Latest / What the Flux / KPMG's audit scandal | Universal Music rejects a mega offer | The Astronaut Wears Prada

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KPMG's audit scandal | Universal Music rejects a mega offer | The Astronaut Wears Prada · What the Flux

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  Speaker 1: This is what the flux. I'm Brett and I'm Justin
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  Speaker 1: and it's Wednesday, the tenth of June. Josey Boy turns
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  Speaker 1: out money can buy happiness. According to new data from
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  Speaker 1: the Australian Bureau of Statistics, the Australians were actually happier
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  Speaker 1: during the pandemic lockdowns when they were under less financial
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  Speaker 1: stress and fewer cost of living pressures. Life satisfaction was
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  Speaker 1: at seven point two out of ten in twenty twenty.
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  Speaker 1: Now it's down slightly to seven point one. Ah the
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  Speaker 1: good old days. Fox An the ASEX two hundred claim
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  Speaker 1: just under one percent in May, and there were a
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  Speaker 1: few companies in a particular industry that outperformed the rest.
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  Speaker 1: In the Flux app, our latest article breaks down the
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  Speaker 1: top four of the best performing ASEX two hundred stocks
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  Speaker 1: in May this year. So if you want to learn
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  Speaker 1: which companies and which industry outperform the rest, make sure
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  Speaker 1: to download the Flux app and check it out. Three
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  Speaker 1: delightful stories today, Juzzy Boy, let's do it for our first.
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  Speaker 1: KPMG's global bosses have frozen partner exits at KPg Australia
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  Speaker 1: to stop an exodus blowing up the entire audited season.
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  Speaker 1: This is getting real ugly, b man, so tell me
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  Speaker 1: more so. KPMG is one of the big four global
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  Speaker 1: professional services firms, you know, the elite club that udits
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  Speaker 1: the majority of the world's largest companies. In fact, the
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  Speaker 1: big four KPMG, Deloitte, UY and PwC generated over ninety
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  Speaker 1: nine percent of the audit fees for the ASX two hundred,
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  Speaker 1: So they've basically become the gate keepers of corporate truth. Now,
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  Speaker 1: Josey boy, let's wind back to May twenty twenty four,
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  Speaker 1: when a former KPMG audit director at dropped a pretty
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  Speaker 1: explosive allegation. Yeah, they alleged KPMG partners had misused confidential
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  Speaker 1: board papers from their audited client, lend Lease. The partners
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  Speaker 1: allegedly used the lend Lease audit info to pitch for
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  Speaker 1: audit contracts at Westpac and Dexas, and also allegedly using
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  Speaker 1: inside info to get other work at mcquori Group. Now,
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  Speaker 1: after this complaint was made by the employee, KPMG Australia
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  Speaker 1: allegedly sat on that complaint for two years. When the
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  Speaker 1: whistleblower escalated KPMG International, they were told the international body
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  Speaker 1: had no power to force action, so the whistleblower went
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  Speaker 1: elsewhere Asseic Chadocountant, Australian News learned and politician and suddenly
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  Speaker 1: the allegations were taken very seriously. Yeah, so far KPMG
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  Speaker 1: Australia CEO as well as the head of audit has
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  Speaker 1: left the firm, with more expected to leave soon and
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  Speaker 1: Judzy Boy. To stem the exodus, KPMG has frozen partner
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  Speaker 1: exits ahead of the June thirty audit season deadline. Because
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  Speaker 1: nothing says everything is fine, quite like locking the doors.
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  Speaker 1: What's the key learning here. What happens in the audit
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  Speaker 1: stays in the audit, Well, at least that's what's supposed
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  Speaker 1: to happen. You see. Be Man. Performing an audit gives
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  Speaker 1: the auditing firm extraordinary access to its client startup, We're
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  Speaker 1: talking board papers, financial forecast, strategic plans, management relationships and
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  Speaker 1: a man that access is supposed to be kept behind
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  Speaker 1: some very serious information barriers. The Judge Boy in this case,
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  Speaker 1: it's alleged that this info has not been kept secret.
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  Speaker 1: You see be Man. The Big Four are also massive
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  Speaker 1: advisory businesses. There's consulting, there's tax, there's deals. There's restructuring.
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  Speaker 1: Audit is now just one division in a giant professional
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  Speaker 1: services machine. In fact, KPMG's global advisory and tax revenue
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  Speaker 1: now is significantly bigger than its audit revenue. YAP audit
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  Speaker 1: revenue now makes up only thirty five percent of global revenue,
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  Speaker 1: so the incentive financially to use audit access for sales
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  Speaker 1: and business development in other growing areas of the firm
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  Speaker 1: it's pretty big, So it'll be interesting to see how
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  Speaker 1: bad this scandal actually hurts KPMG Australia. For our second story,
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  Speaker 1: Universal Music is sounding out a one billion euro bond
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  Speaker 1: sale after one of its major backers sold a steak
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  Speaker 1: in the company toys out of the cot there the man,
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  Speaker 1: So tell me what's going on, well, johnsy Boy. Universal
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  Speaker 1: Music doesn't need much of an intro. It's the biggest
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  Speaker 1: music company in the world, operating in sixty countries, and
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  Speaker 1: it owns a bunch of major labels that are tied
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  Speaker 1: to huge musicians like Taylor Swift, Billie Eilish, Kendrick Lamar,
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  Speaker 1: Post Malone, Your Faith a very big chunk of the industry,
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  Speaker 1: and Universal has a market cap of around thirty three
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  Speaker 1: billion euros on the Amsterdam Stock Exchange, and in twenty
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  Speaker 1: twenty one, a hedge fund, Pershing Square Capital Management, bought
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  Speaker 1: a ten percent stake in Universal. In April this year,
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  Speaker 1: the firm tried to buy the remainder of Universal in
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  Speaker 1: a deal that would have valued the company at roughly
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  Speaker 1: fifty six billion euros, but Universal said no, thank you,
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  Speaker 1: we are worth more than that. So Pershing Square Capital
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  Speaker 1: Management slammed the door on the recording studio and sold
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  Speaker 1: its portion after the takeover offer was rejected. And just wait,
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  Speaker 1: with this acquisition not taking place, Universal is going to
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  Speaker 1: its remaining investor base to refinance a one billion euro
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  Speaker 1: bond sale. Interesting, So what is the key learning here?
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  Speaker 1: A bond sale is when a company or a government
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  Speaker 1: borrows money from investors, promising to pay it back with
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  Speaker 1: interest over a set period of time. So essentially Universal
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  Speaker 1: is trying to swap their expensive short term debt for
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  Speaker 1: longer term, more stable debt. And the timing here is
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  Speaker 1: very interesting. How so, well, this refinancing is coming off
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  Speaker 1: the back of a pretty bold rejection of that takeover bit. Yeah,
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  Speaker 1: so this bond refinance is Universal trying to signal confidence
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  Speaker 1: to the market. We don't need your money or your valuation,
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  Speaker 1: we can fund ourselves and be man Well. A one
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  Speaker 1: billion eurobond sale sounds big, it's nothing compared to more
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  Speaker 1: recent corporate borrowings. Brees Well, Amazon did a fifty four
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  Speaker 1: billion US dollar bond sale. Meta recently did a twenty
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  Speaker 1: five billion US dollar bond sale to fund its AI
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  Speaker 1: expansion as well. And the good news for Universal is
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  Speaker 1: that investors don't seem rattled by this drama. No, it
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  Speaker 1: shares a steady on all of this news. For our
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  Speaker 1: third and final story, Parata is heading to the moon
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  Speaker 1: by designing garments for NASA astronauts to wear for their
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  Speaker 1: next big moon landing. The astronaut wears Prata b Man
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  Speaker 1: sounds like a pretty good third movie, so tell me what. So.
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  Speaker 1: Prata is the luxury fashion powerhouse that opened its first
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  Speaker 1: door in nineteen thirteen and has become pretty iconic in
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  Speaker 1: fashion and pop culture. It operates in more than seventy countries,
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  Speaker 1: with over eight hundred stores and nearly six billion euros
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  Speaker 1: in revenue last financial year. But like all luxury brands,
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  Speaker 1: it's been battling to appeal to younger, affluent shoppers in
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  Speaker 1: recent years. So now PRATA is finding an unexpected way
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  Speaker 1: to reach its audience of shoppers. Prata is officially designing
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  Speaker 1: a garment for NASA astronauts heading to the Moon. It's
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  Speaker 1: their body hugging suit with a space infrastructure developer called
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  Speaker 1: Axiom Space. We're talking ventilation tubes that are knitted into
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  Speaker 1: the garment. And then, man, it's not Prata's first space
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  Speaker 1: project either. They ready dropped the space suit that'll be
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  Speaker 1: worn for NASA's at twenty twenty eight Artamus four moonlanding.
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  Speaker 1: And for a brand trying to stay culturally relevant, there's
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  Speaker 1: more to it than making astronauts look chic. Yep, So
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  Speaker 1: what is the key learning here? Sometimes cultural relevance comes
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  Speaker 1: from unexpected places, and for luxury labels, the best bet
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  Speaker 1: might just be in space. Man, as the space exploration
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  Speaker 1: and tourism industries developed, Prada wants to be the name
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  Speaker 1: on every space explorer's lips. Just think of how much
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  Speaker 1: space has dominated headlines recently. Yeah, NASA's Artemis live stream
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  Speaker 1: alone clock twenty eight million YouTube streams, and SpaceX Elon
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  Speaker 1: Musk Space Company is about to become the largest IPO
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  Speaker 1: in history, and Jazuboit presumably the people who can actually
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  Speaker 1: afford space tourism are exactly the audience will be forking
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  Speaker 1: out for luxury brands, which means Prita isn't just joining
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  Speaker 1: the space race, it's running it alone at the top
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  Speaker 1: end of the luxury market. Flex amm One company on
• 6:41
  Speaker 1: the ASX jumped seventy percent in May alone. All the
• 6:45
  Speaker 1: names will be revealed in the Flex app, where we
• 6:47
  Speaker 1: break down four of the best performing ASX two hundred
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  Speaker 1: socks for May twenty twenty six. Download the Flex app
• 6:52
  Speaker 1: and check it out. Thanks for listening, and we'll see
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  Speaker 1: you on Friday.