- LEG Immobilien (LEG TH) +3.6%
- LEG Immobilien Boosts FY AFFO Forecast, Beats Estimates
- Nel (D7G TH) +3.2%
- SocGen (SGE TH) +1.7%
- SocGen Raised to Buy at Deutsche Bank; PT 34 euros
- Engie (GZF TH) +1.3%
- Engie Raises Guidance on ‘Normalization’ of Market Conditions
- BP (BPE5 TH) +1.2%
- Rio Tinto (RIO1 TH) +1.2%
- China Steelmakers Issue Stark Warning About Second-Half Outlook
- Novo Nordisk (NOVC TH) +1%
- Last Taboo for Novo’s Smash Obesity Shot Is Asking When to Stop
- Glencore (8GC TH) -1%
- Nokia (NOA3 TH) -1.1%
- Tesco (TCO0 TH) -1.7%
- Tesco Challenged by Rising Costs, Competition, Overseas Retreat
- Stellantis (8TI TH) -1.7%
- Stellantis, Kuniko Sign Raw Material Production Offtake Pact
- Adidas (ADS TH) -1.7%
- Watch Adidas, Puma After Nike’s Outlook Disappoints Investors
- ASML (ASME TH) -1.9%
- US to Get ASML to Ship Fewer Chip Machines to China: Reuters
- Puma (PUM TH) -2.7%
- Watch Adidas, Puma After Nike’s Outlook Disappoints Investors
DAX:
- Adidas (ADS TH) -1.7%
- Watch Adidas, Puma After Nike’s Outlook Disappoints Investors
MDAX:
- LEG Immobilien (LEG TH) +4.4%
- LEG Immobilien Boosts FY AFFO Forecast, Beats Estimates
- Nordex (NDX1 TH) +2.8%
- Nordex Reinstated Buy at Deutsche Bank; PT 17 euros
- K+S (SDF TH) -0.7%
- Puma (PUM TH) -1.9%
- Watch Adidas, Puma After Nike’s Outlook Disappoints Investors
SDAX:
- Aroundtown (AT1 TH) +1.6%
- Grand City Properties (GYC TH) +1.1%
- Ceconomy (CEC TH) -1%
- Suess MicroTec (SMHN TH) -6%
- Suess MicroTec Holder Luxempart Offers 856,339 Shares: Terms
A gauge of global stocks fell slightly on Friday, trimming a first-half rally that’s defied rising interest rates and the risk of recessions in major economies. The yen whipsawed after weakening through the closely watched 145 level versus the dollar, which drew verbal intervention from authorities in Tokyo.
As the second quarter draws to a close, Japan’s Topix was down for the day but headed for a gain of well over 20% since the start of the year. Chinese equities fluctuated Friday while remaining in the red versus the start of January. MSCI Inc.’s measure of developed and emerging markets was nearly up 12% year-to-date.
US futures were only marginally higher after the S&P 500 made a modest advance on Thursday as traders adjusted their positions at the end of the quarter. The yen’s depreciation through 145 for the first time since November was followed by a rapid retracement to around 144.70 after Finance Minister Shunichi Suzuki told reporters the government would respond appropriately to any excessive moves in the currency market. arlier, inflation in Tokyo re-accelerated for the second time in three months in June, supporting expectations the Bank of Japan will raise its prices forecast. Yet this may not be enough to shift the BOJ’s monetary settings anytime soon, leaving the yen under pressure versus currencies like the dollar that are supported by higher interest rates. The offshore yuan remained in the spotlight after the recent slide to its lowest level in seven months. It appreciated Friday, for the first time in three days, after the People’s Bank of China again set the daily reference rate for currency at a level stronger than the average estimate in a Bloomberg survey. The currency is down almost 5% against the dollar this year, prompting extra scrutiny from Chinese regulators, according to people familiar with the matter. Purchasing managers’ index data from China Friday underscored concern that the economy is losing steam, bolstering calls for more policy support. After the data came out, the US yield-curve inversion intensified — with longer-dated yields rising less than shorter-maturity ones. That means the economy may look stronger now, but investors expect the Fed’s rate increases to curb future growth, which could boost the risk of a recession down the road. US After Hours NKE -2.6% lower on earnings; ACCD +16.9%, SGH +3.1% higher on earnings; AUPH +10.8% on exploration of strategic alternatives.
Nikkei -0,30% Hang Seng +0,14% CSI +0,87 Shanghai +0,87% Shenzen +1,26%
Eur$ 1.0874 CNH 7,2598 CNY 7,2487 JPY 144,67 GBP 1,2632 CHF 0,8983 RUB 87,2867 TRY 26,0372 WTI$69,97 Gold 1,909 +0,45% BTC 30,785 +1% ETH 1,887 +2%
S&P +0,12% Nasdaq +0,30% EuroStoxx +0,21% FTSE +0,27% Dax +0,32% SMI
Macro :
- Fed Is ‘Effectively Done’ Hiking Rates, TPW’s Pelosky Says
Keep an eye on :
- ABI BB : Bud Light Didn’t Reach Out After Trans Backlash, Mulvaney Says
- ADS GY : Nike 4Q EPS Misses Estimates
- AAPL US : Apple Has Another 30% Upside, Citi Says in New Buy Rating
- ARGEO NO : Argeo Offering of 15.6m Shares Prices via SpareBank 1 Markets
- ASML NA : US to Get ASML to Ship Fewer Chip Machines to China: Reuters (1)
- CSGN SW : Credit Suisse Senior Investment Banker David Wah to Leave UBS
- EDF FP : EDF CEO Tells Managers Nuclear Business to Be Reorganized: Rtrs
- EDV LN : Kinross Gold Is Said to Reject Takeover Approach from Endeavour
- ENENTO FH : *ENENTO SAID TO WEIGH SALE AFTER REJECTING TRANSUNION APPROACH
- ERG IM : ERG Sells Priolo Plant to Achernar Assets In Deal Valued €205.5m
- IBS PL : Ibersol to Start Share Buyback, Suspends Liquidity Contract
- IPN FP : Ipsen, Genfit Say Elative Phase III Trial Met Primary Endpoint
- MMB FP : Lagardère Extends Maturity of Its €982m Credit Facility
- LEG GY : LEG Immobilien Boosts FY AFFO Forecast, Beats Estimates
- MC FP : Tiffany’s NYC Flagship Store Escapes Damage From Nearby Fire
- NEL NO : Nel Gets Order for 16 Hydrogen Fueling Stations in California
- PDG LN : Pendragon Chair Filby to Step Down Amid Activist Pressure: Sky
- RNO FP : Renault Boosts Automakers, New Audi CEO: EMEA Industrials Wrap
- RENEW SS : Re:NewCell Offers SEK200 million Shares, Re:NewCell Offering of 3.3m Shares Prices at SEK72/Share
- SHBA SS : Safello Says Handelsbanken to Terminate Business Relationship
- SMNH GY : Suess MicroTec Holder Luxempart Offers 856,339 Shares: Terms
- SW FP : Sodexo 3Q Organic Revenue Beats Estimates
- STLA IM : Stellantis, Kuniko Sign Raw Material Production Offtake Pac
- SUBC NO : Subsea 7: Seaway 7 Gets ‘Very Large’ Offshore Wind Pact in UK
- VOW GY : VW’s Electrify America to Add Tesla Chargers to Vast Network
>>> Up
* Accor Raised to Neutral at Goldman; PT 35 euros
* Alfa Laval Raised to Buy at DNB Markets; PT 435 kronor
* Aviva Raised to Buy at HSBC; PT 480 pence
* Belimo Raised to Buy at Stifel; PT 475 Swiss francs
* Carnival Raised to Buy at Jefferies; PT $25
* Drax Raised to Outperform at Credit Suisse; PT 760 pence
* Fastned GDRs Raised to Buy at Jefferies; PT 42 euros
* Frontline PLC Raised to Buy at Deutsche Bank; PT $17
* Gore Street Energy Storage Fund/The Raised to Buy at Liberum
* Nvidia Raised to Outperform at Daiwa; PT $475
* PGS Raised to Hold at SEB Equities; PT 6 kroner
* Sdcl Energy Efficiency Income Trust Raised to Buy at Liberum
* SocGen Raised to Buy at Deutsche Bank; PT 34 euros
* Steico Raised to Overweight at Morgan Stanley; PT 45 euros
* Triple Point Energy Transition Raised to Buy at Liberum
>>> Down
* Aquila European Renewables Cut to Hold at Liberum; PT 1 euro
* Arbonia Cut to Hold at Stifel; PT 11.25 Swiss francs
* B&M European Cut to Neutral at BNPP Exane; PT 600 pence
* Ebusco Holding Cut to Hold at Jefferies; PT 8 euros
* Kapsch TrafficCom Cut to Hold at Erste Group; PT 12.50 euros
>>> Initiation
* Nordex Reinstated Buy at Deutsche Bank; PT 17 euros
* Smiths Rated New Hold at HSBC; PT 1,860 pence
>>> Call
* Material-Sector Valuation Back to Neutral, Hides Some Divergence
China’s Economy Shows New Signs of Weakness
Manufacturing contracted for a third straight month, and employment looks weaker, prompting calls for more aggressive government support
HONG KONG—Evidence of China’s flagging growth continues to roll in, raising questions about whether the government is doing enough to turn things around.
China’s manufacturing sector contracted for a third straight month in June and the nonmanufacturing sector weakened, with new orders falling for both, the country’s official statistics agency said Friday. Employment declined across both broad sectors, an indication that a nagging jobs shortage—particularly for young people—is worsening.
“The data will likely prompt officials to provide more easing to the economy,” said Louise Loo, a China economist at Oxford Economics who is based in Singapore. “The trade component of the economy has really deteriorated.”
China is facing a host of challenges that economists warn will threaten its long-term growth potential in the absence of drastic reforms. They include a mounting debt burden, stubbornly high youth unemployment, and a short-lived rebound in the beleaguered real-estate market.
Persistent political tensions have prompted more manufacturers to diversify their supply chains, a trend that will likely erode China’s role as the world’s factory floor.
Friday’s figures are the latest evidence that China’s economic recovery remains on shaky ground months after Beijing abandoned its draconian Covid-19 restrictions. Global demand for goods has cooled amid high inflation elsewhere in the world, while a domestic rebound driven by consumer spending is losing steam.
China’s official manufacturing purchasing managers index rose slightly to 49 in June from 48.8 in May, not enough to get over the 50 mark that separates expansion from contraction, the National Bureau of Statistics said. The result was largely in line with the 49.1 expected by economists surveyed by The Wall Street Journal.
A subindex on employment shrank to 48.2 in June, in contraction for a fourth straight month, highlighting the continuing stress in the labor market. The unemployment rate among workers aged 16 to 24 rose to a record of 20.8% in May, in part due to evaporating jobs in the manufacturing sector.
Despite policy makers’ efforts to maintain China’s lead in global trade by offering tax cuts for exporters and allowing its currency to depreciate, demand from overseas continues to drop. The new export orders component of June’s manufacturing PMI continued to decline to a five-month low of 46.4. The index for new orders overall remained in contraction at 48.6.
Meanwhile, activities in the services sector, a key driver of China’s postpandemic recovery, softened further in June to 52.8 from 53.8 in May, according to the statistics bureau.
That marks the lowest reading since last December, when Beijing abruptly scrapped Covid-related restrictions that had snarled internal travel and confined large swaths of urban dwellers at home from time to time over the past three years.
An index of nonmanufacturing sector employment came in at 46.8, registering a fourth straight month of contraction. The index for new orders, at 49.5, showed contraction for the second month in a row.
Another subindex tracking construction activities pulled back to 55.7 in June from 58.2 in May, a six-month low, as a short-lived rebound in housing activity continued to fizzle.
The weakness raises questions about the effectiveness of Beijing’s recent modest moves to cut interest rates, moves aimed at making it cheaper to borrow but which don’t address the demand-sapping stress experienced by many Chinese families.
Economists expect Beijing to remain reluctant to pump large amounts of credit into the economy, in part because demand for loans has been feeble as more households and companies shift to paying down debt instead of spending and making new investments.
China also has refrained so far from launching a big round of government spending, as it did to rescue the economy from the global financial crisis.
“Waning fiscal support weighed on construction activity,” wrote economists from Capital Economics in a note to clients on Friday, “and even services sector growth, a bright spot earlier this year, has now dropped below prepandemic levels.”
China is still largely expected to hit its annual growth target of around 5% despite the continuing weakness, reducing the urgency for Beijing to resort to big-ticket spending.
But economists warn that restraint may come at a cost.
“Unless concrete support is rolled out soon, the recent downturn in demand risks become self-reinforcing,” according to Capital Economics.
Bankers’ fees plunge to near-decade low owing to deal drought
Industry suffers from wave of job cuts as prolonged M&A slowdown takes its toll
Investment bankers’ advisory fees have plunged to the lowest level in almost a decade as the industry suffers from a wave of job cuts because of a prolonged slowdown in deal activity.
Fees for completed mergers and acquisitions globally plummeted 35 per cent in the first half of the year to $12.8bn compared with 2022, the lowest level since 2014, according to data provider Refinitiv.
Global M&A fell 38 per cent to $1.3tn in the first half, the lowest deal volume since the start of the pandemic in 2020, as higher rates, stricter antitrust enforcement and geopolitical tensions hit the market.
Transactions driven by private equity groups, typically a key driver of dealmaking, also tumbled. Global private equity-backed M&A activity fell to $263.3bn in the first six months, down 51 per cent compared with last year.
Deals between private equity groups have been hampered by a number of factors including rising debt costs, concern over the economic outlook and difficulty agreeing on valuations for transactions.
“There’s a lot of headwinds,” said David Walker, a partner at law firm Latham and Watkins who focuses on private equity deals.
Job cuts at the largest US banks this year are on course to exceed 11,000 as Wall Street contends with the worst recruitment market since the 2007-08 financial crisis following a pandemic-era hiring binge.
Top banks like Goldman Sachs and JPMorgan, which raked in profits during the recent dealmaking boom, are wielding the axe. Goldman, top of the M&A advisory league table last year, is eliminating fewer than 250 jobs in fresh cuts across the bank, primarily at the senior level.
“We’re running the firm tighter and we’re preparing for a tougher environment,” Goldman president John Waldron warned at a conference this month. “Activity levels are definitely more muted.”
However, there were signs of optimism for dealmaking during the second quarter, up 23 per cent compared with the first, which was the slowest start to the year in a decade.
The second quarter pick-up has been helped by less traditional approaches to transactions.
“We’re seeing hostile bids, unsolicited [bids], topping bids, carve outs, spin-offs, you name it,” said Melissa Sawyer, global head of the M&A group at law firm Sullivan and Cromwell. “People are just having to get more creative in how they do things.”
The carve out of healthcare multinational Johnson & Johnson’s consumer unit marked the largest US initial public offering in almost 18 months.
And a hostile approach from the Swiss-based commodity trader Glencore to buy Canada’s Teck Resources for $23bn in April triggered one of the mining industry’s largest takeover battles in decades.
While Teck has repeatedly rebuffed Glencore’s advances, natural resource deals have otherwise been a rare bright spot in a slower M&A environment as companies focus on investing in metals necessary for the transition to cleaner energy sources and electric vehicles.
Groups ranging from traditional carmakers to a growing number of private equity firms are among the companies looking to invest in natural resources and cleaner energy, a shift from recent years.
“Everyone is looking to secure and produce supply in the short and medium term [in natural resources],” said Citi’s Barry Weir, who co-leads M&A across Europe, the Middle East and Africa. “We’re seeing a much broader universe of buyer.”
Another bright spot is healthcare, where deal volumes rose 35 per cent to $174.6bn in the first half compared with the same period last year as companies sought to refresh drug pipelines to compensate for a sharp fall in sales of pandemic-related products.
The largest contributor was Pfizer’s $43bn acquisition of Seagen, an oncology-focused biotech.
However, rising geopolitical tensions between Washington and Beijing are complicating dealmaking, as some western groups pull back from making investments in China.
Still, that is opening up other avenues for transactions as European companies turn to the US to expand.
“For the last decade there was a very strong focus on Asia including China,” said Birger Berendes, who co-leads Bank of America’s Emea M&A group.
“Now companies realise that the US may be really well positioned for the next decade in terms of growth and stability, so we have seen many European clients looking to expand in the US.”
With the US nearing a presidential election, that could also affect appetite for transactions. “We’re heading into an election year and it’s never clear in those periods of time how that impacts dealmaking or not,” added Krishna Veeraraghavan, a partner at law firm Paul Weiss.
But, despite the variety of factors slowing transactions, M&A volumes have held up compared with earlier prolonged slowdowns following the dotcom crash and the global financial crisis.
“If this is the trough right now, I’d take this as a trough in any cycle because activity just hasn’t stopped,” said Oliver Lutkens, co-head of advisory for the Emea region at BNP Paribas.
Trade-off between EV sales and EU relations leaves carmakers in a fog
UK wants to increase electric car use but this will cost business tariffs under post-Brexit deal with Europe
Ask any business, in any region or sector what they want most from regulators and the same answer always comes back: certainty.
Whether they are setting long-term strategies or short-term sales targets, companies need to know the rules they are required to follow.
Nowhere is this more keenly felt than in the uncharted corporate territory of decarbonisation, where government emissions targets are dictating business plans in everything from energy generation to aircraft manufacturing.
Forcing carmakers to ditch engines, power companies to wean themselves off fossil fuels, or consumer goods groups to make all plastics fully recyclable — the latter being likely under a UN treaty coming next year — requires new business models.
Business needs clarity to navigate these waters. Complying with one set of regulations is feasible. But trouble comes when competing regulations come in at the same time.
The need for regulators or politicians to adjudicate between different priorities inevitably means tense negotiations that often leave businesses in the dark until the very last moment.
The result is that regulation is often not finalised until months — sometimes even weeks — before it comes into force.
A glaring current example is the UK’s electric vehicle dilemma. Policy must meet two very different objectives: boosting EV sales, while at the same time nurturing the country’s post-Brexit relationship with the EU.
It is a cautionary tale of competing regulatory interests that has caught the region’s largest manufacturing industry in its net.
From next year, any car brand operating in the UK must meet a quota of electric vehicle sales. The level starts at 22 per cent of the total, climbing to 28 per cent in 2025, 33 per cent in 2026, and ratcheting up every year to 100 per cent by 2035.
Another set of rules coming in next year means that any carmaker shipping EVs between the UK and EU must pay a 10 per cent tariff if more than 40 per cent of the value of the car battery comes from outside the UK or Europe.
These “rules of origin” requirements, set out in the post-Brexit trade agreement between the UK and EU, are a standard feature of trade deals and are intended to prevent technology from a third party nation, such as China, entering the market in another product.
But there is a catch. Europe and the UK have very little in the way of EV battery production capacity so almost no cars will meet this threshold. Any carmaker wanting to operate in the UK will have to pay the trade tariffs to meet the country’s EV sales quota.
The potential costs look huge. German premium brands BMW, Mercedes and Audi would face a tariff bill of almost half a billion pounds each between 2024 and 2026, according to Financial Times’ calculations. For mass-market brands with higher sales such as Ford and Volkswagen it is even bigger.
For an industry operating on razor-thin margins and facing a squeeze from the coming wave of cut-price EVs from China, these extra costs are damaging.
The UK has asked the EU to waive the “rules of origin” requirements until 2027, by which time the region should have a lot more battery capacity. Carmakers from the UK, France and Germany all agree.
The issue is now with Brussels, which must decide whether the financial hit to some of the region’s biggest companies is worth the political capital of a concession to the UK.
Meanwhile, businesses have no idea what the rules will be in six months’ time and are hurtling towards 2024 with their windscreens fogged.
“An eleventh hour deal is too late,” one chief executive said this week. “We need to know now.”
After Hours Summary: NKE -2.6% lower on earnings; ACCD +16.9%, SGH +3.1% higher on earnings; AUPH +10.8% on exploration of strategic alternativesAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ACCD +16.9%, SGH +3.1%, PRGS +0.5%
Companies trading higher in after hours in reaction to news: AUPH +10.8% (initiates exploration of strategic alternatives, including potential sale or merger), INDI +4.6% (launches automotive wireless power charging system), MRUS +4.6% (FDA grants Breakthrough Therapy Designation for Zeno), EFX +2.8% (Boa Vista Servicos shareholders approve merger protocol), ASO +1.5% (in sympathy with NKE earnings), VSEC +1.4% (awarded $565 mln U.S. Air Force contract), ENVX +0.5% (names new CFO), BTE +0.5% (offering by selling shareholders), NATI +0.3% (NATI shareholders approve transaction with EMR), FTI +0.3% (awarded significant contract), ODC +0.2% (implements 10-15% price increases on absorbents)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: BGCP -2.7% (reaffirms guidance; also expects to complete conversion to a Full C-Corp on July 1), NKE -2.6%, BRCC -1.3% (guides Q2 revs below consensus; also CFO and COO to step down)
Companies trading lower in after hours in reaction to news: ROOT -16.2% (says it is not in receipt of any proposal that is actionable or in best interests of its shareholders), PTCT -3% (MIT-E trial fails to achieve primary endpoint), DRIO -2.5% (files for 6,583,890 shares of common stock by selling shareholders), TRVI -2.2% (files $200 mln mixed shelf securities offering), CRMT -2% (files $400 mln mixed shelf securities offering), EMR -1.4% (NATI shareholders approve transaction with EMR), BBY -0.8% (Chairman Emeritus sold 250000 shares), FL -0.6% (in sympathy with NKE earnings), LUNR -0.3% (stock offering by selling shareholders), FLWS -0.2% (CEO stepping down for health reasons, chairman to also become CEO), DKS -0.2% (in sympathy with NKE earnings), JBLU -0.1% (new service between Paris and NY and Boston)
Women Interviewing for Bill Gates’s Private Office Were Asked Sexually Explicit Questions
Female job candidates say extreme vetting process by a security firm sometimes included questions about pornography and sexual histories; Gates’s office says such questioning would be unacceptable
Some people who sought jobs at billionaire Bill Gates’s private office described going through an extensive screening process that included being questioned by a security firm about their sexual histories, past drug use and other parts of their private lives that might indicate they were vulnerable to blackmail.
Some female job candidates were asked whether they ever had extramarital affairs, what kind of pornography they preferred or if they had nude photographs of themselves on their phones, according to the candidates and people familiar with the hiring process. While it couldn’t be determined whether any men were asked such questions, none who spoke to The Wall Street Journal said they had.
Female candidates sometimes were asked whether they had ever “danced for dollars,” some of the people said. One of the candidates was asked whether she had ever contracted a sexually transmitted disease, according to the candidate.
A spokeswoman for Gates said his private office, Gates Ventures, hasn’t heard about such questions being asked during background checks done by third-party contractors. “This line of questioning would be unacceptable and a violation of Gates Ventures’ agreement with the contractor” who must comply with pre-employment screening laws, she said.
The people said the screenings were conducted in recent years by a security consulting firm called Concentric Advisors, and the interviewers were ultimately trying to find any information that had the potential to be used to compromise or blackmail individuals who would be working closely with one of the world’s richest men.
Concentric said its protocols comply with applicable laws.
Gates himself also has had multiple extramarital affairs and had meetings with Jeffrey Epstein, a convicted sex offender, the Journal has reported. Gates has said it was a mistake to associate with Epstein.
Employment lawyers and security consultants said the process these people described could run afoul of state and federal employment discrimination laws. For certain high-security government roles, such questions may be more acceptable, they said.
Carol Miaskoff, legal counsel of the federal Equal Employment Opportunity Commission, said any questions about a candidate’s health or psychiatric history before a job offer “is just flat out prohibited by the federal Americans With Disabilities Act” regardless of who does the questioning during the application process.
Concentric says on its website it has worked with private family offices for almost two decades. It cites work including pre-employment background checks and due-diligence investigations.
Questions related to past illegal drug use could violate the same law since they may reveal an addiction, which is considered a disability, she said. Instead, Miaskoff said an employer can ask if a candidate is currently using drugs illegally or get consent for a drug test.
“There’s not a black letter law prohibition on asking questions related to sex,” Miaskoff said, but “getting the information and taking some adverse action with that information” such as rejecting the candidate could lay the basis for a legal challenge.
The Gates spokeswoman said Gates Ventures, which was previously known as bgC3, follows careful due diligence when hiring staff and that it works with contractors to perform industry-standard pre-employment screenings for men and women. She said it requires all vendors to operate in compliance with state and federal laws and regulations.
“We have never received information from any vendor or interviewee in our 15+ year history that inappropriate questions were asked during the screening process,” she said in a statement. “We can confirm, that after a comprehensive review of our records, no employment offer has ever been rescinded based on information of this nature.”
Concentric CEO Mike LeFever said that the company provides industry-standard background checks for hundreds of companies and its pre-employment interview protocol, which is identical for men and women, is compliant with laws in each state and nation where it provides services.
Asked how questions about sexual or medical histories comply with laws, a spokesman for Concentric denied it initiated such questions and said such information can be volunteered by job candidates when asked about public records. The Concentric spokesman said the company doesn’t provide hiring recommendations as part of its security-screening business.
The security screening involves “assessing a candidate’s truthfulness and vulnerability to blackmail, which often starts with voluntary statements by the candidate with follow-up questions by company interviewers,” the spokesman said. Not all information discussed in a Concentric security screening is included in the reports it provides to clients, he said.
Job candidates disputed Concentric’s characterization, saying they were asked about sensitive information and didn’t volunteer it. They said they were informed their job offers were conditional on passing the assessments. Documents are at odds with the contention that the screening process wasn’t for hiring.
A consent form, reviewed by the Journal, said a behavioral assessment by a Concentric professional would be used to “assess suitability for employment” by Gates’s private office and would include drug and alcohol history as well as past medical and psychiatric history as it relates to the job.
The form, requiring a signature from the job candidate, gave permission to disclose the results from the assessment to Gates’s private office, including “highly sensitive information,” and “does not allow for the re-disclosure of sexually transmitted diseases,” the document shows.
Some people who worked for Gates’s private office said they didn’t undergo such questioning.
Gates himself was investigated in 2019 by Microsoft board members over allegations of a past sexual relationship with a Microsoft employee. Epstein appeared to attempt to blackmail Gates in 2017 over a different affair with a Russian bridge player, the Journal has reported. Gates’s spokespeople have said that he had a consensual relationship with the Microsoft employee about two decades ago, and that Epstein tried unsuccessfully to leverage the past relationship with the Russian woman.
The Microsoft co-founder has hundreds of people who work for several entities he controls, including Gates Ventures, private aircraft, horse stables and a company that oversees household staff and security. These workers are hired directly for these entities and they aren’t employees of the Bill & Melinda Gates Foundation or Microsoft.
Concentric describes itself as a risk-management firm that has several former Central Intelligence Agency and Federal Bureau of Investigation officials on its staff. It has worked with private family offices for almost two decades, providing pre-employment checks and mitigating risks posed by individuals with “potentially nefarious motives,” according to its website.
Concentric’s headquarters are in the same lakefront office park in Kirkland, Wash., as Gates Ventures.
Informally, Gates employees would warn job candidates that a “former CIA agent” would be drilling into medical information, past drug use and relationships, including former sexual partners, some people said.
Employment lawyers said questions about a job candidate’s medical or psychiatric history are illegal, even if part of a security screening for a private office. If a job candidate signs a consent form, it doesn’t make the questions legal, they said.
Questions about a candidate’s sexual history or preferences are “deeply offensive and it has nothing I can conceive of whether a person can do a job,” said Lindsay Halm, a Seattle-based employment lawyer. “I suppose if you’re working at a sex toy store or an adult film store where you might conceivably have a job-related question about that.”
A typical pre-employment background investigation includes an examination of public records and databases, confirmation of resume content and reference checks in addition to an interview confirming job qualification details, the applicant’s background and whether the candidate would be a good fit for the company, said Daniel Karson, a security industry veteran and former executive for business investigations firm Kroll Associates.
“I have never encountered that kind of questioning in a pre-employment background investigation in the private sector,” he said, referring to the questions related to sexual or medical history.
After the Journal article published, Gates Ventures CEO Larry Cohen emailed employees on Thursday about a “security screening process that has been conducted with candidates for some specific roles over the years” and reiterated that Gates Ventures was unaware of such questions, according to an email reviewed by the Journal. Cohen said if employees had questions or concerns they should reach out to him or a human resources executive, according to the email.
AI boom forces tech companies to make M&A choice
Groups have to decide whether to build, partner or buy to take advantage of the innovations
Buy, partner or build? That’s the perennial question when an important new technology comes along — and it’s the question just about every company in the tech industry is grappling with when it comes to generative artificial intelligence.
This week, the focus has swung to acquisition. Databricks, a private company that stores and manages large volumes of data for its customers, paid $1.3bn for generative AI start-up MosaicML. Along with developing open-source versions of the kind of large-language models made famous by OpenAI, Mosaic supplies the tools for companies to put the technology to work inside their own businesses, building and refining models using in-house data.
This week also brought news that Thomson Reuters is paying $650mn for Casetext, a 10-year-old AI company specialising in legal services that branched out into generative AI this year. This has shone a spotlight on the sudden importance of knowing how to use the large-language models that power generative AI.
Any company can tap into OpenAI’s underlying models, but Casetext got a jump on the opposition by forging a relationship with the AI start-up early in the development of its latest system, GPT-4. According to Thomson Reuters executives, learning how to steer GPT-4 to solve problems of particular value to lawyers, and knowing the best prompts to get good results from the system, were enough to justify an acquisition.
This spate of acquisitions also shows how quickly the opportunities in generative AI are expanding. In the months after last year’s launch of ChatGPT, the focus was on the companies building large-language models. Led by OpenAI, these included names such as Anthropic, Cohere and Inflection AI (which has just announced its latest, $1.3bn funding round.)
Attention is now shifting to the full range of technologies — and the skills needed to make use of them. With these acquisitions, the value of any company able to create purpose-built models on demand or apply large-scale generative models to specific industries has just skyrocketed.
Yet while a turn to acquisition highlights the centrality that many tech companies believe this technology will soon play in their products, the main focus for most has been on partnerships, anchored in some cases by an equity investment.
Earlier this month, Salesforce doubled the amount of money it has earmarked for investment in AI start-ups to $500mn, as it laid out ambitious plans to build generative AI into many of its products. The news came hot on the heels of its participation in a $450mn investment in Anthropic.
Likewise, Oracle took part in a $270mn investment round in large-model company Cohere earlier this month. Oracle followed up with the declaration that it was partnering closely with the start-up to embed the technology in other services for its own customers.
The use of partnerships sealed by equity stakes looks like a logical first step. They bring immediate access to an important technology. While the industry’s big rivalries have always attracted the most attention, the tech world has long turned on close partnerships like these to deploy important new technologies.
But if large-language models become as central to the future of tech as many in the industry believe, will the biggest tech companies be content to outsource their development?
That question is of particular significance for Microsoft. Its investment of more than $10bn for a large minority stake in OpenAI overshadows the spate of acquisitions and other investments over the past few weeks.
Speaking to the Financial Times earlier this year, Microsoft chief executive Satya Nadella described the relationship as a form of “codependence”, with OpenAI relying on Microsoft as much as the other way around. The AI company needs the supercomputer Microsoft has built and tuned to train its models, he said.
Whether that is a formula for long-term stability in a critical technology partnership, as Nadella claims, is another question. It leaves Microsoft dependent on another company for a core technology. There is no guarantee OpenAI will feel the need to tie itself to Microsoft’s Azure cloud beyond the period of the company’s initial agreement. Nor is it clear yet exactly how OpenAI’s own ambitions will develop, and how much of a direct competitor to Microsoft it may one day become.
But as the tech industry sprints off after an alluring new market, such considerations are easy to put off till another day.