Facebook Buys WhatsApp for $19 Billion

whatsappp In what appears as a desperate move to many financial analysts, Facebook Inc. has bought WhatsApp Inc. for $ 19 billion. The deal consists of $4 billion cash, shares of facebook worth $12 billion and $3 billion restricted shares to WhatsApp founders and employees. In addition, WhatsApp co-founder and CEO Jan Koum will join the Facebook board.

WhatsApp is a messaging app that has experienced increased growth in the number of its users since its launch. Currently, the app enjoys a daily usage of about 450 million users globally and has an approximated 1 million sing-ups every day.

The revenue stream for WhatsApp comes from the $1 annual subscription fee charged to its users although a free version of the same app is available.

In the past, Facebook bought Instagram for about $ 1billion, thus making the buy out of WhatsApp its biggest acquisition so far. Last year, Facebook offered $3 billion to buy a photo-sharing mobile app Snapchat but the offer was rejected.

For the founders of the 5 years old WhatsApp Inc., it’s a case of creating billions overnight, even as other analysts cast a dark cloud over the buy-out.


Kenya To Issue A Eurobond Soon..

eurobondThe government of Kenya has arranged for a Eurobond to be issued very soon. The preparation of the offering circular; which is a summary of the bond prospectus for issuing to individuals and stockbrokers when marketing the Eurobond has been finalized. The roadshow to market the Eurobond is set to begin from the end of February as stated by sources from the treasury.

A Eurobond is an international bond issued in Europe or in any other country outside the country in whose currency the bond is valued. Most countries and multinational corporations prefer Eurobonds to finance their budget deficits and their long-term investment projects due to the favorable interest rates that come with the Eurobonds. Borrowing locally can be more expensive as compared to borrowing internationally; and therefore to cut down on the cost of borrowing for the government, borrowing internationally is usually the best option.

The Kenyan government seeks to raise $2 billion from the Eurobond equivalent to about Ksh. 172 billion. The money shall be used to partly bridge the budget deficit of Ksh. 330 billion and payoff the $600 million Eurobond issued in 2012 by the government. The government is bargaining on the current political stability, discovery of oil in northern Kenya and its economic development agenda to get favorable interest rates for the Eurobond.

The Kenyan government however faces a risk of getting high interest rates if the US tapers its monthly bond purchase as part of its stimulant package. These bonds offer cheap sources of finance for investors to invest elsewhere; and the tapering of the programme could reduce liquidity in the market and thus raise the interest rates.

The current Kenyan government debt stands at about Ksh. 2 trillion which is about 56% of the GDP. How to repay this debt remains to be the greatest dilemma for our economic policy makers and policy implementers.

Inflation Rates January 2014 – Kenya

inflationThe inflation rate for January 2014 went up to 7.21% from 7.15% in December 2013. This was as a result of a 1.08% increase in the CPI (Consumer Price Index) from 143.85 in December 2013 to 145.40 in January 2014.

The Food and Non-alcoholic index went up by 1.00%. This rise was accountable for much of the rise in the inflation rate being that it accounts for 36.05% of the weights awarded to the consumer basket.

The Housing, Water, Electricity, Gas and other fuels index which accounts for 18.30% of the consumer basket also went up 0.87% between the months of December 2013 and January 2014.

All other indices in the consumer basket also rose marginally with the highest rise recorded in the Education index. This accounts for 3.14% of the consumer basket and it rose by 3.70% between the two comparative months.  

The least margin was from the Furnishings, Household Equipment and Routine Household Maintenance index which rose by 0.37% and accounts for 6.16% of the consumer basket.