The week’s news included; Historic oil price crash explained, France bans coronavirus support for firms registered in tax havens, Netflix surpasses Disney in market cap, UK travel firms unlawfully block customer refunds
Below are our top 10 stories that you need to know about. Be sure to check our twitter page, Facebook page and Instagram 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:
- Business insider – Why are stock markets soaring? Thank the Fed.
- World Economic Forum – Who will be the winners in a post-pandemic economy?
- City A.M – How will Blockchain Revolutionise Financial Services?
- Business Insider – How the oil price capitulation will hit Nigeria, Saudi Arabia and other major exporters.
1. CRUDE OIL PRICE COLLAPSE
Last Monday saw the most dramatic decline in crude oil prices in history. Crude oil tanked as low as -$40.32 per barrel representing a 321% plunge. This is the first time in history that oil has fallen into negative territory. But how did this happen?
Oil price fell so steeply because the coronavirus outbreak has decimated demand for oil. Furthermore, there is too much supply of crude oil and not enough places to store it. Expiring futures contracts were the trigger for the collapse. Futures contracts allow traders to buy oil at set prices for delivery on a future date. Contracts for May were due to expire on Tuesday 21st of April. Many traders, however, did not have enough storage due to or did not want to take more oil due to oversupply. Therefore, these futures contracts were sold rapidly on Monday which drove down the price. Eventually, sellers were willing to pay buyers to take the oil. Oil producing members already agreed a supply cut but if demand stays low, storage could still be an issue next month.
Unfortunately for consumers, these historically low prices are unlikely to see any huge price drop at petrol stations. Petrol prices are a combination of the crude oil price, refining costs, distribution costs and taxes. Therefore, a small price drop is probable but don’t expect to be paid to fill up your tank.
2. JUST EAT MERGER GETS GREEN LIGHT
The UK Competition and Markets Authority has formally approved the £6.2 billion merger between Just Eat and Takeaway.com. Two weeks ago, the CMA revoked its enforcement order against integration of the businesses paving the way for full approval. The CMA found that the merger does not create any competition concerns after its investigation. This brings the end to a long saga, in which competitor Prosus tried to outbid Takeaway.com for Just Eat but faced rejection. Dutch firm Takeaway.com left the UK market in 2016 after it lost over £750,000 in that year alone due to tough competition. The joint companies process a staggering £6.6 billion worth of takeaway orders every year.
3. OXFORD UNIVERSITY BEGINS COVID VACCINE TRIALS
Oxford University has begun human trials on a potential coronavirus vaccine. The university received £20 million in government funding and the first two volunteers have been injected. The vaccine was developed in less than 3 months and the researchers behind the vaccine are confident it will be successful. Over 800 volunteers have been recruited for the trials. In the trial, half of the volunteers will receive the coronavirus vaccine and the other half will receive a control Meningitis vaccine. A larger trial of 5000 volunteers will begin in a few months. Imperial College London is also starting its own trials in June after receiving £22 million in government funding. While this is encouraging, a widespread vaccine is unlikely to be available within the next 12 months. For more on the science behind the vaccine click here.
4. GOVERNMENTS BAN OFFSHORE COMPANY SUPPORT
France, Denmark, & Poland, have blocked companies registered in offshore tax havens from claiming coronavirus government bailouts. France made its announcement last week and has made available €110 billion to help its businesses through the coronavirus pandemic. Where companies have their tax headquarters or subsidiaries in offshore tax havens, they will be ineligible for this support. France is the largest country to implement such a measure, after Poland and Denmark introduced the same earlier this month. France has been one of the most vocal opponents against tax avoiding companies and even faced tariffs from the US over its tech tax.
5. NETFLIX SURPASSES DISNEY ADDING 16M SUBSCRIBERS
Netflix has become more valuable than Disney as it added almost 16 million subscribers in the first quarter of 2020. This growth has been fuelled by coronavirus lockdowns across many major economies. 15.8 million new people signed up, the largest quarterly increase in the Netflix’s history. This figure is almost double what Netflix predicted for Q1 back in January. All new Netflix original series have stopped production, but Netflix will seek to buy content from other producers to fill space. The Tiger King proved to be a huge hit, attracting 64 million viewers. Netflix currently boasts 183 million subscribers across the globe. This huge subscriber growth took Netflix’s value beyond Disney & Exxon Mobil to a staggering $196 million. Despite this Disney+ gained 50 million subs in just 5 months of existence, and could prove a threat to Netflix’s crown.
6. BRANSON SEEKS VIRGIN BAILOUT
Sir Richard Branson is urgently seeking government bailouts to keep his Virgin Atlantic empire afloat, sparking backlash. The airline has been hit hard by the coronavirus outbreak and is on the brink of collapse. He is seeking a £500 million loan from the UK government and even offered to mortgage his private island as collateral to prevent a total collapse. Virgin Atlantic in Australia fell into administration last week after the Australian government refused eight separate bailout proposals pitched by the firm. The UK government also rejected Branson’s initial proposal for an aid package, stating they should seek other means of raising cash first. Branson is worth an estimate £4.7 billion. Many argue he can and should dip into his own pocket, not the taxpayer’s, to keep the business afloat. He is further criticised because he has moved to his island in the British Virgin Islands and has paid zero personal income tax in the UK for the past 14 years
7. MIKE ASHLEY SETTLES BELGIAN TAX BILL
Mike Ashley’s Frasers Group (formerly Sports Direct), reached a settlement with Belgian tax authorities for its £600m unpaid tax bill. In July 2019, Sports Direct received a bill for €674 (605) million in unpaid tax which controversially led to the delay of its financial statements. By January 2020, it confirmed that it had correctly paid tax and three quarters of the total bill was resolved. Last week, the matter was fully resolved, and Frasers group paid out an “immaterial amount” to settle the matter. The decision was taken due to the potential financial difficulties it may soon face from the coronavirus lockdown. No further details were disclosed in the public statement released by the company.
8. UK TRAVEL INDUSTRY BLOCKS REFUNDS
UK airlines and travel agencies have been unlawfully denying refunds to customers who cancelled travel due to the coronavirus outbreak. Consumer group Which? Found that 20 of the UK’s largest holiday companies are illegally withholding refunds, offering vouchers or credit notes instead. Customers are owed an estimated £7 billion for cancelled trips but this is unlikely to be paid anytime soon. Most airlines and travel agencies would collapse if they refunded all affected customers due to the severe lack of income. RyanAir has openly told customers that refunds will only be issued after “the Covid-19 emergency has passed”. Air France and KLM have refused all cash refunds within 12 months. Legally however, refunds must be provided within 14 days. The UK Foreign Office has advised against non-essential foreign travel indefinitely so the travel industry will no doubt have a turbulent 2020. Whether airlines will be held accountable for breaching the law given the extreme circumstances remains to be seen.
9. SAUDI NEWCASTLE TAKEOVER
beIN Sport has urged the Premier League to block Saudi Arabia’s acquisition of Newcastle due to Saudi’s involvement in the illegal streaming of games. The deal to purchase Newcastle FC for roughly £300 million is on the verge of completion. The Saudi backed consortium, PCP Capital Partners, has paid a deposit and exchanged contracts with current owner Mike Ashley and the deal could be completed as soon as next month. beIN is a Qatari broadcaster and wrote to the Premier League suggesting the Saudi government has been directly involved in the illegal streaming of Premier League games. beIn urged the league not to ignore the illegal acts of Saudi Arabia and the impact upon their commercial interests.
The Premier League is still to complete its mandatory background checks on the consortium and its key figures. This will review criminal records, conflicts of interest and other factors affecting their ability to fund the club. Human rights offences would fall outside the jurisdiction of the Premier League and would need government intervention, but this is unlikely. A Saudi Prince already fully owns Sheffield United, so a blockage is unlikely despite beIN’s concerns.
10. SNAPCHAT SEES Q1 BOOST
Parent company of Snapchat, Snap, posted a huge 44% increase in revenue in Q1. This was far larger than analysts predicted as many thought the coronavirus outbreak could hit turnover. The company’s advertising business benefited from a surge in user activity due to the lockdown. Daily active users in the first three months of 2020 rose 20% year on year to 229 million. Revenue for the quarter rose to $462.5 million. The good news saw its share price rise 20% to $16, although this is still over 40% beneath its 2017 IPO price.