformed at a 57 percent rate, while 54 percent of global managers have beaten benchmarks. The average value fund is topping its benchmark by 1.19 percentage points.

The best strategy for outperformance has been underweighting financials, which are up 0.9 percent year to date on the S&P 500, and overweighting healthcare, which is up 8.6 percent in the large-cap universe.

Fundstrat’s survey covers 4,096 funds with $7.9 trillion under management.

Four ways Twitter can win back investors

Jack Dorsey


It’s no real surprise that Twitter’s CEO Dick Costolo has resigned.

Twitter’s huge potential still remains just that; potential not captured. It would not surprise investors if the next quarterly results continue with a string of disappointments. The expectation at this point is for lackluster performance.

Read MoreTwitter will have a tough time finding a new CEO: analyst

The interim CEO Jack Dorsey is a placeholder until the right executive can be found that can restore investor confidence. That confidence will only return when there is clarity about how Twitter will leverage its huge user base combined with a clear vision of how Twitter can continue to be relevant. The opportunity is there but Twitter cannot waste time as competitors continue to focus on growing their market share at Twitter¹s expense.

Twitter needs to do four things to re-engage investors and assure the investing public that the hope of Twitter as an investment is not a mirage.

Make changes to encourage repeat use of the platform

Twitter has a huge number of signed-up users that are dormant in terms of usage. Registered users need to be turned into frequent users.

Twitter needs to make the product easier to use with compelling reasons for repeat use. The key is encouraging engagement.

Innovate, innovate, innovate

Twitter has a huge user base with massive usage around the world. It would be easy to make small, safe adjustments in the platform to not alienate active users. However, that would be a mistake.

Read MoreTwitter would be ‘instant fit’ for Google: Sacca

Twitter needs to think with creativity. The announcement this week that the 140-character limit for direct messages has now been increased to 10,000 characters is the type of change that needs to occur. Twitter cannot be cautious. Time to break the mold and innovate.

Inform the public that MAU is not the only success metric

The investing public focuses on a metric that is not necessarily the whole story when it comes to the health of the business. Monthly Active Users (MAU) is one sign of the level of engagement for Twitter users.

Twitter needs to lay out a clear plan on how it plans to capture opportunity from logout users, Define the metrics that paint a more complete picture of the business.

Define a clear strategic plan

Twitter needs a much clearer strategic plan that needs to be communicated to the investing public. There¹s a reason why the stock has fallen below the closing day IPO price. Investors have lost confidence and that confidence needs to be rebuilt. Just a few of the questions that need answers include:

  • What’s the strategy to engage users?
  • How will Twitter compete against Instagram? Against Facebook? Against Snapchat?
  • How will Twitter increase advertising revenue without alienating users?
  • What is the specific plan to increase usability?
  • How will Twitter deal with cyber bullying?
  • How can Twitter become more of a timeline of events rather than one-off bursts of commentary?
  • How will the company measure its success beyond Monthly Active Users?

These and many other questions need to be thoughtfully addressed by management. Ambiguity won’t do; investors are demanding clarity and an operational vision that resonates. Investors are waiting and are quickly losing patience.

Read MoreHere’s Twitter’s biggest problem

Twitter’s user base is the envy of the Internet and they have the opportunity to leverage huge reach into huge revenues. Twitter has a great problem — hundreds of millions of users waiting for the company to give them another reason to be more active in using the product. The change of management is a first step towards resetting the company’s path and restoring investor confidence.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclosure: Michael Yoshikami does not own shares of Twitter and has no other business relationship with the company. But Destination Wealth Management may buy Twitter for clients.

Early movers: TWTR, BOJA, URBN, WSM, GOOG & more

Traders work on the floor of the New York Stock Exchange.


Twitter-Chief Executive Officer Dick Costolo will leave that job on July 1, with chairman Jack Dorsey serving as interim CEO. Both will appear on CNBC’s “Squawk On The Street” at 10:00 a.m. ET.

Bojangles-Bojangles reported adjusted earnings of 17 cents per share in its first report as a public company, coming in 2 cents above estimates. Revenue was slightly above forecasts for the restaurant chain, although its full-year revenue forecast was largely below analyst predictions.

Agios Pharmaceuticals–New data from a clinical trial for an Agios leukemia treatment showed a 40 percent response rate, including complete remission for several participants. Agios also released positive results in studies of two other drugs as well.

Mondelez International–The packaged food company’s stock was upgraded to “outperform” from “market perform” at BMO Capital, saying the company is doing well at navigating a challenging operating environment and outperforming its peers in that regard.

Urban Outfitters–BB&T Capital Markets upgraded the apparel retailer’s shares to “buy” from “hold”, citing a pullback on what it calls “overblown” worries about a slowdown at the company’s Anthropologie unit.

Williams-Sonoma–The housewares retailer’s stock was upgraded to “outperform” from ‘perform” at Oppenheimer, which said the company is well-positioned to capitalize on improving demand trends in the industry.

United Rentals–Hedge fund Jana Partners took a six percent stake in United Rentals, saying it believes shares of the industrial equipment rental company are undervalued.

Dish Network–The satellite TV service company is talking to banks about funding a bid for wireless services provider T-Mobile US, according to reports. The deal being discussed would leave current T-Mobile parent company Deutsche Telekom with a significant minority stake.

Honda–The automaker will restate its financial results for the past year, adding about $360 million in costs related to an expanded recall involving Takata-made airbags.

Google–The search giant was ordered by French regulators to expand its implementation of Europe’s new “right to be forgotten” rules.

Eli Lilly–The drug maker’s shares are on watch following a 10 percent increase so far this week, as investors await new long-term data on an experimental Alzheimer’s treatment. The release of that new information is expected on Monday.

BlackBerry–The smartphone maker may put Google’s Android operating system on one of its upcoming units, according to a Reuters report.

WIngstop–Wingstop will debut today on the Nasdaq under the ticker “WING”, after the chicken wing restaurant’s initial public offering priced at $19 per share. That was above an expected range of $16 to $18, which had been raised from $12 to $14 earlier this week.

LeapFrog Enterprises–LeapFrog reported a fourth quarter loss, with the maker of educational games predicting that growth will resume in fiscal 2017’s holiday quarter. LeapFrog calls this year a “year of rebuilding” as it moves to bring its games to devices made by other companies.

Activision Blizzard, Take-Two Interactive–Activision’s “Call of Duty: Advanced Warfare” and Take-Two’s “Grand Theft Auto V” top the list of digital video game sales for consoles and PCs last month, according to SuperData Research.

Bob Evans Farms–Bob Evans is considering either converting to a real estate investment trust, or selling and then leasing back its restaurant properties. The company will make a final decision within a few months.

Toyota–Toyota is close to unveiling the 4th generation version of its best-selling Prius hybrid car, according to North American CEO Jim Lentz.

India’s push to offer banking for all stumbles on empty accounts

An employee serves customers inside a branch of Gramin Bank of Aryavat (GBA), sponsored by Bank of India, in the village of Khurana, Uttar Pradesh, India.


More than half of a record 160 million accounts opened in India as part of a drive to offer banking to all are still empty, illustrating the massive task ahead for one of the government’s most high-profile campaigns and the strain on banks.

Prime Minister Narendra Modi launched a scheme last August to end “financial untouchability”, an ambitious project to enable tens of millions to have access to a bank. The scheme offers free insurance and even an overdraft facility and aims to eventually help deliver all subsidies and other social benefits to the poor directly.

But while millions signed up – the volume of accounts made a Guinness World Record and Modi hit his target – 53 percent of these accounts have never been used as of June 3, records show.

Activating these accounts will be the biggest test yet for Modi’s banking drive: a push the government hopes will curb the use of cash, limit corruption and rein in the informal economy.

“It’s always been a challenge, particularly in the rural areas where the population is not literate. They are scared actually to go to the bank,” said Ram Sangapure, an executive director at number four state-run lender Punjab National Bank.

Lambodar Mishra, 37, who runs a small grocery shop in the eastern state of Odisha, was one of many villagers the government targeted.

He and his two young sons opened accounts last year but have never gone back to the bank 5 km away from their village.

“Why do I need a bank? Whatever I earn, I put in my business, I buy things to sell in my shop. I don’t earn a lot.”

Many in rural India have been left behind by modernization.

World Bank figures show a majority of people in India live on less than $2 a day. Low rates of literacy have also deepened suspicion of paperwork and plastic and popularized cash.

Read MoreIndian billionaire worries about disruptive technology

Industry experts say payment mechanisms could be improved while the government could provide more subsidies directly – a process which could take several years to complete – to encourage the use of bank accounts.

Banking on it

State-run banks dominate India’s banking landscape and have driven the government’s inclusion campaign. But they are struggling with bad debt and slow lending growth, and getting Indians to use the new accounts will make the difference between a long-term cost and a long-term opportunity.

“These accounts which today we think are a liability and an expense to the bank, maybe down the line, in a year or so, these accounts will start yielding some returns,” Sangapure said.

Bankers and industry experts estimate the cost of opening and maintaining a bank account at between 200 and 250 rupees ($3-$4), which means the annual cost of the empty accounts for Indian banks could add up to some 21 billion rupees ($328.3 million).

That is excluding the lost opportunity had cash been in the account – deposits are a key source of funding for Indian banks, which pay roughly 4 percent interest on savings but lend that money at rates of 10 percent and higher.

The financial inclusion campaign has seen progress. Fallow accounts made up 77 percent of the total last September, a month after Modi launched the scheme. That has dropped to just over half.

Read MoreEl Niño cloud hangs over Asian stimulus

But some say banks sorely need more direct transfer of subsidies, as well as banking products catering for the needs of the urban and rural poor, to get more people to use their accounts.

“With the full scale launch of direct benefit transfer to these accounts, we understand the usage of account would improve substantially,” said Vikaas Goel, who works on financial inclusion at remittance provider FINO PayTech.

Indian federal and provincial governments subsidize a variety of commodities and services at an annual cost of nearly $59 billion, or about 3 percent of the nation’s GDP.

Subsidies that started flowing into the accounts this year have helped lower the number of fallow accounts. The government plans to transfer all subsidies including food, fertilizer and kerosene, potentially taking direct payments to more than $60 billion.

In comparison, money in active accounts run under the scheme totaled about $2.8 billion as of June 3.

Axovant, biggest biotech IPO: Is biotech in a bubble?

Traders work on the floor of the New York Stock Exchange.


Biggest biotech IPO ever. Biotech firm Axovant priced 21 million shares at $15 on the NYSE, the high end of the price talk of $13-$15. That’s $315 million, which makes it the largest biotech IPO ever based on the amount raised, according to Renaissance Capital.

But that’s only part of the story. Those 21 million shares are only a fraction of the 100 million shares the company has. So the market capitalization of the company at the open was $1.5 billion ($100 million x $15 a share).

The stock closed at $29.90, up almost 100 percent. So we are now dealing with a market capitalization approaching $3 billion.

Here’s what’s remarkable: The company has only one product, a dementia drug for treating Alzheimer’s.

This drug is entering Phase 3 trials.

The CEO, Vivek Ramaswamy, bought this drug from Glaxo for $5 million (Glaxo will get contingent payments if the drug gets approved).

This is rather remarkable. Ramaswamy buys a drug Glaxo passes on for $5 million, turns around and raised $315 million in an IPO, and now has a company that is worth almost $3 billion.

Does this amaze you? It amazes me. Either 1) Ramaswamy has made one of the great investments of all time and Glaxo has made a serious error passing on the drug, or 2) the company is overvalued. Very.

Part of this, of course, is due to the nature of the investment: 1) biotech is a hot space, and 2) there is a serious paucity of effective treatment modalities for Alzheimer’s.

It raises another question: Is biotech developing into a bubble?

Let’s try to narrow the definition. How about looking for really big first-day pops in biotech IPOs. That’s a sign of investment mania.

This was one of the tells in the implosion. In 1999-2000, average first-day pops were roughly 50 percent to 70 percent, according to Renaissance. So investors didn’t do much research; they just went in on every deal because everyone believed in that immediate pop.

Are we seeing this in biotech? Over the last year, there have been 61 biotech IPOs; the first-day pop for the larger deals (over $100 million) has been 38 percent. That’s a lot given how conservative the IPO market has been.

Here are a few first-day pops for biotechs in the last year:
Aduro Biotech up 147 percent
Sparks Therapeutics up 117 percent
Axovant up 99 percent
Avalanche Biotech up 64 percent
Tokai Pharmaceuticals up 58 percent

So, are we in a biotech bubble? There are a few that have had big pops, but most are larger companies. If you compare the entire universe of biotech IPOs (all 61), the average first-day pop has been only 10.2 percent. That’s about in line with the average first-day pop of the entire IPO universe: 12.5 percent.

Bottom line: There are a few signs of a bubble on the larger biotechs. Why? One possible reason is that investors have a hard time judging the science, and many are likely using size as a factor. Stay tuned.

Here is Twitter’s biggest problem



Twitter’s future is a subject of hot debate at the moment. Wall Street is disenchanted and, as a public entity, the company is going through a painful adolescence. It has its supporters, and it has its harsh critics. One who is both, Chris Sacca, a very early Twitter investor and advisor (who self-admittedly “bleeds aqua”), recently published an 8,500 word dissertation entitled “What Twitter Can Be,” where he outlines a detailed proscription for the company’s most immediate ills.

Most concerning for Twitter is the stalled growth in new users, and even more so, the nearly one billion users who have joined and never come back. Sacca notes that, for most people, Twitter is too hard to use, Tweeting is scary, and Twitter feels lonely.

I think Twitter’s woes can be summed up in one word: community… or, more specifically, the lack thereof.

Getty Images
Counter-intuitive, isn’t it? One could argue reasonably that Twitter is the largest, most dynamic, most connected community on the planet. But is it really? I don’t personally experience a strong sense of community when I’m on Twitter. I feel more a part of something when engaged, for example, in the comments section of a favorite blog. I know this is also true for many others who do not measure their followers in the tens or hundreds of thousands.

Read MoreTwitter would be ‘instant fit’ for Google: Sacca

So, why is it that, with its hundreds of millions of monthly active users, all connected by the same network where anyone can talk to anyone, Twitter struggles to generate any real sense of community?

First, Twitter is fundamentally unidirectional. Everything flows downhill, passing from user to followers, in a cascade of information much more resembling a bullhorn than a conversation. What flows uphill from followers to “followees” is considerably less visible. Even Twitter’s language reinforces this. We are “followers.” Following by its very nature creates hierarchy, not community. Communities are built from people who have some common interest — people who might live in the same town, work in the same industry, or share an interest.

Twitter is fundamentally people-centric, and this does not facilitate the development of communities. For the truly dedicated, we try to find community through the use of hashtags and awkward search mechanisms that are not well designed to help us follow our interests efficiently. Twitter forces us to follow people to get to the topics we’re really interested in, when instead we’d much rather follow topics to find the people we’re interested in.

Read MoreCramer: Sacca Twitter note ‘misinterpreted’

Another problem is the fundamental nature of the timeline, which remains Twitter’s dominant discovery and navigation mechanism. Timelines are incredibly inefficient discovery vehicles. As any kind of “tour guide” for finding the content we are really interested in, they are downright miserable. They are filled with noise, and the Tweets that come across them are fleeting, so, we spend most of our time with content we don’t care about, and stand a good chance of missing much of the content we do. It’s true that real-time notifications of relevant news can be useful to any community; however, the vast majority of what communities are interested in does NOT necessarily happen within the last hour. Even if it did, the pressure would be far too great to keep pace with the ever-flowing stream just to be able to participate.

Communities tend to be filled with discussion of their common interest. They want to share opinions and views; they want to learn more, get under the covers and into the details. This cannot happen through a timeline. While Twitter offers other mechanisms, like collections, these mechanisms are awkward, buried and far from central to the core Twitter experience.

Thinking back to the one billion lost Twitter users, it’s easy to see how Sacca is right. For new or casual users, Twitter is difficult, intimidating and lonely. If, upon their arrival, those users had been immediately connected with other users who shared one or more of their interests, things would have been markedly different. When we come into community with others, we tend to stand on the sidelines for a while and just watch. Once we’ve gotten comfortable with the vibe of the community, then we might send or reply to a tweet to see what happens. If we get any feedback from other members, then we’re encouraged to participate more. But if we get dead air, we are discouraged and disconnected. Even more so if we can’t find the community in the first place.

If it hopes to return itself to strong new user growth, and re-attract those one billion lost users, Twitter needs to create much more of a community vibe. First, Twitter should organize itself around topics. This does not have to replace the people-following model, it just provides a different lens. Twitter has started to do this with its new logged-out home screen, but it’s far too light and the topics are too broad. Twitter can’t be the chooser of the topics — Twitter users must be. A better approach conceptually is the recently launched Twitter-curator, but so far this is only for very advanced users (specifically media companies).

Read MoreTwitter shows money men are grabbing more power

Second, Twitter needs to enable a community to draw a circle around itself. A community needs to be able to define and identify itself; it needs its own “space.” Its members need to be able to share and discuss issues among themselves as a community, as peers rather than as an oligarchy. Members need to decide what is important to be shared and discussed, not Twitter.

Lastly, Twitter needs to introduce a much better model for curation. Not just Twitter’s own algorithmic curation, but also curation by community members. Curation is a form of engagement that can have tremendous value for a community. Curation can be a simple up/down voting to rate Tweets and other content, or it can be something more involved, like creating a story from an assembly of tweets using a tool like Storify. Again, Twitter’s current “collections” provide some of this ability, but without the other community-enabling elements it does not have nearly the value or impact it should.

There are good models for the kind of community facilitation that could make a big impact on Twitter. One of the best is Reddit. While Reddit may intimidate many novice users for its own reasons, it has the community thing nailed. With Reddit, communities self-identify and self-organize around subreddits. Communities have moderators, but they are chosen by the community and more importantly it is the community members not the moderators that make the contributions, curate and decide what gets visibility. A new user has little problem quickly surfacing one or more subreddits that interest them, where they can stand on the sidelines to watch for a while. In fact, a new user’s entry point to Reddit is quite often a subreddit. If Twitter’s entry point for new users were a subreddit-like community of other users in active dialog about some common interest, many more of those users would likely stick around.

As Mr. Sacca aptly puts it, “Twitter can afford to build the wrong things. However, Twitter cannot afford to build the right things too slowly.” One of those things Twitter cannot afford to get wrong is community.

Commentary by Stephen Bradley, founder and CEO of AuthorBee,a social media aggregation platform. He has been involved in digital media since he ran research at Gartner and was later involved in the early growth of Pandora and Skillsoft. Follow him on Twitter@AuthorBee.

Blackstone Africa unit makes big Nigeria hire



Lamido Sanusi, former governor of Nigeria's central bank.

Blackstone Group has strengthened its ties to Nigeria, the West African country where it could put big money to work.

The private equity giant announced Thursday that its Black Rhino unit had appointed Lamido Sanusi as chairman of its board of directors. Sanusi is emir of Nigeria’s northern Kano state, a traditional leader who still wields considerable influence, and the former governor of the country’s central bank.

The appointment comes after $310 billion Blackstone announced in August 2014 that it had partnered with Dangote Industries—led by Nigerian billionaire Aliko Dangote—to invest jointly up to $5 billion over the next five years in energy infrastructure projects across Sub-Saharan Africa, part of President Barack Obama’s Power Africa initiative to match private capital with continental energy needs.

No projects for the joint venture have been announced, but Blackstoneis considering an investment alongside Dangote to construct pipelines to bring gas from the country’s energy-rich southern delta region to its business center, Lagos, according to a person familiar with the situation and comments previously made by Dangote. Dangote said he plans to invest up to $2.5 billion in the pipes, which would potentially quadruple the supply of gas to the country.

Some of the most powerful men in Nigeria now hail from the country’s mostly Muslim northern states. Sanusi remains the traditional leader of Kano, also the birthplace of Dangote. (The wealthiest man in Africa, Dangote made a pilgrimage to pay his respects to Sanusi when he became emir in 2014.) New President Muhammadu Buhari hails from Katsina, a nearby northern city.

“Emir Sanusi has a comprehensive mastery of the interdependence of Africa with the global economy,” Mimi Alemayehou, chair of Blackstone African Infrastructure and managing director at Black Rhino, said in a statement. “He has the courage and integrity necessary to give us the full, candid and impartial counsel that a long-term investor in Africa needs. We are gratified and, indeed, privileged to have a partner of such immense stature alongside us as we chart our course.”

Black Rhino’s only announced project so far is a $1.4 billion oil pipeline from sea ports in Djibouti to Ethiopia, a landlocked country that now relies on trucks to bring in fuel.

‘Green’ Google in talks to back massive African wind project

Construction site for the Lake Turkana Wind Power project in Kenya, 2015.

Source: Lake Turkana Wind Power
Construction site for the Lake Turkana Wind Power project in Kenya, 2015.
Google gets lots of attention for expanding into novel technologies like driverless cars and artificial intelligence. But the technology giant also has put big bucks—more than $2 billion to date—into the next generation of energy production.

Now, the company is in discussions to back the largest wind power project in Africa, a fast-growing but power-starved continent, according to people familiar with the situation.

Google is negotiating to become an investor in the Lake Turkana Wind Power Project, a more than $700 million, 40,000 acre undertaking in Kenya. It’s the largest private investment in the history of the East African country—where less than a quarter of the population has access to power—and the project’s 310 megawatt capacity is expected to boost Kenya’s installed energy capacity by 20 percent.

The deal is not finalized, according to the people, and, even if completed, Google’s would be a minority stake.

A spokesman for Google declined to comment, and Turkana representative Rizwan Fazal said, “Google is not involved in LTWP at present and LTWP has no agreement or understanding of any nature with Google.”

Most of Google’s renewable energy investments have been domestic, largely in wind and solar farms in places like West Texas and California’s Mojave Desert. But the environmentally conscious company is increasingly looking outside the U.S.

In 2013, Google invested $12 million in South Africa’s Jasper Power Project, one of the largest solar installations on the continent.

Read MoreThree big takeaways from Google’s I/O conference

Google’s director of energy and sustainability, Rick Needham, has said publicly the company only pursues investments that both make financial sense and that have “transformative” potential for the growth of clean energy.

“We’re investing in clean energy so it’s more accessible for our company and for everyone,” Google’s “Green” website states. “We’re helping create a clean energy future that’s better for our business and the environment.”

While Google’s green investments are for profit, its philanthropic arm has supported SolarAid, which is working to build solar access for so-called off-grid African communities.

The positives of small-scale solar aren’t lost on other investors,including Zouk Capital and Vulcan Capital (which backed Tanzania-based Off Grid Electric); LGT Venture Philanthropy (which backed Kenya-based M-KOPA Solar); and CrossBoundary Energy (which recently raised an investment fund to finance rooftop solar power for African businesses, both on and off the electrical grid).

Google is hardly new to sub-Saharan Africa. The tech company has offices in Nairobi, Kenya; Accra, Ghana; Lagos, Nigeria; Dakar, Senegal; Johannesburg; and Kampala, Uganda.

While the company’s investment would likely be relatively small—perhaps in the tens of millions of dollars, according to the people with knowledge of the talks—it would have broader implications.

One is that Google’s involvement could encourage others to follow.

Sophisticated investors are increasingly looking to build power and energy infrastructure on the continent, including private equity firmsBlackstone Group, Carlyle Group and Denham Capital. But there have been few so-called exits, when investors in a project cash out by selling their stake to another party.

Since Turkana has already raised all the money it needs, a Google investment—if it plays out—would be a boost of confidence for other investors to know there are buyers once a project is relatively developed.

“As assets mature you will begin to see developers and private equity firms looking to exit transactions to parties looking for steady annuity income,” Kwame Parker, head of power and infrastructure for East Africa at South Africa’s Standard Bank, said in an email about Google potentially purchasing an existing stake in the wind project.

“Given Google’s global profile and the profile of Lake Turkana Wind Farm, a Google investment would be a significant vote of confidence for investors considering African power market entry,” added Parker, who helped arrange financing for Turkana (he declined to comment on Google’s plans specifically).

Read MoreTesla batteries: A game changer for the grid

Turkana locked in the money it needed in 2014 with a so-called financial close after years of planning. The money raised for the project is broken down into equity stakes, which have higher risk but also higher rewards, and debt, which carries less risk for the lenders. The majority of the equity is held by co-developers KP&P Africa, a group of Dutch and Kenyan businessmen, and power project specialist Aldwych International, which is majority owned by South Africa-based private equity firm Harith.

Other financial backers include the governments of Denmark, Finland and Norway, and Vestas, the Danish wind company making the project’s 365 turbines. The African Development Bank and the European Investment Bank also provided debt and other support.

Construction site for the Lake Turkana Wind Power project in Kenya, 2015.

Source: Lake Turkana Wind Power

If successful, Turkana also will be a symbol for making renewable energy work for Africa, which is estimated to have the combined installed power generation base of Spain.

“Turkana is a significant opportunity to demonstrate wind at utility scale,” Jonathan Berman, CEO of investment and advisory firm J.E. Berman Associates and author of “Success in Africa,” said in an email. “If they deliver on time it could prove very attractive for political leaders worldwide who need to rapidly address energy shortfalls.”

Bringing in the U.S. government

Another big implication of the Google investment is that it would likely unlock an investment guarantee of up to $250 million from the Overseas Private Investment Corporation—the U.S. government’s development finance institution.

OPIC’s board announced in June 2014 that it had approved the financing for the project as part of President Barack Obama’s Power Africa initiative, which is working to bring in private investors to produce 10,000 megawatts of new energy for the more than 600 million sub-Saharan Africans without power.

A spokesman for OPIC declined to comment, but Turkana, like all other OPIC deals, would require “meaningful involvement of the U.S. private sector,” according to its publicly stated mandate. In this case the catalyst would appear to be Google as no other American companies are presently involved.

Not always easy

Turkana was twice named Africa’s best renewable energy deal for 2014, but its success wasn’t always obvious.

The project was first thought of in 2006 after a local businessman noticed strong area winds. It wasn’t until 2014 that construction began after years of negotiations with the government, developers and financial backers.

The location is also remote, requiring a new major road for construction materials to be trucked in, and 250 miles worth transmission lines to take the power out. Both are in progress. The lakeside site was also studied intensely, according to project developers, to consider environmental and social impacts—including a 12-month study to understand the effects on local birds— in addition to making sure the technology would work.

Kenya has also suffered some political instability over the life of the project, especially violence that followed contested a presidential election in late 2007 (terror attacks in 2013 and earlier this year have also been of international concern).

Turkana is scheduled to begin commercial operations in October 2016 with 50 megawatts and hit full 310 megawatt capacity seven months later, according to Fazal.

Early movers: GE, GOOG, AMZN, NKE, M, HOG, JBLU & more

Trader on the floor of the New York Stock Exchange.


General Electric–European antitrust regulators are set to say that GE’s deal to buy the energy unit of France’s Alstom could harm competition, according to Reuters. The report said that declaration is likely to come tomorrow.

Google–Google announced a new “urban innovation” company called Sidewalk Labs, to be headed by former New York City Deputy Mayor Dan Doctoroff.–The European Commission has opened a formal probe into the company’s e-book business, focusing on agreements between Amazon and publishers. Regulators are focusing on clauses that require them to offer Amazon terms that are at least as good as those offered to competitors.

Lululemon–Founder Chip Wilson and his family have filed to sell their entire 20.1 million share stake in the yoga wear maker. Those shares have not actually been sold as yet—a Wilson spokesperson issued a statement saying the filing merely gives the family the option to sell as circumstances dictate, just like any other shareholder.

Hilton–Brean initiated coverage on the hotel chain’s stock with a “buy” rating, saying Hilton should deliver healthy earnings growth in the years ahead.

FedEx–Citi added FedEx shares back to its “Focus” list, pointing to the benefits of FedEx’s accelerated aircraft retirement plan.

Harley-Davidson–Wedbush downgraded the motorcycle maker’s shares to “neutral” from “outperform,” citing an “underwhelming” acceleration in demand.

Nike—The athletic apparel and footwear maker signed an 8-year NBA sponsorship contract, starting in 2017. Terms were not disclosed.

Amgen–The biotech company got a positive recommendation from an FDA panel for its cholesterol drug Repatha. The panel said the treatment should be approved for patients with dangerously high cholesterol levels, although it also said long-term studies are still needed.

Delta Air Lines–Delta pilots union leaders approved the terms of a new tentative labor agreement, clearing the way for a vote by union members.

Shopify, Facebook–The e-commerce company and Facebook are expanding a beta test of Facebook’s new “buy” button, which allows consumers to buy goods without leaving Facebook.

EBay–EBay and its soon-to-split PayPal unit are being questioned by New York Attorney General Eric Schneiderman’s office, according to the New York Times. The paper said revised user policies—which allow contact with users by phone—raise issues under current consumer protection laws.

Men’s Wearhouse–Men’s Wearhouse reported adjusted quarterly profit of 54 cents per share, beating estimates by 2 cents, with revenue also above forecasts. The clothing retailer also signed a deal with Macy’s to operate tuxedo rental stores.

Krispy Kreme–Krispy Kreme beat estimates by 2 cents with adjusted quarterly profit of 24 cents per share, though revenue fell slightly short. Comparable store sales for the doughnut chain were up 5.2 percent during the quarter, amid improving profit margins.

JetBlue–The airline reported its “load factor” for May at 85.7 percent, an improvement of 0.5 percent from a year earlier.

Box–Box lost an adjusted 28 cents per share for its most recent quarter, 3 cents smaller than analysts were anticipating, and revenue was above expectations. The cloud storage provider also raised its forecasts for the full year on an increase in subscriptions.

Correction: This story has been updated to reflect that Chip Wilson and his family have not yet sold their Lululemon stock.

RBS share sale: What could put off investors?



The U.K. government is planning to put its Royal Bank of Scotlandshares on the block over the next few years – but may not be knocked over by a stampede of investors desperate for the stock.

There are still concerns that the bank has not reached the end of the shrinking and write-offs which have been a key feature of its post-credit crisis years – or proven that it will resume dividends.

George Osborne ready to sell off RBS at a loss
“The dividends are very much a 2017, 2018, 2019 story and that makes it tricky to sell off now,” Michael Browne, a fund manager at Martin Currie who said he would not buy RBS shares today, told CNBC.

And the lack of dividends is not the only cause for concern.

More than 300 institutional investors, and more than 12,000 small retail investors, are suing RBS over its 2008 rights issue, an extremely complicated legal procedure which is not expected to go to trial until December 2016. The claimants, who include many of the top 20 private investors in the bank, argue that the earlier rights issue misled them over RBS’s capital position and exposure to sub-prime mortgages, among other issues. RBS is disputing the claim.

“These guys don’t join these actions unless they think they have a credible case,” Ian Fraser, author of “Shredded: Inside RBS, The Bank That Broke Britain,” told CNBC.

Given that big institutions like Legal & General are currently suing the bank over its last rights issue, it may be difficult to convince them to buy in new shares.

RBS shares slip after first-quarter net loss
RBS is also facing lawsuits from the Federal Housing Finance Agency (FHFA) over the agencies ‘ loss on mortgage-backed securities sold to Fannie Mae and Freddie Mac.

Plus, RBS is in danger of being sued by nearly 300 small- and medium-sized U.K. business over allegations that its now-defunct Global Restructuring Group tried to make profits from their financial problems.

The specter of the Royal Mail privatization last year – which featured an apparently substantial underestimation of the share price, resulting in the government getting less for its stake than the subsequent market valuation – hangs over the RBS sale, too.

BoE’s Carney calls for new penalties for market abuse
Yet the government has a number of important reasons for getting RBS off its hands, even at a loss.

“Capital in RBS is going to be much stronger when they get through the restructuring. When they get there, they’ll have the ability to start paying dividends and doing all the things that normal banks do, and that should be a reason to buy the government shares,” Sandy Chen, banks analyst at Cenkos, who has a buy rating on RBS, told CNBC.

Selling off RBS also means that it will be away from governmental control before the 2020 election.

And don’t forget that RBS is a big play on the health of the U.K. economy, which may not be quite as ship-shape in a few years.

“Almost certainly, between now and 2020, we will have a recession – and it’s hard to sell bank shares in a recession, so why not do that beforehand?” Browne pointed out.