It’s Libra Season, Btches
Facebook is currently making its own money moves – announcing last week that it would launch its own digital coin by 2020. While web or mobile-based banking is already a (pretty big) thing in many places (like M-PESA, launched a while ago in East Africa), Facebook’s digital currency, called Libra, would allow users to make financial transactions around the globe, changing the shape of global banking and finance.
Facebook presents Libra as an accessible financial alternative to many of its (2.4 billion) users who might not have access to traditional banking platforms, but the proposal is under close scrutiny by policymakers worldwide. Banks, regulators, commentators, and governments have responded to the launch citing concerns over privacy, regulations, and repercussions of big tech movements into financial services.
The Bank for International Settlements (BIS) said on Sunday that tech giants could pose a threat to financial stability and social welfare by taking over global finance. Despite the “accessibility” appeal, currencies run by companies like Facebook would also have the capability, given their access to customer data, to price discriminate or exclude certain groups from some markets. The IMF and central banks plan to meet soon to discuss exactly what type of financial, privacy, and competition policy and controls big digital currencies like Libra require.
This news comes after the US Senate wrote Zuck a letter, saying “it is … important to understand how large social platforms use financial data to profile and target consumers.” TBD how big tech will respond to increasing regulatory oversight in the coming months.
The Trans Mountain Expansion Gets (the final) Green Light
It’s no secret that Canada’s oil and gas sector has been hurting over the past several years – in fact, it’s practically all anyone in Alberta ever talks about (no shade pls, the authors are Albertan too).
One of the main challenges facing the Canadian energy industry is in bringing Canadian oil to tidewater for export to other countries. Previously, we mainly exported to the US, but their domestic energy supply has increased with the rise of fracking, and we’ve been hurting for new buyers ever since.
In comes the Trans Mountain pipeline expansion. The controversial energy project, which will transport refined oil from Alberta to the west coast of British Columbia for further export, was given a second green light following the Federal Court of Appeal’s rejection of the first initial approval, citing incomplete Indigenous consultations and a faulty environmental review. Our Minister of Natural Resources, Amarjeet Sohi, predicts construction will conclude by 2022.
Unsurprisingly, the decision has been met with praise from some and outcry from others. But what does it mean for our economy?
The pipeline will triple the capacity for shipping oil to 890,000 barrels per day, which according to economist Robert Mansell at the University of Calgary, will see a whopping extra $9 billion per year in investment and GDP, a $3 billion increase in revenue for both federal and provincial governments, and a $2 billion boost in labour income.
Despite the economic benefits the project may bring, many have criticized the project for the impact it will have on some of the 117 Indigenous communities and regions along the route of the expansion (some are in favour, some not), and the surrounding environment – particularly its effect on marine ecosystems. The Trudeau government has announced it will begin consultations with First Nations groups looking to buy into the project, and will re-invest profits into emerging clean technologies.
It’s a hot button issue with plenty of passionate advocates on either side of the spectrum. Regardless of where you sit on this topic, one thing is for certain – just because approval has been won, the drama surrounding the project is FAR from over. Cue Election 2019.
Direct Listing vs. IPO 101: the Slack Edition
Slack Technologies, aka the makers of Slack, your favourite workplace instant messenger to arrange happy hour drinks on – went public this week.
Unlike other prominent startups this year, like Uber, Beyond Meat, Crowdstrike, and Lyft, which went public through an IPO (see our insta post explaining IPOshere), Slack will be going public through a direct listing, which is very uncommon.
What’s a direct listing? According to Fortune, “Before an IPO, underwriters stage a roadshow with institutional investors to discuss a company’s financials and outlook. In the process, they assess demand and determine an initial price for the stock once it begins trading on an exchange. In contrast, direct offerings are priced by the stock market itself. Before the stock begins trading, the stock exchange determines an “initial reference price.”
In addition, with an IPO, insider shareholders (ie employees, founders, early investors) usually cannot sell their shares until six months after the stock’s first day on the market, which makes an IPO less risky because it can avoid some market volatility for a period of time, while employees in a direct listing can immediately begin selling their shares.
Another distinction? IPOs are better for raising cash for a company than direct listings. Because underwriters, which are the investment banks that (for a fee) assume some of the financial risk of a stock, go around and sell the stock to institutional investors, IPOs raise a lot of cash. In contrast, in a direct listing, a company directly lists shares on the stock market
For Slack, that initial stock price began at $38.62 USD on Thursday, and now sits at $37.22 USD as of Sunday night.
Stay tuned for more direct listings in the coming months – though no date has been set, many are speculating Airbnb will be going the direct listing route in the near future.