CNBC's Leslie Picker reports on the risks and rewards of pipes and the investor incentives with Asim Grabowski-Shaikh of BakerHostetler.
January 25th, 2021
Mark Yusko, CEO, chief investment officer and founder of Morgan Creek Capital Management, discusses his firm’s latest SPAC ETF. With Morningstar’s Ben Johnson and CNBC’s Bob Pisani.
CNBC's Bob Pisani talks the market's wild moves, the SPAC explosion and active management with Bob Shea of TrimTabs Asset Management, Ben Johnson of Morningstar and Mark Yusko of Morgan Creep Capital Management.
CNBC’s Bob Pisani talks with Mark Yusko of Morgan Creek Capital Management about the new SPAC ETF, SPXZ.
Mon, Jan 25 20211:47 PM EST
Bill Foley, chairman of Foley Trasimene, and Stephan Scholl, CEO of Alight, join “Squawk on the Street” to discuss the deal to take Alight public via SPAC.
‘Davos in the Desert’ is back
It’s been more than two years since bankers kept their name badges obscured behind ties at a high-profile investment conference in Riyadh, the capital of Saudi Arabia, held weeks after the killing of the journalist Jamal Khashoggi by Saudi agents at the country’s consulate in Istanbul. After a wave of cancellations at the 2018 event, the next year’s Future Investment Initiative, often called “Davos in the Desert,” saw many business leaders attend as the immediate furor over the killing subsided.
The next installment of the conference begins in Riyadh on Wednesday, and even more — and more senior — executives are expected to appear, both virtually and in person. It raises the question: Is there a statute of limitations in associating with a country accused of human rights abuses?
Who’s going: Some of Wall Street’s biggest names are scheduled to attend, mostly virtually, according to the conference’s itinerary. David Rubenstein of Carlyle is moderating a keynote panel that also includes Ray Dalio of Bridgewater Associates, Larry Fink of BlackRock, David Solomon of Goldman Sachs and Thomas Gottstein of Credit Suisse. James Gorman of Morgan Stanley will be interviewed by the CNN anchor Erin Burnett. Other executives set to appear are Steve Schwarzman of Blackstone, Masa Son of SoftBank, Adena Friedman of Nasdaq, Tom Barrack of Colony Capital and Jeffrey Ubben of Inclusive Capital.
A possible morality test for business in a new administration. Joe Biden called Saudi Arabia a “pariah” on the campaign trail, and, while the new president may not drastically disrupt relations with the country — whose support he may need to renegotiate the Iran nuclear deal — “the atmospherics are going to change,” said Gregory Gause of the Bush School of Government and Public Service at Texas A&M University.
On Friday, the chairman of the House intelligence committee, Adam Schiff, asked for declassification of a U.S. government report on the Khashoggi killing.
What companies are saying. Companies contacted by DealBook pointed to the important business relationships they have with cash-rich Saudi Arabia and others in the region. Some of those ties are long established — Nasdaq has partnered with the Saudi stock exchange for two decades — while others are related to the kingdom’s more recent efforts to diversify its economy beyond oil.
A representative for BlackRock said that Mr. Fink “has been very public about the need for continued reform in Saudi Arabia and believes that engagement and public dialogue by global leaders like himself can help encourage Saudi Arabia’s path of reform.”
“We have long standing clients in the region and continue to serve them,” a Goldman spokesman said.
Representatives for Blackstone, Bridgewater, Carlyle, Nasdaq and Mr. Barrack declined to comment. Representatives for CNN, Credit Suisse, Morgan Stanley, SoftBank and Mr. Ubben did not return requests for a comment.
Legitimacy by association? “M.B.S. is going to be running Saudi Arabia no matter what David Solomon says or doesn’t say,” Mr. Gause of Texas A&M said, referring to the nickname of the Saudi crown prince, Mohammed bin Salman. He questioned the logic of withdrawing corporate ties from Saudi Arabia but keeping them in, say, China, which faces its own criticisms over human rights abuses.
Thor Halvorssen, the founder of the nonprofit Human Rights Foundation, which has funded “The Dissident,” a documentary about Mr. Khashoggi’s killing, said that those attending the event gave the crown prince valuable legitimacy. “The message is, ‘Look, the world’s money and the powerhouses of finance and industry are my puppets,’” he said.
HERE’S WHAT’S HAPPENING
President Biden unveils a “Buy American” executive order. The action strengthens requirements for government contracts to buy domestic products. America’s trade partners will be watching to see how that meshes with Mr. Biden’s efforts to unwind the Trump trade wars.
Taboola, which was started in Israel and is now based in New York, is profitable, according to Mr. Singolda, who said it collected a projected $1.2 billion in gross revenue last year — $379 million in net revenue, excluding payouts to publishers.
In late 2019, Taboola saw a path to even greater growth in a merger with Outbrain, its chumbox archrival. That October, in a long-expected deal, the two announced plans to combine under the Taboola name.
But within a year, both companies’ financial situations had changed. Antitrust regulators in Britain and Israel were still investigating the deal. The pandemic drew more viewers online but also forced websites to re-evaluate their spending and become “way more lean and mean,” Mr. Singolda said.
The merger fell apart in September.
But shortly afterward, Gilad Shany, an Israeli financier, raised nearly $259 million for ION Acquisition Corp 1, a SPAC that aimed to buy another Israeli business “to build a global player.”
He and Mr. Singolda discussed a combination, which would take Taboola public by essentially giving it ION’s stock ticker. It is a quicker and surer way to bring companies to the public markets, which have helped make SPACs one of the finance industry’s biggest obsessions.
Mr. Singolda said going public would give Taboola greater financial resources, notably the ability to sell publicly traded shares — which could help it make more acquisitions. (In addition to the ION fund’s money, Taboola has raised an additional $285 million, including from Fidelity, BlackRock and others.)
“We think this can be five times the size it is today,” said Mr. Shany, who will join Taboola’s board. “You don’t have to think that far to think that big.”
A Kuaishou app interface on a mobile phone, Yichang, Hubei province, China, Jan 20, 2021.
Costfoto | Barcroft Media via Getty Images
Chinese online video company Kuaishou Technology is aiming to raise $4.95 billion to $5.42 billion in an initial public offering (IPO) that will be the largest in Hong Kong for more than a year, according to a term sheet reviewed by Reuters.
The online video site, backed by Tencent Holdings, will price 365.2 million shares at between HK$105 and $HK115 apiece, the term sheet shows.
Kuaishou did not immediately respond to a request for comment.
There is a so-called greenshoe option to sell a further 54.78 million shares in the 30 days after listing that could take the total amount raised up to $5.7billion to $6.2 billion.
The IPO will value Kuaishou at between $55.6 billion and $60 billion, pregreenshoe, the term sheet showed. If the extra shares are sold it would take the market capitalization to $56.3 billion to $61.7 billion.
Ten shareholders, led by Capital Group, have become cornerstone investors accounting for about $2.45 billion, the term sheet showed.
If Kuaishou raises $6.2 billion, it will beat the most recent largest IPO in Hong Kong which was Budweiser Brewing Company’s $5.75 billion IPO in September 2019.
Above that, China Tower Corp raised $7.4 billion in August 2018.
Kuaishou’s deal, at the top end, will be the largest IPO in the world of a digital company since Uber Technologies raised $8.1 billion in May 2019.
Kuaishou, which means “fast hand” in Chinese, operates apps that allow user-uploaded videos as well as live-streaming programs through which vendors can promote consumer products.
The final price of the IPO will be set on Friday and Kuaishou shares will start trading on the Hong Kong exchange on February 5.
Gustavo Razzetti, who gets hired by companies to improve their work cultures, has noticed a change since the pandemic began last year: more political brawls, more managers losing control of their employees, a curious mix of hyper-engagement and lack of empathy.
“Employees are turning their cameras off, hiding behind avatars, becoming disrespectful,” said Mr. Razzetti, whose consultancy is called Fearless Culture. “They’re being aggressive among each other.”
Office conversation at some companies is starting to look as unruly as conversation on the internet. That’s because office conversation now is internet conversation. Many companies have been working online for nearly a year, with plans to continue well into 2021. And just as people are bolder behind keyboards on Twitter, they are bolder behind keyboards on workplace messaging platforms like Microsoft Teams and Slack — with all the good and all the bad, but with a lot more legal liability.
Work culture experts say there are steps companies can take before the lawyers get involved. These are among them: closely monitoring large chat groups, listening to complaints, reminding employees they are on the job and not bantering with friends, and being aware that a move to a virtual work force can expose new issues like age discrimination.
At a lot of American companies, this is the first time colleagues have had to come to terms with working and socializing almost entirely online. There is likely no going back: Nearly half of the U.S. labor force is working from home full time, according to the Stanford economist Nicholas Bloom. And 67 percent of companies expect working from home to be permanent or long lasting, according to a study by S&P Global, which provides financial analysis.
“At the beginning of the pandemic, everyone patted themselves on their back, like: ‘Oh, look, productivity has not fallen. We’ve transitioned to digital. We’ve done things we were seeking to do — streamline processes, move things online, decentralize decision making.’ But they were forgetting about culture,” said Jennifer Howard-Grenville, a professor in organization studies at the University of Cambridge. “Now the reality of that has hit.”
When message boards, chat rooms and Facebook become work tools, off-color humor is more common. Aggressive political discussions that would be out of place among cubicles now seem fine. The hierarchy of physical space disappears when everyone is a username: Confronting senior management does not require a walk and a knock on the door, and confronting colleagues does not require sitting next to them the rest of the day.
“I’ve seen bullying by text in the various kinds of internal instant messenger platforms, and we’ve seen an uptick in those kinds of complaints coming our way,” said John Marshall, an employment and civil rights lawyer in Columbus, Ohio. Harassment from colleagues in internal messaging platforms is not new, he added, but now there is more of it.
These new work tools were designed to look and feel like message boards and social media. Workers notice that and adopt similar behaviors, researchers say. The performative nature of Slack, where colleagues fuel discussions in vast chat rooms by adding emojis, for example, means frenzies grow and are hard to contain once they start.
“Employees ask themselves, ‘Well, what do I know that’s similar to Slack?’” said Mark D. Agars, a California State University professor who studies organizational psychology. “It’s a Reddit board. So we draw on those norms. And those norms are very different than professional norms.”
Some employers have had a strict response to political online chatter. The chief executive of the cryptocurrency company Coinbase — whose workers have complained of disparate pay for women and minorities — recently told employees to stick to work issues in online chats or find another job. Some of them took him up on the offer.
But work culture experts say there is a middle ground. So money saved in office space is being spent on hiring corporate therapists like Mr. Razzetti.
He has a protocol for emergency work-chat situations. First, he shuts down the problematic Slack channel. Then he breaks the team up for an intervention. Colleagues are asked to reflect alone. Next, they can meet with another colleague one on one to share their feelings, then in groups of four. Finally those small groups can begin to reintegrate into a fresh Slack channel.
Business & Economy
Some of the professors and consultants recommend simple solutions: taking turns to talk or post in meetings, requiring silent time to read something together during a video meeting before discussing, and giving workers 90 seconds to vent about politics before beginning a politics-free workday.
“We have people fighting like teenagers online at work,” Mr. Razzetti said. “This can be a very serious thing.” So the recommendation from professionals is, basically, to treat all of us as if we were teenagers who had been fighting online.
As with anything that involves workplace communication — particularly workplace conversation in text form — there are legal liabilities. There is a big legal difference between a troll with an opinion who is an internet stranger and a troll with an opinion who can contribute to your performance review. People could sue if they believe they are being harassed.
Anyone with an eye toward preventing legal liability knows: Text is dangerous. The fact that workplace discussion now happens in online chats is a nightmare for legal teams.
“You need to be sure you’re not writing — documenting — anything that’s going to wildly offend people,” said Leslie Caputo, whose title is people scientist at Humu, which makes workplace culture software. “For the millennials, the first age to grow up with I.M., we’re so used to having our predominant interactions this way, it can be hard to remember that this is a workplace with different rules.”
Lawyers are starting to see more complaints. Some of the risk involves how casually people interact on the platforms, which are built to encourage casual interaction.
“We’re seeing more lackadaisical conduct in general and treating co-workers like they’re your online friends,” said Danielle E. Sweets, a personal-injury lawyer in Los Angeles.
But friendly banter to some can be evidence for litigation to others.
“Now if someone’s experiencing a hostile work environment, it’s going to be written out,” said Christina Cheung, a partner with Allred, Maroko & Goldberg who focuses on harassment cases.
An employment-discrimination law firm recently published this blog post offering its skills: “If you’ve suffered discrimination or harassment in a virtual meeting, don’t wait … reach out to an experienced New Jersey workplace discrimination attorney today to discuss your legal options,” Phillips & Associates wrote.
A lot has been written about the gender divide in working from home, how mothers have a disproportionate amount of home-schooling labor put on their laps. But working from home is making another divide starker: the generational divide. Older employees often feel less comfortable with the sort of constant digital chatter that is normal for younger workers.
“For them, it feels so stark to not be in a room with people. They might not be as quick to jump in on Slack,” Ms. Caputo of Humu said. “How will this impact performance reviews? There could be serious ageism that comes from all of this.”
An example: A worker is struggling to navigate new software or accidentally stays muted, and the boss makes a “boomer” joke.
There are, of course, benefits to these changes. Ms. Caputo has connected with colleagues in new ways. Her daughter has severe food allergies, and now there is a Humu chat room for people coping with the same issues. A member of senior leadership joined. They are all bonding.
The norms of internet conversation rely on a unique mix of anonymity, lack of self awareness, a sense of protection and humor. Behind an avatar and a username, we can be more blunt or cruel, careless and brave and charming. Online communication lends a sense of distance and safety and — easily overlooked in the hand-wringing over virtual workplace culture — fun. It also empowers employees who may not be as willing to speak up in physical settings.
Sammy Courtright, a co-founder and the chief brand officer of Ten Spot, a company that builds tools for healthy workplace engagement, likens workplace behavior now to online dating. Meeting someone at a bar and striking up a conversation requires a level of empathy and nuance that is not always required when meeting someone on Tinder.
“It’s empowering in certain ways — people can say what they want to say,” Ms. Courtright said. “Perhaps their persona is more direct online. They can be who they want to be.”
Venture capitalist Mike Speiser had a historic 2020. His firm, Sutter Hill Ventures, turned an initial investment of less than $200 million in Snowflake into a stake worth $12 billion after its IPO in September.
Sutter Hill amassed its fortune in the cloud software vendor in a unique way. The typical method of early-stage investing is to bet on a bunch of company founders, then get out of the way and let them work their magic. A few winners pay for all the companies that don’t work out.
But Speiser has shunned the portfolio approach most VCs use. He told CNBC that his strategy is to spend 80% of his time and resources on a single project and the other 20% on the rest.
Speiser came up with the concept for Snowflake alongside its founders in 2012. Sutter Hill gave the start-up space to work in its office, helped it create the original product, and continued to invest in subsequent rounds as revenue swelled. For years, Snowflake was Speiser’s main gig — he even served as its CEO at the beginning, and recruited top talent along the way.
Now that Snowflake is an $81 billion publicly traded company with thousands of employees, a well-seasoned CEO in Frank Slootman, and a leadership position in cloud databases, Speiser has shifted his attention to another project Sutter Hill incubated. It’s a security company called Lacework — and it’s built on top of Snowflake.
“There hasn’t been a $100 billion company in security, and we think that’s about to change,” Speiser said.
At Sutter Hill, a company like Lacework doesn’t just show up, give a presentation and get showered with money until it becomes a stock-market darling.
Instead, the firm often helps hatch the idea, and sees it through to the end.
Lacework’s original CEO was Sutter Hill Managing Director Stefan Dyckerhoff, who joined the firm in 2012 from enterprise network hardware maker Juniper Networks. The technical co-founder was Vikram Kapoor, who became an entrepreneur-in-residence at Sutter Hill in 2014. (He previously worked at Oracle alongside Snowflake founders Thierry Cruanes and Benoit Dageville.) Sam Pullara, another Sutter Hill managing director who had contributed early work to Snowflake’s software development, got pulled in, too.
Speiser hasn’t been involved with Lacework for long, but he’s already been helpful. “Shortly after the Snowflake IPO, Mike took a call to interview a HR candidate,” said Dan Hubbard, who replaced Dyckerhoff as CEO in 2019.
Once a company is up and running, Sutter Hill’s other portfolio companies try the product and offer their thoughts on how to improve it. “We’ve now built five companies on Snowflake. Lacework was the first,” Speiser said.
In turn, Snowflake was an early customer of Lacework, and several of Sutter Hill’s other 25 portfolio companies use Lacework. Grail, a cancer screening company that Illumina agreed to acquire, is a customer. So is Wavefront, a monitoring start-up that Pullara co-founded before selling it to VMware in 2017. Data center hardware maker Pure Storage uses Lacework, too.
Sutter Hill also helps with recruiting, and can sometimes act like the research and development wing of a company.
“The second product at Pure Storage was incubated at Sutter Hill and spun in at no cost to Pure Storage right before they went public,” Speiser said.
The firm’s all-or-nothing style is risky. Sutter Hill doesn’t have the massively diversified portfolio that larger venture firms rely on to balance the losing bets.
But the firm has an uncommon financial structure that provides it this kind of freedom.
Many of Sutter Hill’s peers in venture capital go to limited partners and raise hundreds of millions of dollars or more, and then bring in returns over a set period of time. Big wins help persuade limited partners to put in money for the next fund.
Sutter Hill works differently. For decades it has maintained an evergreen fund. Limited partners have made investments, and Speiser and his fellow investors contribute money, too, with no set end date. Instead, a limited partner can invest money for a cycle that lasts a few years, and the limited partner’s money remains invested during the next cycle unless it opts out, said one person familiar with the practice. Sutter Hill decides when to distribute money or company shares to the limited partner, and the firm can also invest money into new or existing portfolio companies, the person said.
Sutter Hill regularly leads early rounds of funding for its start-ups, because it’s not making a whole lot of other bets.
“It’s quite rare for a venture firm to be all-in and lead multiple rounds of funding,” said Vik Singh, a former Yahoo architect who spent time working on his start-up Infer at Sutter Hill as an entrepreneur in residence in 2009 and 2010.
In the later stages of a company’s life, Sutter Hill is willing to put up serious money right next to deep-pocketed investors. Some prominent firms, such as Sequoia, have growth funds to do that, but Sutter Hill invests from its evergreen fund.
For instance, in the case of Pure Storage, which Speiser worked on in 2009, Sutter Hill bought more shares than Greylock Partners, Index Ventures and Redpoint Ventures in 2013 and 2014 funding rounds, before Pure’s 2015 debut on the New York Stock Exchange.
Similarly, when Snowflake raised money in 2020 before its IPO, Sutter Hill was a big buyer.
Sutter Hill wasn’t always a place where start-ups are built. The firm was founded in 1962 and for decades was mainly known as one of the earliest ones to open in Silicon Valley. It did gain some distinction after backing Nvidia: When the graphics card maker went public in 1999, Sutter Hill owned about 10% of the stock. It also backed storage hardware and software maker Data Domain, which Slootman took public in 2007 and EMC bought for $2 billion two years later.
The firm embraced the approach of incubating tiny start-ups after Speiser arrived in 2008. (Sutter Hill had backed Bix, a consumer start-up Speiser co-founded; Yahoo bought it in 2006.)
Not long after moving in to the office, which is down the street from HP headquarters in Palo Alto, Calif., Speiser began assembling Pure Storage with John Colgrove, who had worked at Veritas, and John Hayes, who was fresh out of Yahoo.
“What really happened is I saw flash in 2008, and I had the idea to build a storage company and a database company,” Speiser said. Pure became a vendor of hardware that worked very fast thanks to the fast flash drives inside of its boxes, rather than cheaper and more traditional disk drives. The database company came later, when Cruanes, Dageville and Speiser constructed Snowflake on flash storage, too.
For years insiders have been aware of Sutter Hill’s hands-on style. When Snowflake went public last year, drawing investments from Berkshire Hathaway and Salesforce and reaching a $70 billion market cap on its first day of trading, the method was validated as more than a quirky differentiator.
Some people would like to replicate Sutter Hill’s model. Investors at venture firm Wing have discussed nurturing start-ups very early on, partner Jake Flomenberg said. Greg Sands, who left his investing role at Sutter Hill after 13 years in 2011 and founded his own firm called Costanoa Ventures, said Costanoa recently finished a variant of Speiser’s incubation process for one start-up, with the founder also holding the CEO title. Sands said he would give Speiser credit for steering the firm toward finding outstanding people and helping them form promising businesses.
But Speiser said that it’s the firm that deserves credit, not just him.
“I’ve found that just by intense focus on things, I can do really well if I stay in my swim lane, I work really hard, and I surround myself with a ton of people in other areas,” Speiser said.
SAN FRANCISCO — Uber on Thursday laid off roughly 185 people from its Postmates division, or about 15 percent of Postmates’ total work force, said three people with knowledge of the actions, as the ride-hailing giant consolidates its food delivery operations to weather the pandemic.
Most of the executive team at Postmates, including Bastian Lehmann, the founder and chief executive of the popular food delivery app, will leave the company, said the people, who spoke on condition they not be named because they were not authorized to speak publicly. Uber bought Postmates last year for $2.65 billion.
Some Postmates vice presidents and other executives will leave with multimillion dollar exit packages, the people said. Some employees may also see reduced compensation packages, the people said, while others will be asked to leave or serve out the end of their contract positions, which could lead to more exits in coming months.
The cuts are part of a larger integration of Uber’s food delivery division, Uber Eats, with Postmates. While the Postmates brand and app will remain separate, much of the behind-the-scenes infrastructure will be melded with Uber Eats and supported by Uber Eats employees. Pierre Dimitri Gore-Coty, the global head of Uber Eats, will continue running the combined food delivery business, the people said.
An Uber spokesman, Matt Kallman, confirmed the cuts. “We are so grateful for the contributions of every Postmates team member,” Mr. Kallman said. “While we are thrilled to officially welcome many of them to Uber, we are sorry to say goodbye to others. We are so excited to continue to build on top of the incredible work this remarkable team has already accomplished.”
Food delivery has been crucial to Uber as its ride-hailing business has been severely weakened by the pandemic’s effects on travel. Dara Khosrowshahi, Uber’s chief executive, has pointed to food delivery as a bright spot; last year, Uber Eats’ revenue overtook the revenue from the ride-hailing business for the first time as people ordered more meals delivered to their homes.
Uber, which loses money, laid off hundreds of employees in 2019 as it tried to get costs under control. The company currently has more than 21,000 full-time employees; its drivers are independent contractors.
While Uber has been strong in food delivery, it has had to fend off deep-pocketed rivals that have sought to gain market share by subsidizing delivery costs with promotions and discounts.
DoorDash, which went public in December, has rapidly expanded over the past few years and has acquired the smaller food delivery start-up Caviar. Other significant competitors include Just Eat Takeaway, which beat out Uber to acquire Grubhub last year for more than $7 billion, and Deliveroo, a delivery company that is popular in Europe.
Amazon wrote to President Biden on Thursday offering to assist with communication and technology. Microsoft is opening up its largely empty office campus as a vaccination center as part of a broader partnership with the State of Washington. Starbucks is assigning workers from its operations and analytics departments to help design vaccination sites, donating the labor to the same state while continuing to pay employees.
While some retailers and pharmacy chains have been directly involved in the rollout of coronavirus vaccinations, more surprising is the number of companies that have offered help despite having little to do with health care.
What these companies do have are vast national footprints, significant manpower, huge distribution warehouses and, in some cases, empty office buildings. And they have the money to spare for a public service effort that could boost both their public image and their bottom line.
“Big companies can think big,” said Arthur Herman, senior fellow at the Hudson Institute, a think tank in Washington, D.C. “They can afford to step back and think about their role as a social force in their state and in the country. They also have enormous supply chains and logistical connections.”
As Mr. Biden tries to ramp up vaccination efforts, he will need all the help he can get. The president has asked Congress for $20 billion to help fund vaccinations at stadiums, pharmacies and the like. He said Friday that he had tapped the Federal Emergency Management Agency to operate up to 100 mass vaccination sites.
But the private sector could assist the administration’s efforts with data storage, appointment scheduling, the delivery of supplies to clinics and hospitals, and more.
“Amazon, Google, Microsoft, these guys are consumer-facing people who can deal with billions of transactions on a daily basis,” said Suketu Gandhi, a partner Kearney, a management and consulting firm.
Washington’s governor, Jay Inslee, included the help of companies like Starbucks, Costco and Microsoft in a plan to vaccinate 45,000 residents a day.
“We are not a health care company,” Kevin Johnson, the chief executive of Starbucks, said at a news conference announcing the partnership on Monday, “but Starbucks does operate 33,000 stores at scale, serving 100 million customers a week. And we have a world-class team of human-centered-design engineers who are working under the direction of the state, and health care providers like Swedish, Kaiser Permanente and others.”
The coffee chain will lend its expertise in “operational efficiency,” among other things, Governor Inslee said in a news release.
While the exact order of vaccine recipients may vary by state, most will likely put medical workers and residents of long-term care facilities first. If you want to understand how this decision is getting made, this article will help.
Life will return to normal only when society as a whole gains enough protection against the coronavirus. Once countries authorize a vaccine, they’ll only be able to vaccinate a few percent of their citizens at most in the first couple months. The unvaccinated majority will still remain vulnerable to getting infected. A growing number of coronavirus vaccines are showing robust protection against becoming sick. But it’s also possible for people to spread the virus without even knowing they’re infected because they experience only mild symptoms or none at all. Scientists don’t yet know if the vaccines also block the transmission of the coronavirus. So for the time being, even vaccinated people will need to wear masks, avoid indoor crowds, and so on. Once enough people get vaccinated, it will become very difficult for the coronavirus to find vulnerable people to infect. Depending on how quickly we as a society achieve that goal, life might start approaching something like normal by the fall 2021.
Yes, but not forever. The two vaccines that will potentially get authorized this month clearly protect people from getting sick with Covid-19. But the clinical trials that delivered these results were not designed to determine whether vaccinated people could still spread the coronavirus without developing symptoms. That remains a possibility. We know that people who are naturally infected by the coronavirus can spread it while they’re not experiencing any cough or other symptoms. Researchers will be intensely studying this question as the vaccines roll out. In the meantime, even vaccinated people will need to think of themselves as possible spreaders.
The Pfizer and BioNTech vaccine is delivered as a shot in the arm, like other typical vaccines. The injection won’t be any different from ones you’ve gotten before. Tens of thousands of people have already received the vaccines, and none of them have reported any serious health problems. But some of them have felt short-lived discomfort, including aches and flu-like symptoms that typically last a day. It’s possible that people may need to plan to take a day off work or school after the second shot. While these experiences aren’t pleasant, they are a good sign: they are the result of your own immune system encountering the vaccine and mounting a potent response that will provide long-lasting immunity.
No. The vaccines from Moderna and Pfizer use a genetic molecule to prime the immune system. That molecule, known as mRNA, is eventually destroyed by the body. The mRNA is packaged in an oily bubble that can fuse to a cell, allowing the molecule to slip in. The cell uses the mRNA to make proteins from the coronavirus, which can stimulate the immune system. At any moment, each of our cells may contain hundreds of thousands of mRNA molecules, which they produce in order to make proteins of their own. Once those proteins are made, our cells then shred the mRNA with special enzymes. The mRNA molecules our cells make can only survive a matter of minutes. The mRNA in vaccines is engineered to withstand the cell’s enzymes a bit longer, so that the cells can make extra virus proteins and prompt a stronger immune response. But the mRNA can only last for a few days at most before they are destroyed.
Microsoft will open up an empty building on its campus in Redmond to vaccinations in partnership with the state and health care providers. It is also offering its technology, building on abilities it has already offered to the government, including artificial intelligence to the State Department of Health to help track hospitalizations and tests.
“Certainly technology plays a role in the distribution of vaccines, as it basically does in the distribution of everything in the world,” Microsoft’s president and chief legal officer, Brad Smith, said at the event announcing the rollout.
Amazon is holding a pop-up vaccine clinic in Seattle on Sunday, through a partnership with Virginia Mason Medical Center; they hope to vaccinate 2,000 people. The company has also offered to vaccinate its own employees in the state, many of whom it says are essential workers — an offer it has made to Tennessee as well.
This past week, Amazon told the Biden administration that it could help with “operations, information technology and communications capabilities.” It did not elaborate to The New York Times on what the assistance would entail.
“The scale of some of these retailers is so important,” said Andrew Lipsman, analyst at the data analytics firm eMarketer. “They’ve never been better equipped to handle increases in volume, especially because they have had to ramp up their operational capacity in the middle of the pandemic.”
Certain companies may hope their offers endear them to the new administration — or the public.
“It’s great P.R. to be seen as someone who helps during this crisis,” said Mr. Herman, the senior fellow at the Hudson Institute.
Companies are also encouraging their workers to get vaccinated. Representatives for Kroger and Walmart said vaccination efforts would include their employees who were eligible to receive one.
Some retailers are giving their employees direct incentives to get vaccinated.
JBS, the meatpacking giant, is offering a $100 bonus. (The industry’s working conditions make its employees particularly vulnerable to the coronavirus.) Dollar General, which has 157,000 workers in about 17,000 stores, is giving them four hours of pay if they get a vaccine. The grocery delivery service Instacart said it would provide a $25 stipend. Chobani is covering up to six hours of wages so workers can get vaccinated.
“We’re going to do our part to help defeat this virus that’s hurt so many,” said Peter McGuinness, Chobani’s chief operating officer. “And, in doing so, it’s going to keep our employees safer.”
Other companies’ approaches are more stick than carrot, saying they may require vaccinations. Scott Kirby, the chief executive of United Airlines, which reported its biggest losses in a decade for the fourth quarter, told employees on Thursday that the carrier — and other businesses — could make the coronavirus vaccine mandatory for all workers.
Companies with vaccinated employees are likely to be more attractive to customers, making them feel safer when shopping or receiving assistance in stores. For some, mass vaccination may be essential for their business to stabilize.
“There’s no doubt that getting their employees vaccinated is going to be good for business and will be an important boost to getting the economy back on track,” said Mr. Herman, who has written a book about the mobilization of American industry during World War II.
Still, to achieve national vaccination requires what Mr. Biden has described as a “full-scale wartime effort,” with its success dependent on coordination among companies, federal agencies and a bitterly divided Washington.
“These companies have a huge, huge opportunity to help,” Mr. Gandhi of Kearney said. “Will they save the day? I don’t know.”
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When Goldman Sachs announced that it would help companies go public only if they had at least one diverse board member — meaning that the bank wouldn’t work with I.P.O. hopefuls whose directors were all white men — it was met with a mix of support and skepticism. In the year since, with less fanfare, the bank has also built up a business to help recruit directors for those boards, which has expanded to cover public companies as well.
“It became very clear to us early on that board diversity is something that’s important — and should be — to all of our clients,” said Ilana Wolfe, Goldman’s head of corporate board engagement.
For its part, JPMorgan Chase has had a board advisory service since 2016. It’s not focused exclusively on diversity, but that has been a priority since its early days. Of the 42 board members the service has placed, 30 are women and five are people of color.
Big banks getting involved in helping boards diversify suggests that there is a business case for it. Or, put more bluntly, there are future fees to be made.
For the banks, there is the dual attraction of helping society in general, via greater equality, and their business in particular, by meeting a demand from clients and forging relationships with directors who may be a source of future revenue.
When I called Ursula Burns, the former Xerox chief executive and director on many boards, she urged me to not make this “a bank story.” For good reason: advocacy groups have been pushing for greater board diversity long before banks took a serious interest. To formalize this work, Ms. Burns, the first Black woman to run a Fortune 500 company, helped start the Board Diversity Action Alliance last year to address the “glacial” progress of hiring racially and ethnically diverse board members.
Indeed, women account for around a quarter of directors at S&P 500 companies and roughly the same share of board members self-identify as a race or ethnicity other than white, according to the Conference Board. Only 5 percent of the 3,000 largest listed companies in the United States have a board with an equal gender balance, per the group Women on Boards. Progress on these measures has been gradual, despite some research that shows more diverse boards are linked with better financial performance.
Pressure for change is now coming from all sides. A renewed focus on diversity from the Biden administration, expressed in several executive orders, puts a spotlight on equity and inclusion that will filter down into boardrooms. The swearing-in of Vice President Kamala Harris, the first woman and the first person of color to hold the nation’s second-highest office, was also a landmark moment. Mr. Biden’s pick for chairman of the Securities and Exchange Commission, Gary Gensler, is expected to push for company disclosure of diversity data.
Business & Economy
Last year, California passed a law mandating a minimum level gender diversity on corporate boards. Starting this year, State Street will vote against certain board nominees at companies that do not disclose diversity data, and BlackRock may do the same. Nasdaq is seeking regulatory permission to require diverse boards and related disclosures at companies that list on its exchange, or face expulsion. (When asset managers and exchanges speak up about diversity, it follows that banks would take notice.)
“The old guard has moved out,” said Rebecca Thornton, who leads JPMorgan’s director advisory service. “Many stood in an ivory tower with a bias that ‘this board is only CEOs and we are not going to trade on quality to get diversity.’ Those who are evolved enough to ignore the title and take the meeting see the value of having that diverse voice in the room.”
But boards are also mindful of getting the recruiting process right, lest they give ammunition to critics of quotas and other mandates. This week, Arthur Levitt Jr., the former S.E.C. chairman during the Clinton administration, called Nasdaq’s proposals “political at their core,” questioned the link between director diversity and financial performance, and said new rules would not break hiring habits that “depend on informal social networks where friends recommend each other.”
That’s where groups like Ms. Burns’s Board Diversity Action Alliance, the Executive Leadership Council, Latino Corporate Directors Association and Women Corporate Directors come into play, expanding networks beyond the usual suspects.
“Finding qualified diverse directors is not unduly difficult. In a country with over 330 million people, there are plenty of qualified candidates,” wrote John Rogers and Mellody Hobson of Ariel Investments in a letter to the S.E.C. supporting Nasdaq’s diversity proposal. Ms. Burns also explained the fallacy of the so-called pipeline problem at DealBook’s Online Summit in November:
Gloria Boyland, a former FedEx executive, joined the board of the industrial technology company Vontier last year, with the help of JPMorgan. (FedEx is an important client of the bank.) Conversations with representatives from JPMorgan, before they had a board opening to pitch her, gave the bank’s team a better understanding of her, she said. That was particularly important because her job at FedEx was in operations and service support, a less easily categorized role than, say, a finance role. (She retired from FedEx last year.)
“The conversation was really around understanding my experience, and what I might bring to a board,” she said, rather than immediately scouting for a specific opportunity. Ms. Boyland, who is Black, was already a director of Chesapeake Energy at the time she joined Vontier, a position she got through her network.
Karen Francis, Vontier’s chair, got to know JPMorgan’s recruiting service through of its annual conferences for directors. She later called them when she was building a new board after Vontier was spun off from its former parent. She did not necessarily require that directors have past board experience, as long as they “had a really good comprehension of what the board does,” she said.
“What I would say to chairs who don’t want to bring on first-time people would be: ‘Well, aren’t you expert enough that you can train that person?” Ms. Francis said.
Her first priority was finding someone with audit committee chair experience, and she found Andrew Miller, a white man, to fill the post. Later, Ms. Thornton of JPMorgan suggested Ms. Boyland as a candidate for a director role, who Ms. Francis said was a great fit for the board’s needs.
Banks, of course, aren’t the only way for companies to tap diverse talent pools, but perhaps by putting their considerable resources behind promoting boardroom diversity, they will encourage others to do the same.
What do you think? Is there a better way to recruit directors? What’s the business case for boardroom diversity? Let us know: email@example.com.
When Andi Owen took over the furniture company Herman Miller, in 2018, she didn’t expect to get caught up in politics. But these days, it seems no chief executive is safe from the culture wars.
Over the last year, Ms. Owen, a former executive at the Gap, has had to mollify a work force shaken by the same polarizing forces straining the nation. On her factory floor in the battleground state of Michigan, wardrobe choices — from Make America Great Again hats to Black Lives Matter T-shirts — have provoked arguments among employees. In response, Ms. Owen has tried to hold together a company already tested by the pandemic and slumping sales.
“We’ve tried to create opportunities for people to have frank conversations, for them to get together and discuss the hard topics of the day,” she said. “I don’t think these are new problems. But whether it’s about race, or inclusiveness, or whether it’s about what’s happening in the world today, these are all things you have to talk about.”
At the same time, Ms. Owen has been steering Herman Miller through a pandemic that closed offices worldwide — an existential threat to a company that makes office furniture and owns Design Within Reach, an upscale retailer.
Ms. Owen went to Interlochen Arts Academy, a Michigan boarding school focused on the arts. It was there that she first learned about Herman Miller, which produces iconic pieces by famous midcentury designers such as Isamu Noguchi and Charles and Ray Eames, and modern office staples like the Aeron chair.
Ms. Owen then studied art history at the College of William and Mary, and started working in retail. A job at The Gap led to a series of senior roles at the retailer, culminating in her leadership of the Banana Republic brand, before she moved to Herman Miller.
This interview was condensed and edited for clarity.
Did getting a liberal arts degree have an impact on your career?
It’s helped me in a lot of ways. I learned a lot about people. I learned a lot about history. I learned a lot about observation. I’ve always approached any job I’ve ever had as a generalist and an observer of human nature.
Some people would say I’m not good at any one thing. I’m sort of OK at a lot of things. And that’s OK. I’ve surrounded myself with people that are a lot smarter than me. But I have a little bit of a broader point of view, and an experience that doesn’t necessarily pigeonhole me into thinking one thing or another.
I had a mom who was an educator and a dad who is this free spirit musician. And all my mom ever said to me was, “When you go to school, learn what you love. You’ll have plenty of time for a career and it won’t matter anyway.” So I really did spend time doing what I loved, and I think it’s been an advantage.
Unlike a lot of C.E.O.s, you never got an M.B.A.
I actually applied and got accepted. I was in my late 30s, and as I was talking to a woman in admissions and she said, “It’s great. We don’t have that many middle-aged women that are interested in these programs because they’re all having families.” And I was like, “Not me. I’m good.” And then of course I got pregnant and didn’t go.
You get to a certain point in your career where getting a standard M.B.A. is a little bit of a waste of time, because you’ve learned too much along the way. But I went back and got an executive M.B.A. at Harvard, which kind of filled in the gaps.
The Gap has obviously had its ups and downs. What did the company get right, and what did it get wrong over the years?
Business & Economy
I was fortunate enough to be there for the really, really good years, when the stock was splitting every year. And I was there to watch the decline.
The Gap was at its best back in the day when the trusted editor was important, when you played a role helping people understand what they needed. We had a lot of success early on. But when you’re super successful and you don’t change, you get afraid. That ability to take risks — to think about how the company could be different, to reinvent yourself from the inside — it became impossible. And a lot of great people got fed into the wood chipper trying to bring The Gap back.
When the digital revolution hit I went into the online part of our business. And I remember one of my bosses telling me, “No one will ever buy clothes online. This is going to be the biggest mistake of your career. What are you doing?” That really was the way people were thinking back then.
We just didn’t change fast enough. And we were really out of touch with the customer. When you rely on a playbook that was successful in the past, and you don’t understand where your customer is going, it’s a prescription for disaster.
How did your time at The Gap shape your thinking about what you do at Herman Miller?
I interviewed a guy who became my head of digital. He had worked in retail, and he said, “Do you know what excites me most about coming to this industry? I feel like I’m going from making landfill to making heirlooms.”
I feel similarly. These are products that you hope you’re going to hand down. With some of the Banana Republic cashmere sweaters I made, I hope somebody hands those down. But I know the millions and millions of T-shirts we made probably aren’t getting handed down.
What happened when the pandemic hit, and how did you find your way out of it?
We’d never closed down our plants before, and there we were all of a sudden. We shut down all of our plants in 12 hours, and every day was a new lesson in crisis management.
There have been nights when I have sat down at the end of the day and shed a few tears because of it. The human toll from this pandemic has been not just the death toll, but people’s lives and jobs, whole industries wiped out. We capped out at 400 layoffs and people who opted out [about 5 percent of the work force], and we’ve done our best to keep that number where it is. But we’ve also designed a new product in times that we never thought we could. So it’s been a real balance of, “Hey, right now is really crappy,” and, “We’re going to get through it.”
Your core business has held up surprisingly well during the pandemic. Who is buying so much office furniture right now?
Our international business is strong. The parts of the world that have gotten out of the pandemic — certain parts of Asia, New Zealand — they’ve moved on.
Now the biggest questions that C.E.O.s and people that are planning space have are: “Hey, what does the distributed work force look like? What does my new office need to look like?” It certainly can’t be what it was. People don’t want employees to come back to what it was.
At first it was, “How do I make it safe? How do I put barriers everywhere?” Now the conversation has evolved to, “How do I make it a compelling environment?”
What are some of the answers to that question?
It is a fascinating variety. Financial companies are like, “We’re coming back to exactly what it was. We’re not going to change much of anything.” And then some of the tech companies in Silicon Valley are like, “Who needs an office ever again?”
I’m not sure either one of those are necessarily the answer. Along that continuum, most people are landing in a place of, “Gosh, what do people miss?” So whether that’s innovation, creativity or collaboration, how do you create environments where people can have those kinds of things? Depending on the industry, I think we’re going to see a whole lot of different solutions in this first year or two.
At Herman Miller, we’re taking all of our office environments and using this time while we have people working remotely to completely renovate them. They’re our own little test labs.
Herman Miller isn’t an inherently political company, so how do you deal with a moment like this, when there is so much rancor, including among your own employees?
We have got to unify, we’ve got to talk. We have to have respect and kindness and we have to listen. What happened at the Capitol was not OK. On the other hand, I have to make sure that we’re listening to one another, and are trying to find commonality.
Sometimes I yearn for the days when I was back in Berkeley, Calif., and I could walk down the street and everybody thought the same way. But you know, everybody is in Michigan. So you have to make the folks on the right feel comfortable, and you have to make the folks on the left feel comfortable. That’s a challenge as we get more and more divisive as a society. Sometimes you have to agree to disagree because you’re so far apart. But for us, it’s been about encouraging respect and encouraging kindness.
Most of the time, the 116-year-old movie theater business is rather humdrum.
Tickets get sold. Images get projected onto screens, sometimes in 3-D. Every now and then, change-phobic cinema operators get excited about an innovation. The armrest cup holder, for instance, was patented in 1981.
But these are not normal times at movie houses. Just ask Adam Aron.
A year ago, Mr. Aron, who runs AMC Entertainment, the world’s largest multiplex chain, was feeling unusually invigorated about his antiquated industry. Even with streaming services proliferating — and attendance in North America declining — cinemas worldwide collected $42.5 billion in 2019, a record high. “We see dramatic growth in the size of the domestic box office not so far away,” he said with flourish in late February.
By mid-March, the coronavirus had forced Mr. Aron to furlough 35,000 workers, including himself, and close every AMC theater: 10,700 screens in 15 countries. As the coronavirus surged and retreated and resurged, AMC reopened most of its theaters, re-closed many of them and, lately, started to reopen some of them again. To keep the debt-saddled chain alive, Mr. Aron and his chief financial officer, Sean Goodman, who joined AMC just a couple of months before the crisis, have done financial back flips, narrowly averting bankruptcy four times in nine months. AMC has raised more than $1 billion in fits and starts and has secured another $1 billion or so in rent deferrals from landlords.
It has been one of the wildest corporate rides of the pandemic, which has severely tested chief executives everywhere. And it is not over yet.
With some film studios now predicting that moviegoing will not begin to recover until midsummer — and postponing releases yet again as a result — Mr. Aron has said AMC needs to raise another $750 million to squeak through. So far, AMC has raised $204 million toward that goal. AMC said in a recent securities filing that, without added cash, liquidation or bankruptcy restructuring was “likely.” One potential new lifeline involves a financing package tied to Odeon, a European theater chain owned by AMC.
“Many have repeatedly underestimated the sheer will of our management to power through this crisis,” Mr. Aron said in an interview, adding a bit of the droll brashness that is his trademark: “We have not yet begun to fight!”
The pandemic has also thrust Mr. Aron, 66, to the front lines of the streaming wars, where, over the past six months, his industry has blasted him as a traitor one minute and followed him as a trailblazer the next.
Mr. Aron, a relative newcomer to the multiplex business, broke ranks with other chains in July and agreed to drastically shorten the exclusive window that AMC receives to play Universal films. The studio, home to the “Despicable Me” and “Fast and Furious” franchises, now has the right to make movies available in homes through premium video on demand after just 17 days in AMC theaters — down from roughly 90 days, long the industry norm. In return, Universal agreed, for the first time, to share a portion of the premium on-demand revenue with AMC.
Mooky Greidinger, who owns Regal Cinemas, the No. 2 chain in North America, dismissed Mr. Aron’s deal as “the wrong move at the wrong time” in an August interview. He cited the usual reason: People will be reluctant to buy tickets if they can see the same film on their living room television set or iPhone screen just a few weeks later.
“This is not a business that you are shaking up that easily,” said Mr. Greidinger, whose family has operated cinemas since the 1930s.
Consider it shaken: Regal is now in talks with Universal for a similar arrangement, according to two people with knowledge of the matter, who spoke on the condition of anonymity to discuss private negotiations. Two other chains, Cinemark Holdings and Cineplex, have already followed AMC.
Given the initial blowback, Mr. Aron should be taking a victory lap. Instead, he has found himself back on the defensive.
Mr. Aron has been sparring with Warner Bros., which is owned by AT&T, over streaming. Warner recently vowed to release 17 coming films without giving theaters any exclusive play time — or any financial sweeteners. To play a Warner film with no exclusivity, AMC initially demanded up to 80 percent of revenue from ticket sales, according to two people briefed on the matter, who spoke on the condition of anonymity to discuss the private talks. Warner rejected that request.
Ticket sales are typically split 50-50 between studios and theaters.
The two sides struck a deal for at least one film on Thursday, with AMC beginning to sell tickets for “The Little Things,” a Denzel Washington crime thriller that Warner will release on Jan. 29 in theaters and on HBO Max. AMC declined to comment. Warner did not respond to a query.
Even if he does manage to steer AMC through the pandemic, Mr. Aron faces bone-chilling challenges on the other side. At best, the company will emerge deep in debt. Moviegoing could surge with pent-up demand. Or the masses, now trained to expect instant access to major films on streaming services or online rental platforms, could be reluctant to return. Nobody really knows.
How much fight does Mr. Aron really have left in him?
Darryl Hartley-Leonard, who ran the Hyatt Hotel Corporation in the 1980s when Mr. Aron served as chief marketing officer, laughed when asked that question.
“Let me explain Adam to you this way,” Mr. Hartley-Leonard said. “Had he been the band leader on the Titanic, not only would he have gone down with the ship, he would have looked over the side as the dark, icy water got closer and asked, ‘Do you think we have time to write another song?’”
Blunt and quoting Churchill
Adam Maximilian Aron is not well known in Hollywood. He lives in a distant land called Kansas, where AMC is based, and arrived at AMC in January 2016 by way of the hotel business.
After breezing through Harvard University in three years and earning his M.B.A. (also from Harvard, with distinction), he went to work for Pan American World Airways in the marketing department. In his early 30s, he became Hyatt’s marketing chief and subsequently held the same job at United Airlines. Then he began making a name for himself as a turnaround artist, serving as the chief executive of Norwegian Cruise Line, Vail Resorts and the Philadelphia 76ers. For a time, he was a senior operating partner at Apollo Global Management, the private-equity powerhouse. Before AMC, Mr. Aron ran Starwood Hotels.
He can be marvelously blunt. “The quarter was simply a bust,” Mr. Aron told AMC analysts in 2017. More often than not, however, he drifts into monologues and voluminous lists. “Before turning to your questions, I’d like to comment on eight important specific topics,” he said on AMC’s most-recent earnings call. Bad puns delight him, as do folksy interjections. (“Whoa, Nelly!”) He has a tendency to grandstand, quoting, for instance, a wartime Winston Churchill to sum up AMC’s pandemic mind-set. “We shall fight on the beaches,” Mr. Aron told analysts with flourish in November. “We shall fight on the landing grounds. We shall fight on the fields and in the streets.”
Mr. Aron is usually one of the more colorful attendees at the annual National Association of Theater Owners convention in Las Vegas. One year, citing a bad knee, he zipped around Caesars Palace on a Rascal mobility scooter. Another time, he made his staid competitors reach for their smelling salts by brainstorming — in front of reporters — ways to reverse a worrisome decline in young ticket buyers.
What about allowing smartphone use in the back of certain auditoriums?
What about exploring dynamic pricing for tickets (the way airlines do it)? Or selling subscriptions (a certain number of screenings for a flat monthly price) like MoviePass was doing?
“Adam has never been interested in just running a company,” Mr. Hartley-Leonard said. “He has always wanted to change an industry — to challenge that lazy, this-is-how-we-have-always-done-it mentality that can settle in.”
Excoriated for the smartphone idea, Mr. Aron quickly dropped it. But he pressed forward with the contentious notion of subscriptions: For $23.95 a month, AMC Stubs A-List members can see up to three movies a week at any location.
Tapping his experience with hotel and airline loyalty programs (he created Pan Am’s frequent-flier program in 1982), Mr. Aron improved AMC’s version, Stubs, which has 25 million members, up from two million in 2016. He also moved AMC into the video-on-demand business by starting an iTunes-style online store.
“In terms of innovation, Adam has done a great job,” said Eric Wold, a senior analyst at B. Riley Securities.
Even so, Mr. Wold noted, AMC shares have struggled. The company’s market capitalization in March, just as the pandemic started, was $780 million. It was $2.2 billion when Mr. Aron arrived.
AMC shares hit a 52-week low of $1.91 on Jan. 5, down 45 percent from a month earlier, when Warner announced its streaming plans. Shares were trading at about $2.90 on Friday.
“You are painted by the stock price as chief executive, and by that measure his tenure has not been strong,” Mr. Wold said. “If he can steer them out of this current nightmare, of course, that changes everything.”
‘Stare change in the face.’
In some ways, Mr. Aron is trying to push a boulder up a hill. Moviegoing is growing overseas — AMC has been making inroads in Saudi Arabia — but attendance in North America, the world’s No. 1 movie market, has been weakening for nearly two decades. Admissions in North America peaked at 1.6 billion in 2002.
The thrill of big screens and super-salty popcorn has been undercut by fancy home theater systems. Shopping malls, which house many theaters, have fallen out of favor. Some people complain about sticky theater floors and disruptive patrons. Others say moviegoing has become too expensive — concessions, tickets, babysitters — especially given the growing array of low-cost, at-home entertainment options that are already part of a household’s budget. Disney+ subscriptions are $7 a month. A single trip to a theater to see a Disney film for a family of four would run $50-plus (not including snacks) in bigger cities.
AMC entered the pandemic with pre-existing conditions, including considerable debt, the result of a modernization campaign that started in 2012 when Dalian Wanda Group, a Chinese conglomerate, bought AMC from a group of private equity companies. It began to replace worn seats with La-Z-Boy-style recliners; install enhanced projection and sound systems; and experiment with alcohol sales.
Mr. Aron supercharged the initiative. The strategy: Find ways to raise prices for existing customers and, hopefully, win some new ones.
He also went on a shopping spree, paying $3.3 billion to buy several competing chains and transforming AMC into the world’s largest cinema company.
But the spending added up.
AMC had $4.8 billion in debt when the pandemic started, up from $1.9 billion when Mr. Aron arrived in 2016. Debt now totals $5.5 billion — not including rent payments that have been deferred during the pandemic — a colossal sum for a company that generated $5.5 billion a year in revenue when running as normal.
“Go back to the Jack Welch school of management,” Mr. Aron said when asked if his acquisitions made sense in retrospect, referring to the fabled General Electric leader. “You pick up economies of scale, and being No. 1 gives you other enormous advantages, including, in our case, negotiating with studios from a place of greater strength.”
Mr. Aron will need all the negotiating leverage that he can get. Most of the conglomerates that own movie studios are downsizing their theatrical slates and routing more movies toward their own streaming services, which need exclusive content to grow. This paradigm shift is one reason that Mr. Aron engaged with Universal about shorter exclusivity periods.
“Some of my competitors, the ones caught up in the past, are saying that I’m the worst human being alive on the planet,” Mr. Aron said shortly after announcing the Universal deal. “But sometimes you have to stare change in the face, recognize that it has or soon will arrive, and reshape it to one’s own benefit.”
Has the conservativeness of the multiplex business surprised him?
“It’s shocking actually,” he said. “Shocking.”
Hoping for another magic trick
Challenging the status quo — and upsetting competitors in the process — is the thread that extends through Mr. Aron’s career. “What separates successful leaders from unsuccessful leaders is boldness, and I have always tried to be the opposite of timid, to fundamentally change a company or an industry for the better,” he said.
When he was running Norwegian in the early 1990s, Mr. Aron made waves in the conservative cruise industry with a marketing campaign about sex. (One tagline: “There’s no law that says you can’t make love at four in the afternoon.”) When he arrived at Vail Resorts in 1996, he outraged traditionalists in what was then a stubbornly static business by dramatically expanding the company beyond skiing. He bought other winter resorts and a chain of luxury hotels; opened dozens of restaurants and retail stores; and plunged into condo development. By the time he left Vail in 2006, competitors were copying his strategy.
“Instead of sitting around whining, Adam says: ‘These are our cards. How the hell are we going to play ’em?’” said Harry Frampton, a major Colorado real estate developer. “Anytime that happens, you make a couple of people mad along the way.”
“Vail was tired around the edges, and Adam’s approach — it’s not just about skiing — was transformative,” Mr. Frampton added. “He called it the Vail Renaissance, which I thought was silly branding at the time. But I was wrong.”
Time will tell whether the movie theater industry comes to view Mr. Aron the same way. If nothing else, his tenacity in avoiding bankruptcy has certainly been noticed.
“During this crisis, Adam has been like Houdini,” said Richard L. Gelfond, the chief executive of Imax. “Every time I start to doubt that he can do something, he somehow pulls off another magic trick.”
For his part, Mr. Aron is optimistic that AMC, founded in 1920 and standing for America Multi-Cinema, will find the needed rescue funding and enjoy a “renaissance” as people emerge from the pandemic.
“If you want to know my mood, I’m very encouraged that multiple vaccines are rolling out globally,” he said. “To use a bad pun, it’s a real shot in the arm.”
Mat Ishbia of United Wholesale Mortgage and Alec Gores of The Gores Group join “Squawk on the Street” to discuss the Wall Street debut of United Wholesale Mortgage.
A banner for Snowflake is displayed on its IPO day at the New York Stock Exchange on September 16, 2020. It was the largest software IPO in history and was one of eight CNBC 2020 Disruptor 50 companies to go public, and more Disruptor deals are coming soon.
Brendan McDermid | Reuters
As we call for nominations for the 2021 CNBC Disruptor 50 list, the opportunity for new companies to be selected is bigger than ever.
Since we chose 2020’s fastest-growing, most disruptive private companies last June, we’ve seen more names from that list go public than in any year since the original Disruptor 50 list in 2013. That means that fewer Disruptor 50 veterans — 36 from last year’s list — still qualify to be nominated.
The past half-year has been a record one for IPOs and so far there have been eight public offerings from the Disruptor 50: Airbnb, Affirm, DoorDash, C3.ai, Snowflake, Lemonade, Root Insurance, and GoodRx. There have also been two pending SPAC mergers – SoFi and Butterfly Network. And yet another company, UiPath, has filed a confidential S-1 to go public.
These exits, at some massive valuations – Airbnb now has a $108 billion market cap – speak to the maturity of these companies, and just how long they waited to go public. Artificial intelligence company C3.ai was founded in 2009; GoodRx was founded in 2011. These companies had well-established relationships with Fortune 500 business partners before bringing their shares to the public.
The companies on the 2020 list have also seen massive demand for their shares. The Disruptor 50 index, which includes all companies from past lists that have gone public, is up 145% in the past 12 months, compared to the Nasdaq’s 42% gain in the same time period. These stock moves are not just because a big first-day pop has become expected for IPOs, but also because the companies’ products and services play into the digitization of the economy that has accelerated during the Covid-19 pandemic.
Take the way Affirm enables people to spread out payments for Peloton bikes and other big ticket purchases, a fee-free alternative to a credit card. Or the way Root and Lemonade use Artificial Intelligence to streamline and simplify the process of buying insurance. Snowflake is helping companies move their data into the cloud, and run businesses from anywhere.
This massive wealth creation will have a ripple effect beyond benefitting the angels investors, the VCs, and their limited partners, that backed these companies. The payout to early employees at these companies could create the next generation of angel investors. Those employees who end up selling their shares will have newly-deep pockets, which could both encourage more entrepreneurship and enable them to place bets and seed early-stage entrepreneurs.
And that wealth creation is happening in more places across the country. Last year’s Disruptor 50 was the first time that more than half of the companies (33) were from outside of Silicon Valley. That trend, which legendary investor Steve Case calls the “rise of the rest” will be compounded as more tech giants leave the valley and more investment dollars go to other areas.
PitchBook forecasts that 2021 will be the first year that the Bay Area’s share of venture capital dollars falls below 20%, while other cities such as Atlanta and Austin draw more entrepreneurs and investment. In 2020, $156.2 billion of venture capital raised in the US; 23% of deals, representing 39% of VC dollars, went to companies headquartered in the Bay area. PitchBook reports that Silicon Valley’s share of deal count has fallen every year since 2006.
The fact that the percentage of dollars going to Silicon Valley companies is so much bigger than the number of deals indicates that the companies there are raising more per investment round, the sign of larger and more established companies. PitchBook reasons that it doesn’t matter if a company is in the same building, city, state or country as investors, which has somewhat leveled the playing field for investor attention. For the 2021 Disruptor 50 list, we hope access to capital and opportunity isn’t limited by location, and we continue to find industry-changing start-ups wherever they happen to be based.
Nominations are open for the 2021 CNBC Disruptor 50, a list of private firms using breakthrough technology to become the next generation of great public companies. Submit by Friday, Feb. 12, at 3 pm EST.
Google shuts a high-flying cell service project. The tech giant said it was ending Loon, which used high-altitude helium balloons to beam internet access. Loon was one of Google’s most prominent “moonshot” projects, which have fallen out of favor as the company tightens its belt.
Signs of a green revolution for regulations
On the eve of President Biden’s inauguration, the Federal Housing Finance Agency made a quiet announcement that speaks volumes about the changes coming to financial regulation. The agency, which oversees Fannie Mae and Freddie Mac, requested input on climate-change risk management, noting a “growing body of research” on the threat extreme weather poses to the economy.
The timing looks suspicious, but is fortuitous, agency spokespeople told DealBook. It may seem like an about-face from the agency run by Mark Calabria, a libertarian economist appointed by a president who dismissed climate science. But the move was not designed to please a new, green administration, they insisted. Extreme weather is an obvious problem for the housing market, as Fannie and Freddie found with mortgage defaults following Hurricane Harvey in Texas in 2017. Mr. Calabria has long been building up a research and data team, soon to include an environmental economist, they said.
The change in administration could bring powerful new partners. The Treasury secretary nominee Janet Yellen said that she would appoint “someone at a very senior level” to create a hub in the Treasury focused on climate change and financial system risks. Many of Mr. Biden’s other nominees come with green credentials, forming “the largest team of climate change experts ever assembled in the White House.”
The move is “consistent with a sea change in how financial regulators will be thinking about risk,” said Mark Zandi, Moody’s chief economist. The Commodity Futures Trading Commission and the Fed recently addressed climate risks in high-profile reports. Legally and politically, agencies can act quickly on climate initiatives now, given the new administration’s priorities.
“We have one of those rare moments of hope,” said Tim Mohin of the carbon accounting start-up Persefoni, who has seen climate risks go from a fringe notion to mainstream over 30 years working on sustainability in government and at companies like Apple and Intel. “There is no reason to go slow.”
Business & Economy
Pushback against Nasdaq’s diversity move
As the S.E.C. considers Nasdaq’s proposal to require greater diversity on the boards of its listed companies, criticism has come from an unexpected source: Arthur Levitt Jr., the commission’s chairman in the Clinton administration.
Mr. Levitt aired several arguments against the proposal, writing in a Wall Street Journal op-ed that the requirement would be “political” and that evidence of a link between diverse boards and financial performance was lacking. He urged the S.E.C. to study the issue and let Nasdaq make it a voluntary measure. A Nasdaq spokesman declined to comment to DealBook.
Others have written in support of the proposal:
“We believe it is critical not just for us, but for all our nation’s leading companies to compose their boards in a manner that values diversity and inclusion as key drivers of value and productivity,” wrote Sheryl Sandberg of Facebook, which is listed on the Nasdaq.
The Center for Capital Markets Competitiveness, an arm of the U.S. Chamber of Commerce, said that it “commends Nasdaq for promoting a private sector-based solution to foster greater diversity among boards of directors,” but opposes a mandated quota system.
The S.E.C. is expected to make a decision in the coming weeks. You can read all of the comments it has received here.
In the waning days of the Trump administration, the schism between big business and the Republican Party burst into the open.
While corporate America notched real gains over the last four years, including lower taxes and a looser regulatory environment, President Donald J. Trump routinely upset major chief executives. The Jan. 6 riot at the Capitol and the refusal of Mr. Trump and many congressional Republicans to recognize the election result was the breaking point, culminating in many large companies condemning Mr. Trump and cutting off support for his allies in Congress.
But just because big business is at odds with the Republican Party doesn’t mean it’s ready to embrace every aspect of the Democratic agenda. With President Biden seeking to undo much of Mr. Trump’s legacy, including some initiatives championed by big business, chief executives are approaching the new administration with a mix of optimism and apprehension.
At the most fundamental level, many executives appear grateful to move on from the Trump administration, which routinely surprised companies with abrupt changes to trade policy, immigration rules and more.
“Business hates uncertainty, and we’ve had chaotic uncertainty now for some time,” said Andrew Liveris, who stepped down as chief executive of DowDuPont in 2018 and is now a board member at IBM. “Trying to navigate through it as a company has been very tough.”
But the prospect of higher corporate taxes and new regulations that might curtail profits is unlikely to sit well with a business community struggling to recover from the pandemic. “The rubber will hit the road when we get around to things like taxes and climate tariffs,” Mr. Liveris said.
Mr. Biden began putting his policy agenda to work on Inauguration Day, signing 17 executive orders and actions in the Oval Office.
One recommitted the United States to the Paris climate accord, a move that was met with praise from business leaders, many of whom objected to Mr. Trump’s withdrawal from the pact in 2017. On Twitter, the Microsoft co-founder Bill Gates cheered the move, saying that “the United States also has the opportunity to lead the world in avoiding a climate disaster.”
Other orders shielded “Dreamers” from deportation and named an official response coordinator for the pandemic.
Sundar Pichai, the chief executive of Alphabet, applauded on Twitter the “quick action on Covid relief, the Paris Climate Accord, and immigration reform,” and said his company looked forward “to working with the new administration to help the US recover from the pandemic + grow our economy.”
But at least one early move by Mr. Biden — his revoking of a permit for the Keystone XL pipeline — was met with swift condemnation from some business leaders.
Jay Timmons of the National Association of Manufacturers, a group that just weeks ago called on the cabinet to consider removing Mr. Trump from office, criticized the move, arguing that the pipeline would have created 10,000 union jobs.
The Chamber of Commerce, another pro-business group that took an increasingly hard line with Mr. Trump in the last weeks of his presidency, also opposed the move, calling it “a politically motivated decision that is not grounded in science.”
The Biden Administration
“It will harm consumers and put thousands of Americans in the building trades out of work,” said Marty Durbin, an executive at the chamber.
More skirmishes may be on the horizon. Mr. Biden has signaled that he is open to raising taxes on corporations.
“I’m sure there will be conflict on the tax issue for corporations,” said Richard A. Gephardt, a Democrat and former House majority leader.
The prospect of higher individual taxes is also likely to face pushback from wealthy executives. In New York, Gov. Andrew M. Cuomo recently floated a tax increase on high earners. Should the federal income tax rate go up, too, it could result in an effective tax rate of more than 60 percent for some well-paid New Yorkers.
“That’s pretty onerous,” said Kathy Wylde, chief executive of the Partnership for New York City, a trade group that represents many large employers.
Ms. Wylde added that potential changes to taxes on real estate, which Mr. Trump cut, could also be a cause for concern among executives. “There’s probably nervousness in the real estate community,” she said.
But an increase in the corporate tax rate is a price companies may be willing to pay in exchange for an administration with more predictable stances on critical issues like trade and tariffs.
“They may like the Biden administration more on trade than they did Trump, because he jerked things around so much,” Mr. Gephardt said.
For the moment, there is a palpable sense of relief in board rooms across the country, with executives exhaling after four years during which Mr. Trump’s unpredictable outbursts led to abrupt changes in policies, and sometimes targeted companies.
“The markets are relieved to be on the other side of all the tumult and uncertainty that was Donald Trump,” said Brad Karp, chairman of the law firm Paul, Weiss. “You woke up in the morning and saw the president imposing tariffs, or closing borders, or retaliating against a company. Business needs predictability and certainty.”
And as Mr. Biden works to get the coronavirus under control, companies large and small will be rooting for the new administration. The pandemic has decimated the economy, sapping businesses of sales and leading to mass unemployment. Measures the Biden administration is considering, including a new stimulus package and a large government infrastructure program, could help bolster an economic recovery.
“Getting Covid under control will be good for business,” Mr. Karp said. “A stimulus plan will be good for the economic recovery. Infrastructure spending will be good for the economy.”
Immigration is another issue where big companies have cause for optimism. Mr. Trump curtailed immigration and put caps on the H1-B visa program, which allows foreigners to work in the United States, a shift that caused headaches for many companies.
“America-first policies don’t work for global business,” Ms. Wylde said. “Those will not be missed.”
Mr. Biden signed an executive order mandating the wearing of masks on federal property. By contrast, Mr. Trump politicized mask wearing, further disillusioning business leaders who watched, dismayed, as arguments about masks erupted in their stores.
“Trump lost a lot of the business community on the mask stuff,” Ms. Wylde said. “Without a mask mandate, the enforcement agents became the business. That was a major issue for retailers.”
Already, some executives who supported Mr. Trump are welcoming the Biden administration. Nick Pinchuk, the chief executive of Snap-on, a tool company based in Kenosha, Wis., said he was hopeful that the federal government would support efforts to bolster the working class, such as retraining efforts and investments in education.
“It remains to be seen, but it looks like this administration could prioritize those things,” Mr. Pinchuk said. While not all of his employees were pleased with the election result, he said, they largely disapproved of Mr. Trump’s meddling with the democratic process and seemed willing to give Mr. Biden a chance.
“The business world wants the Biden administration to be successful,” said Blair Effron, a co-founder of Centerview Partners, an advisory firm that works with many large companies. “People understand the urgency of the moment for this country, politically, economically, healthwise and socially.”
The start of 2021 has been rocky for Britain. Its exit from the European Union unleashed a colossal amount of red tape that has left some industries desperate for help, and the country is under yet another lockdown because of a fast-spreading strain of the coronavirus.
But there has been a glimmer of hope. More than four million people in Britain have been partly vaccinated against the coronavirus, a promising pace of inoculation.
Investors looking to ride a wave of optimism about a vaccine rollout have turned to Britain’s stock market, which has posted a strong start to the year, jumping more than 6 percent in the first week.
In the first two and a half weeks of January, the FTSE 100, Britain’s benchmark stock index of large companies, gained 4.3 percent — outstripping the S&P 500 index, which rose 2.6 percent, and the Stoxx Europe 600 index, which was up 3 percent. Even when the gains are converted to U.S. dollars, the FTSE 100 still has a clear lead.
Beyond the vaccine rollout’s helping to ensure an economic rebound, another factor is drawing investors: the relative cheapness of British stocks.
The FTSE 100 index is benefiting from an investment strategy in which traders buy so-called value stocks. These are companies that are perceived to be trading below their true value because their business has been disrupted by a recession, especially in the financial and energy sectors, and the FTSE 100 has a large share of these stocks.
Analysts at Citigroup have ordained Britain’s stock market their “favorite” value trade.
“I would emphasize the very much unloved and horrible dreadful U.K. market might be worth a look this year,” Robert Buckland, a Citigroup equity strategist, said in a presentation last week. “We all know it’s been a place to avoid for many, many years.”
The British stock market has been a laggard for years. The last time the FTSE’s gains looked better than those of the American and European benchmarks was in 2016, when a severe drop in the pound enhanced the earnings of FTSE 100 companies, which earn three-quarters of their revenue overseas.
Once converted into dollars, the annual returns of the FTSE 100 have been the worst of the three indexes for the past nine years.
Why are investors betting on a turnaround now? For one thing, many of them are ready for a bargain. The equity bull market has been dominated by shares of American tech companies that are expensive, which makes some investors nervous about how much they can keep rising. Cheap stocks in industries that tend to do well during economic boom times are offering an alternative.
And then there is Britain’s free-trade deal with the European Union. Some investors have put aside whether it’s a good or bad deal in its detail, in favor of relief that an agreement was finally reached in late December.
The deal “reduced that overhang people had of uncertainty,” said Caroline Simmons, the U.K. chief investment officer at UBS Global Wealth Management, the Swiss asset management firm. And it could encourage the return of overseas investors that were put off by Brexit, she said. Until last week, UBS said British stocks were one of its most preferred trades, for the first time since 2013.
Two asset managers at London-based Schroders are hoping the interest in large companies will trickle down to smaller ones, which are lagging. Rory Bateman and Tim Creed raised 75 million pounds ($102 million) in December for their British Opportunities Trust, a fund that will invest in public and private companies that have been hit by the pandemic but that they expect to recover with a little extra capital.
The vaccines were the “start of the turn in sentiment around the U.K.,” Mr. Bateman said. “Momentum is definitely shifting.”
But this strategy is highly dependent on the success of the vaccine rollout and could easily be undone by signs of delays in manufacturing or distribution. And Britain’s equity index could slip back down to the bottom of the pile.