WSJ : Elon Musk Has Used Illegal Drugs, Worrying Leaders at Tesla and SpaceX

Elon Musk Has Used Illegal Drugs, Worrying Leaders at Tesla and SpaceX
Some executives and board members fear the billionaire’s use of drugs—including LSD, cocaine, ecstasy, mushrooms and ketamine—could harm his companies

Elon Musk and his supporters offer several explanations for his contrarian views, unfiltered speech and provocative antics. They’re an expression of his creativity. Or the result of his mental-health challenges. Or fallout from his stress, or sleep deprivation.

In recent years, some executives and board members at his companies and others close to the billionaire have developed a persistent concern that there is another component driving his behavior: his use of drugs.

And they fear the Tesla TSLA -0.18%decrease; red down pointing triangle and SpaceX chief executive’s drug use could have major consequences not just for his health, but also the six companies and billions in assets he oversees, according to people familiar with Musk and the companies.

The world’s wealthiest person has used LSD, cocaine, ecstasy and psychedelic mushrooms, often at private parties around the world, where attendees sign nondisclosure agreements or give up their phones to enter, according to people who have witnessed his drug use and others with knowledge of it. Musk has previously smoked marijuana in public and has said he has a prescription for the psychedelic-like ketamine.

In 2018, for example, he took multiple tabs of acid at a party he hosted in Los Angeles. The next year he partied on magic mushrooms at an event in Mexico. In 2021, he took ketamine recreationally with his brother, Kimbal Musk, in Miami at a house party during Art Basel. He has taken illegal drugs with current SpaceX and former Tesla board member Steve Jurvetson.

People close to Musk, who is now 52, said his drug use is ongoing, especially his consumption of ketamine, and that they are concerned it could cause a health crisis. Even if it doesn’t, it could damage his businesses.

Illegal drug use would likely be a violation of federal policies that could jeopardize SpaceX’s billions of dollars in government contracts. Musk is intrinsic to the value of his companies, potentially putting at risk around $1 trillion in assets held by investors, tens of thousands of jobs and big parts of the U.S. space program.

SpaceX is the only U.S. company now approved to transport NASA astronauts to and from the International Space Station. The Pentagon, meanwhile, has stepped up purchases of SpaceX rocket launches in recent years, and the company has also been looking to develop a large business selling satellite services to national-security agencies.

One former Tesla director, Linda Johnson Rice, grew so frustrated with Musk’s volatile behavior and her concerns about his drug consumption that she didn’t stand for re-election to the electric-car company’s board in 2019, according to people familiar with the matter.

Musk didn’t respond to requests for comment.

An attorney for Musk, Alex Spiro, said that Musk is “regularly and randomly drug tested at SpaceX and has never failed a test.” Spiro, who said he represents Tesla, added in response to detailed questions that “there are other false facts” in this article but didn’t detail them.

The people around Musk long ago became accustomed to his volatile behavior. Some SpaceX executives who had long worked with him, however, noticed a change at a company event in late 2017.

Hundreds of SpaceX employees gathered around mission control at the rocket company’s headquarters in Hawthorne, Calif., in anticipation of Musk, who was nearly an hour late to arrive at the all-hands meeting about the company’s latest rocket.

When he finally took the stage, Musk was strangely incomprehensible at times. He slurred his words and rambled for around 15 minutes, according to executives in attendance, and referred repeatedly to SpaceX’s Big Falcon Rocket prototype, which was known as BFR, as “Big F—ing Rocket.”

SpaceX President Gwynne Shotwell ultimately stepped in and took over the meeting.

It couldn’t be learned if Musk was under the influence that day. But after the meeting, the SpaceX executives privately talked about their worries Musk was on drugs. One described the event as “nonsensical,” “unhinged” and “cringeworthy.”

Spiro called the description of the SpaceX incident “false as has been confirmed by countless people who were present.” He declined to elaborate on what specifically was false or describe the countless people.

Then in 2018, people familiar with Musk’s behavior said, another incident seemed to mark a turning point for him—and showed that his drug use could have consequences for his businesses. That year, Musk got into trouble with NASA for smoking marijuana on the Joe Rogan show, raising red flags for some about the business impact of Musk’s conduct and causing employees at SpaceX to be randomly tested for drugs.

Worry by board members
In addition to violating federal contracts, any kind of illegal drug use would break company policies at both SpaceX and Tesla, and would raise questions about Musk’s executive role at the publicly traded Tesla, where the board has a duty to shareholders to oversee management.

Some Tesla board members over the years have talked among themselves about their concerns over Musk’s alleged drug use but haven’t said anything formally that would end up as an official board agenda item or in meeting minutes, people familiar with the discussions said. Some directors, including current Tesla board chair Robyn Denholm, have gone to Kimbal Musk, who is a Tesla board member and was a SpaceX board member until early 2022, for help with Musk’s behavior, without using the word “drugs,” the people said.

Some on the board and others close to Musk worried he was on drugs when he tweeted in 2018 about plans to take Tesla private, people familiar with the episode said. Kimbal Musk informally approached Musk about it on behalf of some board members, some of the people said. The tweet brought on an SEC investigation into whether the statement was misleading or false, and resulted in Musk’s agreement to step down as Tesla chairman for a time.

Some close to Musk said they learned he was under the influence during a media interview he gave soon after the tweet when he choked up describing how difficult his year had been.

Part of the issue directors have grappled with over the years is whether drug use by Musk is to blame for his unusual behavior, or if it is something else, such as his consistent lack of sleep, which he has talked about.

Musk oversees six companies, including social-media platform X, formerly Twitter; his tunneling venture, The Boring Co.; his brain implant startup, Neuralink; and a new artificial-intelligence company, xAI. His business life bleeds into his personal time in a way that is uncommon even for other chief executives.

At Tesla and X, he has said he regularly slept at the office. He often emails company lieutenants in the middle of the night, and hosts work meetings at midnight. He said he works almost nonstop. “Vacation is a strong word,” he said in 2022 court testimony. “For me, it is email with a view.”

In a new authorized biography of Musk, author Walter Isaacson described Musk’s “demon mode”: Musk, Isaacson wrote, entered into a state of intense fury and would frequently lash out at employees and executives. In the Isaacson book, Musk is quoted as saying, “I really don’t like doing illegal drugs.”

Musk and others have attributed his erratic office behavior to his mental health. A Twitter user asked in 2017 if he had bipolar disorder, which can cause mood swings, to which Musk replied affirmatively, although he said he was undiagnosed.

Musk also said, when he hosted Saturday Night Live in 2021, that he had Asperger’s, a form of autism.

Drug use has also been a thorny topic for directors at Musk’s companies because some of them are his close friends, and attend parties and travel with him, according to people familiar with the matter and court documents.

Musk has been known to attend parties and events at Burning Man, the Nevada arts and music festival where drugs are widely used, to blow off steam, according to people close to him.

He also throws his own private events, where drug use is common, according to people who have attended the parties.

The executive’s whereabouts are often a closely guarded secret, and he is protected by private security. At his companies, executives and employees often have to sign nondisclosure agreements.

Kimbal Musk frequently attends the same parties and events as his brother, including an Art Basel party in Miami in late 2021 when both took ketamine recreationally, according to people with knowledge of their drug use. Kimbal Musk has talked to friends about the benefits of psychedelics, and tweeted in June in support of his wife when she spoke at the country’s largest psychedelic conference about the benefits of the drugs for mental health treatment.

In 2023, The Wall Street Journal reported that Elon Musk microdoses ketamine for depression and also takes full doses at parties. Following publication of the article, Musk tweeted that ketamine is a better way to deal with depression compared with more widely prescribed antidepressants that are “zombifying” people.

In a separate tweet, Musk later said that he had a prescription for ketamine. The psychedelic-like drug can be prescribed “off label” for depression and post-traumatic stress disorder, and it is also a widely used party drug that can be purchased illegally through dealers.

Government contracts
As a general rule, board members and executives have long struggled with how to deal with substance abuse at their companies.

Some directors have wondered whether it is their role to police drug use outside the office, saying what executives do in their personal lives—especially with drugs that may be legal in certain instances or states—may not impact their business decisions.

At most companies, board members aren’t required to investigate an executive for drug use, but they often do take action if they believe it is impacting the business.

That can include encouraging a leave of absence for treatment or opening an investigation, corporate governance experts say. Drug use is a more challenging issue than other substance problems, such as alcohol, because possessing certain drugs, such as cocaine, can bring felony charges.

In 2020, former Zappos chief executive Tony Hsieh’s abuse of ketamine ultimately caused executives at the shoe company’s parent, Amazon, to step in, according to people familiar with those events.

Amazon executives gave Hsieh a couple of months to clean up his act, and when he wasn’t able to do so, he resigned. Hsieh was trapped in a house fire while under the influence in late 2020 and later died from his injuries.

Tesla’s code of conduct described the electric-vehicle maker as a drug-free workplace and prohibits all employees, including executives, from using them, even out of the office.

Illegal drug use by employees is also in violation of the rules that govern the more than $14 billion in contracts that Musk’s private rocket company, SpaceX, has with the U.S. government for civilian and military space missions.

Federal contracts require that companies comply with the Drug-Free Workplace Act and foster a drug-free culture with programs and policies, regardless of any state laws that may legalize some usage. Contractors can also lose security clearances because of drug abuse, defined as the use of illegal drugs or prescription medications “in a manner that deviates from approved medical direction.”

In his role as CEO and founder of SpaceX, Musk has a security clearance that gives him access to classified information.

Investors have often turned a blind eye to concerns about Musk, including his drug use, especially when Tesla is doing well, investors and people close to the board said. And in recent years, Tesla and SpaceX have both performed exceptionally. Tesla stock is up around 1,000% in the past five years, despite declines in 2022, compared with the S&P 500’s increase of around 86% in that time period. Revenue at SpaceX also has soared.

Tweet firestorm
In the summer of 2018, some people around the billionaire began getting concerned that he was losing control.

Several months after the all-hands meeting at SpaceX, Musk tweeted in August that he planned to take Tesla private at $420 a share—“420” is slang for smoking marijuana—and that he had “funding secured.”

The now-infamous tweet set off a firestorm among investors, who scrambled to understand the billionaire’s plans for the electric-car maker. Tesla shares increased more than 6% the day of the tweet. The SEC launched an investigation that resulted in a settlement that included fines of $40 million and Tesla adding two independent board members and overseeing the CEO’s communications. Musk didn’t admit or deny wrongdoing.

Board members told regulators they didn’t know about Musk’s plans and were taken aback by his actions. Privately some on the board became concerned that Musk was on drugs when tweeting, and some directors briefly discussed among themselves the idea of him taking a leave of absence from Tesla, people familiar with the discussions said.

In an interview with the New York Times soon after, Musk choked up multiple times as he described the intense personal toll of leading Tesla, saying, “This past year has been the most difficult and painful year of my career.”

Behind the scenes, things were much more dire: Musk had been under the influence as he answered the reporters’ questions, according to people briefed on the episode. The CEO hadn’t informed Tesla’s communications team that he was giving the interview, people familiar with the episode said.

Soon after, Musk smoked marijuana on the comedian Rogan’s show, which can be streamed online. NASA demanded written assurances that SpaceX was complying with the federal drug-free workplace law and spent $5 million in taxpayer dollars on training for SpaceX employees, according to a letter NASA sent to the company and federal contracting records.

Musk has said the agency required drug testing at SpaceX for a year.

Corporate contractors must follow standard NASA guidelines for drug tests that usually check for marijuana and cocaine and have the ability to also test for amphetamines, opiates and PCP.

Spiro didn’t respond to a question on what type of drug tests Musk has taken.

At SpaceX and some of Musk’s other companies, including the tunnel venture Boring Co., executives began warning employees to follow company rules at all times, including to not use illegal drugs, even out of the office, according to people familiar with the warnings.

SpaceX brought in drug-sniffing dogs on a random basis to make sure employees weren’t carrying illegal substances, according to the people.

At Tesla, Denholm, the current board chair, James Murdoch and other directors sometimes gathered around Kimbal Musk informally during board breaks or after meetings to ask how Elon Musk was doing or if he was getting enough sleep, people familiar with the conversations said. While the directors wouldn’t specifically ask about substance abuse, the people said they understood the questions to be about Elon Musk’s perceived drug use.

Rice, the director who didn’t stand for re-election in 2019, raised concerns about his drug consumption more than once in side conversations with board members about Musk’s increasingly erratic behavior during her two year tenure on the board, according to people familiar with her concerns. She informally asked whether the board should investigate and was brushed off, one of the people said.

WSJ : The Stock Rally Has Stalled. Now Comes Earnings Season

The Stock Rally Has Stalled. Now Comes Earnings Season
Wall Street expects S&P 500 companies to report second straight quarter of earnings growth

After a recent pullback in stocks, investors are looking to the coming earnings season for clarity on companies’ growth prospects.

U.S. stocks defied expectations to rally in 2023 but have struggled to extend gains into the new year. The S&P 500 shed 1.5% in the first week of January. Tech stocks, which led the market last year, have stumbled, with Apple and Microsoft falling 5.9% and 2.2%, respectively, in the past week.

For many investors, quarterly results and commentary from executives will help signal if the recent stock-market declines are warranted or whether companies’ profits are strong enough to renew the rally.

“This is a very interesting and important earnings season to get confirmation on fundamental trends,” said Raheel Siddiqui, senior investment strategist at Neuberger Berman.

Analysts expect companies in the S&P 500 to report a second straight quarter of earnings growth. Profits for the fourth quarter are projected to have risen 1.3% from the same period a year earlier, according to FactSet.

That is down from the 8% profit growth analysts had projected at the end of September. For all of 2023, Wall Street now expects earnings grew 0.8% from 2022.

In the week ahead, investors will get results from some of the country’s biggest banks, including JPMorgan Chase and Bank of America, as well as Delta Air Lines and UnitedHealth Group. They will also get fresh inflation data likely to influence the Federal Reserve’s plans on interest rates.

Much of the optimism that propelled stocks’ furious ascent in the final weeks of 2023 rested on data suggesting the economy has slowed enough for inflation to ease but not enough to fall into a recession. That “soft landing” scenario would allow the Fed to shift to cutting interest rates.

Friday’s monthly jobs report showed hiring picked up in December, but job gains for previous months were revised downward. Average hourly earnings ticked up more than expected. The mix of data did little to clarify when the Fed might start lowering rates.

Investors will closely watch what corporate leaders say about their outlook for the economy, especially executives at the country’s biggest banks.

“The big question is, can the economy orchestrate a soft landing?” said Stephanie Lang, chief investment officer at Homrich Berg.

Strong consumer spending helped buoy the economy in 2023, even as the Fed pushed up interest rates to the highest levels in more than two decades. The latest data from the holiday shopping season showed an increase in spending to finish the year.

Early quarterly reports from retailers struck more of a wary tone.

Nike and FedEx, which reported their latest quarterly results in December, both lowered their revenue forecasts and warned of weak demand. Conagra Brands, the maker of Healthy Choice frozen meals and Slim Jim meat sticks, also cut its annual guidance in the past week after sales volume slipped. Walgreens Boots Alliance said Thursday it would cut its dividend, sending shares tumbling.

“We are seeing indications of more cautious consumer behavior around the world in an uneven macro environment,” Nike Chief Financial Officer Matthew Friend said in the company’s Dec. 21 earnings conference call.

Earnings results from megacap technology companies in the weeks ahead loom large over the market after a big run-up in their share prices in 2023. The heavy weighting of companies like Apple and Microsoft in the S&P 500 make their results particularly influential in the stock market’s overall direction.

Analysts expect communications-services companies to report the highest year-over-year earnings growth among the S&P 500 sectors at about 42%, with Meta Platforms being the biggest contributor, according to FactSet. They forecast the energy segment to experience the biggest profit decline compared with 2022, when oil prices soared and earnings boomed.

Some investors are focusing on sectors that lagged behind last year, believing those beaten-down areas could bounce back this year. Lang said she is interested in healthcare stocks and views them as attractively priced compared with other segments of the market.

This year, Wall Street expects earnings to grow sharply. Analysts expect profits among companies in the S&P 500 to climb about 12% in 2024, according to FactSet.

But there is some question about whether stocks will rally even if earnings climb. Companies in the S&P 500 are trading around 19.2 times their projected earnings over the next 12 months, compared with the five-year average of 18.9, according to FactSet.

“High valuations basically mean that markets are priced for perfection, and then some more,” said Anna Rathbun, chief investment officer for CBIZ Investment Advisory Services.

FT : G20 push for faster payments risks weakening Russia sanctions, experts warn

G20 push for faster payments risks weakening Russia sanctions, experts warn
Speeding up digital systems makes them more vulnerable to criminal networks and money laundering

A G20-led push to speed up international payments risks enabling financial crime and hindering the enforcement of sanctions against Russia and other states, industry experts have warned.

The plans to make digital payment systems more efficient by 2027 do not take into account their increasing vulnerability to criminal networks and the heightened money laundering risks posed by a surge in war-related sanctions, according to the Future of Financial Intelligence Sharing, a UK-based research programme.

“A key institutional failure at the G20 level is the lack of responsibility among payments reform policymakers to consider fraud prevention and financial crime security,” said Nick Maxwell, head of FFIS, which on Sunday published a report on the issues.

The report urged increased public and private sector collaboration to “hardwire” financial crime prevention systems into cross-border payment infrastructure and harness national data to spot money laundering networks.

A failure to address these concerns could have “wide-ranging negative impacts [for] consumer financial safety, law enforcement effectiveness against organised crime and national security in terms of sanctions implementation”, he added.

The value of cross-border transactions, including wholesale payments between financial institutions, retail transfers and remittances, is forecast to hit $250tn by 2027 from $150tn a decade earlier, according to the Bank of England.

The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, has developed a road map for enhancing cross-border payments. The G20-led initiative is supported by the World Bank, the IMF and about 40 central banks.

The FSB published an update to the plan in October, focusing on practical measures that will enable G20 countries to fulfil a 2020 commitment to make international payments cheaper, faster and more transparent by 2027.

The “priority areas” in the financial watchdog’s road map include setting common data standards, improving settlement infrastructure and convening regulators, supervisors and lawmakers to address “regulatory friction” across the sector.

But while the road map plans to scrap the “very limited time period” required to screen transactions and recall funds before they are settled, it does not include mitigation plans for the “increased risk of cross-border fraud and associated money laundering”, the FFIS report warned.

Under the plan, cross-border payments, which are typically processed in a few hours or days, could be settled within seconds, leaving less time for counterparties to apply compliance checks and block suspicious payments.

“The faster the money moves the less time people have to react . . . speed does not have to compromise security but it can if you don’t embed security within the scheme,” said Chris Lewis, head of research at fraud prevention software group Synectics.

Alaina Gimbert, senior vice-president at US payments operator the Clearing House, said the G20 plan did not substantially address the need to enforce sanctions by blocking transactions in real time, a mandatory requirement of most US sanctions programmes.

“You can’t pretend that these compliance issues don’t exist. The G20 has not really given that risk the level of attention that it needs,” she said.

Western sanctions have greatly increased in number since Russia’s full-scale invasion of Ukraine nearly two years ago. Russian financial institutions have been hit hard by the restrictions. Some of its biggest lenders were removed from the Swift global payments system, which facilitates trillions of dollars worth of transactions every day.

Hundreds of executives close to President Vladimir Putin have been blacklisted from using western financial systems, while western companies are banned from importing a range of Russian commodities.

Gimbert urged governments to have “an honest conversation” about how to reconcile the goals of achieving faster international payments and enforcing economic sanctions.

“There’s going to need to be some form of compromise.”

The FSB did not respond to requests for comment on concerns relating to the progress report.

The FFIS published its report with the Centre for Financial Crime and Security Studies. They are both partnership programmes with the UK-based Royal United Services Institute, an independent defence and security think-tank.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: The grid, which includes production, storage, and transmission of electricity, is set to undergo significant changes

Cover:
-The grid, which includes production, storage, transmission, distribution, and consumption of electricity, is set to undergo significant changes. As data centers and electric vehicles (EVs) grow, the production of electricity will increase, necessitating more energy storage assets and robust transmission lines. This will also require more software and artificial-intelligence tools to coordinate the process. The changes will benefit homeowners, utilities, and companies that build grid infrastructure. Despite a record 4.2 trillion kilowatt-hours of electricity consumed in 2022, overall demand has been sluggish, with 60% coming from coal and natural gas, 20% from nuclear power, and 20% from renewable sources.

Interview:
-Michael Lippert, a former lawyer and Baron analyst, has been successful in buying growth stocks with sustainable competitive advantages. He focuses on companies with durable secular trends that will continue to grow over many years. Lippert's investment maxim is to buy stocks that will outperform their peers in the long run. His Baron Opportunity fund, which has $1.1B in assets, has an average annual return of 17.6% in the past 15 years, outperforming 93% of its large-growth-category peers. The fund has an all-cap mandate, with its five biggest holdings being megacaps. However, lesser-known companies like Gartner, CoStar Group, Rocket Pharmaceuticals, Guidewire Software, and Trade Desk also drive returns.

Tech Trader:
-The Consumer Electronics Show (CES), first held in 1967, is now the largest technology event since Covid-19, with an expected crowd of 130,000. The show covers various technology segments and products, including cars, boats, helicopters, computers, robots, streaming services, televisions, virtual reality headsets, consumer appliances, semiconductors, and more. With over 4,000 exhibitors spread across 2.5M ft2 of exhibit space, the event is expected to attract 130,000 attendees. The show offers an opportunity to meet tech companies, see inventive ideas, and stay updated on trends. However, it is also exhausting with meetings from dawn to the wee hours and a logistical nightmare. CES has been the launchpad for digital watches, camcorders, DVD players, and Atari Pong, but this year's focus will be on the rapid emergence of artificial intelligence software and hardware.

The Trader:
-Goldman Sachs predicts a 3% decrease in net interest income for the year, following a 16% increase for 2023. Credit quality could also be a concern, as consumers have remained resilient over the past four years. Keefe, Bruyette & Woods analysts are neutral on banks, warning that deteriorating credit could cause earnings per share to drop by up to 25%. Selectivity is essential, with KBW highlighting KeyCorp, Webster Financial, and Goldman Sachs as potential opportunities. Meanwhile, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo are set to report their financial results on Friday, with investors eagerly anticipating signs of better financial outcomes in 2024 compared to 2023, which saw rising Treasury yields impact bond bank valuations.
-Walt Disney is facing a contentious battle with activist investors, despite the company's stock losing over half its value since March 2021. Disney has entered into an information-sharing agreement with ValueAct Capital, which pledges support for Disney's board slate. Rival investment firm Blackwells Capital is pushing three of its own directors. Trian Fund Management is the most belligerent, seeking two board seats and lambasting Disney for poor performance. The drama is expected to continue over the next few months, with proxy fights potentially being just what Disney needs.

Features:
-The boomerang generation's struggle to integrate in the workforce is causing parents to grapple with the financial dilemma of supporting their adult children while securing their own financial future. Many parents are utilizing their retirement savings to support their children, with nearly half of individuals aged 18 to 29 living with their families, the highest percentage since the 1940s. A recent Harris Poll survey revealed that nearly 70% of parents with adult children have made financial sacrifices to support their children financially.
-The US labor market ended 2023 with higher-than-expected hiring, low unemployment, and steady wage gains. The December jobs report reveals that the Federal Reserve can continue to fight inflation by holding interest rates steady, rather than considering near-term cuts to spur economic growth. The US added 216,000 jobs in December, surpassing economists' forecasts and exceeding November's revised gain of 173,000. Nonfarm payrolls rose by 2.7M for all of 2023, with an average monthly gain of 225,000 jobs. Key Private Bank's chief investment officer, George Mateyo, believes the Fed should maintain a 'higher for longer' stance on interest rate policy, causing market participants to reconsider their forecasts.

Europe:
-Dividends in Europe experienced a significant drop during the pandemic in 2020, as financial firms were forced to suspend payouts. However, dividends have since rebounded, with a 60% increase across the region. The global payout ratio for stocks, which represents the percentage of company earnings paid out in dividends, has dropped from 35% in 2021 to the low 40s, providing ample room for a dividend recovery. Dividends have followed earnings but have not played catch-up significantly in terms of the payout ratio. Global higher-income stocks have performed well overall in the past four 12-month periods following the Federal Reserve's final interest-rate hike, reflecting their "value plus defensiveness" characteristics. Legrand, a French-based electrical equipment maker, and RELX, a UK digital media company, as they have strong dividend growth, with Sam Witherow, a London-based equity portfolio manager at J.P. Morgan Asset Management expecting RELX to grow its dividend at a 9% annual clip over the next five years.

Emerging Markets:
-Turkey's equity markets have seen positive flows in November and December, with yields on 10-year dollar bonds dropping 200 basis points and central bank currency reserves increasing 40%. Economic policy surprises include President Recep Erdogan's orthodox approach, which has led to increased interest rates and a decrease in inflation. The new central banker, Hafize Erkan, has hiked rates from 8% to 42.5%, with an expected increase to 45% in January. Erkan and finance minister Mehmet Simsek are working on reducing regulations that subsidized credit to favored borrowers.

Commodities:
-Chile's government has announced a public-private partnership to extend the life of the world's cheapest lithium basin by 30 years. The deal will take effect from 2060, as the Atacama salt flats in the high Andean desert are entered into a 50-50 joint venture with state copper giant Codelco. This move is seen as a pragmatic move by Chile's president, Gabriel Boric, who is advocating for progressive reforms. However, Chile will need more compromise to fulfill its lithium destiny, as its largest proven reserves are constrained by a Pinochet-era law designating lithium a strategic metal for nuclear energy. The move has been stymied by divisions between statists and free marketers in Congress.

Streetwise:
-The US stock market is increasingly dominated by artificial-intelligence companies, with the seven biggest tech companies worth more than the combined stock markets of Japan, Canada, and the UK, according to Apollo Global Management. However, only 27% of stocks in the S&P 500 outperformed the index last year, with over 150 index members trading below 15 times forward earnings projections. Most of these companies arest unexciting, with some being deeply challenged and others just unexciting. Verizon Communications and KeyBanc Capital Markets have attracted analyst upgrades, with Verizon Communications projected to top 2% in adjusted Ebitda growth this year.

FT : Private equity targets UK accounting firms

Private equity targets UK accounting firms
Buyout groups hope to roll smaller companies into bigger businesses to attract larger clients

EY’s attempt to split its audit and consulting business sent shockwaves through the top tier of the accounting profession. 

The break-up, eventually abandoned last year after infighting among EY’s top ranks, challenged the prevailing partnership model in which professional services firms are owned and run by their senior practitioners without external investors.  

Below the top echelon of global accounting players, business models are already being transformed in a wave of consolidation fuelled by private equity groups.

Buyout investors are betting they can profit by rolling up small partnerships into bigger groups, investing in technology and using their scale to attract bigger clients that have traditionally turned only to the Big Four accounting firms — Deloitte, EY, KPMG and PwC — or the very largest mid-tier players. 

Supporters of the wave of private equity interest say it provides capital to smaller firms to fuel growth that would not be possible under the traditional partnership model. 

“There comes a point where partners don’t want to take further risk with their own capital,” said Timothy Mahapatra, a former Big Four partner who is now head of deals at Cooper Parry, a UK accounting firm backed by Netherlands-based private equity house Waterland. “In some cases, growth opportunities require capital in excess of what partners themselves can actually fund.” 

Private equity involvement in the UK accounting sector is less extensive than is the case in the US, where domestic accounting firms are larger, but interest has been gathering pace. While the Big Four and the largest mid-tier firms such as BDO and Grant Thornton have remained independent, the long tail of smaller tax, accountancy and advisory businesses are being targeted.

Cooper Parry received investment from Waterland in 2022 and used the funds to go on an acquisition spree including the purchase of the 11 London offices of top 20 firm Haines Watts. In July, Waterland also invested in Moore Kingston Smith, another top 20 UK accounting and advisory firm. 

Private equity investor Hg has used accounting and advisory group Azets to roll up more than 90 firms in six years, saying it now has annual revenues of “about £700mn”. PAI Partners, another buyout group, bought part of Hg’s stake in July. 

Warburg Pincus and Permira own Evelyn Partners, formed by the 2020 merger of wealth manager Tilney and financial and professional services firm Smith & Williamson. It reported revenues of £600mn in its most recent financial year. 

Part of investors’ rationale is that by combining forces, the smaller and regional firms that often work for small and medium-sized enterprises can win mandates from bigger clients that were previously out of reach.  

“Over the last 10 years, the Big Four, Grant Thornton, BDO and RSM have effectively been growing the size of clients they wish to serve, so deserting the lower mid-market and the mid-market,” said Mahapatra.

Some of the top firms’ smaller audit clients have been “effectively jettisoned”, creating “an opportunity for the next wave of players, who probably prior to this change were highly fragmented small firms in very local areas.”

Winning work from the larger clients requires smaller or regional firms to bulk up and extend their geographic reach. 

The change is also being driven partly by accounting firms’ need to invest in technology to make their systems more user-friendly for clients and to make rudimentary tasks more efficient.

Proponents of the partnership model say that the benefits include being able to manage the business for the long term because they are not answerable to external investors or stock market analysts. 

But most accounting firms pay out the bulk of their profits to the partners each year, making it hard to get agreement for big technology investments. These reduce partners’ pay in the short term, a particular disincentive for the older among them who will retire before reaping any long-term benefit of the investments. 

“Partnerships typically are structured on cash drawings in the moment so they tend to optimise for 12 months — cash conversion and withdrawal — whereas most industries have optimised for enterprise value over the long term,” said Caroline Plumb, chief executive at Gravita, a private equity-backed accounting firm. 

As well as improving the service clients receive, better technology could improve efficiency and reduce data security risks, said Plumb, pointing to the fact that many accounting firms have systems containing banking information but much weaker security than banks. 

Mike Reynolds at private equity group Tenzing, which has invested in Gravita and its UK peer DJH Mitten Clarke, said the case for backing tax and accounting firms was similar to the rationale for involvement in areas such as payroll and compliance services. These also sold directly to companies’ finance functions, he said, and had “high recurring revenue” because they were “reasonably mission-critical”. 

Improving technology could allow firms to win more work, he added. 

But expanding rapidly carries risks, particularly in an industry where attracting and retaining good staff and partners is crucial. “Some consolidators have tried to go too big too fast,” said Reynolds. 

While he believes there is a strong investment case, Reynolds acknowledged that not every investor will win. “What typically happens is you see that there’s a large number of players . . . and then it narrows down probably, to four to five winners.”

Andrew Jeffs, a partner at Cavendish who advises on UK accounting firm mergers, said the question for investors would be about how they could achieve an exit.

“Trade buyers are few and far between,” he said. “So it looks like investors are banking on another round of consolidation led by bigger funds.” 

FT ; Activist investors mount record number of attacks against companies

Activist investors mount record number of attacks against companies
More shareholders are picking proxy fights with businesses whose stock prices have languished

Companies faced a record number of attacks from activist investors in 2023 as disgruntled shareholders sought to oust directors or force the sales of businesses whose share prices had languished. 

There were 252 new campaigns globally, according to a report by investment bank Lazard, a 7 per cent increase on the previous year. Few companies were safe from scrutiny, with a broad range of activists targeting blue-chip businesses such as Walt Disney, Salesforce and Starbucks.  

Europe and Asia Pacific saw record levels of activity, with the UK and Japan leading the pack. There were 69 campaigns launched in Europe, most of which had demands related to mergers and acquisitions, and 44 new campaigns in Asia Pacific where local hedge funds were the most active participants. 

“Activism today has a very regional dynamic,” said Rich Thomas, a managing director in Lazard’s capital markets advisory group. “Global campaigns are at an all-time high because [Asia Pacific] and Europe have had a breakout year.”

Activists typically buy stakes in companies and lobby for changes they believe will help increase the share price. In its earlier years investors attacked businesses and their leadership in public letters but advisers said much of the negotiating between activists and targets now took place behind closed doors. 

However, a number of high-profile battles have spilled into the public forum, adding to pressure on executive teams dealing with slowing economic growth and higher interest rates. 

Trian Partners last year said it would seek two board seats at Disney, setting the stage for one of the most contentious proxy fights in years and pitting its co-founder Nelson Peltz against returning chief executive Bob Iger. 

Carl Icahn, whose own public investment company was attacked by activist short seller Hindenburg Research, waged an aggressive campaign against Illumina over its acquisition of cancer test developer Grail. In December the gene sequencing company said it would divest from Grail.  

While activism has historically been dominated by hedge funds such as Elliott Management and Third Point, the strategy is increasingly being deployed by other types of shareholders. More than 40 per cent of activists launching campaigns last year did so for the first time, according to Lazard, as the list of discontented investors with whom companies must deal broadens. 

Thomas said Europe in particular had seen a significant uptick in the number of first time activists, after many previously held back during the cost of living crisis and rising energy prices.

“The barriers have come down and frustrated shareholders are now launching more campaigns,” he said. “We’re seeing this landscape of activists diversify and broaden.”

Starbucks is facing a challenge from a coalition of labour unions called the Strategic Organizing Center, which has launched a proxy contest to replace three of the company’s directors with its own nominees over “severe human capital mismanagement”.

The proxy fight, if it goes ahead, is expected to be a test case for whether a larger shareholder can be won over by single-issue battles, and shows the threat companies face even from shareholders who hold minor stakes.

Universal proxy rules introduced in 2022, which guarantee that all board nominees will appear on the company’s ballot, have had little effect on the number of board seats won by activists, according to Lazard.

However, companies are now quicker to call a ceasefire with activist investors to avoid proxy contests. Just 37 per cent of campaigns that ended with winning a board seat lasted more than 90 days last year, down from 44 per cent, and 34 per cent settled within one week, according to Lazard. 

Over the past year there has also been a resurgence in multiple hedge funds swarming around the same target. At one point Salesforce had seven activists on its shareholder register, according to people familiar with the company, including ValueAct, Elliott and Third Point. 

“There had been this discussion of the wolf packs that would attack small companies but rarely would you see those campaigns at a large cap company because it was hard to get a hold of enough shares and manage the process,” said Bruce Goldfarb, founder of proxy solicitation firm Okapi Partners.

“Now there are a number of activist hedge funds who have to take larger positions to be impactful for their investors so they end up at the same targets, often without any collective action.”

FT : The European football clubs turning stadiums into cash cows

The European football clubs turning stadiums into cash cows
Clubs are racing to transform their venues into entertainment destinations, but competing is costly and not without risk

When work is finally completed on the four-year renovation of Real Madrid’s iconic Santiago Bernabéu stadium early this year, it will boast two important new buttons.

One triggers the new retractable roof, able to close in just 15 minutes, that will protect future concert goers from the elements as they enjoy top international music acts. Taylor Swift is booked to play in May. 

The other button begins the five-hour process that splits the stadium’s football pitch into six sections and sends it to a vast underground storage space, where light, temperature and humidity controls provide optimum conditions to maintain the grass regardless of what is happening overhead.

All of this is part of the club’s €1.2bn renovation project, which includes restaurants that can serve thousands of people, a skywalk with views across Madrid and a newly expanded museum that is expected to increase visitors from 1.5mn a year to 2mn. Museum revenue is projected to hit €50mn as a result, similar to the amount some clubs in Spain’s top tier earn from their broadcast rights. 

But Real Madrid is not alone. With most TV deals negotiated at league level and new regulations that link spending to income, top clubs across European football are raising billions of euros, dollars and pounds for stadium redevelopment with the aim of creating a more diverse pool of cash flow.

The result is akin to an arms race, as owners seek to outdo each other with high-tech, adaptable venues that can grab a slice of the booming market for live music, host lucrative sporting events such as boxing and NFL games, and create a thriving food, beverage and retail business that can compete with neighbouring high streets. Even better for clubs, institutional investors and commercial banks have been lining up to finance it all.

Several top European clubs are at some stage of upgrading or replacing their stadiums in an effort to keep up. Inter Milan, AC Milan and Roma are all finalising designs for new facilities, Paris Saint-Germain, Chelsea and Manchester United are weighing up whether to upgrade or replace their cramped or ageing homes, while Barcelona recently raised €1.5bn from the US bond market to pay for a major overhaul of its Camp Nou stadium (below).

The pressure to compete in the stadium wars is stretching the finances of some clubs, which usually have to cover the mammoth cost of construction themselves. But some within the industry argue that failing to diversify their home grounds is equally something they cannot afford in the long run.

“The concept is clear,” says one senior club executive working on a major stadium project. “Convert a football stadium that gets used 25 days a year into a multipurpose entertainment venue that’s busy every day of the year.”

The Spurs model
For now, the gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019.

Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000. 

“We had been operating with one of the smallest stadia in the Premier League and, consequently, lower match day revenues — in what is a fiercely competitive environment,” says Daniel Levy, chair of Tottenham Hotspur, in an email to the Financial Times. “An increased capacity stadium was critical to meeting demand from fans unable to get access . . . and driving greater match day and non-match day revenues to reinvest in the football side.”

The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts. 

Money brought in from football has gone up too. Match day income is up from €85mn in 2018 to €125mn last season, according to Deloitte, partially due to the addition of premium hospitality such as The H Club offering private members cuisine from celebrity chefs and The Vault, a place where they can store their whisky and fine wines.


An executive at a rival club described the stadium as a “work of art” that had inspired owners across Europe to reassess their own facilities, and focus much more on the fan experience.

“We can’t treat football fans as a captive audience. They do have choice. They will come to the game, but they will spend their money in a local pub and restaurant if you’re not providing good enough quality,” says Christopher Lee, managing director of the Europe, Middle East and Africa business at stadium designer Populous. 

Other clubs are following suit. In Barcelona, the club’s redevelopment project, which has been almost a decade in the making, is finally under way. Once finished, the total capacity at Camp Nou will only rise slightly to 105,000, but an extra ring of VIP seats will be added, as will a roof, a new third tier of general admission seats, and a 360-degree screen.

More work will take place outside the stadium, where a new building will house the museum and club shop, alongside a revamped Palau Blaugrana, a space that will hold 15,000 people for concerts and other sport, such as basketball.  

Spanish clubs will also need to invest heavily in preparation for the 2030 World Cup. La Liga’s investment deal with private equity firm CVC Capital Partners included carve-outs from the league’s spending rules to encourage clubs to put money into stadium infrastructure instead of blowing it all on players. La Liga expects the deal to help unlock as much as €1.8bn in investment.

Milos Nenadovic, club infrastructure consultant at La Liga, says the goal is to give fans a reason to arrive before the game and increase the amount of money they spend once there.

Work at the top Spanish clubs has left their Italian counterparts racing to catch up. The two Milan teams share the San Siro, which was completed in 1926 and then renovated ahead of the 1990 World Cup. The fierce rivals have explored building a new venue together, but recently announced separate plans to build their own stadiums each with capacity for about 70,000 fans. Both would be some way south of Milan city itself. 


In Italy, the problems with infrastructure are acute. Serie A was the top league in the world in the 1990s, but has since seen its position slip, in large part due to a lack of investment. It now generates less broadcast income than top leagues in England, Spain and Germany, and recently concluded a domestic TV deal at a lower price than its last contract. Club executives and owners, including a growing band of professional investors, see new stadiums as key to getting the league back on track. 

“Italy is super interesting because the infrastructure has held back huge clubs with massive fanbases and international appeal, which is why we’re seeing international capital move in,” says Lee, who helped design Tottenham’s stadium and is working on stadium projects at both Inter Milan and Roma. “They are ultimately very undervalued assets. The stadium is the one thing that flips that.”

Despite the advantage that comes with lucrative Premier League TV rights, English clubs are not immune from the need to update facilities. Manchester City, ranked by Deloitte as the club with the highest revenue in football, is feeling the pressure to keep up with Europe’s top clubs. It is planning to add about 7,000 seats to the Etihad, its home ground, but is also building a hotel, a museum and a new 23,500-capacity music space — the Co-op Live arena — on its campus in east Manchester that will host the likes of Nicki Minaj, Eric Clapton and Barry Manilow when it opens in April.

Roel De Vries, chief operating officer of the group that owns Manchester City, says the club needs to increase stadium revenue “if we want to stay competitive in the world of football and be in the top group when it comes to performance”.

“We cannot easily expand the stadium beyond 60,000,” he says. “So then we have to figure out, ‘How can we squeeze a lot more out of the stadium?’”

Lure of long-term financing
Much inspiration for the current trend of investment has come from the US, where sports stadiums are often part of a much bigger entertainment complex designed to generate returns seven days a week. 

Owners have spent billions of dollars on new facilities for their baseball, basketball and NFL teams, although the model in the US is distinct because franchises can uproot themselves and find new homes. Cities and states then compete to attract teams by offering to finance or underwrite the costs of new stadiums, with taxpayers often footing the bill. 

Although the American funding set-up is hard to replicate, the broader idea of creating diversified real estate businesses with a sports team at the centre is increasingly taking hold.

“There’s the building and how that building generates revenue,” says Irwin Raij, co-chair of law firm Sidley Austin’s sports and entertainment division. “Then there’s the other part, which has become very fashionable in the US, of owners saying: ‘I want to control the real estate around the building.’” 

It is no coincidence that many of the big projects under way are happening in tourist centres. London, Paris, Rome, Milan and Barcelona are all in the top 10 most visited cities in Europe, with Madrid also in the top 15.

Owners see the opportunity to turn football stadiums into attractions in their own right — with stadium tours for football fans and other activities for those who are not. Tottenham will add a Formula One-branded electric karting track this year, part of a 15-year contract with the motorsport operator. 

While football teams are seen as relatively risky borrowers — clubs often pay specialist lenders interest rates of well over 10 per cent — stadiums are seen through a different lens. Owners will often split the business into a company that owns the club and another that owns the stadium, or a “stadco”.

Stadcos have a far lower risk profile, similar to a power station or wind farm, according to bankers, because they generate long-term, predictable returns that are not so beholden to the team’s performance on the pitch. While relegation from a top league would push a club’s broadcast income down dramatically, ticket sales and corporate hospitality tend to be sticky in comparison. Despite enduring its worst ever start to the season, French club Olympique Lyonnais was recently able to complete a €320mn refinancing of its stadium at a fixed interest rate of 5.8 per cent.

The design of a new stadium can have a significant impact on how it is financed. Anything that brings in visible and reliable future income — such as hospitality boxes — can be borrowed against, often at relatively low rates.

Much of the cost of rebuilding Wembley Stadium in London was paid for through a long-term hospitality contract with sports agency IMG. At Tottenham, hospitality guests now account for about 13 per cent of those attending matches, partly due to rising demand from wealthy people keen to enjoy a premium match experience rather than corporate clients. 


Other clubs have turned to the handful of big investment banks that work on stadium project finance, such as JPMorgan and Japan’s MUFG, or have brought in new shareholders. Sir Jim Ratcliffe’s deal to buy 25 per cent of Manchester United included a further $300mn investment dedicated to the stadium.

Bankers say some clubs are still able to get long-term financing for as little as 2 percentage points above the base rate, thanks to multiyear contracts such as stadium naming rights or advertising. Another boost could come if the US Federal Reserve follows through on signals that it will begin cutting rates this year.

“In 2024, the wind is behind our sails. Everyone believes interest rates will go down,” says Greg Carey, global co-head of sports franchise at Goldman Sachs. “People are getting more comfortable that inflation is under control, and we’re feeling very good about the projects coming on board.”

The less predictable income — a Taylor Swift concert, for example — then becomes an upside for the club. Hosting a single night of live music from premium artists such as Rihanna or Lady Gaga can bring in as much as €4mn, according to industry executives.

Barcelona was able to borrow the €1.5bn it needs for its project from the bond market in April, even as the club grappled with overstretched finances and high levels of debt.

Real Madrid tapped US investors through private placement, securing long-term financing when interest rates were still close to zero. Then last year it agreed a deal with US investment fund Sixth Street, which paid €360mn in return for the rights to host music and other live events inside the Bernabéu through Legends, the firm’s events business.

But getting projects over the line is easier said than done — and is not without financial risk. Building in European city centres is expensive and slow, while planning permissions are often hard, sometimes near impossible, to come by. Italy has had to change planning laws to make stadium investment easier. 

More than a year after their £2.5bn takeover, Chelsea’s US owners are still grappling with whether to attempt a big renovation of Stamford Bridge to increase the 40,000 capacity stadium, or explore an alternative site elsewhere in west London — one of the world’s most expensive real estate markets. The current stadium is hemmed in by train lines, tightly restricting what can be done.

Although clubs have a range of financing options once a stadium is finished, most must bear the burden of construction directly — typically through standard commercial lending. That leaves the club exposed to rising building costs, delays and, potentially, higher borrowing costs.

“Until that stadium opens you need to make sure you build it on time and at cost,” Carey says. “Mitigating construction and completion risk is the biggest risk these clubs face.”

The price of construction has soared since the pandemic as the economic rebound pinched global supply chains. The headline price of Everton’s new stadium, for example, has jumped to at least £760mn, adding to the club’s serious and mounting financial problems.

While some clubs may try to lock in a fixed-price contract for building work, construction companies are increasingly wary of committing to anything when prices for all things — from labour to materials to energy — are so unpredictable.

For those yet to break ground, the halcyon days of locking in cheap, long-term financing may have passed. “Timing is everything,” says Levy, the Spurs chair. “We simply wouldn’t be able to do what we did if we were doing it today.”

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-The US Supreme Court has agreed to hear whether Colorado can ban Donald Trump from the presidential ballot, potentially leading to a significant legal decision impacting the 2024 US election. The case is scheduled for February 8, putting the decision on a collision course with the presidential primary process, which begins on January 15 with the Iowa caucuses and the New Hampshire primary on January 23. Trump remains the frontrunner in the shrinking field of Republicans vying for the party's nomination.
-Wayne LaPierre, the gun rights lobbyist who has led the National Rifle Association for over three decades, will resign as CEO at the end of the month due to a corruption trial in New York. LaPierre, who has been a driving force in loosening gun laws, will be replaced by Andrew Arulanandam as interim CEO. The NRA claims LaPierre's health reasons were the reason for his decision, but he still faces legal troubles as the subject of a lawsuit by New York state attorney-general Letitia James.
-Israel's top general Herzi Halevi announced the military will establish a committee to investigate intelligence and operational issues, sparking criticism from senior ministers. The topic is sensitive as Netanyahu and his government have rejected immediate inquiries, arguing that the war in Gaza should not start. Despite publicly apologizing for failures before October 7, Netanyahu has resisted acknowledging responsibility, only stating that answers will be given when necessary. Analysts view this as a potential campaign to blame the military and intelligence chiefs.
-The killing of Hamas senior leader Saleh Arouri by Israel has raised the stakes and questioned the effectiveness of Hezbollah’s restraint. Hezbollah must respond quickly to restore the balance of deterrence in a war context, but it must be a carefully calibrated response. This week's events highlight the challenges facing Hezbollah leader Nasrallah as he navigates the most serious escalation of hostilities with Israel since Hezbollah last fought the Jewish state in a 2006 war. The events highlight the pragmatism of Nasrallah's leadership.
-US blue-chip stocks have broken a nine-week bull run, marking one of their worst starts in a decade. The S&P 500 index closed up 0.2% but managed a 1.5% loss over the shortened four-day trading week to begin 2024. The benchmark swung sharply, dropping early after strong employment data and then recovering on weak service sector figures, reviving hopes of a slowing US economy prompting Federal Reserve interest rate cuts.
-US natural gas companies Chesapeake Energy and Southwestern Energy are in advanced discussions for a merger deal, forming the largest single producer in the country with a combined market value of around $17B. The deal is expected to be signed next week, as mergers and acquisitions in the US oil and gas sector aim to build scale and expand prime drilling acreage.
-A collision between a JAL Airbus A350 and a coastguard turboprop aircraft killed five (out of six) coastguard team members. The investigation is ongoing alongside a police probe into possible professional negligence. Airport camera footage suggests the coastguard plane may have been on the runway for up to 40 seconds before the collision. Aviation safety experts warn against pre-empting the investigations' findings, but highlight the dangers passengers face on the ground and the need for improved alert systems to prevent deadly collisions.
-North America's Great Lakes are experiencing their lowest ice cover level in 50 years, a decline linked to climate change. The Great Lakes Environmental Research Laboratory reported that only 0.45% of interconnected lakes were covered with ice, compared to an average of 10.6% over the past half-century. This low ice cover could trigger extreme weather effects in the north-eastern US and southern Canada.
-German Chancellor Olaf Scholz has condemned an incident involving protesting farmers trying to stop the vice-chancellor from disembarking from a ferry after a holiday on a North Sea island. The incident, which involved 250-300 farmers protesting against a government decision to cut agricultural subsidies, was described as "disgraceful" and "violated all the rules of democratic coexistence." The protesters were held back by police using pepper spray.
-AP Møller-Maersk will reroute ships from the Red Sea around Africa for the foreseeable future due to increased Houthi militant attacks in Yemen. The move comes as container shipping rates surged and economists warn of inflationary pressure if disruption continues. Maersk has decided to divert all vessels transiting the Red Sea/Gulf of Aden south around the Cape of Good Hope.
-China has initiated an anti-dumping investigation into French brandy imports, escalating a trade dispute between Beijing and Brussels. The probe was prompted by complaints from domestic manufacturers, as brandy is the most-imported spirit into China. This comes four months after the European Commission announced an anti-subsidy probe into Chinese electric vehicle imports, supported by French car executives. Shares in major liquor producers fell, with Rémy Cointreau down over 12% and Pernod Ricard down 3.6%.

NEW YORK TIMES
-The Colorado Supreme Court ruled last month that Donald Trump could not appear on the state’s Republican primary ballot, saying he had engaged in insurrection.
-Biden condemns Trump as dire threat to democracy in a blistering speech. Speaking in Pennsylvania, President Biden described former President Trump as a chaos agent willing to discard American ideals for personal benefit.
-After addressing President Biden’s Pennsylvania speech in his first event today, Donald Trump’s second event of the night stayed closer to his more traditional stump speech. He attacked Nikki Haley and Ron DeSantis in more depth than usual but otherwise stuck to his typical set of campaign promises.
-Wayne LaPierre has resigned from the NRA. The resignation of Mr. LaPierre, came as he faced a corruption trial in Manhattan.
-Former top NYT editor, Joseph Lelyvof, has died at 86. He oversaw a period of growth, expanding national and international readerships, creating new sections and ushering in the digital age with a Times website.
-Terrorism in Iran exposes a vulnerability it doesn’t want to recognize. The Islamic State took responsibility for deadly bombings, but Iran’s government, facing public anger, blamed Israel.
-Israel’s defense minister Yoav Gallant floated a postwar plan for the Gaza Strip that exposed divisions in Israeli leadership.
-An Alaska Airlines flight returned to Portland International Airport in Oregon shortly after takeoff. Passengers described a harrowing midair experience.
-Images from the Webb telescope suggest that newborn galaxies look weirder than expected. Exactly how off-kilter was physics at the dawn of time?
-Neri Oxman, a former M.I.T. professor, is accused of copying from Wikipedia. Her husband, Bill Ackman, vowed to check the work of the entire M.I.T. faculty.
-Prosecutors push back on Trump’s contempt claims in election case. The filing by Jack Smith was the latest volley in a battle over the timing of the case accusing Donald Trump of plotting to overturn the 2020 election.
-Critics say that hard-won progress toward democracy in Indonesia has been backsliding under Joko Widodo, a two-term president who was once a political outsider.

NY POST
-Biden press secretary Karine Jean-Pierre and National Security Council spokesman John Kirby are reportedly at odds over the division of responsibilities for their media briefings. Kirby, a former top spokesman for the Pentagon and State Department, has become a favorite of the president, often asking him to brief him personally. However, his briefing room appearances are tightly controlled by Jean-Pierre, who selects which reporters can ask Kirby questions.
-The Justice Department is in the "late stages" of filing a massive antitrust lawsuit against Apple, a sign of mounting regulatory pressure on the iPhone maker. The DOJ is investigating whether Apple has used its hardware and software products to maintain its dominance in the smartphone market. The probe is focusing on Apple's business, including whether the Apple Watch performs better when linked to the iPhone.
-A YouTuber, Kyle Conner, conducted an unofficial range test of Tesla's Cybertruck, revealing that it only reached 79% of its advertised 320-mile range. The Cyberbeast model, priced at $99,990, can last up to 320 miles on a full charge, which could take seven to 14.5 hours depending on the charging socket. Conner's livestream, which lasted five hours, showed the vehicle only lasted 254 miles before needing another charge.

WSJ : Washington Heats Up Nuclear Energy Competition With Russia, China

Washington Heats Up Nuclear Energy Competition With Russia, China
U.S. puts diplomatic clout behind sales of cutting-edge reactors that have yet to show commercial success


WASHINGTON—To compete with its biggest geopolitical rivals, the U.S. government is looking toward small nuclear reactors.

Not a single so-called small modular reactor has been sold or even built in the U.S., but American officials are trying to persuade partner countries to acquire the cutting-edge nuclear reactors still under development by U.S. firms. The goal: to wrest nuclear market share from Russia—the global industry giant—and defend against China’s fast-growing nuclear-technology industry.

The U.S. hopes that putting its clout behind a new technology can cement future commercial and diplomatic relationships and chip away at China’s and Russia’s ability to dominate their neighbors’ energy supply.

The Biden administration also sees nuclear energy as a way to export reliable green energy, since nuclear-power plants split atoms and don’t burn carbon-based fuels that contribute most to climate change. With Russia’s broad 2022 invasion of Ukraine sending Poland and other European countries looking for new energy partners, U.S. officials and industry leaders see a potential opening in the market for U.S. exports to compete with China’s growing nuclear ambitions.

At the United Nations climate-control conference in Dubai, officials from 20 countries last month agreed to a pact led by the U.S. that would triple global nuclear-energy output over three decades. Meanwhile, the Republican-controlled House of Representatives and Democratic-led U.S. Senate passed legislation aimed at weaning the U.S. off Russia’s nuclear fuel over time and helping to build capacity to enrich uranium domestically. In November, the U.S. signed an agreement to facilitate the sale of nuclear-energy technology and material to the Philippines, just one southeast Asian country that is re-examining nuclear energy a dozen years after the Fukushima disaster in Japan.

While China dominates the wind- and solar-power sectors, nuclear energy is one area where officials believe the U.S. could compete with its long menu of newer reactor types and fuels. The U.S. aims to sign agreements for partnerships lasting 50 years or longer to provide U.S. technology to Moscow’s former energy partners and to fast-growing countries in Southeast Asia worried about overreliance on Chinese and Russian energy.

“If we’re the supplier, we support the energy security of our allies and partners,” said Ted Jones, head of national security and international programs at the Nuclear Energy Institute, a U.S. industry group. “We help prevent them from finding themselves in the situation of Europe with respect to Russian gas and nuclear.”

At the core of the U.S. campaign is a technology, yet-unproven in the U.S., called a small modular reactor, or SMR. SMRs generate about one-third the energy of a conventional nuclear reactor and can be prefabricated and shipped to the site. Among other potential advantages, they are intended to be cheaper than larger reactors, which often have to be custom designed, and they can be installed to meet growing demand for energy, according to the International Atomic Energy Agency.

‘Very, very long-term strategic partnership’
U.S. officials say they are working with developers of SMRs, and the government-run Export-Import Bank and the U.S. International Development Finance Corp., to win overseas orders that will bring down costs and build an order book for the new technology, all while linking the countries’ energy systems to the U.S. and its allies. By 2035, the U.S. Nuclear Energy Agency estimates that the global SMR market could reach 21 gigawatts of power, enough to power two billion LED lightbulbs.

“It’s important that the United States maintains that leadership in the transition from the laboratory to the grid and deployment and commerciality,” said Geoffrey Pyatt, the State Department’s assistant secretary of energy resources. “It’s about building a very, very long term strategic partnership.”

To make nuclear-energy exports a viable tool of foreign policy, U.S. companies will have to prove they can deliver smaller reactors for export on time and budget, a goal that has eluded larger nuclear-power plants in the West.

The U.S. has yet to build an SMR, and none is yet under construction in the U.S. The concept’s economics remain unproven, as does the timeline for building such a reactor. One company, Kairos Power, recently received construction approval for a demonstration project in Tennessee. It plans to focus on the domestic market. NuScale Power, one of the major U.S. players, recently canceled an SMR project in Idaho when a group of utilities in the Mountain West couldn’t get enough members to commit.

To make the concept work, most SMRs’ developers would need a pipeline of orders so they could move into factory-style production, lowering unit costs.

Among the potential customers U.S. industry and government officials are looking at are Polish energy company Orlen, which wants to build SMRs designed by GE Hitachi Nuclear Energy.

The U.S. Export-Import Bank and U.S. International Development Finance Corp. have offered to arrange up to $4 billion in financing for a plant planned by NuScale in Romania, with an aim of going online in 2029 or 2030. U.S. officials also say they are in discussions with Bulgaria, Ghana, Indonesia, Kazakhstan and the Philippines on new nuclear projects.

China is leading the world in reactor construction and recently started commercial operations of a plant with two SMRs. The country is now building 22 of the 58 reactors under construction around the world, according to the International Atomic Energy Agency. China has built reactors in Pakistan and aims to join Russia as a major exporter of nuclear technology.

Last year, China and the U.S. were jockeying to provide civilian nuclear technology to Saudi Arabia. Washington appeared close to a deal, part of a regional pact with Israel, but it was derailed by Hamas’s attack on Israelis in October and the subsequent war in Gaza.

U.S. sales pitch: We’re less risky than Russia and China
Russia’s state-owned Rosatom, meanwhile, is a major exporter of both reactors and nuclear fuel.

According to the latest World Nuclear Industry Status Report, it was building 24 reactors: 19 large reactors in countries from Turkey to Bangladesh, a barge to be equipped with two small reactors under construction in China but intended for use in Russia, and three reactors at home. Of the reactors under construction in Russia, two are large; the third is an SMR that would use liquid metal for cooling. Rosatom started commercial operations of two SMRs on a floating barge in 2020, though that project took longer and cost more than expected.

Washington is counting on partner countries’ interest in working with U.S. firms and what officials are selling as a less risky tie-up than working with Moscow and Beijing on projects that have a lifespan of 50 years or more.

“It’s never good if our allies are dependent on a potential adversarial country for energy,” said Bret Kugelmass, chief executive of nuclear-power startup Last Energy, which plans to build microreactors that would generate 20 megawatts of electricity and be sited near factories.

The process for hammering out a network of government and commercial deals can take years, with U.S. officials working alongside foreign counterparts, export credit agencies, nuclear-energy firms and utilities, not to mention the U.S. Congress. Russia and China have the advantage of state-led financial sectors to fund projects that can span a decade until power flows.

U.S. industry executives and government officials say they are now working on shortcuts to marketing reactors, including setting up a single government-to-government deal that includes corporate contracts and public and private financing assistance.

The new deals are designed to appeal to partner countries that want a simpler path to getting a reactor, without the heavy dose of Chinese financing that U.S. officials say might have strings attached.

FT : Entain included Antarctica and Vatican City on exit list in compliance driv

Entain included Antarctica and Vatican City on exit list in compliance drive
The Ladbrokes owner cited its withdrawal from 140 territories as part of efforts to clean up

Antarctica and Vatican City are among the list of more than 140 unregulated gambling territories that Entain said it had exited in a frequently cited statistic to show how the Ladbrokes owner had cleaned up its business, according to an internal document.

The London-listed bookmaker was not generating any revenues in these two territories in the run-up to closure, according to internal estimates, but they were nevertheless included in a list of areas from which Entain committed to withdraw as there was no path to domestic gambling regulation.

The worldwide exits were held up as part of efforts by Entain to overhaul its compliance, especially in light of a criminal bribery probe by British authorities that concluded last month with Entain agreeing to pay a £615mn penalty.

The deferred prosecution agreement Entain signed with UK prosecutors over historic wrongdoing at its Turkish subsidiary obliged the bookmaker to withdraw from unregulated markets. Entain pointed to how it had “exited approximately 140 markets where there was no clear path to regulation” in line with the DPA’s conditions.

Entain’s chair Barry Gibson also emphasised its success in withdrawing from more than 140 unregulated markets at its most recent trading update in November, saying it was “the right thing for the business”.

An internal tracking document maintained by Entain’s compliance team, seen by the Financial Times, shows that along with Antarctica and Vatican City, other territories with a permanent human population of less than 1,000 people helped make up the total of 140-plus unregulated gambling markets that the bookmaker exited.

These included the Pitcairn Islands, the French Southern and Antarctic Lands, and the United States Minor Outlying Islands.

Greg Johnson, an analyst at Shore Capital, said: “I struggle to see why it’s a great achievement to move out of markets you either weren’t ever really in or shouldn’t have been in the first place”.

Entain’s plan to close unregulated markets, which was first announced in November 2020 and completed at the end of last year, was known internally as “Project Sunrise”. According to the internal spreadsheet, Entain officially exited more than 100 other markets on December 17 2020. Subsequent rounds of market exits occurred between 2021 and 2023.

Bigger unregulated markets, such as Argentina, Russia and Ukraine, were also closed, according to the internal spreadsheet.

Entain’s board is wrestling with major shareholder unrest over the company’s poor performance and languishing share price, which resulted in its chief executive leaving last month. The company counts four US activist hedge funds among its top-20 shareholders, including Corvex Management and Eminence Capital, and last week granted Eminence’s founder Ricky Sandler a board seat.

Entain is the only major gambling group that has fully withdrawn from unregulated markets. But much of the industry is heading in a similar direction: industry rival Flutter, which owns Paddy Power and Sky Bet, derived 97 per cent of its revenues from regulated markets in 2022.

Shore Capital’s Johnson said withdrawing from unregulated markets had been “an easy win” for Entain, adding that it was a move aimed at “simplifying the business and having that nice round figure that you’re 100 per cent regulated”.

Entain said the company had foregone about £100mn in earnings before interest, taxes, depreciation and amortisation as a result of these market exits “to create a more sustainable, higher-quality revenue base”.

“We closed 140 markets where revenues ranged from significant to de-minimis at the time of exit, but where customers could bet with us,” the gambling group added.

Under the terms of the DPA agreed last month, Entain has a 12-month deadline to exit four further markets — Brazil, Chile, Peru and Mexico — if regulation is not achieved. However, Entain obtained a Mexican licence late last year and Brazil is expected to pass betting legislation early this year, so the company could remain in those markets.