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Facebook shelled out roughly $23.4 million in 2020 to protect its founder and CEO Mark Zuckerberg.

The massive amount includes about $13.4 million for personal security for Zuckerberg, along with an additional annual $10 million pre-tax allowance for the protection of his family, according to a Proxy statement filed by Facebook last Friday.

Zuckerberg’s company-instituted security program includes protection for the billionaire while traveling and at home.

It also covers the costs of installation and maintenance of security measures at his residences.

“We believe that the scope and costs of these security programs are appropriate and necessary,” the company said in the Proxy statement.

“We believe that Mr. Zuckerberg’s role puts him in a unique position: he is synonymous with Facebook and, as a result, negative sentiment regarding our company is directly associated with, and often transferred to, Mr. Zuckerberg,” the statement continued.

Overall in 2020, Facebook spent about $25.3 million on Zuckerbeg. His base salary was just $1.

Lower debt levels could over time boost the company’s credit rating, Tom Sweet says

Dell Technologies Inc.’s plan to spin off its stake in software-giant VMware Inc. will help its finance chief shrink the personal-computer maker’s mountain of debt.

The Round Rock, Texas-based company on Wednesday said VMware will pay a special cash dividend of $11.5 billion to $12 billion to the company’s shareholders, including $9.3 billion to $9.7 billion for Dell. Dell holds roughly an 81% stake in VMware.

“This accelerates our plan to delever the company,” Chief Financial Officer Tom Sweet said.

Dell’s 2016 merger with EMC Corp. saddled the technology firm with substantial debt. The company in late February reported $33 billion of core debt—an amount separate from the debt of its financial services division and that of its subsidiaries—for its latest fiscal year.

Dell paid down $5.5 billion in core debt during fiscal year 2021 and initially planned to spend at least another $5 billion on debt reduction this fiscal year. With the proceeds from the VMware transaction, Mr. Sweet is now raising the amount he wants to reduce its debt by to about $14.5 billion for the current fiscal year.

That would bring the ratio between core debt and earnings before interest, taxes, depreciation and amortization to about two times, down from 2.5 times at the end of the 2021 fiscal year, Mr. Sweet said.

Debt reduction isn’t a goal in itself for Dell, but seen as a step toward an investment-grade credit rating. The company hasn’t held one since 2013, when founder Michael Dell and private-equity firm Silver Lake took the company private. It returned to the public markets in December 2018.

Fitch Ratings Inc., Moody’s Investors Service and S&P Global Inc. currently rate Dell below investment grade. “It is important given the size of the company to return to an investment-grade rating,” Mr. Sweet said, adding that Dell has regular conversations with the ratings firms.

S&P on Wednesday said it had placed Dell on credit watch with positive implications, indicating an at least 50% chance the company would raise its rating to investment grade once the VMware spinoff has closed. “We believe Dell’s financial policy will support an investment-grade rating,” S&P said. “In our opinion, lowering the absolute debt load is also in the best interest of both equity and debt investors considering its high leverage compared to other hardware peers, which exposes Dell to ratings pressure during industry downturns,” S&P said.

Fitch also put Dell on rating-watch positive and said it sees room for a higher credit rating.

An investment-grade rating would provide the company with more flexibility around its capital allocation and could enable it to spend money on shareholder returns such as dividends and share buybacks, Mr. Sweet said. Dell currently doesn’t pay a dividend to shareholders.

The company intends to pay off two coming debt instruments of about $1.5 billion each as well as a margin loan of $4 billion that was secured by Dell’s VMware shares, Mr. Sweet said.

The spinout is expected to close in the fourth quarter of the 2021 calendar year. Dell last year initiated a process to examine its stake in VMware that included unloading its ownership interest.

“Paying down core debt has been a key focus for Dell since the EMC deal, and we’ve seen this with Dell divestitures,” said Mark Cash, a senior equity analyst at Morningstar Research Services LLC, a research provider.

Wednesday’s transaction enables the company to release additional value that hasn’t been realized in the current capital structure, said Daniel Newman, founding partner at Futurum Research, a research firm.

Dell’s share price rose 8.25% in after hours trading to $100.35, according to FactSet.

Ad conglomerate beat revenue expectations, citing growth in the U.S. and Asia, as well as increased demand for digital services

Organic revenue at Publicis Groupe SA increased 2.8% in the first quarter, the advertising agency conglomerate said, ending a streak of recent declines as the pandemic’s impact on its business continued to abate.

Organic revenue is a common metric that strips out currency effects, acquisitions and disposals.

Much of the growth came in the U.S. and the Asia-Pacific region, according to Arthur Sadoun, chief executive of Paris-based Publicis, which owns agencies such as Spark Foundry, Saatchi & Saatchi and Leo Burnett.

Some clients are restarting projects in the U.S., where marketers’ confidence seems to be growing, Mr. Sadoun said.

Clients are also investing more in digital marketing services to reach consumers online and to prepare for coming changes in consumer tracking and ad targeting, he added.

“Clients are realizing that digital channels, e-commerce and direct-to-consumer are going to be more core to growth,” Mr. Sadoun said.

Mr. Sadoun urged caution about the year ahead, however, noting that some parts of the world are still struggling with uncertainty related to the pandemic.

Publicis’ net revenue, which strips out pass-through costs, decreased in the first quarter to €2.39 billion, equivalent to $2.86 billion, from €2.48 billion a year earlier. The new figure beat analysts’ expectations of €2.29 billion, according to an analyst consensus provided by Publicis.

Organic growth in North America, Asia Pacific, Europe and Latin America, exceeded analyst expectations, according to the consensus provided by Publicis.

Organic revenue rose 4.7% in North America, including a 5.1% increase in the U.S.; 5.7% in the Asia Pacific region; and 7.7% in Latin America, the company said. It declined 1.8% in Europe and 11% in the Middle East and Africa.

Organic revenue at Publicis Sapient, a division that focuses on digital marketing and technology consulting services, increased 11.2%, benefiting from work that started to return in the third quarter last year, the company said.

Epsilon, a data company Publicis acquired in 2019, saw organic revenue grow 4.7%, driven in part by its recovery in the automotive sector and increasing demand for digital media and data services.

Publicis will likely consider acquisitions abroad that bolster Epsilon’s international operations, which, although they only account for 5% of its overall business, are growing at a rate of 25%, said Mr. Sadoun.

In the second quarter this year, the company expects to recover a majority of the organic revenue it lost during the same period in 2020, when the ad business was hit hard by the effects of the pandemic, implying organic growth of between 8% and 10%, it said.

After more than a decade marked by economic and financial crises, Greece is looking to rebuild its economy with a plan to spend billions of euros from the EU’s post-pandemic recovery fund, seeking in the process to transform its industrial model, attract foreign investment and mend its public finances. 

Kyriakos Mitsotakis, Greece’s prime minister, has hailed the programme, known as “Greece 2.0”, as one that “essentially changes the model of the Greek economy, making it competitive and outward-looking”. 

It comes as Greece looks to recover from the coronavirus pandemic which has hit its economy, heavily dependent on tourism and services, particularly hard. In 2020, output fell by 10 per cent, while national debt as a proportion of gross domestic product climbed above 200 per cent, the highest in the eurozone.

However, some observers worry about Greece’s poor record in policy delivery and its ability to make the best use of the money it will receive from the recovery fund. 

Greece 2.0 will be sent for final approval to Brussels early next week. Officials will scrutinise its 2,000 pages, which lay out in detail how the government will use €31bn from the EU, and another €27bn expected from investors over the next six years. 

The submission is the culmination of six months of work, during which Greek officials have have had more than 100 meetings with their counterparts at the European Commission.

“The Greek plan is one of the best we have seen so far,” an EU official said. The blueprint, based on a growth strategy designed by Nobel Prize-winning economist Christopher Pissarides, is among the most coherent of the plans submitted by member states, the official added. 

Greece emerged from eight years of international bailouts in 2018, but it remains under a system of “enhanced surveillance” by the commission designed to ensure that the country meets agreed deficit targets. Although the way the bailout was administered by the commission, IMF and European Central Bank — known collectively as the “troika” — was deeply unpopular in Greece, some in Brussels think the experience is now working to the country’s advantage. 

“The programme experience helps a lot,” said the EU official, who pointed out that the commission had been working closely with the Greek authorities for more than ten years now. 

The injection of EU funds gives Greece an opportunity to carry out reforms previously stymied by the dire state of its public finances. The implementation of Greece 2.0 will see, for instance, the injection of substantial amounts of capital into e-governance and the digitisation of the public sector.

Under the plan, 57 per cent of the funding will be used for green transition and digital transformation projects. Among the measures envisaged are the creation of 5G infrastructure, improving the connection of the Greek islands to the mainland electricity grid, digitising tax services and retraining or “upskilling” the workforce.

The plan also comes with an ambitious target of increasing Greek GDP by 7 per cent and creating 180,000 new jobs by 2026. 

“Greece 2.0 is a comprehensive, ambitious, and modern plan as far as promises are concerned,” said Maria Demertzis, deputy director of the Bruegel think- tank in Brussels. “But it remains a promise, as implementation and absorption of EU funds have always been an issue. I hope Greece will do better this time.” 

Mitsotakis and his advisers have assumed responsibility for delivering the project, with alternate minister of finance Theodoros Skylakakis in the lead. He says he is aware of the challenges posed by the traditional failings of the Greek public sector. 

“This is both a historic opportunity and a unique challenge because we have to change the efficiency and culture of the state itself to succeed. It won’t be an easy task, but we are confident in our plan and in the country’s future,” Skylakakis said.

Hedge funds rethink after GameStop pain

January’s surprise attack by retail investors has sparked new efforts to detect emerging threats

Hedge funds are to revise the way they monitor risk after retail investors sent the price of stocks such as GameStop soaring — triggering big losses for the fund managers that bet against them.

Investors co-ordinating their purchases on Reddit’s WallStreetBets message board were able to drive up the share price of Gamestop, the US video game retailer, from less than $20 at the start of the year to more than $480 by late January, while the prices of some other beaten-down stocks also soared.

For some hedge funds, that proved painful. GameStop had become a favourite target for short sellers — investors betting on a falling share price — which were hit hard when the price shot up. Prominent among them was Melvin Capital, whose assets fell by $4.5bn.

Losses were exacerbated because many funds were crowding into the same trade. Short selling involves of borrowing shares, selling them, and later buying them back in the market, to give them back to the lender. If the price has fallen as anticipated, the trading yields a profit for the short seller. In the case of Game Stop, it did the opposite, and the funds’ simultaneous rush to close their losing bets by buying back the shares only pushed the price higher, in a so-called “short squeeze”.

The episode exposed an unexpected hazard for hedge fund managers in the US and Europe. An industry that has long been associated with hard-nosed tactics towards the companies that it bets against suddenly found itself targeted by retail investors out to inflict serious damage on its members.

That threat has led many to increase the range of tools they use to assess the risks in any potentially dangerous trades. “In the current environment, you are being negligent if you don’t measure and manage your exposure on the short side to both crowding and retail interest,” says Bruce Harington, head of equity long/short strategies at Stenham Asset Management, which invests in hedge funds.

The dangers of crowding are not new. In 2008, Volkswagen briefly became the world’s biggest company by market capitalisation when fellow carmaker Porsche triggered a short squeeze by unexpectedly announcing that it controlled three-quarters of VW’s ordinary shares. Given other large shareholdings, that left less than 6 per cent of VW’s ordinary shares available to buy in a market where 12 per cent were being shorted. The resulting scramble by short sellers to buy shares to close their positions pushed VW’s share price punitively high.

Such risks will be amplified if retail day traders continue to target short-sellers, whose practice of profiting from companies’ misfortunes has often sparked controversy.

Some prominent investors have responded by adopting a lower profile. In late January, vocal short seller Andrew Left said that his Citron Research would stop publishing research on short positions. He noted that, having started the firm “to be against the establishment, we’ve actually become the establishment”. 

While industry insiders expect activist short sellers to struggle, they do not expect funds to abandon the practice. Short selling remains one of the sector’s most useful tools and some managers believe the excesses created by trillions of dollars of monetary and fiscal stimulus in recent years offer plentiful opportunities to bet against overpriced stocks.

However, funds have started to look at a broader range of information sources to try to stay one step ahead of retail investors.

The head of one multibillion-dollar US hedge fund, who asked not to be named, says it is “absolutely” looking at forums such as WallStreetBets: “We’re monitoring that extremely closely.”

Cutler Cook, managing partner at investment firm Clay Point Investors, says hedge funds have traditionally monitored the risk of short squeezes by looking at the supply and demand for stock lending at prime brokerages, or by looking at a stock’s disclosed levels of short interest and its average daily liquidity. But he says: “New tools and data points like natural language processing and message boards are absolutely being used as a way to monitor for short-squeeze risk, and some are doing so systematically with [web] scraping tools.”

However, while managers are devoting more resources to monitoring these risks, some remain sceptical about the value of trawling through platforms such as Reddit.

“We’ve certainly expanded our data sources during and after [the GameStop squeeze],” says Sushil Wadhwani, chief investment officer at QMA Wadhwani and a former member of the Bank of England Monetary Policy Committee.

Wadhwani says his firm looks at “a variety of media sources”, such as news reports, to gauge what themes are likely to affect share prices, although he has doubts about going as far as scraping blogs. The firm is considering blogs as sources, he says. “But I need to be persuaded. There’s a lot of nonsense.”