The week’s news included; US companies banned from business with TikTok , EU investigates Google’s $2.1 billion FitBit deal, Kodak under investigation due to 2700% share price hike, Thousands of travel industry job cuts announced
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 – The good, the bad and the ugly of the cryptocurrency dream
- BBC News – Downturn less severe than feared – Bank of England
- FT – Monzo: the bank that doesn’t want to be
- City A.M – Are the new planning reforms what’s needed to help alleviate Britain’s housing crisis?
1. TIKTOK IN TROUBLE
Donald Trump has signed an executive order prohibiting all US firms from doing business with TikTok after 15 September. Microsoft are in discussions to purchase TikTok but now has barely one month to reach an agreement. President Trump is in favour of a Microsoft takeover but is keen to quickly drive out Chinese big tech from the US amid increasing political tension. The executive order also included action against Chinese firm WeChat. Action against WeChat came as a surprise as it was not previously highlighted as a threat and is one of the only social media apps allowed in China. For those with relatives in China, WeChat is a crucial means of communication.
Trump has cited security concerns for this decision after allegations of data theft emerged. There are fears that TikTok could be used as a tool for the Chinese government to gather information on US persons. Trump has even threatened to ban TikTok completely within the US due to this. TikTok firmly denies all allegations and has now threatened legal action against the US government over this latest executive order. It has 80 million monthly active US users, around one tenth of its global usership.
Furthermore, TikTok defiantly announced plans last week to open a $500 million data centre in Ireland. The firm claims this signifies its commitment to operating in the West. The centre will store data from European users.
2. EU INVESTIGATES GOOGLE FITBIT DEAL
The EU Commission has announced that it will carry out a full investigation into Google’s $2.1 billion acquisition of FitBit. There are serious concerns that Google will use the health data of FitBit uses for targeted adverts. Google promised not to do so last month but the regulator will not take Googles word at face value. There are also huge concerns that the deal would give Google a data advantage and give it an uncompetitive edge. The EU Commissions investigation will explore how this merger will affect the digital health are sector and the impact on rivals.
FitBit was one of the first fitness and health trackers. The company has 30 million active users. It posted a $132 million loss last year so many analysts questioned why Google would buy FitBit, if not for its data. FitBit as a market pioneer has, however, formed alliances with health organisations worldwide, which could prove beneficial for Google.
3. GOLD TOPS $2000
Last week, gold reached $2000 an ounce as investors seek security amid volatile markets. Gold is typically a good store of value when times are turbulent and can shield investors from heavy losses in securities. The coronavirus outbreak coupled with rising political tension between China and the US has created nervousness in the investment world. Across the globe, businesses are collapsing, and the world is facing the deepest recession in living memory. Gold prices have soared 30% this year alone, with other precious metals also seeing huge gains.
4. KODAK SEC INVESTIGATION
Kodak is facing investigation by the US SEC due to its recent 2757% share price increase. Two weeks ago, Kodak announced they had received a $765 million government loan to begin making generic pharmaceutical drugs (see previous top 10). There are, however, questions over the announcement of the loan. The photography company was to make its official announcement on July 28. On July 27 however, a local TV station published news of the loan and Kodak had not prohibited this. The early announcement of the loan could have fueled these enormous price hikes. Many analysts see the price hike however, as mere baseless speculation.
The SEC investigation is at a preliminary stage and no allegations or charges have been. Despite this, after years in the wilderness Kodak is finally starting to get its name back in the headlines. Whether its venture into pharma will be profitable or even viable in the long term remains to be seen.
5. TRAVEL INDUSTRY IN TATTERS
It has been a bleak week for travel as firms announced thousands of job cuts. Foreign exchange company Travelex has fallen into administration after facing a cocktail of challenges including a huge cyber-attack earlier this year. Last week, after falling into administration, it secured a rescue deal from lenders which saved 1800 jobs, but this deal will see 1309 jobs lost in the UK. Many of the branches closed during lockdown will not reopen.
In January, Travelex workers were forced to work with pen and paper as the company’s whole IT infrastructure was held to ransom by hackers. The hackers gained access to Travelex systems in mid-2019 and stole thousands of consumers’ data. In December 2019 however, they encrypted all company files, shutting down Travelex’s entire IT system and demanded $6 million to restore. The company paid $2.3 million in Bitcoin to the hackers to restore the files. This saga coupled with the coronavirus outbreak pushed the company over the edge.
The travel firm that saved thousands of Thomas Cook jobs last year is to slash 20% of its workforce due to Covid-19. Hays Travel will cut 878 jobs as the furlough scheme ends and the UK government banned travel to Spain due to a spike in cases. Spain is one of the most popular summer holiday destinations and travel companies had hoped restrictions would be easing by August. Last year, Hays purchased all of Thomas Cook’s 555 high street stores for £6m after the iconic travel firm fell in administration. This move saved 2000 jobs but the added pressures of covid-19 meant such cuts were inevitable. Hays is the UKs largest independent travel agent and employs 4500 people.
The airlines themselves are also facing an extremely tough time. British Airways has announced 10,000 job cuts. 6,000 of these redundancies were voluntary after the airline proposed drastic changes to employment contracts. Most of the job losses were cabin crew, engineers and airport staff. In the US, Virgin Atlantic filed for bankruptcy in a bid to stay afloat. Virgin Australia also cut a third of its staff and will be seeking to step out of the long-haul flight market and focus on shorter flights. 3000 jobs will be lost due to this move.
6. AMAZON DIGITAL TAX
The UK’s digital service tax came into effect in April, but Amazon is now to pass the levy onto sellers. Online service providers such as Amazon and Facebook face a 2% levy on their annual revenues. Amazon initially absorbed the tax while discussions with the government were ongoing. The UK government was pushing Amazon to absorb the tax rather than passing it on to sellers. Talks broke down and Amazon issued a note to sellers informing them that seller fees will be increasing by 2% from 1 September. Amazon already faced a tech tax in France and in this case, it also passed the levy costs on to seller. Amazon posted UK revenue of £13.4 billion in 2019.
7. OFGEM CUTS PRICE CAP
The UK energy regulator Ofgem has announced that it will slash the cap on annual energy bills to £1042, bringing as much as £95 a year in savings for customers. This cut is due to the fall in the price of wholesale gas as a result of falling demand. Those on regular tariffs will see up to £84 in annual savings while those with prepaid meters will see up to £95 in savings. Ofgem has recommended this cap remain in place at least until next year, a welcome boost for consumers pinched by the coronavirus outbreak. This cap reduction will bring savings for roughly 15 million UK households.
8. UBER ACQUIRES AUTOCAB
Uber has bought Autocab, a UK based taxi tech company for an undisclosed sum. Autocab develops booking and taxi dispatch software which private taxi companies can use to pick up passengers. Uber’s acquisition will allow them to connect passengers with drivers from local firms in locations where it does not currently operate. This includes smaller towns such as Oxford and Ipswich.
This could prove significant for Uber who are facing regulatory difficulties in markets globally. Most notably, its saga with TFL is still ongoing as it has been barred from operating in London. Uber’s legal appeal is set to be heard in September and until then it continues to operate as normal. The coronavirus outbreak has obliterated revenue in its taxi business as it lost $1.78 billion in Q2. Consolidations such as this Autocab deal could prove crucial for Uber’s long-term profitability
Check out our insight article exploring the Uber-TFL saga.
9. PIZZA EXPRESS STORE CLOSURES
Pizza Express has announced that it will close 67 stores, putting 1100 jobs at risk. Covid-19 has made some businesses unsustainable and has led to a seemingly endless stream of cuts on the high street. Pizza Express will launch a company voluntary agreement (CVA) to restructure its business and seek rent cuts. This, however, may lead to further cuts. These moves could see Pizza Express’ enormous debt cut in half to just over £300m, giving the restaurant a greater chance of survival.
The government’s Eat Out to Help Out scheme came into effect last week, but this won’t be enough to save many restaurants. Customers are still cautious, and restaurants are unlikely to hit full capacity any time soon. Even prior to Covid-19, analysts predicted swathes of closures due to unsustainable overheads alongside changing consumer tastes. The coronavirus outbreak has simply exacerbated the issues and accelerated the decline of our high streets.
10. ZUCKERBERG HITS $100 BILLION
Facebook CEO and founder Mark Zuckerberg has joined the highly exclusive centibillionaire club. His personal wealth exceeded $100 billion for the first time as Facebook’s share price jumped 6% last week. Facebook launched a new feature called Reels, designed to rival TikTok. With TikTok firmly in the crosshairs of the US government, Facebook is keen to capitalise on the potential vacuum left once TikTok faces its ban. Investors were pleased with announcement and Facebook’s shares soared, increasing the value of Zuckerberg’s 13% stake past the $100 billion mark. The 36-year-old joins an exclusive club with only two other members. The two other centibillionaires are Microsoft founder Bill Gates and Amazon founder Jeff Bezos.