Commercial Awareness Update - December 2019

Discussion in 'Commercial Awareness Forum' started by Alice G, Dec 4, 2019.

  1. Alice G

    Alice G Legendary Member
    TCLA Moderator

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    4th December 2019

    December has come around so quickly but we will still be providing you all with the need-to-know news of this month! Our commercial team would like to wish you a lovely month of festivities, whatever it is you are up to, and hope you all get a well-deserved break as 2019 draws to a close.

    Topics covered this week are:

    1. Trump’s Tariffs on French Goods (@Alice G)

    2. Saudi Aramco Update - IPO Bids (@Sairah)

    3. Tesla’s Cybertruck (@Sara Moon)


    Trump’s Tariffs on French Goods @Alice G

    The Story:

    This week, President Trump proposed the imposition of tariffs on all French goods, totalling up to $2.4bn worth. This is in retaliation to France’s digital services tax which the Office of the United States Trade Representative has found ‘unfairly discriminates against US companies’, following a US investigation into the tax. The French tax, a 3% levy on the French revenue of digital companies, has been imposed over concerns that many US tech companies are avoiding taxation through their use of digital transactions. Trump has publicly voiced his disapproval that France are levying a tax against American companies, citing it a matter of importance that America taxes American companies. The tariffs on French goods will not be immediately imposed and the matter of digital services taxation is something to be discussed in 2020, when it is hoped a shared system of taxation might be agreed between nations multilaterally.

    Impact on Businesses and Law Firms:

    Naturally, this will be a significant issue for French producers should the tariffs come into force. The United States is France’s second largest export market behind Germany and so a 100% tariff levy will have a significant impact to its economy’s health.

    The digital tax is a really interesting opportunity for lawyers who will be integral in drafting and advising on such matters. The technology sector is a burgeoning space, and should there be a multilateral digital services tax, lawyers will be relied upon to ensure that transactions are still structured in the most efficient way whilst being fully compliant with any new regulatory changes.

    Saudi Aramco Update - IPO Bids @Sairah

    The Story:

    Saudi Aramco’s share sale attracted bids worth 166 billion Saudi riyals (£34.3 billion) last Friday, approximately 1.7 times the amount the government plans to raise.

    According to Samba Capital, more than half of the bids (54%) came from Saudi corporate investors. It is estimated that institutional investors as a whole have made subscriptions worth £24.5 billion. It is possible bids will still be on the rise, as they have until this Wednesday (4th December) to submit bids. This is when Saudi Aramco will formally set the valuation of the IPO, with the start of trading on the Saudi Stock Exchange expected to commence around 11th December.

    Non-Saudi investors accounted for 10.5% of the bids, around £2.5 billion. It has been estimated the United Arab Emirates, a key Saudi ally, is likely to have invested at least £1.1 billion through its government investment vehicles. With Kuwait expected to have invested around £770 million.

    Impact on Businesses and Law Firms:

    Although Saudi Aramco’s IPO has exceeded its amount of bids, the level of interest is relatively low compared to other emerging market IPOs, such as the listing of Saudi Arabia’s National Commercial Bank in 2014 that was oversubscribed 23 times over. In addition to this, in 2006, 10 million Saudi citizens, about half of the adult population, applied to purchase shares in the local unit of the Middle East’s biggest property developer, Emaar Properties.

    Despite this, Saudi Aramco is convinced it is still on track to be the world’s largest IPO, which could see the company being valued at $1.7 trillion. The government is still determined to encourage more Saudis to invest, promoting such investment in Aramco to be a ‘patriotic duty’, particularly after Aramco’s oil facilities were attacked in September. This comes after Aramco scrapped its international roadshows in New York and London due to international investors unwilling to accept the proposed valuation. Therefore, Aramco had no choice but to focus on pushing the offering among its wealthy Gulf Arab allies.

    It is also believed that Saudi banks have been offering citizens easy loans to bid for shares in Aramco with some financial institutions offering loans four times their usual limits and others setting no benchmark on the amount clients could borrow.

    Tesla’s Cybertruck @Sara Moon

    The Story:

    On 21st November, Tesla unveiled the ‘Cybertruck’, an all-electric pickup truck. Elon Musk, the co-founder and CEO at Tesla, said at the launch of the vehicle that “We need sustainable energy now. If we don’t have a pickup truck, we can’t solve it.” Given that the top three selling vehicles in America are pickup trucks, he believes that a sustainable pickup truck is essential to solving sustainable energy problems.

    Impact on Businesses and Law Firms:

    “Sustainability” has been a crucial part of many businesses’ initiatives and companies of all industries are introducing creative projects to contribute to a more sustainable future. Apart from Tesla’s new vehicle, a famous American cosmetic brand Estée Lauder and a fast food chain McDonald’s have both signed power purchase agreements (PPA) last month. The deals mean that both companies will be converting to renewable energy by procuring energy they use for their businesses from wind farms. Baby food brand Little Freddie partnered with Sainsbury’s to introduce in-store recycling services, which will place bags in Sainsbury’s stores where consumers can place used pouches of baby food to be recycled by Little Freddie’s recycling partner Enval.

    Law firms are also incorporating various environmental initiatives and are using them to promote their business. For example, Linklaters has been a Carbon Disclosure Project supply chain responder since 2012 and has consistently disclosed its firmwide greenhouse gas emissions. DLA Piper launched a Global Sustainability Initiative in 2007 and has been strategically managing its impact on the environment.

    In addition to initiating sustainability policies themselves, law firms have also been affected by environmental issues their clients are facing. The government’s commitment to protecting the environment, such as phasing out coal by 2025, and various regulations arising out of it, meant that law firms are increasingly advising on the implications of these regulations on client businesses to help them keep abreast of quickly changing laws.
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