The week’s news included; Sam Bankman-Fried facing 110 years in prison for FTX fraud , Uber and Lyft settle wage theft claims for $328m, Disney buys out Hulu, Shein to buy Missguided.
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:
- City A.M. – Why Gen Z daughters won’t follow in their mums’ career footsteps
- BBC News – Call of Duty: Can the world’s favourite shooter game last another 20 years?
- Sky News – Why industry may never recover from spectacular downfall of ‘crypto king’
- CNBC – Bad news for the economy is good news for the stock market … as long as it doesn’t get too bad
- City A.M. – Why can’t we level up? It takes years to start new infrastructure
1. SBF GUILTY OF FRAUD
Sam Bankman-Fried, the man behind collapsed cryptocurrency exchange FTX, has been found guilty of fraud. The 31-year-old former billionaire faces a potential 110 year prison sentence. FTX was one of the world’s largest cryptocurrency exchanges, valued at $32 billion at its peak. Investigative journalists found severe financial irregularities and the house of cards collapsed. FTX took loans and used its own cryptocurrency as collateral and had very few real assets. Bankman-Fried also lied to investors about FTX’s financial position and stole money from FTX to fund his lifestyle. Ultimately, $8 billion of customer funds was missing. Our previous article explored the issue. Bankman-Fried was found guilty on 7 charges and is due for sentencing on 28 March.
2. UBER AND LYFT SETTLE WAGE THEFT CLAIMS FOR $328M
Uber and Lyft have agreed to pay drivers in New York $328 million for wage theft. The ride hailing companies reportedly cheated drivers out of pay and benefits. Between 2014 and 2017, drivers were reportedly taxed by Uber instead of taxes being applied to their passengers. The New York Attorney General investigated these claims and the pair of hide hailing firms agreed to settle. Uber will pay the lion share, a huge $290 million. Lyft will pay $38 million. Under the deal, neither firm admitted fault but have denied wrongdoing. Drivers will also get paid sick leave. Uber and Lyft shares rose 5.2% and 7.1% respectively in response to the news.
3. DISNEY BUYS HULU OUTRIGHT
Disney is buying an additional 33% in streaming site Hulu, taking full control of the company. The media giant will pay roughly $8.6 billion to buy this stake from Comcast. Disney already owned 67% of Hulu but this deal will allow it to integrate the platform into Disney+. Hulu currently has over 48 million subscribers. Like other streaming platforms, Disney has been scrambling to boost profits as subscriber numbers have fallen in Q3 for the third quarter in a row. The company recently increased its subscription fee by £3/$3 per month. Disney’s subscriber numbers now sit at roughly 146 million.
4. SHEIN TO BUY MISSGUIDED
Shein has agreed to buy fast fashion brand Missguided from Frasers Group. Missguided was bought out of administration by Mike Ashley’s Frasers Group last year for £20 million. The Chinese fashion giant has bought Missguided’s intellectual property with aims to “reignite” the brand. Missguided’s real estate and employees have already been integrated into Frasers Group. Frasers Group has a strong portfolio of fashion brands including Sports Direct, Jack Wills and USC.
Shein is worth roughly $66 billion, down 34% from its peak of $100 billion last year. The chain has been criticised for alleged design theft, use of slave labour and severe environmental damage. The fee paid by Shein has not been disclosed.
5. FACEBOOK & INSTAGRAM SUBSCRIPTION PLANS
Facebook and Instagram will now offer European users paid subscription plans, following the footsteps of X (formerly Twitter). Users can pay €9.99 per month to remove ads across its platforms. There could be an additional €3 per month fee for subscription accounts paid for via iOS or Android app stores due to fees. Alternatively, paying using the Facebook or Instagram website will exempt users from the additional fee. Users can continue with a free account however, they will have to agree to have their data collected. Rival TikTok is also trialling its own paid service.
Only users aged 18 and older in the EU, EEA and Switzerland will be offered the subscription service. The service will not be offered in the UK. Earlier this year, Meta was fined €390 million in the EU for breaches around data collection and targeted ads.
6. PAYPAL & QVC CHANGE BNPL TERMS
PayPal and QVC have been pushed to amend the terms of their buy-now-pay-later offerings. The UK Financial Conduct Authority (FCA) found that their terms were “potentially unfair”. The sector is currently unregulated but the FCA has powers to enforce the Consumer Rights Act with regards to financial promotions. Provisions with their terms and conditions were potentially harmful to consumers. The use of BNPL services have soared within the past few years, particularly due to the cost of living crisis. Both PayPal and QVC made voluntary amendments to their terms to better protect consumers. This shows the desire of the regulator to clamp down on the BNPL sector even if formal regulations have not yet been introduced.
7. MAERSK CUTS 10,000 JOBS
Shipping giant AP Moller-Maersk is cutting a total of 10,000 jobs as demand for shipping has declined. Retailers are shipping significantly less than before, partly due to the cost of living crisis. The rapid spike in demand during Covid caused logistical problems for shipping firms and a shortage of containers which initially hit profits. Now, demand has tanked as consumers cut back on retail goods, further harming Maersk’s balance sheet. The cost of shipping has plunged in the past year from $18,000 per container to just $2000. This is largely due to the collapse in demand. Although this is in line with pre-pandemic levels, it hammered sales and profits. Last quarter, Maersk profits sank by 92% from $9.1 billion to just $691 million. Sales nearly halved from $22.7 billion to $12.1 billion. The company already cut 6500 jobs earlier this year but will cut a further 3500 due to this sustained period of financial pressure. Maersk’s workforce will now fall below 100,000.
8. WEWORK CLOSES OFFICES
WeWork is shutting many of its offices around the world as it faces bankruptcy. The flexible workspace provider is considering filing for Chapter 11 bankruptcy protection. WeWork has had a tumultuous past and was already on the brink of collapse in 2019 after its failed IPO (see previous top 10). Since then it has struggled and this year alone its share price has plunged 96%. Its shares are worth less than $1, a far cry from its peak in 2021 of over $500. It is currently sitting on a $2.9 billion long term debt pile along with $13 billion in long term leases.
The collapse of WeWork could be devastating for the office leasing sector. In the UK alone, WeWork is the largest single office tenant and accounts for 0.8% of offices in the market. City A.M. looks closer at the impact.
9. UK INTEREST RATES KEPT STEADY
The Bank of England has voted to keep interest rates steady at 5.25%. This is the second monetary policy committee (MPC) meeting where they have voted not to change rates. Despite inflation rates declining to 6.7%, there is still a long way to go to hit the Bank of England’s 2% target inflation rate. The Bank predicts that there will be zero growth in the UK in 2024. It has also warned that it is too early to consider lowering rates.
10. SIR RATCLIFFE TO INVEST £245M IN MAN U
Following his deal to buy a 25% stake in Manchester United, Sir Jim Ratcliffe, will spend £245 million to revamp the club’s infrastructure. The club’s current owners, the Glazer Family, have been criticised for failing to invest in the club. Much of the equipment and facilities have not been upgraded for years. Sir Ratfcliffe’s investment will be staggered and will come personally from him. This means new debt will not be added to the club’s balance sheet. In total, Sir Ratcliffe will be committing £1.5 billion to the club immediately upon completion. The deal will be formally announced in the coming weeks.