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Financial advisers are worrying their profession will shrink — and they're blaming robo-advisers and waning interest in the career

Sat, 01/11/2020 - 9:55am  |  Clusterstock

  • A recent survey of financial advisers found that 43% believe their population will shrink in the next five years.  
  • And of that group, 43% believe robo-advisers are the leading factor in eliminating financial adviser roles, according to the survey conducted by research firm Greenwich Associates. 
  • Startup robo-advisers enjoyed growth last decade, forcing traditional wealth managers to consider how to adapt to changing customer tastes. 
  • Visit BI Prime for more stories.

The end is near for financial advisers, according to financial advisers. 

That's the sentiment from some advisers surveyed as part of a recent report on the impact of technology on their roles. 

Research and consultancy Greenwich Associates surveyed more than 2,500 advisers on the state of their occupation in five years — and the majority of the group's outlook was pretty bleak, with 43% believing fewer financial advisers will exist in the future.

Of that group who see a decline in the cards, 43% said robo-advisers would be the leading factor in the decline of the occupation, closely followed by "less interest in becoming a financial adviser."

Meanwhile, the technology is actually helping advisers' business, according to their customers. A survey of 312 US investors found that 37% trust their adviser more because of the increased use of fintech as part of the adviser relationship. 

"Put another way, financial advisers expect technology to take their jobs, but clients expect technology to make their financial advisers better," said Brad Tingley, a market structure and technology analyst at Greenwich Associates, in the report. "The reality is somewhere in between." 

The results from the survey echo some findings from a recent CFA Institute poll.

More than half — 54% — of wealth managers, financial advisers, and planners, said they expected their roles to "substantially" change over the next five to 10 years, with 4% believing the job will cease to exist entirely in that time. 

Financial advisers have no love lost for robos, which spent the better part of the past decade growing in size thanks to their low fees and digital-first experiences. In a November survey of financial advisers by Greenwich Associates, 71% labeled robo-advisers and automated investing as over-hyped.  To be sure, pure-play robos still make up just a tiny fraction of overall global wealth assets, and some experts say the space could be overdue for consolidation.  

Still, despite their distaste for the up-and-coming tech, legacy players have been forced to consider how to use it. 

Business Insider first reported in November that storied asset and wealth manager Neuberger Berman was overhauling its client- and adviser-facing digital offerings in a firm-wide upgrade by the end of 2020.

In December, we surveyed executives across the wealth management spectrum to understand the skills human advisers would need to stay ahead of the curve in the future, and which technology would become ubiquitous in a decade. Many said artificial intelligence aiding advisers' decision-making for clients would only grow in popularity.

And while some advisers have come around to adopting new technology, most haven't been keen to share those capabilities with clients. Greenwich's latest report indicates just 29% of advisers make clients aware of all the tech tools available to them.

Industry-wide changes

Meanwhile talent in the business — comprised of players like traditional wirehouses, independent registered investment advisers, and retail banks — is aging, and firms are trying to combat the industry's realities.

The average US financial adviser is 52 years old, according to research provider Cerulli Associates, and those under 35 comprise just 9% of the total workforce.

And over the next decade, some 37% of advisers overseeing about 39% of industry assets are expected to retire. The majority of those retirements are expected to come from wirehouses and independent broker-dealers.

UBS, the world's largest wealth manager by client assets, said last month that it would bring back its wealth planning analyst role, a position more junior to full-fledged financial advisers.

Rival wealth manager Morgan Stanley has been turning to a group of junior wealth staffers to assist advisers in getting up to speed with new capabilities; it's one way to create a pipeline of younger employees to full-fledged adviser roles.

And we first reported last year that Merrill Lynch raised trainee financial advisers' starting salaries by $10,000 as it looked to attract fresh talent and maintain a competitive edge. 

Read more: Robo-advisers like Wealthfront and Betterment are in a tricky spot — here's why one fintech banker thinks buyers and public investors will be hard to win over

Read more: WEALTH MANAGEMENT 2030: Read the full responses to our survey about wealth management and the financial adviser of the future

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The 7 types of accounts you need to accelerate your wealth, according to a financial adviser

Sat, 01/11/2020 - 9:45am  |  Clusterstock

  • If you've got all or most of your money in a single investment account, you're missing serious opportunities to build wealth.
  • One of the biggest wealth secrets is to earn money on your money, whether it's in checking, savings, or being put aside for retirement.
  • It's a good idea to designate specific accounts for specific purposes, like paying your taxes (especially if you're self-employed) and investing in yourself.
  • SmartAsset's free tool can help find a financial adviser to create your own wealth-building plan »

If you're serious about building wealth, there are seven types of accounts you need to have to make it happen. Don't worry if you don't have them right now – that's the whole point of this article. I didn't have them either when I began my wealth-building journey, but I added them as I moved forward. You can do the same.

And once you have them up and running, you're going to see your wealth begin to grow faster than you ever imagined. It's all about creating the right mix of accounts.

Let's jump right in with the seven types of accounts you need to accelerate your wealth.

1.  High-yield checking accounts

I know what you're thinking: What does a checking account have to do with building wealth? After all, just about everyone has a checking account.

But the arrangement tends to be a bit different with the wealthy. The wealthy make sure their money is working for them, even in their checking accounts. That's why they favor interest-bearing checking accounts, paying rates at the top of the yield curve for that account type.

The basic idea is to make sure you're earning some kind of income, even on funds you expect to spend in the current month.

This is the exact opposite of how most people think. They may believe that since the money will be in the account only for a few days or weeks, there's no point worrying about earning income on it. But for the wealthy, it's about earning something on your money, no matter where you have it parked.

If you have a certain asset amount, you'll usually have access to a private banking or private wealth management account with a bank. That will often come with high-interest checking. But even if you don't have the large bankroll, there are still ways you can earn high interest on your checking.

There are online banks that specialize in paying high interest rates, even on checking accounts, like Ally Bank's Interest Checking Account and Charles Schwab's High-Yield Investor Checking Account (not that Schwab's must be linked to a Schwab One Brokerage account, which also requires no minimum investment and charges no monthly fees).

2.  High-yield savings accounts

If you're not in the habit of scanning interest rates at least occasionally, you may have fallen into the trap of believing your local bank is paying you the highest interest available. Unfortunately, that isn't remotely true. Complacency with interest yields costs you money in the form of lost income. That's exactly what the wealthy don't do.

This process starts by understanding exactly what interest rate your bank is paying you on your savings. Next, you'll need to investigate the available alternative high-yield savings accounts. And trust me, the difference between the two is probably a lot bigger than you think.

Here's the problem … the typical bank is paying just 0.09% on savings. It's a solid bet you're not earning much more than that on your current savings arrangement. But there are plenty of alternatives.

Before we get into that, make sure you check the financial integrity of any institution that's paying high interest rates. First, make sure your deposits are fully FDIC-insured. Second, check the rating on the bank to make sure they're solvent. N0 matter how much interest an institution pays, it's not worth the risk if it may fail.

That said, there are plenty of high-quality options. 

If you're not earning top interest rates on your savings, it's the equivalent of giving your bank a loan. Even if they're paying you 0.09%, the rate is practically nothing. And they'll be loaning out your funds for 4% on car loans and 20% or more on credit cards. You owe it yourself to earn as much on your savings as possible.

3.  Tax savings accounts

This is one I didn't quite get it until I launched my own business. When you're self-employed, you have to make tax deposits throughout the year. Unlike an employee, you don't have withholding taxes taken out of each paycheck.

If you're self-employed, or if you expect to have significant non-employment income, you'll need to set up a tax savings account to be ready to file your income tax return. That will apply if you are operating a side business, freelancing, consulting, or working as an independent contractor.

You need to make quarterly tax payments, or at least have money set aside to pay your taxes at the end of the year. As a loose guideline, figure between 20% and 30% of the income you earn from non-wage sources should be paid estimates or set aside.

If you want to be really accurate, have an accountant or tax preparer analyze your income for the year and let you know how much you should be allocating for tax payments.

If your year-end tax liability from your extra income will be more than a few hundred dollars, you can be hit with a large tax bill when you file your return. Even worse, the IRS imposes penalties and interest on nonpayment or underpayment of income tax due.

If you're making estimated quarterly tax payments, you'll need to accumulate funds in your tax savings account as you earn them. This will be even more important if you plan to hold the funds to pay your additional tax liability when you file your return. Note that a "tax savings account" is not a different banking product — it's just a designated use for a savings account, like an emergency fund would be.

You should plan to accumulate the funds in a high-yield savings account. Even though the purpose of the money will ultimately be to pay your tax bill, you should still give yourself the benefit of earning high interest on those funds. It's a way to build additional wealth even on money earmarked for other purposes.

4.  Personal equity fund

Hopefully, my use of the word "personal" in the name of this account doesn't cause you to confuse it with an emergency fund. That's not what it is at all. Everyone should have an emergency fund, and it should be held in a high-yield savings account so you can access the funds quickly when an unexpected need arises.

But a personal equity fund is something completely different. And unlike the other account types on this list, it's not for investing in financial instruments either. Instead, it's a fund you create to invest in yourself.

Investing in yourself may be the most overlooked type of investment there is, but it's also one of the very best. This is where you allocate funds to cover the cost of programs you'll participate in to improve your career and business skills. It can include coaching programs, mastermind groups, conferences or obtaining needed certifications. And that's just the short list.

Every wealthy person I know recognizes the value of investing in themselves, even if they don't have a designated personal equity fund for that purpose. But they do allocate money toward their personal development, self-growth, making themselves more marketable — you name it.

It's an investment of time and effort, as well as money. The personal equity fund will cover the money part, and that's more important than you might realize. By having an account set up specifically for these expenses, you'll be establishing the intent of self-improvement, as well as providing yourself the funds to do it. (Like the tax savings account, this isn't a different product your bank offers — it's a specific use for an account like a high-yield savings account.)

The more money you can earn, the more you'll have available for every other investment on this list. No matter who you are, that starts with making an investment in yourself to make that happen.

5.  Roth IRA

Even if you're covered by an employer-sponsored retirement plan work, a Roth IRA has an advantage not available to any other retirement plan. It's tax-free income in retirement. If you're seriously interested in building long-term wealth, this is a component you need to add to your portfolio.

A Roth IRA is a particularly good strategy early in your wealth-building process. The plan does come with income limits. If you exceed those limits, you won't be able to make direct contributions to the plan. This is unlike contributions to a traditional IRA, where even if you are covered by an employer plan and exceed certain income limits, you can still make contributions but they won't be tax-deductible. With the Roth IRA, once you've reached those limits, you won't be able to make contributions, period.

But even if you exceed the limits for a Roth IRA contribution, there's another way you can make it work. It's the Roth IRA conversion. You'll make a non-deductible contribution to a traditional IRA, then do a conversion of those funds to a Roth IRA. This is often referred to as a backdoor Roth IRA contribution, and it can be done tax-free if it's made with non-deductible traditional IRA funds.

Even though a Roth IRA contribution isn't tax-deductible, the investment income you earn on the account is tax-deferred. But once you reach age 59 ½, and as long as you've been participating in the plan for at least five years, any withdrawals you make from the account will be tax-free. That includes both your contributions and the investment earnings they've accumulated.

You can open a Roth IRA just about anywhere. That includes a bank, credit union, brokerage firm, or a robo-adviser, like Betterment or Wealthfront.

An unexpected benefit of a Roth IRA, and one of the reasons I'm such a strong proponent, is that it's an excellent account to learn how to invest. For example, you'll need to meet with the trustee that will hold your account. That's how you'll learn about your investment options and the specifics of how the account works.

And if you choose self-directed investing through a brokerage firm, you'll get hands-on experience investing. Once you become familiar with that process, it'll help you increase your wealth throughout your life.

6.  Self-directed 401(k)

Do you notice the term self-directed? That's not an accident — it's a special type of 401(k) plan that allows you to build wealth much more quickly.

Being self-employed, I was able to set up a self-directed 401(k) plan for myself and my wife that enables us to make tax-deductible contributions of $110,000 per year. This is clearly not a typical 401(k) plan, like the one your employer offers.

The large contribution amount will give you a great big tax deduction. And it also provides an opportunity to earn tax-deferred income on a very large plan balance.

But the self-directed aspect of the account is one of the biggest advantages. You can open a self-directed 401(k) plan with a large investment broker, and have virtually unlimited investment options. Stocks, bonds, mutual funds, exchange traded funds, real estate investment trusts, options, commodities — you name it — you can hold it in a self-directed 401(k) plan.

It goes even farther than that. Self-directed 401(k)s are how wealthy people are able to invest their retirement money in unconventional investments, like private equity deals, real estate, and even small business ventures.

If you have a significant amount of self-employed income, this is an account you need to have. It may be the single best wealth-building investment plan available.

7.  Regular investing account

This can be an individual or joint investment account. We're not concerned about tax-sheltered investing here – that's covered by some of the accounts above. This is more of a catch-all account where you can invest above and beyond the other account types.

You can use this account to invest anyway you like. For example, you can use it to invest in individual stocks, bonds, options, real estate investment trusts. It's completely up to you.

Once again, there are advantages to this type of investing. But the purpose may be for a medium-term goal, providing you with capital for a future purpose, without needing to liquidate your retirement savings early.

There's also something unique about this type of account. I've seen multimillionaires who still maintain the account, mainly to use it as play money!

What do I mean by play money?

Maybe you want to get into day trading, options, dabbling in cryptocurrencies, or even shorting stocks or options. A regular investment account is where you'll do this. It's play money because your long-term financial survival doesn't rest on this account. You're free to do whatever you want with it.

The rest of your accounts are set up to provide predictable, long-term growth. But this is the account where you can "scratch an itch." That might be participating in a type of investing you find interesting, challenging, or stimulating. It might just be something you've heard about and want to try. This is the account to do it in.

This type of investing is more risky and hands-on than everything else we've discussed up to this point. And for that reason, it should be only a small percentage of your total investment portfolio. You're playing here, so if it doesn't work out your overall financial security won't be affected. That's another reason why I'm referring to it as play money.

The truth is, investing can (and should) be kind of boring. But this is the type of account where you can spice things up a bit and have some fun. And in the process, you may even learn a few things about investing you didn't before.

All these accounts are working toward your financial goal

This is the whole purpose for having seven types of accounts. Though each is different from the others, it serves an important purpose in the grand scheme of things, which is to help you achieve your financial goals.

For example, maybe you hope to retire at 45. Each of these individual account types should be set up in a way that will move you in that direction.

Even if you don't have all these accounts set up right now, don't sweat it. Investing is a work-in-progress, and you can add one account at a time. Get comfortable with one type, then move on to another. As you add new accounts, try to make it fun. Yes, investing can be boring, but watching your wealth grow is anything but.

SmartAsset's free tool can help find a financial adviser to create your own wealth-building plan »

Jeff Rose is an entrepreneur disguised as a certified financial planner, author and blogger. Jeff is an Iraqi combat veteran having served in the Army National Guard for nine years, including a 17-month deployment to Iraq in 2005. He's best known for his award-winning blog GoodFinancialCents.com and book, "Soldier of Finance: Take Charge of Your Money and Invest in Your Future." He's also the founder of Wealth Hacker Labs, a movement to teach accelerated wealth-building strategies to future generations. 

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Ally's head of strategy told us how one of the first digital banks picks fintechs to partner with, invest in, and buy

Sat, 01/11/2020 - 9:42am  |  Clusterstock

  • Ally Financial's Ally Bank, one of the oldest digital-only banks in the US, may be branchless, but it's not a neobank. In addition to credit and savings accounts, Ally offers mortgages and trading accounts.
  • We spoke to Dinesh Chopra, Ally's head of strategy, about his outlook on M&A, partnering with other fintechs, and Ally's venture investing. 
  • In April, Ally announced it had teamed up with mortgage startup Better.com. Ally's venture arm also invested in Better's Series C fundraising round.
  • A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech. "We as a company wrestle with that decision on a day-to-day basis," Chopra said. 
  • "We also look at what our exit strategy is. Because when you enter into a partnership, you always have to plan for the worst," Chopra said.
  • Click here for more BI Prime stories.

Ally Financial's online bank is one of the oldest digital banks in the US. But it's not a neobank.

It may be branchless, but Ally has a banking charter, so it's regulated like any other retail bank. Most neobanks don't have bank charters, instead partnering with banks like Bancorp or GreenDot, which provide the core banking processing and FDIC insurance.

Ten-year-old Ally Bank is nevertheless part of the cohort of digital-only banks that includes startups like Chime — which are attracting VC backing and gaining users and deposits.

Ally is leaning on adding new products for growth, as startup neobanks lure customers with high-yield savings accounts and banking giants build out their own digital capabilities — and how exactly it goes about doing that is a critical question.

"We believe that there is a structural tailwind behind digital banking," Dinesh Chopra, chief strategy and corporate development officer at Ally Financial, told Business Insider.

"Digital banking overall is only 8% of the market," he said. Legacy players like Chase, Bank of America, Wells Fargo, and Citi account for most of the country's consumer deposits.

Chopra heads up Ally's corporate strategy team, which includes oversight of mergers and acquisitions, strategic partnerships with fintechs, and Ally's venture capital arm.

He's responsible for Ally's strategic roadmap, deciding when to build new products and when to partner with or acquire fintechs. Prior to joining Ally in 2017, Chopra was head of strategy for Citigroup's retail bank as well as its mortgage and payments businesses.

As of the first quarter last year, Ally was the 15th largest bank in the US in terms of total assets, according to the Federal Reserve

Chopra said consumers want more than high-yield savings — they want to borrow, save, invest, and protect their money.

"We're trying to get into other verticals like wealth management," said Chopra. "I think to have a sustainable banking practice, you have to have a more holistic value proposition than just one product."

Deciding when to build, partner, or buy

A bank can expand its product lineup in a few ways. It can build in-house, buy a company that has already built that product, or partner with a fintech.

"We as a company wrestle with that decision on a day-to-day basis," Chopra said. 

Building new products in-house can be expensive and delay time to market, meaning partnerships are often a more attractive option. 

"We don't believe we have to do everything ourselves," said Chopra. "The world is moving towards growth through partnerships."

In April, Ally announced it had teamed up with mortgage startup Better.com on digital home lending. Ally's venture arm also invested in Better's Series C fundraising round.

Through its partnership with Better.com, Ally is able to offer fully digital mortgages on its website and app, meaning customers can apply, receive, and pay down a mortgage online.

"It is completely end-to-end digital. You can get your mortgage application done in less than five minutes on a mobile phone," said Chopra.

Ally had a mortgage business prior to its Better.com partnership called Ally Home, which launched in 2016. To apply for a mortgage, customers would have to fill out a form on Ally's website, then wait for a phone call from a company representative to complete the application.

Making sure you have an exit strategy

Ally considers a few things when looking externally for a partner or possible acquisition, Chopra said. For one, it looks for a partner that has created a compelling product. 

"We have a very high bar for what we share with our customers," said Chopra. "We are trying to look for something that is differentiated and disruptive."

Then, Chopra has to decide if the money makes sense by looking at a potential partner's business plan and revenue-share agreement. 

"We might find a candidate that has something we want and it makes sense to partner with them because the time to market can be quicker, but the economics may not work out," he said.

Chopra also considers the risks of depending on a partnership to support a growing product. 

"We also look at what our exit strategy is. Because when you enter into a partnership, you always have to plan for the worst," Chopra said.

While signing a partnership is one way to grow, Ally has also bought its way to new tech through strategic acquisitions.

In 2016, Ally acquired online broker TradeKing, which was rebranded as Ally Invest. And in October this year, it jumped into healthcare financing when it acquired point-of-sale lender Health Credit Services.

Ally's venture arm can feed its M&A pipeline

M&A and partnerships are closely tied to Ally's venture strategy. 

Ally has invested in Greenlight, a startup that offers debit cards for kids and teens, as well as Modal, a digital sales platform for car dealerships that billionaire tech investor Peter Thiel also backed.

"We make small investments in early stage companies with the primary purpose of getting a tap into the market," said Chopra. 

And when the venture business is looking for a new investment, it also considers how that investment could play into Ally's future.

"We look at companies which could be in the pipeline where we could either partner or acquire them in future," said Chopra. "It's not like a traditional VC firm where we are trying to make a 100x return on two or three investments. It's more strategic."

The Ally we know today traces its roots back to 1919 as General Motors Acceptance Company (GMAC), the captive finance arm of GM, handling the car manufacturer's auto lending business.

Before the Ally rebrand, GMAC offered more than auto loans. It also had a subprime mortgage arm, ResCap, and a direct banking channel called GMAC bank. The global financial crisis hit GMAC hard as delinquencies on mortgages and auto loans rose.

In 2008, the company received a $17.2 billion bailout from the US government, which it wouldn't exit until 2014.

In the aftermath of the global financial crisis, GMAC rebranded as Ally Financial in 2010. ResCap filed for bankruptcy, and Ally started to distance itself from GM.

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Palantir tapped John Hueston to replace litigation powerhouse Boies Schiller in a huge trade secrets case. Insiders explain why the one-time Enron prosecutor is perfect for the job.

Sat, 01/11/2020 - 9:36am  |  Clusterstock

  • If you're an executive facing a legal crisis and have anywhere between $1,000 to $2,000 an hour to spend, you might consider turning to John Hueston. 
  • Palantir, the data analytics company Peter Thiel funded, tapped Hueston when it found itself getting nowhere in a trade secret lawsuit. So did Elon Musk, when the SEC claimed he violated a settlement over his infamous "funding secured" tweets.
  • Hueston is also defending Bill McGlashan, the former TPG exec charged in the college admissions scandal.
  • His website for the law firm Hueston Hennigan has a scrolling testimonials section featuring one-time clients including actor Alec Baldwin and execs from corporations like T-Mobile, BlackBerry, and Waste Management.
  • Business Insider took a deeper look at the man responsible for the fate of the powerful people and companies that we cover.
  • Click here for more BI Prime stories.

If you're an executive facing a legal crisis and have anywhere between $1,000 to $2,000 an hour to spend, you might consider turning to John Hueston.

He's the lawyer who Peter Thiel's data analytics company, Palantir, turned to when it found itself getting nowhere in a trade secret lawsuit. He represented Elon Musk when the SEC claimed he violated the terms of a settlement over his infamous "funding secured" tweets. And he's defending Bill McGlashan, the former TPG exec charged in the college admissions scandal. 

We reviewed court records and talked to a dozen insiders including friends, colleagues, and competitors, to learn how the one-time prosecutor who grilled former Enron Chairman Ken Lay in one of the biggest corporate fraud trials in history has turned into a fixer for the rich and powerful.

His website for the law firm Hueston Hennigan has a scrolling testimonials section featuring one-time clients including actor Alec Baldwin and execs from corporations like T-Mobile, BlackBerry, and Waste Management. And if the firm's docket and 2020 schedule is any indication, it stands to add a few more.

"He can effectively present to any audience, whether it's a board or a jury or the Supreme Court," said Wayne Gross, a lawyer who has worked closely with Hueston, as far back as the 2000s when they were both prosecutors, as well as in recent years, while working in private practice. 

Other colleagues pointed to a mix of boldness and media savvy, with an energy that's led him to climb mountains and ride his bike cross-country while carrying his laptop and cell phone to stay in touch with clients. 

"He has a rare combination of being willing to do any work it takes to know the case as well as anyone else, but also be nimble and find a path that others haven't thought of," said Robb Adkins, a white collar defense partner at Winston & Strawn, who is also a longtime friend. 

Palantir fires Boies Schiller, hires Hueston

That reputation led Hueston to Palantir, the Peter Thiel-funded data company which had grown frustrated with delays in a trade-secrets case. At some point in 2019, it fired lawyers at Boies Schiller Flexner — the firm founded by famed trial attorney David Boies — and brought Hueston in to supercharge the case. 

Palantir, founded in 2003, sells software and analytics tools to US government agencies. Immigration and Customs Enforcement was reported to have used Palantir as part of a immigration crackdown under President Donald Trump.

The secretive company was last valued at $20 billion, and there's been much speculation about when it might finally pursue an initial public offering

One of the biggest legal issues currently facing the company is a longstanding dispute with an early investor, Marc Abramowitz, who had a falling out in 2015 with CEO Alexander Karp.

Abramowitz says Palantir blocked him from selling $60 million of shares and is investigating possible fraud at the company, while Palantir says Abramowitz stole trade secrets and used them to set up a competing business.

After three years in court, including back-and-forth deliberations about the nature of trade secrets Abramowitz is alleged to have misappropriated, there has been no discovery conducted against Abramowitz, even as a June 2020 trial looms ahead. 

In late December, Hueston filed a motion in California court pursuing discovery against Abramowitz, and referenced a new claim he added under RICO — a racketeering law often cited by prosecutors when going after organized crime, and a more aggressive accusation than trade secret misappropriation.

Boies Schiller did not respond to requests for comment about Hueston's involvement. Neither did attorneys at Skadden who are representing Abramowitz. 

Hueston advises Elon Musk 

In February, Hueston represented Elon Musk when the billionaire entrepreneur got into hot water with the Securities and Exchange Commission for tweeting what the securities regulator said was fraudulent information about Tesla's business.

Musk had already entered into a settlement with the SEC for tweeting the words "funding secured" in August 2018, which suggested to many observers that he could take Tesla private at $420 a share. The SEC called those tweets misleading, and a go-private deal never happened. 

As part of the SEC settlement, Musk forfeited his role as chair of the Tesla board for three years, paid $20 million, and agreed to have his tweeting monitored by lawyers.

Then, months later, another tweet — this time, inaccurate sales projections which he later corrected — provoked the SEC to file another legal action against Musk, claiming he was in violation of the settlement.

That's when Hueston was called in to iron things out. He argued that Musk had been perfectly cooperative with the SEC, despite his view that the Twitter restrictions raised First Amendment concerns. And, he said, that the SEC's action "smacks of retaliation and censorship" after Musk was critical of the agency in a CBS interview. 

After some jockeying in court, the matter was resolved with Musk's CEO position intact at Tesla and he and Hueston appeared outside the courtroom steps in the Southern District of New York, fielding questions from reporters. 

Hueston picks up McGlashan as a client

It was around the same time that former TPG executive Bill McGlashan, who was charged by U.S. prosecutors of paying to falsify his son's record in an attempt to get him into the University of Southern California, was on the phone with Hueston about his own legal problems.

In the McGlashan case, Hueston interviewed as many as four parents for possible representation after a sweeping March indictment netted 33 accused of paying a consultant to create fake profiles and exam scores for their children to gain entry into top universities. 

People familiar with the process said that Hueston went with Hollywood private-equity mogul McGlashan, at least in part, because he was willing to fight the charges rather than cop to a plea agreement with prosecutors to make the matter go away. 

Later in the year, Hueston attacked the prosecutors charging McGlashan, peppering them with discovery requests and asking for any documents that could show he had been unaware of the fraudulent scheme orchestrated by the consultant he paid, Rick Singer. 

From Enron prosecutor to a friend to big business 

Hueston has always been known as aggressive. He made his name in 2006 when he received public recognition for his role as the attack-dog prosecutor grilling former Enron chairman and CEO Ken Lay in one of the biggest corporate fraud trials ever. 

Hueston had been called in from Southern California to Houston to work as one member of a special Justice Department task force investigating the events that led up to Enron's collapse in 2001.

He proved himself to be dogged in mounting a case against Lay, while others investigated onetime CEO and COO Jeffrey Skilling, as well as other executives. By the end of it, both Lay and Skilling were convicted on fraud and conspiracy charges, and Hueston's work was covered in lengthy profiles

Afterward, Hueston joined the law firm of Irell & Manella, where he switched sides and, instead of holding corporations to account for wrongdoing, decided to make bank — earning millions defending corporations and wealthy people in both criminal prosecutions and civil business disputes.

Split identity

At times, Hueston has wrestled with whether he has wanted to continue on as a defense lawyer, according to people who know him. 

In 2014, while working at Irell, he applied for the role of U.S. Attorney of the Central District of California, the most populous district in America. It involved an extensive, weeks-long application process, including reference checks, a list of cases and judges he appeared before, as well as names of opposing counsel. 

"Making the decision to apply, I think, really was driven by a continuing desire to be a pubic servant," said Brian Hennigan, Hueston's law partner. 

He was interviewed by Senator Dianne Feinstein, who would make the recommendation as to who would be the next U.S. Attorney for the Central District, appointed by then President Obama. They went with an internal hire instead: Eileen Decker, who served from 2015 to 2017. 

Shortly after, he launched Hueston Hennigan, where he set out to handle high-stakes cases that are also in the public interest. 

Both plaintiffs and defense

Since starting the firm, he's taken on both plaintiffs and defense-side cases, and some at discounted rates.

That includes representing Navajo Nation, an American Indian territory which has sued the EPA and other parties they say are responsible for a 2015 gold mine waste spill in Colorado. 

The cases that don't fall into that "low bono" category, however, are often not pretty. 

At one point, he represented Corinthian Colleges, the onetime for-profit college chain that was investigated by attorneys general for fraud, including fake job placement statistics, over-promising a flowery future to prospective students and then charging high prices for tuition and racking up student debt.

Both then-California attorney general Kamala Harris and the federal Consumer Financial Protection Bureau accused the school chain of financial improprieties.  

The school chain filed for bankruptcy and Harris won a $1.1 billion judgment against the defunct company in 2016, yet, thanks to Hueston's involvement, none of its executives were criminally charged. All penalties remained financial.

SEE ALSO: VIP lists and a music mogul: How one private equity exec caught in the college admissions scandal says he tried to get his son into USC, legally

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Wall Street bonus season is kicking off — here's when big banks will be revealing numbers and how experts think it will play out

Sat, 01/11/2020 - 9:31am  |  Clusterstock

  • With the books closed on 2019, the top US banks are set to announce year-end compensation. 
  • Wall Street banks pay robust base salaries, but the annual bonus can be far more lucrative for top performers. 
  • Business Insider spoke with insiders at the biggest banks to assemble a guide to the much-awaited bonus announcement season. 
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With 2019 officially in the books, Wall Street's bonus season, always hotly anticipated, is upon us. 

Bankers make comfortable six-figure salaries, but the year-end bonus is usually far more lucrative for top performers. It's not only a potentially giant lump sum of cash, but also an individual measuring stick and a way for firms to signal how much they value employees. 

Some industry experts are expecting a down year across investment banking, though fortunes vary by bank and division.

Compensation consulting firm Johnson Associates projected sales and trading bonus pools would decline 10% to 15% in equities and be flat to down 5% in fixed income compared with last year. Investment banking advisory is expected to be flat to up 5%. 

Another executive recruiting and compensation expert painted a slightly rosier picture to Business Insider, saying the big five US banks would cut bonus pools only slightly in investment banking advisory and fixed-income trading, with some product areas seeing gains — like mergers and acquisitions as well as securitized products and credit trading. But they projected a drop of as much as 12% in equities, with cash trading fairing the worst. 

Business Insider spoke with insiders familiar with bonus schedules at the big banks. Bonus dates have been known to change at the last moment, but here's when Wall Street's top banks are expected to announce compensation at this point:

  • Morgan Stanley this year is planning to reveal compensation the week of the 13th but before its quarterly earnings announcement that's scheduled for January 16th, according to an insider familiar with the plan. Another source said the announcement will come on the 14th. 
  • Citigroup typically begins communicating bonuses in the ensuing days after its board of directors meets to sign off on compensation and quarterly earnings results, according to people familiar with the matter. The board is set to meet on the 13th, with earnings to follow the next day and bonus announcements through the 16th, the people said. 
  • Bank of America typically reports last of the big five. But multiple sources inside the firm said this year bonus announcements were pegged to start on the 17th.
  • Goldman Sachs starts communicating comp in the days after it reports quarterly earnings, with some senior personnel learning about their paycheck that day, sources said. Goldman will report earnings on the 15th this year. 
  • JPMorgan Chase is expected to go last this year, revealing year-end compensation on the 21st — the Tuesday after the Martin Luther King Jr. holiday. 

The bonuses usually hit employees bank accounts a week or two after they are announced.

Representatives from each of the banks declined to comment for this story. 

Europe's largest banks report earnings after the US banks and start announcing bonuses afterward as well, usually in early to mid-February.

This story has been updated from its original version. 

Have a tip? Send an email to the reporter at amorrell@businessinsider.com.

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Here's how Tesla went from Elon Musk's infamous $420 tweet to being worth almost $500 per share (TSLA)

Sat, 01/11/2020 - 9:28am  |  Clusterstock

I've been covering Tesla since 2007, and it's hard to believe that it was just a year ago that CEO Elon Musk dispatched his now-infamous $420 and "funding secured" tweet — and push to take the company private.

That decision wound up costing Tesla and Musk $40 million in an SEC settlement, plus Musk's chairmanship of the company. 

But Tesla actually had bigger problems to deal with. Both 2018 and 2019 were tough, as the company struggled through production of the Model 3 sedan and worked feverishly to get a new factory up and running in China.

Somehow, it all came together in late 2019, just as Tesla revealed an absolutely bonkers vehicle, the long-awaited Cybertruck pickup.

Tesla's stock rallied and rallied and then some. By the end of the year, $420 was in the rearview mirror; by January 2020, a $500 share price was in sight.

Here's how it all happened:

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On August 7, 2018, Musk was reportedly sitting in his car in Los Angeles when he tapped out the tweet heard 'round the world: "Am considering taking Tesla private at $420. Funding secured."

Tesla shares were actually riding relatively high at the time: $340. But they shot up to almost $390 after Musk's tweet, before settling at $380.

Musk's take-private plan collapsed over the next few months. Tesla shares fell to $250 and Musk would eventually face an SEC investigation into whether Musk misled investors. The settlement cost the CEO and the company $40 million, and Musk agreed to restrict his Twitter habit while also forfeiting his chairman title at Tesla.

With that catastrophe behind it, Tesla could get back to being a public company trying to hit sales targets from its Model 3 sedan.

The results of that effort paid off in the third quarter, a historically money-losing Tesla swung to a profit. Shares rallied at the end of 2018, peaking above $360.

Tesla finished 2018 on a strong note, delivering almost 250,000 vehicles, a record. Fourth-quarter earnings also showed a profit, but it was lower than expected.

The first half of 2019 was rough for Tesla bulls. The company sold a lot more vehicles and booked much higher revenue, but the losses were staggering. The stock plunged to $190 by mid-year.

The second half of 2019 saw Tesla return to profitability, and in October, an epic rally commenced. The carmaker's execution had improved significantly, and Musk's promise to bring a new factory in China online for 2020 had become a reality.

The modest momentum that Tesla shares established in October went ballistic for the last two months of the year. The stock blasted through $400 and then $420 by Christmas, and in the first weeks of January, $500 was in sight, with fourth-quarter earnings to come as a fresh dose of rocket fuel.

The insane Tesla Cybertruck had also arrived, proving that Tesla was still able to blow minds with its visionary vehicles.

Short-sellers had enjoyed high times in 2019, but they were crushed as the year closed out. With anywhere from a third to a fifth of Tesla's total share float shorted, frantic covering propelled the rally to new levels.

There were two big takeaways from Tesla's wild 2018 and 2019 stock-market adventure.

The first was that Tesla investing isn't for the weak of knee. An ill-considered tweet from Musk and assorted growing pains on the manufacturing side cost bulls billions of dollars.

The second is that in the auto industry, there is no magic formula. If you can build and sell vehicles on schedule and with discipline, revenue and profits should follow.

Then you can move to scaling up, as Tesla now has in China, and begin to capture unmet demand.

That's how Tesla got from a $420 tweet in August 2018 to a stock price much higher than that today, posting a 2,000% gain since 2010.

In retrospect, maybe Musk's idea of going private wasn't so great! Better luck next time, Elon.

How private equity can write paychecks to public-company CEOs and not have to disclose it

Sat, 01/11/2020 - 9:25am  |  Clusterstock

  • Gannett CEO Mike Reed has been tasked with drawing up as much as $300 million in cost cuts to America's largest newspaper publisher after a merger last year brought the USA Today publisher and a large local-newspaper chain under the same roof.
  • His assignment, which will inevitably lead to people losing their jobs, may not be the most enviable role in the news industry today. 
  • But thanks to an arrangement with a private-equity firm, Reed's compensation will stay shielded from the public — and his own employees — as he takes an ax to the business. And that's despite Gannett being a public company. 
  • Business Insider took a look at the deal that granted Reed such anonymity, which traces back to 2013, when he became CEO of the media-investment firm that acquired Gannett, New Media Investment Group. 
  • The compensation is a byproduct of an uncommon management structure at public companies where a CEO is employed by an outside manager, rather than as a full-time employee of the company itself, according to corporate attorneys and Wall Street executives. 
  • In 2018, an adviser to shareholders of public companies in proxy votes, Institutional Shareholder Services, found about 90 US public companies that were externally managed. That's in comparison with more than 3,400 publicly listed US companies overall that year.
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Mike Reed is the CEO of Gannett, the largest US newspaper publisher, and he's planning layoffs as part of up to $300 million in anticipated cuts on the back of a huge merger with the local-newspaper owner New Media.

He has met with local newsrooms and answered questions about upcoming changes, telling The Tennessean, for instance, that he expects to make many cuts by the first half of February, according to a recent report by Poynter.

One thing he hasn't talked much about, though, is his own compensation, which is, thanks to an arrangement with a private-equity firm, entirely shielded from the public eye — despite Gannett being a public company.

His pay contract, a carryover from his six-year tenure as CEO of New Media — a media investment firm created by the private-equity shop Fortress — offers a glance at how private equity can in rare instances be responsible for the compensation of CEOs at public companies on an ongoing basis.

Though it is not common, the contract presents a data point about private-equity firms' influence in corporate America at a time when politicians such as Democratic presidential candidate Sen. Elizabeth Warren are scrutinizing how their management strategies affect business and society. 

Business Insider delved into Reed's pay arrangement shortly after he was named CEO of Gannett in November, reviewing Securities and Exchange Commission filings and speaking with corporate attorneys, Wall Street bankers, and people close to the newspaper deal.

The findings turned up multiple instances where CEO compensation was not disclosed at a public company because of the involvement of an outside manager.

Meanwhile, the deal terms in the New Media-Gannett merger call for Fortress to stop managing the newspaper publisher in two years.

At that point, Reed — or whoever the CEO is at that time — would no longer be employed by Fortress, the merger agreement said.

Until then, though, as Reed sets out to make critical changes to the newspaper business, his employment contract with Fortress remains; however, the private-equity firm has agreed to reduce the fees it earns from managing the company overall.

Through a spokesman, Reed declined to comment for this article. So did Fortress. 

Reed's history with Fortress

Reed's employment with Fortress traces at least as far back as his role as CEO of New Media Investment Group, which the firm spun out in 2013.

During Reed's tenure, he worked on its board with Fortress' billionaire CEO, Wes Edens — who co-owns the Milwaukee Bucks — and managed New Media's expanding list of local newspapers under its operating division, GateHouse, which owned and operated papers throughout New England, Ohio, Texas, and other parts of the country.

But each year, as New Media reported its annual proxy statement with the SEC, it excluded Reed's compensation where public companies normally disclose CEO pay. 

Instead, New Media said Reed was an employee of Fortress, rather than the media investment firm itself, so his compensation would remain private — "a loophole in securities law," one person familiar with the matter called it. 

People familiar with the arrangement said it was completely legal and in-line with SEC disclosure requirements because Reed was paid by a third-party, Fortress, rather than the company he was managing, New Media. 

Indeed, similar "externally managed" structures have also been used at other public companies, like National Beverage Corp., which distributes La Croix, the sparkling-water brand. 

Externally managed companies

Such instances in which a company is externally managed by the CEO of an outside management-services firm, rather than a full-time employee of the company itself, are not common, but there is some precedent, according to corporate attorneys and Wall Street executives.

In 2018, an adviser to shareholders of public companies in proxy votes, Institutional Shareholder Services, found about 90 US public companies that were externally managed. That's in comparison with more than 3,400 publicly listed US companies overall that year, according to a finance-industry report by The Carlyle Group. 

Most of those 90 companies were real-estate investment trusts, or REITs, according to ISS.

Experts told Business Insider that the externally managed structure could fuel investor concerns about conflicts of interest — in cases of mergers and acquisitions, for instance, given private-equity firms' ownership of other companies. 

This became an issue for Fortress in at least one other investment with an external-management structure that did not disclose a CEO's compensation. 

In 2014, Fortress spun off a publicly traded investment firm called New Senior. The following year, it bought 28 senior-living-home properties for $640 million.

Afterward, shareholder John Cumming sued New Senior CEO Edens and Fortress, pointing to the fact that the properties were owned by one of Fortress' own private-equity funds and alleging New Senior had overpaid in a deal that was filled with conflicts of interest.

Fortress initially fought the lawsuit but paid $53 million to settle last year.

At New Media, however, Business Insider found no similar investor lawsuits related to its management structure in a search of federal court records. 

'Various services' performed

Of the externally managed companies ISS found in 2018, many did not disclose CEO compensation details, according to David Kokell, ISS's head of US compensation research. 

The disclosure of CEO compensation — not just the amount but also performance metrics — is important because it can show whether the CEO is working in a company's best interests, rather than in the interests of a third party, Kokell said.

"Without the disclosure, you can't really evaluate that," he said. 

In the case of New Media, the company did not lay out Reed's performance metrics in SEC filings, though in a sign that he is invested in the company's future, he bought 280,000 shares of Gannett in November shortly after the merger. 

The explanation 

Language in proxy statements filed by New Media and New Senior show how Fortress explains why it does not disclose the CEO compensation. 

In addressing Reed's 2018 compensation in an April proxy statement, New Media said Reed "devoted a substantial portion of his time to the company ... although he did not exclusively provide services to us."

It said Fortress compensated Reed "based on the overall value of the various services" he performed to the private-equity firm and that it was "not able to segregate and identify any portion of the compensation awarded to him as relating solely to service performed for us."

Reed did not respond to a request for comment about what other services he performed for Fortress, if not for his service of managing New Media as CEO.

Overall, SEC filings show Fortress charged New Media management and incentive fees at a clip of $24 million a year including expenses in the lead-up to its merger with Gannett. 

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US population growth is the lowest it's been since 1918. Here's why that's terrible news for the economy.

Sat, 01/11/2020 - 9:10am  |  Clusterstock

  • The US population barely grew in 2019, amounting to a 0.48% trickle unseen in a century. It carries major economic implications for the nation's future.
  • Major factors of the past year's slowdown included fewer US births, a reduced number of immigrants, and Americans living longer, but it reflects trends that stretched back the last decade.
  • The slowdown in population growth is playing a key role in sober assessments of 2% US economic growth throughout the 2020s.
  • It could mean fewer, prime-age workers in the economy paying taxes and supporting a bevy of government programs.
  • Visit Business Insider's homepage for more stories.

America's population grew only 0.48% in 2019, according to new Census figures released at the end of December. It's a trickle unseen since the end of World War I in 1918 — and the trend carries major economic implications for the nation's long-term future.

Three key elements in the population slowdown over the last year included fewer US births, a reduced number of new immigrants, and the overall graying of Americans. The birth rate and immigration have historically driven the nation's changing population dynamics.

The census data capped 10 years of sluggish US population growth. The 2010s may enter the record books as the slowest decade in population growth since the first Census in 1790, according to the Brookings Institution. And low fertility and an increase in deaths are projected to continue into the 2020s.

The prospect of demographic stagnation is playing a critical role in projections of slower US economic growth over the next decade, given smaller increases in the numbers of working-age Americans and as baby boomers continue retiring. Going forward, a ballooning number of retirees would rely on a shrinking number of workers to power the economy.

As a result, most analysts expect the economy to grow 2% annually instead of the 3% common in the half-century before the Great Recession. 

Having fewer workers would also mean a drop in the amount of payroll taxes the government collects, severely straining tight finances for programs used to support older Americans like Social Security and Medicare. 

A report released last year from the Economic Innovation Group — a tech-funded think-tank — showed that 41% of US counties are experiencing population declines similar to Japan's. It said the demographic losses would "reverberate" through housing markets and municipal finances, prompting a drop in home values and local tax revenue that helps pay for education and infrastructure.

The study projected that by 2037, two-thirds of counties will have fewer working-age adults compared to 1997, despite the US population bumping upward year-after-year.

That trend threatens to throw rural areas into a cycle of decline — and make it harder for young people to stick around instead of heading elsewhere for schooling or work, further undercutting the economic futures of those communities.

But the group engineered a possible solution harnessing the natural pull of immigration. It proposed a "heartland visa" program that would encourage immigrants to settle in struggling communities hollowed out by workers seeking better opportunities in larger, thriving cities.

More immigration could help stem slow population growth

President Trump's restrictive immigration policies are likely linked to a slowdown of new immigrants entering the United States. Last year, the net increase of immigrants dropped to 200,000 people, a 70% decline from the previous year.

That doesn't bode well in the short-term for the working-age population, since immigration is expected to drive most of the increase over the next 15 years to at least 2035.

Unlike the birth and death rates, though, immigration is an issue that lawmakers can do something to encourage.

"The wild card is immigration. The reason we don't have a declining labor rate is because we've had strong immigration rates over the last three decades," says William Frey, a senior fellow at the Brookings Institution who studies demographics. "That's a factor we can do something about."

Immigrants are also increasingly moving to red states, bolstering their strong labor markets. And they tend to arrive at working ages, meaning they can pay taxes that help keep programs like Social Security alive. And research has shown that they start companies at double the rate of native-born Americans.

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Jeff Talpins' $18 billion Element Capital announced it would raise fees in 2019 and turned in a worse performance than the previous year — but still beat the average hedge fund

Sat, 01/11/2020 - 9:07am  |  Clusterstock

  • Macro manager Element Capital finished 2019 up 12%, a source familiar with the firm told Business Insider. 
  • Jeff Talpins' firm manages $18 billion and is raising performance fees to 40% this year, Bloomberg reported last summer. 
  • The firm also cut seven portfolio managers last year to refocus on the core macro strategy. The firm trailed the overall market this year, but finished above the average hedge fund. 
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$18 billion Element Capital hit 12% returns in 2019, trailing the surging stock market but beating the average hedge fund.

A source familiar with the performance told Business Insider that returns were spread equally across investments the firm made in foreign exchange, interest rates, and equities. 

Jeff Talpins' fund had a busy 2019 after posting 17% returns in 2018, when the average fund lost money. The firm increased performance fees to 40%, which took effect at the beginning of this year, and gave investors a chance to redeem before the fee bump in the hopes of shrinking the firm's AUM. The manager controlled $18.3 billion in the middle of 2019, and ended the year with $18 billion in assets. 

Element also cut seven portfolio managers because they were focused on "non-core" strategies, Bloomberg reported last year. Talpins manages a majority of the firm's assets, the article noted. 

The firm has returned average annual returns over the last five years is 15%, the source also said. 

Read more: In 2019, activists and stock pickers were hot — but Ray Dalio made a rare stumble and short sellers got crushed

Read more: Billionaire Larry Robbins' Glenview Capital crushes 2019 with eye-popping returns after a year that lost the firm billions

Read more: BlackRock's flagship hedge fund Obsidian returns more than 13% in 2019 after stumbling in August

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A Bain Capital Ventures partner says construction tech is hot but short-term-rental startups are overhyped

Sat, 01/11/2020 - 8:59am  |  Clusterstock

  • Construction tech is one of three real-estate-tech trends that Bain Capital Ventures is watching in 2020, according to partner Merritt Hummer. 
  • She also included the increasing institutionalization of short-term rentals and the "internet of things" as some of the top real-estate-tech trends. 
  • Hummer doesn't think proptech as a whole is overvalued, but real-estate companies that "masquerade" as tech companies may see lower valuations in 2020. She said coworking, coliving, and short-term rentals would be hit the hardest by the shift. 
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One of the biggest trends of 2020 in real-estate technology will likely be the continued adoption of tech in one of the oldest industries.

Construction, which has trailed the economy in labor-productivity growth since the 1970s, has been attracting entrepreneurs and venture-capital dollars alike.

"It's the least automated industry there is," Merritt Hummer, a partner at Bain Capital Ventures, told Business Insider.

Construction tech is one of three real-estate-tech trends that Bain Capital Ventures is watching in 2020, according to Hummer.

But some of the buzzier parts of real-estate tech in 2019 may have been overvalued, Hummer said. She highlighted coworking and short-term rentals as two verticals that could take a hit.

Last year saw large funding rounds for Knotel, Industrious, and WeWork, as well as a lot of venture-capital funding and buzz for the short-term rental startups Sonder, Lyric, and Domio.

Bain Capital Ventures, the venture arm of Bain Capital, has found success in many verticals, namely e-commerce and fintech. Hummer, who led recent investments in the mortgage company Ribbon and the "internet of things" and property-management company SmartRent, is leading its foray into proptech. 

While Bain is operating in a space with many specialist funds with strategic limited-partner bases consisting of the largest real-estate companies, Hummer said Bain has some clear advantages. 

"We just have more capital, so having a bigger fund enables us to support companies through their entire life cycle," Hummer said, pointing to their ability to lead early- and late-stage rounds. 

Two of three Bain Capital Ventures real-estate-tech investments, in Roofstock and Ribbon, point to another advantage: They can bring their fintech expertise to companies at the cross section of finance and real estate. 

2020 proptech trends

Most construction-tech companies doesn't overlap with Bain Capital Ventures' historical expertise, but the larger company's global scale means that it can easily consult with experts it has worked with on previous projects. 

Bain's view is that the best construction-tech investments are with companies that aren't trying to totally "overhaul" the existing ways that construction is done but are instead "shaving off cost and time." Construction is a highly fragmented industry, which means that it would be much harder for one company, by itself, to make an industry-changing impact. 

"They're not going to homebuilders and saying, 'We would completely transform the way you do business,'" Hummer said. "Others make that claim and may be successful in the long run, but it will likely take them longer." 

Hummer highlighted OpenSpace, a company that uses helmet-mounted cameras to create 3D renderings of worksites, and Mosaic, a construction company that has created its own project-management software, as two companies that use tech to make improvements on their existing workflow.

Some experts see construction tech as a way to make the cost of housing cheaper, and while Hummer said that affordability isn't Bain's focus, it may have an impact in some markets. 

"The supply and demand dynamic of each local market will dictate how much of the incremental profit can be retained by the builder," Hummer said. In hot markets, the savings may be absorbed by the builders or developers, while in markets with less demand, they could lower costs for renters or homeowners.

The fragmented nature of construction also means that regardless of market conditions, some builders may pass on the savings, while others will keep them.

Single-family rentals are historically similarly fragmented. Hummer named the institutionalization of single-family rentals as another proptech trend to watch. 

The direct effect is that single-family rentals will "become an investable asset class" for both retail and institutional investors. There are only a few nationally focused single-family public equities. Hummer sees this changing rapidly, with investors being able to choose between national and more localized investment strategies. 

Roofstock, a Bain portfolio company that just recently raised $50 million in funding, is a marketplace for single-family-rental investments that also connects investors with property managers, opening up investors to markets far from where they live or work. 

Companies that sell property-management tools will also benefit from this increased institutionalization. Large investors will work with them to manage their portfolios, while smaller investors that have historically been tech-adverse will begin to adopt more technology to compete. 

The third theme, one that Hummer said has been a theme for the past few years, is the internet of things.

"It's a very fast-moving category that looks different every year," Hummer said. 

SmartRent, another Bain Capital Ventures portfolio company, combines the internet of things with property management by providing a suite of hardware and software to multifamily residential owners. Tenants are given typical internet-of-things control over building access, lighting, and climate, while property managers are given building-management tools and data. 

The state of valuations in proptech and venture more broadly

WeWork's massive valuation slide and abandoned initial public offering and Uber's and Lyft's troubles in the public market were some of the biggest business stories of the year, prompting some experts to predict more crumbling valuations in 2020. Hummer has noticed the trend and thinks it will have varying effects on different verticals in the proptech universe. 

"We think of proptech as not just one area, but an amalgamation of many, many different business models," Hummer said. 

WeWork is considered by some to be a proptech company, and Hummer thinks that valuations may decrease in some of the areas that are closest to WeWork's business model, but not across the whole sector. 

"There's not going to be a single wave that influences valuations across the board," Hummer said. "Our view is that it should be a lot more nuanced."

Proptech that is more purely technological will be much less affected than tech-enabled models. 

"We do think that there has been a recognition that some real-estate businesses are masquerading as tech businesses," Hummer said. 

She said coworking, coliving, and short-term rentals would be hit the hardest by this shift.

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Iran admits it shot down Ukrainian Airlines flight 752, blaming human error

Sat, 01/11/2020 - 1:44am  |  Clusterstock

  • Iran on Saturday admitted that it shot down Ukrainian Airlines flight 752, which crashed near Tehran on Wednesday with 176 people on board.
  • A statement from Iran's military said it shot down the plane by accident after it got close to a military base.
  • Iran's foreign minister blamed the shooting on "human error," brought about by an atmosphere of crisis caused by the sudden escalation of Iran's conflict with the US.
  • Iran at first sought to blame the crash on a mechanical fault on board the plane, but changed its story on Saturday.
  • Visit Business Insider's homepage for more stories.

Iran admitted shooting down a Ukrainian passenger jet with 176 people on board, which it says was the result of human error.

In a statement by military officials early Saturday, Iran admitted hitting Ukrainian International Airlines flight 752 with a missile earlier this week.

It said that the plane flew close to a sensitive military site and was mistaken for a threat.

"In such a condition, because of human error and in a unintentional way, the flight was hit," the Iranian statement said.

The shoot-down came hours after Iran launched a missile attack on US troops stationed in Iraq, while the military was on high alert.

That strike, which failed to kill any US troops, was itself retaliation for the death of Iran's most prominent military commander, Qassem Soleimani, who was killed by a drone strike ordered by US President Donald Trump.

Iran initially denied responsibility for the plane crash, which it sought to blame on a mechanical problem with the jet, a Boeing 737-800.

It made the admission two days after the US, Canadian, and British governments blamed the crash on an Iranian missile, citing their intelligence agencies.

Not long after Iran admitted shooting down the plane, its foreign minister sought to also blame the US.

In a tweet, Javad Zarif described the cause as "human error at a time of crisis caused by US adventurism."

A sad day. Preliminary conclusions of internal investigation by Armed Forces:

Human error at time of crisis caused by US adventurism led to disaster

Our profound regrets, apologies and condolences to our people, to the families of all victims, and to other affected nations.

Boeing's fired CEO got his $62 million payout confirmed the same day 2,800 people in the 737 Max supply chain were laid off

Fri, 01/10/2020 - 9:36pm  |  Clusterstock

  • Dennis Muilenburg, the recently-ousted CEO of Boeing, is leaving with a $62 million payout, the company said Friday.
  • The substantial award comes despite being fired for poor handling of the fatal crashes, aftermath, and continued suspension from service of the 737 Max.
  • Also on Friday other workers lost their jobs because of the 737 Max: 2,800 employees of Boeing supplier Spirit AeroSystems.
  • Spirit said the workers had to go because there was no work for them in light of Boeing suspending production of the 737 Max while it is grounded.
  • Unlike Muilenburg, they did not get large exit packages, and will instead receive 60 days' pay.
  • Visit Business Insider's home page for more stories.

The recently-fired CEO of Boeing is leaving the company with a package worth $62 million, the company said Friday — just hours after 2,800 workers lost their jobs over the 737 Max disaster.

Payout details for Dennis Muilenburg, who was ousted from Boeing in late December, were made public in a filing with the US Securities and Exchange Commission.

Muilenburg lost his job over Boeing's disastrous handling of two fatal crashes by the 737 Max in which 346 people died.

The jet was grounded ten months ago, in March 2019. It has no firm date to return to service and Boeing has stopped building new ones.

On his departure, Boeing stripped him of his bonus, any severance pay, and other incentives worth nearly $15 million.

However, that still left him with a parting package of $62 million made up of Boeing stock, pension payments, and other deferred contributions.

Meanwhile, rank-and-file aviation workers in Boeing's supply chain were cut lose without anything like that kind of compensation.

Earlier on Friday, Spirit AeroSystems, a Kansas-based manufacturer, which gets more than half its revenue from the 737 Max, announced layoffs for 2,800 workers at its Wichita facility.

When Boeing froze the 737 Max production line, it promised not to lay off any of its own staff.

But the loss of work proved devastating for suppliers like Spirit, which said in a statement that the grounding and production freeze left them little.

"Spirit is taking this action because of the 737 MAX production suspension and ongoing uncertainty regarding the timing of when production will resume and the level of production when it does resume," the statement said.

Spirit said it plans to lay off an unspecified number of workers at two plants in Oklahoma, and may also have to shed more workers at its Wichita base if 737 Max production does not recommence.

The laid off are due to receive 60 days' pay, Spirit said.

SEE ALSO: The 16 most outrageous things Boeing employees said about the company, 737 Max program, and each other in released internal emails

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Google Ventures founder Bill Maris blasts outgoing chief legal officer David Drummond (GOOG, GOOGL)

Fri, 01/10/2020 - 7:49pm  |  Clusterstock

Google Ventures founder Bill Maris isn't holding anything back when it comes to his thoughts about his former colleague David Drummond.

On Friday, Google-parent company Alphabet announced that Drummond — Alphabet's longtime Chief Legal Officer, who has been accused of having multiple relationships with subordinates — was leaving the company.

The news elicited a string of fiery remarks from Maris, in a remarkable breach of the typical reticence observed among executives — at least, publicly — during corporate shake ups.

Maris told Axios that Drummond was the reason he had left Google several years ago. "I simply could not work with him any longer," Maris said. "We have very, very different ideas about how to treat people, and this was a long time coming," he told Axios. 

Drummond was one of the most powerful executives at Alphabet, having joined in 2002 when the company was still a privately held search engine by the name of Google.

Alphabet announced Friday that Drummond will retire at the end of January following allegations that he had relationships with subordinates at the company and the reported launch of a board investigation into Alphabet's handling of sexual-misconduct claims.

Maris, who is now a founding partner at the VC firm Section 32, started Google's in-house venture capital group, initially known as Google Ventures. The group was overseen by Drummond, among his various duties. 

Maris' comments are a change of tone from when he left GV in 2016. At the time, Maris told Recode he was leaving "because everything is great."

"It's mission accomplished for me," Maris said in a Q&A with the publication. 

On Friday, Maris turned to "Star Wars: Episode III – Revenge of the Sith" to refer to the news of Drummond's departure, in his statement to Axios. 

"At an end, your rule is. And not short enough, it was," Maris said, taking a line used by Master Yoda as he confronted Darth Sidious, the arch-villain of the movie.

Alphabet did not respond to requests for comment about Maris' statements.

Maris' full statement to Axios is below:

"The news of David Drummond leaving Google today brings to mind a quote from one of my most favorite creatures. 'At an end, your rule is. And not short enough, it was.' I had been asked in the past why I left Google in 2016, and I have never really commented on that. David Drummond is the reason I left Google. I simply could not work with him any longer. It's that simple. We have very, very different ideas about how to treat people, and this was a long time coming."

SEE ALSO: The Google exec at the centre of explosive #MeToo allegations is one of the highest paid at the firm, earning $47 million

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Casper's filing to go public dropped a big hint about what could come in the product pipeline, from pajamas to medical devices to sleep masks

Fri, 01/10/2020 - 6:48pm  |  Clusterstock

  • Casper, the online mattress retailer, has filed to go public.
  • Its S-1 filing revealed the company's ambitions to develop products across the entire "sleep arc," which could potentially include pajamas, travel accessories, supplements, and machines for sleep apnea sufferers.
  • Casper's paperwork revealed that product development costs almost doubled from 2017 to 2018.
  • Visit Business Insider's homepage for more stories.

Casper is taking on the full sleep stack.

The online mattress retailer filed to go public on Friday, and the paperwork revealed the company's ambitions to develop products across the entire "sleep arc," which is marketing-speak for the products and services that help promote a good night's rest.

Casper's filing hints that it will continue to expand its offerings beyond the bed to products that "promote the ideal ambience for sleep," such as lights, white noise machines, room diffusers, and humidifiers. Its first tech gadget was a bedside lamp that costs $129, first released last year.

Casper's product pipeline could also include sleep technology, which it defines as sleep trackers, medical devices, and bedside clocks; sleep services, such as apps, meditation, and counseling; and sleep supplements to help with dozing off, according to the filing. It claims that the market for continuous positive airway pressure (CPAP) machines, which help people with sleep apnea breathe more easily, is worth $25 billion alone.

The filing has no mention of plans to disrupt the pajamas business, though an infographic makes the case for doing so. It puts the pajamas market at $32 billion globally. Casper already provides pajamas for long-haul international flights on American Airlines, along with mattress pads, duvets, and slippers.

Casper started selling mattresses online and shipping them to customers in boxes in 2014. Its direct-to-consumer model earned it the nickname, "the Warby Parter of mattresses." Since then, Casper has become a disruptor in its own right. The company delivered mattresses to more than 1.4 million customers and opened 60 retail stores where customers can try out the beds. It also added pillows, sheets, weighted blankets, pet beds, and other sleep-related products to its online catalog.

Casper has more than 40 employees at a product development lab in San Francisco, working as researchers, designers, engineers, and support staff "focused on building a better night's sleep." The company said it expects to invest more in product development.

Casper's federal filing showed that while product development costs almost doubled to $12.3 million in 2018 from $6.5 million in 2017, those costs slipped to $9 million for the first nine months of 2019 from $9.7 million for the same period in 2018.

"The improvement of existing products and the introduction of new products have been, and we expect will continue to be, integral to our growth," it read.

Over the last year, Casper has focused on staffing up its physical stores. Retail was one of the most popular job categories, according to Thinknum Media, a data-analysis startup that scours job listings to find hiring trends.

SEE ALSO: Buzzy sleep startup Casper just filed to go public — and spent nearly half a billion in marketing to get there

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2 hemp and CBD startups just laid off workers as the industry confronts a uniquely challenging phase

Fri, 01/10/2020 - 6:21pm  |  Clusterstock

  • Hemp and CBD companies have laid off workers in recent weeks, Business Insider has learned.
  • Colorado-based Mile High Labs laid off 20 staffers on Thursday, concentrated among entry-level sales roles, the company confirmed.
  • The Kentucky-based hemp grower and CBD manufacturer GenCanna laid off 65 employees in December, the company confirmed.
  • Click here for more BI Prime stories, and subscribe to our weekly cannabis newsletter, Cultivated.

Times are tough in the cannabis industry, and hemp companies are no exception.

The hemp and CBD startups GenCanna and Mile High Labs have laid off a number of employees in recent weeks, Business Insider has learned.

Mile High Labs laid off 20 staffers on Thursday, concentrated among entry-level sales roles, the Colorado-based CBD manufacturer's chief financial officer, Jon Hilley, told Business Insider in an interview. The Kentucky-based hemp grower and CBD manufacturer GenCanna laid off 65 employees in December, Steve Bevan, the company's president and executive chair, said.

Read more: Cannabis companies have slashed over 1,000 jobs in recent weeks as the industry contends with a 'toxic' landscape. We're keeping track of all the cuts here.

For Mile High Labs, the layoffs represent just under 10% of total staffers out of a head count of 250 before the layoffs, Hilley said. 

'The business has to evolve'

"It's part of the learning process as you go from a company of 30 people to 250 people in under a year," Hilley said. "The business has to evolve."

Mile High Labs purchased an $18 million CBD manufacturing facility in Broomfield, Colorado, and relocated the company's operations there last fall. The Denver Post reported on the job cuts at the company earlier on Friday.

In a Friday afternoon interview, Bevan pointed to increasing automation of the hemp and CBD supply chain as one of the reasons for the layoffs.

"Because of significant advances in technology, we need fewer people to do more," Bevan said.

He said the company's head count — excluding seasonal farm workers who harvest the hemp crop — has fluctuated over 2019.

GenCanna hired Goldman Sachs to advise on 'strategic alternatives'

The company started 2019 with 162 employees and ended the year with 224 employees after the layoffs.

"With hemp at the intersection and cutting edge of federally legal cannabis and agriculture, ebbs and flows are to be expected," Bevan said. "During 2019, pricing for products declined across the industry, due to less-than-predicted demand while constraints — common in new agriculture — were greater than expected." 

GenCanna was an early entrant to the hemp market. Founded in 2014, the company has remained private but hired Goldman Sachs in September to advise on a potential initial public offering or other "strategic alternatives."

Business Insider previously reported that companies in the broader cannabis industry, from startups to publicly traded behemoths, have cut over 1,000 jobs as the industry enters a uniquely difficult phase.

The Marijuana Index, a composite of cannabis and cannabis-related stocks in the US and Canada, lost about half its value last year.

Business Insider is tracking job cuts across the cannabis industry.

Got a tip? Contact this reporter via email at jberke@businessinsider.com, or Twitter DM @jfberke. Encrypted messaging app Signal number available upon request.

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These are the unusual, colorful slides that mattress startup Casper is using to convince IPO investors that it can capitalize on the $432 billion 'sleep economy'

Fri, 01/10/2020 - 5:40pm  |  Clusterstock

  • Buzzy $1 billion mattress startup Casper is going public.
  • The company just filed paperwork with the US Securities and Exchange Commission to start trading on the New York Stock Exchange. 
  • The company envisions itself taking over the $432 billion "sleep economy" — which not only includes mattresses, pillows and pajamas, but also pet beds, social media channels offering meditation, and medical technology. 
  • Here are some of the wackiest slides submitted in its IPO 
  • Visit Business Insider's homepage for more stories.

Buzzy mattress startup Casper has repeatedly pushed the idea that sleep is more important than any other single activity in a person's life.

That belief is on full display in its S-1 prospectus — the document Casper filed on Friday ahead of a planned IPO later this year. 

"In the coming years, we expect to accelerate a new marketplace which we call The Sleep Economy. We will be tireless in our pursuit of creating the world's first Sleep Company that delivers value for our consumers, our investors, and our incredible team of dreamers and doers around the world," Casper CEO Phillip Krim said in the filing.

All told, Casper says, this "sleep economy" will be a market worth $432 billion, with the opportunity for the company to go beyond mattresses, pillows and pajamas, and into markets like pet beds, social media channels offering meditation, and medical technology. 

And people have bought into their story. Casper, which ships mattresses, pillows, and other sleep-related products directly to consumers, has raised $355 million in private funding to date. It was last valued at $1.1 billion.

Here are some of the wackier slides that Casper is using to convince investors that it can fully take control of the market. Some of these charts are pretty normal, like the timeline of Casper's rapid growth.

A chart shows the company's revenue growth alongside its different product offerings, growing from Casper's first mattress back in 2014. Casper now offers four mattresses, pillows and sheets, a glow light and even a dog bed. It generated $357.9 million in revenue in 2018. 

The chart also highlights Casper's humble origins, like Casper cofounder Neil Parikh delivering the startup's first mattress by bike. 



Notably missing - a chart of Casper's profit margins. Its financial statements show heavy losses, which the company cites as a significant risk.

Casper racked up operating losses of $65 million by September 2019, roughly the same as it lost in the same period the year before.

More than 70% of its gross profit in the first nine months of 2019 were spent on sales  and marketing costs.



The rest of its slides focus on the sleep market, adding a quirky dash to the prospectus. This timeline shows investors when to use Casper products — between bedtime and waking up.

Casper doesn't envision itself as a mattress company, positioned in a mattress market. 

It is a company that aims to take advantage of an entire "sleep economy." 

One of its wackier slides drums that point home, through a slide showing a timeline between bedtime and waking up.



Casper also included a slide to explain how it plans to improve its products. It features its data-analysts as scientists that appear to be conducting a chemistry experiment amid a swirling chaos of data.

Casper gathers data from customer website visits, customer reviews, social media, and other sources. 

This graphic shows its data scientists in the middle of a chemistry lab, funneling data gathered from these sources into improving its sales and marketing experiences (which in turn, should encourage customers to give more feedback as per the graphic). 

 



This slide shows how Casper estimated the value of the global sleep market at $432 billion — by including sleep technology, medical devices, and sleep for pets.

Casper envisions its offerings growing far beyond the humble mattress, to take advantage of a global market that sells sleep for pets, sleep for travelers, sleep technology and medical devices. 

"The total market size of the categories and geographies we currently address is $67 billion in 2019, leaving significant opportunity for growth," the company says. This graphic shows how it aims to grow its offerings in the future. 

 

 



And this slide shows that Casper sees the global sleep market growing at twice the rate of the global economy.

Not only does Casper value the global sleep market at a whopping $432 billion, but it also estimates it growing at an annual rate of 6.3% over the next five years, a rate almost twice as fast as the global economy, which grew 3.5% in 2019, the IMF said.

A chart later in the IPO shows that the domestic sleep market is also expected to grow at a rate well above the US economy's 2.1%, at 3.6%. 

By 2024, Casper says the sleep market will be worth $585 billion. 



Boeing's former CEO, who was fired over the 737 Max crisis, got no severance pay but left with $62 million Boeing says he was 'contractually entitled' to (BA)

Fri, 01/10/2020 - 5:37pm  |  Clusterstock

Boeing Co's ousted chief executive officer, Dennis Muilenburg, stands to receive $62 million in long-term incentive, stock awards and pension benefits, but forfeited $14.6 million and will receive no severance, the planemaker said in a regulatory filing on Friday.

Muilenburg was fired from the job in December as the company failed to contain the fallout from a pair of fatal crashes that halted output of its bestselling 737 Max jetliner and tarnished its reputation with airlines and regulators.

He was replaced by Boeing board chairman David Calhoun, 62, a turnaround veteran and former General Electric Co executive who has led several companies in crisis.

Based on Boeing securities filings from early 2019, Muilenburg was eligible for about $39 million in severance.

"Upon his departure, Dennis received the benefits to which he was contractually entitled and he did not receive any severance pay or a 2019 annual bonus," Boeing said in a statement.

The 737 Max has been grounded since March. The deadly accidents in Indonesia and Ethiopia within five months killed 346 people.

Calhoun, who starts as CEO on Monday, will receive a base salary at an annual rate of $1.4 million, Boeing said.

SEE ALSO: Boeing 737 Max: Here's the complete history of the plane that's been grounded since 2 crashes killed 346 people 5 months apart.

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Casper warns investors that its business would be hurt if any of its 'thousands' of Instagram influencers turned against it

Fri, 01/10/2020 - 5:31pm  |  Clusterstock

Online mattress seller Casper filed its paperwork Friday to become a public company, and it's warning potential investors that its value could be impacted by the network of influencers it partners with to advertise on social media.

As is customary for a S-1 filing, Casper disclosed a number of risk factors to potential investors that could cause the company's stock to decline. Two of these risk factors concern internet-bred influencers, who companies will often pay or provide free products to in exchange for advertisements and mentions on social platforms like Instagram, Twitter, and Snapchat.

Casper warned that missteps or a pattern of bad behavior by one of its "thousands" of social media influencers could damage the company's reputation and impact its IPO price. A bad review from an influencer could also hurt Casper, the company writes.

"Influencers with whom we maintain relationships could also engage in behavior or use their platforms to communicate directly with our customers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us," Casper said in its S-1 paperwork. "It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases."

As the influencer marketing space stays on track to reach $15 billion by 2022, brands engaging in influencer-fueled campaigns are increasingly held accountable for the behavior of the popular internet personalities they sponsor. In the face of majorly publicized scandals such as those involving PewDiePie or Logan Paul, YouTube and massive brands like Disney have reacted by distancing themselves from these creators and halting plans for partnership deals and ad campaigns.

Ad campaigns on social media have become so common that the federal government has gotten involved in its regulation. In November 2019, the Federal Trade Commission issued guidelines for how influencers should disclose sponsored and paid posts in order to maintain a sense of transparency and stay within the confines of the law.

These new FTC guidelines could also pose a potential problem for Casper, the company said in its S-1 filing. Casper is tasked with the "burden" of monitoring its influencers' posts to ensure they abide by federal guidelines. However, Casper admitted that it doesn't check or approve every post an influencer makes.

"While we ask influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influencers post," Casper wrote. "If we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations."

Since it launched in 2014, Casper has invested heavily in its online presence and relationship with influencers. The company sponsored a post on Instagram in 2015 from Kylie Jenner, who reportedly raked in around $400,000 per post in 2017. (That number has since spiked to over $1.2 million.)

Casper's influencer network is vast and far-ranging: Its ads have appeared in social media posts from famous petssocial media strategiststeen Nickelodeon stars, radio show hosts, and fitness gurus.

But Casper may be particularly cautious about influencers in its S-1 filing because it already knows what it's like for an influencer debacle have negative effects on the company's reputation. In 2016, Casper sued three popular mattress-review sites, claiming that they wrote reviews about Casper's competitors without disclosing they received the products for free as well as affiliate revenue for driving sales to these companies.

Casper alleged that the behavior had cost the mattress company "millions of dollars of lost sales," but all three sites settled with Casper in the end, Fast Company reported in 2017.

SEE ALSO: Jake Paul says he and his brother Logan are the 'big bad wolves' of YouTube that everyone wants to see fail

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SoftBank-backed companies laid off 2,600 people this week and more than 7,000 in the past year. Here's everything we know.

Fri, 01/10/2020 - 4:42pm  |  Clusterstock

  • SoftBank-backed companies are laying off thousands of employees globally as they struggle to find paths to profitability.
  • In the first full week of 2020, four companies – Oyo, Rappi, Getaround, and Zume – laid off a combined 2,600 employees. 
  • In the last two months, other SoftBank-backed companies including WeWork, Uber, Wag, and Fair have also cut their ranks dramatically. 
  • If you work at a SoftBank-backed company, Business Insider wants to hear from you. Get in touch on secure messaging app Signal using a non-work phone: 646 768 1627. 
  • Click here for more BI Prime stories.

Flush with billions of SoftBank dollars, startups ranging from a robot pizza maker to a low-cost hotel operator have swelled their ranks in recent years. 

Now, as the Japanese investor faces a reckoning about how the companies will become profitable, layoffs are hitting the companies across the world.

In the first full week of 2020, four of SoftBank's companies cut a combined 2,600 employees, according to media reports from Business Insider and other outlets.

Those layoffs follow major cuts in the fourth quarter at companies including WeWork, Uber, Wag, and Fair. In total, SoftBank-backed companies have cut over 7,000 jobs in the last year, by Business Insider's count.

That figure doesn't include groups of employees like WeWork's 1,000 janitorial staff in the US and Canada who are being outsourced. Trouble at these companies has knock-on effects since many work with contractors, such as the people that walk dogs for Wag, who enjoy fewer labor protections than full-time employees. 

A SoftBank spokesman did not respond to a request for comment. 

Business Insider is tracking the layoffs and what's happening at each company. The numbers are based on our own reporting as well as media reports elsewhere. We will continue to update this page as news evolves.

If you currently work for or were previously employed at a SoftBank-backed company and want to get in touch, use encrypted app Signal to text or call this reporter at 646 768 1627. You can also contact Business Insider securely via SecureDrop.

See more: I spent 24 hours living on SoftBank services like Uber, WeWork, and Oyo. It revealed some flaws in Masayoshi Son's grand $100 billion investment vision.

See more: A futuristic farming startup raised $260 million from Jeff Bezos and SoftBank on the promise of upending agriculture. Insiders are raising questions.

 

Oyo cuts 1,800 in China and India - Bloomberg

Discount hotel operator Oyo is laying off 1,800 employees in China and India, Bloomberg reported Friday

The restructuring isn't over: Oyo is planning to cut another 1,200 in India in the next four months, Bloomberg reported. 

"We continue to be one of the best places to work for and one of the key reasons for this has been our ability to consistently evaluate, reward and recognize the performance of individuals in a meritocratic manner, and enable them to improve their performance," Oyo said in a statement to Bloomberg. 

The company lets people book hotel rooms in more than 80 countries through its app. It turns struggling local hotels into Oyo franchises, puts up some money to redecorate and make sure the wireless internet is working, and takes a cut on every booking.

Oyo has raised more than $3 billion in capital, though the last fundraise included $700 million from its young chief executive, Ritesh Agarwal. He bought back shares from existing investors Lightspeed Venture Partners and Sequoia Capital, as part of a deal that raised Oyo's valuation to $10 billion. SoftBank has been pumping money into the company since 2015.



Zume cuts 360 employees and a third of its executive team

Zume, the robotic pizza startup valued at $1 billion, lost a third of its executive team hours after announcing that 360 of its employees were being terminated this week, Business Insider previously reported. 

Amid a broader strategy shift away from its famous pizza-making robots towards compostable packaging, Zume now finds itself without a chief business officer, a chief financial officer, a chief technology officer, and a chief revenue officer.

The layoffs come as the Mountain View, California, startup has struggled to secure additional funding from SoftBank. Zume cofounder and CEO Alex Garden has become so cautious that he has restricted all communication from his senior staff to outside investors.

The company was most recently valued at $1 billion after a $375 million venture-capital investment from SoftBank's Vision Fund. 



Getaround lays off 150 - The Information

Car rental platform Getaround is laying off about 150 employees – a quarter of its staff – reported The Information

SoftBank invested $300 million in the company's 2018 Series D round.

In a blog post on January 7, Getaround founder Sam Zaid said "growing this fast has also pressure-tested our organization." 

"We've learned a lot about our business during this period and the importance of balancing growth with efficiency," he wrote. "SoftBank has stepped up in a big way with their unique network of experts, resources, and partners to support this change." 

Getaround has raised a total of $612 million and has a $1.7 billion valuation, per Pitchbook. 



Rappi cuts about 300 - Brazil Journal

The Latin American food delivery startup is cutting about 6% of its workforce, about 300 employees, according to the Brazil Journal. 

The cuts come less than a year after SoftBank led a $1 billion funding round. 

"We are in fact actively hiring a large number of people in our areas of focus for 2020," the company said in a statement to Reuters. 

"We are investing heavily in our tech team, automating some roles, re-balancing areas and embracing high performers," Rappi said, without noting how many employees it plans to add. 

Cofounder Sebastian Meijia told Reuters his priority was to grow fast when the outlet asked how soon the company would become profitable. 

The company has raised a total of $1.46 billion and has a $3.5 billion valuation, per Pitchbook. 



WeWork laid off 2,400 in November and outsourced 1,000 cleaning staff

Embattled office company WeWork cut 2,400 employees globally in November, about 20% of its workforce.

The company is also outsourcing about 1,000 cleaning staff in the US and Canada in a change planned months before its failed IPO. 

Earlier this year WeWork was privately valued at $47 billion, which made it the most valuable private startup in America. But filings for WeWork's highly anticipated IPO revealed wide losses and left prospective investors questioning the company's leadership and business model.

Now, it's valued at less than $5 billion, and investors are still marking their stakes down. Jefferies said on Wednesday it slashed the value of its $9 million investment by $69 million last quarter after cutting the value down by $146 million in August. 

SoftBank, one of WeWork's primary investors, ultimately offered a $9.5 billion package to acquire majority ownership of WeWork, giving former WeWork CEO and cofounder Adam Neumann a $1.7 billion deal in exchange for his departure.



Uber slashed more than 1,000 jobs last year

Uber, which went public in May, went through three rounds of layoffs last year that saw the ride-hailing company shed more than 1,000 jobs. 

The cuts hit about 400 people in marketing, 350 employees in its self-driving cars unit, and 435 staff in product and engineering.  

Overall, Uber employs about 27,000 people. 

Uber has been under tremendous pressure to reach profitability in the months since its IPO in May. Cost-cutting efforts like job cuts, as well as increased passenger fares, are part of that initiative, and Wall Street analysts have commended the moves so far. Shares of the company have plummeted 17% since going public.

SoftBank is Uber's biggest shareholder. 



Fair cut 300 employees in October

Fair, the short-term car rental platform for consumers and Uber drivers, cut about 300 employees in October. 

The layoffs came after a sudden SoftBank audit that led to the ouster of controversial CEO Scott Painter and his brother, the chief financial officer. 

Business Insider talked to a dozen current and former employees in November who explained how the startup burned through nearly $400 million, largely from SoftBank, in 10 months, a cautionary tale of a startup on an explosive growth path.

SoftBank's rescue plan included an immediate $25 million infusion to keep the company afloat. 

 



Wag laid off 182 employees and lost its CEO last year

Dogwalking startup Wag had a turbulent fourth quarter. 

CEO Hilary Schneider left in late November to join photo-sharing company Shutterfly, and the company went through its second round of layoffs, bringing the total cuts in 2019 to 182 employees. 

SoftBank also announced it would sell its nearly 50% stake back to the company, reportedly at a significant discount, and give up its two board seats. 

SoftBank's Vision Fund first invested in the dog-walking startup early last year, pushing up the company's valuation to about $650 million. But the startup has struggled to compete, and Bloomberg reported in October that it was seeking to sell itself at a discount.

SoftBank's Masayoshi Son seemed to express concern about Wag in his latest investor presentation, as he referred to a dog-walking company as one of the Vision Fund's more troubled investments.

SoftBank's sale of its stake followed a disagreement within the company's board on its path to future profitability, one person familiar with the talks told Business Insider.

Wag had raised a total of $361 million, per Pitchbook. 



Katerra cut more than 300 last year and lost its cofounder

Katerra, the modular construction company, said in December it would shut down a factory in Phoenix, cutting about 200 jobs, Bloomberg reported

In November, Katerra cofounder Fritz Wolff left the company, real estate publication The Real Deal said. Katerra has struggled with executive retention, with three CEOs and three CFOs in four years 

And in October, The Information reported the company had cut more than 100 employees in three states. 

Katerra had raised $1.24 billion, most recently with a January 2018 funding round of $865 million, led by SoftBank. That round valued the startup at just over $3 billion, per CNBC. 

 



Ola restructuring affected 350 employees, with some reassigned to other roles

In November, the Indian ridesharing company said it would restructure about 350 employees' jobs, with some employees moving to other roles, the Economic Times reported

The company is still expanding, with plans to launch in London this month, per CNBC. Last year, Uber had its London license revoked by local authorities. Ola already operates in eight UK cities, and in Australia and New Zealand. 

The company has raised $3.78 billion at a $4.44 billion valuation, per Pitchbook. SoftBank most recently led a $330 million funding round in February 2017. 



Opendoor laid off 50 in July and reduced its free lunches - Bloomberg

Online homeseller Opendoor cut about 50 of its 1,300 staff in June – and stopped free lunches for small offices, Bloomberg reported.

The company also asked about 300 employees in offices across the country to relocate to its Phoenix office. Despite the layoffs, a spokeswoman said Opendoor planned to add 250 employees to the Phoenix office and will 

The startup plans to double the number of employees in Phoenix to more than 500 next year, and will continue to hire in all of its markets, Bloomberg said. 

Opendoor was last valued $3.8 billion, per Pitchbook.  



Brandless cut 13% of its staff and saw its founder leave last year

Brandless CEO Tina Sharkey stepped down in March and moved to co-chair of the board, reportedly amid tensions with SoftBank, per The Information

Sharkey's role swap wasn't the only change at the discount e-commerce platform. Brandless cut 13% of its staff in March, per Forbes. The company struggled with inventory management and profitability when its items were all priced at $3. 

Now, the company is expanding into CBD, and Brandless's new CEO told Forbes in July that he thinks the company could be profitable by 2021. 

Brandless raised nearly $300 million, per Pitchbook, including a $240 million Series C in September 2018 led by SoftBank. 



Former top Bloomberg lieutenant steps down from financial services company after Business Insider reports past harassment complaints

Fri, 01/10/2020 - 4:32pm  |  Clusterstock

  • TMX Group, a Canadian-financial services firm, announced on Friday that CEO Lou Eccleston will be stepping down from the company, following a Business Insider investigation that revealed he allegedly engaged in inappropriate sexual behavior while working at Bloomberg LP in the 1990s.
  • According to several witness statements discovered by Business Insider, Eccleston openly flirted with female employees, inappropriately touched them at office and social gatherings, excessively drank at work events, and engaged in sexual relationships with coworkers.
  • Michael Bloomberg, the former New York City mayor running for president, was told about Eccleston's alleged behavior while working at Bloomberg LP, according to accusations in legal filings previously reported on by Business Insider.
  • Eccleston's departure comes as Michael Bloomberg faces scrutiny over the culture he fostered at his namesake company, which multiple former employees have characterized as toxic and sexually charged.
  • On Friday, the company said Eccleston will be retiring early to "avoid further distraction to the Company," despite his contract being set to expire in December 2020. According to TMX's Board of Directors, an independent investigator found no evidence that Eccleston engaged in sexual harassment or sexual misconduct while at TMX Group
  • Visit BusinessInsider.com for more stories.

TMX Group, a Canadian-financial services firm, announced on Friday that CEO Lou Eccleston will be stepping down from the company, following a November Business Insider investigation revealing allegations that he engaged in inappropriate sexual behavior during his tenure at Bloomberg LP in the 1990s.

Business Insider previously reported that Eccleston, then a senior manager at the financial-data firm created by presidential candidate Michael Bloomberg, was accused by multiple employees in court records and New York Division of Human Rights filings of preying on women with impunity. The article described allegations of a toxic workplace and misconduct at Bloomberg LP, documented in a string of lawsuits spanning decades at the company. Eccleston was not named as a defendant in any of the lawsuits.

According to several witness statements discovered by Business Insider, former employees alleged that Eccleston openly flirted with female employees, inappropriately touched them at office and social gatherings, excessively drank at work events, and engaged in sexual relationships with coworkers. One witness statement filed with the New York Division of Human Rights said that "Lou Eccleston is the biggest sleaze in the world. There are two ways to get ahead with Eccleston: Kiss his ass, kiss his penis."

Do you have a tip about working at Bloomberg LP, or about Michael Bloomberg? Contact this reporter at neinbinder@businessinsider.com, direct-message on Twitter at @NicoleEinbinder, or text our tips line via Signal or WhatsApp at 646-768-4744. You can also contact Business Insider securely via SecureDrop.

Following the publication of the story, TMX Group announced an investigation into Eccleston's past conduct. On Friday, the company said he will be retiring early to "avoid further distraction to the Company," despite his contract being set to expire in December 2020. According to TMX's Board of Directors, an independent investigator found no evidence that Eccleston engaged in sexual harassment or sexual misconduct while at TMX Group.

"The Board accepts Mr. Eccleston's decision to retire and recognizes his outstanding efforts since taking on the CEO role in October 2014," Charles Winograd, Chair of TMX Group, said in a statement. "We thank him for his leadership of TMX Group and for delivering a focused and compelling business strategy and growth plan that is driving our continued success."

John McKenzie, TMX's Chief Financial Officer, has been appointed as interim CEO, the company said. Eccleston did not immediately respond to a message sent via LinkedIn.

Michael Bloomberg allegedly knew about Eccleston's behavior

According to witness statements obtained by Business Insider, multiple former employees said that Bloomberg was aware of complaints about Eccleston's alleged behavior while at Bloomberg LP and failed to take any action.

According to one witness statement filed with the New York Division of Human Rights, a Bloomberg employee said that "Mike Bloomberg knew all about what Lou was doing. If five girls want to sleep with Lou, that was O.K."

Mary Ann Olszewski, a former Bloomberg sales staffer who sued the company in 1996, alleging that she had been raped by a senior manager, said "the sexualized attitude comes from the top: Mike Bloomberg and Lou Eccleston," according to a New York Division of Human Rights filing. "We saw Lou drink and proposition girls to come up to his room," she added.

Multiple records obtained by Business Insider, including a sworn statement from former Bloomberg LP employee Rowland Hunt, described an office Christmas party in 1990 at which Eccleston did "body shots" with several female employees under his authority. "'Body shots' consist of embracing and licking salt off the neck, kissing, squeezing, leg up," read Hunt's statement. "It was a ribald scene." The statement went on to describe a "rumor that Lou Eccleston had slept with one of the female employees who got pregnant."

Eccleston's behavior bothered Hunt so much that, according to his statement, he confronted Michael Bloomberg directly. "After the Christmas party experience, I lost respect for management and I was not happy at work. I met with Mike Bloomberg in February 1991 and told him I didn't see eye-to-eye with Lou Eccleston," Hunt's statement said. "Mike insisted I take my concerns directly to Lou. In March, Lou called me to talk in Mike Bloomberg's office. I told him that I had lost respect for him as a professional and as a boss. Lou's response was, 'You're fired.'"

Bloomberg LP and a Bloomberg campaign spokesperson did not immediately respond to a request for comment about Bloomberg's knowledge of Eccleston's behavior. 

Allegations of a toxic workplace at Bloomberg LP

Eccleston's departure comes as Michael Bloomberg faces scrutiny over the allegedly toxic culture he fostered at his namesake company.

Business Insider's November report revealed that nearly 40 employment lawsuits from 65 plaintiffs have been filed against Bloomberg LP and Bloomberg personally in state and federal courts since 1996. The majority of those allege discrimination over gender, race, and disability status, as well as pregnancy discrimination and wage theft. Eight discrimination suits were launched after Bloomberg returned to the company as president and CEO in 2014.

Last month, after ABC News wrote a follow-up story about the Bloomberg lawsuits, presidential candidate Elizabeth Warren called on Bloomberg to release women from any non-disclosure agreements they may have signed with the company. The group Lift Our Voices, formed by three former Fox News employees to end the practice of mandatory non-disclosure agreements to conceal workplace misconduct, also sent letters to all of the presidential campaigns urging them to publicly condemn these types of agreements in the context of sexual misconduct and other workplace issues.

Julie Roginsky, one of the founders of Lift Our Voices, told Business Insider earlier this week that Bloomberg did not respond to the group's letter. On Thursday, ABC News reported that Bloomberg won't release women who sued him from their NDAs. "You can't just walk away from it," Bloomberg said. "They're legal agreements, and for all I know the other side wouldn't want to get out of it."

While NDAs are common in legal disputes, they have faced scrutiny in the wake of the #MeToo movement for being used by powerful men, such as Harvey Weinstein, Bill O'Reilly, R. Kelly, and Donald Trump, to silence their accusers.

Laurie Evans, a former Bloomberg LP employee who has sued the company for discrimination, asked a New York Supreme Court judge last month to invalidate not just her NDA, but the NDAs of any "similarly situated" Bloomberg LP employees.

"Employees, and particularly female employees who are aware of discrimination in the workplace, if they become aware of it or become a victim of it, they are afraid to complain, to lose their job, to be retaliated against, to not be believed — and therefore they are silenced," Donna Clancy, Evans' attorney, previously told Business Insider. "When they are silenced, it breeds a culture. When you have a culture then and no one complains about it and it can be swept under the rug and managed internally, it gets worse and nothing gets better."

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