The week’s news included; Google buys Fitbit for $2.1 billion, Virgin Galactic IPO tanks despite strong start, UK bans fracking, Twitter bans all political ads
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:
- City A.M – Wework’s fall back down to Earth was a long time coming.
- The Fashion Law – What Does the Growing Number of Paparazzi Lawsuits Say About the Fashion Industry?
- BBC News – Raise VAT to save the high street
1. BREXIT EXTENSION AND GENERAL ELECTION
We are going to the polls as Brexit is delayed until 31 January 2020. The EU had already accepted the request to extend Brexit but agreed the length of extension last week. Following this, Parliament voted to hold a general election on December 12. This will be the first winter general election since 1923 which did raise concerns amongst some MPs. Nonetheless, the parties have sprung into electioneering mode and are preparing their campaigns. The election will no doubt focus on Brexit as the main parties have clearly drawn their battle lines;
- Conservatives: “Get Brexit done” and leave the EU as soon as possible with Johnson’s negotiated deal.
- Labour: Renegotiate a withdrawal deal with the EU and have a referendum on the final deal, with the deal or remain on the ballot.
- Liberal Democrats: Stop Brexit and revoke article 50 altogether.
Nigel Farage’s Brexit Party will also be a thorn in the Conservatives’ side. The Brexit Party will contest every seat it can after Johnson ruled out a pact with the newly formed party. This could take some crucial Brexit supporting votes away from the Conservative Party.
As we saw in 2017 however, fundamental issues such as healthcare, schools and policing will still heavily influence voters so this will not be solely a Brexit election. Crucially, if no majority is achieved and we see another hung Parliament, we will simply end up with the same stasis in the Commons, in other words, back to square one. Furthermore, all parties have also ruled out working with one another so if no coalition is reached this complicates matters further. This election is of huge significance because it will fundamentally shape how the UK leaves the European Union or if the UK leaves at all.
Make sure you register to vote, it takes 5 minutes! https://www.gov.uk/register-to-vote
2. GOOGLE BUYS FITBIT
Google will buy fitness device maker FitBit for $2.1 billion. This sum is almost half of its $4 billion valuation at its IPO in 2015 but a 19% premium on its current share price. FitBit shares jumped 40% following reports of Google’s interest and trading has now been suspended. FitBit currently has 28 million active users but has been struggling with declining demand. The company put itself up for sale a few weeks ago as its losses piled up. Under the deal, FitBit has said the health data from users would be strictly protected and will not be used for Google’s advertising. Many are sceptical however, as the health data would undoubtedly be a large selling point of FitBit. The deal will allow Google to enter the fitness tech market and it hopes to allow FitBit to improve its innovation and ultimately profitability. The deal is expected to be completed by 2020.
3. FIAT CHRSYLER PSA MERGER
Fiat Chrylser has agreed a merger plan with PSA, the maker of Peugeot and Vauxhall. The deal would see the creation of the world’s fourth largest car maker worth nearly £40 billion. Under the deal, the companies would make £3.2 billion worth of savings through synergies but without any plant closures. This would done by making savings in investment costs and greater buying power. Nonetheless, trade unions are seriously concerned about jobs that could potentially be shed under the deal.
The combined companies would boast nearly £150 billion in revenue and annual sales of 8.7 million vehicles. Both companies have taken a hit from the global economic slowdown, particularly in China where new car sales have long propped up carmakers’ balance sheets. Car manufacturing production in the UK slowed by 3.8% in September alone and is down 15.6% in 2019 so far.
4. VIRGIN GALACTIC IPO
Virgin Galactic floated on the NYSE last Monday, making it the first publicly listed space tourism company. Shares in the company soared by as much as 9.75% but soon fell again slightly. This still valued the company at $2.3 billion. The share price then nosedived to as low as 20% beneath its IPO price by the weekend. Investors are understandably jittery about betting on a company with no immediate income streams and a highly ambitious project in a completely new market. The company merged with Social Capital Hedosophia Holdings, a publicly traded company, earlier this month which triggered the floatation process. CEO Richard Branson retains a 51% stake in the company.
The IPO was to raise essential cash to fund it’s projects. Virgin Galactic is yet to make a profit and made a heavy net loss. Virgin’s IPO performed well amidst a slew of flops like Uber and Lyft as the market remains apprehensive about loss making giants.
Virgin Galactic’s offering is certainly unique from the other market debutants this year. Passengers can enjoy a 90 minute flight and experience 0 gravity for the cool price of $250,000. Virgin is also competing with Elon Musk’s SpaceX and Jeff Bezos’ BlueOrigin to take tourists to space. Space tourism will no doubt be an increasingly common buzzword of the 2020’s.
5. FACEBOOK ACCEPTS FINE
Facebook has agreed to pay a £500,000 for its involvement in the Cambridge Analytica scandal. This fine was initially imposed in October 2018 but Facebook appealed the decision but has now dropped the appeal. The ICO deemed Facebook had put user data at risk through failing to scrutinize third party apps on its platform.
Cambridge Analytica launched a quiz on Facebook and harvested the data of participants and their friends, without consent. Users were profiled based on this data. Crucially, the data gathered from this was used by Russia to influence the 2016 US elections by pumping propaganda to potential Trump voters. It is estimated that up to 87 million Facebook users may have been affected. Cambridge Analytica has since shut down.
Facebook says it wishes it had done more to investigate claims about Cambridge Analytica and prevent the misuse of data. As the breach was identified before the introduction of GDPR in May 2018, the maximum fine that can be imposed is £500,000. Under GDPR fines can be a maximum of 4% of global turnover.
6. UK BANS FRACKING
The UK government has banned fracking after it has been found to cause earthquakes in surrounding areas. A new study found that fracking may have unacceptable environmental consequences for surrounding areas, such as earthquakes. The magnitude of such earthquakes is also unpredictable. This was evident in Lancashire where the UK’s only fracking project was halted earlier this year. At this site, multiple tremors were triggered by the fracking. The government has now halted fracking projects and will not approve any new projects until conclusive evidence proves fracking is safe in the UK.
Campaigners have worked hard to prevent fracking projects, warning of the environmental impact and will see this decision as a huge win. The Guardian explores the decision in more detail.
7. HONG KONG ENTERS RECESSION
Months of protests have taken its toll on Hong Kong’s economy as it sinks into technical recession. In the third quarter Hong Kong’s GDP contracted by 3.2%, this is following a 0.5% contraction in the second quarter. Hong Kong’s retail and tourism sectors have particularly suffered from the protests and don’t show many signs of improvement. The protests look set to continue and Hong Kong’s economy is likely to be in the red for 2019.
Hong Kong has been locked in protests since June, sparked by the controversial extradition bill. This bill would allow extradition of Hong Kong persons to mainland China. Although the extradition bill itself has been withdrawn, protesters have other civil rights demands such as the universal right to vote. Organisers claimed that as many as two million people participated in the protests, over 25% of Hong Kong’s entire population.
8. LLOYDS PROFITS FALL 99%
Lloyds has seen its profits fall to £50 million in the third quarter, a 99% decline year on year. This fall was due to a £1.8 billion hit from PPI claims. The bank has incurred £2.32 billion in costs related to the payment protection insurance mis-selling scandal. Lloyds, like many other banks, faced a huge surge in claims in the run up to 29 August deadline. The bank had expected this surge although the extent of this figure was on the upper end of the expected range. Barclays took a £1.4 billion hit while RBS took a £900 million hit from the claims. Profits were down from £1.82 billion last year.
9. TWITTER BANS POLITICAL ADVERTISING
Twitter has banned all political advertising ahead of the upcoming US elections. The ban will come into place from November 22. CEO Jack Dorsey said that the reach of political messages “should be earned, not bought”. This decision was supported by a number of politicians as a move to protect democracy from “alternative facts”.
This is in contrast to Facebook who stated they would not ban political adverts. CEO Mark Zuckerberg argued politicians should not be censored by private companies. He came under fire at a recent Congressional hearing over their political ads policy and it transpired that Facebook does not fact check political speech so politicians are essentially free to publish ads which are misleading statements or blatant lies. This is particularly pertinent in the era of fake news where many people are swayed by information they see on social media. Political campaigns are expected to spend over $1 billion on digital campaigns in the upcoming election. Facebook was not alone in this policy, YouTube and Twitter for example, had the same policy but now Twitter has taken a step to avoid getting involved in the political debate. The reality is however, politicians have such large followings on social media that lies can be spread to millions without needing advertising. Donald Trump for example, has over 66 million followers on Twitter.
10. GOALS SOCCER SAVED
Goals Soccer Centres have been bought out for £27 million by Northwind 5s. The company put itself up for sale after uncovering seriously overstating profits, leaving it with a £13m tax bill. The investigation into the company and its executives is ongoing and this sum could rise to £40 million as the issue may date back to 2009. Information has been passed on the Serious Fraud Office. Goals was founded in 1987 and is partly owned by Sports Direct. This deal will also save 750 jobs.