Business & economic highlights of 2014

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Photo: European Commission

Alibaba IPO

Alibaba Group Holding Limited, founded by Jack Ma in 1999 has become China’s largest e-commerce company and in 2014, took investors by surprise as after setting up an Initial Public Offering (IPO) of a staggering $25 billion, making it the worlds largest IPO, surpassing Agricultural Bank of China’s IPO of $22.1 billion in 2010. Transactions on its websites last year totalled $248 billion, more than Amazon and eBay combined. Furthermore, Alibaba has a market capitalisation of $230 billion, the fourth largest in history after Apple, Google and Microsoft respectively.

Fall in oil price and Russian Rouble

Oil prices have fallen by more than half, from $110/ barrel in June, to $53/ barrel at the end of 2014, after nearly five years of stability. High oil prices have affected oil-producing countries such as Russia (where the rouble has fallen to record lows) and Saudi Arabia.
Russia, being the most affected, has had an injection of $76 billion to maintain the rate of the rouble.

Oil prices have fallen due to:

1) American companies using hydraulic fracturing and horizontal drilling technologies, resulting in increased oil supply for America and less imports

2) Reduced global demand for oil due to weakened economies in Europe and Asia coupled with a stronger U.S. economy made oil.

3) Lower oil prices drive down commodity prices and gas prices because they lower production costs. Oil importing nations such as Japan, South Korea, China, India and Germany stand to benefit from the lower oil prices.

Continued low oil prices would eventually lead to the closure of drilling projects and related businesses, leading to job losses. Furthermore, oil-exporting nations such as Russia, Iran, Saudi Arabia and Venezuela would be hard hit by continued low oil prices.

Facebook buys Whatsapp

In early-2014 Facebook bought Whatsapp for $19 billion, a deal which is 13 times Facebook’s entire net income of 2013, making it Facebook’s largest ever acquisition to date.

The deal to buy Whatsapp (which was made in just 11 days after the proposal was tabled) includes $4bn in cash and approximately $12bn-worth of Facebook shares, plus an additional $3bn in stock to WhatsApp’s founders and employees at a later date. It is the largest deal in history for venture-backed companies.

Forex fines

Six banks have been fined collectively fined £2.6 billion by regulators in the UK (Financial Conduct Authority) and US over the attempted manipulation of foreign exchange rates by their traders. These six banks include HSBC, RBS, UBS, JP Morgan Chase, Citibank and Bank of America with a probe into Barclays ongoing. Separately, the Swiss financial regulator, FINMA, has penalized UBS 134m Swiss francs. This fine has taken a big hit on UK banks as over 40% of the worlds dealing is conducted in London, UK.

Ebola epidemic

The Ebola epidemic began at the start of 2014 and has since spread vigorously throughout Africa, widely effecting the economics of African countries, mainly Sierra Leone, Liberia and Nigeria as these countries vastly depend on agriculture farming and mining. Furthermore, tourism throughout Africa has majorly disrupted British mining and construction firms and has had to withdraw their operations from West-Africa due to the difficulty in dealing with the Ebola crisis. The World Bank assessed the Ebola outbreak to affect world economy by $4 billion to $30 billion. As the crisis continues, airlines have had to halt or delay services to these countries, which has affected income from tourism and the profits of airline companies.

The Sony breach

As Sony Pictures Entertainment prepared for the Christmas Day premiere of The Interview, a comedy about two American journalists involved in a CIA plot to assassinate North Korean dictator Kim Jong-un, the company suffered a massive data breach.
U.S. officials believe North Korea was involved in the hack, which included the theft of 100 terabytes of sensitive employee data, embarrassing email exchanges between executives, and five movies. Sony cancelled the release of The Interview after the hackers threatened a terror attack on movie theatres that showed it, but eventually reversed its decision. The breach turned out to be one of the costliest cyber attack ever waged, possibly costing them around $150 million and more!