Relx Should Address the ‘Claude Crash’ by Repurchasing Shares – and Then Acquire More | Nils Pratley

As the FTSE 100 index hovers near its historic peaks, one might overlook a significant decline occurring in a specific sector of the market. This decline has been dubbed the “Claude Crash”, a term that references the innovative legal products introduced by the AI firm Anthropic, which are integrated within its Claude Cowork office assistant.

This dual launch might appear benign at first glance; however, as evidenced by the dramatic stock market reaction observed over the past few weeks, it is a pivotal moment underscoring the potential impact of AI technologies on several major publicly traded companies in the UK. Notably, these companies are positioned in the somewhat unexciting yet profitable “data” sector, including names like Relx, the London Stock Exchange Group, Experian, Sage, and Informa.

Among these, Relx, historically known as Reed Elsevier, stands out as particularly fascinating. The company’s self-description might not inspire much excitement—it claims to be “a global provider of information-based analytics and decision tools for professional and business customers”—but its share price history is remarkable. In 2012, shares were valued at £5, soaring to around £41 by May of the previous year. This surge brought Relx’s market value to approximately £70 billion, making it the fifth-largest entity within the FTSE 100 index.

Fast forward to today, and the narrative has changed dramatically. The company’s share prices have plummeted by nearly 50% from their previous highs, with the most significant declines coinciding with the introduction of Anthropic’s Claude plug-ins. Once regarded as a potential AI beneficiary due to its efforts to leverage AI for enhancing existing services, the market now harbors anxiety about the sustainability of Relx’s impressive 34% profit margin.

What is the perspective from Relx itself? Thursday’s release of their full-year results didn’t carry a title like “the stock market’s gone mad,” which is uncharacteristic of their messaging. However, both the figures and the accompanying statements exuded a sense of optimism: revenues rose by 7% to £9.6 billion, while operating profits increased by 9% to reach £3.3 billion. The company forecasts “another year of strong growth in 2026,” highlighted by a 7% increase in dividends and an expanded share buyback program totaling £2.25 billion.

Chief Executive Erik Engström presented a compelling case for why the advancement of AI will continue to deliver substantial customer value and drive growth for Relx in the foreseeable future. His key argument emphasizes that AI technologies are not entirely new; the recently launched products which triggered market upheaval are “workflow” tools designed for the organization and review of documents tied to specific tasks. In contrast, Relx primarily operates within a more niche market that focuses on providing indispensable and reliable information, particularly useful in legal contexts.

The range of Relx’s data offerings is diverse: some data is public, others might have been public at some point but are no longer available, and some involves proprietary or licensed information. What sets Relx apart is not just the data it holds but also the insights, interpretations, and judgments accumulated over decades, which are invaluable to various professionals, including scientists, lawyers, finance experts, and insurance risk assessors. While AI can enhance how this information is accessed, its fundamental value lies in its depth and reliability.

Engström’s additional major point asserts that Relx remains in a position to engage in limited licensing agreements with AI companies if it chooses to, while continuing to develop its own “workflow” tools. However, the company is resolute about retaining its proprietary information, recognizing it as the core asset that fuels its competitive edge.

The initial market response to these reassurances saw a modest bounce of 2% in share prices, yet concerns linger about the trajectory of AI evolution and whether Relx’s competitive advantages are as robust as initially claimed. Much of this anxiety stems from an inherent fear of the unknown.

Given this backdrop, Relx’s strategic response appears quite straightforward. If the company genuinely believes that growth prospects remain solid “for many years to come,” as Engström stated, leveraging buybacks when shares are priced at half of their previous value seems prudent. The current £2.25 billion buyback plan, increased from the previous £1.5 billion, represents approximately 6% of the company’s entire equity base. Sustaining this level of buybacks over the coming years could significantly bolster earnings per share—assuming, of course, that the forecasts about the company’s ongoing performance are indeed reliable.

Interestingly, this trend of executing larger buybacks is also advocated by activist investor Elliott Management at the London Stock Exchange Group (LSEG), where lingering worries about AI mirror those of Relx. If both firms are genuinely confident in their outlooks, then enhancing buyback activities is a judicious course of action.