By the Editors November 20, 2015
Lawsuits Against Volkswagen Pile Up
Volkswagen assembly line ©Roger W
Australian law firm Maurice Blackburn this week filed a $72 million class action lawsuit against Volkswagen. It is one of dozens that have been filed against the German automobile manufacturer in recent weeks after the company became embroiled in a global recall scandal. The recall was ordered after tests revealed that the company had fitted thousands of its vehicles with software aimed at falsifying emissions levels.
More than 10,000 car owners have joined the Australian lawsuit, which seeks to recover the full cost of the vehicle, plus damages for alleged deceptive conduct. Some 90,000 cars fitted with the software were sold in Australia.
Volkswagen has set aside US$7.3 billion to cover the fallout from the scandal, according to the Wall Street Journal. Regulators in Europe and the U.S. imposed a deadline of today for the company to offer a method for fixing cars affected by the software, which could represent more than 12 million vehicles worldwide. The company this month offered US$1,000 in goodwill payments to U.S. customers whose diesel cars contained the emissions software.
Square and Match IPO
Tinder, a Match Group site © Global Panorama
Mobile payments startup Square Inc. and online dating empire Match Group Inc. made their debuts on the stock market this week. The two IPOs performed well in early trading.
Square shares popped 45 percent in trading on Thursday, but the IPO was offered at just $9 per share, well below the expected $11 to $13, which was already down from earlier estimates. The company sold stock for $15.46 a share in its last private funding round, according to Bloomberg.
Match, which operates Match.com, OkCupid and Tinder, priced its shares at $12, at the bottom of the expected range of $12 to $14. The IPO opened 13 percent above the offering price.
The two tech companies were known as unicorns—a term used in the venture capital world to refer to private startups whose value has exceeded $1 billion. Some analysts worry that private tech startups are being valued at unsustainable levels.
It has been a bad year for IPOs. So far in 2015, the average IPO has lost 4.8 percent from its offer price, according to Reuters, which cites Renaissance Capital. And of 14 widely watched IPOs that went to market in the past 12 months, half of them are now in the red.
IRS to crack down on corporate inversions
The U.S. Treasury this week issued a letter announcing its intention to crack down on corporate inversions. It is a strategy U.S. multinationals have increasingly been using to avoid U.S. taxation. The U.S. multinational acquires a small foreign competitor and relocates, on paper, to its home country. Management typically stays in the U.S.
Drugs ©Charles Kaiser
The announcement came amid news that U.S. drug giant Pfizer is in talks to acquire Allergan, which would result in the U.S. company re-domiciling to Ireland. That deal had faced delays recently and timing is now uncertain given the Treasury’s announcement.
“Later this week, we intend to issue additional targeted guidance to deter and reduce further the economic benefits of corporate inversions,” the Treasury wrote in its letter, according to Reuters.
Pfizer was not named in the letter, which was signed by Treasury Secretary Jack Lew and addressed to U.S. Senators Ron Wyden and Orrin Hatch, and Representatives Kevin Brady and Sander Levin, who serve on the Senate and House tax committees. But Levin said in a statement, “The fact that American companies, including Pfizer, continue to pursue inversions makes clear that additional steps are needed to stop this trend.”
According to Reuters, the Treasury has already taken a number of steps to curtain inversions after a flurry of such deals took place in September, 2014.
U.S. Healthcare Spending Doesn’t Pay
Doctor visit ©Laura Smith
The Economist this week published a data visualization that shows America’s big spending on healthcare doesn’t pay off in life expectancy. The visualization relies on November data from the OECD. “In 2013 America spent, on average, $8,713 per person—two and a half times as much as the OECD average. Yet the average American dies 1.7 years earlier than the average OECD citizen,” the Economist wrote. “Americans have the same life expectancy as Chileans, even though Chile spends less than a fifth of what America spends on health care per person.” It’s a depressing look at America’s ongoing healthcare crisis.
