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Apple on Thursday reported a 10% drop in iPhone sales for the second fiscal quarter, dropping from $51.33 billion to $45.96 billion, year-over-year. The slowdown was fueled, in part, by an 8% drop in China.

Apple’s slow adoption of AI versus competitors like Google and Microsoft likely played a role in consumers’ decision to hold off on purchasing a new iPhone. Apple has promised some big announcements on that front (likely at WWDC in June), but the iPhone 16 itself likely won’t arrive until fall.

“Keep in mind as we described on the last call in the March quarter a year ago, we were able to replenish iPhone channel inventory and fulfill significant pent up demand from the December quarter COVID-related supply disruptions on the iPhone 14 pro and 14 Pro Max,” CEO Tim Cook explained on an earnings call. “We estimate this one time impact is to $5 billion to the March quarter revenue last year. If we remove this from last year’s results, our March quarter total company revenue this year would have grown.”

In spite of those dire hardware figures, however, the company still managed to beat Wall Street expectations and the stock rose more than 6% after hours, fueled by both an increase on services revenue and a massive $110 billion stock buyback — a jump over last year’s $90 billion purchase.

Services, which includes offerings like iCloud, Apple TV+ and Apple Music, jumped 14% for the year. Apple has long anticipated a slowdown in hardware sales, and its increasing focus on subscription services have helped to make up for some of that loss.

“We expect our services business to grow double digits at a rate similar to the growth we reported for the first half of the fiscal year,” CFO Luca Maestri noted on the call. He added that, “iPad should grow double digits.”

The company is expected to release two new iPads at a standalone event next week. That the company has not refreshed the tablet line since 2022 no doubt contributed to its own drop in sales from $6.67 billion to $5.56 billion, year over year. At Tuesday’s event, Apple is also expected to announce along with the M4 chip — the latest addition to the Apple Silicon line. The company’s chip progress, however, will soon be challenged by Microsoft’s efforts in the space, which are expected to be revealed at its Build conference in late-May. More hardware is likely also on the docket for its annual World Wide Developers Conference in June.

Apple does not break out Vision Pro numbers. Instead, those numbers are included in Wearables, Home and Accessories — a list that also includes devices like Apple Watch, AirPods and HomePods. Most reports, however, point to worse than anticipated sales. The company still attempted to give the headset’s arrival a positive spin.

“During the quarter, we were thrilled to launch Apple Vision Pro and to show the world the potential that spatial computing unlocks,” Cook noted in a release. “We’re also looking forward to an exciting product announcement next week and an incredible Worldwide Developers Conference next month.”

In February, Cook attempted to address concern that the company was falling behind Google and Microsoft, noting that it would have more information on its generative AI efforts “later this year.” While the subject will no doubt be top of mind at the iPad event, it seems likely the company is saving the big news for WWDC in June. In the meantime, reports have surfaced that Apple is in to integrate both OpenAI’s ChatGPT and Google’s Gemini into future iPhones.

“I don’t want to get in front of our announcements, obviously,” Cook said in response to a question on the subject during tonight’s call. “I would just say that we see generative AI is a very key opportunity across our products. And we believe that we have advantages that set us apart there. And so and we’ll be talking more about it in as we go through the weeks ahead.”

New iPad Pros, iPad Airs, Apple Pencil and perhaps the M4 chip

So far, the biggest surprise about May 7’s “Let Loose” event is that it’s happening at all. We’re just over a month out from Apple’s annual Worldwide Developer Conference, and yet the company determined there was enough news to warrant a stand-alone event. iPads (including the iPad Pro and iPad Air) will be the focus, while the long-neglected Apple Pencil is finally getting some love. It was, after all, the focal point of the event’s invite.

Rumors have also begun swirling around a potential M4 announcement. If true, it would represent a key change to Apple’s silicon release cadence, though that hasn’t exactly been consistent over the year. The likeliest reason for the change is Microsoft’s expected release of first-party, ARM-based silicon at its Build conference at the end of the month. Speculation has it that Microsoft’s AI-focused silicon will smoke Apple’s M3 chips.

It’s only been roughly seven months since Apple announced a trio of M3 chips. That’s a quick turnaround for a replacement chip, but keep in mind, the company is believed to have been working toward a more staggered release schedule last year, only to have those plans gunked up by some ongoing supply chain issues. Perhaps this schedule readjustment could see additional M4 SKUs announced during WWDC in a month.

In the meantime, it’s possible that, for the first time, the latest chip could appear on an iPad first — specifically the iPad Pro. At the very least, the high-end iPad is due for a refresh. The latest model, which sports the M2 chip, was released toward the end of 2022. Apple has spent the past several years blurring the line between the iPad and Mac, so why not let the tablet get its hands on new silicon first for a change?

The other big change to the Pro is said to be the long-awaited upgrade to an OLED display. Bloomberg suggests that this can’t come soon enough, as the tablet category is “in a deep funk right now.” Certainly the days of the iPad, one of Apple’s superstar devices, seem mostly behind us.

Image Credits: Matthew Panzarino

The company continues to dominate the category, but the tablet had a rough 2023, giving Apple a big slice of an increasingly shrinking pie. Canalys says the overall market decreased by 10% last year. Given the Vision Pro’s slow start, Apple could really use a shot in the arm right now — though a redesigned iPad doesn’t really fit the bill.

A pair of new iPad Airs is said to be arriving in 11- and 12.9-inch versions. The current rumor still has the more accessible models receiving an M2 chip — if the M4 does arrive next week, however, perhaps they’ll get an additional bump as well.

For what remains a relatively niche device, the Apple Pencil is apparently ready for its close-up. The stylus is said to be getting a new squeeze detection feature (which was alluded to earlier in an iPad) update. Haptic feedback could be on the docket as well, along with interchangeable magnet tips. Find My support could arrive too — a welcome addition for an eternally misplaced peripheral. Talking of blurring the lines between the iPad and Mac, Apple’s latest Magic Keyboard makes the tablet look even more like a laptop than before.

How Newchip’s bankruptcy threatened the cap tables of thousands of startups

Lacey Hunter thought all was well as she put her startup through the three-month Newchip accelerator. Then the organization filed for bankruptcy in May 2023. Things went from bad to worse later that year when she discovered warrants of her company — rights to buy an ownership stake — had become part of the proceedings, which ultimately forced her to shut down her company.

In 2022, Hunter started TechAid, an AI smart-matching tool for humanitarian aid, and was just beginning the accelerator’s curriculum when Newchip filed for bankruptcy.

“I made a few friends, but functionally, got nothing from Newchip,” Hunter said. “I was shooting to have the curriculum done by August, but in May, the website went down.”

The now-defunct Austin accelerator had filed for bankruptcy amid employee and customer discontent. The court has since ordered the company to auction off the warrants it held in more than 1,000 of the startups that went through the accelerator program.

Normally, private companies like startups have control over which investors are allowed to buy shares and the prices they pay. But the bankruptcy court, which works to restore creditors rather than equity holders, isn’t allowing Newchip’s startups to exert that kind of control. Instead, the auctions are ongoing, with the first tranche already sold and upcoming tranches expected to be sold this spring and summer.

Founders are outraged — including some, like Hunter, who have actually lost their companies as a result.

TechAid fought the sale of the warrants prior to closing the company. Hunter tried to buy them back herself from Newchip, but the organization’s lawyers declined her offer, she told TechCrunch. She had lined up a grant from a bank to help fund her offer, but it ultimately told her no because it was too risky for them to be involved with an unknown warrant holder on her cap table. So Hunter felt she had no choice but to shut TechAid.

“There was no path,” Hunter said. “I knew I was not going to be able to raise money. I mean, I couldn’t even get a no-strings-attached grant. I totally get that, but it still sucks.”

Newchip’s fall from accelerator grace

Newchip started out as an aggregator of top deals from “various equity-based crowdfunding platforms,” according to Silicon Hills News, and later evolved into an accelerator that promised to help startups grow their companies and meet investors — for a hefty fee.

It charged startups between a few thousand dollars and $18,000 to $20,000 for its training programs, founders said. Startups also granted Newchip the right to buy $250,000 worth of shares in the company at a later date, but at their current valuation — this type of deal is also known as a warrant.

Newchip founder and CEO Andrew Ryan previously faced harsh criticism about his leadership style, including allegations that he could be “abusive” and threatening to employees, according to eight former employees who walked out. (Ryan acknowledged to TechCrunch last year that his leadership style was based on “a military mindset.”) One example involved a meeting of about 15 employees in sales, operations and marketing. Ryan had asked the leaders of each department to read a book on how to help college volunteers be more passionate about volunteering, recalled one person who attended the meeting. Ryan asked two of the company’s leaders to lead the group in a discussion of the book. But many were confused by it and didn’t see how it applied to Newchip’s business.

“They were struggling with it. Andrew kept jumping in and interrupting them, and directly challenging them.” And finally, recalled the source, Ryan said, “This was a test for individuals that I’ve asked to do this today. I was going to fire one of you, based on whoever did the worst job.”

He then singled out one person, told the room the person was fired, and, this person recalled, Ryan then said, “I do stuff sometimes to see who’s loyal and to see who is going to do what I tell them to do. This was a test and you failed. You’re out.’”

After seeing Ryan fire this guy in front of the whole room, “I literally watched all of his direct reports sitting there saying to themselves, ‘I will never trust this man again,’” the source said.

Ryan contends that the person who was fired during that meeting had behaved aggressively after being singled out. Ryan also claims that the individual had come unprepared to lead the meeting, which Ryan viewed as an “act of overt insubordination,” telling TechCrunch: “While conducting the termination publicly in that meeting may seem harsh, it was intended to reinforce the gravity of the situation and ensure all managers understood that we took these training sessions and their responsibilities as leaders seriously.”

When Newchip (which also did business under the name Astralabs) initially filed for bankruptcy in March 2023, it was a Chapter 11 debt reorg. It then went into Chapter 7 — dissolution and liquidation — two months later.

Its Chapter 11 filing revealed that it had $1.7 million in total assets and $4.8 million in total liabilities. But the value of the warrants was apparently not taken into account at that time, a source familiar with internal happenings said. Those warrants were estimated to be valued at an eye-popping just under $500 million by Austin-based VC fund and early Newchip investor Sputnik ATX, according to a document viewed by TechCrunch.

“I feel so much stress and embarrassment. I’m a struggling founder and don’t have the money to pay for a lawyer. Here was this accelerator supposed to help founders, and instead it is imposing stress on young founders.”

Management had not been keeping up with the warrants to the point where it had missed that some companies had exited or raised money, losing out on the potential upside, noted Kerstin Hadzik, a consultant who was brought in to serve as interim CFO a few weeks after the initial bankruptcy filing.

How much did Newchip potentially lose? Sputnik ATX said it identified $54 million in warrant value from companies that had liquidity events “that should have been reported to Newchip but were not,” according to documents viewed by TechCrunch.

In Hadzik’s view, Newchip might have also been saved from going into Chapter 7 if Ryan had been willing to step down as CEO and had presented the warrants as assets when initially filing for Chapter 11.

The judge repeatedly asked Ryan if he would voluntarily step down and let someone else, such as a chief restructuring officer, run the company. Ryan repeatedly dodged the question, expressing doubt that anyone could do so successfully. Ryan also noted that employees had requested “a new CEO” and later claimed that he “was going to step aside … but the shareholders and investors, as part of them putting capital in, preferred that I stay here to make sure that we have the capital … to continue driving the business.”

Ryan also admitted that he was the company’s “major owner and shareholder” and that he had just “terminated all the board” the week before, just after having filed for bankruptcy, according to court documents viewed by TechCrunch.

“The judge was offering like a lifeline,” and Ryan “just said no,” Hadzik recalled.

In a Zoom interview with TechCrunch back when we first reported on the bankruptcy, and in two LinkedIn posts in 2023, Ryan said that he accepted “full responsibility for the events at Newchip.”

Ryan later alleged that there was an attempted coup on the part of an investor but sources say that Ryan had actually asked early investor Joe Merrill to serve as CEO before changing his mind and resuming the role himself. Merrill, who was an early investor in Newchip under its previous model and also co-founder of Sputnik ATX, declined to comment beyond noting that he believed the attempted sale of the warrants was a valid move.

Founders fight for their companies

One founder, who asked to remain anonymous, told TechCrunch that Newchip had approached her on LinkedIn and told her if she got approved to join, she would get introductions to investors. So she paid a $7,500 deposit and was all set to join Newchip when a founder friend told her to “never pay for introductions.”

She decided to hear out Ryan. What convinced her to ask for her money back was that Ryan “blew off our meeting.” He reached out later, but she had already emailed Newchip asking for her deposit back on the basis that she had not started yet.

The founder got her money back, but Newchip didn’t void her contract, so she is now part of the bankruptcy lawsuit. That’s when she learned that someone could buy the warrants of her company for pennies on the dollar, and “it could screw your valuation going forward,” she said.

“I feel so much stress and embarrassment,” she told TechCrunch. “I’m a struggling founder and don’t have the money to pay for a lawyer. Here was this accelerator supposed to help founders, and instead it is imposing stress on young founders.”

There was a period of time when founders could object to their warrants being sold, according to Chad Harding, managing partner at Peak Technology Partners, the investment banking firm tasked by the court to sell the warrants.

The deadline for those in the first tranche to object to these sales was January 15, he told TechCrunch. Founders from all over the world, including Australia and Finland, filed objections, according to court documents.

“We were in the process of obtaining a refund from Newchip when Newchip went bust,” wrote Veronica Hey, CEO and founder of Australian startup Ok Away. “The contract is therefore null and void and the warrant attached to it is not applicable. None of this will stand up in an Australian court. If you continue to pursue in ‘selling’ this warrant you are selling something that does not exist and there will be repercussions.”

But startups’ objections were made in vain when the court overruled them. A bankruptcy court’s goal is to oversee the selling of assets to settle debts. If there is money left over, it’s paid to shareholders. Ryan is the majority shareholder.

So the warrants are being sold in three tranches. The first involved 133 companies, including for startups such as Cleanster.com, bitewell, Agshift and Firehawk Aerospace. Combined, those 133 startups had raised over $340 million in funding, according to documents shared by the sales agent with potential investors and viewed by TechCrunch.

Ultimately, the sales agent ended up selling 28 warrants in just four companies from the first tranche for a total of about $58,000, presumably at a discount. Successful bidders included Bitewell and ClearForce — startups that bought back their own warrants in advance for $5,000 each, according to an agreement with the trustee — as well as Palm Ventures and Angel Deal Syndicate. The latter purchased the bulk of the warrants, spending $43,000 on warrants in 24 companies, according to court documents viewed by TechCrunch.

The second tranche will likely be sold this summer and will include over 1,400 warrants for sale, according to Harding. The bid deadline will likely be late July, Harding said.

Founders of those startups included in the second tranche will also have the opportunity to object with a proposed deadline of May 31.

Ryan maintains that extensive efforts “have been made to notify stakeholders well in advance.”

“This has afforded ample time for interested parties to access information and documents, raise any objections or issues, and prepare for participation in the sale,” Ryan told TechCrunch.

When dreams become nightmares

Like TechAid’s Hunter, Garrett Temple blames the loss of his company on Newchip’s demise. He, similar to Hunter, also participated in Newchip’s accelerator program from January until May 2023. His startup, Novogiene, was a medical tech company focused on epidemic prevention.

Temple put around $7,500 on his credit cards to be part of the program and said that he never spoke with investors. His main reason for doing Newchip was to get investors for a $500,000 round, in part to pay for a small production run of his device so he could send it to universities and medical schools for pilot testing.

The meetings with investors were supposed to happen after a demo day that was scheduled for the summer. But when Newchip shut down in May, that demo day, and hence those introductions, didn’t happen. Temple wasn’t able to keep going and ended up dissolving Novogiene in the summer of 2023. As such, his company no longer existed for warrants to be sold to potential investors.

Temple said he spoke with his bank about getting money back from the program since he used credit cards. The bank was at first successful in getting $5,000 returned. However, about a month later, Temple noticed that money was no longer in his account and believes Newchip protested the funds.

Though Temple has moved on, he still has some intellectual property for Novogiene and says he is hoping at some point to license the technology to someone else or perhaps at another time pick up where he left off.

“It was very sad to call it quits because getting the funding to make those units was the only hurdle before making serious progress,” Temple said. “If they connected me with investors like they said, I could have made my invention, gotten efficacy and would be shipping units right now. I really do believe that.”

Accelerator operators sell dreams. But that doesn’t always mean that the accelerator will come through. And sadly, the founders who buy into those dreams can be the ones who end up paying the price.

A supply crunch is affecting markets across the country, as the mortgage rate lock-in takes control of the high end

Sellers are locked into low rates. Construction costs are about 40% higher than before Covid, putting a damper on new construction. Buildable land is getting ever more scarce.

These are just some of the reasons why some luxury housing markets nationwide are facing inventory crunches and high prices, despite an overall housing slowdown. From California to Connecticut, deep-pocketed buyers are competing over a limited supply of luxury homes, amid a historic decline in listings caused by long-term owners hanging on to properties and home builders failing to keep pace with population growth and demand. Since 2000, the average monthly number of active existing-home listings has dropped 45%, according to a recent report by Compass, which said the U.S. population has grown about 20% in that time.

As of Jan. 31, for example, the St. Louis metro area had a three-month rolling average of 1.73 months of luxury supply—defined as homes in the top 5% of the market—far below the roughly five months that is generally considered to be a sign of a healthy market, according to real-estate brokerage Redfin.

Meanwhile, in Oakland and San Jose, Calif., just 0.8% of the area’s total luxury housing stock was listed on average over the three months ended Jan. 31, according to Redfin, which analyzed luxury inventory in the 50 most populous U.S. metro areas for The Wall Street Journal. The average in the 50 metros was 2.56% during that time period, Redfin data show.

“The lack of supply almost perpetuates the lack of supply because sellers don’t have anywhere to go,” said Ken DeLeon of DeLeon Realty in California’s Bay Area.

Even though luxury buyers tend to be less rate-sensitive, the mortgage lock-in effect is pervasive, said Chen Zhao, head of economic research at Redfin. Some would-be sellers believe if rates come down, buyer demand will increase further, so they may be hanging on to homes until that happens. At the same time, owners whose property value skyrocketed in recent years may opt to keep the property rather than pay capital-gains taxes—unless they are motivated by life circumstances. “It’s very location specific,” Zhao said.

Here’s a look at five of the country’s tightest luxury housing markets based on levels of supply.

Las Vegas

For the three months ended Jan. 31, the Las Vegas metro area had an average of about 3.2 months of luxury housing supply—down 32.5% from the same period a year earlier. The supply-demand imbalance has driven prices up in recent years. The median luxury sale price was $1.2 million for the three months ended March 31, compared with $1.1 million for the prior-year period.

Despite the tight market, the number of luxury sales in Las Vegas jumped 38.67% for the three months ended Jan. 31 compared with the same period last year—the biggest year-over-year jump of the 50 biggest metros nationwide. However, its 2024 level was still far below sales activity recorded at the height of the pandemic between August 2020 and July 2022.

Real-estate agent Kristen Routh-Silberman of Douglas Elliman said Las Vegas has evolved from an entertainment mecca to a cultural destination that is also an attractive tax haven for well-heeled home buyers.

Routh-Silberman said the recent sale of real-estate developer Rich MacDonald’s personal residence in Henderson, Nev., typifies the market dynamic. The property was listed for around $5 million in 2011, but it didn’t sell. MacDonald put it back on the market asking $12 million in November 2023, and it closed for $10 million in March.

Routh-Silberman said that in February, there were about five months worth of luxury supply of homes priced at over $1 million, down from 10 months a year prior. (In 2022, there was roughly two years worth of supply.) She said there are also dwindling development sites for luxury homes in the area. “We want to get people to do specs and build more,” she said. “It now appears some big builders are going to flat-out build as much as they can right now to create some inventory.”

St. Louis

The St. Louis metro area had an average of just 1.73 months of available inventory over the three months ended Jan. 31, the lowest of the 50 biggest metros nationwide and below an average of about 3.3 months for those metros. “Scarcity is the No. 1 variable that is keeping prices high,” said Jeffrey Warner of Dielmann Sotheby’s International Realty. The median luxury sale price was $840,000 for the three months ended March 31, compared with $790,000 a year prior.

Warner said this spring, for every 10 offers his team writes for clients, they lose out on six of them. “There’s just so few homes,” he said. He recently marketed a teardown in Clayton for just under $1 million, and had a three-way bidding war before it was even formally listed.

He said there is little new development, and many sellers are locked into low interest rates. “Midwesterners are conservative. They’re not going to give up their 2% mortgage to buy another house,” he said. Erica Willert, also of Sotheby’s, said despite the low inventory, she recently helped clients find a home after a roughly 18-month search. The couple, who moved to St. Louis from California to be near their adult daughter, made “several offers” on $1 million properties but lost to buyers who outbid them. “These people were a little more conservative” and didn’t want to overpay, she said. “We eventually ended up finding a great home.”

Oakland and San Jose, Calif.

In the metros of Oakland and San Jose, a tiny fraction of luxury homes are making it to the market: For the three months ended Jan. 31, each metro had an average of just 0.8% of the area’s total luxury housing stock listed for sale, the smallest of the 50 biggest U.S. metros. In comparison, 6.3% of the total luxury housing stock in Miami was listed over the same period, the most of the 50 biggest U.S. metros.

Meanwhile, demand among tech employees and others is strong, particularly since a number of large companies called workers back to the office, said Compass’s Katharine Carroll. That has resulted in crowded open houses and bidding wars. In the San Jose metro area, the median luxury sale price was $4.7 million for the three months ended March 31, compared with $4.4 million in the prior-year period. In the Oakland metro area, the median luxury sale price was $2.85 million for the three months ended March 31, compared with $2.725 million in the prior-year period.

Carroll said she recently helped clients buy a house in Los Altos after nearly a year of looking. She said they submitted one of 12 offers on a property asking $4.275 million, and got the house for $5 million. “It blows my mind that there are 11 other people in that price range waiting for the next good, solid house option to come up,” she said.

Carroll’s colleague Michael Hall recently sold a house in Sunnyvale for $3.6 million. After listing it for $3.45 million, over 100 groups came through over the course of a weekend. The seller accepted a cash offer and closed in 10 days.

Agents said there is little new development, making turnkey properties that much more desirable.

DeLeon said he has a “record number” of luxury buyers, in part because many of them made money in the stock market over the past 12 months. One of his clients recently lost a bid for a property in Atherton that was listed for $24 million in February. Despite having title issues, it got multiple offers and went into contract within a month. “There’s been so much pent up demand,” he said, that clients are compromising on their wish list, forgoing an extra bedroom and taking on a renovation if necessary.

Atlanta

Since May 2023, Atlanta’s active luxury listings have been on the decline, along with a handful of the biggest 50 metros. For the three months ended Jan. 31, an average of 2.3% of the area’s total luxury inventory was on the market. Active listings over that period were down 8.7% year over year. In comparison, luxury listings in Austin—where the market has softened since its peak in 2022—rose 42.3% year over year.

Although Atlanta’s level of luxury inventory is relatively healthy—with about four months of supply on average for the three months ended Jan. 31—real-estate agent Bonneau Ansley said the luxury condo market is tight because of limited development in recent years. He cited just a handful of new buildings in recent years. “It’s not like Manhattan where there’s new condo towers being built,” he said. Overall, he said low inventory has constrained sales within a several-mile radius of the city and surrounding areas.

As in other areas, the tight market is pushing prices higher, and deals are happening off market. The median luxury sale price was $1.275 million for the three months ended March 31, up 5.7% year over year, according to Redfin. In March, a roughly 17,000-square foot house in Atlanta’s Buckhead area traded for $19.8 million in an off-market deal, records

Ansley said he sold another Buckhead house, on about 12 acres, for $12.865 million this spring. He said the property had been on the market for years, but it got three offers this spring when the market picked up. Luxury home-buyers in Atlanta, particularly those who have done well in the stock market, are paying cash and see real estate as a hedge against inflation, Ansley said. “There’s more cash in the system and those people don’t have to worry about financing,” he said.

Newark, N.J.

The Newark, N.J., metro area—which includes wealthy communities within Morris and Essex counties—had a three-month rolling average of just 1.93 months of supply at the end of January, one of the three lowest among the biggest 50 metros nationwide. During the same period, an average of just 1.6% of the area’s total luxury housing stock was listed on the market, down from 1.8% a year prior; active listings dropped 12.5% year over year.

In Livingston, a New York City commuter town about 12 miles northwest of downtown Newark, there were 42 luxury homes on the market as of late March, compared with 120 that would be listed in a “normal market,” said Jamie Silverman of Coldwell Banker Realty. She recently sold a house for $4.3 million that was listed in October and got three offers within 30 days. The Newark metro area’s median luxury sale price was $1.65 million for the three months ended March 31, compared with $1.525 million a year earlier.

The majority of buyers come from New York City, said Cynthia Baker of Lois Schneider Realtor in Summit. “I’m like a Midtown train conductor,” she said. “It’s a fire hose that’s still turned on with buyers since Covid started, and it just has not abated.

Baker said the first wave of buyers from the city in 2020 and 2021 snapped up so many homes that there are limited options for house hunters today. Meanwhile, potential sellers looking to downsize have nowhere to go in the area, and are also facing heavy competition for very little inventory, she said.

There is limited new development in the area, with just a handful of spec homes in Short Hills and Chatham. She recently had a client who snagged a new-construction home by delivering pies to the builder around Thanksgiving. Baker said the builder didn’t want to list the property before it was finished, but the pies opened the door to negotiations and the builder never listed it. “It was a little bit risky” and definitely “gimmicky,” she said, but it worked. The client is in contract to buy the house for north of $3 million.

As Iran and North Korea draw closer, Pyongyang could learn from Tehran’s attack on Israel

SEOUL—The Iranian assault on Israel last month is likely to have drawn the keen interest of one world leader in particular: North Korea’s Kim Jong Un.

The attack—and the overwhelming success of Israel and its allies, including the U.S., to repel it—offers Kim a real-world test case of a clash with Western defenses.

It adds to North Korea’s understanding of how its munitions might perform should it attack Japan or South Korea, two countries whose defenses are—like Israel—increasingly integrated with the U.S. And it comes as North Korea and Iran draw closer, raising concerns in the West that the two could eventually cooperate militarily.

Even before Iran’s attack on Israel, North Korea was watching the performance of its own munitions in Ukraine, where Russia is using North Korean arms against weapons the U.S. and its European allies have supplied to Kyiv.

To be sure, there are important differences. Iran’s attack on Israel came with ample forewarning, with the weapons in flight for hours as they traveled more than 1,000 miles. Kim is unlikely to give such advance notice for a potential strike of South Korea or Japan—one that could arrive in mere minutes, security experts say.

Nuclear-equipped North Korea ranks as one of the world’s most volatile military threats. In recent years, Pyongyang has carried out weapons tests with impunity, including an April 22 exercise that Kim oversaw and that state media claimed was the country’s first simulated nuclear counterattack.

The lessons Tehran gleaned from its own strike on Israel, as well as Israel’s small-scale retaliation against Iran, are likely to prove instructive to Kim, as well as to China’s Xi Jinping and Russia’s Vladimir Putin, said Cho Sang-keun, a professor at South Korea’s Korea Advanced Institute of Science and Technology, who researches military technology.

Russia, China, North Korea and Iran, which have drawn closer since the Ukraine war started and find common cause in their antagonism to the West, form something of an “authoritarian value chain,” Cho added.

“With similar values, these authoritarian countries can trade know-how on weapons production or technology,” Cho said.

Pyongyang-Tehran ties

North Korea recently sent a high-level delegation to Iran led by Yun Jong Ho, who heads the country’s external economic relations and visited Russia in March. State media didn’t offer details on the nature of the trip. But U.S. and South Korean officials have recently expressed concern about potential military cooperation between Iran and North Korea. The delegation, which returned to Pyongyang on Thursday, attended a trade show and met with state officials, an Iranian Foreign Ministry spokesman said earlier this week, dismissing speculation of bilateral military cooperation as biased and baseless.

Tehran and Pyongyang have a history of arms deals dating back to the Iran-Iraq war in the 1980s. Iran’s Shahab-3 ballistic missiles appear to have been developed based on North Korea’s Rodong designs, according to a 2019 assessment by the U.S. Defense Intelligence Agency.

South Korea’s spy agency said it would look for commonalities between Iran’s drones and missiles used against Israel. There is little evidence that Pyongyang and Tehran have worked closely in recent years. But the potential exists for the two to join forces on military technology, said Tianran Xu, an analyst for the Open Nuclear Network, a research group based in Vienna.

Iran used a mix of ballistic and cruise missiles along with explosive drones to attack Israel in April, similar to Russian attacks on Ukraine. Much of the incoming fire was detected by early warning radars then intercepted by defense systems, along with help from the U.S., U.K. and other allies. Israel itself has several layers of air-defense systems including the midrange David’s Sling, designed to intercept missiles from around 62 miles to 124 miles away, and the long-range Arrow-2 and Arrow-3 systems that can shoot down missiles outside the earth’s atmosphere.

But North Korea would pose a greater threat, in part because South Korea and Japan are much larger territories to defend, said Derek Grossman, a former Pentagon official who worked on Indo-Pacific security issues.

Given its overwhelming success, “the Israel case is really the exception to the rule,” said Grossman, who is now a senior defense analyst at Rand Corp., a think tank based in Santa Monica, Calif. “Shooting down a bullet with another bullet is extremely difficult to do.”

A takeaway for Kim might be to focus a first wave of missiles or drones on targeting South Korean, Japanese and U.S. missile defenses, said David Maxwell, a former U.S. Army Special Forces colonel who served in Japan and South Korea. Iran didn’t appear to attempt this or was unsuccessful in doing so against Israel. By contrast, Israel’s attack in retaliation for the Iranian barrage took out radar systems defending the main target, an Iranian air base.

“A major principle for any air attack is the suppression of enemy air defenses,” Maxwell said.

Vulnerabilities in Seoul and Tokyo

The lessons from the Iranian attack on Israel could be especially valuable to North Korea as both Pyongyang and its rivals build up their militaries to prepare for an eventual conflict.

Kim has pushed Pyongyang to develop hypersonic technology and short-range missiles that can confuse radars by changing direction midflight. More of North Korea’s newest missiles rely on solid, rather than liquid fuel, allowing for a potentially faster deployment. Pyongyang is believed to have hidden weapons inside caves and mountains, and has showcased an ability to fire missiles from railroad cars.

In response, South Korea and Japan are spending tens of billions of dollars to upgrade their missile-defense systems. For the first time, the two countries and the U.S. started late last year to knit together their missile-radar systems, though integrated defenses remain a distant goal, military experts say.

Currently, South Korea possesses its homegrown Cheongung-II interceptor, complementing the U.S. Patriot missile interceptors and the Terminal High-Altitude Area Defense system. South Korea plans to upgrade a deterrence system aimed at launching pre-emptive strikes and intercepting North Korean missiles by deploying more drones, spy satellites and homegrown medium- and long-range surface-to-air missile systems.

If Pyongyang were to launch a missile-and-drone attack in the region now, Washington and its allies may not be able to block even half of the barrage, according to Bang Jong-kwan, a former South Korean Army Major General.

“North Korea will watch closely how Iran’s tactic of putting pressure on air defenses could be applied on the Korean Peninsula,” he said.

Washington and Seoul have the ability to detect and intercept combined attacks by North Korea, though there are plans to upgrade defense systems, a Seoul military spokesman said in April.

Japan relies on both land-based Patriot-missile batteries and sea-based Aegis-equipped naval destroyers. Tokyo has also agreed to jointly develop with Washington interceptors that could take out hypersonic glide vehicles and ballistic missiles.

Japan has pledged a significant boost to its military budget—up nearly 50% this fiscal year from two years ago—as Tokyo looks to beef up defenses against regional threats such as North Korea. The expansion includes new systems, such as American Tomahawk missiles, which would give Japan the ability to target foreign military facilities if an attack appeared imminent.

Unlike Israel, South Korea and Japan don’t have much experience responding to a barrage of missiles launched all at once, said Grant Newsham, a senior research fellow at the Japan Forum for Strategic Studies.

“I suspect both South Korea and Japan would have trouble responding to a no-notice North Korean missile attack,” said Newsham, a retired U.S. Marine colonel.

CEOs weighing mergers may think twice after FTC bars industry veteran from Exxon’s board

US regulators have introduced a new point of tension in the federal government’s fractious relationship with the country’s oil industry, accusing one of the sector’s most outspoken executives of attempted collusion to boost energy prices.

The Federal Trade Commission on Thursday alleged Scott Sheffield, the former head of Pioneer Natural Resources, had tried to co-ordinate production levels with the Opec cartel to “pad Pioneer’s bottom line . . . at the expense of US households and businesses”.

The surprise move by the agency — which came alongside its approval of ExxonMobil’s $60bn takeover of Pioneer — sent tremors through the industry, leaving insiders wondering how past comments could be scrutinised and fanning fears of a broader crackdown before November’s presidential election. 

“The implications go far beyond Sheffield,” James Lucier, an analyst at Capital Alpha Partners, wrote in a note to clients. “The FTC has not to date taken an adversarial approach toward oil industry mergers . . . This relative hands-off policy is no more.”

“Any CEO contemplating a merger will have to worry about being singled out the way Sheffield was,” he added. 

Under chair Lina Khan, an appointee of US President Joe Biden, the FTC has taken an aggressive approach to its job of protecting competition and consumers. In the past two weeks alone it has banned employee non-compete agreements and sued to the block an $8.5bn luxury goods industry takeover, arguing the deal “threatens to deprive consumers of the competition for affordable handbags”.

As a condition of approving Exxon’s purchase of Pioneer, the FTC took the extraordinary step of barring Sheffield from joining the supermajor’s board as anticipated in the merger agreement. In doing so, the agency took aim at a senior figure in the US shale energy revolution, who built Pioneer over the past two decades into the biggest oil producer in Texas with operations in the sprawling Permian Basin.

The FTC homed in on Sheffield’s efforts to curb production in the middle of a dramatic price crash at the start of the Covid-19 pandemic in 2020, which left many US producers on the brink of bankruptcy. 

Sheffield led an effort urging Texas regulators to introduce supply curbs and called on members of the Opec+ group, including Saudi Arabia and Russia, to dial back output. 

Pioneer said Sheffield, 71, who has lived through six industry downturns, had merely “voiced concerns aimed at raising awareness of the issue and encouraging state, federal and international governments to act”. Sheffield declined to be interviewed.

But the FTC, which combed through hundreds of text and WhatsApp messages and public statements as it scrutinised the Exxon takeover, said he had “embark[ed] on a series of efforts to co-ordinate output levels to keep production artificially low”, and served to “direct communications between his competitors in the Permian Basin and Opec”.

Sitting on Exxon’s board risked “amplifying his public messaging and the effectiveness of his private contacts with Opec”, the agency said. 

Among the evidence the agency cited was a dinner Sheffield attended along with other US producers, hosted by the late Opec secretary-general Mohammed Barkindo, in 2017. Such dinners have become a regular industry feature in recent years, often hosted on the sidelines of the annual CERAWeek energy conference in Houston. 

Attendees say the gatherings have become increasingly cordial in recent years as memories fade of the cartel’s efforts to sink the US shale industry by flooding the market with oil.

Among the CEOs who have attended are Occidental Petroleum’s Vicki Hollub, Devon Energy’s Rick Muncrief, Chesapeake Energy’s Nick Dell’Osso and John Hess of Hess. Chesapeake declined to comment, while the other companies did not respond to requests for comment. 

Industry executives and analysts said Sheffield was paying a price for being outspoken and had become a casualty of an FTC effort to take a tough stance the sector. One leading executive described the agency’s approach as “a little over the top”.

“Sheffield has clearly been one of the voices of the US upstream industry and he is obviously in hindsight taking some heat for that,” said Dan Pickering of Pickering Energy Partners, an investment and advisory group. 

“Given the high-profile nature of this transaction they needed something. I think you would hear a lot of squawking from a lot of folks who didn’t want this deal to go through if it sailed through with no changes.”

The move comes six months before Americans head to the polls as officials in the Biden administration fret over the electoral impact of rising prices at the pump.

Kevin Book, an analyst at ClearView Energy Partners, said it could point to a “new tactic” by the administration to temper such rises: “implicitly encouraging domestic operators seeking the commission’s approval for transactions to increase their production”.

There are concerns in the industry that the FTC will initiate a broader, sector-wide inquiry into alleged collusion in the run-up to the election as it gathers a huge amount of documentation and private communications from energy companies in the middle of a mergers and acquisitions boom. 

Aside from the $60bn Exxon-Pioneer deal, the FTC has made second requests for information from companies in at least four other pending takeovers with an aggregate value of more than $100bn: Chevron and Hess; Diamondback Energy and Endeavor Energy; Occidental and CrownRock; and Chesapeake Energy and Southwestern Energy. 

The FTC declined to comment on whether it would launch a sector-wide probe into the allegations of collusion. 

But some experts said that notwithstanding the action on Sheffield, the agency’s approval of the Exxon-Pioneer deal — the supermajor’s biggest since its 1999 merger with Mobil — demonstrated it was unlikely to block similar megamergers in the oil patch. 

“I think that the outcome is genuinely encouraging for these upstream deals that are currently in front of the agency,” said Jeffrey Oliver, partner at law firm Baker Botts and a former FTC staff attorney. “That’s very helpful to many of these deals that are still in limbo.”