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(Bloomberg Opinion) -- Vacant storefronts are the scourge that is eating New York City. At least, that’s been the story for the past couple of years. Bleecker Street in Greenwich Village went from high-end fashion destination to a row of empty shops reminiscent of the Rust Belt. Manhattan’s Upper East Side has been “facing a retail vacancy epidemic.” Manhattan Borough President Gale Brewer bemoaned 188 vacant storefronts along the length of Broadway, and a New York Times photo essay on vacant storefronts cited a “survey conducted by Douglas Elliman,” a real estate brokerage, that purportedly found about 20% of Manhattan retail space to be vacant, up from 7% in 2016. That statistic has been repeated widely since, even though when Rebecca Baird-Remba of the Commercial Observer followed up, nobody at Douglas Elliman could confirm it.Recently, though, two city agencies have finally come through with real numbers, and the picture they paint isn’t nearly as dire. Retail vacancy rates have risen in the city over the past decade, at least through last fall, but only by a couple of percentage points. New York’s retail vacancy problems may actually be smaller than those facing most of the rest of the country as online shopping keeps gaining market share. And while the City Council has been considering legislation to limit landlords’ ability to raise rents on commercial tenants, asking rents have been falling rapidly in the many of the city’s retail districts.How bad is the vacant storefront problem in New York, and how much worse has it gotten? In a survey of 24 neighborhoods in all five boroughs that was released in August, the Department of City Planning found that the percentage of retail storefronts that were vacant averaged 11.6% in late 2017 and 2018, ranging from 5.1% in Jackson Heights in Queens to 25.9% along Canal Street in Manhattan. In eight neighborhoods that the department had also surveyed in 2008 and 2009, the percentage of vacant storefronts had risen from 7.6% to 9%. Then, in September, City Comptroller Scott Stringer published a report using administrative data from property tax filings to estimate the percentage of retail square footage in the city that was vacant — the way commercial vacancy rates are usually expressed — and found that it had risen from 4% in 2007 to 5.8% in 2017.In raw numbers, the Comptroller’s office found that city had 142 million square feet of retail space in 2007, 5.6 million of them vacant, and 202.8 million square feet in 2017, 11.8 million of them vacant. These numbers do have quirks, such as the fact that some owners of smaller retail properties aren’t required to file the Real Property Income and Expense forms from which the data are derived.(2) But it’s nice to finally have some data, and the story they tell rings true, especially when you break things down by borough.Vacancy rates are down since 2010 in the Bronx, Brooklyn and Queens, which have all been having a pretty good decade, economically speaking. They’re up in Manhattan, which has also been having a good decade but has by far the most retail space and highest rents. Then there’s Staten Island, which is much less urban than the rest of the city and has seen less recent economic and population growth — and now has a retail vacancy rate in the double digits.Staten Island’s retail vacancy line looks a bit like the one for large shopping malls nationwide. Despite a growing economy and strong consumer spending, the national mall vacancy rate was 9.4% in the fourth quarter, as high as it was during the aftermath of the worst recession in 75 years, and almost twice as high as before the recession.“Retail is in a process of evolution,” says Victor Canalog, chief economist at Moody’s Analytics Reis, the source of the national data. “Some are handling it better than others.” Department stores and clothing retailers are struggling, while restaurants, nail salons and other businesses that are less vulnerable to online disintermediation aren’t. New York City happens to be really big on restaurants, nail salons and other you’ve-got-to-be-there storefront businesses.Moody’s Analytics Reis also measures vacancy rates for “neighborhood and community shopping centers,” aka strip malls.(3) For them the national vacancy rate was 10.1% in the third quarter of this year, which is about where it’s been since 2014 when the data series begins. The company doesn’t track New York City retail because so much of the space is in residential and office buildings, but third-quarter vacancy rates were 11.7% in Central New Jersey, 8.9% in Northern New Jersey and 7.4% in Fairfield County, Connecticut. So while the numbers may not be perfectly comparable, New York City’s retail vacancy rate of 5.8% doesn’t seem at all out of line with what’s been going on in the rest of the region and the country. In fact, it seems like it might be on the low side.So why has there been so much gnashing of teeth about the city’s vacant storefronts? Well, we New Yorkers do like to complain. Also, because the city has added so much retail space (like the big new Hudson Yards development), the sheer amount of vacant space is up more sharply than the vacancy rate. And there definitely are some well-known shopping streets with eye-catching numbers of vacant spaces. The most shocking tend to be in what the Department of City Planning refers to as “hot corridors” — established or rapidly changing areas in Manhattan and Brooklyn where rents rose a lot before the vacancy uptick and building owners have resisted price cuts. “Some owners kept spaces vacant while seeking high rents,” according to the department’s report. “In many cases, they had promised certain rent levels and a ‘credit tenant’ to their lenders in order to secure favorable loan terms.” What’s a credit tenant? “Typically large retailers with a national footprint.”This sure seems to be what’s been going on along Canal Street, which was formerly known for its very local and far-from-posh retailers of electronics, hardware, art supplies and counterfeit brand-name goods and is now transitioning into something more conventional. On Bleecker Street it’s a more involved story that apparently started with the 1996 opening of Magnolia Bakery, which, after being featured in an episode of “Sex and the City” in 2000, began attracting crowds from all over the world who wanted the cupcakes that they had seen Carrie and Miranda eat. Retailer Marc Jacobs soon followed in the crowds’ wake, and other fashion brands followed Marc Jacobs. From a New York Times retrospective published in 2017:During its incarnation as a fashion theme park, Bleecker Street hosted no fewer than six Marc Jacobs boutiques on a four-block stretch, including a women’s store, a men’s store and a Little Marc for high-end children’s clothing. Ralph Lauren operated three stores in this leafy, charming area, and Coach had stores at 370 and 372-374 Bleecker. Joining those brands, at various points, were Comptoir des Cotonniers (345 Bleecker Street), Brooks Brothers Black Fleece (351), MM6 by Maison Margiela (363), Juicy Couture (368), Mulberry (387) and Lulu Guinness (394).In the end, though, the theme park failed to attract enough paying visitors. It was a failed retail experiment that was enormously disruptive to the neighborhood and the small businesses that had previously served it, and I totally get why it makes steam come out of some people’s ears.Still, Bleecker Street is now making a low-key comeback, thanks to asking rents that are 40% lower than they were just three years ago. (Oh, and Magnolia Bakery is still there, and now has locations in four other U.S. cities and seven foreign countries.)The Bleecker Street data only start in 2008 because the Real Estate Board of New York, a trade association, didn’t consider it a major retail corridor before then (it still doesn’t consider Canal Street one), which is why I’ve included a nearby stretch of Broadway in Soho to give a sense of what probably happened before 2008. The first 15 years of this century were a time of major retail rent increases in Manhattan, with some of the biggest in neighborhoods that were already quite expensive.One thing that stands out is what has happened to the stretch of Madison Avenue with high-end department store Barneys near its south end and what used to be an unbroken succession of smaller and in many cases even higher-end clothing and accessories retailers to the north. This corridor saw big rent increases in the 2000s, and was the highest-rent retail zone in the city for much of that decade, but since the financial crisis its rents haven’t come even close to keeping up with those in the tourist-clogged shopping districts to its south. The Madison Avenue retail business model was about selling very expensive tangible goods to rich people, in person, and it has been struggling for a while. Barneys filed for bankruptcy in August and the blocks north of it are now pocked with empty storefronts.(1)By contrast, retail space in Times Square and along Fifth Avenue in midtown is used as much for branding and entertainment as for selling goods, and that has held up better. Will it continue to hold up? I don’t think anybody knows — Neiman Marcus and Nordstrom are embarking on grand new ventures in the city this year even as other department stores struggle or leave town. Retail is changing, and the long leases and high transaction costs in commercial real estate markets make adjustment to those changes slow and uneven. But the adjustments do come.I’ve been living near Broadway on Manhattan’s Upper West Side and just north of it for most of the past two decades, and that thoroughfare has been in an ongoing retail transition for the whole time, with lots of boarded-up storefronts to show for it. One cause is the rising neighborhood affluence (aka gentrification) that has led building owners to raise rents higher than long-established merchants could bear. Another has been the desire of “large retailers with a national footprint” to expand into neighborhood shopping districts around the city, which further encouraged building owners in their rent aspirations. The two kinds of retailers that seem to have expanded the most in Manhattan over the past couple of decades are bank branches and drugstores. Their expansive era may have ended, though:If I were a commercial property owner in a neighborhood shopping district in Manhattan, this chart would make me sad. As a regular shopper in such a district, I see it as a sign that the worst may be over.About 15 years ago, a toy store and an adjoining pizzeria or bagel shop or both (family recollections differ) on Broadway near our then-apartment shut down. My wife and I assumed the replacement would be something lame, but our then-five-year-old son hopefully speculated that the new place would be a combination toy and book store. When it turned out to be an HSBC bank branch, he was crushed. And people wonder why Gen Z distrusts capitalism!Times change, though. About four years ago, a less-than-great toy/gift store on Broadway in our current neighborhood shut down. The space reopened in 2017 not as a bank but as Hex & Co., a board-game store and gaming parlor that also serves food and drinks and hosts classes and events. It’s been a huge success, and will be moving soon into a larger space a couple of blocks to the north. One of its owners, a former real estate executive named Mark Miller, recorded an illuminating video a few months ago in which he rails against the idea that landlords jack up rents because they secretly benefit from empty storefronts:[There’s] a myth, a conspiracy theory, an urban legend that somehow our vacant retail space is the result of landlords asking for inflated commercial rents because they somehow have some magic way of turning that into cash or tax breaks on the back end. To me that’s just crazy talk. What benefits you is getting a solid tenant who can pay a sustainable rent.Miller goes on in the video to say that succeeding in storefront retail now requires experimenting with more lines of business than just selling goods that can be acquired online, that landlords are “cautious creatures,” that lining up a retail lease is a complex affair “more like a kidney donation than it is like going to the store to buy a sweater” and that city regulations that weigh heavily on small businesses are a problem.A multivariate regression analysis of the vacancy data conducted as part of the Comptroller’s office study backed up a couple of these assertions, finding statistically significant associations between vacancy rate increases and: Amazon.com Inc. revenue. The length of time it takes to get an alteration permit or liquor license from the city. Rising neighborhood retail rents.The link between rising rents and rising vacancy rates does indicate that even though landlords do not have a magic way of turning vacant retail space into cash, they’re more likely to hold space vacant if they think it will rent for more in the future. Falling rents should eventually shift that equation. REBNY tracks retail rents for Broadway from 72nd Street to 86th Street on the Upper West Side, and they were lower last spring than at any time since 2007. Adjusted for inflation, they haven’t been this low since 2002. Let the retail experimentation begin.(Clarifies the percentage of vacant retail storefronts between 2017 and 2018 in the third paragraph.)(1) Also, starting in 2014, penalties for failing to file the forms sharply increased. So actual square footage is more than the reported numbers, but the gains over the past decade were probably smaller — although still quite substantial in terms of both vacant and total space. The vacancy rates may also be skewed by the reporting quirks, although probably not by as much.(2) Here are the formal definitions from Moody's Analytics Reis: A neighborhood shopping center is"constructed around a supermarket and/or drug store as the only anchor tenant(s)," while a community shopping center is "a retail property offering a wider range of apparel and general merchandise than a neighborhood center."(3) The Barneys bankruptcy was occasioned in part by a doubling of its Madison Avenue rent, which may seem odd in light of recent rent decreases along the street but is actually entirely to be expected given that its previous lease dated to 1999.To contact the author of this story: Justin Fox at email@example.comTo contact the editor responsible for this story: Sarah Green Carmichael at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Someone had to take the fall for the latest disastrous turn in Boeing Co.’s 737 Max crisis and that someone appears to be commercial airplanes chief Kevin McAllister. Boeing abruptly announced on Tuesday afternoon — less than 24 hours before it's due to report third-quarter results — that McAllister is stepping down. He joined in 2016 from General Electric Co. and oversaw the unit responsible for the troubled Max, which has been grounded for seven months following two fatal crashes. He will be replaced by Stan Deal, formerly head of Boeing’s services division, effective immediately. The leadership shakeup comes as Boeing tries to counter the reputational damage from a bombshell release last week of instant messages that appeared to indicate internal hesitation over a flight-control system on the Max years before that same software would be implicated in the accidents. The messages have raised concern that it will be politically difficult for the Federal Aviation Administration to agree to put the plane back in the air by the end of the year, even as Boeing makes progress on a fix. Boeing has pushed back on the interpretation that the messages show it misled regulators, but its explanations are unlikely to curb the ire of angry lawmakers, some of whom have already called for the ouster of CEO Dennis Muilenburg.I would like to believe that Boeing is making a serious effort at holding itself accountable. But at the end of the day, like all of the company’s efforts at redemption in the wake of the Max crisis, it appears to be reacting to criticism, rather than doing the right thing on principle. The company last month unveiled an organizational overhaul meant to help insulate its engineers from profit concerns and the board stripped Muilenburg of his chairman title on Oct. 11. But those two changes book-ended an unflattering report from the Joint Authorities Technical Review (a body of experts including international and NASA delegates) that contended regulators lacked the resources and necessary information to properly evaluate the Max’s complex design and that Boeing exerted “undue pressures” on employees that had FAA authority to approve changes. This seeming inability to embrace full accountability and transparency remains the company’s biggest problem. Until it rectifies that, it will be impossible for Boeing to truly move on from this crisis. One cynical read of this leadership change is that McAllister is simply more expendable than Muilenburg right now, with the CEO reportedly set to testify before the Senate on Oct. 29, one day before a scheduled appearance in front of the House of Representatives. I would imagine Muilenburg has spent hours preparing for that grilling, and Boeing may not have time at this point to get a replacement ready. With regard to those troubling messages, Boeing has countered that the description of the Maneuvering Characteristics Augmentation System flight-control software as “egregious” was meant to refer to a bug in a flight simulator that was being tested. The Seattle Times reports that this explanation checks out, based on three experts’ perspective. However, the FAA has rightly taken issue with the fact that Boeing reportedly turned over these documents to the Department of Justice in February – one month before the second Max crash – and yet only recently gave the information to the regulator. Boeing’s claims that the regulator was informed “multiple times” about the expanded role of the flight-control software run counter to reporting from the Seattle Times and others, as well that JATR report.Meanwhile, all major Max customers have now pulled the plane from their schedules through at least January 2020, giving up hope that it will be recertified in time for the holiday season. In his job as head of the commercial unit, McAllister was tasked not only with helping oversee the development of a fix for the flight-control system, but with managing Boeing’s relationship with customers. He appears to have fallen short on both fronts. The New York Times published a damning portrayal of McAllister last week as not being proactive enough in addressing the Max crisis with airlines and unwilling to accept criticism for the plane’s issues, which he blames on his predecessors.He is unlikely to be the last Boeing executive to be shown the door. To contact the author of this story: Brooke Sutherland at email@example.comTo contact the editor responsible for this story: Beth Williams at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary […]
who want to appear more popular than they actually are is unlawful, the Federal Trade Commission declared on Monday. The FTC fined a Florida businessman $2.5m as it announced its first lawsuit involving “the sale of fake indicators of social media influence”. In a separate settlement also announced on Monday, the FTC accused Sunday Riley, the influencer who runs an eponymous skincare brand, of posting fake reviews of her products on Sephora.com, the cosmetics retailer.
(Bloomberg) -- A Saudi dissident sued Twitter Inc. claiming its failure to tell him about a state-sponsored hack of his account led to government agents discovering his plans for a social media protest with Jamal Khashoggi a few months before the journalist was slain last year.Omar Abdulaziz claims a Twitter employee, a Saudi national, was recruited by the government to gain access to his account and gather intelligence on him.Twitter found out about the activities of the employee, Ali Al-Zabarah, fired him in 2015 and later notified a few dozen users of the platform that their accounts “may have been targeted by state-sponsored actors,” Abdulaziz said in the complaint.But Abdulaziz says he wasn’t notified. All he got a few months later was an email saying that due to a bug “the email address and phone number linked to your account was viewed by another account,” according to the complaint, which included the email from Twitter.In June 2018, Saudi agents planted malware on Abdulaziz’s phone, which allowed them to spy on his activities, he alleges. At the time, he and Khashoggi, who worked for the Washington Post, were planning the “electronic bees” project, which organized Saudi activists on Twitter to counter the government’s so-called “electronic flies” campaign.Read More: Israeli Spyware May Have Helped Khashoggi Killers, Snowden SaysAbdulaziz, who had won political asylum in Canada, where he was attending college, said Saudi agents stepped up their harassment of him in July 2018 and arrested his brothers in Jeddah. The agents asked him to meet at the Saudi embassy in Ottawa. He declined. A few months later, Khashoggi was killed in the Saudi embassy in Istanbul.Subsequently, the fired Twitter employee was appointed by Saudi crown prince Mohammed bin Salman to be the chief executive officer of a multibillion-MISK foundation, according to the complaint.Abdulaziz said his brothers are still in prison in Saudi Arabia without having been charged and have been tortured to pressure Abdulaziz to stop his activism.McKinsey & Co., also named as a defendant in the lawsuit, is faulted for writing a report that identified Abdulaziz as one of the top three activists protesting human rights abuses in Saudi Arabia.Read More: How Despots Use Twitter to Hunt DissidentsTwitter and McKinsey “have individually invaded plaintiff’s privacy and exposed him, his family members, friends and political associates to imprisonment, torture, and even death,” Abdulaziz said in the complaint.Much of the narrative in the complaint was reported a year ago in the New York Times.Representatives of Twitter and McKinsey didn’t immediately respond to requests for comment. McKinsey told the Times last year that the report was an internal document based on publicly available information and wasn’t prepared for any government entity. The firm was quoted saying it was “horrified” that the report could have been misused.The case is Abdulaziz v. Twitter Inc., 19-cv-06694, U.S. District Court, Northern District of California (San Francisco).To contact the reporter on this story: Robert Burnson in San Francisco at email@example.comTo contact the editors responsible for this story: David Glovin at firstname.lastname@example.org, Peter Blumberg, Joe SchneiderFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- U.S. lawmakers from both parties slammed Apple Inc. and Chief Executive Officer Tim Cook on Friday for “censorship of apps” at the “behest of the Chinese government.”Senators Ted Cruz, Ron Wyden, Tom Cotton, Marco Rubio and Representatives Alexandria Ocasio-Cortez, Mike Gallagher and Tom Malinowski expressed concern about the removal of an app that let Hong Kong protesters track police movement in the city.“Apple’s decisions last week to accommodate the Chinese government by taking down HKmaps is deeply concerning,” they wrote in a letter to Cook, urging Apple to “reverse course, to demonstrate that Apple puts values above market access, and to stand with the brave men and women fighting for basic rights and dignity in Hong Kong.” Apple didn’t respond to a request for comment on Friday.Apple removed the HKmap.live app from the App Store in China and Hong Hong earlier this month, saying it violated local laws. The company also said it received “credible information” from Hong Kong authorities indicating the software was being used “maliciously” to attack police. The decision, and the reasoning, was questioned widely.Cook, in a recent memo to Apple employees, said that “national and international debates will outlive us all, and, while important, they do not govern the facts.” On Thursday, the CEO met with China’s State Administration for Market Regulation head Xiao Yaqing in Beijing to discuss consumer-rights protection, boosting investment and business development in the country, according to a statement from the Chinese regulator.The Cupertino, California-based company isn’t the only one referenced in Friday’s letter. The lawmakers mentioned recent headlines involving the National Basketball Association and Activision Blizzard Inc., a video game company that suspended a professional game player for supporting the Hong Kong protests.“Cases like these raise real concern about whether Apple and other large U.S. corporate entities will bow to growing Chinese demands rather than lose access to more than a billion Chinese consumers,” the lawmakers wrote.They also slammed Apple for removing other apps, including VPN apps that helped Chinese people get around the government’s online censorship. The letter said Apple has “censored” at least 2,200 apps in China, citing data from non-profit organization GreatFire. Apple says on its website that it removed 634 apps in the second half of last year globally due to legal violations.The letter implied that Apple made the removal decisions to maintain its huge business in China and appease the government. Greater China was Apple’s third-largest region by revenue last year, generating more than $50 billion in revenue.Apple is one of the rare tech companies that operates in China, with rivals like Google and Facebook Inc. hardly operational in the market. China’s importance to Apple means the company has to balance its own values with following local laws.In the past, the company has pulled the Skype and New York Times apps from its App Store in China. More recently, it removed a Taiwanese flag emoji for users in Hong Kong and Macau and was criticized for sending some browsing data to China’s Tencent Holdings Ltd. as part of a privacy feature.To contact the reporters on this story: Mark Gurman in San Francisco at email@example.com;Ben Brody in Washington, D.C. at firstname.lastname@example.orgTo contact the editors responsible for this story: Tom Giles at email@example.com, Alistair Barr, Robin AjelloFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Imagine you’re the chief executive officer of a large pharmaceutical corporation with an important drug that’s under attack. More than 2,500 lawsuits have been filed against your company. The plaintiffs aren’t individuals, though, they’re governments — counties, cities and states. And some of the biggest names in the plaintiffs’ bar have agreed to represent these entities, lawyers like Joe Rice, whose firm was said to have earned $1 billion for helping to bring the tobacco companies to heel in the 1990s.You know you’ve got some incriminating-sounding documents in your corporate files — what company doesn’t? — but you also know that the Food and Drug Administration approved your drug. Patients crushed it and snorted it — something that was never intended. And you’re convinced that the plaintiffs are pushing the envelope with the public nuisance laws they are relying on to bring these cases. Yes, your company will probably lose at trial, but you think you have a good chance to win on appeal.Then you look at the army arrayed against you, and it hits you: You’re never going to be able to litigate your way out of this. It’s not just that there are 2,500 lawsuits or that they are being brought by governments. It is what that represents. Government exists to serve the interests of the people, and the people are saying that your company participated in something that inflicted tremendous damage on the country. Hundreds of thousands of people have died. And your company needs to be punished.At this point, you pick up the phone, call your opponents and say, “How much do we need to pay to settle this?”I am obviously not privy to the thinking of the CEOs of the various companies facing opioid lawsuits. But given the news of the last few days, I imagine that their thought process was not too far from what I just described. On Tuesday, the Wall Street Journal reported that three of the distributors being sued — McKesson Corp., Cardinal Health Inc., and AmerisourceBergen Corp. — have offered to pay $18 billion over 18 years to settle their cases. This news leaked less than a week before the start of a big opioid trial in Cleveland, in which the three companies are among the defendants.The next day, Bloomberg News reported that Johnson & Johnson was offering $4 billion to end the litigation, and Teva Pharmaceutical Industries Inc. was proposing to give away $15 billion worth of generic drugs to be freed of the lawsuits. On Thursday, the New York Times reported that the five companies and the states had agreed on the outlines of a settlement that would cost the companies $50 billion.And of course, Purdue Pharma Inc. had already waved the white flag, with a bankruptcy filing last month intended to end the lawsuits by essentially turning the company’s assets over to a trust that would be controlled by the plaintiffs.It is too early to know whether any of these settlement offers will stick. Although the federal judge presiding over the Cleveland trial, Dan Aaron Polster, has asked the CEOs of the three distributors plus Teva to appear Friday to discuss the settlement talks, I’m told that the trial is still likely to begin on Monday, as scheduled.Any settlement will also need approval from the cities and counties that have filed suits. They are deeply suspicious of any deal the states might cut because they remember the outcome of the tobacco litigation. In 1998, the tobacco companies agreed to pay $246 billion over 25 years to the states, but little of that money trickled down to cities and counties. Indeed, a minuscule amount went to anti-tobacco efforts; most of the money is now used to fill state budget gaps.Still, whether it happens next week or next year, the opioid litigation will almost surely end with the companies being sued spending billions to settle it. The stock market practically demands it: Share prices of all the companies that have made settlement offers in recent days have jumped. And continuing litigation drains and distracts a company.Here’s the problem, though. Whenever plaintiffs’ lawyers argue that companies have done bad things and need to pay up, they justify the demand for money by saying it will be used to solve the problem. But will it? In this case, I have my doubts.In an opioid case in Oklahoma a few months ago, a judge ruled that Johnson & Johnson should pay $572 million (later reduced by $107 million), which he calculated would cover opioid abatement services in Oklahoma for just one year. So point one: Ending the crisis will require more money than even Big Pharma can provide.Second, just throwing money at the problem is not going to solve it. States and cities will most likely take different approaches. Some will be better than others. But there is no clear plan coming from the federal government — or anywhere else — about what steps are needed to end the crisis. Until there is, more money is likely to be wasted than not.Third, chances are good that the settlement money will be used for things that have nothing to do with opioids. Again, tobacco in instructive: Settlement money was supposed to be earmarked for tobacco control programs, but in most states the politicians couldn’t resist grabbing it for other purposes.Earlier this summer, during a court hearing, Judge Polster said that “developing solutions to combat a social crisis such as the opioid epidemic should not be the task of our judicial branch.” It was the job, he said, of the executive and legislative branches.He’s right. But that’s just not the American way. In the U.S., when there is a problem with a product, our first instinct is to sue the corporation that made it. When the litigation is settled, money is transferred from shareholders to plaintiffs (and their lawyers). It may be a satisfying resolution, but it rarely solves the problem. To reference tobacco one more time, two decades after the tobacco settlement, 480,000 Americans still die from smoking each year.I suspect the same will be true of the opioid crisis. The companies will settle, the lawyers will pocket millions and the states will get the rest. And the crisis will continue.I’ve said it before, and I’ll no doubt say it again: There’s got to be a better way.To contact the author of this story: Joe Nocera at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Joe Nocera is a Bloomberg Opinion columnist covering business. He has written business columns for Esquire, GQ and the New York Times, and is the former editorial director of Fortune. His latest project is the Bloomberg-Wondery podcast "The Shrink Next Door."For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- The strange thing about the “cease-fire” negotiated Thursday in Ankara between the U.S. and Turkey is that one party isn’t actually fighting and the other seems unlikely to abide by it. Turkey’s foreign minister said the agreement “is not a ceasefire” but rather a pause in military operations. He vowed that those operations would continue until Kurdish fighters — aligned with the U.S. until earlier this month — leave the border area entirely. For good measure, he also contradicted Vice President Mike Pence, saying his government never promised not to send its army into the city of Kobani.Nor is it likely that Kurdish forces will agree to Turkish demands. For one, the Syrian Democratic Forces have already struck a bargain with Russia and the Syrian regime, allowing the Syrian army into the semi-autonomous zone it controlled. The deal reached in Ankara was just between Turkey and the U.S.And those are just a few of the problems with the agreement negotiated by Pence and Secretary of State Mike Pompeo. Far from fixing a problem caused by President Donald Trump’s diplomatic bluster and caprice, they have compounded it. The U.S. has essentially acceded to Turkey’s demand for control of a 20-mile buffer zone deep into Syrian territory. The Turks intend to use this new territory to relocate the more than 3 million Syrian Arab refugees now living in Turkey.Turkish President Recep Tayyip Erdogan has been open about this. Just this week, he outlined his plans: “We will secure the area extending from Manbij to the Iraqi border and then facilitate 1 million Syrian refugees’ return home in the first phase and, later on, the return of 2 million people.” But this safe zone is an area that is for the most part historically Kurdish. If the Turkish military and its allied militias are allowed to dominate the area, then it is a near certainty that Kurdish civilians will suffer.And while it’s hard to confirm early reports in the fog of war, that appears to be exactly what is happening. New York Times reporter Rukmini Callimachi tweeted the grisly autopsy report of a murdered Kurdish politician. Public violence like this is meant to send a message that all civilians are targets. In essence, America has agreed to let Turkey solve its Syrian refugee problem by creating a new Kurdish refugee problem.Then there is the message this sends to Erdogan himself. The Turkish leader has humiliated Trump and the U.S. in recent weeks and months. He went ahead with the purchase of a Russian S-400 air defense system this summer, over several U.S. objections, and has faced no sanctions. He ordered his military to violate an earlier safe-haven agreement that to which Turkey had previously agreed. His forces fired artillery on a U.S. outpost last week. And he has metaphorically — and literally, according to the BBC — thrown Trump’s “Don’t be a tough guy” letter into the trash.In exchange for this disrespect and petulance, Erdogan got what he has wanted all along. He started a war to create a buffer zone in northern Syria, then got the U.S. to agree that he be allowed to keep it. Trump is even now repeating Erdogan’s talking points, claiming (without evidence) that the Syrian Kurds have launched attacks into Turkey. “In all fairness they’ve had a legitimate problem with it,” Trump said Thursday, referring to the safe zone. “They had to have it cleaned out. But once you start that, it gets to a point where a tremendous amount of bad things can happen.”That point has already been reached. Bad things are indeed happening, and will continue to happen. And there’s little reason to believe Trump’s capitulation in Ankara will do much to stop them.To contact the author of this story: Eli Lake at firstname.lastname@example.orgTo contact the editor responsible for this story: Michael Newman at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Eli Lake is a Bloomberg Opinion columnist covering national security and foreign policy. He was the senior national security correspondent for the Daily Beast and covered national security and intelligence for the Washington Times, the New York Sun and UPI.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The UK prime minister is still struggling to win political backing for the accord from the Democratic Unionist party, which said earlier on Thursday that it was not satisfied with the stance he had agreed on both customs and consent by the Northern Ireland assembly. This raises questions over Mr Johnson’s ability to clinch support for the deal in the Westminster parliament — an issue that is likely to hang over the upcoming leaders’ summit. Mr Johnson will ask EU leaders tonight not to offer another Brexit extension.
(Bloomberg Opinion) -- Thanks to some inspired digging from ProPublica reporter Heather Vogell, it appears the Trump Organization has been massaging reported profits, expenses and occupancy rates at a pair of its Manhattan properties to make them look robust to lenders, but much less so to authorities who assess property taxes.If this means that President Donald Trump’s company keeps two sets of books, it may be an attempt to secure lower interest rates on borrowings while keeping tax expenses down. A dozen real estate experts Vogell contacted couldn’t explain “multiple inconsistencies” in Trump Organization documents she showed them. The variations are “versions of fraud,” Nancy Wallace, a finance and real estate professor at the Haas School of Business at the University of California-Berkeley, told Vogell. “This kind of stuff is not OK.”No, it’s not. It may amount to the same kind of financial fraud that sent two former Trump advisers, Paul Manafort and Michael Cohen, to prison. Cohen, in congressional testimony in February, accused Trump of falsifying records he provided to banks in 2011, 2012 and 2013.“It was my experience that Mr. Trump inflated his total assets when it served his purposes, such as trying to be listed among the wealthiest people in Forbes, and deflated his assets to reduce to real estate taxes,” Cohen said, essentially portraying the president as a serial grifter.The problems Vogell uncovered pertain to two signature Trump properties in Manhattan — 40 Wall Street and Trump International Hotel and Tower — and involve transactions and records she examined dated from 2012 to 2018. The Trump Organization, its lawyers and its accountants declined to respond on the record to Vogell’s detailed questions about the irregularities.The Trump Organization has been at this game for a long time. When I interviewed its chief financial officer, Allen Weisselberg, in 2005 for a biography I wrote, “TrumpNation,” he told me that Trump valued 40 Wall Street at $400 million — at a time when it was assessed for property tax purposes at only $90 million.Trump unsuccessfully sued me in 2006 for libel, arguing that “TrumpNation” damaged his reputation by including unflattering assessments of his business record and unfair speculation that he had spent decades inflating his wealth. Trump lost the suit in 2011, and during the litigation was forced to turn over his tax returns to my lawyers.Fred Trump, the president’s father, taught his son the art of dodging assessments, taxes and record keeping.In 1954, Fred was called before the Senate to testify about overcharging the federal government millions of dollars by inflating costs associated with a taxpayer-subsidized, Trump-owned housing development in Brooklyn. The government then banned Fred from bidding on federal housing contracts — the foundation for his family’s wealth. So he turned to state-subsidized developments. By 1966, a New York investigations board called him into embarrassing public hearings to explore how he had overbilled the state for equipment and other costs. Although he was never charged with wrongdoing, those hearings marked the end of Fred’s career as a major developer of publicly subsidized housing.A devastating account of the Trump family’s finances and tax maneuvers that the New York Times published in 2018 revealed that Fred and his wife, Mary, structured their estate and the income it generated in ways both illegal and dubious. They ultimately transferred “over $1 billion in wealth to their children, which could have produced a tax bill of at least $550 million under the 55 percent tax rate then imposed on gifts and inheritances,” the Times reported. Instead, the Trumps paid $52.2 million in taxes, a rate of about 5%.The Times also reported that Trump “received the equivalent today of at least $413 million from his father’s real estate empire.” It added that those riches flowed more fully due to “dubious tax schemes [Trump] participated in during the 1990s, including instances of outright fraud.” The Trumps did this, in part, by “grossly undervaluing” the properties they intended to pass on to their children. (A lawyer for Trump told the Times that the president, his parents and his siblings relied on outside advisers for tax planning purposes and that nothing they did was fraudulent.)Weisselberg was Fred’s accountant as well as Donald’s CFO, and he has an intimate familiarity with the details of all of this. He cooperated with federal prosecutors in their investigation of Cohen’s dealings, and Vogell’s reporting is bound to renew interest in him. Vogell noted that Weisselberg’s son, Jack, was an executive at Ladder Capital, an institution that loaned money to Trump for 40 Wall Street.The Manhattan district attorney’s office is currently battling Trump and the U.S. Justice Department for access to the president’s tax records as part of a criminal fraud investigation. Congressional committees have also subpoenaed Trump for his tax records, one of many requests he has refused to comply with. Vogell has given prosecutors and legislators more ammunition. As she observes in her ProPublica article, “New York City’s property tax forms state that the person signing them ‘affirms the truth of the statements made’ and that ‘false filings are subject to all applicable civil and criminal penalties.’”Those battles are playing out, of course, amid an impeachment inquiry that has put the president in a tight corner in Washington. Given how investigations are proceeding around his businesses, he’s unlikely to find much wiggle room in New York, either.To contact the author of this story: Timothy L. O'Brien at firstname.lastname@example.orgTo contact the editor responsible for this story: Mary Duenwald at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Timothy L. O’Brien is the executive editor of Bloomberg Opinion. He has been an editor and writer for the New York Times, the Wall Street Journal, HuffPost and Talk magazine. His books include “TrumpNation: The Art of Being The Donald.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
The New York Times Company (NYT) announced today that its third-quarter 2019 earnings conference call will be held on Wednesday, November 6 at 8:00 a.m. E.T. The company’s earnings announcement will be released earlier that morning and will be available on www.nytco.com. Participants can pre-register for the telephone conference at dpregister.com/10135803, which will generate dial-in instructions allowing participants to bypass an operator at the time of the call. Alternatively, to access the call without pre-registration, dial 844-413-3940 (in the U.S.) or 412-858-5208 (international callers).
(Bloomberg Opinion) -- Gender parity at work is still decades away, if it ever comes at all. Why? Part of the problem is that men and women look at the same world and see different things.Almost half of men (44%) say women would be “well represented” at their company if just one in 10 senior leaders were female. Only 22% of women agree with that. These findings come from McKinsey and LeanIn.org, via their annual report on women in the workplace, based on a survey of 65,800 people at 329 companies.And this is actually an improvement, says Alexis Krivkovich, a senior partner at McKinsey’s San Francisco office. In previous years, an even larger share of men thought women were well represented in company leadership — even when company-specific data showed that wasn’t true. And men today are more likely to say gender diversity is a “high personal priority” than they were in 2015.Yet to the extent that men are becoming more aware that the gender gap at the top is a problem, they still disagree with women about what’s causing it. Men are most likely to say the trouble is “too few qualified women in the pipeline.”Women point to different causes. Forty percent say women are judged by different standards. (Only 14% of men see it that way.) Nineteen percent of women correctly perceive that junior women are less likely than junior men to get that first promotion into management. (Only 7% of men see that.) And 32% of women say women lack sponsors to champion their work. (Only 12% of men agree.)This last problem is especially troubling for two reasons: First, the scarcity of sponsors for women has been linked with stalled careers in study after study. And second, the men who responded to McKinsey’s survey themselves revealed a real reluctance to sponsor or mentor junior women. In January 2018, months before the deluge of MeToo stories began with the New York Times’s reporting on Harvey Weinstein, 46% of men said they’d be uncomfortable mentoring a younger female. By March 2019, after the Weinstein revelations, that figure had risen to 60% percent. In fact, they’re now 12 times as likely as they once were to hesitate to have even a one-on-one meeting with a younger female colleague.Think of that: Senior men don’t think women have a problem finding sponsors to help them win plum assignments and promotions, but they themselves admit to balking at spending any one-on-one time with the women they’re responsible for championing. “There’s this urban myth that gosh, somehow in this post-MeToo workplace, women have become dangerous or scary,” says David Smith, an associate professor of sociology at the Naval War College and co-author of “Athena Rising,” a book about men who mentor women. “They might just decide to falsely accuse us of sexual harassment. There’s no evidence to support that. As men we need to push back on each other when we hear that.”And when men refuse to mentor women, those women go without mentors. There aren’t enough senior women to pick up the slack.The result is a workplace in which equally ambitious and, yes, equally qualified women consistently find it tougher to get ahead.Women and men want promotions, ask for promotions, and ask for raises at nearly identical rates; the difference is that men are much more likely to get them. In fact, the gender gap appears with that first promotion into management: Although half of entry-level employees in corporate America are female, for every 100 men who get promoted to first-line management jobs, only 72 women get through.This difference can’t be due to qualifications — these are entry-level employees, just a few years out of college. (The same colleges where female students graduate in higher numbers, and score higher GPAs.) Nor can it be due to family responsibilities; many of these workers don’t have children. It’s not a pipeline problem. Over and over, women are banging their heads on the glass ceiling, but it seems many men don’t even hear the commotion.Women are twice as likely as men to say that they’ve had to provide extra evidence of their competence — 30% of all women report this, and 40% of black women. Half of women say they’ve been interrupted or spoken over, while only a third of men have. Only 8% of men of all races say colleagues have expressed surprise at their language or other abilities; 26% of black women say it’s happened to them.Our impressions, of course, are shaped by our experiences. One in five women reports being the only woman on her team; for women in senior and technical roles, it’s one in three. Just one in 50 — 50! — men say the same. Among these “only women,” half say they’ve had to prove their competence or have had their expertise questioned. Roughly 70% say they are interrupted, and half say they don’t get credit for their ideas.These slights may seem trivial, but things like getting credit for your ideas or being seen as an expert are what allow successful employees to advance.There are plenty of things companies can do to remedy these problems — actions that also make them better places to work. It’s not hype that more diverse companies perform better, or that venture capital firms with more women get better returns. Well-managed companies care about merit, about fairness, and about promoting the best people. If you’re pulling talent from only half the population, your results just aren’t going to be as good.A reason to feel hopeful: Younger men are much more capable of recognizing bias when they see it. Among people under the age of 30, 41% of women and 17% of men say they’ve heard or seen bias directed at women in the past year. That’s a gap, but not nearly as wide as the one in the 50-60 age group, where 32% of women and just 9% of men say they’ve witnessed bias.That’s why it’s so important for people of all ages to call out bias when they see it. And here’s where men can be especially valuable, because unlike women, they face no penalty for doing so. Another reason younger guys might be expected to help the project of gender equality advance: They’re more likely to be part of a dual-career couple, Krivkovich says, so they have a personal connection to the problem. Smith says it can only help men understand the problem better to hear about it firsthand from a woman they care about: “A lot of times that’s what gets in touch with our sense of fairness and justice.”It might be just what we need to start seeing the world (almost) the same way.To contact the author of this story: Sarah Green Carmichael at firstname.lastname@example.orgTo contact the editor responsible for this story: Mary Duenwald at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Green Carmichael is an editor with Bloomberg Opinion. She was previously managing editor of ideas and commentary at Barron’s, and an executive editor at Harvard Business Review, where she hosted the HBR Ideacast. For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- California regulators have closed an investigation into whether the infamous biohacker Josiah Zayner was practicing medicine without a license.In a letter dated Sept. 25 that Zayner shared with Bloomberg News on Tuesday, the Medical Board of California wrote that it had concluded its investigation and that “no further action is anticipated.”“When I received the letter about being investigated, it was one of the scariest days of my life,” Zayner said. “I’m not committing crime. I am just trying to make science and knowledge accessible.”The California Department of Consumer Affairs told Zayner in May that it had received a “complaint of unlicensed practice of medicine” and requested that he appear for an interview. Zayner, a one-time NASA scientist with a Ph.D. in biophysics, has earned both fame and scrutiny for carrying out daredevil scientific stunts. At a conference, he once shocked the audience by injecting himself with the gene-editing tool Crispr.Anyone can file complaints with California’s medical board, but the agency doesn’t always pursue them. In its letters to Zayner, the board didn’t say who had filed the original complaint. When asked for comment on Tuesday, the board said information on its investigations is confidential.In California, practicing medicine without a license can be a misdemeanor or a felony, with penalties of as much as three years in prison. Zayner, 38, said the threat of incarceration may have a chilling effect on his work.Biohackers like Zayner publicly advocate for the democratization of technologies like genome editing. He’s the chief executive officer of a company that sells inexpensive tools for genetic engineering. At times, he’s given advice to people with serious illnesses about novel research they might explore.In July, California passed legislation intended to discourage do-it-yourself gene editing, and the U.S. Food and Drug Administration has also said it’s illegal to sell such kits intended for use in humans.So far, most biohacking experiments in humans have failed or fizzled, but some proponents have recently signaled a desire to adopt stricter standards for DIY work.“I know it’s not the last time I hear from the government,” Zayner said.To contact the reporter on this story: Kristen V. Brown in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Drew Armstrong at email@example.com, Mark Schoifet, Timothy AnnettFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
If you're interested in The New York Times Company (NYSE:NYT), then you might want to consider its beta (a measure of...
(Bloomberg Opinion) -- Out of the destruction of the postwar economies, came the rise of the economists. This is the tale that journalist Binyamin Appelbaum, this week's guest on Masters in Business, chronicles in his new book, "The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society."First in the U.S., then around the world, economists created new ideas about deficits, monetary and fiscal policy, trade, government spending and deregulation. Their influence could be seen as well in the rise of corporations that wielded enormous power with very little accountability. Appelbaum gives credit for this to economist Milton Friedman, who he said had a greater influence on 20th-century American life than any economist of his generation.Appelbaum is the lead business and economics writer for the New York Times editorial board. He was part of a team at the Charlotte Observer that in 2007 examined the high rate of housing foreclosures and questionable sales practices during the subprime mortgage crisis. The reporting won a Gerald Loeb award, a George Polk Award and was a finalist for the 2008 Pulitzer Prize in public service. His favorite books are here; a transcript is here.You can stream/download the full conversation, including the podcast extras on Apple iTunes, Overcast, Spotify, Google Podcasts, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.Next week, we speak with Fran Kinniry, global head of portfolio construction at Vanguard.To contact the author of this story: Barry Ritholtz at firstname.lastname@example.orgTo contact the editor responsible for this story: James Greiff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Tencent Holdings Ltd. live-streamed two National Basketball Association games played outside of China Monday, even as the nation’s top broadcaster shuns the league because of a controversy around Hong Kong’s pro-democracy movement.The Chinese social media giant aired a game between the Chicago Bulls and Toronto Raptors and another between Maccabi Tel Aviv and Minnesota Timberwolves, according to its official program. That’s despite the WeChat operator last week freezing broadcasts of two pre-season games played in China: a pair of high-profile match-ups between the Los Angeles Lakers and Brooklyn Nets in Shanghai and Shenzhen last week. China Central Television -- the government’s flagship broadcaster -- announced its boycott around the same time and has so far not resumed televising.A Tencent representative didn’t respond to emailed requests for comment. At stake for the internet giant are billions of dollars in ad and subscription revenue, along with its strategy of becoming a go-to destination for NBA broadcasts online. The social media giant had just inked a $1.5 billion, five-year deal to stream league games online in China. It drew almost half a billion basketball aficionados to its streams last season -- an audience now in jeopardy.Tensions flared after Houston Rockets General Manager Daryl Morey tweeted support for Hong Kong’s protests, which some in China view as a secessionist movement, triggering a backlash from companies and fans. By allowing games in China to go forward last week however, Beijing signaled it may be winding down its harsh response to the tweet, which was deleted but inflamed by NBA Commissioner Adam Silver defending Morey’s right to free speech.There were other signs too: The New York Times reported that editors at state-run news outlets have told reporters to stop emphasizing the NBA issue, fearing it might get overheated.According to Tencent Sports’s app, other pre-season games will only be streamed in text and images. Video-streaming is scheduled to return Oct. 23 as the regular season starts. The company’s shares gained 1.1% alongside other Chinese shares.“We do not comment on the specific commercial decisions of individual businesses,” Chinese Foreign Ministry spokesman Geng Shuang told a regular news briefing Monday in Beijing in response to questions about Tencent’s decision. “Exchanges in sports have always played an important role in promoting China-U.S. exchanges and friendship, but like we stated earlier, be it in China or the U.S., mutual respect is a prerequisite for conducting exchange and cooperation.”Read more: Tencent Gets ‘Wakeup Call’ From China’s Assertions of Patriotism(Updates with government’s response in the final paragraph)\--With assistance from Dandan Li and April Ma.To contact the reporters on this story: Jinshan Hong in Hong Kong at firstname.lastname@example.org;Lulu Yilun Chen in Hong Kong at email@example.com;Gao Yuan in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Sam NagarajanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- WeWork is considering a bailout that will hand control of the co-working giant to SoftBank Group Corp., according to a person familiar with the matter, one of two main options to rescue the once high-flying startup.The Japanese investment powerhouse controlled by billionaire Masayoshi Son is convinced it can turn around the cash-strapped American company with the right financial controls in place, the person said, asking not to be identified talking about internal deliberations. WeWork’s board and backers however are also weighing another option: JPMorgan Chase & Co. is leading discussions about a $5 billion debt package, Bloomberg has reported.Either rescue package, or some combination of them, would ease a cash crunch that could leave the office-sharing company short of funds as soon as next month. We Co., the parent of WeWork, had been headed toward one of the year’s most hotly anticipated IPOs before prospective investors balked at certain financial metrics and flawed governance, turning the American giant into a cautionary tale of private market exuberance and costing the company’s top executive his job.The fast-growing, money-losing startup had been counting on a stock listing -- and a $6 billion loan contingent on a successful IPO -- to meet its cash needs.Son, SoftBank Risk Too Much With WeWork Takeover: Tim CulpanRead more: WeWork Is in Talks for $5 Billion Debt Package With LendersThe Wall Street Journal first reported that SoftBank may be discussing a deal to gain control of WeWork. Representatives for the Japanese company weren’t immediately available for comment Monday, a national holiday.SoftBank is already WeWork’s biggest shareholder but the proposed deal would shore up its control of the startup, the person said, declining to elaborate on when a decision on the competing offers might be reached. The Japanese company is in advanced talks to acquire more shares at a significantly lower valuation than the $47 billion WeWork sported in January, two people familiar with those discussions said last week. The New York Times has reported that members of the board would meet Monday to decide on which bailout to select.If the board opts for the SoftBank deal, the Japanese company will be taking on a troubled enterprise at a time it’s struggling to convince the market about its longer-term investment vision. It’s also busy wooing potential investors for a successor to its record-breaking Vision Fund.Read more: SoftBank’s Son Is ‘Embarrassed’ By Record, Impatient to ImproveSon is going through a rocky stretch after repositioning his company from a telecommunications operator into an investment conglomerate, with stakes in scores of startups around the world. He built a personal fortune of about $14 billion with spectacularly successful bets on companies such as Alibaba Group Holding Ltd. But SoftBank’s shares are down about 30% from their peak this year as investors, unnerved by WeWork and Uber Technologies Inc.‘s disappointing debut, grow skittish about startup valuations. In an interview with the Nikkei Business magazine, Son said he is unhappy with how far short his accomplishments to date have fallen of his goals.WeWork and Uber may be losing money now, but they will be substantially profitable in 10 years’ time, Son said in that interview. But at a private retreat for portfolio companies late last month, he had a different message: get profitable soon. At the gathering, held at the five-star Langham resort in Pasadena, California, Son also stressed the importance of good governance. Just days later, SoftBank led the ouster of WeWork’s controversial co-founder Adam Neumann.“WeWork has retained a major Wall Street financial institution to arrange a financing,” a representative for the U.S. company said in a statement on Sunday. “Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”(Updates with details of SoftBank investments from the sixth paragraph)To contact the reporters on this story: Gillian Tan in New York at firstname.lastname@example.org;Michelle F. Davis in New York at email@example.com;Davide Scigliuzzo in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Liana Baker at email@example.com, ;Tom Giles at firstname.lastname@example.org, Edwin Chan, Virginia Van NattaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Rudy Giuliani, the personal lawyer to US President Donald Trump whose role in the Ukrainegate scandal is under intense scrutiny, on Friday said he was unaware of any investigation into his Ukraine-related activities by prosecutors in New York. The New York Times reported late on Friday that federal prosecutors in Manhattan had opened an investigation into whether Mr Giuliani, a former New York mayor, had violated lobbying-related laws with his efforts to oust the former US ambassador to Ukraine. “I have no such knowledge of Manhattan prosecutors investigating me,” Mr Giuliani told the Financial Times when asked about the New York Times story.
(Bloomberg) -- Uptown, “Mean Girls” was looping. Downtown, puppies were frolicking.Across Manhattan and out into Brooklyn, kombucha was flowing.For all the troubles at WeWork – its grandiose plans gone astray, a hoped-for rescue possibly underway -- the mood inside its New York office spaces is surprisingly upbeat.We Co., as the co-working giant is now known, may look like the omnishambles of the unicorn generation of startups. But for now, at least, many of its tenants hardly seem to care. In fact, the reaction from more than 20 people who spoke with Bloomberg this week was a shrug that said, “Not our problem.”The mood was presumably less sanguine at JPMorgan Chase & Co., which on Friday was said to be leading efforts to arrange $5 billion in financing to keep We afloat. Time is short. Without help, We could run out of money by late November.The financing could start to come together as early as next week, but it may take longer for its structure and terms to be finalized, according to people familiar with the matter who asked not to be named because the talks are private.Withdrawn IPOWe was one of the year’s most hotly anticipated initial public offerings before doubts about valuations and transparency ended with the IPO’s withdrawal and the company’s top executive losing his job. The fast-growing, money-losing startup had been counting on a stock listing -- and a $6 billion loan contingent on a successful IPO -- to meet its cash needs.Now it will pay considerably more to borrow. One option that’s been floated is raising $3 billion or more of the debt package through the sale of high-yield bonds, some of the people said. Those would likely be priced at a premium to the yield commanded by WeWork’s outstanding bonds, which were issued with a 7.875% coupon and offer a yield of around 10%, some of the people said.SoftBank Group Corp., the largest shareholder in WeWork, is currently in advanced talks to acquire more shares at a significantly lower valuation than the $47 billion WeWork had in January, said two people familiar with those discussions.Spokeswomen for JPMorgan and WeWork declined to comment.WeWork’s bonds, which traded above par less than a month ago, have plunged into distressed levels since then, dropping more than 20 cents on the dollar amid mounting concerns about the company’s cash situation before regaining almost half of that decline amid news of the debt talks. Fitch Ratings and S&P Global Ratings have cut WeWork’s credit grade further into junk on liquidity issues.Financial FalloutThe potential financial fallout could be huge. JPMorgan has loans out to the company and its founder, while SoftBank has watched its investment plummet in value. But the implications for New York real estate are worrisome too. We became Manhattan’s biggest office lease holder, with more than 7 million square feet, partly because it was sometimes willing to pay above-market rents.Since We’s brash co-founder, Adam Neumann, abruptly stepped down last month, the company has drastically reversed its growth-at-all-costs strategy. It’s moved to sell Neumann’s luxurious Gulfstream G650 and shed other assets and headcount.The company’s new co-chief executive officers have been moving to slash costs and spin off businesses in the past two weeks in an effort to slow its cash bleed. Analysts had previously estimated that the company would run out of money by the middle of next year.In Manhattan’s financial district, We member Brianna Rowe, who has been there for four years, said the WeWork space was one of the perks of her job working for a nonprofit.“It was just so cool, it was unlike anything I had ever really experienced before,” she said.Blessing, CurseNathan Lee Colkitt, who’s been renting We space for his architectural firm since 2010, said that as long as the place is kept up, he’s happy to stay put. We’s big selling point – flexibility -- has turned out to be a blessing for him, if a curse for WeWork.“The very same thing that made them successful gives you the ability to jump at any month,” Colkitt says. “So that’s sort of ironic or coincidental.”Rarely has so much gone so wrong so fast for a young company in the spotlight. We has raised more than $12 billion since its founding and never turned a nickel of profit. Now, its very future is in doubt. We’s travails are bound to shape investors’ views of other fast-growing startups hoping to go public.From Midtown down to Gramercy Park, WeWork members said that for them, it was business as usual. At offices at 750 Lexington Ave., “Mean Girls,” the Lindsay Lohan comedy, was playing over and over on Oct. 3, known as “Mean Girls Day.” A puppy party broke out at 33 Irving Pl., with happy hour to follow, while the spaces at 880 Third Ave. featured a macaroni-and-cheese bar and massages.For WeWork’s tenants, the financing negotiations and the scramble to cut costs went largely unnoticed or remarked upon.Robert Snow, another We member, summed up the view: “As far as I can tell, it’s the same as it’s always been.”\--With assistance from Natalie Wong and Davide Scigliuzzo.To contact the reporters on this story: Gwen Everett in New York at email@example.com;Gillian Tan in New York at firstname.lastname@example.org;Michelle F. Davis in New York at email@example.comTo contact the editors responsible for this story: Rob Urban at firstname.lastname@example.org, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
President Donald Trump created a rare moment of unity between Washington’s Republicans and European governments when he ordered troops to vacate part of Syria ahead of a Turkish assault on America’s Kurdish allies. , the move is backed even by groups normally viscerally opposed to the government.
(Bloomberg Opinion) -- The New York Times recently released a dramatic infographic showing how much less progressive U.S. tax system have become since 1950. When the animation starts, most taxpayers are paying about 20% of their income in taxes, but the top 1% is paying almost 30%, while the country’s 400 highest earners are paying 70%. During the next 68 years, most brackets see their tax rate rise, while the richest 400 see their rate fall relentlessly. When the animation finishes, the top 400 individuals are paying just over 20% – lower than any other bracket.These numbers are astounding, and they suggest that higher tax rates on the country’s wealthiest individuals are in order. But first, it’s important to understand what it does and doesn’t show.First of all, the graph zooms in on the top brackets – it shows the tax rate at the 90th income percentile, then the 99th, then the 99.99th, and finally the top 400 people. If it had stopped at the 99th percentile, it would have shown roughly constant top tax rates over time; what looks like a dramatic fall in tax progressivity comes entirely from the tiny sliver of earners at the very top of the income scale.Second, the graph doesn’t include transfers – the money that the government pays out. Overall, these have risen. This, along with rising taxes for the upper-middle class, is the main reason why the U.S. fiscal system as a whole has become steadily more progressive since 1950. Most of the country simply isn’t affected very much by what the government does to the 400 highest earners.A final caveat is that the tax rate of top earners is very hard to measure because they earn their income in non-standard ways, and they try very hard to hide it from the tax collectors.But despite all these caveats, it’s clear that tax rates for the richest handful of Americans have gone down a lot since the mid-20th century. And the country is starting to feel increasingly uncomfortable about that fact. The share of Americans who believe that high earners pay too little in taxes has come down a bit over the years, but it’s still a substantial majority:Meanwhile, a number of the country’s wealthiest people, including Bill Gates and Warren Buffett, have called for their own taxes to be raised. Presidential candidate and billionaire Tom Steyer has echoed the call. Facebook founder Mark Zuckerberg has gone even farther, declaring that “no one deserves” the amount of wealth that he and other billionaires have accumulated.So how can top earners be taxed? The first order of business is to raise the capital-gains tax rate. Despite news headlines about overpaid chief executives, the very top earners make most of their income from the financial assets they own. Taxing capital gains is unlikely to hurt business investment, given that the country is awash in savings earning increasingly low returns. Economic research has shown that cuts in dividend tax rates (which work similarly to capital-gains taxes) haven’t boosted growth or investment, so it stands to reason that raising rates wouldn’t hurt.A second step is to repeal President Donald Trump’s new deduction for pass-through business income. This lets many top earners pay lower taxes by passing their income through an S corporation or other closely held company; it's an important reason tax rates on the wealthiest are falling.A third step is to create more tax brackets. The reason that top income tax rates were so high in the mid-20th century is because there were special brackets for very high earners. In 1920 there were more than 50 federal income-tax brackets, with the rate on income of over $1 million – about $12.8 million in today’s dollars – set at 73%. As of 2019 there are only seven brackets, with the top bracket set at just $500,000. Adding more brackets at the top of the income scale would allow steeper rates to be targeted at very high earners.Taxing the highest earners has a number of benefits. It will raise some government revenue (though perhaps less than most ardent proponents expect). Higher income taxes may prompt wealthy people to shelter their money within corporations as they did in the 1950s, which could raise the declining rate of business investment.And finally, taxing the rich more will increase social cohesion. Obligating the top earners to pay more creates a sense that American society isn’t just every man for himself, but that the most successful are required to give something back to the country that gave the opportunity to succeed. Buffett, Gates, Zuckerberg, Steyer and other extremely wealthy individuals seem to share the general yearning for a society that isn’t so divided into winners and everybody else.(Corrects to indicate that taxes paid by the 400 wealthiest Americans are all taxes, not just federal taxes.)To contact the author of this story: Noah Smith at email@example.comTo contact the editor responsible for this story: James Greiff at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- For Democrats, the Overton window — the range of ideas that are not considered extreme — has shifted markedly to the left in the last few years. It now seems that the window for discourse about economic reality is moving as well. Take the headline on David Leonhardt’s recent New York Times column, summarizing the research of economists Emmanuel Saez and Gabriel Zucman, who are advisers to Elizabeth Warren: “The rich really do pay lower taxes than you.” No, they do not.In a progressive system, people with higher incomes are required to pay a larger share of their income in taxes. This is reasonable and fair because people differ in their ability to earn income and because the labor-market rewards for workers of different skill levels are determined by factors other than ability and effort. Contrary to the narrative that seems to be forming on the political left, the U.S. federal tax code is very progressive. According to the nonpartisan Congressional Budget Office, the lowest-income 20% of households have an average federal tax rate of about 2%. Those in the middle 20% pay 14% of their income in federal taxes. Higher-income households face higher rates. The top 20% pay a 27% federal rate. And the federal tax rate for the top 1% is 33%. These data are for 2016, the most recent year available. This is half of the story. When assessing the progressivity of the U.S. federal system, it makes sense to look at both taxes and the means-tested transfer payments — Medicaid, food stamps and Supplemental Security Income — that those taxes fund.If you subtract these payments from federal taxes paid, the tax rate for the top 20% of households (including the top 1%) is unchanged, as those households don’t receive means-tested benefits. The tax rate for households in the middle 20% drops considerably, from 14% to 9%. And the rate for the bottom 20% of households plummets to minus 70%. Those households receive $49 in transfer payments for every $1 they pay in federal tax.When assessing the total tax burden facing different U.S. households, looking at federal, state and local taxes is instructive. The federal system is more progressive than state and local systems, but combining them — as the Institute on Taxation and Economic Policy has done — doesn’t change the story: the higher your income, the greater your tax burden. Harvard economist and top Obama adviser Jason Furman confirms this by combining federal taxes and transfers with state and local taxes.How to square this with Saez’s and Zucman’s research? There is an active debate among economists about technical questions in income measurement. How much of the income that is not reported on tax returns should be assumed to have been earned by the rich? How to account for unrealized capital gains when determining income? Which income group pays the corporate income tax? How should social insurance programs that transfer income across a person’s life cycle — for example, Social Security and Medicare — be treated? The answers to those questions, and to many others, in large part determine the conclusions about how the tax code treats different groups of households. That applies to any analysis, including mine, above, and to Saez’s and Zucman’s. But the existence of this academic debate shouldn’t obscure the overwhelming consensus among economists that the U.S. tax system is progressive. This consensus holds even when you look within the top 1% of households. The Urban-Brookings Tax Policy Center finds that this group faces the highest tax rate.Saez and Zucman train much of their focus on the 400 wealthiest Americans. This group makes up 0.0003% of households. The New York Times column describing the Saez-Zucman estimates reports that last year this group had a 23% combined federal, state and local tax rate. In fact, the jury is still out on that number, which is based on a forecast of what income might have been last year. (The data for 2018 aren’t in. If you filed for an extension, your taxes for 2018 aren’t due until next week.) Even if it turns out to be correct, it doesn’t follow that the U.S. system is not progressive. Characterizing features of the tax system based on a few hundred individuals is silly. For one, people cycle in and out of the top 400 every year. And there are over 120 million households in the U.S. The tax code can create strange situations for some of them, depending on their circumstances. For example, low-income households that stand to lose Medicaid benefits by increasing their income can face implicit marginal tax rates of close to 100%. It is more reasonable to conclude that those households face a quirk in the tax code than to draw general conclusions about the tax and safety net systems as a whole.None of this is to say that we shouldn’t be concerned if those 400 Americans don’t face the highest tax rates in the U.S. (Though that is not at the top of my list of concerns.) And whether the system is progressive is a separate question from whether policy should further increase the tax burden on the wealthy. The latter is worthy of debate. But that contest of ideas should take place on a playing field of facts. And the fact is that the U.S. tax system is progressive. To contact the author of this story: Michael R. Strain at email@example.comTo contact the editor responsible for this story: Katy Roberts at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.