Beijing tightens the screws
Over the weekend, Chinese officials fined Alibaba a record $2.8 billion over antitrust violations. It was the biggest penalty yet as the Chinese government scrutinizes Jack Ma’s business empire — and it served as a warning for the country’s other internet giants.
The fine was linked to Alibaba’s locking of merchants into its sales platform, according to the Chinese market authority, and vastly exceeds the agency’s previous largest fine, a $975 million antitrust penalty imposed on Qualcomm in 2015. A commentary published in the state-run People’s Daily minutes after the Alibaba announcement called such regulation “a kind of love and care.”
This morning, Chinese regulators asked Ant Group, the Alibaba affiliate whose I.P.O. was halted last November, to become a financial holding company subject to stricter rules. The authorities also told Ant to stop anticompetitive practices.
The fine will likely curb Alibaba’s ambitions. Like its American counterparts, the company argued that its sheer size and wealth of services are a net positive for consumers. But smaller rivals are now likely to find support from Beijing if they accuse Alibaba of anticompetitive practices in the future.
“We accept the penalty with sincerity,” Alibaba said in a statement, and executives held a call today to say the fine, worth about 4 percent of revenue, wasn’t material to the e-commerce giant’s finances.
Shareholders appeared relieved. Alibaba’s shares rose by more than 6 percent in Hong Kong trading. Beyond the fine, the company agreed to stop violating antimonopoly rules and submit compliance reports for three years. And today, the company said it would lower the fees it charges merchants and provide additional services. Alibaba’s shares are still down sharply from late last year, when the antitrust rumblings began.
Alibaba suggested that rivals could be next. “The penalty issued today served to alert and catalyze companies like ours,” the company said in its statement. “It reflects the regulators’ thoughtful and normative expectations toward our industry’s development.” Unlike Alibaba, shares in Tencent and Baidu were down today, as other big internet businesses in China feared that they might be next.
HERE’S WHAT’S HAPPENING
An effort to unionize Amazon workers fails. Workers at a warehouse in Alabama overwhelmingly voted against the proposal, crushing one of the biggest drives to form a union in Amazon’s history. The lopsided result may prompt organized labor to try different tactics in the future.
Jay Powell says the economy is at an “inflection point.” The Fed chair said on “60 Minutes” last night that the U.S. outlook had “brightened substantially” but warned that flare-ups in Covid-19 cases remain a risk. Speaking of virus risks: the South African variant may be able to evade some of the protection of the Pfizer-BioNTech vaccine.
Microsoft may be close to striking another big acquisition. It is near a deal to buy Nuance Communications, the A.I. and speech recognition software company whose tech is tied to Apple’s Siri virtual assistant, Bloomberg reports. At a potential valuation of $16 billion, a transaction would be Microsoft’s biggest since buying LinkedIn for $26 billion.
Preet Bharara is becoming a digital media executive. Vox Media agreed to buy Cafe Studios, the publisher behind “Stay Tuned With Preet,” the podcast hosted by the former Manhattan U.S. attorney. Mr. Bharara, who made his name prosecuting insider trading and terrorism cases, will join Vox as the creative director of Cafe.
Two electric vehicle battery makers settle their feud. LG Energy Solution and SK Innovation reached an agreement to end their intellectual property dispute, with SK paying LG $1.8 billion in lump-sum and royalty payments. The settlement ends a fight that threatened the Biden administration’s climate agenda, as well as a big battery factory SK is building in Georgia.
C.E.O.s talk politics
Over the weekend, more than 100 corporate leaders held a conference call to discuss what they should do, if anything, to shape the debate around restrictive new voting laws under discussion across the U.S. Snap polls during the call suggested that most of the participants favor doing something, though what that would be isn’t yet clear.
The voting-rights debate is fraught for companies, putting them at the center of an increasingly heated partisan battle. Ken Chenault, the former AmEx chief, and Ken Frazier, the current Merck C.E.O., urged the executives on the call to publicly state their support for broader ballot access, following their work gathering 70 fellow Black leaders to sign a letter calling on companies to fight bills that restrict voting rights, like the one that recently passed in Georgia.
A new survey of Americans gives support for companies wading into politics. The data provided by Morning Consult was presented to the C.E.O.s on the call, which was convened by the Yale professor Jeffrey Sonnenfeld. Here are some highlights:
62 percent of “avid” baseball fans support M.L.B.’s decision to move the All-Star Game from Georgia in response to the state’s new voting restrictions. Support was lower among all adults (39 percent), but if the league was worried about the effect on its most dedicated fans, this is an important finding.
57 percent of Americans think companies should cut back on donations to elected officials who are working to limit voting rights. Nearly three-quarters of respondents said that the government should ensure equitable access to voting locations.
More than half of Americans said they were more likely to buy from companies that promote certain social causes, including racial equality and civil rights, although support among Democrats was stronger than among Republicans on many of these issues. Among the handful of issues that would make Republicans less likely to buy from a company were support for the Black Lives Matter movement, abortion rights, stricter gun control, transgender rights and gay rights.
“However glad we are to see a new generation’s evolving perspective on investing, our goal is not to make it easier for them to pile into and rush out of speculative meme stocks.”
— Ron Kruszewski, the C.E.O. of Stifel, in his annual letter to shareholders.
On due diligence and flying taxis
Archer, the electric aircraft company, said earlier this month that it’s facing a federal investigation over allegations of I.P. theft. That’s not just a potential problem for Archer, which denies wrongdoing, but also for the investment bank Moelis & Company, which announced in February that a blank-check firm it was backing would acquire Archer in a deal that valued the company at $3.8 billion.
Questions arise about due diligence. Archer revealed the federal investigation on the day a rival, Wisk, sued the company and accused it of stealing trade secrets and infringing on its patents. According to Wisk’s suit, it informed Archer of its concerns last year, before Archer’s deal with the Moelis-linked SPAC, known as Atlas Crest Investment. “They had to be aware of this — so what did they make of it?” said Kevin LaCroix, a lawyer and author of D&O Diary.
Moving too quickly? I.P. theft claims are common in nascent industries like the one for electric air taxis, and Atlas may have dismissed the matter as a competitive tactic from a rival. But Atlas’s due diligence took a little over a month, according to regulatory filings. The SPAC led by Reid Hoffman took almost three times as long to run the rule over its acquisition of another rival, Joby.
What about incentives? Moelis not only backed the Atlas SPAC but also served as its financial adviser and placement agent for the additional funding alongside the merger — roles that could earn it $30 million in fees, according to filings. Moelis bankers, including the chairman Ken Moelis, own a “substantial majority” of founder shares and warrants in the SPAC, which would be worthless if a deal isn’t done.
There are “huge incentives” for SPAC deals to close, Mr. LaCroix said. “Does that create its own logic which kind of creates sort of a runaway freight train so that, if problems do emerge, they kind of get glossed over? That is the risk.”
Baseball on the blockchain
A classic American pastime — baseball-card collecting — is getting a 21st century update. The blockchain platform Worldwide Asset Exchange (WAX) and Topps, the collectibles and candy company, are launching NFTs, or nonfungible tokens, digitizing this season’s Major League Baseball trading card series.
WAX minted more than a million NFTs for 75,000 digital card packs. The series, digitizes nearly 2,000 images to be sold in packs of six or 45 cards starting next week. William Quigley, WAX’s co-founder, said he expects “millions” in direct sales and a robust secondary market. For M.L.B., the tokens essentially act as an annuity, paying the league a fraction of every resale via conditions written into their code. That is a new source of revenue that didn’t exist with old-fashioned cards.
Top Shots, the National Basketball Association’s NFTs, are among the most popular assets to take off in the recent crypto craze, generating nearly $150 million in sales over the past month alone, according to DappRadar.
Digital tokens solve several problems, Mr. Quigley said. With standard cards it has been difficult to establish how many cards were issued and to ensure the authenticity of a supposedly rare one. NFTs have built-in authentication and verification data, and separate ownership from possession so that owners don’t need to amass physical goods in a world with “landfills worth of junk,” he said. Mr. Quigley himself is considering giving up on buying physical art. “I’m thinking I don’t like it,” he said.
A home run in a hot market? Topps is riding high as the pandemic has driven new interest in memorabilia, especially trading cards. And NFTs are not the only hot trend Topps is betting on: the company is going public via SPAC in a deal that values it at $1.3 billion, DealBook reported last week.
THE SPEED READ
Medline Industries, a maker of medical equipment, is reportedly weighing a sale that could value it at more than $30 billion. (WSJ)
Didi Chuxing, the Chinese ride-hailing giant, is said to have hired Goldman Sachs and Morgan Stanley to lead its forthcoming I.P.O. in the U.S. (Reuters)
Politics and policy
David Cameron, the former British prime minister who became a top adviser to Greensill Capital, admitted to mistakes in lobbying policymakers on behalf of the recently collapsed lender. (FT)
“We Asked Congress’s Freshmen to Give Up Stock Trading. Few Were Willing.” (NYT)
Court filings in Texas revealed that Google secretly used past bids for its digital advertising exchange to give its own ad-buying system an advantage over rivals. (WSJ)
More than 500 employees of Alphabet signed an open letter demanding the tech giant change rules they say unduly protect those credibly accused of harassment. (The Verge)
Best of the rest
Acceptance rates at elite colleges have hit a record low; Harvard accepted 3.4 percent of applications for its class of 2025. (Insider)
Don’t mistake a work colleague’s silent endurance for resilience. (NYT)
Online schools are here to stay, even after the pandemic. (NYT)
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