The round-up of the stories that a budding Student Lawyer should be aware of this week. Sign up here to get these updates in your inbox every week.
Article by Jamie Adair (1st year LLB student at Warwick University)
Macy’s, the largest US department store operator, has agreed to take a stake in the Swedish payments group, Klarna, as part of a five-year partnership – a move which sees them join the likes of BlackRock and H&M as investors in the online payments market.
Macy’s, an American department store founded in 1858, has faced struggles competing with the rise of online shopping and in particular the dominance of Amazon. It is hoped that such a partnership will provide a much needed boost, especially considering how popular Klarna is with younger consumers. The American company believes it’s crucial to expand what it offers online and adapt to changing consumer habits. This deal would make Macy’s one of the first department store companies to offer Klarna’s “buy now, pay later” (BNPL) service.
Klarna, Europe’s highest-valued private fintech, has said that this investment by Macy’s is among a number of significant deals it hopes to complete in the US before a possible initial public offering (IPO) within the next couple of years. Using Klarna allows shoppers to complete their purchase through four equal, interest-free instalments when checking out online. Klarna pays the merchant and customers then begin repaying Klarna in interest-free instalments. The Swedish company makes its money by charging fees to partner merchants and to customers for late payments.
Sebastian Siemiatkowski, Klarna’s chief executive, detailed how the ongoing pandemic affected the company in an “odd” manner which caused rapid growth as consumers started turning to online shopping. He also explained how essential “smart and flexible payments” were becoming given changing consumer behaviour. Klarna said that it processed transactions totalling $22 million in the first half of 2020, an increase of 44% compared to the same period last year. Furthermore, in the first half of 2020, it had partnerships with more than 35,000 retailers, and now partners with more than 200,000 brands globally.
Klarna has faced scrutiny recently over whether it mischievously encourages younger consumers to overspend by offering its credit solutions. Despite this, the Swedish company will be hoping to make significant gains in the US and given the ongoing pandemic it appears that the company is going from strength to strength.
Article by Joyce Yiu (LLM student at the Queen Mary University of London)
Shares in Big Hit Entertainment, the music agency behind K-pop superstars BTS, rose sharply on their market debut, as retail investors piled in and pushed the company market value as high as Won9.6tn (£6.5bn). It was more than the other three major K-pop agencies combined. Big Hit’s shares jumped by as much as 160 per cent from their IPO price of Won135,000 (£91) to Won351,000 (£237) in early trading in Seoul on 15th Oct 2020 and the shares ended trading about 90 per cent higher.
This year, as the virus kept people home, it boosted the surge in trading. Individual investors have taken over from institutional ones to account for the bulk of South Korea’s stock-market volume. Big Hit’s offering was more than 1000 times oversubscribed by institutional investors, and more than 600 times by retail.
Despite BTS faced criticism in China after one of its member Kim Nam-Joon, talked about the U.S.-South Korea relations during the Korean war in a video, sparked anger among Chinese internet users that he ignored to highlight China’s part in the conflict, Bit Hit’s listing is successful than one expected. It is noted that, as a result of the Chinese social media firestorm, Samsung removed BTS edition smartphones and earbuds from its official stores on JD.com and Alibaba’s Tmall as well as its website. Carmaker Hyundai also removed post feathering BTS from its Chinese social media sites, the Financial Times reported.
The moves indicate the potential risks foreign brand encounter in China against the backdrop of increasing nationalism. Many global brands, including Gap, Mercedes-Benz and National Basketball Association have battled reputational crises after touching on politically sensitive issues including Hong Kong, Taiwan and Tibet.
Big Hit relies heavily on BTS, who accounted for almost 90% of sales in the first half. Its dependence on just once band strikes a dissonant note. The members’ eventual absence for military service becomes a growing concern for the band. While Korean males between 18 and 28 must serve in the military for two years, BTS’s oldest start, Kim Seok-jin, is already 27. Optimism has been driven by news that K-pop boy band members who have made “great contributions” to popular culture could be granted deferral to the military service that disrupts their careers. This move would buy the band members some time, though not much.
Another risk comes from Big Hit’s investors. Entertainment stocks tend to attract short-term shareholders highly sensitive to market gossip. 30% of the institutional investors who bought into the IPO can sell the shares after a month which their lock-in period expires. Some institutional investors have agreed to short lock-in periods – as little as 15 days. Private equity firms, the third-largest shareholder group, will be tempted to take their profits when they can and potentially it might lead to the fluctuation of Big Hit’s share price.