Commercial Awareness Breakdown: 16–20 March 2020

Plant-Based Meat, E-Scooters and Brent Crude

Posted at youthlaw.co.uk…

Commercial Awareness Breakdown deconstructs three of the week’s commercial stories in an understandable and jargon-free manner. Terms bolded and underlined may be more difficult to understand and are explained at the bottom.

Unsure about what exactly commercial awareness is? Click here to find out.

1) Plant-Based Meat

US plant-based meat manufacturer Impossible Foods has recently raised $500 million in funds in an attempt to prepare itself against the Covid-19 outbreak, a pandemic which has already caused chaos across multiple markets. The firm’s chief financial officer (CFO), David Lee, stated that the raise was carried out primarily “to withstand any short-term shocks”.

Impossible Foods’ rival, Beyond Meat, conducted an IPO last year, but has recently lost half of its value. On the 19th of March, the shares, trading as BYND (its ticker symbol), were valued at $57.33 per share. One month ago, however, on the 19th of February, they were trading at $126.10.

Impossible Foods’ fund raiser was led by South Korean asset management firm Mirae Asset Global Investments. The manufacturer has also been pushing into new global markets, having recently applied for EU and Chinese regulatory approval.

The money, claims the firm, will be used for research, development and commercialisation. Currently sold in the US, Singapore and Hong Kong, the firm seeks to expand its range to plant-based fish substitutes, having recently released its pork and sausage lines.

The firm currently has no plans to make a public offering. Considering Beyond Meat’s recent performance, this seems to be a prudent idea. That said, Pat Brown, the firm’s founder and CEO, has noted that the firm has already carried out most of the background work, so could float relatively quickly if it needed to.

2) E-Scooters

Electric scooters may soon be legalised on roads in England in an attempt to support environmentally friendly transport. The scooters, despite being hugely popular, are currently illegal to ride on public roads under the 1988 Road Traffic Act.

E-scooters qualify as ‘personal light electric vehicles’ (PLEVs), which are illegal to ride on the UK’s public roads and pavements (1835 Highways Act). Riders using these vehicles, which can often reach speeds of 20mph, may currently be fined £300 and issued with six points on their driving licence.

The requirements imposed by the government will likely include a minimum age for use along with insurance requirements. It has been suggested, however, that this isn’t enough, and that instead separate lanes should be given to e-scooter riders.

The government has announced it will run consultations on how to allow the use of scooters whilst maintaining safety and insurance standards. According to one source, the technology has resulted in at least 29 deaths since 2018, the vast majority of deaths being that of the rider. The government’s move comes as part of a larger review of transport legislation across the UK. Grant Shapps, the government’s Transport Secretary, stated that the country is “on the cusp of a transport revolution”, and that the government’s review will ensure they “understand the potential impacts of a wide range of new transport modes”.

The government has announced it has £90 million available for studying e-transport solutions, including e-scooters, in four zones across the country. Other solutions to be explored include the use of drones for carrying medical supplies. Along with the government, Bird, a Californian start-up, has been running trials in an east London park since 2018 in an attempt to persuade lawmakers to legalise the technology.

A recent study found that e-scooter riders are not exposed to significantly higher risk of injury or death than cyclists. However, although this may be the case in cities, it has also been noted that uneven roads may pose larger risks to e-scooter riders than cyclists, as the wheels are simply much smaller. Clearly, these scooters are beneficial for the planet. However, whether they can be implemented safely is for the government to determine.

3) Brent Crude

A small group of hedge fund managers have seen large returns after betting on a fall in oil prices. Betting on a fall in a market, known as ‘shorting’, occurs when a trader anticipates the fall in value of a share/commodity, and sets up their fund to profit from this fall. The grade of crude oil in question here is Brent crude, a sweet light crude of low density, set as a major trading standard worldwide.

Oil prices have recently declined by more than 60% after a combination of Saudi-Russia relations and the coronavirus outbreak — for the first time in 17 years the price of one barrel of Brent crude sat below $25 ($24.88 on March 19th). The price did rise up to $28.47 on the 19th, however sat at $26.98 at the end of trading on Friday the 20th.

Brent crude value over the past six months, data provided by Business Insider: http://markets.businessinsider.com/commodities/oil-price

Pierre Andurand, Doug King and Per Lekander are three of the few investors still betting on the Brent crude markets. Pierre Andurand’s Andurand Capital fund, which manages around $1 billion of assets, took a loss in January, but is reported to have made up to 50% this month from the falling oil prices. Doug King, head of RCMA’s $165 million Merchant Commodity Fund, is reported to have gained over 25%. Mr King described the current situation as “dreadful”, but reminded onlookers that his job is simply “to protect investor capital”. Per Lekander of Lansdowne Partners, a renewable energy focused fund with around $1 billion under management, is up around 6% this year from oil’s failings and the renewables’ endurance through the recent crises.

Along with the coronavirus spread, the price fluctuations have been fuelled also by the Saudi-Russia price war. The two nations had had a deal for around three years, using their collective power to control the price of oil by limiting production. However, after oil demand began to slow, the two disagreed as to a response, with Saudi Arabia wanting to further cut production to ensure stability, and Russia wanting to produce more.

Saudi Arabia, fuelled by the dispute, promised to drown the market with 2.6 million more barrels per day whilst cutting the price for Europeans. The price of crude subsequently fell by 30%. The fight is still ongoing, and US President Trump recently stated he would “get involved” at the “appropriate time”. However, whether this input will work is unclear, as despite facing economic hardship from the plummet, Russia seems resistant to even hold conversations with Saudi leaders.
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Difficult Terms:

Asset Management Firm — A firm paid to invest individuals’/companies’ capital with the aim of growing their finances.

CEO — Chief Executive Officer — the most senior officer in charge of an organisation.

Commodity — A raw material traded on a commodity market.

Crude Oil — Crude oil is a naturally occurring, unrefined petroleum product which is often traded on commodity markets.

EU — European Union — An international organisation in which different countries are members. The union imposes certain trade and legal requirements upon its members.

Float — Floated shares are available to the public for investors to trade.

Hedge Fund — An investment fund which takes assets from various investors and pools it into a variety of assets.

IPO — Initial Public Offering — Stocks (financial units of ownership interest in a company) are offered (for the first time) for the public to buy on a stock exchange — this is often used as a method of raising cash in a company.

Legislation — Written law passed by Parliament.

Renewable Energy — Energy collected from renewable, sustainable resources — for example solar energy, wind energy and tidal energy.

Returns — Returns is the ratio or percentage of gain made on an investment. Good, reasonable, returns sit at around 15%, however in some cases these can be much higher.

Secretary — A Secretary of State is a Cabinet minister in charge of a particular government department.

Share — A financial unit of ownership interest in a company.

Start-up — A new company intending to grow to be a large-scale organisation.

Ticker Symbol — An abbreviation uniquely identifying publicly traded shares on a stock market.