Capture Structure

Contemporary Issues in international Finance 2 - crowdfunding extansion Research

Contemporary Issues in International Finance 2

-          Crowdfunding extension research

 

In previous blog, I have brief talking about the crowdfunding regulation in America. However, technology development is existed in all over the world. Except America, some other countries, such as China, does not have specific regulation for crowdfunding. Therefore, this blog would compare the crowdfunding between America and China to study the further development of those emerging country.

Previous review:  crowdfunding is firstly regard as likely illegal funding and turn to regular after Jumpstart Our Business Startups Act regulation has been signed in 2012.

Then, in current China, Crowdfunding has similar threaten as regarding as illegal funding. From current Chinese Corporation Law, exceeding 200 people nongovernmental funding would regard as illegal funding. Then, some current crowdfunding corporation are limited under that regulation which would not develop well.  After comparing several differences between Chinese financial market and American financial market which would be discussed in the following, the reason of low ebb around crowdfunding in China might be got.  

Firstly, funding environment is different. Comparing complicated and polybasic funding market in America, there are few funding methods in China, in particular for micro-corporations and creation corporations. Therefore, crowdfunding would be possible developed rapidly in China.

However, as credit system is different, crowdfunding development would be limited in China. There is perfect and mature credit regulation, organization to support financial activities in America. However, this kind of system is typically weak in China. For investors, the credit of project starters and crowdfunding corporations is significant. Then, some swindle crowdfunding corporations are frequent exist recently in China. Therefore, crowdfunding in China could not develop well the same as America. Even though, there are some licenses are made by Chinese government to help investors distinguish relatively trusted corporations. As the weaken credit system, it is difficult for government and central bank themselves to distinguish some fresh corporations.

Moreover, the differences in regulation environment would be the significant reason to show the limitation of crowdfunding in China. In 2012, America set up a Jumpstart Our Business Startups Act to crowdfunding exemption. However, there isn’t any specific regulation for crowdfunding in China although Chinese government shows some support and positive view on crowdfunding future development. Moreover, current regulations are limiting the development of crowdfunding.

Except crowdfunding, there are some more technological and financial related area has been unified and named as internet finance in China (Xie & Zou, 2012). In China, some experts defined internet finance in 6 patterns, such as Peer-to-Peer lending, big data finance, crowdfunding, the third part payment, internet finance website and technological financial organization. The other five internet finance situation is similar as crowdfunding in China. First of all, according to the China Development Bank (2013), Chinese government have promoted financial inclusion system by the “Decision of the CPC Central Committee on Several Major Issues Concerning the Comprehensive Deepening of Reforms” announced at the Third Plenary Session of the 18^th CPC Central Committee. To make finance inclusive, internet finance could be used as a popular and simplified finance model (Xie & Zou, 2012). However, according to the Economist (2014), some revolute financial system like internet finance could be hard to survive in some complicated environment, such as China, as its difficult control.  Thus, internet finance has well finance but currently limited.

 All in all, beside crowdfunding, internet finance would have good prospect in China but regulations should be established as soon as possible.

Bibliography:

Cdb,. (n.d.). CHINA DEVELOPMENT BANK. Retrieved 18 March 2014, from http://www.cdb.com.cn/english/NewsInfo.asp?NewsId=4886

The Economist,. (2014). Foe or frenemy?. Retrieved 18 March 2014, from http://www.economist.com/news/finance-and-economics/21597966-chinas-giant-banks-are-under-attack-foe-or-frenemy

Thinksaas,. (2014). differences between America and China in Crowdfunding. Retrieved 18 March 2014, from http://www.thinksaas.cn/news/show/5471/

Xie, P., & Zou, C. (2012). Internet financial model research. Financial Research.

 

Contemporary Issues in International Finance 1 - crowdfunding class case based analysis

Contemporary Issues in International Finance 1

-          Class Case (Kick Starter) based analysis

General knowledge introduction

Kickstarter is a Crowd Funding platform which is stated mission is to help bring creative projects to life. People who back Kickstarter projects are offered tangible rewards and special experiences in exchange for their pledges (Kickstarter, n.d.).

Crowdfunding  is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet (Oxford Dictionary, n.d.).

After Kickstarter lauched in 2009, there is a furious debating on that website as it seems to be illegality funding with high success project’s rate. On the one hand, the New York Times (2011) called Kickstarter "the people's NEA" as well as the Time named it one of the "Best Inventions of 2010" and "Best Websites of 2011" (McCracken, 2011). Other other hand, as the high subscribe rate in Kickstarter, some projects may exceed 100 thousands people to invest it which become the typical irregular funding case. Moreover, as Kickstarter  is different from P2P pattern which has been control by current laws, Kickstarter is  exceed the all of exemption regulation in America. However, in America, the Crowdfunding situation has been efficient control since Jumpstart Our Business Startups Act regulation has been signed in 2012 (Goins & Little, 2014). After its specific regulation has been set up, Crowdfunding are generally turned into a normal and regular pattern in current financial market.

Class case reflection

Based on previous brief introduction and regular analysis on crowdfunding, some further ideas related to crowdfunding based on Kickstarter case are got after class study. In the international finance and financial management seminar, we have been separated into four teams and create our projects to crowdfunding from other classmates. Four teams would be generally classified to 4 types of projects: innovation technology, computer games, electric project, shoes creation project. First of all, after comparing with four projects, there is another regular could be found around this area. In the seminar, an innovation technology project related to translation is the most popularity project in that class. Moreover, it could be found that, the more life related projects win more investors’ attention.  Then, although, according to Kickstarter (2014), it seems that most of projects in Kickstarter are related to arts, such as: films, music, stage shows, comics, journalism, video games and food-related projects. From the class projects, it seems that some projects related to computer and high technology could be the primary elements of crowdfunding.  However, this kind of structure basis of crowdfunding may increasing to risk impact of crowfunding and lead financial crisis. According to Galbraith and Hale (2004), there is a typical risk could be found in technology based company which called ‘the dot-com bubble’.  It seems that the value rise of technological corporations is rapidly, but it maintain high risk and would lead to financial crisis. For example, the collapse of the bubble took place during 1999-2001. In that period, some corporations like Pets com is completely failed, some corporations like Cisco has declined lots of value but remain stable and profitable as well as some corporations like Amazon.com has reduced  a lot but recovery and exceed several years later. Then, combining with the crowdfunding risk on trust security, the high risk of technology project in crowdfunding should be challenged, highly paid attentions and  study in following financial study.

 

 

 

References:

Galbraith, J., & Hale, T. (2004). Income distribution and the information technology bubble.

Goins, T., & Little, E. (2014). Crowdfunding. Investment Lawyer, 21(1), 3-7.

Kickstarter,. (2014). One Billion Dollars. Retrieved 16 March 2014, from https://www.kickstarter.com/1billion?ref=promo&ref=PromoNewsletterMar0314

Oxford dictionaries,. (n.d.). crowdfunding: definition of crowdfunding in Oxford dictionary (British & World English). Retrieved 16 March 2014, from http://www.oxforddictionaries.com/definition/english/crowdfunding

McCracken, H. (2011). I just discovered Kickstarter on TIME's list of Best Websites. Explore it and more must-see sites on TIME.com. TIME. Retrieved 16 March 2014, from http://content.time.com/time/specials/packages/article/0,28804,2087815_2088176_2088182,00.html

WALKER, R. (2011). Log In - The New York Times. Nytimes. Retrieved 16 March 2014, from http://www.nytimes.com/2011/08/07/magazine/the-trivialities-and-transcendence-of-kickstarter.html?pagewanted=all&_r=0

 

 

 

 

 

International Business Investment Opportunities: International Merger and Acquisitions (Facebook case analysis)

Facebook: Facebook is an online social networking service to connect people with friends and others who work, study and live around them.

Whatsapp: Whatsapp is a proprietar, cross-platform instant messaging subscription service for smartphones. In addition to text messaging, users can send each other images, video, and audio media messages as well as their location using integrated mapping features. 

On Feburary 19th, Facebook founder Mark Zuckerberg make a full statement to announce that Facebook have agreed to acquire Whatsapp in a deal worth a total of $19bn in cash and shares.

From above table, Facebook have already merger 10 companies. However, Whatsapp is the largest merger case in Facebook acquisition history. It should be mentioned that Whatsapp acquisition is not the first over value merger case. There is another merger case on Facebook which is Facebook and Instagram merge in $1 bn on April 2012. At first, people thought that Facebook bought Instagram for its IPO. Moreover, the Instagram acquisition could be cared as another good case like Google merger Youtube. However, the slump on Facebook stock on May 2012 prove that those unseen profit technological corporations have high risk. From 1 billion photo quantity of Instagram on May 2012 and 0.4 billion every month active user of Whatsapp on December 2013, those two company seems to have high potential which could be a strong competitor of Facebook in the future. Therefore, those two merger cases are seems that Facebook is eliminating its  predicting competitors by acquisition. Although Whatsapp have high potential, $ 19 bn of Whatsapp acquisition is too much. What benefit could bring from Whatsapp acquisition?

Are target firms poor performers?

As Facebook and Whatsapp are both on network social service, its active user is its value. There are 1 billion active users of Facebook on September 2012 and 90 million active users of Whatsapp on January 2013. That is to say, Facebook active user is much more than Whatsapp. According to Arnold (2008, p888), Whatsapp could increase its profitability from this acquisition.

Do the shareholders of acquires gain from mergers?

Although, as the influence of privacy problem, Facebook stock price is mainly increasing since 19th Feburary.

Do target shareholders gain from mergers?

In Facebook & Whatsapp acquisition, the biggest winner should be Sequoia Capita which is Whatsapp shareholder. As Whatsapp has been financing just 1 million and Facebook merger Whatsapp on $19 billion, it could be brief calculated that Sequoia Capita would gain $1.6 billion which is 200 times of it initial investment if Sequoia Capita hold 10% Whatsapp shares.

Do the employees gain?

According to Facebook(2014) statement, “the agreement also provides for an additional $3 billion in restricted stck units to be granted to Whatsapp’s founders and employees that will vest over four years subsequent to closing.” That is to say, early employees reported have 1 percent stakes, which yields each of them $160 million each.

Do the directors of the acquirer gain?

As Facebook & Whatsapp acquisition case is the biggest acquisition in network industry, Mark Zuckerberg would gain more reputation from that.

Do the directors of the target gain?

Whatsapp CEO Jan Koum owns a 45% equity stake, which makes him worth $6.8 billion while cofounder Brain Acton gets $3 billion for his 20 percent stake.

Do the financial innsitutions gain?

As Facebook & Whatsapp acquisition case is the biggest acquisition in network industry, both Facebook adviser (Allen & Co. And Weil, Gotshal & Manes) and Whatsapp adviser (Fenwick & West) could possible gain reputation from that.

Does society benefit from mergers?

As Facebook would connect with Whatsapp in the future, the progress of social service would fast as two corporation technology and resources would link together. 

The popularization and importance of instant message would be paid more attention to. For example, Blackberry was increasing its stock price from $9.01 on Feb. 21st 2014 to $10.04 on Mar. 6th 2014 as its BBM could possible have high value under Whatsapp high acquisition consideration. 

However, from the 3.09% Tencent stock price decreasing on 20th March 2014, another competitor of Facebook (Wechat) was threaten by this acquisition as Instagram has high utilization in emerging country in particular China and Facebook originally has not. 

It should be mentioned that Facebook & Whatsapp acquisition has been challenged as this case is going against Whatsapp privacy protection regulation. Many user of Whatsapp are worried that their personal privacy would threaten by this acquisition. In addition, as Facebook is continued merger its competitors could have an effect on network social service mnopolization. Therefore, both Facebook and Whatsapp could be the winner of this acquisition without their users.

At last, although, the sum of acquisition is too much and network industry has high risk, comparing with the similar acquistion on Instagram, Instagram has a huge increasing progress and provides electric advertising business profit for facebook which may show a positive expect.