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From AI boom to zombie companies; an A to Z of financial markets in 2023

US powerhouse economy grows by 5.2% in third quarter, is expected to expand by 2.1% in 2023 and 1.5% in 2024

Sam Bankman-Fried, founder of the crypto firm FTX, was convicted in November of seven charges of fraud and conspiracy. He awaits sentencing. Photograph: Hiroko Masuike/New York Times

Joe Brennan
Fri Dec 29 2023 - 06:02

Artificial intelligence (AI) was one of the mega-investment themes of the year. Microsoft made a $10 billion (€9.2 billion) investment in January in ChatGPT, the text-generating AI chatbot created by OpenAI that has taken the internet by storm, and followed up by launching an AI-powered office assistant for commercial customers. Google’s parent, Alphabet, and Amazon have since unveiled their chatbots. The three tech giants, which also are the world’s biggest cloud computing groups, have ramped up spending this year to build capacity to serve the growth of generative AI.

Barryroe Offshore Energy, the oil explorer that traces its roots back to 1981 when Sir Anthony O’Reilly set up a company to pursue opportunities off Ireland’s shores, filed for examinership in July after burning through €270 million of equity raised from investors over the past dozen years. It came after Minister for the Environment Eamon Ryan refused to grant a permit for its key Barryroe oil project off the Cork coast. Barryroe’s largest shareholder Larry Goodman subsequently took over the company in November after committing €6 million. The stated aim is to pivot the business towards green projects, but it’s speculated the company will also mount a legal challenge against Ryan’s decision.

Credit Suisse gave up its independence after 167 years in March when it agreed to be acquired in a shotgun deal by rival UBS for a knock-down price of $3 billion, to stave off the group’s collapse. Credit Suisse suffered 61.2 billion Swiss francs (€65 billion) of outflows of customers’ money in the first quarter as confidence evaporated following a series of scandals and missteps in recent years.

Denis O’Brien agreed in March to cede control of his Digicel telecoms empire as a group of bondholders under a $1.7 billion debt-for-equity swap. The deal, which is awaiting final approval from some of Digicel’s 25 markets across the Caribbean and Central America, is the embattled company’s third debt restructuring in five years. It will mean the businessman’s stake slumps to 10 per cent. However, he may ultimately end up with as much as 20 per cent, should warrants attached as an incentive to the overhaul end up being triggered.

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The European Central Bank (ECB) and other major monetary authorities held centre stage again in 2023 as they continued to raise interest rates in an all-out fight to curb inflation. The ECB increased its key deposit rate from 2 per cent to 4 per cent — following up on 2.5 percentage points of hikes in 2022 as it abandoned a negative rates policy after eight years. The US Federal Reserve, which moved earlier and more aggressively last year, hiked its main rate by 1 point this year to a range of 5.25-5.5 per cent. Major central banks put rate increases on pause during the second half of this year as inflation has eased considerably. Economists see the ECB starting to cut rates as soon as the second quarter of 2024 — with money markets now betting that its deposit rate will fall to 2.5 per cent by the end of the year.

An investigation into FTX, the US cryptocurrency exchange that collapsed last year, saw its founder, Sam Bankman-Fried, being found guilty in November of fraud and money laundering after $8 billion of customers’ money went missing from the trading platform. He faces a maximum 110-year prison sentence when his punishment is announced in March.

Greece, the epicentre of the euro zone debt crisis more than a decade ago, saw leading credit ratings Standard & Poor’s, Fitch and DBRS Morningstar this year upgrade their views on the country’s creditworthiness investment grade from “junk status” for the first time since 2010. The European Commission expects Greece’s debt burden to fall to 148 per cent by 2025 from more than 200 per cent in 2020, driven by economic growth.

HealthBeacon, the medical technology company that floated in Dublin two years ago, succumbed to examinership in October as it ran out of cash. The company’s flagship product is a digital sharps disposal bin for needles and syringes that reminds patients to stick to injection schedules at home.

A major Iseq exodus struck this year when building materials giant CRH, previously the largest company in Dublin, quit the market in September as part of a listings overhaul that meant its main quotation moved from London to New York. Cardboard box maker Smurfit Kappa also signalled the same month that it intends to abandon the Irish market under a plan to merge with US rival WestRock, while gambling giant Flutter Entertainment recently confirmed it is exiting the Irish market early next year, after taking on a Wall Street listing.

Jen-Hsun “Jensen” Huang, founder, chief executive and 3.5 per cent shareholder in Nvidia, saw his wealth more than treble this year to as much as $43.8 billion as demand for the computer semiconductor manufacturer’s specialised chips, known as graphics processing units, that can perform AI tasks like image, facial and speech recognition as well as generate text for chatbots like ChatGPT. Nvidia, which developed a clear lead in the industry in producing these high-end chips, joined the $1 trillion valuation club earlier this year to peak at $1.25 trillion.

Klarna, the Swedish buy-now-pay-later company that launched in the Irish market two years ago, confirmed in November that it is “taking steps” towards an eventual initial public offering (IPO) after posting its fourth quarterly profit in four years.

Global debt liabilities — spanning countries, corporates and households — topped $300 trillion for the first time this year to reach $307 trillion by the end of September, according to the Institute of International Finance. Total borrowings stood at $255 trillion before the pandemic.

Michael Hartnett, investment strategist at Bank of America, coined the phrase “magnificent seven” earlier this year for the group of tech stocks driving a wider market rally on Wall Street from losses in 2022. The seven are: Apple, Facebook parent Meta, Amazon, Alphabet (owner of Google), Nvidia, Tesla and Microsoft — and have been fuelled by the AI theme.

Danish drugmaker Novo Nordisk became Europe’s largest publicly-quoted company, worth more than €420 billion as its Wegovy weight loss treatment, which mimics the action of a gut hormone that is released after eating, and sister drug Ozempic turbocharged the share price. Shares in the company rose about 55 per cent this year. The once-weekly injectables contain the same active ingredient, semaglutide. Ozempic was approved by the US Food and Drug Administration for use in adults with Type 2 diabetes. Wegovy got the nod in 2021 to treat obesity but it took until last December to make all doses available because of an initial production outage.

The US opioid crisis enabled Irish-based Mallinckrodt to file in August for Chapter 11 bankruptcy protection in Delaware — and examinership in Dublin — for a second time since 2020, resulting in its shares being suspended in New York. It emerged from the process in November with a deal to cut $1 billion from what it must pay opioid crisis victims, cancel existing shares, and trim nearly $2 billion in other debt.

Speculation over a potential US recession kept markets participants busy during 2022, following a series of interest rate hikes. But the world’s largest economy defied the pessimists — growing by 5.2 per cent in the third quarter alone. It is expected to expand by 2.1 per cent in 2023 and 1.5 per cent in 2024, according to the International Monetary Fund.

Irish chief executive Alan Joyce, of Australian airline Qantas, quit in September, two months earlier than he’d planned, after competition authorities in the country sued the carrier for allegedly selling tickets for thousands of cancelled flights. Quantas has refuted the claims.

Alison Rose, who made history in 2019 by becoming the first woman to lead one of the UK’s big four banks, was forced to resign as chief executive of NatWest in July after admitting to a “serious error of judgment” in discussing former Brexit Party leader Nigel Farage’s relationship with the bank with a BBC journalist. NatWest’s private bank Coutts had decided to cut the politician as a customer partly because an internal committee had taken the stance his views did not align with the lender’s.

Smurfit Kappa, led by third-generation chief executive Tony Smurfit, served up by the biggest Irish deal of the year when it agreed to an all-stock merger with US peer WestRock to create a packaging giant worth more than $20 billion, based on current market valuations.

Toyota shares rose almost 45 per cent this year as its earnings surged amid strong global demand for its hybrid vehicles as the carmaker finally bowed to pressure to make big investments in purely electric vehicles. The company’s operating profit margin topped that of Tesla in the three months to June for the first time since 2021 and it is now forecasting that its operating profit for the year to the end of March 2024 will rise by 65 per cent to the equivalent of $29 billion.

In March, Silicon Valley Bank (SVB), the former go-to bank for tech start-ups, was taken over by US authorities following a run on its deposits as savers fretted about unrealised losses in its bonds investment portfolio, which had fallen in value as a result of a surge in interest rates. Its UK unit was subsequently taken over by HSBC, while the rest was acquired by North Carolina’s First Citizens Bank. The biggest banking crisis since the financial crash also led to the implosion of New York-based Signature Bank and another regional lender, First Republic Bank, being bought by JP Morgan — amid concerns over large unhedged paper losses in their bond portfolios.

A Canadian investment firm called Vision Capital created a headache for Ires Reit, the largest Irish private residential landlord, in May when it issued a series of open letters urging the company to put itself up for sale as its stock traded at a discount to its intrinsic value. Ires subsequently sold close to €100 million of assets to ensure it avoids breaching a debt limit amid declining property values. But Vision came back in December calling for an extraordinary general meeting (egm) as it plots a board overhaul and resolution for the group to be privatised, sold or broken up over two years.

WeWork, the US-based office-sharing company that was once privately valued at $47 billion, filed for bankruptcy protection in November as it grappled with $2.9 billion in net debt and more than $13 billion in long-term leases on properties. The group gained notoriety in 2019 as it was forced to drop an initial IPO plan as investors raised concerns about its finance and corporate governance. It finally went public two years later but has since continued to lose money.

X, formerly known as Twitter, which was bought by tech entrepreneur Elon Musk in 2021 for $44 billion, issued stock grants to employees in October that valued the company at just $19 billion as advertising revenue plummeted amid concerns among large corporations about the billionaire’s behaviour, content moderation, mass lay-offs and general uncertainty about the platform’s future.

The Japanese yen was the worst-performing major currency in 2023 — falling at one stage by about 10 per cent against both the dollar and the euro — as the country’s central bank maintained a negative rates policy at a time when peers elsewhere were hiking rates. Higher interest rates typically boost the value of a currency.

Rising interest rates globally have increased concerns about so-called zombie companies — businesses that consistently barely make enough to continue operating and service their debt. About 12 per cent of all US companies listed on the Russell 3000 index can be classified as zombies, US wealth management company Glenmede said in a recent report. However, the low valuation of such companies means they only make up about 2 per cent of total value of the market.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times

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