By Tegan Valentine
Hello and welcome back to Top Five Friday Finds – the weekly series in which we share five of the business news stories that dominated the papers (and our conversations) this week.
Last week, we commented on the proposed Kinder Morgan TransMountain expansion project which is slated provide Alberta’s oil producers with the opportunity to ship 890,000 barrels a day to British Columbia, and overseas to Asian markets. The project gained approval from the federal government, but its future is still uncertain after plaguing regulators and policymakers for over 6 years. The TransMountain express is just one of many energy projects that has found itself in Canadian regulatory limbo. Indeed, major Canadian energy projects are notoriously difficult to approve, with critics pointing to the arduous requirements and unclear timelines set out under the existing National Energy Board as hindering energy development. With this in mind, on Thursday the prime minister’s office unveiled new rules for the environmental and regulatory approval process for pipelines and other major energy projects. The new ‘Canadian Energy Regulator’ will be comprised of two distinct agencies designed to ‘ensure more timely and predictable project reviews’ with the ultimate goal of attracting investment in the nations energy sector. Trudeau’s announcement has members of the energy sector buzzing, but sadly the excitement doesn’t extend to Kinder Morgan – projects under review will continue under the current rules.
European retailer Signa Holding’s has been courting Hudson’s Bay Company, and this week the Canadian retailer announced their decision to reject Signa’s advances. To provide context, last November HBC announced that it had received an unsolicited offer from Signa for Kaufhof, the retailer’s German department store branch. HBC had acquired Kaufhof back in 2015 as part of a $3.2 billion transaction designed to grow the company’s European business and real-estate assets. Business has been difficult for HBC in recent years. The iconic Canadian brand has struggled to adapt to changes in customer buying habits, and has seen major changes in revenue (the company lost $243 million in the final quarter of 2017), staffing (the brand aims to cut 2,000 jobs by December 2018) and leadership (HBC is set to welcome their third CEO in three years next week) as a result. When Signa’s $4.49 billion bid for Kaufhof was announced activist investors and analysts alike urged management to seriously consider accepting the bid, pointing out that the above purchase price offer would provide the company with a fresh injection of cash. Despite these statement, HBC’s board of directors unanimously voted to reject Signa’s proposal, and indicated their commitment to growing both in Europe and beyond.
Cryptocurrency dominated the investing news in 2017. When bitcoin was introduced to the international markets in 2009, it was viewed as an oddity, with many unsure how to go about handling a digital currency without roots in any given market. The currency remained relatively insignificant until 2017, when investment in bitcoin suddenly went mainstream, with the digital currency’s value surging more than 1000% over the course of the calendar year. This unprecedented growth has left regulators scrambling, and many are still struggling to determine how bitcoin should be treated domestically. Previously we’ve commented on the decision of South Korean officials to ban bitcoin trading, a move that temporarily set digital currency values in a tailspin. This week Toronto’s own Wildeboer Dellelce released a statement that is a bit closer to home, and commented on how bitcoin will be handled by Canadian tax authorities as we head into spring tax season. The Canadian Revenue Agency has said that cryptocurrencies are not considered ‘money’ or ‘currency’, and should instead been viewed as a ‘commodity’. As a result, investors are urged to compare digital ‘coins’ to conventional commodity investments, such as gold. For traders, this introduces a series of complex challenges, as buying and selling a commodity can be viewed as either a capital gain or business income, with each view being treated differently by revenue authorities.
It’s been a rough month for stock markets, and the hits keep on coming. As of Thursday, North America’s Dow, S&P, Nasdaq composite and TSX composite indexes were all down, continuing on a streak of losses that have impacted the markets since the end of January. The drop isn’t limited to North America. On Friday, investors woke up to see a 4% drop in Chinese shares with the Shanghai Composite Index down as much as 6%. What’s causing the crash? After a string of interest rate increases in both Canada (we commented on Canada’s benchmark lending rate increase to 1.25% here) and the United States (the markets expect to see three American interest-rate increases in 2018 from the Federal Reserve), investors and companies alike are concerned that inflation and the increased cost of borrowing will cut into company margins, and hinder economic growth. As a result, investors are turning away from equity markets, and looking for other forms of investment.
And finally, the markets might be down but one company is looking up – way up. On Tuesday Elon Musk’s SpaceX was able to successfully launch its Falcon Heavy rocket into space. The product of nearly $500 million in investment, the Falcon Heavy is considered the world’s most powerful rocket – capable of carrying twice as much payload as its closest competitor. This week’s cargo? A red Tesla Roadster piloted by a crash test dummy lovingly named Starman. Tuesday’s launch marks the first successful rocket launch for the company, which gained notoriety after being founded in 2002 for its lofty goals of making commercial space travel feasible, and colonizing mars. Currently, SpaceX is one of the most valuable privately held corporations in the world, with best estimates placing company value at approximately $21 billion. The future of SpaceX, and space travel in general, is still up in the air (pun intended), however with another Falcon Heavy launch on the horizon, it’s safe to say investors and government officials alike will be eagerly watching the company’s every more.