Clusterstock

Syndicate content Business Insider
The latest news from Finance

As Airbnb and Instacart gear up for rumored IPOs, here are the VC firms that have made the most early investments in billion-dollar startups

Thu, 05/16/2019 - 2:57pm

With Uber, Lyft, and Pinterest now public companies, all eyes are on other billion-dollar businesses in the IPO pipeline.

According to a new report from CB Insights, early-stage tech investing firms SV Angel and Y Combinator are poised to make a hefty return if either Airbnb or Instacart go public in 2019. The two firms are early investors in both companies, which are each valued well above $1 billion.

The CB Insights report lays out which investors have staked early claims in the elite group of "unicorns" — startups valued by private investors at $1 billion or more —  with SV Angel coming out on top with 18 unicorn feathers in its proverbial cap. SV Angel's stake in Airbnb is not publicly disclosed, but according to Pitchbook data, the firm would have bought shares at $0.42 each in the round, meaning it's likely to turn a big profit if and when Airbnb IPOs. 

Read More: Check out the pitch deck that Sandbox VR used to get Andreessen Horowitz as lead investor in a $68 million round, and watch the investors discuss the pitch

Notable startup incubator Y Combinator is a close second with 16 early bets. Startups that graduate from Y Combinator's program receive $150,000 in exchange for a 7% stake in the company. At current valuations, Y Combinator's stake in Airbnb is worth around $2.6 billion, and its stake in Instacart is worth $532 million.

Here are the top venture capital firms with the most early-stage investments in billion-dollar businesses, according to CB Insights:

Read the full report from CB Insights.

SEE ALSO: Uber’s first employee is worth over $1 billion as company goes public, and he’s already committed to donating at least $14 million to charity

Andreessen Horowitz tied for fourth place with 11 early bets on startups now valued at or above $1 billion.

CB Insights doesn't share the firm's largest investments, but Andreessen Horowitz was a major early investor in startups like:

  • Airbnb, most recently valued at $29.3 billion.
  • Stripe, most recently valued at $22.5 billion.
  • Coinbase, most recently valued at $8 billion.

 



Tied for fourth place is Sequoia, one of Silicon Valley’s oldest firms, which made early bets on Airbnb, Instacart, and DoorDash.

Top early stage investments:

  • Airbnb, seed and Series A. Most recent valuation: $29.3 billion
  • Instacart, Series A. Most recent valuation: $7.6 billion
  • DoorDash, Series A. Most recent valuation: $7.1 billion



Also tied for fourth is IDG Capital, an international investment firm that has early stakes in U.S. and Chinese companies.

Top early stage investments:

  • SenseTime, Series A. Most recent valuation: $4.5 billion
  • XPeng Motors, Series A. Most recent valuation: $3.65 billion
  • Zoox, Series A. Most recent valuation: $3.2 billion



Sequoia Capital China, the Chinese counterpart to the Silicon Valley firm, comes in third with early bets on Chinese startups.

Top early stage investments:

  • Chehaoduo, Series A. Most recent valuation: $9 billion
  • VIPKID, Series A. Most recent valuation: $3 billion
  • Ucommune, Series A. Most recent valuation: $3 billion



Y Combinator comes in second with early investments in companies that graduated from its accelerator program.

Top early stage investments:

  • Airbnb, seed-stage. Most recent valuation: $29.3 billion
  • Instacart, seed-stage. Most recent valuation: $7.6 billion
  • Rappi, seed-stage. Most recent valuation: $1 billion



SV Angel has made the most early investments, including in Airbnb and Instacart.

Top early-stage startups investments:

  • Airbnb, Series A. Most recent valuation: $29.3 billion
  • Instacart, Series A. Most recent valuation: $7.6 billion
  • OpenDoor Labs, Series A. Most recent valuation: $3.8 billion



Why Goldman Sachs just did its biggest deal in nearly 20 years as part of a pivot to less wealthy clients

Thu, 05/16/2019 - 2:48pm

  • Goldman Sachs agreed to pay $750 million in cash to buy United Capital, a registered investment adviser with 220 wealth managers and $25 billion in assets under management.
  • The deal is the biggest for Goldman since its $6.5 billion purchase of Spear Leeds in 2000. It's scheduled to close in the third quarter. 
  • Goldman's purchase is part of a push to bring in more stable revenue, which is valued more highly by Wall Street analysts and investors than the more episodic revenue that comes from trading and private investing activities.
  • The bank's stock has lagged broader indexes, in part because of its reliance on the types of volatile businesses that investors discount.  
  • Visit Business Insider's homepage for more stories.

David Solomon is wasting little time. 

The Goldman Sachs CEO, an investment banker who took over from Lloyd Blankfein in October, signed the bank's largest deal in more than 15 years on Thursday, announcing the $750 million purchase of the wealth-management firm United Capital.

The transaction is intended to fill in Goldman's wealth offering and bring in more recurring revenue to a firm that still gets more than 60% of its top line from trading and private investing activities. 

More broadly, the deal is a sign that Solomon and his management team of Chief Financial Officer Stephen Scherr and President John Waldron recognize that investors haven't given the firm credit for maintaining some of the highest returns in the industry, according to analysts.

Over the past 12 months, the bank's share price has fallen 17%, compared with a 4.7% increase for the S&P 500 index. The shares rose 1.6% to $199.40 as of Thursday afternoon. 

"As the stock has underperformed despite solid ROEs, there is a realization the quality of earnings matters rather than the quantity," Christian Bolu, an analyst at Autonomous Research, said in an interview before the deal was announced. "The sense of urgency has probably stepped up."

Read more: Human resources is the next battleground for Wall Street wealth advisers as Morgan Stanley and Goldman Sachs jockey over new turf

The deal is Goldman's biggest since the firm's 2000 purchase of Spear Leeds, done by another investment banker, Hank Paulson. That $6.5 billion deal was largely seen as a failure as trading began to move away from the floor of the New York Stock Exchange, one of Spear Leeds' specialties. Blankfein, a trader, steered clear of large acquisitions during his time as CEO.

Despite the size of the transaction, some current and former Goldman employees worry that the bank needs a much bigger transaction to accelerate its transformation. 

What's Goldman Sachs getting with United Capital?

United Capital is what's known as a registered investment adviser (RIA), which acts as a client fiduciary and tends to make money by managing assets for a flat fee rather than collecting trading commissions. 

The deal gives Goldman 220 financial advisers managing roughly $25 billion of assets across 90 US offices. The additional people will allow Goldman to scale its Ayco business, which offers financial, tax, and investments planning to C-suite executives through partnerships with their employers.

Goldman will now have more people to service those corporate execs who may not be the most senior but still need complex financial advice and investments, according to a statement from the company. United Capital also brings a digital financial-planning tool that is expected to help reach a broader swath of clients. 

Ayco works with more 400 companies, including approximately 60 of the Fortune 100. Goldman signed a deal last year with Google to provide Ayco services to the tech giant's entire employee base.

Ayco has dabbled in the RIA business in the past, though the firm's commitment to it has been uneven. A few years ago, in response to the Department of Labor's proposed fiduciary rule, the firm fired some of its RIA advisers, according to a person with knowledge of the matter. 

The bank has plans to offer a mass-market wealth-management offering through its Marcus digital bank and already manages more than $450 billion for ultra-high-net-worth clients from its private-wealth-management business. Ayco manages roughly $35 billion. 

"On the surface it helps them execute their stated game plan to widen their footprint in wealth management," Shirl Penney, CEO of a tech and back-office-operations provider to the RIA industry, Dynasty Financial Partners, said in an email. "If they can get the divisions cooperating with each other there should be good synergy."

The acquisition will help accelerate Goldman Sachs' wealth plans

The United Capital purchase is not without risk, most notably around merging the cultures of the various groups and retaining talent, according to Mindy Diamond, the president of the financial-adviser recruitment firm Diamond Consultants.

Goldman is already suffering from retention issues in its high-end private-wealth business, according to RIABiz

"Now you will bring in a mass affluent, down stream, down market alternative and if I am a Goldman adviser and positioning myself as the elite, I'm not sure how good I'm going to feel about that," Diamond said. "Retention is the first concern."

Read more: Goldman Sachs execs are opening up about their plans for Marcus, and they think it can do to banking what iTunes did to the music industry

It's also not clear how United Capital's advisers will feel about being part of the Goldman enterprise. RIAs tend to think more independently and don't like being told to sell specific products. When Goldman purchased Ayco in 2003, the firm largely left it alone for the next decade or so, though in recent years some employees have chafed under what they described as a culture that pushed Goldman product. 

"While Goldman certainly understands wealth management, they have a successful and robust private-wealth unit, they don't understand the mass affluent client space at all," Diamond said. 

One reassuring point: Joe Duran, United Capital's CEO, will join Goldman Sachs as a partner, according to a spokesman.

Join the conversation about this story »

NOW WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

What could happen if China uses its 'nuclear option' in the trade war

Thu, 05/16/2019 - 2:42pm

  • Earlier this week, the editor-in-chief of the Global Times, a state-aligned Chinese tabloid, said Chinese scholars were looking into the possibility of China dumping US Treasurys.
  • UBS looked at the Federal Reserve's tapering to try and figure out what kind of effect China selling $1.1 trillion of Treasurys would have on the bond market and concluded the 10-year yield could rise by up to 40 basis points.
  • Bloomberg's Joe Weisenthal thinks yields could actually fall if China sold its holdings.
  • The debate is likely for naught as China needs to hold Treasurys, according to one analyst.
  • Visit Markets Insider's homepage for more stories.

Chinese scholars are reportedly looking into the so-called nuclear option in the trade war — Beijing dumping US Treasurys. 

"Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically," Hu Xijin, the editor-in-chief of the state-aligned Chinese tabloid Global Times, tweeted on Monday, setting off a debate about what the consequences would be if China divested its holdings.

While UBS strategists think it's unlikely China would sell the entirety of its holdings, they looked into what could happen just in case. To do so, they looked at the effect the Fed's tapering had on yields. 

"Through quantitative easing programs, the Fed expanded its balance sheet by about $3.5trn," the strategists wrote. "We estimated that this compressed US term premium by about 110bp. Through its balance sheet unwind of $600bn, we estimated that 10-year term premium had risen by about 20-30bp."

Therefore, they concluded that China unloading all $1.1 trillion of its Treasurys, or about 7% of the entire market, would cause the 10-year yield to climb by 30 to 40 basis points. 

But not everyone agrees that yields would go higher. In Bloomberg's daily markets email, Joe Weisenthal, the executive editor for daily news, suggested Treasury yields could actually fall.

"What's more plausible than spiking yields is that if word got out that China really did want to dump U.S. debt in size," he wrote.

"Yields would fall because people would assume that this 'nuclear option' represented a gigantic break in the U.S.-Sino relationship. All that would hurt the global economy, causing the Fed to be even slower with expected rate hikes. In the immediate term, there would likely be a flight to Treasuries, amid a big risk-off move in markets. The Treasury market often behaves counterintuitively," he added. 

Of course, the whole debate is likely for naught.

"What people don't understand is that it is not a choice" for China to keep so many Treasurys, J Capital Research cofounder Anne Stevenson-Yang told Business Insider's Linette Lopez. "This is a dollar world and China hold Treasurys to manage its trade with the world."

Selling Treasurys is a "good meme for the Chinese people but it doesn't actually mean anything," she said.

Join the conversation about this story »

NOW WATCH: The Karlmann King is a $2 million enormous ultra-luxury SUV built upon a Ford F-550

Tesla's senior director of global communications is leaving the company — here are all the key names who have departed in the past year (TSLA)

Wed, 05/15/2019 - 10:40pm

    • Tesla is known for its high rate of executive turnover, and the past year has been no different.
    • During a year in which the automaker faced production and delivery issues, investigations from the federal government, and questions about the decision-making of CEO Elon Musk, departures from senior employees have added yet another challenge.
    • Tesla's senior director of global communications Dave Arnold is leaving the company. Arnold served the electric automaker for two years.

Tesla has seen a lot of senior employees leave in the last year.

As the automaker has faced production and delivery issues, investigations from the federal government, and questions about the decision-making of CEO Elon Musk, departures from senior employees have added yet another challenge.

The outflow hasn't stopped in 2019, either.

Read more: Tesla's price target has been slashed by 3 major Wall Street banks. Here's where other analysts stand right now.

After losing its CFO in January, its top lawyer in February, and its senior director of global security in April, Tesla's senior director of global communications Dave Arnold is leaving the company. Arnold served the electric automaker for two years.

"We'd like to thank Dave for his work in support of Tesla's mission, and we wish him well," a Tesla spokesperson said in a statement to Business Insider on Wednesday.

These are the key names who have left Tesla or have announced their departure in 2018 or so far in 2019, as well as when they left and where they went next (according to their LinkedIn profile or company announcements):

  • January 2018 - Jason Mendez, director of manufacturing engineering: LinkedIn profile does not list next position
  • January 2018 - Will McColl, manager of equipment engineering: founded WaveForm Design
  • February 2018 - Jon McNeill, president of global sales and services: became COO of Lyft
  • March 2018 - Eric Branderiz, chief accounting officer: became CFO of Enphase Energy
  • March 2018 - Susan Repo, corporate treasurer and vice president of finance: became CFO of Topia (she left Topia in June, according to her LinkedIn page)
  • April 2018 - Jim Keller, head of Autopilot hardware engineering: became head of silicon engineering at Intel
  • April 2018 - Georg Ell, director of Western Europe operations: became CEO of Smoothwall
  • May 2018 - Matthew Schwall, director of field performance engineering: became heady of field safety at Waymo
  • July 2018 - Ganesh Srivats, vice president overseeing retail, delivery, and marketing: became CEO of Moda Operandi
  • September 2018 - Sarah O'Brien, vice president of communications: became VP of executive communications at Facebook
  • September 2018 - Gabrielle Toledano, chief people officer: became executive in residence at Comcast Ventures
  • September 2018 - Dave Morton, chief accounting officer: became CFO of Anaplan
  • September 2018 - Liam O'Connor, vice president of global supply management: became chief procurement officer and head of bikes and scooters at Lyft
  • September 2018 - Antoin Abou-Haydar, senior director of production and quality: became vice president of global quality for Byton
  • October 2018 - Justin McAnear, vice president of worldwide finance and operations: became CFO of 10X Genomics
  • November 2018 - Phil Rothenberg, vice president in the legal department: became general counsel of Sonder
  • November 2018 - Jeff Jones, head of global security: LinkedIn profile does not list next position
  • November 2018 - Dan Kim, senior director of global sales, marketing, and delivery: became director of Airbnb Plus at Airbnb
  • December 2018 - Aaron Chew, director of investor relations: LinkedIn profile does not list next position
  • January 2019 — Todd Maron, general counsel: LinkedIn profile does not list next position
  • January 2019 — Charles Mwangi , senior director of engineering: LinkedIn profile says he is working at an unnamed startup
  • February 2019 — Cindy Nicola, vice president of global recruiting: LinkedIn profile does not list next position
  • February 2019 — Dane Butswinkas, general counsel: returning to his trial practice at the firm Williams & Connolly
  • March 2019 — Deepak Ahuja, CFO: retired
  • March 2019 — Praveen Arichandran, director of growth: joining Citizen in April to lead growth.
  • April 2019 — Karl Wagner, senior director of global security: PTSD and suicide-prevention advocacy
  • May 2019 — Dave Arnold, senior director of global communications: LinkedIn profile does not list next position.

Have you worked for Tesla? Do you have a story to share? Contact this reporter at mmatousek@businessinsider.com.

SEE ALSO: Uber plans to sell around $10 billion worth of stock in its IPO, seeks $90 billion valuation

Join the conversation about this story »

NOW WATCH: Look inside Nissan's 50th anniversary edition GT-R

Trump pardons convicted fraudster Conrad Black, an ex-media mogul who wrote a book praising him in 2018

Wed, 05/15/2019 - 9:51pm

  • President Donald Trump signed a full pardon for the former media mogul Conrad Black, who was convicted in 2007 of fraud and obstruction of justice.
  • Black was found guilty of scheming to siphon off millions of dollars from the sale of newspapers. He spent roughly 42 months in prison.
  • "Lord Black's case has attracted broad support from many high-profile individuals who have vigorously vouched for his exceptional character," the White House said in a statement.
  • Black, 74, is Canadian-born British citizen and ran an international newspaper empire that included the Chicago Sun-Times, Britain's Daily Telegraph and the Jerusalem Post. He is an outspoken Trump supporter who published a book on Trump's political rise.
  • Visit Business Insider's homepage for more stories.

President Donald Trump on Wednesday signed a full pardon to the former media mogul Conrad Black, who was convicted in 2007 of fraud and obstruction of justice.

Black, 74, a Canadian-born British citizen, once ran an international newspaper empire that included the Chicago Sun-Times, Britain's Daily Telegraph, and the Jerusalem Post.

"Lord Black's case has attracted broad support from many high-profile individuals who have vigorously vouched for his exceptional character," the White House said in a statement announcing the pardon.

"In light of these facts, Mr. Black is entirely deserving of this Grant of Executive Clemency," the White House added.

Read more: Trump pardons former Army Ranger convicted of fatally shooting an Iraqi prisoner

Black was found guilty in the US of scheming to siphon off millions of dollars from the sale of newspapers owned by Hollinger Incorporated, where he was chief executive and chairman. He spent roughly 42 months in prison.

Two of his three fraud convictions were later voided, and his sentence was shortened. He was released from a Florida prison in May 2012 and deported from the US.

Black is an outspoken Trump supporter who published a book dedicated to his journey to the White House.

"I think he's done quite well," Black said of Trump in 2018, according to The Guardian.

Black previously downplayed the suggestion that he gave his appraisal in hopes to receive a potential pardon.

"This irritating mindreading by people who don't know me, this imputation of motives, I think, is discreditable," Black said in 2018. "There is, at this point, no thought of a pardon whatsoever."

SEE ALSO: Trump pardons former Army Ranger convicted of fatally shooting an Iraqi prisoner

Join the conversation about this story »

NOW WATCH: This video shows the moment Sarah Sanders lied to a room full of reporters about FBI agents telling her they were happy Trump fired Comey

Tesla is losing another top executive amid a brutal week for the electric automaker (TSLA)

Wed, 05/15/2019 - 9:44pm

  • Tesla is losing another top executive, this time in the communications department. The senior director of global communications Dave Arnold is leaving the company.
  • Arnold served the electric-car company for two years. He follows a long line of Tesla executives who have parted ways with the company in the past year.
  • "We'd like to thank Dave for his work in support of Tesla's mission, and we wish him well," a Tesla spokesperson said in a statement to Business Insider on Wednesday. Arnold will remain at the company for another month while Keely Sulprizio, the director of global communications, takes over his duties.
  • Visit Business Insider's homepage for more stories.

Tesla's senior director of global communications Dave Arnold is leaving the company. Arnold served the electric automaker for two years.

"We'd like to thank Dave for his work in support of Tesla's mission, and we wish him well," a Tesla spokesperson said in a statement to Business Insider on Wednesday. Arnold will spend another month at the company, while Keely Sulprizio, the director of global communications, takes over his duties.

Arnold follows a long procession of Tesla executives who have left the company in the past year.

Tesla lost its CFO, Deepak Ahuja, in January. Its general counsel, Dane Butswinkas, left in February after just two months on the job.

The high rate of turnover in Tesla's executive ranks is just one of a number of challenges the company is staring down at the moment.

Read more: It's time for Tesla to go into stealth mode for the rest of 2019

Ongoing production challenges and difficulty shipping its Tesla Model 3 to international markets have weighed heavily on the company's share price. A Tesla analyst at Evercore ISI slashed his target price for Tesla shares to $200 — down from $240 per share — for the second time in a month. On Monday, Tesla shares hit their lowest point since January 2017.

Dustups between CEO Elon Musk and US federal regulators have also rattled investors.

More recently, Tesla's disappointing first-quarter earnings report did the company no favors with a $702 million loss on the books for the three-month period that ended March 31.

Despite the turmoil, Tesla has been able to count some victories. The company recently boosted the size of its latest capital raise from $2.3 billion to $2.7 billion, and AutoTrader named Tesla the most-loved car brand this week.

SEE ALSO: Tesla's senior director of communications is leaving the company — here are all the key names who have departed in recent months

Join the conversation about this story »

NOW WATCH: The Qiantu K50 is China's first electric supercar coming to the US

President Trump's national emergency likely won't stop you from buying a Huawei phone, much less an iPhone. Here's what it means for you.

Wed, 05/15/2019 - 9:06pm

  • President Trump's declaration of a national emergency and executive order banning tech products made by US adversaries isn't likely to affect consumers here anytime soon.
  • Although the order is broad, it's widely expected to be used to target China and Chinese equipment maker Huawei.
  • It likely will be applied to equipment purchased by telecommunications companies, not consumer products and almost certainly won't be applied to iPhones or other goods made in China for US firms.
  • It's unclear exactly when the rules implementing the order will take effect or precisely what they'll cover.
  • Visit Business Insider's homepage for more stories.

President Donald Trump made a dramatic move Wednesday when he declared a national emergency and issued an executive order banning the import of technology products and services from US adversaries.

The action, which appeared to be targeted at China in general and at Chinese equipment maker Huawei in particular, seemed likely to ratchet up the trade tensions between the two countries. It also seemed likely to put further pressure on Huawei's business and that of its partners. And because of how broadly the order was written, it could potentially be applied to a vast swath of goods and services, since so many technology products — even those that carry US brand names — are made in China.

Read this: Trump declares a national emergency, which could set up a huge blow to China's Huawei

It's not clear exactly how the order will be implemented. But at least for now, it likely will have little effect on everyday consumers. So you shouldn't worry about being barred from purchasing a Huawei phone — much less an iPhone — anytime soon.

What kinds of products will be barred from being imported into the US under the emergency order? Communications and technology equipment and services.

Which countries' products are affected by the order? It's unclear. The order doesn't specify any particular nations. Instead, it applies to unnamed "foreign adversaries." However, it's widely assumed that the order is targeted at China.

Which companies' products are covered by the order? Again, it's unclear. The order doesn't include a blacklist of specific corporations, but it's written broadly enough to cover a wide range of them. It applies to any technology or communications product "designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary" that poses a security risk to the United States.

"We're all in the dark" about exactly how it will be implemented, said Steve Becker, a partner at the law firm Pillsbury who focuses on international trade law.

Who will determine which products are covered? Secretary of Commerce Wilbur Ross after conferring with a group of other administration officials, including the attorney general, the US trade representative, and the secretaries of State, Defense, Treasury, and Homeland Security.

What kinds of products are likely to be banned? While the order is broad, Ross is widely expected to apply it fairly narrowly to Huawei's networking equipment. He's unlikely to target consumer products and almost certainly won't bar devices made in China on behalf of US companies, such as Apple's iPhones or Dell computers, Becker said.

"Clearly, the main focus has been on backbone equipment — network switches and routers," Becker said.

When will the order take effect? Nominally, the order takes effect immediately. But it could be five months or more before the regulations that will flesh it out will be in place. The president gave Ross 150 days to publish rules to carry out the order. But even if he meets that deadline, those rules will be subject to public comment or some delay before they carry the force of law.

Will consumers or companies have to hand over previous purchases of affected products? Generally, no. Trump's order applies to products and services purchased on or after Wednesday and to purchases that were still pending at that time. It doesn't apply to previous purchases.

Is this going to affect the rollout of 5G services in the United States? It's unclear. Huawei is one of the leaders in equipment for 5G — or fifth generation — wireless networks. The big US carriers had already promised not to use Huawei equipment. But, assuming that Huawei is indeed the target of the order, it could bar smaller carriers from buying the company's equipment. That could force them to pay higher prices, and they may delay rolling out their services as a result.

Got a tip about tech? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Trump's secretary of state warned Britain and savaged China in a stinging attack on Huawei

Join the conversation about this story »

NOW WATCH: I tried $600 smart glasses and learned why they haven't replaced smartphones yet

Trump's Huawei ban could spark a tit-for-tat fight with Beijing that puts Apple in the middle of the crossfire (AAPL, NVDA, INTC, AMD, QCOM)

Wed, 05/15/2019 - 8:51pm

  • The US ban on Chinese tech giant Huawei could trigger a major retaliation by Beijing.
  • Analysts say China could hit back at US tech giants doing business in the Asian nation, with Apple especially at risk.
  • One analyst believes the reaction could be so severe that the effect on some US tech companies could be 'disastrous.'
  • Visit Business Insider's homepage for more stories

A ban on Chinese tech giant Huawei by the Trump Administration could spark a tit-for-tat with Beijing that would turn the heat up on US tech companies, with Apple vulnerable as high-profile target for retaliation, analysts said Wednesday.

One analyst thinks Beijing's reaction could be 'disastrous' for American companies.

The ban on doing business with Huawei was imposed shortly after President Trump's executive order aimed at "foreign adversaries" in the technology industry. According to the US Commerce Department order, Huawei is now prohibited from buying parts and components from US companies without US government approval.

Huawei has been repeatedly accused of spying and violating US laws. Huawei has denied the accusations, while Beijing has denounced the charges as unfair.

Spying allegations vs Huawei

"This is clearly targeted at China spying via Huawei, something that has not been conclusively proven yet," analyst Tim Bajarin of Creative Strategies Inc. told Business Insider. "But it represents a ban on a Chinese product in the US that has other ramifications."

The spying allegations "could be real," he added. But so is China's potential reaction.

"China could retaliate by banning US products from the Chinese market using the same pretense, even it may be false," he said. "A tit-for-tat fight that could be disastrous for any company that  sells a lot of goods into China, especially technology-based goods, if they get banned for any reason as part of a Chinese retaliatory move."

And coming on the heels of the recent tariffs that the US and China have imposed on hundreds of millions of dollars of each other's goods, a potential Chinese ban on certain US companies could cause significant problems.

Wedbush analyst Dan Ives said the Trump threat could just be all bluster ahead of next month's G-20 Summit in Japan.

"We think the bark is going to be worst than the bite, but this adds more noise when tech investors are already on edge," he told Business Insider. "This is a major shot across the bow. … They continue to ratchet up the heat in the kitchen especially with Huawei given the strategic importance of Huawei in China."

Trade war escalation

China could hit back, he said, which could hurt leading tech names, including chipmakers Nvidia, Qualcomm and Intel.

In a note in December following the US indictment of Huawei CFO Meng Wanzhou, Bernstein analyst Stacy Rasgon said Huawei is "overall a sizeable buyer of semiconductors." But he said the impact on major US chip-makers would be minimal.

Rasgon said the "supply chain could evolve" helping ease the impact of the Huawei ban on US chip companies.

"If the semi companies can't sell to Huawei and thus Huawei can't sell equipment, other companies would eventually take up Huawei's slack, companies that the semis can sell to," he said. "In other words, the Chinese equipment companies would likely lose share to other non-Chinese companies providing similar products, assuming broad demand for those products remains."

But he added: "The transition would likely be messy though."

The worst case scenario, Bajarin said, is if China hits back at Trump and "really hurts some major American company that sells a lot of products in China."

A target on Apple's back

"It could be companies who sell PC's, Servers and telecom equipment as a start," he said. "But if it was true retaliation, it would be a major US company with a solid brand."

Ives of Wedbush thinks the most vulnerable target would be Apple, perhaps the most well-known US tech brand.

"The broader worry here is: does this put more of a target on the back of Apple?" Ives said. "The poster child is Apple."

Crawford Del Prete, president of research firm IDC, said he doesn't think a Chinese reaction would impact other areas of tech immediately.

"As for spreading to other areas, I do not see that as likely at this point," he told Business Insider.

Meanwhile, Huawei faces a tougher situation as it is barred from doing business with US firms, he added.

"For Huawei, they will need to stay focused and on message that they are not a security risk, so that they can maintain business outside of the US," he said.

Got a tip about Huawei, Apple or another tech company? Contact this reporter via email at bpimentel@businessinsider.com, message him on Twitter @benpimentel, or send him a secure message through Signal at 510.731.8429. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: The 10 people transforming the way the technology industry does business

Join the conversation about this story »

NOW WATCH: I tried the $1,980 Samsung Galaxy Fold and it's impressive for a first-generation foldable phone, though far from perfect

Deutsche Bank has hired a new credit-trading exec, filling a void after it dismissed a rising star earlier this year

Wed, 05/15/2019 - 8:24pm

  • Deutsche Bank has hired a new credit-trading exec in the US. 
  • Sonny Kathpalia, who left Barclays in 2018, is joining the company running credit-swaps index trading.
  • He'll help fill a void left when rising-star Tian Zeng was dismissed earlier this year. 
  • Kathpalia joins the top-ranked credit-trading team on Wall Street. 
  • Visit Business Insider's homepage for more stories.

Deutsche Bank has hired a new credit-trading exec, filling a hole after the firm dismissed a rising star earlier this year. 

Sonny Kathpalia, most recently a senior index trader at Barclays, is joining the German bank as its head of credit-swaps index trading in the US, according to people familiar with the matter.  

Kathpalia, 36, spent most of his career at Lehman Brothers and Barclays before leaving in 2018, according to FINRA records. 

A Deutsche Bank spokeswoman declined to comment. 

Kathpalia will report into credit-trading head Paul Huchro and help fill a void left when Tian Zeng, a senior credit-index trader, left the firm in February. 

Zeng, a top trader who was brought over from Citadel Securities as part of a build-out of the US credit-trading business, was discharged after Deutsche Bank concluded he'd violated firm policies by disclosing client information to a third party, according to FINRA records

While Deutsche Bank has struggled in recent years and seen its stock tumble, credit trading under Huchro has been a bright spot. The German lender was tied with JPMorgan Chase as the top-ranked credit-trading operation globally in 2018, according to industry data consultant Coalition. 

The firm's fixed income, currencies, and commodities revenues in aggregate fell 15% to $6.3 billion last year. 

Join the conversation about this story »

NOW WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

The 'single-best leading indicator for stocks' in recent history is predicting doom

Wed, 05/15/2019 - 8:11pm

  • Copper has been the "single-best leading indicator for stocks over the past 18 months," according to one research firm.
  • Sentiment in the copper market suggests prices should be about 7% below where they are currently trading, a Capital Economics analyst wrote. 
  • Trade-war tensions and the end of the Fed's rate-hike cycle are bad news for stocks, other experts said. 
  • Visit Markets Insider for more stories.

Copper prices are signaling a stock-market sell-off may be brewing. 

The red metal has been the "single-best leading indicator for stocks over the past 18 months," and is flashing a warning sign for risk assets in general, according to a note put out on Wednesday by Tom Essaye, founder of Sevens Report Research. 

"Looking all the way back to early 2018, copper chopped lower the entire month of January, disconnecting with the stock market with which it is normally very closely correlated," he wrote.

Since then, Essaye says the price action in copper has been leading the stock market:

  • Early 2018: Copper prices disconnected from the stock market shortly before short-volatility funds imploded, leading to one of the most-violent stock-market sell-offs in history.
  • Later in 2018: Copper sold off sharply during the summer as the stock market regained its footing. Volatility returned to stocks in the fourth quarter. 
  • Early 2019: Copper rallied amid optimism surrounding a trade deal, decent corporate earnings, and better-than-expected economic data, and shortly thereafter the stock market returned to a record high. 
  • May 1: Copper rolled over and volatility soon returned to the stock market.

"We point all of these instances out, because over the last 18 months, no leading or concurrent indicator has been better than copper at forecasting the next move in stocks, both higher and lower," Essaye added.

Copper prices have been under pressure in recent weeks as a slowing Chinese economy and rising trade-war tensions between the US and China have sent investor net-long positions to the lowest level in four years, according to Ross Strachan, senior commodities analyst at Capital Economics.

"Arguably the decline in investor positions would have been consistent with prices falling to around $5,600 per tonne, rather than remaining close to $6,000," he wrote, citing prices on the London Metals Exchange.

That suggests a drop of about 7%. And, according to Essaye, it would mean bad news for the stock market, which has seen renewed volatility after President Donald Trump announced last week that the US would hike tariffs on $200 billion worth of Chinese goods. A few days later, China retaliated by increasing tariffs on $60 billion of US goods. 

The stock market has gone virtually nowhere over the last eight months. Sure, there was the big sell-off in the fourth quarter as investors worried about the possibility of further rate hikes, and the ensuing rally that developed when they didn't come. But overall, the market is pretty much where it was last October. The problem is the backdrop is deteriorating. 

"While the prospects of a 'no-deal' between the US and China is directly impacting risk sentiment, tariff hikes will be an additional burden for US companies and weigh on future earnings," analysts at Fitch Solutions Macro Research said in a recent note.  

They added: "While a deal is still possible, this recent decision increases the downside risks to global trade and growth, deteriorates risk sentiment and weighs on financial markets."

Of course, all of this comes as the Federal Reserve's tightening cycle draws to a close. The central bank has raised interest rates nine times since late 2015 as it attempts to normalize its balance sheet after coming out of the Great Recession. 

"There is a perception among some investors that the Fed's tightening cycle is already priced into US equities," said UBS strategist Francois Trahan in a recent note to clients. "This notion could prove to be a major surprise this year, a disappointing surprise that is."

Read more: UBS' new equity chief warns that a 10% plunge in the stock market this year will catch investors off-guard — and outlines how to protect against losses

He notes that GDP was the strongest its been in years during the first quarter, and that a strong economy typically occurs at the end of the Fed's rate-hike cycle.

"In short, it takes a full two years for changes in the federal funds rate to be fully reflected in GDP growth," Trahan added. "At least, that was the historical dynamic before the fed funds rate hit zero in late 2008. Most importantly, perhaps, there is no reason to think that this relationship will be any different today."

He sees the S&P 500 falling 10% to 2,550 as the higher borrowing costs take their toll on the US economy. That wouldn't be too different from the downside that Strachan sees for copper. 

Join the conversation about this story »

NOW WATCH: The Karlmann King is a $2 million enormous ultra-luxury SUV built upon a Ford F-550

A Lincoln exec explains why the automaker wasn't surprised by the success of its new Navigator SUV — and promises a fully electric Lincoln is in the works (F)

Wed, 05/15/2019 - 7:58pm


Ford is in the middle of an $11-billion turnaround plan, led by CEO Jim Hackett, that looks to be gaining some traction after about two years. Since the beginning of the year, Ford's stock — declining for much of Hackett's tenure — has reversed course and is now up over 20%.

Within Ford, there's been a turnaround story that's been ongoing for almost a decade now: Lincoln.

Lincoln was on the chopping block back when Ford was reorganizing before and after the financial crisis. But Ford decided to keep its luxury brand alive, and the marque survived to see its 101st birthday last August.

The revival of the brand has been impressive. Now led by Ford veteran Joy Falotico — she oversees Ford marketing in addition to serving as Lincoln's president — Lincoln enjoyed a great year in 2018 thanks to the redesign of its Navigator full-size SUV, a Business Insider Car of the Year finalist.

Read more: How Lincoln returned from near death and restored Ford's luxury brand

The Navigator is so popular with dealers that Ford hasn't been able to build enough to satisfy demand. But the brand has also been launching new and revamped crossovers to slot in below Navigator. The Aviator and Nautilus are on sale now, and Lincoln launched a new vehicle, the Corsair, at the recent New York auto show to fill out the range and provide customers with an entry-level option.

"We're very pleased with the momentum and energy we have around the brand," Falotico said in an interview with Business Insider at the Corsair's debut.

While the Navigator's sales surge might have surprised some observers who've fixated on new electric vehicles from luxury automakers, Falotico said that Lincoln knew it had a winner with the SUV, which was launched at last year's New York auto show.

"I think we thought if it were going to happen with any vehicle, it would be Navigator," she said. "We created that segment, and the vehicle turned out so beautiful. The team did a great job."

What about electric vehicles?

To a degree, Lincoln has benefited from a shift among buyers away from sedans and over to crossovers. The brand sells four-doors, including the legendary Continental. But it's also had a strong lineup of SUVs, even before it entered its new-product cadence and began to rename crossovers as the brand realigned it identity, first around the "quiet luxury" concept and then later "quiet flight."

But what about the enthusiasm for electric vehicles? Lincoln's crosstown rival, Cadillac, announced prior to this year's Detroit auto show that it would be the tip of General Motors' electrification spear.

Falotico said that Lincoln has plans to electrify the lineup, pointing to a hybrid version of the Aviator that's now at dealerships.

But she also said that Lincoln would make a fully battery-electric vehicle. 

"It's too early to talk about it now," she said. "But it will be coming. For sure."

FOLLOW US: On Facebook for more car and transportation content!

Join the conversation about this story »

NOW WATCH: The Karlmann King is a $2 million enormous ultra-luxury SUV built upon a Ford F-550

Business leaders are expressing frustration and uncertainty about the US-China trade war

Wed, 05/15/2019 - 7:50pm

  • Executives at S&P 500 companies sounded off on the US-China trade war during their first-quarter conference calls.
  • Goldman Sachs equity strategists analyzed a selection of executive commentary across S&P 500 earnings calls and found trade-related uncertainty to be a major theme plaguing business.
  • Visit Markets Insider's homepage for more stories.

If there's an elephant in the room that US multinational corporations are grappling with, it's the ongoing trade war between the two largest economies.

Executives at S&P 500 companies addressed how the US-China trade dispute influenced their companies' first-quarter earnings results, detailing a significant degree of uncertainty and the extent of their exposure.

It's one of the three major themes highlighted by Goldman Sachs strategists in a quarterly report released this week analyzing excerpts from 40 first-quarter conference calls. 

Executives said the uncertainty over trade made it more difficult to navigate their relationship with China but did not have significant near-term ramifications.

"The decision by President Trump to raise tariffs surprised both managements and investors who had believed the trade friction was moving towards a resolution," the strategists, led by David Kostin, wrote in a report to clients out Monday.

Downward pressure on profit margins remains a risk for many companies, the strategists said, while some corporations were already preparing to shift their supply chains away from China to minimize the effect.

"We've been very, very highly focused not only at fixing long-term problems by diversifying away from China our supply, but also by creating, through our procurement organization and supply chain, a number of partnerships which are almost standby partnerships, ready to jump in as soon as we have issues," Pierre Brondeau, the chairman and CEO the chemical manufacturer FMC, said on his company's earnings call earlier this month.

It should be noted that the comments listed below were made before the most recent escalation in the trade war, which rocked global markets over the past week. China on Monday hiked tariffs on $60 billion worth of US goods, sending markets plunging. 

That followed President Donald Trump's surprise announcement on Friday that the US would raise tariffs on $200 billion worth of Chinese imports to 25%. The announcement took investors by surprise after Trump earlier this month said Beijing and Washington's trade talks were progressing.

Below is a selection of what companies said about the trade war's influence on business:

Electronic Arts

Ticker: EA

While the company hadn't "heard anything or seen anything that would imply pressure," an executive said on the earnings call earlier this month that the dispute was a source of uncertainty for the business.

"In terms of China, trade policy is a daily question in our mind when we see what tweets come out each morning, so it's hard for us to gauge," Blake Jorgensen, the chief operating officer and chief financial officer at Electronic Arts, said.



United Parcel Service

Ticker: UPS

UPS CEO and chairman David Abney said the US-China trade uncertainty has prompted "softer" industry forecasts throughout the first quarter.

"We certainly encourage leaders of the two countries to find solutions that support increased two-way trade, but also by ensuring many US companies have access to export to China," he said.

Some UPS customers had adjusted their own supply chains to adapt to "changing trade dynamics," he added.



Microchip Technology

Ticker: MCHP

"I think having seen the yo-yo sentiment on the trade talks, I would rather wait for the talks to conclude than analyze what that finality is, whether it ends up at 10% duty or something higher than that or goes all the way to 0%," Microchip Technology CEO and chairman Stephen Sanghi said earlier this month. 

Sanghi said he wanted to wait to make an informed opinion about the trade war's effect on the business by speaking with salespeople "rather than just throw something out."



Church & Dwight

Ticker: CHD

"The other thing that's hurting the business is the tariff war," Matthew Farrell, the Church & Dwight president and CEO, said on the company's first-quarter earnings call earlier this month.

He pointed to China being the No. 1 importer of whey protein from the US and that lower demand has in turn depressed milk prices. 

"But long term, we still feel good about the business because we are effectively making the move diversifying away from dairy," he said.

Farrell made a similar comment on Church & Dwight's quarterly earnings call in November. 



Fortune Brands Home & Security

Ticker: FBHS

All of the Fortune Brands businesses are "attacking the tariff situation" through a combination of cost and pricing, CFO Patrick Hallinan said on the company's first-quarter earnings call in April.

"I would say, in the case of plumbing, more specifically, it's more cost takeout in areas where we could accelerate it, pricing and some cost sharing with vendors more than getting out of China," he said.

That's been more difficult to do within its plumbing category than it has been within other areas, such as cabinets, where its wood-product business is already departing China.



International Paper

Ticker: IP

"I think we're learning every time there's a disruption with China how much of a role it plays in the global economy," International Paper chairman and CEO Mark Sutton said on the company's first-quarter earnings call in April.

While International Paper has customers in 150 countries, Sutton said many of the company's US-based packaging customers have faced uncertainty because they export a portion of their goods to China.

"It's not a big part of their business, but it's a meaningful part," he said. "And it's disruptive to some extent due to tariffs and other things."



Aptiv PLC

Ticker: APTV

"We are certainly dealing with some of the FX and tariffs," said Joseph Massaro, the chief financial officer of Aptiv, a Dublin-based global auto-parts company that's partnered with Lyft.

"We don't give up on those. They're hard to deal with in a particular quarter, over particular couple of quarters, depending on how significant the movement is," he said, adding Aptiv would focus on cost structure to "work to offset those."

More broadly, the company is facing a decline in vehicle production in China, CEO Kevin Clark said.



Leggett & Platt

Ticker: LEG

"A lot of uncertainty" related to the trade dispute has negatively affected consumer confidence through the back half of last year and into the first half of 2019, J. Mitchell Dolloff, Leggett & Platt's chief operating officer, said on the company's first-quarter earnings call in April.

"Certainly retaliatory tariffs in China have reduced demand for inputs there," Dolloff said, adding that steel and aluminum tariffs have raised transaction prices and slowed sales in the US. "Those are really coming through lower incentives that the consumer is having to absorb."



SEE ALSO:

'Death by Amazon': 20 once thriving companies that find themselves in the e-commerce giant's crosshairs



WeWork's CFO says it will generate $2 billion in profit on the desks it's opened this year, and it shows the importance of the 'space as a service' model

Wed, 05/15/2019 - 6:06pm

  • WeWork's focus on attracting larger companies to its spaces is a key part of its growth strategy, co-president and chief financial officer Artie Minson told Business Insider.
  • The firm's revenue doubled year-over-year to $689 million last quarter.
  • Visit Business Insider's homepage for more stories.

WeWork doubled its revenue in the first quarter, and it's gearing up for even more growth. 

The company now has $3.4 billion in multi-year agreements with big companies, a major revenue driver as it moves away from overseeing coworking spaces for small startups and into managing office space for big companies.

For the first time, that figure is now bigger than its total run-rate revenue of $3 billion – a key sign of how important its enterprise business is, chief financial officer Artie Minson told Business Insider in an interview. 

WeWork wants to be seen as more than a traditional landlord by offering a variety of services, from networking groups to tech-driven insights about space utilization. With its enterprise business, WeWork could oversee a company's real estate footprint across the world.

 WeWork is different from its co-working competitors because of its focus on this "space as a service" model for larger companies, vice chairman Michael Gross told Business Insider. 

In the first three months of the year, revenue more than doubled year-over-year to $728 million, according to an earnings presentation reviewed by Business Insider.

We Work also added 82,000 desks during that time. The company says those desks will generate $9 billion of revenue over their life and $2 billion of profit.

See more: WeWork's CEO explains why he thinks his $47 billion company is recession proof, and how he keeps his ego in check as a young billionaire

"We fundamentally believe we're at a paradigm shift on how physical space is being consumed. The world is never going back to 250 square feet per employee," Gross said 

WeWork's international presence is an increasingly key growth driver, too. However, it's driving average revenue per membership down – to $6,340 last quarter – as the company opens in cheaper locations, such as China and Latin America, Minson said. He added that membership revenue city-by-city is up, though the overall figure declined year-over-year.

Join the conversation about this story »

NOW WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war

Warren Buffett's Berkshire Hathaway reveals $904 million Amazon stake for the first time (AMZN)

Wed, 05/15/2019 - 5:49pm

  • Berkshire Hathaway disclosed in a filing with the Securities and Exchange Commission Wednesday that it bought 483,300 shares in the first quarter, worth about $904 million.
  • CEO Warren Buffett told CNBC earlier this month Berkshire had been buying Amazon shares, but didn't reveal how much.
  • Watch Amazon trade live.

Investors knew Berkshire Hathaway was buying up Amazon. Now they know just how much.

Warren Buffett's conglomerate revealed in a filing with the Securities and Exchange Commission Wednesday that it bought 483,300 shares in the first quarter.

With Amazon's closing price Wednesday of $1,871.15 a share, that puts the value of the stake at just over $904 million. Berkshire Hathaway's position may have changed since the end of the first quarter.

Amazon's stock rose modestly in late Wednesday trading.

Buffett first said earlier this month in an interview with CNBC that Berkshire was buying up Amazon, but that he wasn't doing the purchasing himself.

"One of the fellows in the office that manage money ... bought some Amazon so it will show up in the 13F," he told the network just before the Omaha giant's annual shareholder meeting kicked off.

Read more coverage from Markets Insider and Business Insider:

Death, Wells Fargo, and the most 'fun' investment: Here are the biggest things you missed from Berkshire Hathaway's annual gathering

Warren Buffett says Wells Fargo 'incentivized the wrong behavior,' and Charlie Munger says he wishes Tim Sloan was still CEO

Warren Buffett says the US won't 'go into socialism in 2020, or 2040, or 2060'

Join the conversation about this story »

NOW WATCH: Warren Buffett, the third-richest person in the world, is also one of the most frugal billionaires. Here's how he makes and spends his fortune.

WeWork is setting up a $2.9 billion fund to buy buildings that it will lease to itself

Wed, 05/15/2019 - 5:32pm

  • WeWork has set up a new fund to purchase commercial properties that it will then lease.
  • The move is a change from its traditional strategy of leasing space from other building owners.
  • Most of the money in the fund will come from outside investors, but WeWork will have majority control over it.
  • CEO Adam Neumann plans to sell to the fund properties he's purchased stakes in that WeWork has leased space in.
  • Visit Business Insider's homepage for more stories.

WeWork CEO Adam Neumman has a new plan for the $47 billion office-sharing company: Instead of subleasing space in other people's buildings, he wants WeWork to buy its own buildings.

WeWork announced Wednesday that it has set up an investment fund called ARK that will be used to purchase commercial properties that the fund will lease to WeWork. The fund will be separate from WeWork and most of the money it will invest will come from outside sources, according to Bloomberg Businessweek, which first reported the new fund. But WeWork will be the majority owner of ARK, the company said in a statement. 

ARK will have $2.9 billion in cash to invest, $1 billion of which will come from Ivanhoé Cambridge, a Canadian real estate company, Neumann told Business Insider.

Read this: WeWork's CEO explains why he thinks his $47 billion company is recession proof, and how he keeps his ego in check as a young billionaire

"Now that people believe in us and are willing to give us money to buy [properties], we're very happy to have [partners] like Ivanhoé Cambridge," Neumann said. "We have some of the largest institutions of the world, and we will not let them down."

ARK represents a change of strategy for WeWork

Prior to the launch of ARK, WeWork has generally focused on leasing space from traditional property owners rather than buying and leasing out its own properties. The company typically subdivides the space it leases and sublets it to other companies, mostly startups.

With that strategy — and with plenty of backing from venture and other investors — WeWork has become a major player in the real estate market. It now has some 45 million square feet of office space around the world, about the same amount in all of downtown Philadelphia, according to a separate Bloomberg report

But the company's massive expansion has come with major costs. It lost $1.9 billion last year and has repeatedly had to raise new funds to replenish its coffers.

Neumann has generated controversy by personally purchasing stakes in properties that then lease space to WeWork. Although the transactions have been legal, he's been accused of engaging in a kind of self-dealing that raises questions about conflicts on interest.

Neumann is selling properties to ARK

As part of establishing the new fund, Neumann plan to contribute his interest in those properties to WeWork, Neumann told Business Insider. He'll sell them to ARK basically for the price he paid for them, he told Bloomberg Businessweek.

"Whatever I own that has any WeWork tenancy in it is moving to WeWork," he told Business Insider. "I'll lose money on that transaction, but the reason that's not a problem is because I'm a large shareholder of WeWork. WeWork is me; I am WeWork.

"If it's good for WeWork, it's good for me. The only vision moving forward is one aligned strategy."

To be sure, transferring the property to ARK doesn't eliminate the conflict of interest concerns, as Bloomberg Businessweek noted. What's good for the outside investors in ARK — such as which buildings to buy, which potential tenants to lease to, and the rental rate to charge — may not be good for WeWork and vice versa.

Although WeWork will control the fund, it will be overseen by Steven Langman, who will serve as its chairman, Neumann said. Langman and his team will run it to the benefit of the fund's investors, he said.

"They have fiduciary duties toward the people they raise money from," Neumann said. "It's their job to buy real estate that is going to make a return for their investors."

Got a tip about WeWork or another tech company? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

Read more:

SEE ALSO: WeWork has raised $6.1 billion and pioneered the co-working movement — but it increasingly looks like it doesn't understand commercial real estate

Join the conversation about this story »

NOW WATCH: We unboxed the $1,980 Samsung Galaxy Fold — here's what comes inside

We got our hands on filings that show $3.2 billion health-insurance startup Oscar Health is plotting an expansion into another city

Wed, 05/15/2019 - 5:19pm

  • Oscar Health just posted its financials for the first quarter of 2019.
  • The company said Wednesday that it had taken in $354 million in gross premium revenue. 
  • According to filings reviewed by Business Insider, Oscar has filed as an insurer in three new states: Illinois, Georgia, and Pennsylvania. In Pennsylvania, plans to operate plans in Philadelphia and Delaware counties.  
  • Visit Business Insider's homepage for more stories.

Oscar Health is headed for another metro area. 

The startup health insurer, which currently sells insurance on the individual exchanges set up by the Affordable Care Act and to small businesses, has filed to be an insurer in another new states for 2020.

Documents reveal the company plans to operate in Philadelphia and nearby Delaware county in Pennsylvania next year. Business Insider previously reported that the company planned to enter Illinois and Georgia, too. 

A spokeswoman for Oscar said in a statement that the company is laying the groundwork to operate in new markets, but that the company won't necessarily sell health plans in all three states in 2020.

This year, Oscar offers health-insurance plans in nine states: Arizona, California, Florida, Michigan, New Jersey, New York, Ohio, Texas, and Tennessee.

Read more: $3.2 billion startup Oscar Health is plotting its expansion into new states as it moves into a competitive insurance plan market

"Oscar is committed to expanding our footprint so we can offer our tech-driven, consumer-facing health insurance to more people across the country," the spokeswoman said. "There are regulatory requirements with which we need to comply and licenses we need to obtain in order to operate in new markets. These new entities are merely preparatory and, pending approval, we will announce our 2020 footprint and the products we will offer in each market later this year."

Oscar has said that it's planning to offer a new type of health insurance as well. In 2020, Oscar will start offering private health-insurance plans to seniors, which are known as Medicare Advantage plans. The company hasn't yet said where it will sell those plans.

Read more: We got a look at $3.2 billion startup Oscar Health's latest enrollment numbers, and they show why the company is pursuing a new strategy for growth

Oscar in August 2018 raised $375 million from Google's parent company Alphabet, and said it would use the funds to bring its tech-backed health insurance plans to more people, including in Medicare Advantage. In total, the company has now raised more than $1 billion.

On Wednesday, Oscar provided reporters with a summary of its financial results for the first quarter of 2019. The company said it took in $354 million in gross premium revenue, and that it generated a gross underwriting profit of $82 million. The company said it spent about 70% of its members premium dollars on medical care. 

The gross profit figure doesn't include spending on investment the company is making in hiring new people or building out its technology, nor its marketing costs to get the word out about the plans. The gross revenue figure adds back in funds that Oscar sends to insurance giant Axa as part of a reinsurance deal.

A portion of the premiums that Oscar collects are sent to Axa, and in return Axa agrees to share a portion of Oscar's profits or losses. 

Business Insider reviewed Oscar's financial filings to gain a more complete view of the company's results.

Oscar took in about $198 million in premiums in the first quarter of 2019, according the company's filings. The figure excludes funds sent to Axa. The filings also leave out some members in New Jersey. The company posted a net profit of $24 million, according to the filings.

Join the conversation about this story »

NOW WATCH: A fire expert explains why historic buildings like Notre-Dame Cathedral burn so easily

7 reasons the Chase Sapphire Preferred is worth it — even though the card doesn't come with as many flashy perks as the Sapphire Reserve

Wed, 05/15/2019 - 5:16pm

Business Insider may receive a commission from The Points Guy Affiliate Network if you apply for a credit card, but our reporting and recommendations are always independent and objective.

When Chase released its popular Sapphire Reserve credit card in 2016, the new offering generated a lot of buzz. With a high sign-up bonus, plus an annual $300 travel credit, 3x points on dining and travel, access to Priority Pass airport lounges, and many of the same benefits — in some cases enhanced — as its older sibling, the Chase Sapphire Preferred, the card offered more than enough value to make up for its hefty $450 annual fee.

That fee, however, is still a lot of money to have to pay up front. Plus, while the Reserve is excellent, the older Sapphire Preferred is still a useful card with rich rewards and valuable benefits. In fact, there are a few reasons you may want to consider signing up for that older card, the Sapphire Preferred, instead.

Read on to see reasons that you may want to go for the Sapphire Preferred instead of the Reserve.

Click here to learn more about the Chase Sapphire Preferred from Insider Picks' partner: The Points Guy.

Keep in mind that we're focusing on the rewards and perks that make these two cards great options, not things like interest rates and late fees, which can far outweigh the value of any rewards.

When you're working to earn credit-card rewards, it's important to practice financial discipline, like paying your balances off in full each month, making payments on time, and not spending more than you can afford to pay back. Basically, treat your credit card like a debit card.

1. The Sapphire Preferred has a (much) lower annual fee

I often argue that the Reserve's $450 annual fee is actually just $150. That's because each card-member year with the Reserve, you'll get $300 of statement credits on travel purchases. In other words, the first $300 of travel purchases you make, whether one big purchase or a lot of smaller ones, will be canceled out by the credits. It's basically a rebate of $300 of the annual fee.

Still, $150 is still a decent bit of money. And though you'll get value back in the form of travel statement credits, you'll still need to pay $450 for the fee on your first statement, and not everyone has that amount of cash to float or is willing to put up that much.

The Sapphire Preferred, on the other hand, has an annual fee of $95, a relatively standard fee for a rewards card.

Looking at the fees over the first 24 months makes the differences even clearer — you'll pay $900 for the Sapphire Reserve (with up to $600 in statement credits) compared with just $190 for the Sapphire Preferred.

Read more: 8 lucrative credit-card deals new cardholders can get this month — including up to 75,000 Delta SkyMiles

2. The Sapphire Preferred has a higher sign-up bonus

Though the Sapphire Preferred has a much lower annual fee, it offers a higher sign-up bonus than the Sapphire Reserve — 60,000 points after spending $4,000 in the first three months. When you have the Sapphire Preferred, that's worth $600 as cash, $750 as travel booked through Chase, and potentially even more when you transfer those points to a hotel or frequent-flyer partner.

For comparison, the Sapphire Reserve offers only 50,000 points when you meet the same spending threshold.

Read more: 5 reasons the Chase Sapphire Preferred is a powerhouse within the increasingly competitive credit card space

3. The Sapphire Preferred has fewer perks than the Reserve but offers many of the same crucial benefits

The Sapphire Preferred doesn't come with the more premium Reserve's airport-lounge access, concierge service, or a credit to cover the cost of enrolling in Global Entry/TSA PreCheck, but other than that the two cards have almost the same benefits — that's impressive, considering the Preferred's much lower fee.

Both cards offer trip-delay insurance. If you're traveling by common carrier — airplane, train, ferry, bus, and similar public forms of transportation — and your trip is delayed, you can be covered for up to $500 of expenses, including a change of clothes, hotel room, toiletries, and meals. Both cards' trip-delay insurance kicks in when the delay forces an overnight stay, or, if you aren't stuck overnight, the Preferred's coverage kicks in after 12 hours, and the Reserve's after six hours.

Similarly, both cards offer primary rental-car damage/loss coverage, trip cancellation/delay insurance, lost-luggage insurance, and various purchase protections. There are minor differences in some of those benefits between the cards, but for most instances, they're effectively identical.

4. You'll still earn bonus points on dining and travel with the Preferred

There's no question that the Sapphire Reserve's earning rate of 3x points on dining and travel makes it easy to earn points quickly. But you'll still earn bonus points on the same categories with the Sapphire Preferred, even though they won't add up as fast. For every dollar you spend on dining and travel, you'll earn 2x points, and 1x point per dollar on everything else.

These categories are particularly useful because of how broadly they're defined. Dining includes restaurants, bars, cafes, bakeries, ice-cream shops, fast-food stands, brewery tap rooms, and delivery services like Seamless and Grubhub.

Travel, similarly, includes just about everything, big or small. You'll earn 2x points on taxis, Uber/Lyft rides, subways, commuter trains, parking, tolls, rental cars, airfare, hotels, cruises, and tours.

5. The Chase Sapphire Preferred has access to the same great transfer partners as the Reserve — and offers similar flexible ways to redeem points

As with the Sapphire Reserve, Ultimate Rewards points earned with the Sapphire Preferred can be exchanged for cash back, with each point worth $0.01, or points can be used to purchase travel through Chase. When you do that, you'll get a 25% bonus, effectively making your points worth $0.0125 each (the Sapphire Reserve offers a 50% bonus, making points used to purchase travel through Chase worth $0.015 instead).

Much more value could be gleaned from points, however, by transferring them to one of Chase's nine partnering airline frequent-flyer programs or four hotel loyalty programs. The two cards have access to the same transfer partners.

While this is more complicated, you can generally get more value by booking frequent-flyer award tickets than you can by using your points as cash or through Chase. You can even book flights in business or first class for fewer points than it would cost if you used them as cash or through Chase's website to buy the flights. For example, my wife and I used the points from our Sapphire Preferred cards to fly to Japan in first class for our honeymoon.

You can read more about why transferable points are so valuable here.

6. The card doesn't charge a fee for authorized users

If you're planning to add a partner, a child, a friend, or anyone else as an authorized user on your account, you may be better off with the Sapphire Preferred. That's because you can add as many users as you want to your account free. You'll even get 5,000 bonus points if you add an authorized user and they make a charge within your first three months. The Sapphire Reserve, on the other hand, charges $75 for each user you add. Those users will get access to Priority Pass lounges, at least.

7. It's easier to get approved for the Sapphire Preferred

While there's no official publicly available formula for how banks approve credit cards, common knowledge is that the Sapphire Reserve — which is a Visa Infinite card — has higher standards for approval than the Sapphire Preferred — a less-exclusive Visa Signature card. You'll still need a solid credit score for the Preferred, but you have better odds of getting approved if you have a shorter credit history.

The bottom line

Regardless of which card you choose, both offer class-leading value.

Though the Sapphire Reserve is an excellent card — I personally went with the Reserve over the Preferred — the annual fee is a lot to stomach. Depending on your cash flow, how you budget, or how you view these benefits and rewards, the Sapphire Preferred may be a better option for you.

Don't forget to also check out the reasons you may want to consider the Reserve over the Preferred, instead.

$95 annual fee: Click here to learn more about the Chase Sapphire Preferred card from Insider Picks' partner The Points Guy. $450 annual fee: Click here to learn more about the Chase Sapphire Reserve card from Insider Picks' partner The Points Guy. For more about the Chase Sapphire Preferred:

SEE ALSO: The best Chase cards you can sign up for right now

Join the conversation about this story »

We took a look at the latest financial results for health insurer Clover Health, which raised $500 million in January and laid off 25% of its staff in March

Wed, 05/15/2019 - 4:57pm

Clover Health seems to be holding steady even as it goes through some big changes.

For the first quarter of 2019, Clover generated $115 million in revenues across its health plans in seven states, according to two regulatory filings. The company sells private health-insurance plans for seniors, a market known as Medicare Advantage.

Clover lost $9.3 million in the first quarter, according to state insurance filings reviewed by Business Insider. That's down from the $14.7 million the company lost in the first quarter of 2018.

The company paid out $109 million in medical expenses for its customers over the quarter, or about 95% of the premium revenue it took in, similar to its results from 2018.

Read more: We just got our first look at health-insurance startup Clover Health's financials since it raised another $500 million

Clover got its start selling Medicare Advantage plans in New Jersey, which remains the company's main market. The company also operates in Pennsylvania, Texas, Tennessee, Georgia, South Carolina, and Arizona.

Founded in 2014, Clover said it hoped to use data captured through its technology to improve patients' health. But pulling that off hasn't been easy.

When people in the US turn 65, they can choose to be part of either traditional Medicare or Medicare Advantage, which is operated through private insurers. It's a big market for startups like Devoted, Clover Health, and Bright Health — and soon, Oscar Health — but it's also a market with entrenched insurers like Humana, UnitedHealth Group, and CVS Health.

Clover had 40,137 Medicare Advantage members at the end of the first quarter, up from 32,425 at the end of 2018.

Over the years, Clover has raked in $925 million in funding from investors, including a $500 million round in January.

In March, the company said it was laying off 25% of its workforce, or about 140 employees, as part of a restructuring. Clover said it would open a new office in Nashville, Tennessee, which is known for being a hub for expertise in health IT and health insurance, to tap into a talent pool that fits the skill set it's looking for better than what's in the tech-focused Bay Area.

Join the conversation about this story »

NOW WATCH: Ketamine, once known for its club-enhancing effects, is now an FDA-approved antidepressant. Here's what it does to your brain.

800 hospitals are joining forces to make their own drugs and upend the generic pharma business. They just revealed the 2 treatments they plan to make first.

Wed, 05/15/2019 - 12:01am

  • A group of 800 hospitals created a nonprofit generic drugmaker called Civica Rx.
  • The hope is to make generic drugs that are in short supply or have artificially high prices, based on what the hospitals need. 
  • On Wednesday, the organization picked a supplier and two antibiotics to start with in its plan to upend the generic pharma business. 
  • Visit Business Insider's homepage for more stories.

Hospitals have a creative plan to tackle the high price and frequent shortages of generic drugs. 

The nonprofit company, dubbed Civica Rx, was first announced in early 2018, and has gained a lot of attention for its promise of a cheaper and more reliable supply of crucial medicines. In total, 800 hospitals from more than 20 health systems have joined the effort.

Now, Civica has picked its first supplier: Xellia Pharmaceuticals. Xellia, based in Copenhagen, will make antibiotics for the hospitals in Civica's network, including vancomycin and daptomycin, according to a statement. Overall, Civica has committed to making 14 different drugs this year. 

The hospitals that are part of Civica agreed to purchase the drugs for five years from Xellia, and will receive the drugs by the third quarter of this year. The antibiotics business can be difficult for manufacturers if they're not sure how much of their products hospitals will want to buy.

"What we offer these manufacturers is certainty,"  Civica CEO Martin VanTrieste told Business Insider.

Read more: Hospital groups and the VA are trying to upend the generic drug business

Civica's priorities include making essential medicines that have been on the FDA drug shortage list and taking on decades-old drugs that have artificially higher prices because there's no competition to make them. 

In some cases, companies made business choices that led to shortages, such as giving up on unprofitable drugs. Other drug shortages are related to manufacturing problems. In other cases, a drug is only being produced by a single manufacturer, which can lead to price hikes. There's also been a consolidation of the manufacturers that produce generic drugs.

For years, health systems have been on the hook for skyrocketing drug prices for injections or drugs delivered through IV solutions. As of Tuesday, there were 205 drugs currently facing shortages, according to the American Society of Health-System Pharmacists. Those shortages include everything from bags of saline solution to common antibiotics — including vancomycin and daptomycin — and a type of epidural used for pregnant women during childbirth

Vancomycin and daptomycin can be given through an IV and are used to treat potentially deadly infections. Civica has given a commitment to Xellia that it'll purchase the antibiotics for its member hospitals for the next five years. 

Join the conversation about this story »

NOW WATCH: Here's why NASA spacesuits are white

Uber riders can now ask their drivers to be quiet directly from the app, but you'll pay extra for that convenience (UBER)

Tue, 05/14/2019 - 11:40pm

  • Uber is rolling out a new quiet mode for riders who want to keep conversation between themselves and their drivers to a minimum.
  • The ride-hailing service is offering the option to users who choose the Uber Black and Uber Black SUV services, starting May 15.
  • Those rides will come with some additional perks, including the option to select an ideal interior temperature for your ride, luggage service, and a little extra time to find your driver's car after it has arrived.
  • It's part of Uber's effort to draw users back to its pricier Uber Black service. The ride-hailing company has not yet made a profit, despite its multibillion-dollar valuation. It will likely seek additional roads to revenue after a disappointing stock market debut last week.
  • Visit Business Insider's homepage for more stories.

Uber is offering some added perks for users who choose its pricier Uber Black and Uber Black SUV service.

Riders who want to keep conversation between themselves and their drivers to a minimum can select "quiet mode," and they can enjoy other perks like luggage service, freedom to choose a specific interior temperature, and extra time to find their driver's car after it has arrived.

Users also get access to a dedicated customer-support line and what the Uber bills as "professionalism" and "consistent quality" — meaning Uber is promising there's a commercially licensed driver behind the wheel, who is showing up in the kind of vehicle one would expect when using a luxury car service.

Read more: Uber isn't screwed. There are a ton of ways it could become a profitable monster

Uber's senior product manager Aydin Ghajar said in a press release on Tuesday the company understands that riders who choose the Uber Black and Uber Black SUV service "want a consistent, high quality experience every time they ride."

"With these new features and more to come, we're excited to ensure that our riders can arrive relaxed and refreshed, wherever they're headed," Ghajar said.

The features come online May 15. They are part of Uber's effort to draw users back to its pricier Uber Black service.

The giant ride-hailing company has not yet made a profit, despite its multibillion-dollar valuation. It will likely seek additional roads to revenue after a disappointing stock market debut last week.

SEE ALSO: Sure, Uber didn't leave any money on the table, but its IPO was nothing to celebrate and it could haunt the company and its execs for years to come

Join the conversation about this story »

NOW WATCH: We rode in a self-driving Uber — here's what it was like



About Value News Network

Value is the only commonality in an increasingly complex, challenging and interdependent world.
Laurance Allen: Editor + Publisher

Connect with Us