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Wednesday, July 15, 2020
The wheels are coming off The Stagecoach. Wells Fargo swung to a big loss in the second quarter, forcing it to set aside billions of dollars to cover possible loan losses ahead as the coronavirus threw a wrench into its efforts to recover from a slew of scandals. The third-biggest US lender posted a net loss of $2.4 billion for the second quarter on revenue of $17.8 billion. A year earlier, Wells had posted a profit of $6.2 billion. Wells’ loss per share of 66 cents was also much deeper than the 20 cents forecast by the Street. In keeping with a broader industry theme, Wells forecast more pain to come in 2020, setting aside a massive $8.4 billion in loan loss reserves, signaling that it expects a wave of defaults in the second half of the year. Wells also cut its dividend to 10 cents from 51 cents. “We are extremely disappointed in both our second-quarter results and our intent to reduce our dividend,” Wells Fargo CEO Charles Scharf said in a statement. “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter.” Scharf, who might be able to take some solace in his bank’s improved efficiency ratio, which measures how well it is managing its assets against its liabilities, fully joined the chorus of bank CEOs foreshadowing an ugly end to a terrible year. Wells’ $8.4 billion in loan provisions was less than JPMorgan’s $10.5 billion, but more than Citigroup’s $5.6 billion. Nonetheless, the combined $24.5 billion disclosed on Tuesday morning alone sent the stock prices of all three banks into the red. Wells Fargo led the group, however, with its shares recently off 6.7 percent at $23.72.
The boss of Neiman Marcus has been getting paid lavishly to lead the swanky chain out of bankruptcy — and that’s ruffling feathers in the rank-and-file. On March 30, Geoffroy van Raemdonck — a Belgian-born luxury merchant who was named chief executive two years ago — declared he was waiving “100 percent” of his salary while he furloughed more than 14,000 workers amid lockdowns that had shuttered the Dallas-based luxury retailer’s stores nationwide. A recent filing in bankruptcy court, however, reveals that van Raemdonck continued to pocket big paychecks in the weeks that followed, even as thousands of workers at dozens of stores were sent to the unemployment line. On April 10, van Raemdonck got a salary check for $57,692, implying a yearly salary of $1.5 million, court documents show. Later in the month, two smaller salary checks arrived totaling $17,230. And on April 24, van Raemdonck got a payment of $172,135 to offset taxes on more than $2 million in stock options he received the previous year. Info on van Raemdonck’s pay since April couldn’t immediately be obtained, and a Neiman Marcus spokeswoman declined to comment for this story. In the year leading up to Neiman’s bankruptcy filing, van Raemdonck received three pay raises that saw his annual salary jump from $1 million to $1.2 million and finally to $1.5 million on March 13. Along with each bi-weekly paycheck, the executive also received a $19,230 bonus check, according to court documents. The fat pay and perks are irking Neiman employees, who gripe that van Raemdonck has been slow to bring people back to work as lockdowns get lifted nationwide, instead limiting most stores to curbside pickup service. “I can tell you that after seeing this I feel betrayed as he has personally told us that he has given up his salary, but never told us he received the bonus,” an employee who asked to remain anonymous for fear of reprisal told The Post in an email. “He told us he appreciates our sacrifices, but it looks like he’s not making any himself. He has continually talked about love of customers and how we’re in this together, but after no salary increases and job cuts it seems very one-sided.” Five weeks after van Raemdonck’s no-salary pledge on May 7, Neiman Marcus filed for Chapter 11. That day, van Raemdonck told Women’s Wear Daily that if it weren’t for the coronavirus, the company wouldn’t have gone bankrupt. “The mood is positive,” he told the trade publication. “We have a very healthy business and we were on track to deliver more profit this year than last year and grow our gross margin and our top line.” But skeptics say it’s also possible that Neiman — which has been struggling for years under more than $4 billion in debt it was saddled with in a private-equity buyout — had been preparing for a possible bankruptcy months earlier. In February, the board handed van Raemdonck a $4 million bonus. While it looks like optimism on the face, experts say it also could be part of a recent trend by boards to hand out bonuses shortly before filing for bankruptcy to avoid having to tangle with creditors and judges over generous pay plans in court. “My guess is that when they took the bonus, that bankruptcy was a distinct possibility,” said Kenneth Rosen, a bankruptcy attorney at Lowenstein Sandler. “The pandemic may have expedited it, but in the midst of their distress the entire senior management team grabbed a lot of money,” Rosen said of the filings. Neiman on June 22 also approved cash payouts for seven other top executives, saying their “workloads expand significantly” during bankruptcy, according to the filing. Chief Merchant Officer Svetlana Todorovich stands to receive the second-highest bonus of $600,000 if Neiman Marcus exits bankruptcy by Sept. 15, and that’s on top of an $800,000 bonus she received on April 17. But it’s van Raemdonck who stands to bag the biggest prize — an additional bonus of $3 million — if Neiman exits Chapter 11 by Sept. 15. The bonus gets halved if Neiman exits by Oct. 7 and a later exit would net him just $750,000, the documents show. Some industry insiders say that could explain van Raemdonck’s reluctance to fully reopen stores, noting that rival Saks Fifth Avenue has been more aggressive in opening its doors to customers, outfitting its staff in masks and gloves and aggressively sanitizing store fixtures throughout the day. “Geoffroy is saving his cash so when the bankruptcy judge asks, do you have enough cash, he can say ‘yes’,” one industry executive speculated. Rosen, of Lowenstein Sandler, noted that such pay incentives can cloud an executive’s judgment. “It places them in the position of making a decision that is good for them individually but not necessarily good for the business,” Rosen said. “Every time that person has to make a decision they will think of whether it’ll delay the case and what that will mean for them financially.”
Movie theaters pinning their reopening success on the August release of blockbuster hopefuls “Tenet'” and “Mulan” are in for a major blow, industry experts said. With COVID-19 cases on the rise in major cities across the US, it’s looking increasingly doubtful that Warner Bros. will premiere Christopher Nolan’s spy flick “Tenet” next month, dealing a harsh blow to theaters, said MKM analyst Eric Handler. “We place a low likelihood of ‘Tenet’ opening on August 12 given a rising number of COVID-19 cases in key areas such as California, Texas and Florida along with the slowed re-opening of the New York City economy,” Handler said. “In our view, it would be surprising to see theaters able to re-open nationwide before September, at the earliest.” Handler expects 2020 domestic box office sales to slide 70 percent from 2019 levels of $11.4 billion, and not rebound until 2022. Disney investors, meanwhile, are betting that the live-action remake of animated hit “Mulan” could skip movie houses entirely and go straight to Disney’s streaming service, Disney+, said LightShed analyst Rich Greenfield. For Disney, sending “Mulan” straight to streaming would appear to make economic sense even if it would “deliver a death blow to theaters,” Greenfield said. Disney currently drives 40 to 50 percent of the worldwide box office. “A movie like ‘Mulan,’ pre-COVID, expected to do north of $1 billion” at the box office, Greenfield explained. “If an average movie ticket is $10 that means that 100 million people would need to buy a ticket for ‘Mulan’ to hit its numbers,” he said. “It seems hard to fathom right now.” Reps for the studios declined to comment on their premiere plans, but both “Tenent” and “Mulan” have already delayed their movie theater debuts due to the spread of the coronavirus. “Tenet,” originally scheduled for July 31, delayed its release to August 12, while Disney postponed “Mulan” from July 24 to August 21. Greenfield pointed to “Hamilton,” Lin Manuel’s Broadway smash hit, which made its exclusive Disney+ debut on July 3, as a potential blueprint for how the Mouse House could handle “Mulan.” Disney, which paid $75 million for the rights to the musical, had originally planned to show the filmed version of the show in theaters. But by taking “Hamilton” straight to its streaming service, the Mouse House benefited from a 74-percent spike in Disney+ app downloads in the US to 458,796 over the prior year, analytics firm Apptopia said. Globally, the app was downloaded 752,451 times, amounting to a 46.6 percent increase over last year. Theater chains AMC, Regal and Cinemark have already raised alarm bells over their financial health since their theaters were forced to shutter across the country in March. AMC is nearing a debt-restructuring deal to avoid bankruptcy, while Regal and Cinemark have raised debt and cut costs in a bid to stay afloat. “Everything is pointing towards streaming movies,” Greenfield said. “The more you do this, the harder it is to shift back.”
PepsiCo provided an upbeat start to the second-quarter earnings season on Monday. While revenue at the food and drink giant’s North American beverage division dropped 6.6 percent, to $4.97 billion, thanks in part to restaurant shutdowns, the company saw a positive 6.6 percent surge in its snack division as consumers sheltering in place devoured more of its salty Fritos and Cheetos snacks. In late-afternoon trading, the stock price climbed 1.3 percent higher, to $136.22.
Pershing Square Tontine Holdings, the blank check company backed by billionaire investor Bill Ackman, has increased the size of its initial public offering by $1 billion to $4 billion, the largest ever IPO by a special purpose acquisition company, or SPAC. The firm plans to go public with 200 million units at $20 each, according to a regulatory filing on Monday. A SPAC uses IPO proceeds and borrowed funds to acquire a company, typically within two years. Investors are not notified in advance which company a SPAC will buy. Ackman, whose New York-based hedge fund manages more than $10 billion in assets, may ultimately have $7 billion to invest. In the filing, Ackman said the company will seek to acquire a venture capital-backed firm that he called a “mature unicorn” that has chosen to remain private. Reuters first reported Ackman’s plans in June. Ackman, best known as an activist shareholder who calls for changes at companies, was also a co-sponsor of Justice Holding Inc., a SPAC which acquired restaurant chain Burger King for $1.4 billion in cash in 2012. Ackman’s latest vehicle will handily beat out former Citigroup executive Michael Klein’s Churchill Capital III Corp CCXX.N, which raised $1.1 billion in February, to become the largest ever SPAC. Churchill Capital late on Sunday agreed to take health care payment solutions provider Multiplan public in an $11 billion deal. Ackman is looking to list the SPAC’s shares on the New York Stock Exchange under the symbol “PSTH.U”.
Southwest Airlines CEO Gary Kelly told employees on Monday it needs a dramatic jump in passenger demand or it will be forced to take new steps to reduce staffing. Employees face a Wednesday deadline whether to participate in a voluntary incentive program to leave the airline. “Although furloughs and layoffs remain our very last resort, we can’t rule them out as a possibility obviously in this very bad environment,” Kelly said in a message to employees. “We need a significant recovery by the end of this year — and that’s roughly triple the number of passengers from where we are today.” Kelly added that the “recent rise in COVID cases and increasing regional restrictions on businesses and states requiring quarantine aren’t positive developments for our business, and we are concerned about the impact on already weak travel demand.” Airlines are grappling with overstaffing as they decide whether to further limit passengers on flights. JetBlue Airways said Monday it will extend blocking middle seats on larger airplanes and aisle seats on smaller aircraft for flights through Sept. 8 in response to COVID-19. Other airlines, like American Airlines are again booking flights to capacity. Last week, United Airlines said it was preparing to send notices of potential furloughs to 36,000 US-based frontline employees, or about 45 percent of staff, as travel demand hit by the coronavirus pandemic struggles to recover. Not everyone who receives a notification will be furloughed, United said. Furloughs would begin Oct. 1, when a government-imposed ban on forced job cuts by airlines that accepted billions of dollars in federal assistance expires. Delta Air Lines, which is blocking middle seats through at least Sept. 30, told employees Thursday it plans to get “smaller as we look ahead to the recovery, which is likely to be lengthy and slow.”
Tesla’s stock continued to accelerate at breakneck speeds on Monday before investors abruptly slammed the brakes on concerns that its California factory could be re-shuttered due to COVID-19 spikes in the Golden State. The electric-car company’s stock surged as much as 14 percent in early trading as excitement grew around its upcoming earnings report. If it posts a profit that meets generally accepted accounting principles, it will have four consecutive profitable quarters under its belt — a key metric for being added to the popular S&P 500 stock index. “Really that’s the only number that analysts are looking at in the upcoming earnings release,” CFRA Research analyst Garrett Nelson said of the July 22 earnings report. A spot on the S&P 500 would be a big win for Tesla’s outspoken CEO, Elon Musk, who has watched as his car company’s stock price skyrocketed 258 percent since the coronavirus pandemic hit the US. The stock hit a new intraday high of $1,794.99 a share before California Gov. Gavin Newsom announced that he would be shutting down bars and indoor dining in the state. The stock ended the day down 3.1 percent, to close at $1,497.06, on fears of another shutdown of Tesla’s Fremont factory, which is responsible for about 70 percent of its vehicle production, Nelson said. “California is far and away their largest market,” Nelson said. “If California is being forced to shut down again, there are going to be a lot fewer people looking to buy new vehicles.” Tesla’s recent decision to discount the price of the Model Y SUV just four months after its release is another potential red flag for investors, Nelson added. But try telling that to Tesla’s investors, who keep sending the stock to new heights at a time of record unemployment. Tesla, which is up nearly 10 percent in the past week and more than 50 percent in the past month, now boasts a market valuation of $277 billion — greater than Ford and General Motors combined. “It’s anyone’s guess trying to explain the day-to-day movement,” Nelson said. “Tesla kind of has a mind of its own.”
Scammers and thieves supposedly made off with around $24 million in Bitcoin in the first six months of 2020, according to reports. Twitter bot Whale Alert, which tracks large transactions of cryptocurrency such as Bitcoin, worked with Scam Alert to produce a “crime reporting, tracking and analysis” report. Bitcoins, as a digital cryptocurrency, verifies every transaction, meaning that any use and exchange of a bitcoin can be tracked. The initial analysis showed that some $38 million in bitcoin was stolen over the past four years (excluding Ponzi schemes), with $24 million in the first six months of 2020, according to a Medium post. Whale Alert noted that some of the “most successful scams” made over $130,000 in a single day with “nothing more than a one-page website, a bitcoin address and a decent amount of YouTube advertising.” The tracking service highlighted a few of the more successful operations, including “the Giveaway,” which features a celebrity, such as Elon Musk, which can net around $300,000. “The change in method and the increase in quality and scale suggests that entire professional teams are now behind some of the most successful ones and it is just a matter of time before they start using deepfakes, a technique that will surely revolutionize the scam market,” Whale Alert claimed. Deepfake is a technique by which a person’s face or likeness is superimposed over another person in an image or video. “There are dozens of different types of scams such as giveaways, sextortions, fake exchanges, fake ICO’s, bitcoin recovery, video scams, Ponzi schemes, fake tumblers, malware and the list goes on, but there is one thing all of these scams have in common: for the criminals, there is almost no risk involved while victims’ lives are being destroyed,” Whale Alert wrote in its post. Whale Alert projects upwards of $50 million in revenue for scammers by the end of the year.
Walt Disney is temporarily closing its Hong Kong Disneyland theme park from July 15 amid rising coronavirus cases in the Chinese-ruled city, the company said Monday. The announcement came two days after Disney reopened its biggest resort, Walt Disney World in Orlando, Fla., as coronavirus cases surged in the state. “As required by the government and health authorities in line with prevention efforts taking place across Hong Kong, Hong Kong Disneyland park will temporarily close from July 15,” a Disney spokeswoman said in a statement. The Hong Kong Disneyland Resort hotels will remain open with adjusted services. They have put in place enhanced health and safety measures, the company said. Hong Kong recorded 52 new cases of coronavirus on Monday, including 41 that were locally transmitted, according to health authorities. Since late January, Hong Kong has reported 1,522 cases and local media reported an eighth death on Monday. Florida has emerged as an epicenter of US COVID-19 infections. In Orange County, where Disney World is located, cases rose by 623 to a total of 18,624, the fifth-highest outbreak in the state. Hong Kong is tightening social distancing measures amid growing worries about a third wave of coronavirus infections. The government will limit group gatherings to four people — from 50 — a measure last seen during a second wave of the outbreak in March. Hong Kong Disneyland, which is majority-owned by the Hong Kong government, reopened in June. Hong Kong Tokyo reopened in July; Disneyland Shanghai reopened in May. Disney’s reopening of its parks in Asia helped provide assurance about moving ahead in Florida, Josh D’Amaro, chairman of Disney’s parks, experiences and products division told Reuters in an interview on Saturday. David Miller, an analyst at investment bank Imperial Capital, estimates that Disney generates 75 percent of operating income in its parks division from Walt Disney World, compared with 10 percent from all of the foreign parks combined.
Apple shares neared record levels on Monday as an analyst predicted the iPhone maker could become the world’s first $2 trillion company as soon as next year. The upcoming launch of its 5G iPhones at the end of 2020 will position the Cupertino, Calif. tech giant to take advantage of “continued demand snapback in China” and supercharge its stock price, according to a research note from Wedbush Securities. The firm raised its price target to $450 from $425, adding a bull case target of $525. Apple currently has a market cap of $1.7 trillion. It first passed the trillion-dollar mark almost two years ago in August 2018 when its share value hit $207.05. To reach the $2 trillion threshold, Apple stock would need to reach a valuation of roughly $462 per share. Shares of Apple were up 3.6 percent Monday morning, trading at $397.53, not far off their all-time high of $399.47 With the holiday season, which is traditionally Apple’s most profitable period, just around the corner, Ives predicts that Apple will be celebrating to ring in the new year. “We think that when the ball drops in Times Square, Apple will have hit $2 trillion,” he told The Post. Apple will see “roughly 20 percent” of iPhone upgrades coming from China in the coming year, analyst Dan Ives wrote, and will be able to “cement its installed base” in the country thanks to its wide range of phones, including the cheaper iPhone SE. The next iPhones are also rumored to have 5G hardware, which will allow the phones to access a network that promises faster internet and quicker response times than LTE. Wedbush also forecasted that Apple will sell 90 million AirPods units this year — compared to 65 million in 2019 — thanks in part to its upcoming move to not include complimentary wired headphones with the next generation of iPhones. Separately on Monday, Digitimes reported that Apple is increasing its third-quarter MacBook orders by 20 percent thanks to the coronavirus pandemic. Americans continuing to work from home has increased reliance on laptop computers, and the company has upped its supplier shipments to follow suit, according to supply chain sources.
Satellite radio giant SiriusXM said Monday that it is buying podcasting platform Stitcher from broadcaster E.W. Scripps for $325 million. Sirius had been in talks for weeks to acquire the platform, which owns a handful of podcast networks that produce shows like “Freakonomics Radio,” “My Favorite Murder” and “Conan O’Brien Needs a Friend.” The deal positions Sirius to run in the podcasting big leagues, alongside Apple Music, iHeart Media and Spotify, which leads the podcast race thanks to a slew of recent acquisitions, including Bill Simmons’ The Ringer, Gimlet Media and hit show “The Joe Rogan Experience.” “With this acquisition, SiriusXM’s combined properties will contain the largest addressable audience in the US across all categories of digital audio — reaching over 150 million listeners,” Sirius Chief Executive Jim Meyer said in a memo to staff Monday. Prior to the Stitcher transaction, Sirius had been slowly moving into podcasting with the 2018 acquisition of music and podcast streamer Pandora for $3.5 billion, as well as this year’s acquisition of Simplecast, a podcast hosting platform where users can manage their show distribution and content, among others. According to reports, Stitcher has been shopped for some time by Scripps, which is facing pressure in its core local TV business. The podcasting company, which was bought by Scripps in 2016 for 4.5 million, brought in  $17.1 million in operating revenue for the first quarter of the year, up 13 percent from a year earlier. Under the terms of the deal, which is is expected to close in the third quarter of 2020, Sirius will make a cash payment of $265 million to Scripps. The agreement provides that Sirius will will potentially make up to $60 million in additional contingent payments based on Stitcher achieving certain financial metrics in 2020 and 2021.
Chatham Asset Management plans to buy the bankrupt McClatchy newspaper chain in the latest hedge-fund takeover of a major news publisher. New Jersey-based Chatham was named the winning bidder Sunday of a bankruptcy auction for the publisher of 30 local newspapers including the Miami Herald, the Sacramento Bee and the Kansas City Star. The companies did not reveal the price of the deal. But Chatham and fellow hedge fund Brigade Capital Management had put together a bid worth more than $300 million in an auction that drew more than 20 potential buyers, as The Post previously reported. The deal will also restructure McClatchy’s hefty debt burden linked to its 2006 takeover of rival news publisher Knight-Ridder, along with its pension obligations, which helped push the company into bankruptcy. A federal bankruptcy court has to approve the agreement, and a hearing is set for July 24. McClatchy is poised to exit bankruptcy in the third quarter of this year under the deal with Chatham. The company indicated that it will emerge from Chapter 11 with all of its publications intact — though their future is uncertain as the news industry takes a beating from the coronavirus pandemic. McClatchy President and CEO Craig Forman said he was “pleased” that Chatham and the company’s other creditors “believe in our business and our mission and are helping to achieve these goals.” “Local journalism has never been more vital and we remain steadfast in our commitment to delivering on our mission and continuing to serve our communities,” Forman added in a statement. Chatham was McClatchy’s biggest debt holder and shareholder when the Sacramento-based chain filed for bankruptcy in February. The fund run by Anthony Melchiorre also owns American Media Inc., publisher of the National Enquirer, and the Postmedia newspaper chain in Canada. Alden Global Capital — another hedge fund with a reputation for gutting local papers under its MediaNews Group banner, which owns dozens of outlets including the Denver Post — also emerged as a potential bidder for McClatchy last week before Chatham was picked as the winner, according to reports. With Post wires