Thursday 04/07/19

  1. In CRYPTOCURRENCY NEWS, US lawyers get medieval on Libra and the UK regulator plans a ban on crypto for retail investors
  2. In DISRUPTOR NEWS, Spotify does an about-turn and things get interesting for corporate travel
  3. In INDIVIDUAL COMPANY NEWS, Deutsche faces big restructuring costs, Broadcom closes in on Symantec and Purplebricks abandons its American Dream
  4. In OTHER NEWS, I bring you world leaders with football manager hair. Stay with me on this – it’s worth it…



So Libra faces a crackdown and the UK regulator wants to cut retail investor access to crypto products…

US lawmakers seek ‘immediate’ halt to Facebook’s digital coin (Financial Times, Hannah Murphy) highlights an open letter published on Tuesday by lawmakers who are calling for Facebook to hold off the launch of its digital currency Libra until regulators and Congress have had time to examine the risks properly. They cited “privacy, trading, national security, and monetary policy concerns” given Facebook’s tarnished reputation on the privacy of user data following the Cambridge Analytica scandal. The letter went on to say “Failure to cease implementation before we can do so, risks a new Swiss-based financial system that is too big to fail”. * SO WHAT? * Fair enough, I say. The G7, the international Financial Stability Board and our very own Financial Conduct Authority have all said that they plan to look into the project very closely. The House financial services committee and the Senate banking committee are to meet in mid-July to discuss Libra. I would want everyone and their dog looking into Libra properly because it is the sort of thing that – if it goes wrong – the consequences could be massive. I think that any company trying to introduce something as big as this would be under intense scrutiny, but I guess that Facebook’s recent scrapes re data privacy have made convincing regulators that much harder. Germany shows Facebook might be on to something with Libra (Financial Times, Martin Arnold) gives an interesting

anecdotal spin on the whole Libra thing as the author outlines his recent experiences on holiday in Germany where he was caught short while trying to pay a restaurant bill but couldn’t pay by card and couldn’t use his UK bank card to withdraw cash. As a result, apparently, the average German carries around €107 in cash – according to a recent Bundesbank survey – versus €32 for the French and a paltry £22 for your average Brit. This, he argues, is a situation that needs changing. If it’s not Libra, it needs to be something else – but if Libra fizzles out, at least it will hopefully have prompted banks to innovate.

In Regulator plans retail ban on cryptocurrencies (The Times, Ben Martin) we see that the UK’s Financial Conduct Authority (FCA) said that it is planning to ban the sale to retail investors of financial instruments that let people bet on bitcoin and other cryptocurrencies. The proposed ban, which is currently under consultation, will include derivatives like Contracts For Difference (CFDs), futures and options and exchange traded notes. The FCA said that the difficulty in valuing cryptoassets means that it is even harder to ascertain the value of the derivatives that are linked to them. It added that the tokens on which these assets are based “have no inherent value and so differ from other assets that have physical uses, promise future cashflows or are legally accepted as money…They are opaque, complex and unreliable as reference assets for investment products”. * SO WHAT? * Bad news for retail investors who are crypto-converts, but I’m sure there will be some way around it for the most determined. It’s just going to get that bit harder.



Spotify makes a U-turn and corporate travel is ripe for a shake-up…

Spotify drops plan to pull in independent artists (Financial Times, Anna Nicolaou) heralds an about-face for Spotify who last year told investors that they would disrupt the music industry by cutting out the record companies and putting artists in front of fans directly. The company promptly released a tool that let artists release their music without a label or third-party distributor but now, less than a year after their bold statement of intent, Spotify has decided to wind its neck in and said in a blogpost that “The best way for us to serve artists and labels is to focus our resources on developing tools in areas where Spotify can uniquely benefit them”. * SO WHAT? * Investors initially cheered the thought of Spotify’s course of action because they thought it would give them long-term revenue streams and reduce the company’s reliance on big music labels. However, in the end, it didn’t generate enough stars and rubbed the labels up the wrong way – so it is understandable that it has decided to walk away. Analysts have long said that Spotify really needs to get its own content to generate better margins and, for now, it looks like focusing its efforts on getting big in podcasts. The company is planning to spend $500m on acquisitions in this area and RBC analyst Mark Mahaney believes that this could ultimately help the company generate $500m in annual revenue for Spotify by 2022. That’s clearly something “for the future”, but the more immediate event that will impact Spotify’s profitability is the negotiation currently going on between Spotify and the record labels re licencing costs. Presumably this latest announcement will go some way towards appeasing annoyed record labels who thought that Spotify was going to nibble away at their lunch.

I thought I’d mention The start-ups trying to shake up corporate travel (Financial Times, Alice Hancock) because it goes to show what a disruptor can do to a generally staid and boring area of business. TripActions is only four years old but raised $250m last week, giving it an implied valuation of $4bn. The start-up says that it can predict travel preferences by going through previous employee bookings and can automatically rebook things if flight schedules change and inform customers quickly. It claims that it has cut the time spent on booking the average business trip from one hour to just six minutes. However, it is one of many such companies vying with each other to simplify the business of business trips given the fragmented nature of the market in its current state (others include TravelPerk and Rocketrip). * SO WHAT? * Currently, the biggest operator in this space in the UK is American Express Global Business Travel which has a whopping 17% market share and turns over 1.5 times as much as the #2. Upside is definitely there for the taking for the newbies but the potential difficulty is going to be customer service. Business travelers are understandably demanding and if they have no-one to call/blame when things go wrong they won’t come back for more. Customer service capability ups costs considerably, so is something that needs to be addressed properly in order for the start-ups to be able to take on the incumbents. I would expect there to be consolidation both among start-ups but also for “traditional” operators buying them out to freshen up their existing offering. However, consolidators will have to be particularly brave to pour cash into this area at a time when global trade is slowing down (ultimately leading to fewer business trips).



Deutsche Bank faces big restructuring costs, Broadcom closes in on Symantec and Purplebricks pulls out of the US…

Given it’s ongoing nightmares, Deutsche Bank faces restructuring costs of up to €5bn (Financial Times, Olaf Storbeck) shouldn’t come as too much of a surprise but its plans to cut deep into its investment banking division are going to cost a lot as it embarks on its biggest shake-up in over twenty years. Over 20,000 jobs cuts are rumoured and over €50bn of its assets are to be siphoned off into a “bad bank” as part of the process. * SO WHAT? * Current CEO Christian Sewing is trying to cut costs whilst at the same time transitioning the bank away from the volatile fortunes of investment banking and towards more stable businesses of retail banking and asset management. This is all going to be very painful and will take time. It is thought that those involved in the US equities trading and rates divisions will be hit hardest by the cuts, at least in the short term.

Broadcom nears $15bn deal to buy Symantec (Financial Times, James Fontanella-Khan, Richard Waters and Tim Bradshaw) highlights the proximity of an acquisition of ailing cyber security company Symantec for $15bn. The chip-making giant is looking to get an agreement on the deal asap but it is thought that a decision may not come until after the July 4th holiday. * SO WHAT? * There aren’t really any overlaps in terms of business areas for the two companies – however, one good thing is that they both preside over big and largely stationary customer bases. Symantec could do with some help at pulling it out of its current rut, so it’ll be interesting to see if Broadcom can come up with the goods.

Purplebricks to exit US market as losses almost double (Financial Times, Judith Evans) shows that the online estate agency has decided to pull the plug in the ‘States after almost doubling its full-year loss and concluding that it had tried to expand too quickly. * SO WHAT? * It remains to be seen whether damage done by an overambitious growth strategy will be terminal but at least it can focus its efforts more closely on its operations in the UK.



And finally, in other news…

You know there are times when you see something on the internet and think to yourself “some people clearly have too much time on their hands”? Well I actually think that whoever did this spent their time wisely in Someone is putting football managers’ hair on politicians and it’s glorious (Metro, Joe Roberts My own favourites are Donald Trump with Steve McClaren hair and Vladimir Putin sporting a Louis van Gaal do. Nice ???? Which combination do you like best? Any suggestions for other winning mash-ups??

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Some of today’s market, commodity & currency moves (as at 0836hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq**DAX *CAC-40 *Nikkei **Shanghai **
7,609 (+0.66%)26,966 (+0.67%)2,996 (+0.77%)8,16912,616 (+0.71%)5,619 (+0.75%)21,702 (+0.30%)3,005 (-0.33%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)