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Oil price shock leaves markets on edge, as WeWork postpones float – business live Oil price shock leaves markets on edge – business live
(32 minutes later)
Shares in cruise operator Carnival have dropped by 3% in early trading, to the bottom of the FTSE 100 losers column.
Higher oil prices will eat into its profits, and could also hurt economic growth - possibly meaning fewer people can pay for that trip of a lifetime....
Shares in oil giant have risen again this morning, as investors anticipate higher crude prices.
BP and Royal Dutch Shell topped the FTSE 100 risers at the open, up around 1%.
WeWork’s business model is pretty simple -- it buys offices, and then rents it out to businesses, or individual workers who might want an occasional hot-desk.
The idea is that WeWork handles everything -- from paying the utility bills to restocking the printer -- along with some enticing downtime options including video games and table football. For a while there was even unlimited free beer.
But ultimately, it’s office rental -- so a $47bn valuation always looked toppy.
Last week, my colleague Nils Pratley outlined the four reasons investors weren’t keen on backing the IPO.
As Nils put it:
Co-founder Adam Neumann wasn’t obviously living up to the spirit of collective endeavour when his investment vehicle was paid $5.9m by the company for the right to use the trademarked word “we”. The sum has been repaid but how was the arrangement ever approved?
WeWork looks like a bubble waiting to burst
The We Company, the parent of WeWork, insists that its float will still take place by the end of the year (just not next week).The We Company, the parent of WeWork, insists that its float will still take place by the end of the year (just not next week).
In a statement following the postponement of its IPO, it says:In a statement following the postponement of its IPO, it says:
“The We Company is looking forward to our upcoming [initial public offering], which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment.”“The We Company is looking forward to our upcoming [initial public offering], which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment.”
But... the delay is going to cause problems.But... the delay is going to cause problems.
WeWork needs to raise at least $3bn through a float to unlock a new $6bn debt facility from its banks. As WeWork is currently loss-making, it would have to raise cash elsewhere if it lost that credit line. No wonder it hopes to press on.WeWork needs to raise at least $3bn through a float to unlock a new $6bn debt facility from its banks. As WeWork is currently loss-making, it would have to raise cash elsewhere if it lost that credit line. No wonder it hopes to press on.
Ironically the delay could be good news for Japanese tech investor SoftBank, a major investor in We. Last year it injected $3bn, in a move valuing We at around $45bn. Had We only floated at, $20bn, SoftBank’s investment wouldn’t look very rosy.Ironically the delay could be good news for Japanese tech investor SoftBank, a major investor in We. Last year it injected $3bn, in a move valuing We at around $45bn. Had We only floated at, $20bn, SoftBank’s investment wouldn’t look very rosy.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Global stock markets are extremely edgy today as investors worry about rising tensions in the Middle East.Global stock markets are extremely edgy today as investors worry about rising tensions in the Middle East.
Last weekend’s attack on Saudi Arabia’s massive oil facility at Abqaiq, and America’s threat of military response, has knocked shares around the world and driven oil prices alarmingly higher.Last weekend’s attack on Saudi Arabia’s massive oil facility at Abqaiq, and America’s threat of military response, has knocked shares around the world and driven oil prices alarmingly higher.
Fears of supply shortages drove crude prices alarmingly higher on Monday, up over 14%. Brent crude spiked to $69 per barrel, the biggest one-day jump since the 1980s. US crude finished at $62, the biggest one-day move since the financial crisis.Fears of supply shortages drove crude prices alarmingly higher on Monday, up over 14%. Brent crude spiked to $69 per barrel, the biggest one-day jump since the 1980s. US crude finished at $62, the biggest one-day move since the financial crisis.
The jump in oil prices has hit airline stocks. Higher crude prices could mean slower global growth -- hurting banks, industrial firms and consumer goods makers.The jump in oil prices has hit airline stocks. Higher crude prices could mean slower global growth -- hurting banks, industrial firms and consumer goods makers.
Last night, the US Dow Jones lost 142 points, or 0.5%. Stocks have fallen in Asia overnight, with China’s CSI 300 index losing 1.7% and Hong Kong’s Hang Seng dropping by 1,5%.Last night, the US Dow Jones lost 142 points, or 0.5%. Stocks have fallen in Asia overnight, with China’s CSI 300 index losing 1.7% and Hong Kong’s Hang Seng dropping by 1,5%.
Donald Trump has insisted that he doesn’t want war in the Middle East, but Washington are also insisting the attacks has Tehran’s fingerprints on it.Donald Trump has insisted that he doesn’t want war in the Middle East, but Washington are also insisting the attacks has Tehran’s fingerprints on it.
Remember when Iran shot down a drone, saying knowingly that it was in their “airspace” when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a very big lie. Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?Remember when Iran shot down a drone, saying knowingly that it was in their “airspace” when, in fact, it was nowhere close. They stuck strongly to that story knowing that it was a very big lie. Now they say that they had nothing to do with the attack on Saudi Arabia. We’ll see?
Stephen Innes, Asia Pacific market strategist at AxiTrader, says investors worry that an oil price shock could push the global economy down:Stephen Innes, Asia Pacific market strategist at AxiTrader, says investors worry that an oil price shock could push the global economy down:
Global equity markets are stabilising after the drone attack but remain in a state of limbo trying to access the economic damage of a possible lengthy oil price shocker, keeping in mind that every recession since 1973 has included an oil price shock, versus the favourable medium-term S&P 500 correlation to higher oil prices.Global equity markets are stabilising after the drone attack but remain in a state of limbo trying to access the economic damage of a possible lengthy oil price shocker, keeping in mind that every recession since 1973 has included an oil price shock, versus the favourable medium-term S&P 500 correlation to higher oil prices.
All the while, nervously evaluating the possibility of a joint military response from the U.S. and Saudi Arabia.All the while, nervously evaluating the possibility of a joint military response from the U.S. and Saudi Arabia.
Saudi oil attacks push prices up by highest amount since 1988Saudi oil attacks push prices up by highest amount since 1988
The other big news of the morning is that WeWork, the office space sharing firm, has postponed its controversial stock market flotation.The other big news of the morning is that WeWork, the office space sharing firm, has postponed its controversial stock market flotation.
WeWork was forced to pull its IPO after getting a lukewarm, bordering on chilly, reception from potential investors.WeWork was forced to pull its IPO after getting a lukewarm, bordering on chilly, reception from potential investors.
The office sharing firm was once valued by major investor SoftBank at $47bn (£37.8bn), but was forced to slash its ambitions as Wall Street baulked at its heavy losses, complicated corporate structure, and founder Adam Neumann’s grip on the company.The office sharing firm was once valued by major investor SoftBank at $47bn (£37.8bn), but was forced to slash its ambitions as Wall Street baulked at its heavy losses, complicated corporate structure, and founder Adam Neumann’s grip on the company.
It had been planning an investor roadshow to market the shares this week, ahead of a trading debut next week - but this is now on pause.It had been planning an investor roadshow to market the shares this week, ahead of a trading debut next week - but this is now on pause.
This is obviously a blow to the company, which had been under pressure to complete the IPO to unlock new funding.This is obviously a blow to the company, which had been under pressure to complete the IPO to unlock new funding.
As the Financial Times puts it:As the Financial Times puts it:
The delay to the IPO will also block WeWork from accessing a $6bn loan that had been provided by a consortium of banks, contingent on a successful IPO this year. If WeWork is unable to finalise its listing in 2019 it could be forced to draw up new financing plans.The delay to the IPO will also block WeWork from accessing a $6bn loan that had been provided by a consortium of banks, contingent on a successful IPO this year. If WeWork is unable to finalise its listing in 2019 it could be forced to draw up new financing plans.
While the company is still set to receive a $1.5bn capital injection from SoftBank in 2020 as part of an earlier agreed deal, the cash cost of its global expansion has depleted its reserves and proven a key issue for investors.While the company is still set to receive a $1.5bn capital injection from SoftBank in 2020 as part of an earlier agreed deal, the cash cost of its global expansion has depleted its reserves and proven a key issue for investors.
Traders will also have a eye on the UK Supreme Court. Eleven of Britain’s top judges will hear today whether Boris Johnson acted unlawfully when he advised the Queen to suspend parliament for five weeks.Traders will also have a eye on the UK Supreme Court. Eleven of Britain’s top judges will hear today whether Boris Johnson acted unlawfully when he advised the Queen to suspend parliament for five weeks.
Supreme court to hear claims suspension of parliament is unlawfulSupreme court to hear claims suspension of parliament is unlawful
The agendaThe agenda
10am BST: ZEW survey of German investor confidence10am BST: ZEW survey of German investor confidence
2.15pm BST: US industrial production figures for August (forecast to rise by 0.2%, up from -0.2%).2.15pm BST: US industrial production figures for August (forecast to rise by 0.2%, up from -0.2%).