Header Ads

Breaking News

DealBook Briefing: Tesla Is Raising Cash. It May Not Be Enough.

Category: Business,Finance

Good Friday. (Want this by email? Sign up here.)

Tesla said yesterday that it would sell about $2 billion in stock and bonds to help fund its operations after a worse-than-expected first quarter.

It’s the first time in two years that Tesla has sold securities to raise money. Elon Musk had said for months that Tesla did not need to raise new capital.

It’s necessary because Tesla hasn’t sold enough cars to cover its operating costs. Sales of the Model 3 tumbled in the first quarter, and the company used over 40 percent of its available cash during that quarter.

The timing is questionable. “It probably would have made more financial sense when Tesla’s stock price was a lot higher,” Peter Eavis of the NYT writes. Tesla’s stock is down a third from its 2018 peak, so it has to sell more shares to raise money — diluting the investments of existing shareholders.

Shares in Tesla jumped 4.3 percent after the announcement. “This is an upside-down reaction,” the research analyst Joseph Osha told the WSJ. “But it tells you the issue of liquidity has been on people’s minds, and this capital raise puts that issue to bed.”

But is it actually enough? Mr. Eavis writes that the sale should cover the production of current models, but not the funding of new vehicles. More production delays could deplete cash, forcing Tesla to go back to the markets again and giving rivals time to eat into its market share.

More: Tesla reportedly expects a shortage of minerals used to create electric vehicle batteries.

President Trump said yesterday that he won’t nominate Stephen Moore to the Fed’s board, after the economics commentator faced growing criticism over his qualifications and past writings about women.

Mr. Trump’s news was a swift U-turn for Mr. Moore. Just two hours before the president tweeted the announcement, Mr. Moore had told the WSJ and other news outlets that he would continue to seek a nomination to the Fed.

Mr. Moore blamed “gutter campaign tactics and personal assaults” for the about-face in a WSJ op-ed. Critics had questioned his potential politicization of the Fed and his failure to make child support and alimony payments to his former wife, as well as past writings that denigrated women.

It was a blow to the White House. Mr. Moore is the second of the president’s Fed choices to withdraw from consideration in recent weeks. Herman Cain bowed out last month amid criticism over previous accusations of sexual harassment.

It’s unclear whether Mr. Trump will nominate anyone else to fill the two empty spots on the Fed’s board. The NYT notes that Fed officials are unconcerned about the vacancies.

Facebook’s plan to build its own cryptocurrency is one of tech’s poorer-kept secrets. Now, the WSJ has published a report containing more details from unidentified sources about the effort.

Facebook is developing a digital coin, as the NYT reported earlier this year. It is expected to be pegged to the value of a basket of foreign currencies to ensure the stability of the coin. According the WSJ, the initiative is code-named Project Libra.

The coin could be used to settle payments between people, as well as making purchases on Facebook and other websites, the WSJ reports. Facebook is also considering “paying users fractions of a coin when they view ads, interact with other content or shop on its platform — not unlike loyalty points,” the WSJ adds.

The company is in talks with major financial institutions, according to the WSJ, including Visa and Mastercard. It is said to be seeking as much as $1 billion — a figure first reported by the NYT’s Nathaniel Popper — to “underpin the value of the coin to protect it from the wild price swings seen in Bitcoin and other cryptocurrencies.”

It’s also in discussions with merchants who it wants to adopt the coin. The WSJ says Facebook would “seek smaller financial investments from those partners.”

More Facebook news: The company yesterday evicted seven of its most controversial users, many of them conservatives, inflaming the debate about the power and accountability of Big Tech. Its potential settlement with the F.T.C. could include actions against WhatsApp. And Mark Zuckerberg’s property portfolio is growing.

Congress is struggling to get a glimpse of President Trump’s tax returns. But a team from Deutsche Bank, Mr. Trump’s longtime lender, has seen them, and Bloomberg has the story on how that played out, according to unidentified sources.

• “The bankers got a look before agreeing to lend to the Trump Organization in 2012,” the sources said.

• Mr. Trump’s daughter Ivanka “served as the primary contact between the Trump Organization and Deutsche Bank in early discussions ahead of 2012 loans,” which were as much as $100 million.

• “When the bank balked, Ivanka offered to guarantee the loans with Trump’s personal assets.”

• The Trump Organization’s chief financial officer, Allen Weisselberg, “allowed the bankers to see relevant parts of Trump’s tax returns and take notes.” They “weren’t allowed to make copies of the documents.”

• “Deutsche Bank structured the subsequent funding as recourse loans, meaning that the bank could come after Trump’s personal assets in the event of default.”

• Ultimately, the bank “extended more than $300 million in loans to Trump from 2012 to 2015,” suggesting that his finances were relatively strong.

The U.S. Chamber of Commerce was traditionally the main voice of corporate America in Washington. Now it finds itself out of favor, Brody Mullins and Alex Leary of the WSJ report.

The Trump administration’s populism ran counter to the Chamber’s goals. The White House has pushed for tariffs and limits on immigration, something that many of the group’s members opposed. And President Trump has chafed at criticism from Chamber officials.

But the Chamber failed to find friends among Democrats. “The chamber dug themselves into a deep, deep hole when they decided to become an arm of the Republican Party and even oppose moderate Democrats,” Senator Chuck Schumer told the WSJ.

Its financial clout has also weakened. The number of companies contributing $1 million or more to the Chamber fell to 23 in 2017 from 42 in 2012 — and some companies, like CVS Health and Apple, have dropped out altogether in recent years.

And it may be out of step with the times. Corporate America doesn’t speak with one voice anymore, and the Chamber now competes with an array of super PACs and advocacy coalitions focused on narrow issues.

• “During the 10-week trial, federal prosecutors had detailed Insys’s audacious marketing plan — which included paying doctors for sham educational talks and luring others with lap dances — to spur sales of Subsys, an under-the-tongue spray approved to treat patients with cancer.”

• The Insys executives found guilty include John Kapoor, the founder; Richard Simon, the former director of sales; and Michael Gurry, the former vice president of managed markets.

• “The government suggested that executives at the Arizona-based company often operated like drug dealers and that Mr. Kapoor was the ringleader.”

• “The verdict against Insys executives is a sign of the accelerating effort to hold pharmaceutical and drug distribution companies and their executives and owners accountable in ways commensurate with the devastation wrought by the prescription opioid crisis.”

• “Experts said the Insys verdict could encourage other corporate prosecutions and said it demonstrated that the public was willing to mete out penalties for high-level executives at companies profiting from the sales of highly addictive painkillers.”

When unemployment falls, wages usually rise. But the American economy missed that memo in recent years. Pay has been stagnant despite a tight labor market, leaving economists scratching their heads.

That recently started to change, Ben Casselman of the NYT writes:

• “Average hourly earnings in March were 3.2 percent higher than a year earlier, the eighth straight month in which growth topped 3 percent.”

• Today’s monthly jobs report is likely to make that nine.

The reason: The job market wasn’t actually as good as the unemployment rate made it look.

• “The government’s official definition of unemployment is relatively narrow. It counts only people actively looking for work, which means it leaves out many students, stay-at-home parents or others who might like jobs if they were available.”

• When employers tap that broader pool of potential labor, they don’t need to raise wages as quickly.

• And that’s what happened: “In recent months, more than 70 percent of people getting jobs had not been counted as unemployed the previous month.”

• “That is well above historical levels, and a sign that the strong labor market is drawing people off the sidelines.”

David Seaton abruptly resigned yesterday as C.E.O. of the engineering and construction company Fluor.

Charlie Munger of Berkshire Hathaway, which is Wells Fargo’s biggest shareholder, said that the bank’s next C.E.O. shouldn’t come from Wall Street and said he would have kept Tim Sloan in that job.


• Sinclair, the largest U.S. broadcast station owner, reportedly plans to buy 21 regional sports networks from Walt Disney for over $10 billion. (WSJ)

• Barclays shareholders overwhelmingly rejected an effort by the activist investor Edward Bramson to join the British bank’s board. That allows the bank to pursue its global ambitions. (WSJ)

• Shares in Beyond Meat, which produces vegan meat substitutes, jumped 163 percent above their I.P.O. price in their first day of trading yesterday. (Bloomberg)

• Verizon is reportedly looking to sell its Tumblr blogging site. (WSJ)

• Apollo Global Management will ditch its partnership status and become a corporation, following similar moves by Blackstone and KKR. (FT)

• Berkshire Hathaway has been buying Amazon shares. (CNBC)

Politics and policy

• The House speaker, Nancy Pelosi, accused Attorney General William Barr of lying to Congress. (NYT)

• The Democratic-led House voted to require the Trump administration to keep the U.S. within the Paris climate accord, though the Republican-controlled Senate will not take up the legislation. (Reuters)

• Scrutiny is growing over Joe Biden’s role in the ouster of a Ukrainian prosecutor who was investigating an energy company where his son, Hunter Biden, was a director. (NYT)

• The California State Senate passed a bill that would keep President Trump off 2020 ballots unless he releases his tax returns. (Hill)


• Trade talks between the U.S. and China are entering the final stage, but a deal is expected to fall short of addressing several key Trump administration goals. (NYT)


• JPMorgan Chase plans to use Microsoft’s new cloud computing blockchain services to help power its Quorum blockchain platform. (WSJ)

• Huawei has overtaken Apple to become the world’s second-biggest smartphone maker, behind Samsung. (Bloomberg)

• YouTube confirmed that it will make some of its original programming available. (TechCrunch)

• The chairman of Foxconn, Terry Gou, reaffirmed his company’s commitment to building a (heavily delayed) factory in Wisconsin yesterday, a day after meeting with President Trump. (WSJ)

Best of the rest

• The Bank of England raised its economic forecasts for the next three years, saying fears of Brexit turmoil should subside. (NYT)

• PG&E said that the S.E.C. is investigating its disclosures to investors about losses related to wildfires. (NYT)

• The government board that oversees Puerto Rico’s debt crisis sued banks and lenders yesterday, claiming they helped the commonwealth issue $9 billion of debt illegally. (NYT)

• The U.S. plans to return about $200 million in funds linked to the 1MDB scandal to Malaysia. (Bloomberg)

• Manufacturing can’t create enough jobs. Maybe infrastructure can. (NYT)

• How the investor Bill McGlashan was busted for his role in the college admissions scandal. (Vanity Fair)

Thanks for reading!

We’d love your feedback. Please email thoughts and suggestions to business@nytimes.com.

Source link

No comments