This week’s news includes; Sainsbury’s Asda merger confirmed, Cambridge Analytica closes down, Snapchat user growth slows, Goldman Sachs gets into crypto
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:
- eFinancialCareers explains “the questions banks are asking people they really want to hire”
- Business Insider looks at how financial institutions are applying distributed ledger technologies to new use cases for ground-up business transformation
- Legal Week asks “Cyberattacks, geopolitical shocks and global competition: what keeps law firm leaders up at night?”
- CNBC looks at claims that Oil demand (and prices) set to drop dramatically as new technologies take hold
1. SAINBSURY’S AND ASDA MERGER
Sainsbury’s and Asda have officially agreed merger terms. This will create a new, larger player in the market with combined revenue of over £51 billion. The bosses claim that there will be no job losses and customers will see price cuts of around 10% due to economies of scale. There are huge concerns however, that this target will be achieved by massively squeezing suppliers. Their bargaining power will be exceptional as £1 in every £3 spent at supermarkets will go to the combined company.
Under the deal, Walmart will retain 42% of Asda and receive £3 billion cash. The deal will still need to be approved by Competition and Markets Authority. The combined firms would have a market share of 31.4%. There are concerns that localised monopolies may occur so Asda or Sainsbury’s may have to sell some stores.
Following the deal, Sainsbury’s CEO Mike Coupe had to apologise for a musical gaff. He was caught on camera singing “We’re in the Money” while waiting to be interviewed, following the announcement of the deal. He described it as “unfortunate choice of song”, implying that this song was not in relation to the £10 billion merger that had just been agreed. Critics say this was highly inappropriate considering the potential job losses and squeeze on suppliers that may ensue following the merger.
For more analysis on the deal read BBC News’ report.
2. CAMBRIDGE ANALYTICA CLOSES DOWN
Cambridge Analytica (CA) has filed for bankruptcy after being embroiled in a data scandal. CA allegedly harvested data from Facebook users without their consent. They then profiled users and offered a service to politicians where suitable users could have propaganda fed to their timelines. It emerged that they played an significant role in the 2016 US election, by posting vast amounts of pro-Trump propaganda using this improperly gained data An estimated that 87 million users were affected.
This news came as no surprise, It’s reputation had been destroyed. While it denies any wrongdoing and claims its actions were common industry practice, the negative publicity was too severe. Despite the closure, ministers in the UK will still investigate the firm. (BBC News)
3. APPLEBY SETTLEMENT
Offshore law firm Appleby has reached a settlement agreement with the Guardian and BBC over the Paradise Papers leak. The Paradise Papers exposed some of the offshore tax arrangements of numerous wealthy people and companies. The Queen’s private estate, Lewis Hamilton and Lord Ashcroft were all exposed in the leaks. Over 13 million documents were released. Appleby claims that 6 million of these documents that the Guardian & BBC based their reporting on, were private and belonged to them.
The law firm subsequently launched legal action against the BBC and the Guardian for breach of confidence. It also sued for damages for disclosure of confidential documents obtained in a hack.
Most of the documents however, were now no longer owned by Appleby and so a settlement agreement was reached between the parties. (The Guardian)
4. MIRROR GROUP PAYS PHONE HACKING VICTIMS
The Mirror Group Newspaper has paid an undisclosed amount to a number of victims of its phone hacking. Dwight Yorke, Andrew Cole, Jennifer Ellison and Danielle Lloyd all received damages. Mirror Group lawfully hacked the celebrities phones and intercepted their voicemails. They subsequently launched legal action against for the misuse of private information.
All victims asserted that they had suffered reputational and emotional damage as a result of the hacks. Mirror Group apologised for any distress caused by the hacks. (The Guardian)
Tesla CEO Elon Musk made a $2 billion gaff last week. During a conference with analysts about 1st quarter results, he refused to answer questions about finances. He then proceeded to answer numerous questions from a Youtuber about a self driving car network.
An analyst asked him about profit potential and capital requirements to which Musk interrupted “Boring bonehead questions are not cool. Next,”. He then continued “We’re going to go to YouTube. Sorry these questions are so dry. They’re killing me”.
The company burned through a staggered $1 billion in the last quarter alone. Analysts have consistently express concerns about the long term viability of the company. The electric car maker posted a loss of $709 million in the last quarter. Tesla stocks lost over $2 billion in response, a 7.5% drop. (The Independent)
Business Insider however claims that Tesla aren’t spending enough and that investors should be worried.
6. RBS job cuts
The Royal Bank of Scotland has announced that it will be cutting 792 jobs. The news follows financial results in the first quarter. RBS posted profits of 792 million, a 206% increase. Despite this, the bank is looking to close 162 branches.
This is due to the fact that RBS will not launch Williams and Glyn as a challenger bank. They will now be integrated into RBS and become retail branches. This meant that RBS would have superfluous branches forcing them to close some branches.
Another reason for the decision was a huge decline in footfall at branches. RBS cited a 30% fall in branch transactions and a 53% rise in mobile banking transactions. RBS is still 80% owned by the tax payer after the government bailed it out in 2009. (The Independent)
7. SNAPCHAT USER GROWTH SLOWS
Snapchat posted better revenue growth but slower user growth for the first quarter. Snap reported a 54% rise in revenue to $230.7 million and a quarterly loss of only $385.8 million. The loss this quarter was only a fraction of the $2.2 billion posted for the first 3 months of 2017.
User growth however, is what is concerning the markets. The user growth rate fell by over 50% to 4 million in the last quarter. Snapchat currently has 191 million daily active users. The fall in the user growth has been largely attributed to the recent app update. The overhaul of the user interface faced significant backlash, with over 1 million people signing a petition for the update to be reversed.
Share prices crashed 16% in response to the news. With a revenue warning for the 2nd quarter already issued, Snap’s share price is likely to take a hammering for the foreseeable future. (Sky News)
8. GOLDMAN GETS INTO CRYPTO
Goldman Sachs has announced that it will offer cryptocurrency derivatives. It will trade Bitcoin futures as principal (i.e. on its own account). Goldman will not actually hold or trade any Bitcoin. Futures contracts will however, give it exposure to a potentially lucrative market through regulated products. Bitcoin futures contracts were initially offered by exchanges CBOE and CME group in December.
While this isn’t a full crypto trading desk as previously anticipated, it is a positive step for cryptocurrency. More interest from Wall Street will provide crypto markets with greater legitimacy and regulators will be more inclined to implement less draconian measures. (Bloomberg)
9. HERMES LAW SUIT
The GMB union has launched legal action against courier Hermes. It claims that Hermes fails to provide its couriers with basic workers rights. Hermes workers are currently deemed as self-employed. Hermes describes them as “lifestyle couriers”. This means workers are not entitled to holiday pay or the living wage. If this case is successful this will mark a significant change for Hermes’ business model
GMB has already won a case against Uber over drivers’ employee status. Deliveroo is also facing a similar case of the same purpose. The gig economy is being shaken up as companies can no longer get away with denying employment rights to their workers. (City A.M)
Check out our insight article The Gig Economy: Where Are We Now
10. HOUSE OF FRASER
House of Fraser is looking to undergo huge changes which will see job cuts and ownership change. C.Banner International Holdings will now acquire a 51% in the business, raising £70 million. This acquisition relies on House of Fraser undertaking a Company Voluntary Agreement (CVA), which will involve substantial job cuts. C. Banner also owns toymaker Hamley’s. House of Fraser employs 6000 people across 59 UK stores but sales have been declining. It is currently 89% owned by China’s Sanpower.
This simply adds to the list of high street retailers struggling with huge debts and declining footfall. Carpetright also revealed plans to cut 81 stores under its own CVA. House of Fraser will make a decision whether to proceed or not in June. (The Telegraph)