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You can find the current article at its original source at https://www.theguardian.com/business/live/2019/sep/17/markets-oil-saudi-trump-wework-postpones-float-business-live
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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 1988 | Saudi 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 unlawful | Supreme court to hear claims suspension of parliament is unlawful |
The agenda | The agenda |
10am BST: ZEW survey of German investor confidence | 10am 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%). |