Australia's Qantas Airways on Thursday posted a net loss of A$1.964 billion ($1.41 billion) for the year ended June 30, one of its largest ever. Libby Hogan reports.
Australia's Qantas Airways on Thursday posted a net loss of A$1.964 billion ($1.41 billion) for the year ended June 30, one of its largest ever. Libby Hogan reports.
President Donald Trump paid no federal income tax in 10 of the past 15 years due to massive business losses, and just $750 in federal taxes in 2016 and 2017, the New York Times reported on Sunday. The paper said it had acquired more than two decades’ worth of tax-return data from Trump and his business organization, though it does not include his personal tax returns for 2018 and 2019.
(Bloomberg) -- Margarita Louis-Dreyfus took another hefty dividend from the eponymous agricultural-commodity trading house she controls, as the billionaire continues to squeeze the business for cash.During the first six months of the year, Louis Dreyfus Co. paid a dividend of $302 million. The payout related to last year’s profit, the sale of several assets in Canada and its former metals-trading business, according to the company’s interim financial statement. The dividend reduced the company’s equity to $4.48 billion at the end of June, down from $4.79 billion six months earlier.Louis-Dreyfus, who controls more than 96% of the holding company that owns LDC, has been taking big dividends over the past few years to help repay about $1 billion she borrowed to buy out other family members. The payouts, often surpassing the trading house’s profit, have steadily reduced the company’s value.The billionaire owner has been in talks to sell a minority stake in the company, recently holding negotiations with Abu Dhabi sovereign wealth fund ADQ. A successful deal would give the trading house an injection of much-needed cash.On top of its owner’s troubles, the company has struggled over recent years, amid frequent management changes and declining earnings. Veteran Michael Gelchie will become chief executive officer later this week -- the seventh CEO appointed by Dreyfus in eight years -- replacing Ian McIntosh.Despite its recent travails, the first half of 2020 showed some improvement for LDC. Net income climbed 77% to $126 million from a year earlier, despite significant losses from the collapse of Luckin Coffee Inc. Net sales decreased to $16.3 billion, as both prices and volumes shipped fell year-on-year.“The results reported today put LDC in a strong position from which to advance its ambitious growth plans,” said Gelchie.Net debt fell to $6.7 billion at the end of June, from $6.9 billion at the end of 2019, reducing its adjusted leverage ratio to 2.8 times.Dreyfus is the D in the vaunted “ABCD” group that dominates the world of agricultural commodities trading. The others are Archer-Daniels-Midland Co., Bunge Ltd. and Cargill Inc.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Bank of America sees Virgin Galactic stock doubling with commercial passenger flights expected next year.
(Bloomberg) -- Back in March, long before a short seller would raise questions about electric-truck company Nikola Corp. and hasten its founder’s exit, early investors in the company were expressing concerns of their own.Those investors, led by mutual-fund giant Fidelity Investments, were worried that Trevor Milton, for all his brash visionary talk and Twitter braggadocio, lacked the ability that Elon Musk possesses to deliver these sorts of newfangled products to market. They lobbied successfully to remove him as CEO before the company’s June IPO and for Milton’s father to leave the board, according to people familiar with the matter. When the deal was done, Milton only held the title of chairman, the post he resigned this month.The back-room negotiations show that Milton’s past was a concern to investors months before General Motors Co. executives placed a bet on the company in a $2 billion deal carved out after the IPO. They liked Milton’s vision and his ability to raise cash and felt the venture was safeguarded from his shortcomings in operations by his push upstairs, say people familiar with the matter. Nonetheless, the events that have unfolded since the short-seller report, with Nikola’s stock plunging amid a steady stream of negative headlines, have exposed just how high the risks still were.Now, it’s up to former GM Vice Chairman Steve Girsky, whose blank-check company VectoIQ took Nikola public via reverse merger in June, and Nikola CEO Mark Russell to stabilize the business and regain investor confidence. The plan with GM was to use Nikola’s hot stock and Milton’s ability to raise money to build a hydrogen-fueled trucking business with GM’s technology.“There is obviously someone on the diligence side who isn’t going to get a nice bonus this year,” said Reilly Brennan, founder of the venture capital fund Trucks Inc. “The best possible thing if you’re a shareholder is that Milton is no longer running the company and you have Girsky as chairman and GM providing technology.”The GM deal was originally scheduled to close Sept. 30, and the automaker has said it plans to carry through, but that timing may slip, say people familiar with the matter. BP Plc is still engaged with Nikola in talks to partner on a network of hydrogen fueling stations for fuel-cell trucks the company hopes to sell, but also is slowing the pace for a deal, said the people, who asked not to be identified discussing private information. BP and GM declined to comment.Shares of Nikola fell 4.78% to $18.55 as of 9:45 a.m. Monday in New York and down 45% since it went public. GM rose 2.5% to $29.72.Milton’s tale reads like a Greek tragedy. The report by short seller Hindenburg Research accused Milton of overhyping Nikola’s technology and has prompted investigations by the Justice Department and U.S. Securities and Exchange Commission. A cousin has accused him of a decades-ago sexual assault, which he denies. The company’s value peaked at $30 billion and is now worth about $7 billion.Girsky and GM Chief Executive Officer Mary Barra have both said publicly that they did plenty of due diligence. People familiar with the matter say that GM found out when scouting the deal that it had better batteries and fuel-cell technology but joined forces because Nikola had a working semi truck and access to capital markets. In addition, GM will get paid to build Nikola’s Badger pickup on existing assembly lines. Milton was so excited to get the Badger pickup program moving that he signed a deal that heavily favored GM, one of the people said.Nikola’s stock and GM’s $2 billion stake are worth less than half what they were on Sept. 8, when the deal was announced. Milton’s own stake is worth $1.7 billion, down from almost $5 billion at one point.Humble BeginningsMilton said in a June interview with Bloomberg News that he grew up in modest surroundings in Layton, Utah. His family moved to Las Vegas when he was very young and he lost his mother to cancer shortly after moving back to Utah in the sixth grade. He wrote on Twitter he didn’t finish high school, earning an equivalency certification instead, and later dropped out of college. His Twitter account has since been deleted.He grew up in a tight-knit Mormon family, according to Aubrey Smith, his first cousin. She went on social media recently and accused him of sexually assaulting her in 1999 when she was 15 and he was 17.In a public account on Facebook and Twitter, and repeated in a phone interview, Smith said that Milton came onto her at the funeral of their grandfather. He took her shirt off without permission, Smith wrote, and then he touched her inappropriately before someone knocked at the door and she ran out.Milton denied the allegations through a spokesman.Smith said Milton raised money from family members to get his start. He founded and ran several businesses, including a home-security company that Milton claims he sold for $1.5 million. Next, in 2009, he founded an e-commerce platform called Upillar.com, which Milton claims “pioneered the shopping cart online.”Clean PowerThen he got into clean propulsion but ended up embroiled in litigation with dHybrid Inc., which he founded in 2009. The company retrofitted diesel vehicles with natural-gas-burning turbines, claiming the dual system had greater efficiency.But a deal with Swift Transportation Co. in 2010 ended in court when Swift alleged dHybrid defaulted on a $322,000 loan and that it retrofitted only half of the agreed vehicles. The case was dismissed in 2015.Milton later tried to sell dHybrid to a company called sPower in May 2012 but that, too, got mired in lawsuits after sPower backed out and accused Milton of exaggerating its technological capabilities.Amid the litigation, Milton started another company with a very similar name, dHybrid Systems, selling it in 2014 to Worthington Industries.During an interview with Bloomberg in June, Milton said that dHybrid Inc. was a success but conceded that, “we ended up closing that one down because of some litigation.”His next startup was Nikola, founding it in 2014 in Salt Lake City before moving to Phoenix. Emulating Musk, he took the name from the electricity pioneer Nikola Tesla, and the company was soon billed as the Tesla of Trucks. His plan was seen as potentially disrupting the entire transportation industry by making trucks that ran on batteries or hydrogen-fuel cells. He also planned to build a network of hydrogen filling stations.Friends and FamilyMilton had friends and family members working for Nikola despite resumes that didn’t match the job. His brother, Travis Milton, is director of hydrogen and infrastructure. His LinkedIn profile shows that most of his experience was being “self-employed” in Maui. The short seller, Hindenburg Research, said that Travis Milton poured concrete as a contractor. Milton’s father Bill was originally on the board but stepped down when VectoIQ took the company public.The company’s stock prospectus said that Nikola had awarded more than 3 million stock options “to recognize the superior performance and contribution of specific employees.” The list included Travis Milton and an uncle, Lance Milton, the document said, acknowledging that they are relatives.As Milton went public with Nikola’s technology, questions soon arose involving his claims about the company’s fuel-cell system. He bragged in an investor video in 2019 that the company had created “what other manufacturers said was impossible to design.” But while Nikola holds patents in fuel-cell and battery technology, most of its planned hardware was coming from German supplier Robert Bosch Gmbh.Nikola DemonstrationsIt became clear that Milton had gotten ahead of himself. A 2016 demonstration showed a truck that didn’t have a working hydrogen-fuel-cell system and was missing key parts, people familiar with the matter said in June. Milton said at the time that the parts were removed as a safety precaution.In July of this year, he recorded a video of the semi truck in which he ran alongside the vehicle as it coasted at low speeds in a parking lot. Aping Musk’s combative social-media persona, Milton took a shot at his detractors saying, “these damned trolls, I wonder if they are going to apologize to everyone for the lies they spread the tens of thousands of comments about how fake we are.”Girsky said in the webcast “Autoline This Week,” in which Bloomberg participated, that he has been in Nikola’s fuel-cell trucks and that they work.Still, when the GM deal was done, GM will be supplying all of the technology for every global market except Europe. Nikola’s pickup truck, called Badger, will use GM’s Ultium battery, and the semis will run on a fuel cell developed by GM and Honda Motor Co.Since Milton’s departure, Nikola has billed itself more as an integrator of other technologies into its Badger pickup and semi trucks.For GM’s part, the automaker is protected from any financial downside. GM got 11% of the stock for no cash investment and gets paid for its technology. If Nikola fails, GM won’t lose a dime.Milton has remained silent and is out of the company. He unknowingly presaged his own downfall in the June interview with Bloomberg: “Part of becoming a better person in life is losing everything you have got and having nothing left.”(Updates with Monday trading in seventh paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Inovio Pharmaceuticals early Monday said the FDA had forced it to delay the start of final-phase testing on its Covid-19 vaccine candidate until some questions could be answered; INO crashed.
On CNBC's "Mad Money Lightning Round," Jim Cramer said to a viewer he is right to buy Boeing Co (NYSE: BA). He likes it because American Airlines Group Inc (NASDAQ: AAL) got some money from the government, airlines are able to test people before they get on a plane and masks work in planes.It's not General Electric Company's (NYSE: GE) year, said Cramer. It has a very good turnaround plan, but it's not ready yet, he added. This time next year, it's going to be a much better stock, but a lot of people aren't that patient.Cramer feels like he had his call with Rocket Companies Inc (NYSE: RKT) and he is now ready to move on. He explained that there are a lot of people with short positions because they don't like the ownership structure.RedHill Biopharma Ltd (NASDAQ: RDHL) is a smart Israeli company, but Cramer would rather own Royalty Pharma plc (NASDAQ: RPRX).Cramer is worried about Walgreens Boots Alliance Inc (NASDAQ: WBA) because its prescription drug side and the front of the store are under attack. He doesn't know what could make it trade higher.Instead of Illumina, Inc. (NASDAQ: ILMN), Cramer would rather buy Thermo Fisher Scientific Inc. (NYSE: TMO) and Danaher Corporation (NYSE: DHR).Cramer likes Ping Identity Holding Corp (NYSE: PING).See more from Benzinga * Options Trades For This Crazy Market: Get Benzinga Options to Follow High-Conviction Trade Ideas * Mike Khouw Updates His Nike Options Trade * 'Fast Money' Picks For September 28(C) 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Why do pension fund trustees keep doing this, and falling for one of the oldest games in the business? The $4.8 billion pension fund of New York’s Metropolitan Transportation Authority just became the latest to sue a hedge-fund manager after losing hundreds of millions of dollars in complicated financial vehicles that maybe nobody could understand. The MTA joins a list of woebegone pensions suing German financial giant Allianz over its “Structured Alpha” funds, which collapsed in the market turmoil earlier this year wiping out 97%—yes, really—of investors’ capital.
The daughter of Esperanza Ugalde of Illinois filed in August what lawyers believe is the first wrongful death "take home" lawsuit, alleging her mother died of COVID-19 that her father contracted at Aurora Packing Co's meat processing plant. The cases borrow elements from "take home" asbestos litigation and avoid caps on liability for workplace injuries, exposing business to costly pain and suffering damages, even though the plaintiff never set foot on their premises. "Businesses should be very concerned about these cases," said labor and employment attorney Tom Gies of Crowell & Moring, which defends employers.
President Donald Trump paid just $750 in federal taxes in both 2016 and 2017, and no federal income tax in 10 of the previous 15 years due to massive business losses, the New York Times reported Sunday. The paper said it had acquired more than two decades’ worth of tax-return data from Trump and his business organization, though it does not include his personal tax returns for 2018 and 2019.
The major stock indexes were sharply higher early Monday, as the stock market rally attempt continues. Apple and Tesla raced higher.
The company announced in a statement that CEO, Edward Lampert, would step down, with day-to-day operations managed by three high-ranking executives. Where is Sears Today? A bankruptcy judge approved the sale of the company's assets for $5.2 billion to Lampert in a bankruptcy auction.
In the first half of 2020, many companies have cut back on their dividend payments, slashing or suspending them to conserve cash against the downturn. That trend appeared to reverse itself – or at least, to start to reverse itself – in August, when 13 companies announced dividend increases while only 2 announced cuts. Is this a signal that Q3 will show rebounding sentiment toward dividend and buyback policies? The recessionary pressure is easing; and dividends are a powerful attractor for cautious investors.Looking at the current situation from Evercore ISI, market strategist Dennis DeBusschere believes the worse is over, saying, “[A] sharp drop in cash returns is unlikely [in 2h20.]” He believes that companies will continue, albeit slowly, to restore both dividends and buyback policies – but cautions that investors should not expect a return to pre-pandemic levels for until at least 2022.“Though a recovery back to pre-pandemic levels is not likely for at least two years, the negative impact on high cash return names and income strategies should continue to stabilize through year end,” DeBusschere opined. Following DeBusschere’s lead, Evercore’s stock analysts have been tagging high-yield dividend payers as likely prospects for investors looking to buy in. According to the TipRanks data, these are Buy-rated stocks, with at least a 7% dividend yield and upwards of 10% upside for the year ahead. Columbia Property Trust (CXP)The first stock on today’s dividend list is a real estate investment trust, Columbia Property Trust. Columbia holds a portfolio exceeding 6 million square feet of office space in New York, San Francisco, and Washington DC, with smaller investments in Boston, Mass. New York and San Fran were hit hard- by coronavirus and the lockdown policies implemented to halt its spread. That could have badly hurt the company- but Columbia’s 97% lease occupancy and long-term leases (the average term remaining is 6 years) provided a level of insulation.That can be seen by CXP’s performance in 1H20. The company revenues and earning both grow sequentially in the first and second quarters of the year. Finishing the half, the top line reached $79.4 million for the second quarter, and Q2 EPS came in at 40 cents, well above the 35-cent forecast. In a key marker of the company’s fundamental strength, Columbia reported 97.2% success in rent collection, despite the corona pandemic.The strong quarterly results are a welcome contrast to the share performance. CXP fell sharply in the first quarter, during the market’s mid-winter swoon, and has yet to recover.The financial performance was the key, as far as the company’s dividend policy. In August, the company declared the Q3 payment, sent out on September 15, of 21 cents per common share. This was the fourth quarter in a row with the dividend at this level, and the annualized payment of 84 cents per share give a strong yield of 7.8%. CXP has a four-year history of gradual dividend increases.Analyst Sheila McGrath, writing for Evercore, points out the obvious pressures in CXP’s office-space niche: “Sentiment to the office sector with work from home concerns has pressured valuations and increased Betas for the office names.” In analyzing the company’s particular situation, however, she also points out a clear strategy for continued success, saying, “CXP has high occupancy and limited near term rollovers on the horizon. Importantly, the majority of rollover in 2020 is at rents that are substantially below market. Consequently, we expect CXP to work with existing tenants to maximize renewals and minimize downside in the current uncertain environment.”To this end, McGrath gives CXP an Outperform (i.e. Buy) rating, with a $15 price target indicating room for 39% upside growth. (To watch McGrath’s track record, click here)Columbia Property Trust has a Strong Buy rating from the analyst consensus, based on 3 Buys and 1 Hold set in recent months. The stock’s share price is $10.77, and the average price target, at $15.50, is slightly higher than McGrath allows, and suggests an upside potential of 44%. (See CXP stock analysis on TipRanks)AllianceBernstein (AB)Next up is an asset management stock, AllianceBernstein. AB provides both investment services, both research and management, for retail investors and high-net worth individuals around the world. The firm boasts over $640 billion in total assets under management.AllianceBernstein saw 1H20 results that were the opposite of CXP’s above. The company’s share performance saw a large rebound after the February market collapse, and is up 96% from its March trough. That positive result was not reflected in the financial reports during the half. Both quarters saw sequential declines at the top and bottom lines, with the Q2 numbers coming in at 61 cents EPS and $63.2 million in revenue. Even with the decline in 2020, however, EPS was still up 9% year-over-year.Management at AB has a history of both keeping the dividend reliable, not missing a payment, and of regularly adjusting the payment to keep it affordable. They have kept that policy during the corona crisis. The current payment is 61 cents per common share, and while this is down from the 85 cents paid out in February, it still yields 8.9% for investors.John Dunn, writing the review of AB for Evercore, was impressed by the firm’s ability to grow during the corona pandemic. “A repeat of positive flows in both the retail & inst’l channels, setting up an impressive inflow month: AB’s month-end AUM of $643bn was above our / Street quarter-end estimates of $619bn / $618bn. AB saw 3% higher m/m AUM, on market gains in tandem with organic growth which we’ve now seen in 6-of-8 months so far in ’20,” Dunn noted. Dunn gives AB shares a price target of $32, suggesting a one-year upside of 9.5% and supporting his Outperform (i.e. Buy) rating. (To watch Dunn’s track record, click here)Overall, AllianceBernstein shares, with a 2 recent Buy reviews, have a Moderate Buy rating from the analyst consensus. The shares have an average price target set at $30.50, which implies an upside of 11% from the current trading price of $10.77. (See AB stock analysis on TipRanks)MGM Growth Properties (MGP)With the last stock on our list today, we move back to the REIT sector. MGM Growth Properties focuses on entertainment and leisure properties, with a portfolio of 13 destinations in 8 states, mainly casinos and luxury hotels, totaling over 27,000 rentable rooms.As can be imagined, the corona crisis has not been kind to a luxury resort company; social distancing rules and restrictions on commerce have put a damper on both the casino and hotel industries. EPS for each quarter of 1H20 came in at just 56 cents – down from 58 cents in 4Q19 and 59 cents 3Q19. In addition, the 2020 results have come in well below the forecasts. MGP took moves in the second quarter to protect itself from the decline in earnings, with an issue of senior notes worth $800 million.Despite the shock to its business niche, MGP shares showed a strong bounce back from the market crash earlier in the year. The stock is up 119% from its lowest point.The mixed results of the recent months, and the uncertain future during this ‘corona time,’ has not derailed MGP’s dividend policy. The company has been gradually growing the payment for the past 4 years, and raised it again for the June payment this year. The current dividend payout is 48.75 cents per common share, or $1.95 annually. The yield is robust, at 7%, or nearly 3.5x the average found among S&P-listed stocks.Evercore’s Steve Swaka acknowledges weaknesses in MGP’s position, but also points out that the company has a powerful ally in sister-company MGM: “As we have stated at other times recently, although prior to COVID many investors had viewed MGP’s relationship with MGM as a net-detriment to the investment thesis, under the current circumstances it’s hard to see where this has not turned out to be a net-positive.”Overall, Swaka rates MGP shares an Outperform (i.e. Buy) along with a $34 price target. This figure indicates room for 21% growth in the year ahead. (To watch Swaka’s track record, click here)The analyst consensus rating on MGP shares is a Strong Buy, based on 5 Buy reviews and a single Hold set in recent weeks. The stock’s $28.50 share price and $33 average price target make the one-year upside 15.5%. (See MGP stock analysis on TipRanks)To find good ideas for dividend stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
For those who have recently gone full-bore with their bank online, here are answers to your mobile banking questions
Sorrento Therapeutics (SRNE) has taken a unique approach to fighting the coronavirus. While most pharma companies taking the good fight to COVID-19 have focused their energies on one area, Sorrento has taken a more scatter gun approach. The biotech is developing a COVID-19 vaccine, a diagnostic test, an antibody test and has several therapeutic candidates.While it remains to be seen whether the varied method pays off, Dawson James analyst Jason Kolbert believes Sorrento might have a fan, who as they say, has some influence in high places.During a presidential press conference, “the president mentioned among promising therapeutics a monoclonal-antibody that is 70% effective," Kolbert said. "We spoke with Sorrento afterward and remain optimistic that the company’s mAB is very effective (>70%) and is progressing towards approval.” Considering Trump has in the past suggested injecting bleach might be an apt treatment for COVID-19, it is open to debate whether such an endorsement amounts to a positive development. Either way, Sorrento has been making progress with its various programs.The company is working on an antibody cocktail that will be capable of providing 100% protection against a SARS-CoV-2 coronavirus infection, one which will remain effective even if the virus mutates.Kolbert believes that through the U.S.'s Project Warp Speed, the cocktail could get a fast track to commercialization.The target took a step closer to fruition on September 17, when Sorrento got the go ahead from the FDA to proceed with the Phase 1 trial of its COVID-19 neutralizing antibody, code named COVI-Guard (STI-1499).The antibody demonstrated promising in vitro results as it was able to completely block the SARS-CoV-2 virus, making STI-1499 Sorrento's “lead candidate for potential cost-effective passive protection against COVID-19.”Additionally, while competitor Eli Lilly is currently further down the line in the COVID-19 neutralizing antibody race, it recently reported positive interim results in a placebo-controlled study of a compound similar to STI-1499. Kolbert believes “the Sorrento antibody could be more potent and manufactured more easily at a larger scale.”All in all, Kolbert keeps a Buy rating on SRNE shares alongside a $21 price target, which implies a 103% upside from current levels. (To watch Kolbert’s track record, click here)Only one other analyst is currently keeping a close eye on Sorrento developments, also recommending the stock a Buy. Put together, Sorrento has a Moderate Buy consensus rating backed with a $25.5 price target. Investors are looking at serious upside of 185.5%, should the target be met over the next 12 months. (See SRNE stock analysis on TipRanks)To find good ideas for healthcare stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
(Bloomberg) -- Remington Outdoor Co., the 200-year-old gun maker that filed for bankruptcy again in July, has been auctioned off in court.Seven bidders will each purchase a portion of the company’s businesses, according to a filing in the northern district of Alabama.The development caps a hunt for buyers to bring in funds to pay off creditors. Cerberus Capital Management had acquired Remington in 2007, and the firearms and ammunition giant accumulated nearly $1 billion in debt.The company said previously that it had $437.5 million in sales last year, about half the business it did in 2016.Here are the details on the successful bidders and the Remington businesses they are buying:Vista Outdoor Inc. for its Lonoke ammunitions business and certain IP assetsRoundhill Group LLC for its non-Marlin firearms businessSierra Bullets LLC for its Barnes ammunitions businessSturm, Ruger, & Co. for its Marlin firearms businessJJE Capital Holdings LLC for DPMS, H&R, Stormlake, AAC and Parker brandsFranklin Armory Holdings Inc. for Bushmaster brand and some related assetsSportsman’s Warehouse Inc. for Tapco brandsFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Many popular online high-yield savings accounts used to have really good rates, but they've been slashed significantly. Here's what to do to maximize your rates.
Netflix is poised to continue minting money should it raise prices soon, as one analyst projects.
(Bloomberg Opinion) -- After the troubles at Nikola Corp. you’d think stock market investors would have had their fill of startups that promise to revolutionize the trucking world.Yet this week another Texas-based truck electrification business, whose founder is even younger than Nikola’s, is poised to go public. And once again a special-purpose acquisition vehicle (or SPAC) is in the driving seat and making piles of money.Hyliion Inc.’s 28-year-old chief executive officer, Thomas Healy, will become a paper billionaire — a fact that’s sure to capture plenty of attention — as long as the shareholders of cash shell Tortoise Acquisition Corp. vote on Monday in favor of a merger with his company.A Carnegie Mellon mechanical engineering graduate, Healy doesn’t spend a lot of time on Twitter and seems more modest than Nikola’s boastful chairman Trevor Milton, who resigned last week after a scathing short-seller report raised awkward questions about his company.Unlike Milton, Healy isn’t trying build an entire truck. Hyliion’s main goal is to supply hybrid and electric propulsion systems that can be slotted into various manufacturers’ existing heavy-truck models and thereby lower their emissions and the total cost of ownership.One can debate whether a truck component supplier that won’t generate meaningful revenue until 2022 should be valued at about $7 billion, as it will be after the deal. But ignore the technology — and Healy’s $1.5 billion anticipated net worth — for a second, and focus on the SPAC.Considering the limited financial risk involved, the riches Tortoise’s creators are poised to reap are every bit as astonishing as Healy’s. Based on regulatory filings, I calculate the sponsor has sunk less than $7 million of its money into the SPAC and yet it will receive roughly $450 million in equity value from Hyliion.(1)To put that in context, this is about 80% of the $560 million cash proceeds Hyliion gets by merging with Tortoise.(3) In a traditional initial public offering, bank underwriting fees usually don't exceed 7% of the gross proceeds. This outcome may add fuel to the debate about whether SPAC’s high fees (known as the “promote”) are justified. There’s a question too about whether these fees are disclosed in a way retail investors can easily understand.The dream of making such stonking returns is what’s driving the mania for launching SPACs. North American SPACs have raised more than $40 billion so far this year, according to Bloomberg data.Tortoise is led by Vince Cubbage, a former oil and gas executive and ex-investment banking sector head at Banc of America Securities. He and Healy declined to be interviewed ahead of the shareholder vote, citing a regulatory quiet period.In fairness, Hyliion almost certainly wouldn’t be on the cusp of becoming a public company if Cubbage hadn’t alighted on it as a target in March. By June Tortoise had completed due diligence and the two parties agreed Hyliion would be valued at $1.5 billion, including its cash. In their rush it looks like Healy left a lot of money on the table.The retail investor frenzy that propelled Tesla Inc. to a $380 billion valuation this year — and valued Nikola at $29 billion — has boosted Tortoise and Hyliion too. Hyliion encouraged the association by comparing the merits of the three companies’ technologies. Tortoise shares have more than quadrupled in value since the merger announcement. This is the SPAC equivalent of the first-day IPO “pop” that critics dislike because it shortchanges founders. Going public via a SPAC is less time-consuming than a regular IPO and it lets the target negotiate a sale price directly with the sponsor, rather than letting the price be determined by the whims of institutional investors or prevailing market volatility. But it doesn’t alleviate the pop problem, as my colleague Matt Levine has often noted.SPAC sponsors are typically handed a fifth of the SPAC shares for free, which can allow for a profit even if the target they find is a dud. The really big money is made if the SPAC merges with a target whose value soars, as Hyliion’s has. That’s because a sponsor also receives warrants giving the right to purchase more stock if the price rises above a certain level.Jay Clayton, chairman of the Securities and Exchange Commission, said last week that the U.S. regulator was examining how SPAC sponsors disclose their pay structures. The SEC reviewed Tortoise’s proxy statement and must have been happy with the way it disclosed the SPAC’s potential compensation. The information on shareholdings is all there but investors wishing to know the total potential financial return to the sponsor, including the warrants, must do a little math themselves.(2)Before we decide traditional IPOs are outdated, it’s vital investors understand the financial interests that SPAC sponsors have. Otherwise founders and regular shareholders risk losing out.In Hyliion’s case, I doubt anyone’s upset as everyone involved is getting rich — for now. Fresh from his success with Hyliion, Cubbage has raised $345 million to find another target via a second SPAC. But if the hype around SPACs and their zero-revenue targets fades, investors won’t always be so accepting of those fees.(1) The sponsor paid $25,000 for its founder shares and another $6.7 million for the warrants. At current prices the Tortoise sponsor will own Hyliion shares worth $532million following the merger. I’ve subtracted from that the cost of exercising the warrants. The sponsor’s actual return may be affected by financial arrangements with directors and an investor Atlas Point Energy described in this proxy statement. Sponsors also incur costs outside the SPAC structure.(2) A figure that includes the separate pool of institutional money known as a PIPE that Tortoise arranged.(3) Tortoise’s proxy statement prominently explains the sponsor has interests in the merger that are different from regular shareholders, that the sponsor’s founder shares are worth $233 million and that it holds millions of private placement warrants. The proxy statementalso discloses the percentage share ownership if the warrants are exercised.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Billionaires have Davos. For filmmakers, there’s Sundance. For the people who mine and trade and ship everything from iron ore to platinum, there’s London Metal Exchange Week. It’s a blur of symposiums and drinks, with a reliably lavish lunch thrown by JPMorgan Chase & Co. On a balmy October day in 2018, hundreds of guests crossed a courtyard in the shadow of the Bank of England to a medieval guild hall for champagne and sashimi courtesy of the bank and its top metals trader, Mike Nowak.Nowak had plenty to celebrate. His global trading desk at JPMorgan was the powerhouse in futures contracts for gold, silver, platinum and palladium that account for tens of trillions of dollars in transactions annually. In his mid-40s, Nowak had run the precious metals desk for more than a decade. He had a young family, a house outside Manhattan and a seven-bedroom vacation home a few blocks from the beach in New Jersey.But that world was unraveling. Unbeknown to Nowak, one of his former employees was turning on him.That same day, the sun was barely up in Brooklyn when a trader named John Edmonds set off for a meeting with federal prosecutors. Edmonds, who’d worked for years on Nowak’s desk, took a four-hour car trip to Hartford, Connecticut, where he told authorities that Nowak’s crew wasn’t just buying and selling precious metals, but systematically cheating to help themselves and their top clients. Edmonds admitted to fraudulent trades that day in a sealed guilty plea. Soon, others from the precious metals desk provided accounts, setting off events leading to criminal charges against Nowak and four others from the bank.Testimony by Edmonds and others also underpins a U.S. Justice Department criminal investigation into the bank itself that people familiar with the matter say will be resolved in coming days. They said the bank is expected to pay around $1 billion to settle with the Justice Department and U.S. Commodity Futures Trading Commission. Among the alleged misdeeds is so-called spoofing, or planting fake orders into the market to steer others into buying or selling at prices that favor the bank. In authorities’ years-long crackdown on spoofing — which has included the conviction of two former Deutsche Bank metals traders in Chicago late last week — the expected JPMorgan penalty would be several times the size of previous settlements.Read More: JPMorgan Is Set to Pay $1 Billion in Record Spoofing PenaltyNowak and three others have pleaded not guilty and are seeking to have the charges against them dismissed. Lawyers for Nowak and Edmonds declined to comment. JPMorgan, which has said it’s cooperating with the investigation, declined to comment through a spokesman. The Justice Department and CFTC also declined to comment.In charging Nowak and others, prosecutors are testing an unusual application of a law formulated to battle mobsters, the Racketeer Influenced and Corrupt Organizations Act. Prosecutors say Nowak’s trading desk was a criminal racketeering operation within the confines of America’s biggest bank. Traders on Nowak’s desk engaged in spoofing as a core business practice, doing it more than 50,000 times over nearly a decade, they said. The Justice Department has famously used the RICO statute to bring down mafia bosses and drug gangs. It has used other statutes to extract penalties and guilty pleas from big banks accused of market manipulation. But it’s been decades since the government has attempted to apply the anti-racketeering law to members of a major bank’s trading desk, placing Nowak and others in crosshairs once trained on the likes of the Latin Kings and the Gambino crime family.This account is based on court filings, public records and interviews with more than a dozen current traders, former traders and others familiar with the situation who asked not to be identified speaking about an ongoing legal matter.Bear Stearns MarriageThe troubles at Nowak’s operation started in the depths of the financial crisis, arriving in the form of a novel trading strategy from a knot of new colleagues.Nowak had just completed a swift climb at JPMorgan. He’d joined the bank straight from Duke University in 1996 and traded natural gas options for a few years. Then he made his way to the precious metals desk. It was an influential spot. JPMorgan owns and stores tens of billions of dollars of gold and silver in its vaults. It’s also one of the top traders in markets where investors and speculators exchange tens of billions of dollars in futures contracts daily — sending price signals that are picked up by gold funds, pawn shops and Indian jewelry bazaars. Nowak rose to the top of the New York trading desk, and then, in 2006, he took over the London and Singapore operations as well. He was 32 years old.The financial crisis expanded Nowak’s brief further. JPMorgan’s takeover of the teetering Bear Stearns Cos. meant Nowak’s group would absorb Bear’s precious metals desk and some of its traders. Bear’s traders worked in midtown Manhattan, just across Madison Avenue from Nowak’s office.On May 27, 2008, the Bear deal was two days from closing. Nowak was still getting to know his future employees and their culture. That day’s Wall Street Journal ran the first of a three-day series about what went wrong at Bear: It was a brokerage, the paper wrote, “whose culture and fortune were rooted in the trading floor's steely manipulation of risk.”That morning, across the street from Nowak, a Bear trader named Gregg Smith executed a 15-second series of keystrokes.8:39:56 a.m.: Smith enters an offer to sell seven contracts for silver futures. He asks $17.575 an ounce.8:40:06 a.m.: Smith places 13 more offers — not to sell, but to buy 91 contracts. They were at prices from $17.555 to $17.565, just below Smith’s unfilled sell offer.8:40:09 a.m.: Within less than seven-tenths of a second, Smith begins to get buyers for his seven contracts and starts canceling the 13 buy offers. Just then, Nowak received an instant message from a Bear Stearns manager across the street: “Smith just bid it up to … sell.”The timeline of that sale, in which about $600,000 worth of silver futures changed hands, is described in charging documents. The filings don’t say whether Nowak read the message or otherwise acknowledged the trade. But more than a decade later, the sequence was singled out by prosecutors as the beginning of what they described as an eight-year conspiracy.In the following months, Nowak brought over several of the Bear traders, including Smith and the manager who had written him the instant message. Smith’s trade was a preview of a technique that prosecutors say became widespread at JPMorgan.The 15-second sequence was also a response, prosecutors say, to an issue that had been vexing the JPMorgan crew — an upswing in pesky high-frequency traders.Troubles With AlgosFor generations, metals changed hands in open-outcry pits where hundreds of traders screamed prices and obscenities. Nowak, introverted and brainy, came along in time for electronic trading and the problems it posed. Firms and individuals with fast internet connections and proprietary algorithms were swarming in and out of positions to profit on small daily price moves.Traders at big operations like JPMorgan’s found that within a second of placing a bid, their price was often countered by high-frequency traders who would match and close a position before the traders had a chance to complete their deal. These algos not only snapped up trades but also created momentum in the market that pushed prices away from the traders’ targets.One way to outsmart them, current and former brokers and traders say, was to put up and remove an offer on the opposite side of the market. That would cause the algorithms to recalculate market supply and demand, leaving an opening for the traders to get the deal done at the price they wanted.Read More: Bloomberg’s QuickTake on SpoofingEarly on, some of Nowak’s traders were attempting to counter the algos by placing a single large order opposite the one they wanted filled, according to prosecutors. The Bear traders’ twist was to place multiple orders, at different prices, that in aggregate were substantially larger than the genuine order — a technique the government calls layering. The orders, made in rapid succession after the genuine order, would be canceled as soon as the genuine order was filled. Think of it like trying to sell a hamburger. You conjure a mob in front of your burger joint, creating the perception of demand. Once a real customer steps up and buys the burger, you make the mob vanish.The layering worked in futures markets in part because participants see a second-by-second barrage of offers to buy and sell, but not who’s making them. And whereas one big order might stand out, a lot of small ones might not. That made it important to warn colleagues when layering was in progress. One of the former Bear traders did just that for a new JPMorgan colleague in early 2009, according to prosecutors.“So you know its gregg bidding up on the futures trying to get some off,” the Bear alum wrote. “Incase you were watching some large bids come into market.”At that moment, Smith placed an order to sell seven gold futures while placing offers to buy 77. The activity was viewable for 59 seconds before Smith sold three of his contracts and canceled his swarm of buy orders.“Appreesh,” the colleague responded, “that worked!”Smith, a lead gold trader, executed some 38,000 layering sequences over the years, or about 20 a day, prosecutors said in filings. (Smith pleaded not guilty, and his lawyer didn’t respond to requests for comment.) Nowak himself primarily traded options, but he would dip into the futures market to hedge those positions. He tried his hand at layering in September 2009, according to filings, and went on to use the technique some 3,600 times.The government says the traders caused tens of millions of dollars in losses for those on the other side of the transactions and harmed market integrity. It says JPMorgan’s precious metals trading desk — which brings in as much as $250 million in annual profit — generated millions of dollars in unlawful gains.Lawyers for Nowak and Smith declined to comment about their defense strategies. But lawyers in other spoofing and manipulation cases have argued that the ongoing cat-and-mouse game between traders and algos is understood across the market and that the gains are small on minuscule market moves. In this month’s trial of the former Deutsche Bank AG traders, defense lawyers compared high-speed trading on futures markets to a competitive card game, saying canceling orders isn’t spoofing but rather a legal bluffing strategy. They also claimed the government cherry-picked trades, providing too little market context to establish manipulation. Nowak’s AcolyteNowak was an even-tempered manager who was hands-off yet approachable, several people familiar with his work said. When he saw his traders outside the office, they said, it was unlikely to be at a late-night bar. One trader, in an instant message cited in filings, noted that Nowak had come to his kids’ birthday parties. One of Nowak’s acolytes on the desk was Edmonds, a Brooklyn native with a degree from St. Johns University in Queens, New York. Edmonds started in JPMorgan’s back office and was brought to the desk in 2009. He sat next to a former pit trader who would often ask Edmonds to execute his trades, according to Edmonds’s testimony in a civil lawsuit. That trader, identified as a co-conspirator in the indictment, isn’t named or charged in the criminal case. Edmonds’s supervisors and more senior members on the desk showed him how to layer trades, he later told prosecutors, adding that it was understood on the desk that this was the way to trade precious metals futures.For as long as Nowak was on the desk, scrutiny was a constant. Gold and silver bugs — many of them individual investors who bought futures or physical gold and silver as a conservative investment play — claimed the bank was unfairly moving prices in spot and futures markets to benefit itself. Similar allegations were raised in civil lawsuits by people or firms that traded silver futures, such as the suit in which Edmonds provided testimony about the trading desk. For years, those cases went nowhere. And three times, starting in 2004, the Commodity Futures Trading Commission also looked into allegations of market manipulation of the silver market by JPMorgan. Nowak, who held leadership roles on the LME and the London Bullion Market Association, was asked to explain the bank’s trading. In 2010, he sat for two days of interviews with CFTC investigators, explaining the bank’s trading strategies.“To your knowledge, have traders at JPMorgan in the metals group put up bids and offers to the market which they didn’t intend to execute and then pulled them before they got hit or lifted?” one CFTC investigator asked.“No,” Nowak responded.The CFTC closed the third of those three inquiries in 2013 without taking action. JPMorgan has cited those CFTC investigations while defending against civil lawsuits, accusing plaintiffs of rehashing “implausible theories” of silver futures manipulation that were rejected by regulators.Screening for SpoofsFive years passed before Nowak’s operation came under the federal spotlight again. That was thanks to a federal prosecutor with a trove of data and, in Edmonds, a key cooperator.The prosecutor was Avi Perry, an assistant U.S. attorney in Connecticut with a Yale law degree. Perry didn’t set out to target JPMorgan’s operation so much as JPMorgan’s trading found him.Perry started hunting for market manipulation around 2018, as the Justice Department was upping its game in the area. For years, prosecutors had built market manipulation cases by following up on tips and pulling trading data on suspects. Now they were doing deep dives into raw data to uncover targets, parsing records filed directly with the exchanges.In the real-time scrum of futures markets, where offers are made and pulled all day long, it’s nearly impossible to discern potential manipulation. But the government had an edge. The data feed of the trades includes each trader’s exchange credentials, allowing investigators to sort for suspicious patterns and attribute it to individuals.Perry also had a valuable guide to the market. His lead FBI investigator, Jonathan Luca, previously worked as a gold and silver futures trader at Morgan Stanley. Together, they created a screen for precious metals trading data. The idea, according to two people familiar with the analysis, was to turn up sequences in which a trader placed and canceled a profusion of orders on one side of the market while executing a trade on the other. The bigger the mismatch between genuine and pulled offers, and the more a given trader did it, they said, the more it would be considered a red flag for potential spoofing.When they ran the screen, traders at JPMorgan stood out.Grappling With a LossPerry, at the time, was coming off a stinging loss in a spoofing case. In late 2017, his bosses at the Justice Department added him to the team preparing to try an indicted UBS Group AG metals trader. In his mid-30s, Perry hadn’t handled a spoofing prosecution. The case was already speeding to trial, and cracks were showing. The trader was indicted in Connecticut even though his trading occurred on exchanges in Chicago. Most of the charges were dismissed and the trader was acquitted. Defense lawyers and even some fraud prosecutors wondered if the government’s spoofing initiative was waning.But Perry’s bosses had him keep digging. In 2018 they recruited him for a job at the Justice Department’s fraud section in Washington, whose prosecutors have built some of the biggest U.S. corporate crime cases. With the trading analysis in hand, he went looking for individuals who might talk.Edmonds was notable even among the JPMorgan traders. At times he had placed orders with as many as 400 contracts on the opposite side of a genuine one.It’s unclear how Perry and the FBI approached Edmonds. But they could have done so without raising alarms inside JPMorgan. Edmonds had left JPMorgan in 2017 after declining the bank’s offer to relocate to Singapore, and by the fall of 2018 was working at another bank.Perry and his team talked to Edmonds at least twice in the weeks before he traveled to Connecticut to enter his secret guilty plea on Oct. 9, 2018, the day of the London party.Several months later, Perry secured the cooperation of one of the Bear traders who moved to JPMorgan. Pleading guilty, that trader said he personally manipulated trades while working from offices in New York, London and Singapore, and said spoofed trades were a fixture at the bank for nearly a decade.Even so, at Nowak’s office there was little sign of dark clouds. Although banks often place individuals on leave when legal action may be pending, Nowak and Smith remained at their desks well after the charges against Edmonds were made public in November 2018.Green Light for RICOTo prosecutors, the evidence fit the template for a racketeering conspiracy — a pattern of illegality over time, with individuals working together to further the goals of the allegedly criminal enterprise. There was limited precedent applying the RICO law to trading and finance, though. Racketeering charges were leveled against Michael Milken in 1989 but dropped when he reached a settlement with authorities. The statute was successfully applied in the early 1990s against eight traders in the Chicago Mercantile Exchange soybean pits.To guard against overuse or abuse of the statute, the Justice Department keeps a tight handle on RICO charges. The department’s organized crime and gang section gave Perry the green light.In 2019, Edmonds’s plea began to recede into the rear-view mirror. In May, Nowak and Smith hosted an intern, the quarterback for Nowak’s alma mater, Duke. That summer, Perry secured the government’s indictment of Nowak, Smith and a third trader. It was filed under seal in federal court in Chicago, where the trades took place.The charges were made public in September, and Nowak appeared in handcuffs in federal court in Newark, New Jersey — accused of conspiracy to participate in or conduct a criminal racketeering enterprise, attempted price manipulation, bank fraud, wire fraud, commodities fraud and spoofing. In addition to the half-dozen people who’ve been charged, the government documents referred to seven more individuals as unindicted co-conspirators. It’s not clear whether any of them have cooperated or what additional information they may have provided in the year since.Nowak's arrest sent a shockwave through the the metals and proprietary trading world, several people in the industry said. On paper and by reputation, he was as clean as they came, they said, asking: If he could come under scrutiny, couldn’t anyone?Nowak’s trial is on pace for next year, according to filings in the case. The government should be able to use a JPMorgan settlement to its favor, said Michael Koenig, a former federal prosecutor who's now a partner at Hinckley, Allen & Snyder and isn't involved in the Nowak matter. The bank could be required to offer witnesses and testimony, he said.“The company — and all its information and all of its personnel — is now sitting at the prosecutors’ table,” Koenig said.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Shares of Australia-based Piedmont Lithium rocketed on news of a deal with Tesla. Other lithium stocks are gaining, as well.