This week’s news includes; Gender pay gap figures released, Fox may be forced to sell Sky News, Spotify goes public, Barclays credit rating falls to near junk
Below are our top 10 stories that you need to know about. Be sure to check our twitter page and Facebook page for regular posts of important headlines. Get all the important stories and insights straight into your inbox by subscribing to our mailing list here.
Opinion articles of the week:
- The Wall Street Journal “How did the Big 4 Auditors practices made their $117 billion revenue growth? Not From Auditing”
- Lawcareers.net asks “How will Brexit impact London’s status as a centre for international commercial dispute resolution?”
- City A.M asks “Are we over-focusing on STEM at the expense of creative skills?”
1. GENDER PAY FIGURES
Gender pay gap figures of over 10,000 large companies have been released. This has revealed the levels of inequality in our society. 75% of UK companies pay men more than women. Only 14% pay women more than men. The average gender pay gap is 9.7%.
Last week, we looked at some of the figures at large banks and law firms. The figures in other sectors varied significantly. In media sector, on average, the BBC pays women 9.3% less than men while at Channel 4 women are paid 24.2% less. In fast food KFC, McDonald’s were 2 of the 8% of companies that reported no gender at all. In the fashion retail sector posted minimal pay gaps. Primark reported no gender pay gap, Debenhams and Zara reported a 0.3% and 1.1% pay gap respectively in favour of men. Check out BBC News’ pay gap calculator to see how other companies compared.
Over 1500 companies did however, miss the April 5 deadline. These companies could face legal actions and unlimited fines for this failure. Check out our insight article explaining the gender pay gap.
2. FOX MAY SELL SKY NEWS
21ST Century Fox may have to sell or ring-fence Sky News in order to secure its acquisition of Sky. Fox’s £11.7 billion bid to acquire the 61% of Sky it does not yet own, has come under significant scrutiny. The deal was deemed not in the public interest by the Competition and Markets Authority.
The Murdoch Family controls nearly a third of UK media outlets. This further acquisition of Sky News would create issues of media plurality. Two options have been put on the table to address this issue. Fox can sell Sky News to Disney. This would address the issue regardless of whether Disney’s ongoing takeover bid for 21st Century Fox is completed or not. Another is option is to ring-fence Sky News. This would mean that Sky News would 15 years of funding from Fox but run as an independent company. This move however, has been criticised as the directors of Sky News would be appointed by Fox so Sky News would not be free from influence.
BBC News analyses the differing shareholder views on the deal. Our insight article explores the interconnected deals between Sky, Fox and Disney.
3. SPOTIFY GOES PUBLIC
Spotify has listed on the New York Stock Exchange but not through the typical IPO process. Spotify ditched the investment banks and the accompanying hype for a “direct listing”. With direct listings, companies do not issue new stock and prices are not set for shares in advance. (see Investopedia for differences). This was the largest direct listing ever as larger companies tend to opt for traditional initial public offerings. There were concerns that the direct listing would fail to draw in institutional investors. These concerns were soon quashed.
Spotify shares rose by 12.9% on the day and this valued the music streaming company at $26.5 billion. Spotify is a market leader with over 71 million subscribers and with $5 billion in turnover last year although it has not yet turned a profit. It has however, faced criticism for arguably failing to pay musicians reasonably. (The Guardian)
Forbes asks Spotify Goes Public At $30 Billion; When Will Artists See Any Of That?
4. BARCLAYS CREDIT RATED NEAR JUNK
Credit rating agency Moody’s has downgraded Barclays’ credit rating level to one level above junk. The credit rating agency took the decision following Barclays ring-fencing of its retail arm. Barclays is the first UK bank to introduce ring-fencing. Ring fencing is where banks completely separate their retail customer banking from their investment banking businesses. This is designed to limit the impact on retail customers of any future financial crises.
Moody’s believe that ring-fencing will not protect and fundamentally make investment banks weaker, hence the downgrade. The markets however, anticipated this downgrade and this had minimal impact on its share price. (City A.M)
5. HMRC F1 TAX SETTLEMENT
Formula One has been granted a controversial tax boost from HMRC amounting to £187.5 million. The pay-out stemmed from the government’s new laws preventing F1’s legal tax avoidance scheme. F1 owned offshore companies that gave loans to UK subsidiaries at high interest rates. These interest payments wiped out taxable profits and meant F1 paid little to no tax.
The government changed tax laws last year. The new regulations capped the amount of tax-deductible interest on these loans to 30% of profits. F1 subsequently restructured and turned offshore parent companies into UK based companies. The restructuring led to this tax pay out because its cash taxes only amounted to 2% rather than the standard corporation tax rate of 19%.
F1 has only allegedly paid $192 million in taxes on $5 billion of profits over the past 5 years. ITV News looks at the case in more detail.
6. LAW FIRM MERGERS
Magic circle firm Allen & Overy and US firm O’Melveny & Myers have entered merger talks, according to The Lawyer. While, both firms have come out publically to say no plans for a merger have been made. Sources have said however, that talks between managing partners at the two firms have been progressing. The combined firm would have combined revenue of £2 billion. (The Lawyer)
The merger between Bryan Cave and Berwin Leighton Paisner went live last week. The firms operate under the new name Bryan Cave Leighton Paisner (BCLP). The firms have combined revenue of over $900 million with 1600 lawyers in 11 countries.
7. MICROSOFT GIVES CUSTOMERS TECHNOLOGY RIGHTS
Microsoft is allowing firms it works with on new joint ventures to retain the technology patent and design rights. This move is designed to allieviate concerns that tech companies will use knowledge gained in the venture to compete with them. As technology is becoming more involved in all aspects of business (see our Blockchain Explained article), companies need reassurance that big tech isn’t taking their ideas.
Microsoft’s move is contrary to market practice as tech firms usually retain the rights to joint venture technologies. Customers are simply provided with a license to use them. Sometimes however, firms allow firms allow their partners to commercialise the technologies. This option does tend to leave confusing over ownership rights. Microsoft’s move will help prevent any disputes over ownership of joint venture developed technology. (CNBC)
8. OFCOM 5G AUCTION
Vodafone, EE and Three have won the frequencies required for 5G technology in an Ofcom auction. The mobile network providers bid a total of £1.36 billion for the 3.4GHz bandwidth. The 2.3GHz is currently used for 4G mobile users. Providers must buy the “airwaves” in which to transfer mobile signals as there is a limited amount of space on each frequency.
5G is not expected to be available until 2020 and improvements are still being made to 4G. The main difference is that it will be more reliable and faster than 4G. Having 5G will also free up 2.3GHz band width and improve speeds on 4G. (BBC News)
It has been a rough week for Tesla. Tesla’s quarterly target for production of its Model 3 cars was only marginally missed. Tesla made 2020 Model 3’s, only 480 short of its target. Bloomberg had estimated that Tesla would only produce 1200 vehicles. In addition, their recent report Tesla announced that they will not need a debt or equity raise this year. Shares rose by as much as 7% in response to the news. (CNBC)
It has been an exceptionally tough March for Tesla. The tech company’s share price fell by 22% last month and short contracts are at all time highs. Its credit rating was downgraded even further into junk. Tesla has come under increasing pressure as it consistently burns through cash without revenue to show for it. Last week, a driverless Tesla vehicle crashed causing the death of its driver (Bloomberg). To make matters worse, CEO Elon Musk made an April fool’s joke about Tesla going bankrupt. See musks tweet below.
By November 2017, Tesla was burning through $8000 a minute; it will be interesting to see how long investors’ patience will last.
10. DOLCE & GABANNA TURN DOWN TAKEOVERS
Dolce & Gabanna (D&G) has announced that it has refused a number of takeover offers. D&G has now set up a trust to protect its future. The founders want to maintain the company’s independence. The Italian luxury fashion brand is one of the few brands that is private and not owned by one of the luxury fashion conglomerates. (City A.M)
These are the main 6 fashion conglomerates (and a few brands they own) are;
- LMVH (owns Dior, DKNY, Pink, Marc Jacobs, Louis Vuitton),
- Kering (Gucci, Saint Laurent, Alexander McQueen, Balenciaga),
- PUIG (Paco Rabanne, Jean Paul Gaultier),
- Labelux Group (Jimmy Choo, Belstaff),
- Richemont (Dunhill, Net-A-porter.com)
- OTB (Diesel, Marni)