Updated: Jun 21, 2020
The financial world enjoyed, and equally endured, some great surprises this week. The last seven days saw LVMH’s acquisition of Tiffany and Co, Uber’s licensing troubles in London, and Tesla’s nightmare public demonstration, among other events. If none of these events ring a bell, or mean anything in particular to you, don’t worry, because over the course of this article, we’re going to break down three of last week’s biggest financial events, and simplify them, so that you walk away as an expert.
LVMH – Tiffany Deal
On Thursday, a writer for the Economist wrote the following:
“What do you buy the luxury group that has everything? More diamonds, apparently. On November 25th, LVMH, already the biggest beast in global luxury, announced it was taking over Tiffany & Co, where Wall Street bond traders sink a few bucks to improve their chances of turning girlfriends into fiancées.”
On Monday of last week, it was announced that LVMH, the global conglomerate luxury goods company, had acquired Tiffany, the New-York based luxury jewellers. The deal will cost just shy of $17 billion USD, which actually isn’t too steep, as it roughly equates to four years’ worth of Tiffany’s sales. As part of the deal, Tiffany will become the 76th maison, or company owned by the LVMH group, joining alongside renowned businesses such as TAG Heuer, Dior, and Louis Vuitton. What does this mean for the industry, as well as both LVMH and Tiffany?
Well, for starters, it reinforces LVMH’s regal status at the summit of the luxury world. The company, owned by Bernard Arnault, has seen significant growth recently, highlighted by its three-fold increase in share price over the last five years. By means of acquiring Tiffany and Co, it will be hoping to continue this upwards trend. In fact, since news of the acquisition emanated earlier this week, it has seen LVMH’s valuation rise to about $227 billion USD, which puts it in direct competition and rivalry with Royal Dutch Shell for the crown and title of the most valuable EU-based firm.
For Tiffany, it’s also likely to be good news. The jewellery company hasn’t been meeting financial expectations recently, and the acquisition will no doubt help Tiffany in its turnaround efforts. It will look to Bulgari’s success since it was also acquired by LVMH in 2011 [in which it has seen profits increase five-fold] as a benchmark to follow.
For how long the luxury goods industry will continue to thrive is unknown. However, whatever happens within the next few years to the industry, it is certain that LVMH, aided by the acquisition of Tiffany, will still be the principal player in the market.
2. Uber’s Loss of its London License
We all know about Uber. Many of us frequently use it to commute to work, or to get to and from airports and train stations. Even more of us probably use our parents’ credit cards to fund our lavish Uber lifestyle. But, if you’re living in London, this might not be the case for much longer!
On Monday last week, Transport for London (TfL) announced in a report that Uber is no longer ‘fit and proper’ enough to have its license to operate in the city of London renewed. The main reason behind this conclusion is fears over passenger safety. Every once in a while, there’s a circulating article in the news that accuses Uber of not complying with stringent passenger safety guidelines. As recently as August, an Uber driver from Melbourne was found guilty of taking a drunk passenger to his home before raping them. Now, in London, it has been uncovered that over 14,000 rides, operated by forty-three different drivers in the city, were unauthorised. Dara Kerr of Cnet.com explains how the process would work:
“ A number of drivers would share one account, and whenever one of them went out to drive, they’d upload their own photo to fool passengers. The unauthorized drivers were able to pose as vetted, licensed and insured, when often they weren’t.”
This isn’t the first time that Uber have had their London license revoked, as the same thing occurred in September 2017, again over passenger safety concerns. However, the decision was overturned by a court appeal. The problem is also not isolated or specific to London. For example, in 2017, it was discovered by regulators in Colorado that Uber had allowed 57 drivers who were previously convicted of felonies to operate as drivers for the company.
What does the future hold for Uber?
Well, it’s most likely that not much will change. Uber have 21 days to appeal the decision by TfL, and, due to the company’s huge popularity in the capital city, the license ban is unlikely to be permanent. Uber’s share price plummeted by 3.43% after the news was announced on Monday, but it has since started to recover, even amidst the Indian ride-hailing platform, Ola, publicised that it would begin to operate in London soon.
Uber does have increasing competition from companies such as Ola and Kapten, but it is still the market leader in London, and many other global cities, by a long way. Even if other UK cities follow suit in not renewing Uber’s license, it will still undoubtedly continue to flourish in other regions around the world.
3. Tesla’s Smashing Week
Elon Musk’s Tesla is widely regarded as the flagship of the future of the technological and automative world. Its self-driving car technology is set to wow the world in the years to come. However, last week, Musk’s vision seemed to come crashing down. Tesla’s new, all-electric vehicle, the Cybertruck, was revealed to eager investors, but the public demonstration did not go so well. The vehicle was claimed by senior officials at Tesla, including Elon Musk himself, to be bulletproof – protected against a 9mm handgun, a kitchen sink, wrenches and sledgehammers. However, during the demo, Musk, wanting to show the durability of the vehicle, launched a metal ball at the truck’s glass windows. And, they duly smashed…twice. The result was clearly unexpected by Tesla, and, after profanities by Musk on stage, he calmly said, “Well, maybe that was a little too hard!”
Lora Kolodny poking a bit of fun at Tesla
The news isn’t good for Tesla. It’s auto-pilot vehicle, that will have a base market price of $39,900 (with the option to include a self-driving package for an additional $7,000), has been ridiculed around the world. The company’s share price dropped by 6.15% immediately after the embarrassing mishap, and it has found it difficult to rebound in the days since. Even so, the vehicle has received thousands of pre-orders worldwide, and it will be interesting to see how Tesla goes about finding a way to make its “bulletproof” windows actually bulletproof.
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