DealBook: Business Is Worried About Bernie. Should It Be?

February 12, 2020

Good morning. Today we have an exclusive look at James Murdoch’s new bets on clean technology. More below. (Was this email forwarded to you? Sign up here.)

Senator Bernie Sanders Drew Angerer/Getty Images

Sanders wins, execs sweat

Senator Bernie Sanders emerged victorious from last night’s New Hampshire Democratic primary, with former Mayor Pete Buttigieg close behind. Moderate supporters are starting to worry.

Mr. Sanders is now the front-runner in the Democratic primary, the clear choice of the party’s liberal wing. Former Vice President Joe Biden, who had staked his candidacy on “electability,” finished fifth, while Senator Elizabeth Warren finished fourth.

Lloyd Blankfein most likely spoke for many in Corporate America when he tweeted: “Sanders is just as polarizing as Trump AND he’ll ruin our economy and doesn’t care about our military.”

• It probably doesn’t reassure the Blankfeins of the country when supporters of Mr. Sanders boo Mr. Buttigieg as “Wall Street Pete.”

Why Mr. Sanders may still be beatable. He’s falling short on his promises of a progressive revolution, writes Ryan Lizza of Politico:

• The number of young voters in the New Hampshire primary declined this year compared with 2016, suggesting that he’s not bringing in new voters.

• Mr. Buttigieg and Senator Amy Klobuchar, the top two moderates in New Hampshire, together collected far more votes than Mr. Sanders did.

A microcosm of the Democrats’ liberal-vs.-centrist debate is playing out locally as well: The former CNBC anchor Michelle Caruso-Cabrera plans to challenge Representative Alexandria Ocasio-Cortez in the primary for her seat. “M.C.C.,” as Ms. Caruso-Cabrera calls herself, plans to run on a more economically conservative platform against A.O.C., one of the architects of the Green New Deal.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced and Jason Karaian in London.

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James Murdoch, eco-warrior? Bryan Bedder/Getty Images for National Geographic

Exclusive: James Murdoch makes big bets on sustainability

Rupert Murdoch’s younger son has long stood out within his family for being outspoken on environmental issues. Now divorced from the day-to-day operations of the family business empire, following its sale to Walt Disney, James Murdoch is announcing some of his first independent investments, he told Michael in an exclusive interview.

James Murdoch’s new bets are:

• Notpla, whose Ooho edible food pouch is made from seaweed and resembles a laundry detergent pod

• Cove, a maker of biodegradable water bottles

• The Climate Finance Partnership, a new venture organized by BlackRock to invest in projects like low-emission transportation and renewable energy equipment in emerging markets

Mr. Murdoch says the investments continue earlier efforts to combine business and climate activism. As the C.E.O. of Sky, he pushed the British broadcaster to go carbon neutral in 2006. And as the chief of 21st Century Fox, he struck a deal with the National Geographic Society that gave the nonprofit $725 million.

“Any business has to be about more than just capital,” he said. Speaking of capital, Mr. Murdoch personally netted about $2 billion from the Disney sale. “He’s got a big bank account now that he can put to use without the constraints that he had,” said Gary Knell, the president of the National Geographic Society.

Marcio Jose Sanchez/Associated Press

The F.T.C. goes back in time to reconsider tech takeovers

The Federal Trade Commission announced yesterday that it planned to review past takeovers by five tech giants — Alphabet, Amazon, Apple, Facebook and Microsoft, with a combined market cap $5.5 trillion — going all the way back to 2010. It plans to focus on smaller deals that didn’t meet the commission’s threshold for automatic antitrust review (currently set at $94 million).

That means all the deals. The F.T.C. wants the companies to provide documentation on “the terms, scope, structure, and purpose” of every transaction. No clandestine acquihire is too small for scrutiny under this order.

• Last year, Alphabet spent $1 billion on deals not deemed big enough to name.

• Apple reported more than $600 million in costs related to a bevy of small deals in its latest fiscal year.

Go back a decade, and the number of deals caught in the F.T.C.’s net will number in the hundreds.

The big threat: Ultimately, the F.T.C. could unwind mergers if it thinks they harmed consumers by stifling competition.

Facebook has been here before. The company has been in the F.T.C.’s crosshairs for a while, with the regulator opening an antitrust inquiry into its acquisition practices last year — around the same time it was hit with a $5 billion fine for data privacy breaches. As a result, it changed its behavior in “pre-emptive and defensive ways,” the NYT’s Mike Isaac wrote at the time. Will the other tech giants also now reconsider their acquisitive ways?

On the other hand... This week, a federal judge approved Sprint and T-Mobile’s mega-merger against the wishes of state attorneys general, and President Trump praised trillion-dollar tech companies for pushing the stock market higher. And the F.T.C.’s words may not match its deeds, says Shira Ovide, writer of the NYT’s forthcoming tech newsletter:

Here’s a hard truth about legal investigations, particularly antitrust cases involving multiple tentacles of state and federal government: They take FOREVER. Today’s American tech stars could be irrelevant by the time there is any resolution. Insert cliche that “this time could be different,” but predicting government paralysis or inaction isn’t a bad bet these days. What are the odds that all this amounts to three years of shouting, and then nothing?

Oh, the irony: At the end of the F.T.C.’s press release, the agency asks readers to like its page on Facebook.

Counting the cost of the coronavirus

The coronavirus, now officially known as COVID-19, may have peaked, but the global economy will need time to recover.

Chinese officials reported the lowest number of new cases since the end of last month, and suggested that the outbreak may end by April. Other experts aren’t so sure, and the World Health Organization said the virus should be “public enemy No. 1,” with a vaccine at least 18 months away.

Markets are cheering the news of a potential turn in the outbreak, with many indexes around the world setting new highs.

But are investors getting ahead of themselves?

• China’s central position in global supply chains means that the effects of the disruption could be long-lasting.

• The Fed chairman, Jay Powell, said yesterday it was “very likely” that some impact would be felt on the U.S. economy, and global commodity markets are already under strain.

• Fears are rising about the already vulnerable European economy being pushed into a downturn.

• And it’s not great for dealmakers pitching I.P.O.s and M&A in China, either.

Masa Son of SoftBank. Kazuhiro Nogi/Agence France-Presse — Getty Images

Why SoftBank is up when its profits are down

Masa Son’s tech giant reported a 99 percent drop in operating profit for its most recent quarter, driven by a huge loss at its Vision Fund. Yet its shares soared nearly 12 percent on the news. What gives?

The bad news: SoftBank’s Vision Fund and other investments cost the tech company roughly $2 billion, after a bad year where marquee portfolio companies like WeWork and Uber took big hits and others, like the robot pizza maker Zume and the consumer goods retailer Brandless, laid off employees or shut down entirely.

The good news: A federal judge approved T-Mobile’s $26 billion acquisition of the SoftBank-controlled Sprint yesterday. That means that the perpetually money-losing Sprint will soon no longer be a millstone around the highly indebted SoftBank’s neck.

What Mr. Son had to say: “After a difficult winter always comes spring,” he told analysts this morning, according to Bloomberg. “The tide is turning,” he added.

The unknown: What Elliott Management, which has taken a $2.5 billion stake in SoftBank and urged for changes, thinks of today’s news. The hedge fund has pushed for greater clarity and oversight of the Vision Fund. (A spokeswoman for Elliott declined to comment.)

Mike Bloomberg Carlos Osorio/Associated Press

Bloomberg is spending big (on philanthropy)

Mike Bloomberg has said he could spend $1 billion to become president. But he gave away far more money last year to philanthropic causes, according to Maria Di Mento and Jim Rendon of The Chronicle of Philanthropy.

• Mr. Bloomberg topped The Chronicle’s Philanthropy 50 list by donating $3.3 billion last year.

• About $1.8 billion of that went to fulfill his commitment to shore up financial aid assistance at his alma mater, Johns Hopkins University.

Other big donors on the list include Eric Schmidt and Sergey Brin of Google, Jim Walton of Walmart, Sheryl Sandberg and Mark Zuckerberg of Facebook, and the tech investors Robert Smith and Orlando Bravo.

What really caught our eye is how generous donors were last year. According to Ms. Di Mento and Mr. Rendon:

• The top five givers accounted for $9.3 billion, “more than the total giving of all donors on the 2018 list.”

• Donors who appeared on both the Chronicle’s list of 50 top philanthropists and Forbes’ list of the 400 richest Americans gave away about 4.5 percent of their wealth last year. On average, they donated about 2.6 percent over the previous five years.

The speed read

Deals

• TPG’s $450 million investment in Vice in 2017 is now costing the digital media company hundreds of millions of dollars in stock and cash payouts. (WSJ)

• Spotify reportedly paid $250 million for The Ringer, the media and podcast publisher founded by Bill Simmons. (Bloomberg)

• SoundCloud sold a stake in itself to Sirius XM for $75 million. (WSJ)

Politics and policy

• President Trump’s national security adviser asserted that Huawei can secretly retrieve sensitive information in next-generation wireless networks that use its technology. (NYT)

• E.U. policymakers are reportedly considering whether to give more support to Nokia and Ericsson to counter Huawei in the market for 5G technology. (FT)

• Varo Money could be the first of many fintech upstarts to get full-fledged banking licenses in the U.S. (Quartz)

Tech

• Airbnb reportedly lost money in the first nine months of last year, casting a pall over the company as it prepares to go public. (WSJ)

• Some early employees of Uber are facing huge tax bills because of the ride-hailing giant’s disappointing I.P.O. (Protocol)

• Robot stockpickers outperform human analysts, a new study finds. (Bloomberg)

• The wild tale of how, for decades, the C.I.A. secretly owned one of the world’s leading providers of encryption technology. (WaPo)

Best of the rest

• The total debt of U.S. households surpassed $14 trillion for the first time. (Yahoo Finance)

• The U.S. has 607 billionaires. Just five are black. (Business Insider)

• “Paw Patrol” is a hugely popular kids show. A Canadian professor argues that it’s also capitalist propaganda. (Fast Company)

Thanks for reading! We’ll see you tomorrow.

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