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Commercial Awareness Update - June 2019
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<blockquote data-quote="Sara Moon" data-source="post: 11757" data-attributes="member: 525"><p>Hi everyone!</p><p></p><p>Welcome to this week's commercial news update!</p><p></p><p><strong>Commercial News Update – 26th June 2019</strong></p><p></p><p>The topics for this week are: </p><p></p><p>1.<strong> Facebook’s Global Cryptocurrency (by [USER=1550]@Sairah[/USER])</strong></p><p>2. <strong>US-Iran Tensions ([USER=1643]@Moni[/USER])</strong></p><p>3. <strong>Slack’s Unconventional Listing ([USER=1]@Jaysen[/USER])</strong></p><p>4. <strong>The Federal Reserve and Interest Rates ([USER=1160]@Alice G[/USER])</strong></p><p><strong><strong>5. European Central Bank's Effort to Stimulate the European Economy ([USER=525]@Sara Moon[/USER])</strong></strong></p><p><strong><strong></strong></strong></p><p><strong><strong><u>1. <strong>Facebook’s Global Cryptocurrency (by [USER=1550]@Sairah[/USER])</strong></u></strong></strong></p><p><strong><strong></strong></strong></p><p><strong><strong>The story:</strong></strong></p><p><strong></strong></p><p>Last Tuesday, Facebook announced plans to launch a new digital cryptocurrency, called Libra – which is set to be introduced in 2020. By way of background, Libra will be a global currency and would work on the blockchain (the distributed ledger technology). However, unlike other cryptocurrencies like bitcoin, the value of the Libra coin would be linked to a ‘basket’ of bank deposits and short-term government securities. Also, it will be tied to established currencies, such as the US dollar and pound, to reduce volatility. This means, unlike bitcoin which can be worth more today and then less tomorrow, the value of Libra will be relatively stable.</p><p></p><p>To facilitate the Libra transactions, Facebook has set up a subsidiary called Calibra. Calibra will be a digital wallet to allow users to send, receive and store their Libra coins. It will be available in Facebook Messenger, WhatsApp, and as a standalone app.</p><p><strong></strong></p><p><strong><strong>Impact on businesses and law firms:</strong></strong></p><p><strong></strong></p><p>Since the news emerged of Facebook’s new cryptocurrency, lawmakers instantly criticised the company’s bold plans to reach into the financial lives of its potential 2.4 billion users. Many feared on money laundering and privacy issues, given Facebook’s prior breaches of trust. However, to avoid a repeat of the Cambridge Analytica-Scandal, Facebook stressed it will not solely develop Libra. Instead, it has set up an independent not-for-profit organisation called Libra Association. Facebook will be one of its founding members, alongside 27 other companies and organisations, including Uber, Mastercard and PayPal. Despite these measures, many argue the companies involved in the Libra Association – which have each contributed $10 million to the project, would be able to “disrupt and weaken” nation states. Essentially, causing a ‘systematic risk’ to the financial system. If Libra is successful, and has enough users in emerging economies trading their local currencies for Libra, this could potentially threaten the ability of governments to manage their fiscal policies. </p><p></p><p>To understand the potential risks involving Libra, law firms will be needed to advise regulators on existing tax laws to cryptocurrencies in the jurisdictions in which Libra will operate in. Also, it is possible that Facebook would hold undue power on the development of ‘global technology’. This could force laws on matters such as privacy, data protection and cybercrime to be re-considered to tighten Libra’s regulations.</p><p></p><p><u>2. <strong>US-Iran Tensions ([USER=1643]@Moni[/USER])</strong></u></p><p><strong></strong></p><p><strong><strong>The story:</strong></strong></p><p><strong></strong></p><p>Tensions between the US and Iran have been on the rise since President Trump pulled out of the 2015 nuclear deal in May 2018. The Trump administration has since increased economic sanctions on Iran’s oil exports, industrial metals, and petrochemical companies. The US hopes increased economic pressure will drive Iran to accept a stricter agreement. However, Iran has pushed back and last week Tehran shot down a US drone after announcing it would exceed the limits on its nuclear program outlined in the 2015 deal. The US’ European allies are looking to negotiate a new deal with Iran and have cautioned the US against increasing economic pressure. Iran hopes that an aversion to direct war will cause President Trump to ease economic sanctions. Although, President Trump did call of a planned military strike against Iran last week, the US has launched cyber operations against Iranian intelligence and maintains that the decision to call of the military strike should not be interpreted as a sign of weakness. Moreover, President Trump has said that economic pressure will remain unless the Iranian government changed course.</p><p><strong></strong></p><p><strong><strong>Impact on businesses and law firms:</strong></strong></p><p><strong></strong></p><p>One of the most direct consequences of US-Iran tensions are its effects on oil prices which have risen over the past few weeks. Sanctions on Iran’s oil exports reduce the supply of oil and drive oil prices upwards. In addition, several companies have seen their operations impacted by increasing tensions. Exxon Mobil has been forced to temporarily halt a $53B deal intended to boost Iraq’s oil output as a result of US tension with neighboring Iran. In addition, several airlines including British Airways were forced to reroute flights to avoid the Strait of Hormuz (which lies between the Persian Gulf and the Gulf of Oman) after Iran shot down the US drones and American airlines banned American carries from flying area as a result of “heightened military activities”. Although any further the impacts are likely to remain concentrated in the oil sector, businesses, especially those that use oil as an input or those that have significant business in the region, will be monitoring tensions especially if they continue to escalate. </p><p><strong></strong></p><p><strong><u>3. <strong>Slack’s Unconventional Listing ([USER=1]@Jaysen[/USER])</strong></u></strong></p><p><strong></strong></p><p><strong><strong>The story:</strong></strong></p><p><strong></strong></p><p>A second major tech company successfully joined the public markets last week through an unconventional listing. Slack, which provides workplace instant messaging software, followed Spotify in opting for a direct listing instead of a traditional IPO. The company’s shares soared on its first day of trading on the New York Stock Exchange.</p><p><strong></strong></p><p><strong><strong>Impact on businesses and law firms</strong>:</strong></p><p><strong></strong></p><p>Slack’s successful stock market debut is further validation that a direct public offering is a viable option for tech companies. It’s a process that cuts out the middlemen - the underwriters that set the price and allocate shares to investors in a traditional IPO – allowing Slack to avoid expensive underwriting fees.</p><p></p><p>But direct listings aren’t suitable for all companies. Unlike traditional IPOs, companies that choose this route don’t raise new money; instead it’s an opportunity for investors and employees to immediately sell their shares to the market thanks to no lock-up period. However, with it comes the added financial risk of leaving the market to determine the price.</p><p></p><p>While Slack may not have needed as many financial advisers to follow the IPO process, they will certainly have needed lawyers, and this is a great example of the innovative role that lawyers can play in the financial markets. In Spotify’s high-profile debut, Latham & Watkins were crucial in liaising with the SEC, setting precedent for which rules applied to a direct listing, and ensuring investors had the relevant information they needed to make an investment. In fact, Latham’s successful involvement led to a <a href="https://corpgov.law.harvard.edu/2018/07/05/spotify-case-study-structuring-and-executing-a-direct-listing/" target="_blank">case study</a> that was published by Harvard.</p><p><strong></strong></p><p><strong></strong></p></blockquote><p></p>
[QUOTE="Sara Moon, post: 11757, member: 525"] Hi everyone! Welcome to this week's commercial news update! [B]Commercial News Update – 26th June 2019[/B] The topics for this week are: 1.[B] Facebook’s Global Cryptocurrency (by [USER=1550]@Sairah[/USER])[/B] 2. [B]US-Iran Tensions ([USER=1643]@Moni[/USER])[/B] 3. [B]Slack’s Unconventional Listing ([USER=1]@Jaysen[/USER])[/B] 4. [B]The Federal Reserve and Interest Rates ([USER=1160]@Alice G[/USER]) [B]5. European Central Bank's Effort to Stimulate the European Economy ([USER=525]@Sara Moon[/USER]) [U]1. [B]Facebook’s Global Cryptocurrency (by [USER=1550]@Sairah[/USER])[/B][/U] The story:[/B] [/B] Last Tuesday, Facebook announced plans to launch a new digital cryptocurrency, called Libra – which is set to be introduced in 2020. By way of background, Libra will be a global currency and would work on the blockchain (the distributed ledger technology). However, unlike other cryptocurrencies like bitcoin, the value of the Libra coin would be linked to a ‘basket’ of bank deposits and short-term government securities. Also, it will be tied to established currencies, such as the US dollar and pound, to reduce volatility. This means, unlike bitcoin which can be worth more today and then less tomorrow, the value of Libra will be relatively stable. To facilitate the Libra transactions, Facebook has set up a subsidiary called Calibra. Calibra will be a digital wallet to allow users to send, receive and store their Libra coins. It will be available in Facebook Messenger, WhatsApp, and as a standalone app. [B] [B]Impact on businesses and law firms:[/B] [/B] Since the news emerged of Facebook’s new cryptocurrency, lawmakers instantly criticised the company’s bold plans to reach into the financial lives of its potential 2.4 billion users. Many feared on money laundering and privacy issues, given Facebook’s prior breaches of trust. However, to avoid a repeat of the Cambridge Analytica-Scandal, Facebook stressed it will not solely develop Libra. Instead, it has set up an independent not-for-profit organisation called Libra Association. Facebook will be one of its founding members, alongside 27 other companies and organisations, including Uber, Mastercard and PayPal. Despite these measures, many argue the companies involved in the Libra Association – which have each contributed $10 million to the project, would be able to “disrupt and weaken” nation states. Essentially, causing a ‘systematic risk’ to the financial system. If Libra is successful, and has enough users in emerging economies trading their local currencies for Libra, this could potentially threaten the ability of governments to manage their fiscal policies. To understand the potential risks involving Libra, law firms will be needed to advise regulators on existing tax laws to cryptocurrencies in the jurisdictions in which Libra will operate in. Also, it is possible that Facebook would hold undue power on the development of ‘global technology’. This could force laws on matters such as privacy, data protection and cybercrime to be re-considered to tighten Libra’s regulations. [U]2. [B]US-Iran Tensions ([USER=1643]@Moni[/USER])[/B][/U] [B] [B]The story:[/B] [/B] Tensions between the US and Iran have been on the rise since President Trump pulled out of the 2015 nuclear deal in May 2018. The Trump administration has since increased economic sanctions on Iran’s oil exports, industrial metals, and petrochemical companies. The US hopes increased economic pressure will drive Iran to accept a stricter agreement. However, Iran has pushed back and last week Tehran shot down a US drone after announcing it would exceed the limits on its nuclear program outlined in the 2015 deal. The US’ European allies are looking to negotiate a new deal with Iran and have cautioned the US against increasing economic pressure. Iran hopes that an aversion to direct war will cause President Trump to ease economic sanctions. Although, President Trump did call of a planned military strike against Iran last week, the US has launched cyber operations against Iranian intelligence and maintains that the decision to call of the military strike should not be interpreted as a sign of weakness. Moreover, President Trump has said that economic pressure will remain unless the Iranian government changed course. [B] [B]Impact on businesses and law firms:[/B] [/B] One of the most direct consequences of US-Iran tensions are its effects on oil prices which have risen over the past few weeks. Sanctions on Iran’s oil exports reduce the supply of oil and drive oil prices upwards. In addition, several companies have seen their operations impacted by increasing tensions. Exxon Mobil has been forced to temporarily halt a $53B deal intended to boost Iraq’s oil output as a result of US tension with neighboring Iran. In addition, several airlines including British Airways were forced to reroute flights to avoid the Strait of Hormuz (which lies between the Persian Gulf and the Gulf of Oman) after Iran shot down the US drones and American airlines banned American carries from flying area as a result of “heightened military activities”. Although any further the impacts are likely to remain concentrated in the oil sector, businesses, especially those that use oil as an input or those that have significant business in the region, will be monitoring tensions especially if they continue to escalate. [B] [U]3. [B]Slack’s Unconventional Listing ([USER=1]@Jaysen[/USER])[/B][/U] [B]The story:[/B] [/B] A second major tech company successfully joined the public markets last week through an unconventional listing. Slack, which provides workplace instant messaging software, followed Spotify in opting for a direct listing instead of a traditional IPO. The company’s shares soared on its first day of trading on the New York Stock Exchange. [B] [B]Impact on businesses and law firms[/B]: [/B] Slack’s successful stock market debut is further validation that a direct public offering is a viable option for tech companies. It’s a process that cuts out the middlemen - the underwriters that set the price and allocate shares to investors in a traditional IPO – allowing Slack to avoid expensive underwriting fees. But direct listings aren’t suitable for all companies. Unlike traditional IPOs, companies that choose this route don’t raise new money; instead it’s an opportunity for investors and employees to immediately sell their shares to the market thanks to no lock-up period. However, with it comes the added financial risk of leaving the market to determine the price. While Slack may not have needed as many financial advisers to follow the IPO process, they will certainly have needed lawyers, and this is a great example of the innovative role that lawyers can play in the financial markets. In Spotify’s high-profile debut, Latham & Watkins were crucial in liaising with the SEC, setting precedent for which rules applied to a direct listing, and ensuring investors had the relevant information they needed to make an investment. In fact, Latham’s successful involvement led to a [URL='https://corpgov.law.harvard.edu/2018/07/05/spotify-case-study-structuring-and-executing-a-direct-listing/']case study[/URL] that was published by Harvard. [B] [/B] [/QUOTE]
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