OPEC Loses Energy

Plus: Here's one return Amazon won't have to accept: European back taxes. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 15, 2023

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Good morning and happy Friday!

No news is bad news.

Top news publishers, including Condè Nast, Vox, and The Washington Post, have cut nearly 2,700 employees this year, the highest number of layoffs since Covid destroyed content budgets in 2020. Popular Science shut down its online edition, and Bloomberg Businessweek needs a name switch as it switches to a monthly schedule. It's not just the big-name publications suffering either. Layoffs at smaller papers and magazines are creating and expanding news deserts — about 200 US counties don't have a local newspaper. If you're still racking your brain on what to get a loved one for the holidays, we can think of one that won't even break the bank: a free subscription to a newsletter with upside (in its name). We love you, too.

ENERGY

OPEC+ Is Losing Market Share as Oil Demand Starts to Slip

You think it's easy being OPEC+?

The group controls just 51% of the global oil market — the smallest share since its creation in 2016 — driven by both slow demand growth and the record-high output from competing nations, according to the International Energy Agency. You call that a cartel? That's a snack for Alphabet and Meta.

Cut It Out

OPEC+, which comprises mostly Middle Eastern and African nations as well as a few others like Mexico and Brunei, has tried increasing the price of oil this year via voluntary production cuts. But despite members Russia and Saudi Arabia slashing 1 million barrels per day of production since the spring, the per-barrel price mostly spent the year hovering between $75 and $85, and it's been on a straight decline for the past two months to around $71.

And with OPEC+'s diminishing supply, it was inevitable that other producing countries would be incentivized to fill in the gaps — like the US. Despite President Biden's bullishness on clean energy, the US is drilling more than it ever has, with the IEA saying that it was responsible for two-thirds of the production increase from non-OPEC+ countries in 2023. By September, US oil companies were pumping out more than 20 million barrels a day, while Brazil (joining OPEC+ next year) and Guyana hit record high production levels, too.

However, stepped-up supply can become oversupply in hurry, and the IEA said evidence of a slowdown in oil demand is mounting:

Europe's oil demand is expected to be particularly soft amid its manufacturing and industrial slump. And don't forget electric vehicles — as adoption rates continue to grow, oil consumption will curb.
Many nations' are tightening their efficiency standards, and at this year's COP28 climate summit, nearly 200 countries agreed to begin reducing global consumption of fossil fuels to limit climate change.

Decisions, Decisions: Whether the nations at COP28 follow through on using less fossil fuels is far from a given. The IEA says if the world is to reach its climate goals, oil companies would have to take half of the $800 billion they invest into fossil fuels each year and spend it on renewable energy projects. Right now, those companies are spending just 2.5% of their capital on green power. "Clean energy progress will continue with or without oil and gas producers," IEA Executive Director Fatih Birol said. "However, the journey to net zero emissions will be more costly, and harder to navigate, if the sector is not on board."

Written by Griffin Kelly

A Tax to Grind

The case first surfaced in 2017, when the European Commission's antitrust czar Margrethe Vestager alleged that Luxembourg — where the US Big Tech firm keeps its EU headquarters — granted Amazon illegal tax benefits. Essentially, Vestager argued that the company dodged taxes on roughly 75% of its profits between 2006 and 2014 by shifting profits from a tax-subjected company to a tax-exempt holding company.

"In other words, Amazon was allowed to pay four-times less tax than other local companies subject to the same national tax rules," Vestager charged at the time, adding "This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others."

Six years of lengthy appeals processes later, Amazon is getting let off the hook:

In 2021, a lower EU court sided with Amazon, saying the commission failed to prove Amazon was granted illegal benefits. The EC appealed the ruling, sending the case to the EU's highest court, which ruled Thursday in Amazon's favor once more; the case can not be appealed again.
"The Court of Justice confirms that the commission has not established that the tax ruling given to Amazon by Luxembourg was a state aid that was incompatible with the internal market," the court said in a statement.

Apple in their Eye: Amazon's tax bill in this case is but a crab apple compared to what another mega US tech firm may be on the hook for in Europe. In a similar case stemming all the way back to 2016, Vestager and the European Commission are seeking €14 billion in back taxes that Ireland — the EU's relative tax haven preferred by many US firms — allegedly failed to collect from Apple. Europe's Court of Justice is expected to make a final ruling next year. For big US tech firms, you're nobody if you're not receiving antitrust scrutiny from the EU.

Written by Brian Boyle

BANKING

Wall Street Takes Back Equity Underwriting Top Spots

Photo by Sam Valadi via CC BY 2.0

America is No. 1 again on Wall Street. Woot.

After Chinese financial institutions claimed the top spots in global equity underwriting league tables in 2022, good ol' American firms like Goldman Sachs and JPMorgan clawed their way back to the top of the rankings, according to a Bloomberg analysis published Thursday.

IPWoe's

To be perfectly clear: the winnings were slim in 2023. Overall, just over $24 billion was raised in US IPOs this year, up a smidge from last year but still down more than 90% from the IPO fever of 2021. Globally, about $516 billion was raised across IPOs, secondaries, and the convertible bond market, according to data compiled by Bloomberg, leaving US firms with big international operations plenty of room to play.

But for Chinese firms, which clutched last year's top spot amid the US IPO draught, 2023 was a nosedive:

While Chinese companies raised $55 billion en route to IPOs this year, that still marked a 33% decrease from the year before, due to regulatory clampdowns in the country starting late last year that slowed the pace of IPOs.
Citic Securities, which owned the top spot in last year's league tables, fell all the way to No. 6 this year, while last year's fifth-ranked China International Capital Corp. fell all the way to eighth.

"China could see its IPO pipeline squeezed further amid regulatory caution on vetting new listings in order to bolster secondary-market activity," wrote Sharnie Wong, a Bloomberg Intelligence analyst based in Hong Kong.

Road Paved With Gold: The vacuum allowed Goldman Sachs to sweep into the top spot, underwriting $41 billion in offerings globally, good for a roughly 8% market share. That narrowly beats BofA's $39 billion and JPMorgan's third-place $36 billion, with Morgan Stanley and Citi rounding out the top five.

Written by Brian Boyle

Finance Executive Online

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