DealBook Briefing: BlackRock’s Larry Fink Goes Social Activist

DealBook Briefing: BlackRock’s Larry Fink Goes Social Activist

2018-01-16 12:58:03

The context, from Andrew’s latest DealBook column: Mr. Fink’s letter pits the investment mogul “against many of the companies that he’s invested in, which hold the view that their only duty is to produce profits for their shareholders, an argument long espoused by economists like Milton Friedman.”

The assessment: Jeff Sonnenfeld of the Yale School of Management told Andrew, “It is huge for an institutional investor to take this position across its portfolio.” Mr. Sonnenfeld added that he’s seen “nothing like it.”

More in corporate social activism

• Citi said it would measure, publish and address gaps in the pay between male and female employees in the U.S., Britain and Germany, after pressure from an investor. (Bloomberg)

Citi takes a big tax charge.

Citigroup said that it earned $3.7 billion in its fourth quarter — if one excludes a $22 billion charge related to the tax overhaul.

Here’s a look at its results by the numbers:

• $18.3 billion, or $7.15 per share. Citi’s loss in the fourth quarter, including the tax charge. It is the bank’s largest quarterly loss. The new tax law is causing large banks to report big one-time charges to their fourth-quarter results, but the legislation should benefit the banks over time.

• $1.28. Its earnings per share excluding the tax hit. That beat the $1.19 expected by Wall Street analysts, according to Thomson Reuters and topped the $1.14 per share earned a year ago.

$17.26 billion. Citi’s revenue for the quarter, which exceeded the $17.01 it generated a year ago.

$19 billion. The amount of the $22 billion tax charge that came from writing down deferred-tax assets, which companies use to offset future tax bills.

$3 billion. The amount of the tax hit that came from a one-time charge on overseas earnings because of the new tax law.

• $2.9 billion. The amount Citi generated in trading revenue, down 19 percent. JPMorgan reported a 17 percent drop on Friday.

Goldman’s bad commodity trading performance.

Goldman’s commodity trading revenue fell 75 percent last year, its worst annual performance, Bloomberg reports, citing people familiar with the matter.

Goldman’s commodities unit has been under scrutiny both within the bank and among investors since it revealed its second-quarter performance was the worst in its post-IPO history. That triggered an informal review of the unit and several high-profile departures, including global commodities head Gregory Agran.

The bank’s commodities earnings in the final three months of 2017 were better than the previous two quarters as losing natural gas trades were closed. Nonetheless, performance at the unit remained lackluster as it cut back risk-taking.

Goldman reports earnings Wednesday before the bell.

Another millennial marker bites the dust.

The Dow Jones industrial average is trading above 26,000 for the first time.

It took just seven days for the blue-chip index to go from 25,000 to 26,000. If it closes above that level, it will mark the quickest move from one millennial marker to the next.

The previous record was set on Jan. 4 when the Dow finished above 25,000 just 23 trading sessions after surpassing 24,000.

Of course, 1,000 point moves aren’t what they used to be. Going from 25,000 to 26,000 is a move of just 4 percent. By comparison, when the index went from 10,000 to 11,000 in 24 days in 1999, it was a rise of 10 percent, points out the WSJ’s Erik Holm.

And it’s not just the Dow that is surging this month. The more widely followed Standard & Poor’s 500 index crossed 2,800 this morning and is up more than 4 percent this month. That puts it on pace for its best monthly performance since March 2016, when it was rebounding from the steep sell-off during the first six weeks of that year.

In fact, the S.&P. 500 hasn’t experienced a monthly decline since March of last year.


Senator Elizabeth Warren, left, with Senator Heidi Heitkamp.

Tom Williams/CQ Roll Call, via Associated Press

The Washington flyaround

• Eleven Democratic senators, including Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana, are backing a Republican-led effort to loosen financial regulations, in the biggest overhaul yet of Dodd-Frank. (NYT)

• Lawmakers are no closer to avoiding a government shutdown over spending and immigration issues, and President Trump’s immigration comments haven’t helped. (NYT)

• American intelligence officials warned Jared Kushner that Wendi Deng Murdoch, a friend to him and to Ivanka Trump, may have been using her relationship with them to advance Chinese government interests, according to unnamed sources. (WSJ)

• The burger chain Sonic shows the difficulty of being a progressive C.E.O. in the Trump era. (NYT)

• There’s an explosion in financing for nascent chip makers, thanks to the rise of artificial intelligence. (NYT)


From left, Jessica Alba, Gary Vaynerchuk,, Gwyneth Paltrow, and Zane Lowe, stars of “Planet of the Apps.”

Charley Gallay/Getty Images for Apple Music

Behind Raine’s backing of the ‘Planet of the Apps’ team

Raine — the merchant bank that invested early in Vice and counts Masa Son and Steve Ballmer as clients — has invested in Propagate Content, the studio that produced the first original series for Apple and Twitter. (Propagate’s co-founders are Ben Silverman, once co-chairman of NBC Entertainment, and Howard T. Owens, who was president of National Geographic Channels.)

The thesis: That content is more important than ever in an era of online streaming. Raine’s betting that Propagate, which is also turning popular podcasts like “Lore” into streaming series and working on content for Netflix and CBS, can produce hits from a variety of sources and replicate them around the world.

The pullquote, from Raine co-founder Joe Ravitch:

“These guys think global from the very beginning, and the formats and shows that Ben and Howard have developed are some of the best examples of customizing content to different markets and cultures.”

In other media deals:

• Saudi Arabia’s Public Investment Fund is in talks to invest more than $500 million in Endeavor, the parent company of WME, as part of its push to diversify the kingdom’s economy, according to unidentified sources. (TheWrap, Bloomberg)

• Graydon Carter’s first project after Vanity Fair is an investment in Zig, a start-up described as Instagram for news.

Fred Wilson urges start-ups to reconsider equity compensation

From the venture capitalist’s blog post from this weekend, which has been making the rounds in Silicon Valley:

A few years ago I met with a very successful entrepreneur who built his company outside of the tech sector. When I asked him about equity compensation he said to me “You people in tech are crazy. I pay my employees handsomely in cash and I keep all of the equity for myself.”

Mr. Wilson’s bottom line: Stock awards have a real cost — annual dilution of companies’ equity can be as high as 5 percent a year.

He adds:

We should be confronting the true cost of this practice and asking ourselves if it is best for our employees, and if so, which ones, and if it is best for our companies and our shareholders.

The tech and telecom flyaround

• By potentially spinning out its Japanese cellphone business, SoftBank could raise as much as $18 billion for deals. (FT)

• Kuaishou, a video site backed by Tencent, is seeking a valuation of about $17 billion in its new round of financing. (Bloomberg)


A Ram 1500 truck at an assembly plant in Warren, Mich., in 2014.

Bill Pugliano/Getty Images

If Fiat Chrysler won’t split, what lies ahead?

Sergio Marchionne, the automaker’s outspoken C.E.O., made it clear that the company won’t sell its Jeep or Ram divisions or otherwise break itself up. But if that idea is “three years ago,” as he said at the Detroit Auto Show, what is his plan to compete with rivals who are diving headlong into autonomous vehicles?

From his interview with Bloomberg:

“We talk to everybody, and we are continuously learning and making selections on the basis of the best available technology.”

Mr. Marchionne also confirmed that this will be his last year leading Fiat Chrysler, with a successor to be named in March.

The Detroit Auto Show flyaround

• Automakers are celebrating their best ever three-year stretch, but they could be headed for choppier waters. (NYT)

• BlackBerry continued its push into the auto industry with a product to help carmakers detect software security flaws. (Bloomberg)


A sign of the times, Bitcoin edition

That’s an actual question posed in a private forum that was sent to us by a reader this weekend.

Your daily reminder of virtual currency prices, courtesy of CoinMarketCap:

• Bitcoin is at $12,288, down 11 percent over the past day.

• Ethereum is at $1,137, down nearly 15 percent.

• Ripple is at $1.45, down 22 percent.

And your daily dose of virtual currency skepticism, courtesy of Bloomberg:

Investors “should be prepared to lose all their money” in Bitcoin, said Steven Maijoor, chairman of the European Securities and Markets Authority, in a Bloomberg TV interview in Hong Kong.

The digital money flyaround

• The head of Singapore’s central bank said he hoped the technology underpinning Bitcoin and other digital currencies would outlast the current “fever.” (Axios)

• Nine hedge funds who had bet on Bitcoin made a 1,167 percent return last year — less than the virtual currency’s return but far more than the 8 percent that the hedge fund industry as a whole generated. (Bloomberg)

• China is escalating its cryptocurrency crackdown, and has blocked websites and apps that offer exchange-like services, according to unidentified sources. (Bloomberg)

• IBM has teamed up with Moller-Maersk to create a blockchain-based platform for the shipping industry. (Reuters)

• TechCrunch got hold of Telegram’s initial coin offering prospectus and learned that the messaging service wants to challenge Ethereum as a platform for services. (TechCrunch)


Mr. Bezos with, from left, the actors Matt Damon, Taika Waititi and Chris Hemsworth after the Golden Globes last Sunday.

Alberto E. Rodriguez/Getty Images

On Jeff Bezos as cultural icon, of sorts

“He’s getting thanked at the Golden Globes and targeted by presidential tweet tantrums — not even Steve Jobs had that kind of pop-culture currency.”

— Margaret O’Mara, a professor of history at the University of Washington, on how the Amazon founder has been thrust further into the spotlight as his company has come under pressure.

The Speed Read

• Spotify is threatening to upend Wall Street with its unusual public share listing. The banks involved will collect only a fraction of the usual fees for big initial public offerings. (WSJ)

• The e-commerce firm has kicked off a fund-raising round for its logistics unit with a target of $2 billion, according to people with direct knowledge of the matter. (Reuters)

• A Colorado pension fund is suing Canada’s top six banks and three other lenders. It has accused the banks of engaging in an “unlawful conspiracy” to boost their derivatives trading businesses by manipulating a key Canadian lending rate. (WSJ)

• The A380 superjumbo’s days may be numbered: Airbus said that it would have to end production of the plane if its only major customer, Emirates, did not order more. (NYT)

• The British government has been scrambling to contain damage after Carillion, the country’s second-largest construction firm, was forced into liquidation. (NYT)

• The consulting firm Mercer has agreed to buy the Japanese asset management company BFC in a bid to expand its reach into Asia. (FT)

• Greek lawmakers approved new measures demanded by international creditors, which included cuts to benefits for large families and restrictions on trade unions. (NYT)

• Private equity firms are introducing new policies to retain female staff, including paying for nannies to fly with women and offering to freeze eggs for free. (FT)

• Elliott Management has disclosed a 4.8 percent economic stake in Bezeq Israel Telecom, that country’s biggest telecoms group, calling for sweeping reforms to its governance. (Reuters)

• Saudi Aramco has not invited UBS or Bank of America Merrill Lynch to pitch for senior advisory roles in its stock market listing because they have not lent it money in recent years, according to people in finance. (Reuters)

• Prices for Brent crude have risen nearly 50 percent since June, which could lead to increased investment in oil. (NYT)

• Royal Dutch Shell will buy 44 percent of Silicon Ranch, a solar energy company based in Nashville. (Bloomberg)

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