After 10 years of DACA, Dreamers still live in legal limbo
Mike Bebernes
·Senior Editor
Tue, September 13, 2022
“The 360” shows you diverse perspectives on the day’s top stories and debates.
The Biden administration late last month issued a new rule designed to fortify DACA, the 10-year-old policy started under former President Barack Obama that has shielded from deportation hundreds of thousands of immigrants who were brought to the U.S. illegally as children.
Created in 2012, the Deferred Action for Childhood Arrivals policy granted some undocumented people who entered the U.S. as minors — often called Dreamers — the right to live and work in the country as long as they met certain criteria and weren’t convicted of serious crimes.
“These are young people who study in our schools, they play in our neighborhoods, they’re friends with our kids, they pledge allegiance to our flag,” Obama said when he established the program. “They are Americans in their heart, in their minds, in every single way but one: on paper.
In the decade since its inception, more than 800,000 Dreamers have taken advantage of the program, and many of them have since become adults who have started businesses, gotten married and had children of their own. Since the executive branch doesn’t have the authority to grant Dreamers permanent legal status or citizenship, DACA was intended to be a temporary stopgap until Congress passed a more comprehensive solution. Bills to do just that, most notably the DREAM Act, have been proposed repeatedly, but each time have failed to advance.
Lack of action from Congress has left the fate of Dreamers in the hands of the executive branch and the courts. Former President Donald Trump tried to repeal DACA early in his presidency, but was blocked by the Supreme Court. An ongoing legal challenge, however, could end the program for good. Last year, a federal judge in Texas ruled that DACA was unconstitutional. The Biden administration has appealed the decision, meaning current DACA recipients are unaffected as of now, but no new applications can be accepted. The case is currently being weighed by the Fifth Circuit Court of Appeals and, depending on the outcome, could ultimately make its way to the U.S. Supreme Court.
Why there’s debate
A strong majority of Americans, including most Republicans, support a permanent status for Dreamers. But the fate of the program is still very much up in the air and there’s significant debate over the best way to end the legal limbo that Dreamers have lived in for the past decade.
There’s some hope among some immigration rights advocates that the looming legal threat to DACA might provide motivation for Congress to finally pass something like the DREAM Act. Accomplishing that, some argue, might require some concessions from Democrats to secure enough Republican votes to overcome a likely filibuster. It may also mean proposing the DACA protections on their own, rather than as part of a larger package of immigration reforms that prompt more heated partisan opposition.
But skeptics say it’s still unlikely that anything substantive gets done. They argue that Republicans aren’t going to want to hand Democrats another legislative victory, especially with control of Congress up for grabs in the November midterm elections. Some advocates on the left say nothing will happen unless Democrats make a much more aggressive push to codify DACA into law during the shrinking window in which they control both the House and Senate.
Many of those same advocates have criticized Biden for not using his power as president to expand DACA so more immigrants are eligible. Some conservatives, though, argue that DACA has always been a severe violation of executive power and the courts would be correct to return full decision-making power over immigration policy back to Congress.
What’s next
The Fifth Circuit’s DACA ruling is expected to be released in the coming weeks. If that decision is appealed, it could be heard by the Supreme Court as early as this fall, with a potential final ruling sometime next year.
Perspectives
There’s at least some hope that Congress might pass a permanent solution
“If there’s any glimmer of hope for DREAMers, it might be in the Senate’s compromise on another highly divisive topic: gun control. … A series of major mass shootings finally galvanized enough bipartisan support to pass a gun safety package earlier this year that didn’t go as far as Democrats wanted, but still introduced tailored reforms. With the right motivation, immigration advocates hope a similar sort of negotiation might be possible on immigration, as well.” — Nicole Narea, Vox
DACA’s existence may actually be making true reform less possible
“The difference is night and day from being undocumented to then having protection from deportation, work authorization and essentially being able to start one's life. … But as an unintended consequence, DACA may have actually taken some of the steam out of a legislative fix that would have provided permanent legal status for undocumented young people.” — Tom Wong, immigration policy researcher, to NPR
The GOP should hold out on DACA until they have more leverage to enact their own immigration reforms
“Ultimately, this is a battle that must be fought in Congress and likely will not advance for Republicans until a president of their party is in the White House. After a year and a half of the Biden administration’s open borders … the American public is likely more receptive than ever to stricter immigration policies. If Republicans in Congress are paying any attention to where their voters are positioned on immigration, they should think twice before caving on amnesty for illegal aliens.” — Jack Wolfsohn, National Review
Republicans’ hard-line anti-immigrant views don’t allow room for nuance
“It’s all a matter of mindset, of course. Republicans could just as easily look at Dreamers as a ready workforce during a labor shortage that’s aggravating inflation, or perhaps even (God forbid!) as human beings. … They can’t seem to separate Dreamers, raised in the same country as them, from new border arrivals.” — Jean Guerrero, Los Angeles Times
An end to DACA would be an important step toward reining in presidential overreach
“Obama’s illegal DACA program caused an incalculable loss of faith in the rule of law. … Until presidents like Biden, Trump, and Obama are forced to drive within the lines, the presidency itself will continue to be the biggest threat to democracy in America.” — Editorial, Washington Examiner
Lawmakers on both sides must abandon political gamesmanship and pass a simple DACA solution
“The argument in Congress has long been about wider policy differences on immigration and border security. Hundreds of thousands of DACA recipients are human pawns on this political chess board. … Congress could pass a clean law to formally legalize the DACA program, and the president could sign it. Everything else is politics.” — Editorial, Orange County Register
Both political parties are too mired in dysfunction to solve the problem
“There’s a core of Republican voters that won’t support giving legal status to any undocumented immigrants, and members … of Congress either agree with them or are wary of crossing them. Meanwhile, Democrats still have trouble getting on the same page, even with control of the White House and slim majorities in both houses of Congress.” — Editorial, San Diego Union-Tribune
The moral argument for protecting Dreamers can only go so far
“A stunted ethical vision is a major issue at hand, but so is irrationality when one considers the financial contributions that DACA recipients make each year (for example, $9.4 billion in taxes alone) along with other markers showing the benefits that DACA has bestowed on recipients and on society at large — and the ultimate value of granting a pathway to citizenship.” — Andrew Moss, Daily Hampshire Gazette
Biden could do much more to protect Dreamers even without Congress
“Because the Biden administration chiefly focused on its battle with the courts, the new rule fails to adopt any substantive measures to expand or strengthen the DACA program. Most conspicuously, the government declined to extend the date that a young immigrant must have arrived in the United States to apply for DACA. … Effectively set an expiration date for DACA regardless of what the courts decide.” — Jacob Hamburger and Stephen Yale-Loehr, Slate
Even overwhelming public opinion won’t be enough to sway Congress
“The failure of Congress to pass federal legislation that would legalize the immigration status of hundreds of thousands of Dreamers is another reminder that polling data and statistics take a back seat when it comes to immigration policy. Politicians and elected officials would much rather pander to the most extreme and fringe elements of their political base.” — Marcela García, Boston Globe
Failure to protect Dreamers means comprehensive immigration reform is all but unimaginable
“The problem of migrants who lack long-term documentation is broader than dreamers. An estimated 6.7 million migrants have lived here for more than a decade; of that cohort, more than half have been here for 20 years or longer. Yet within that population, dreamers are unique. Having been brought to the country as babies, toddlers and teens, they were handed a raw deal. It’s a disgrace that we can’t resolve it.” — Editorial, Washington Post
Is there a topic you’d like to see covered in “The 360”? Send your suggestions to the360@yahoonews.com.
Photo illustration: Yahoo News; photos: Kent Nishimura/Los Angeles Times via Getty Images
Wednesday, September 14, 2022
ABANDONING LEGACY COSTS
IBM to Post $5.9 Billion Pension-Transfer Charge in Third Quarter
Brody Ford and Max Reyes
Tue, September 13, 2022
(Bloomberg) -- International Business Machines Corp. said it would report a $5.9 billion one-time pretax charge in the third quarter as a result of an agreement to offload pension obligations to two life insurers.
IBM and its pension plan administrator said the purchase of annuities from Prudential Financial Inc. and MetLife Inc. will transfer about $16 billion in pension obligations that cover about 100,000 participants and their beneficiaries. The annuities were funded directly by the assets of the pension plan and required no cash or asset contributions from IBM, the company said Tuesday in a regulatory filing.
The agreement is called a pension risk transfer. IBM, by buying annuities from the insurance companies, makes Prudential and MetLife responsible for paying the pension obligations. Insurers have been seeking out pension-transfer agreements in recent years as a way to accrue assets for investment. The popularity of the deals is also driven by employers that are looking to offload the long-term obligations.
IBM, in a blog post, said it has “taken actions over the last several years to reduce the risk profile of its worldwide retirement-related plans, while at the same time increasing the funded status of the plans.”
IBM said the charge will not affect its third-quarter or full-year operating profit or free cash flow.
IBM to Post $5.9 Billion Pension-Transfer Charge in Third Quarter
Brody Ford and Max Reyes
Tue, September 13, 2022
(Bloomberg) -- International Business Machines Corp. said it would report a $5.9 billion one-time pretax charge in the third quarter as a result of an agreement to offload pension obligations to two life insurers.
IBM and its pension plan administrator said the purchase of annuities from Prudential Financial Inc. and MetLife Inc. will transfer about $16 billion in pension obligations that cover about 100,000 participants and their beneficiaries. The annuities were funded directly by the assets of the pension plan and required no cash or asset contributions from IBM, the company said Tuesday in a regulatory filing.
The agreement is called a pension risk transfer. IBM, by buying annuities from the insurance companies, makes Prudential and MetLife responsible for paying the pension obligations. Insurers have been seeking out pension-transfer agreements in recent years as a way to accrue assets for investment. The popularity of the deals is also driven by employers that are looking to offload the long-term obligations.
IBM, in a blog post, said it has “taken actions over the last several years to reduce the risk profile of its worldwide retirement-related plans, while at the same time increasing the funded status of the plans.”
IBM said the charge will not affect its third-quarter or full-year operating profit or free cash flow.
Woodford Administrator Faces Possible £306 Million Hit, UK Says
Derek Decloet and Loukia Gyftopoulou
Tue, September 13, 2022
(Bloomberg) -- The Financial Conduct Authority said the administrator of Neil Woodford’s failed fund could face a penalty of up to £306 million ($358 million) over its collapse, a first indication of the likely findings from the UK regulator’s longrunning probe.
The Financial Conduct Authority “is likely” to require Link Fund Solutions -- the entity that managed the Woodford fund -- to “pay a financial penalty and/or consumer redress,” the regulator said in a statement Monday, although it noted that the decision was not final and that LFS could challenge it.
The estimated redress payment reflects the regulator’s “current view” of Link’s failings in managing the liquidity of Woodford’s Equity Income Fund. The regulator opened an investigation into the circumstances relating to the suspension in June 2019.
Link Fund Solutions was the fund administrator on the LF Woodford Equity Income Fund, which started to be liquidated nearly three years ago. Woodford froze the vehicle in mid-2019 because he couldn’t meet clients’ withdrawal requests, trapping £3.7 billion of investor funds.
He was ousted as manager of the fund in October of that year, and announced he would shutter his investment firm, a stunning fall that counts as one of the most dramatic in London’s financial history. Subsequent asset sales have seen investors recoup some of their money but they are still about £1 billion out of pocket.
Link Administration Holdings said in a statement Tuesday that LFS “does not agree with the FCA’s view” and “will explore all options,” including challenging any decision. “Link Group considers that any liabilities relating to the Woodford Matters will be confined to” LFS.
Canadian Deal
The potential penalty could derail Toronto-based Dye & Durham Ltd. proposed acquisition of Australia’s Link Administration Holdings Ltd. The FCA said its approval of Dye & Durham’s acquisition of Link is “subject to a condition to commit to make funds available to meet any shortfall” within the fund administrator to cover potential payments.
Dye & Durham is assessing the impact of that demand made by the FCA, according to its separate statement Monday. If it can’t accept those terms, it said, then the companies might not be able to close the $1.7 billion deal, which had already been repriced lower after the sharp selloff in technology stocks.
The firm “must now decide whether to proceed with the transaction at a higher effective purchase price, renegotiate with Link and revise the terms of its offer to account for the incremental liability, or walk away from the deal,” BMO Capital Markets analyst Thanos Moschopoulos said in a note.
Shares in the Canadian company dropped 2% to C$14.43 in Toronto on Monday. Link shares fell by about a fifth on Tuesday in Sydney.
Derek Decloet and Loukia Gyftopoulou
Tue, September 13, 2022
(Bloomberg) -- The Financial Conduct Authority said the administrator of Neil Woodford’s failed fund could face a penalty of up to £306 million ($358 million) over its collapse, a first indication of the likely findings from the UK regulator’s longrunning probe.
The Financial Conduct Authority “is likely” to require Link Fund Solutions -- the entity that managed the Woodford fund -- to “pay a financial penalty and/or consumer redress,” the regulator said in a statement Monday, although it noted that the decision was not final and that LFS could challenge it.
The estimated redress payment reflects the regulator’s “current view” of Link’s failings in managing the liquidity of Woodford’s Equity Income Fund. The regulator opened an investigation into the circumstances relating to the suspension in June 2019.
Link Fund Solutions was the fund administrator on the LF Woodford Equity Income Fund, which started to be liquidated nearly three years ago. Woodford froze the vehicle in mid-2019 because he couldn’t meet clients’ withdrawal requests, trapping £3.7 billion of investor funds.
He was ousted as manager of the fund in October of that year, and announced he would shutter his investment firm, a stunning fall that counts as one of the most dramatic in London’s financial history. Subsequent asset sales have seen investors recoup some of their money but they are still about £1 billion out of pocket.
Link Administration Holdings said in a statement Tuesday that LFS “does not agree with the FCA’s view” and “will explore all options,” including challenging any decision. “Link Group considers that any liabilities relating to the Woodford Matters will be confined to” LFS.
Canadian Deal
The potential penalty could derail Toronto-based Dye & Durham Ltd. proposed acquisition of Australia’s Link Administration Holdings Ltd. The FCA said its approval of Dye & Durham’s acquisition of Link is “subject to a condition to commit to make funds available to meet any shortfall” within the fund administrator to cover potential payments.
Dye & Durham is assessing the impact of that demand made by the FCA, according to its separate statement Monday. If it can’t accept those terms, it said, then the companies might not be able to close the $1.7 billion deal, which had already been repriced lower after the sharp selloff in technology stocks.
The firm “must now decide whether to proceed with the transaction at a higher effective purchase price, renegotiate with Link and revise the terms of its offer to account for the incremental liability, or walk away from the deal,” BMO Capital Markets analyst Thanos Moschopoulos said in a note.
Shares in the Canadian company dropped 2% to C$14.43 in Toronto on Monday. Link shares fell by about a fifth on Tuesday in Sydney.
ECONOMIC DIKTATOR
Turkey’s Odd Bond Yields Show a Market Warped by Erdogan
Asli Kandemir and Ugur Yilmaz
Tue, September 13, 2022
(Bloomberg) --
Turkish debt markets are becoming increasingly disconnected from economic reality as the government’s lira and dollar bonds trade at nearly the same yields.
It’s an oddity that doesn’t make sense when viewed through the lens of classic risk and reward. The lira is one of the world’s worst-performing currencies as Turkish inflation speeds past 80%, while the dollar enjoys the status of the ultimate safe haven.
But in Turkey, market movements are best understood by government policies. The central bank just delivered a shock rate cut demanded by President Recep Tayyip Erdogan while pushing lenders to buy more lira bonds, reducing borrowing costs.
As a result, the yield on lira-denominated notes due in November 2030 dropped as much as 13 basis points below the rate on the sovereign’s similar-maturity dollar bonds last week. In March, local yields were roughly 1,800 basis points higher.
“It’s an extremely rare situation for emerging markets in general, and the first time this has happened in Turkey,” said Emre Akcakmak, a senior consultant to East Capital, based in Dubai. “I wouldn’t expect this yield dynamic to be sustainable.”
The lira bond rally comes despite upward pressure on inflation and expectations the lira will weaken further. It also counters the trend with the junk-rated sovereign’s dollar debt, which has sold off this year -- along with bonds of many other developing markets -- amid risks to global and local economic growth prospects.
Compliance-Driven Rally
Foreign investors have largely exited from the country’s local bonds, meaning price movements there are driven by Turkish investors rushing to comply with new rules, regardless of economic fundamentals.
On Tuesday, the November 2030 lira bonds yielded about 29 basis points more than Turkey’s equivalent dollar notes. Other maturities have also seen an unprecedented conversion, with the extra yield on local bonds due in 2027 dropping to as little as 71 basis points above similar dollar notes last month, from 880 basis points in June.
The low-yield, high-inflation environment is the legacy of Erdogan’s unconventional economic beliefs. He says that low interest rates help curb consumer prices and has pressed policy makers into cutting official borrowing costs. However, the ultra-loose monetary policy has so far failed to halt inflation and contributed to the lira’s 27% weakening against the dollar this year.
Last month, the central bank released rules forcing banks to bring commercial loan rates closer to Turkey’s 13% benchmark policy rate, in an attempt to counter signs that the $830 billion economy might be slowing. Earlier, it forced lenders to buy lira bonds as requirements for collateral as well as bank reserves.
Such low rates on lira bonds may eventually lead to an outflow of foreign currency from Turkey as companies refinance hard-currency debt with local funding, according to Inanc Sozer, managing partner at Istanbul-based consultants Virtus Glocal.
Meanwhile, Turkish banks -- increasingly bloated by low-yielding lira-bond portfolios -- may be hit with “significant losses” when interest rates finally rise, he said.
Turkey’s Odd Bond Yields Show a Market Warped by Erdogan
Asli Kandemir and Ugur Yilmaz
Tue, September 13, 2022
(Bloomberg) --
Turkish debt markets are becoming increasingly disconnected from economic reality as the government’s lira and dollar bonds trade at nearly the same yields.
It’s an oddity that doesn’t make sense when viewed through the lens of classic risk and reward. The lira is one of the world’s worst-performing currencies as Turkish inflation speeds past 80%, while the dollar enjoys the status of the ultimate safe haven.
But in Turkey, market movements are best understood by government policies. The central bank just delivered a shock rate cut demanded by President Recep Tayyip Erdogan while pushing lenders to buy more lira bonds, reducing borrowing costs.
As a result, the yield on lira-denominated notes due in November 2030 dropped as much as 13 basis points below the rate on the sovereign’s similar-maturity dollar bonds last week. In March, local yields were roughly 1,800 basis points higher.
“It’s an extremely rare situation for emerging markets in general, and the first time this has happened in Turkey,” said Emre Akcakmak, a senior consultant to East Capital, based in Dubai. “I wouldn’t expect this yield dynamic to be sustainable.”
The lira bond rally comes despite upward pressure on inflation and expectations the lira will weaken further. It also counters the trend with the junk-rated sovereign’s dollar debt, which has sold off this year -- along with bonds of many other developing markets -- amid risks to global and local economic growth prospects.
Compliance-Driven Rally
Foreign investors have largely exited from the country’s local bonds, meaning price movements there are driven by Turkish investors rushing to comply with new rules, regardless of economic fundamentals.
On Tuesday, the November 2030 lira bonds yielded about 29 basis points more than Turkey’s equivalent dollar notes. Other maturities have also seen an unprecedented conversion, with the extra yield on local bonds due in 2027 dropping to as little as 71 basis points above similar dollar notes last month, from 880 basis points in June.
The low-yield, high-inflation environment is the legacy of Erdogan’s unconventional economic beliefs. He says that low interest rates help curb consumer prices and has pressed policy makers into cutting official borrowing costs. However, the ultra-loose monetary policy has so far failed to halt inflation and contributed to the lira’s 27% weakening against the dollar this year.
Last month, the central bank released rules forcing banks to bring commercial loan rates closer to Turkey’s 13% benchmark policy rate, in an attempt to counter signs that the $830 billion economy might be slowing. Earlier, it forced lenders to buy lira bonds as requirements for collateral as well as bank reserves.
Such low rates on lira bonds may eventually lead to an outflow of foreign currency from Turkey as companies refinance hard-currency debt with local funding, according to Inanc Sozer, managing partner at Istanbul-based consultants Virtus Glocal.
Meanwhile, Turkish banks -- increasingly bloated by low-yielding lira-bond portfolios -- may be hit with “significant losses” when interest rates finally rise, he said.
Germany Sells Lufthansa Stake at $760 Million Profit
Eric Pfanner and Mariajose Vera
Wed, September 14, 2022
(Bloomberg) -- Germany raised 760 million euros ($760 million) from the sale of a stake in Deutsche Lufthansa AG, unwinding all of the holding it took to keep the flagship carrier afloat during Covid-19 lockdowns.
The country’s Economic Stabilization Fund, or WSF, sold its remaining 9.92% stake in Europe’s largest airline via an accelerated bookbuilding to institutional investors, according to a statement late Tuesday.
“The total proceeds of 1.07 billion euros generated for the WSF from the sale of its stake significantly exceed the 306 million euros invested to acquire it by 760 million euros,” said Jutta Doenges, who is responsible for the WSF as managing director of the finance agency. With this outcome, “the participation of the WSF ends and the company is back in private hands,” she said.
The joint bookrunners of the block placement announced late Tuesday that the WSF had sold about 74.4 million Lufthansa shares representing about 6.2% of the share capital at 6.11 euros per share, a discount of 3.35% compared with the airline’s closing price.
Lufthansa in November repaid the last of its 9 billion-euro bailout ahead of schedule, enabling the government to pare its stake at a significant profit.
Germany’s richest man may have been one of the buyers, after saying he wants to acquire more shares in Europe’s biggest airline. Klaus-Michael Kuehne is looking to boost his 15.01% stake according to a filing last week, after investing a chunk of a fortune he made in logistics into the carrier.
The latest developments for the carrier come shortly after it said it reached agreement with pilots to increase pay and bar strikes for about a year. Europe’s largest airline has been wrestling with labor disputes that exacerbated an already chaotic summer travel season.
Eric Pfanner and Mariajose Vera
Wed, September 14, 2022
(Bloomberg) -- Germany raised 760 million euros ($760 million) from the sale of a stake in Deutsche Lufthansa AG, unwinding all of the holding it took to keep the flagship carrier afloat during Covid-19 lockdowns.
The country’s Economic Stabilization Fund, or WSF, sold its remaining 9.92% stake in Europe’s largest airline via an accelerated bookbuilding to institutional investors, according to a statement late Tuesday.
“The total proceeds of 1.07 billion euros generated for the WSF from the sale of its stake significantly exceed the 306 million euros invested to acquire it by 760 million euros,” said Jutta Doenges, who is responsible for the WSF as managing director of the finance agency. With this outcome, “the participation of the WSF ends and the company is back in private hands,” she said.
The joint bookrunners of the block placement announced late Tuesday that the WSF had sold about 74.4 million Lufthansa shares representing about 6.2% of the share capital at 6.11 euros per share, a discount of 3.35% compared with the airline’s closing price.
Lufthansa in November repaid the last of its 9 billion-euro bailout ahead of schedule, enabling the government to pare its stake at a significant profit.
Germany’s richest man may have been one of the buyers, after saying he wants to acquire more shares in Europe’s biggest airline. Klaus-Michael Kuehne is looking to boost his 15.01% stake according to a filing last week, after investing a chunk of a fortune he made in logistics into the carrier.
The latest developments for the carrier come shortly after it said it reached agreement with pilots to increase pay and bar strikes for about a year. Europe’s largest airline has been wrestling with labor disputes that exacerbated an already chaotic summer travel season.
Crypto Lending Now Pays Less Than Safest US Government Debt
Eva Szalay
Tue, September 13, 2022
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(Bloomberg) -- Cryptocurrencies are facing a new threat: the lure of Treasuries offering a similar payout for a whole lot less risk.
In a rare reversal, crypto yields that institutions typically seek out have fallen below what the US government pays to borrow for three months, giving the hedge funds and family offices that have flocked to the digital space one less reason to keep investing.
The Federal Reserve’s hawkish stance is driving up interest rates almost everywhere -- except in the speculative world of crypto, where yields have collapsed alongside volumes, wiping out some of the main avenues for generating double-digit returns, while the implosion of the Terra stablecoin project and the failures of crypto lenders like Celsius Network shook confidence.
“Two years ago, interest rates in crypto were at least 10% and in the real world rates were either negative or near-zero,” said Jaime Baeza, chief executive officer of ANB Investments, a hedge fund focused on digital assets. “Now it’s almost the reverse, because yields in crypto have collapsed and central banks are raising rates.”
This year’s crypto winter has already challenged some of proponents’ key arguments, such as the asset class being a hedge against inflation and political turmoil. Instead, Bitcoin has traded pretty much in line with stock benchmarks like the S&P 500, except that it’s dropped at a much faster pace.
But not until recently have crypto yields been matched, or even surpassed, by those of government debt that’s essentially risk free.
Unlike in traditional markets, falling yields don’t signal lower risks for crypto. Yields are shaped by trading volumes rather than risk sentiment, and reflect the rate an investor can hope to earn lending out holdings on exchanges and decentralized-finance protocols, or depositing them with crypto lenders, often in the form of stablecoins.
Because they have no direct relation to central bank rates, crypto yields can slump even as borrowing costs spike across financial markets to reflect steep Fed hikes. That’s creating a mismatch that could lead to a secular stagnation in some of the world’s most speculative assets, some market observers say. Lower yields will make it less likely that investors buy tokens to lend them out, leading to lower demand and in turn, lower prices.
That dynamic is becoming even more pronounced after Fed Chair Jerome Powell’s recent higher-for-longer rates pledge to subdue stubborn inflation.
“Higher appetite for Treasuries has sucked out liquidity from crypto,” said Sidney Powell, the chief executive of crypto lending company Maple Finance.
DeFi Outflow
It’s not that investors who previously chased crypto yields are now buying Treasuries; rather, what’s happening is that across most of finance, higher rates are now available for a given amount of risk. For example, the yield investors can earn on global company debt has spiked to financial crisis-era highs of 4.4%, according to a Bloomberg index.
A key measure of investor interest in yield-generating crypto activities is the total value locked in marketplaces where much of the lending takes place — so-called DeFi platforms. This measure has declined to just $60 billion from its peak of $182 billion in December last year, according to data from DeFiLlama.
Meanwhile, Bitcoin is trading at $22,351, around 53% off its March peak this year after five consecutive weeks of outflows from Bitcoin and Ethereum ETFs totaling $99 million, according to CoinShares.
Kaspar Hense, a portfolio manager at BlueBay Asset Management, says that’s still too high, and suggests $10,000 would be closer to fair value. Double-digit yields were mainly thanks to distorted real rates when central banks kept borrowing costs anchored near zero, Hense argues.
Still, Inigo Fraser Jenkins, co-head of institutional solutions at AllianceBernstein, said that while the investment case for crypto is harder to make in a high-rate macro environment, institutional investors will still gravitate to it in order to gain experience trading an array of related assets.
“The real importance is seeing crypto as a stepping stone to a broader set of digital assets, in particular tokenized real assets,” Fraser Jenkins said.
Before the recent reversal, crypto had enjoyed exponential growth, even through rollercoaster ups and downs. The post-financial crisis era when central bankers sought to reflate economies via historically low interest rates sent money managers craving returns into ever riskier assets — a windfall for crypto.
“Now the environment is very different,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “A key cross-asset theme has been the shift from a near zero and negative rate environment to one where you can get over 3% on a triple A-rated T-bill that’s guaranteed by the US government. This will have an impact on the performance of assets with no yield such as gold, some tech stocks and crypto.”
Eva Szalay
Tue, September 13, 2022
(Bloomberg) -- Cryptocurrencies are facing a new threat: the lure of Treasuries offering a similar payout for a whole lot less risk.
In a rare reversal, crypto yields that institutions typically seek out have fallen below what the US government pays to borrow for three months, giving the hedge funds and family offices that have flocked to the digital space one less reason to keep investing.
The Federal Reserve’s hawkish stance is driving up interest rates almost everywhere -- except in the speculative world of crypto, where yields have collapsed alongside volumes, wiping out some of the main avenues for generating double-digit returns, while the implosion of the Terra stablecoin project and the failures of crypto lenders like Celsius Network shook confidence.
“Two years ago, interest rates in crypto were at least 10% and in the real world rates were either negative or near-zero,” said Jaime Baeza, chief executive officer of ANB Investments, a hedge fund focused on digital assets. “Now it’s almost the reverse, because yields in crypto have collapsed and central banks are raising rates.”
This year’s crypto winter has already challenged some of proponents’ key arguments, such as the asset class being a hedge against inflation and political turmoil. Instead, Bitcoin has traded pretty much in line with stock benchmarks like the S&P 500, except that it’s dropped at a much faster pace.
But not until recently have crypto yields been matched, or even surpassed, by those of government debt that’s essentially risk free.
Unlike in traditional markets, falling yields don’t signal lower risks for crypto. Yields are shaped by trading volumes rather than risk sentiment, and reflect the rate an investor can hope to earn lending out holdings on exchanges and decentralized-finance protocols, or depositing them with crypto lenders, often in the form of stablecoins.
Because they have no direct relation to central bank rates, crypto yields can slump even as borrowing costs spike across financial markets to reflect steep Fed hikes. That’s creating a mismatch that could lead to a secular stagnation in some of the world’s most speculative assets, some market observers say. Lower yields will make it less likely that investors buy tokens to lend them out, leading to lower demand and in turn, lower prices.
That dynamic is becoming even more pronounced after Fed Chair Jerome Powell’s recent higher-for-longer rates pledge to subdue stubborn inflation.
“Higher appetite for Treasuries has sucked out liquidity from crypto,” said Sidney Powell, the chief executive of crypto lending company Maple Finance.
DeFi Outflow
It’s not that investors who previously chased crypto yields are now buying Treasuries; rather, what’s happening is that across most of finance, higher rates are now available for a given amount of risk. For example, the yield investors can earn on global company debt has spiked to financial crisis-era highs of 4.4%, according to a Bloomberg index.
A key measure of investor interest in yield-generating crypto activities is the total value locked in marketplaces where much of the lending takes place — so-called DeFi platforms. This measure has declined to just $60 billion from its peak of $182 billion in December last year, according to data from DeFiLlama.
Meanwhile, Bitcoin is trading at $22,351, around 53% off its March peak this year after five consecutive weeks of outflows from Bitcoin and Ethereum ETFs totaling $99 million, according to CoinShares.
Kaspar Hense, a portfolio manager at BlueBay Asset Management, says that’s still too high, and suggests $10,000 would be closer to fair value. Double-digit yields were mainly thanks to distorted real rates when central banks kept borrowing costs anchored near zero, Hense argues.
Still, Inigo Fraser Jenkins, co-head of institutional solutions at AllianceBernstein, said that while the investment case for crypto is harder to make in a high-rate macro environment, institutional investors will still gravitate to it in order to gain experience trading an array of related assets.
“The real importance is seeing crypto as a stepping stone to a broader set of digital assets, in particular tokenized real assets,” Fraser Jenkins said.
Before the recent reversal, crypto had enjoyed exponential growth, even through rollercoaster ups and downs. The post-financial crisis era when central bankers sought to reflate economies via historically low interest rates sent money managers craving returns into ever riskier assets — a windfall for crypto.
“Now the environment is very different,” said Andrew Sheets, chief cross-asset strategist at Morgan Stanley. “A key cross-asset theme has been the shift from a near zero and negative rate environment to one where you can get over 3% on a triple A-rated T-bill that’s guaranteed by the US government. This will have an impact on the performance of assets with no yield such as gold, some tech stocks and crypto.”
Starbucks details its blockchain-based loyalty platform and NFT community, Starbucks Odyssey
Sarah Perez
Mon, September 12, 2022 at 6:00 AM·7 min read
Starbucks is today officially introducing Starbucks Odyssey, launching later this year -- the coffee chain's first foray into building with web3 technology. The new experience combines the company's successful Starbucks Rewards loyalty program with an NFT platform, allowing its customers to both earn and purchase digital assets that unlock exclusive experiences and rewards.
The company had earlier teased its web3 plans to investors, saying it believed this new experience would build on the current Starbucks Rewards model where customers today earn "stars" which can be exchanged for perks, like free drinks. It envisions Starbucks Odyssey as a way for its most loyal customers to earn a broader set of rewards while also building community.
To develop the project, Starbucks brought in Adam Brotman, the architect of its Mobile Order & Pay system and the Starbucks app, to help serve as a special advisor. Now the co-founder of Forum3, a web3 loyalty startup, Brotman's team worked on Starbucks Odyssey alongside the Seattle coffee chain's own marketing, loyalty and technology teams.
While Starbucks had been investigating blockchain technologies for a couple of years, it has only been involved in this particular project for around six months, Starbucks CMO Brady Brewer told TechCrunch. He says the company wanted to invest in this area, but not as a "stunt" side project, as many companies are doing. Rather, it wanted to find a way to use the technology to enhance its business and expand its existing loyalty program.
It opted to make NFTs the passes that allow access to this digital community, but it's intentionally obscuring the nature of the technology underpinning the experience in order to bring in more consumers -- including non-technical people -- to the web3 platform.
"It happens to be built on blockchain and web3 technologies, but the customer -- to be honest -- may very well not even know that what they're doing is interacting with blockchain technology. It's just the enabler," Brewer explains.
To engage with the Starbucks Odyssey experience, Starbucks Rewards members will log in to the web app using their existing loyalty program credentials.
Once there, they'll be able to engage with various activities, which Starbucks called "journeys" -- like playing interactive games or taking on challenges designed to deepen their knowledge of the Starbucks brand or coffee in general. As they complete these journeys, members can collect early digital collectibles in the form of NFTs (non-fungible tokens). Starbucks Odyssey, however, does away with the tech lingo and calls these NFT collectibles "journey stamps" instead.
Additionally, a set of limited-edition NFTs will be available to purchase in the Starbucks Odyessy web app, which also works on mobile devices. Though hosted on the Polygon blockchain, these NFTs will be bought using a credit or debit card -- a crypto wallet is not required. The company believes this will make it easier for consumers to engage with the web3 experience by lowering the barrier to entry. It also won't complicate consumers' transactions with things like "gas fees," preferring to offer a bundled price.
The company is not yet ready to share what its NFTs will cost or how many will be available at launch, saying these are decisions that are still being ironed out.
However, the various "stamps" (NFTs) will include a point value based on their rarity and can be bought or sold among Starbucks Odyessy members in the marketplace, with the ownership secured on the blockchain. The artwork on the NFTs is being co-created by Starbucks and outside artists, and a portion of the proceeds from the sale of the limited-edition collectibles will be donated to support causes chosen by Starbucks employees and customers.
By collecting the stamps, members will gain points that can unlock exclusive benefits.
These perks go beyond those you can earn with a traditional Starbucks Rewards account and its "stars." While today, members can earn things like free coffee, free food or select merchandise, the points earned in Starbucks Odyessy will translate into experiences and other benefits.
Starbucks Hacienda Alsacia.
On the lower end, that could be a virtual espresso martini-making class or access to unique merchandise and artist collaborations. As you gain more points, you may earn invites to special events hosted at Starbucks Reserve Roasteries, or even earn a trip to the Starbucks Hacienda Alsacia coffee farm in Costa Rica. It's expected the very largest perks will be reserved for those who purchase NFTs, though lesser versions may be offered to those who earn their way up.
For instance, a paid NFT could offer the full travel package and farm tour, while an earned NFT could offer the tour alone with flights and hotels left up to the user. Starbucks hasn't made any formal decisions on this front, however.
But what the company can say is that it wants to deeply integrate the program with its existing loyalty rewards, beyond simply using the same user account credentials for both programs.
Brewer says Starbucks is already imagining how some of the activities that earn NFTs will be connected to real-world Starbucks purchases, for instance.
In Odyssey, users earn NFTs by doing challenges, which might also include a real-world activity like "try three things on the espresso menu." This would require the user to show their barcode at checkout -- as they would if earning stars -- to have their transaction counted toward the Starbuck Odyssey challenge. The company is still determining what mix of games, challenges and quests it will include at launch.
"But we'll have experiences that do link directly to customers' behavior in our stores," Brewer stresses. Most importantly, the company wants to make gaining NFTs something anyone can do -- not just those with money to blow on digital collectibles, as is often the case with current NFT communities, which price out the average user.
"There will be a lot of ways for people to earn [rewards] without having to spend a lot of money," says Brewer. "We want to make this super easy and accessible. There will be plenty of everyday experiences customers can earn like virtual classes or access to limited edition merchandise, for instance. "The range of experiences will be quite vast and very accessible," he adds.
Starbucks says it explored all the different blockchains for the project but landed on the "proof-of-stake" blockchain technology built by Polygon for this effort because it uses less energy than first-generation "proof-of-work" blockchains, which is more in line with its conversation goals.
The idea to enter into the world of web3 makes sense for a company known for taking advantage of emerging technologies and making them more approachable and easy for consumers to access. In years past, Starbucks introduced Wi-Fi in its stores to encourage customers to spend more time during visits. It also pushed the idea of mobile wallets long before Apple Pay became ubiquitous. And it made mobile ordering the norm well ahead of the COVID pandemic, when other restaurant chains picked it up.
But one criticism leveraged against many traditional businesses when they enter the web3 market is that they're approaching it as a marketing stunt, not a real endeavor. Starbucks, of course, argues that's not the case here -- but only time will tell how serious its interest may be.
"We're bullish on the future of these technologies enabling experiences that were not possible before," Brewer claims. The intention is to be flexible and move with the customers as the web3 market changes, he explains. "It's really important that we're looking at it for the long-term," he continues. "But, given that we're plugging it into our industry-leading, massive scale rewards program -- we're committed," he says.
The company says its web3 platform will open its waitlist (waitlist.starbucks.com) on September 12 and will launch later in the year. It will remove the waitlist and open the platform more broadly sometime next year.
Sarah Perez
Mon, September 12, 2022 at 6:00 AM·7 min read
Starbucks is today officially introducing Starbucks Odyssey, launching later this year -- the coffee chain's first foray into building with web3 technology. The new experience combines the company's successful Starbucks Rewards loyalty program with an NFT platform, allowing its customers to both earn and purchase digital assets that unlock exclusive experiences and rewards.
The company had earlier teased its web3 plans to investors, saying it believed this new experience would build on the current Starbucks Rewards model where customers today earn "stars" which can be exchanged for perks, like free drinks. It envisions Starbucks Odyssey as a way for its most loyal customers to earn a broader set of rewards while also building community.
To develop the project, Starbucks brought in Adam Brotman, the architect of its Mobile Order & Pay system and the Starbucks app, to help serve as a special advisor. Now the co-founder of Forum3, a web3 loyalty startup, Brotman's team worked on Starbucks Odyssey alongside the Seattle coffee chain's own marketing, loyalty and technology teams.
While Starbucks had been investigating blockchain technologies for a couple of years, it has only been involved in this particular project for around six months, Starbucks CMO Brady Brewer told TechCrunch. He says the company wanted to invest in this area, but not as a "stunt" side project, as many companies are doing. Rather, it wanted to find a way to use the technology to enhance its business and expand its existing loyalty program.
It opted to make NFTs the passes that allow access to this digital community, but it's intentionally obscuring the nature of the technology underpinning the experience in order to bring in more consumers -- including non-technical people -- to the web3 platform.
"It happens to be built on blockchain and web3 technologies, but the customer -- to be honest -- may very well not even know that what they're doing is interacting with blockchain technology. It's just the enabler," Brewer explains.
To engage with the Starbucks Odyssey experience, Starbucks Rewards members will log in to the web app using their existing loyalty program credentials.
Once there, they'll be able to engage with various activities, which Starbucks called "journeys" -- like playing interactive games or taking on challenges designed to deepen their knowledge of the Starbucks brand or coffee in general. As they complete these journeys, members can collect early digital collectibles in the form of NFTs (non-fungible tokens). Starbucks Odyssey, however, does away with the tech lingo and calls these NFT collectibles "journey stamps" instead.
Additionally, a set of limited-edition NFTs will be available to purchase in the Starbucks Odyessy web app, which also works on mobile devices. Though hosted on the Polygon blockchain, these NFTs will be bought using a credit or debit card -- a crypto wallet is not required. The company believes this will make it easier for consumers to engage with the web3 experience by lowering the barrier to entry. It also won't complicate consumers' transactions with things like "gas fees," preferring to offer a bundled price.
The company is not yet ready to share what its NFTs will cost or how many will be available at launch, saying these are decisions that are still being ironed out.
However, the various "stamps" (NFTs) will include a point value based on their rarity and can be bought or sold among Starbucks Odyessy members in the marketplace, with the ownership secured on the blockchain. The artwork on the NFTs is being co-created by Starbucks and outside artists, and a portion of the proceeds from the sale of the limited-edition collectibles will be donated to support causes chosen by Starbucks employees and customers.
By collecting the stamps, members will gain points that can unlock exclusive benefits.
These perks go beyond those you can earn with a traditional Starbucks Rewards account and its "stars." While today, members can earn things like free coffee, free food or select merchandise, the points earned in Starbucks Odyessy will translate into experiences and other benefits.
Starbucks Hacienda Alsacia.
On the lower end, that could be a virtual espresso martini-making class or access to unique merchandise and artist collaborations. As you gain more points, you may earn invites to special events hosted at Starbucks Reserve Roasteries, or even earn a trip to the Starbucks Hacienda Alsacia coffee farm in Costa Rica. It's expected the very largest perks will be reserved for those who purchase NFTs, though lesser versions may be offered to those who earn their way up.
For instance, a paid NFT could offer the full travel package and farm tour, while an earned NFT could offer the tour alone with flights and hotels left up to the user. Starbucks hasn't made any formal decisions on this front, however.
But what the company can say is that it wants to deeply integrate the program with its existing loyalty rewards, beyond simply using the same user account credentials for both programs.
Brewer says Starbucks is already imagining how some of the activities that earn NFTs will be connected to real-world Starbucks purchases, for instance.
In Odyssey, users earn NFTs by doing challenges, which might also include a real-world activity like "try three things on the espresso menu." This would require the user to show their barcode at checkout -- as they would if earning stars -- to have their transaction counted toward the Starbuck Odyssey challenge. The company is still determining what mix of games, challenges and quests it will include at launch.
"But we'll have experiences that do link directly to customers' behavior in our stores," Brewer stresses. Most importantly, the company wants to make gaining NFTs something anyone can do -- not just those with money to blow on digital collectibles, as is often the case with current NFT communities, which price out the average user.
"There will be a lot of ways for people to earn [rewards] without having to spend a lot of money," says Brewer. "We want to make this super easy and accessible. There will be plenty of everyday experiences customers can earn like virtual classes or access to limited edition merchandise, for instance. "The range of experiences will be quite vast and very accessible," he adds.
Starbucks says it explored all the different blockchains for the project but landed on the "proof-of-stake" blockchain technology built by Polygon for this effort because it uses less energy than first-generation "proof-of-work" blockchains, which is more in line with its conversation goals.
The idea to enter into the world of web3 makes sense for a company known for taking advantage of emerging technologies and making them more approachable and easy for consumers to access. In years past, Starbucks introduced Wi-Fi in its stores to encourage customers to spend more time during visits. It also pushed the idea of mobile wallets long before Apple Pay became ubiquitous. And it made mobile ordering the norm well ahead of the COVID pandemic, when other restaurant chains picked it up.
But one criticism leveraged against many traditional businesses when they enter the web3 market is that they're approaching it as a marketing stunt, not a real endeavor. Starbucks, of course, argues that's not the case here -- but only time will tell how serious its interest may be.
"We're bullish on the future of these technologies enabling experiences that were not possible before," Brewer claims. The intention is to be flexible and move with the customers as the web3 market changes, he explains. "It's really important that we're looking at it for the long-term," he continues. "But, given that we're plugging it into our industry-leading, massive scale rewards program -- we're committed," he says.
The company says its web3 platform will open its waitlist (waitlist.starbucks.com) on September 12 and will launch later in the year. It will remove the waitlist and open the platform more broadly sometime next year.
UNION BUSTING
Starbucks projects profit growth from tech, stores, workers spending
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Starbucks signage is pictured outside the company's headquarters in Seattle
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Customers line up outside Starbucks' historic first location in Pike Place Market in Seattle
Tue, September 13, 2022 at 10:49 AM·3 min read
By Hilary Russ
SEATTLE (Reuters) -Starbucks Corp projects profits to grow between 15% to 20% per share over the next three years, a significant increase from previous guidance based on spending plans of $2.5 to $3 billion over the same period on technology, new stores and renovations, the coffee chain said on Tuesday.
The company is introducing technology to speed up production of its increasingly popular cold beverages and send digital orders away from busy locations as it seeks to prevent U.S. cafes from being overwhelmed by orders and improve working conditions for employees, it announced during its Investor Day event.
The Seattle-based company expects to return $20 billion to investors via share buybacks and dividends from fiscal 2023 to 2025. Wall Street analysts had largely expected earnings updates to be in line with previous guidance of 10 to 12% growth.
A surge in digital orders, which now make up nearly a quarter of all orders, has helped the coffee chain gain market share during the COVID-19 pandemic but has also led to barista burnout and strained the physical capacity at older stores.
The company is exploring "load balancing" technology that can send orders to stores that have capacity to actually fulfill them – instead of to stores already being slammed by drive-thru customers, for instance, Chief Technology Officer Deb Hall Lefevre said in an interview with Reuters.
"REINVENTION" OF STARBUCKS SINCE PANDEMIC
The pandemic changed customer behavior, leading to a deluge of mobile, delivery and drive-thru orders, as well as an increase in cold beverages and customized coffee drinks.
Calling it a "reinvention," the company laid out a sweeping plan spearheaded by interim Chief Executive Officer Howard Schultz, who will be replaced by Laxman Narasimhan in April.
The plan includes new equipment to heat food faster with less plastic waste, new store designs with larger shelves for orders and additional employee benefits.
A new system for iced coffee drinks shaves nearly a minute off the time it takes to make a Mocha Frappuccino, down to 35 seconds. Baristas would no longer need to haul a bucket of ice to the station every hour because the ice will be automatically fed into the new equipment.
Another machine, which brews hot coffee one cup at a time instead of in bulk batches and eliminates paper filters, is being tested in Minneapolis locations and could be rolled out next year.
Starbucks is on pace to reach 45,000 stores by the end of fiscal 2025 - or nearly eight new stores per day - it said. That includes a net new 2,000 new U.S. stores and some delivery-only locations.
In China, it plans to nearly double the number of stores to 9,000 - or one new store nearly every nine hours.
UNION BACKDROP
Employees at 236 stores voted to join a union over the past year, out of Starbucks' nearly 9,000 corporate-owned U.S. locations. Conversely, 52 stores voted against unionizing, according to National Labor Relations Board data.
Frank Britt, brought in by Schultz to lead the company's transformation strategy, said workers know how to solve the company's problems because they are on the front line.
"A lot of the concerns the partners have, whether they're affiliated with the union or not, are valid concerns. We agree, there's a trust deficit," he said in an interview.
Union members have been holding protests this week to bring attention to their demands. Billie Adeosun, a Starbucks employee since 2015 who works at a unionized location in Olympia, said on Monday higher wages were a top priority.
The company has lifted pay to an average of nearly $17 across non-unionized U.S. locations. Starbucks says the law prohibits it from offering increased benefits to unionized workers without bargaining over them.
"We know that these benefits or higher wages… wouldn't even exist without unions," said Adeosun, who makes $15 an hour. "We've been able to shine a spotlight on this company and show that they're not the liberal company they claim to be."
(Reporting by Hilary Russ; Editing by Josie Kao)
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Starbucks signage is pictured outside the company's headquarters in Seattle
Starbucks employees who support unionization protest ahead of Investor Day, in Seattle
Customers line up outside Starbucks' historic first location in Pike Place Market in Seattle
Tue, September 13, 2022 at 10:49 AM·3 min read
By Hilary Russ
SEATTLE (Reuters) -Starbucks Corp projects profits to grow between 15% to 20% per share over the next three years, a significant increase from previous guidance based on spending plans of $2.5 to $3 billion over the same period on technology, new stores and renovations, the coffee chain said on Tuesday.
The company is introducing technology to speed up production of its increasingly popular cold beverages and send digital orders away from busy locations as it seeks to prevent U.S. cafes from being overwhelmed by orders and improve working conditions for employees, it announced during its Investor Day event.
The Seattle-based company expects to return $20 billion to investors via share buybacks and dividends from fiscal 2023 to 2025. Wall Street analysts had largely expected earnings updates to be in line with previous guidance of 10 to 12% growth.
A surge in digital orders, which now make up nearly a quarter of all orders, has helped the coffee chain gain market share during the COVID-19 pandemic but has also led to barista burnout and strained the physical capacity at older stores.
The company is exploring "load balancing" technology that can send orders to stores that have capacity to actually fulfill them – instead of to stores already being slammed by drive-thru customers, for instance, Chief Technology Officer Deb Hall Lefevre said in an interview with Reuters.
"REINVENTION" OF STARBUCKS SINCE PANDEMIC
The pandemic changed customer behavior, leading to a deluge of mobile, delivery and drive-thru orders, as well as an increase in cold beverages and customized coffee drinks.
Calling it a "reinvention," the company laid out a sweeping plan spearheaded by interim Chief Executive Officer Howard Schultz, who will be replaced by Laxman Narasimhan in April.
The plan includes new equipment to heat food faster with less plastic waste, new store designs with larger shelves for orders and additional employee benefits.
A new system for iced coffee drinks shaves nearly a minute off the time it takes to make a Mocha Frappuccino, down to 35 seconds. Baristas would no longer need to haul a bucket of ice to the station every hour because the ice will be automatically fed into the new equipment.
Another machine, which brews hot coffee one cup at a time instead of in bulk batches and eliminates paper filters, is being tested in Minneapolis locations and could be rolled out next year.
Starbucks is on pace to reach 45,000 stores by the end of fiscal 2025 - or nearly eight new stores per day - it said. That includes a net new 2,000 new U.S. stores and some delivery-only locations.
In China, it plans to nearly double the number of stores to 9,000 - or one new store nearly every nine hours.
UNION BACKDROP
Employees at 236 stores voted to join a union over the past year, out of Starbucks' nearly 9,000 corporate-owned U.S. locations. Conversely, 52 stores voted against unionizing, according to National Labor Relations Board data.
Frank Britt, brought in by Schultz to lead the company's transformation strategy, said workers know how to solve the company's problems because they are on the front line.
"A lot of the concerns the partners have, whether they're affiliated with the union or not, are valid concerns. We agree, there's a trust deficit," he said in an interview.
Union members have been holding protests this week to bring attention to their demands. Billie Adeosun, a Starbucks employee since 2015 who works at a unionized location in Olympia, said on Monday higher wages were a top priority.
The company has lifted pay to an average of nearly $17 across non-unionized U.S. locations. Starbucks says the law prohibits it from offering increased benefits to unionized workers without bargaining over them.
"We know that these benefits or higher wages… wouldn't even exist without unions," said Adeosun, who makes $15 an hour. "We've been able to shine a spotlight on this company and show that they're not the liberal company they claim to be."
(Reporting by Hilary Russ; Editing by Josie Kao)
Starbucks Offers New Savings, Loan Perks for Non-Union Cafe
Leslie Patton
Mon, September 12, 2022
In this article:
(Bloomberg) -- Starbucks Corp. is introducing benefits related to financial savings and student-loan debt for its US baristas. The company says it isn’t allowed to give these new perks to staff at the roughly 300 stores where there’s been union activity.
The new benefits begin Sept. 19, Seattle-based Starbucks said in a statement Monday. The savings program lets staff contribute a part of their after-tax pay to a personal savings account, with the company contributing $25 and $50 credits at milestones up to $250 per person. Starbucks workers will also have access to a new student-loan benefit with coaching on debt about repayment options and refinancing.
Starbucks, which has more than 9,000 US locations that are company owned, legally can’t unilaterally give these benefits to stores that have union activity, according to spokesperson Reggie Borges. Instead, the new benefits can be discussed in collective bargaining, he said.
However, Workers United, the group attempting to organize Starbucks cafes, has argued that the union waived its right to negotiate over extending benefits being provided to other stores, so there’s no legal obstacle to doing so. In August, National Labor Relations Board prosecutors issued a complaint alleging Starbucks violated labor law by withholding new benefits from unionized stores.
“Starbucks is blatantly disregarding the law to continue their scorched-earth union-busting campaign,” Workers United said in a statement. “Starbucks is not only damaging their brand and their business, but irrevocably damaging their credibility as a company.”
Starbucks first announced broader benefits improvements for its baristas on May 3 -- saying they would include opportunities to increase sick-time accrual, a new financial-stability program and tools to help those with student loans. The latter two items are what the company addressed in the Monday announcement.
Starbucks shares were up 0.4% to $89.04 at 3:27 p.m. in New York. The stock was down 24% this year through Sept. 9, compared with the 15% decline of the S&P 500 Index.
Starbucks is giving new financial benefits to employees. There’s just one big catch
Colin Lodewick
Colin Lodewick
FORTUNE
Tue, September 13, 2022
Andrew Lichtenstein—Corbis/Getty Images
Starbucks employees across the country have long enjoyed more benefits than the average service worker.
The company offers retirement planning options and mental health resources. A decade ago, it expanded its health plan to cover gender reassignment surgery for trans employees.
On Monday, the coffee giant announced a slate of new benefits focused on improving the financial well-being of its workers. And while the vast majority of employees will be eligible, a notable portion won’t: those who work at stores that have unionized. The first Starbucks location voted to unionize in December of last year. Since then, other notable unionization movements have emerged at other major American companies, including REI, Amazon, and Trader Joe’s.
Since last December, Starbucks has been grappling with a unionization movement at stores across the country. Now, over 200 locations have unionized, with others continuing to file petitions to vote. Several thousand workers are now union members.
The company has remained steadfast in its opposition to unionization throughout the process, arguing that the unions will get in the way of the company’s direct relationship with its workers.
The new benefits include a new savings plan option along with a student loan management program that comes with tools like individual coaching on loan repayment.
“We’ve heard from our partners and know that pressures of inflation, in addition to debt and savings, are weighing heavily on them,” said Ron Crawford, senior vice president of total rewards for Starbucks, in a press release on Monday. “Providing industry-leading benefits for our partners is a cornerstone of who we are as a company.”
Starbucks’ current interim CEO Howard Schultz first hinted at plans to expand benefits earlier this year during an online forum with store leaders. During the meeting, he said that new benefits couldn’t be extended to unionized employees per U.S. labor law requirements that employers negotiate pay and benefits separately with unionized workers.
While it’s true that Starbucks cannot change benefits without approval from unionized employees, experts previously told Fortune that there are few obstacles in the way from giving unionized employees the expanded benefits.
Workers United, the union seeking to represent Starbucks workers, told Fortune on Tuesday that the company’s decision to not extend the new benefits unilaterally stands on tenuous legal ground, especially after the National Labor Relations Board issued a statement recently that Starbucks’ presentation of expanded benefits only available to non-union employees infringes on the National Labor Relations Act, America’s cornerstone of labor legislation.
“The NLRB recently issued an official complaint against Starbucks alleging that withholding new benefits from unionized workers is illegal,” said a spokesperson from Workers United in a statement to Fortune. “For Starbucks to claim otherwise is simply a lie and blatantly disregarding federal labor law.”
Starbucks did not immediately respond to Fortune’s request for comment.
Tue, September 13, 2022
Andrew Lichtenstein—Corbis/Getty Images
Starbucks employees across the country have long enjoyed more benefits than the average service worker.
The company offers retirement planning options and mental health resources. A decade ago, it expanded its health plan to cover gender reassignment surgery for trans employees.
On Monday, the coffee giant announced a slate of new benefits focused on improving the financial well-being of its workers. And while the vast majority of employees will be eligible, a notable portion won’t: those who work at stores that have unionized. The first Starbucks location voted to unionize in December of last year. Since then, other notable unionization movements have emerged at other major American companies, including REI, Amazon, and Trader Joe’s.
Since last December, Starbucks has been grappling with a unionization movement at stores across the country. Now, over 200 locations have unionized, with others continuing to file petitions to vote. Several thousand workers are now union members.
The company has remained steadfast in its opposition to unionization throughout the process, arguing that the unions will get in the way of the company’s direct relationship with its workers.
The new benefits include a new savings plan option along with a student loan management program that comes with tools like individual coaching on loan repayment.
“We’ve heard from our partners and know that pressures of inflation, in addition to debt and savings, are weighing heavily on them,” said Ron Crawford, senior vice president of total rewards for Starbucks, in a press release on Monday. “Providing industry-leading benefits for our partners is a cornerstone of who we are as a company.”
Starbucks’ current interim CEO Howard Schultz first hinted at plans to expand benefits earlier this year during an online forum with store leaders. During the meeting, he said that new benefits couldn’t be extended to unionized employees per U.S. labor law requirements that employers negotiate pay and benefits separately with unionized workers.
While it’s true that Starbucks cannot change benefits without approval from unionized employees, experts previously told Fortune that there are few obstacles in the way from giving unionized employees the expanded benefits.
Workers United, the union seeking to represent Starbucks workers, told Fortune on Tuesday that the company’s decision to not extend the new benefits unilaterally stands on tenuous legal ground, especially after the National Labor Relations Board issued a statement recently that Starbucks’ presentation of expanded benefits only available to non-union employees infringes on the National Labor Relations Act, America’s cornerstone of labor legislation.
“The NLRB recently issued an official complaint against Starbucks alleging that withholding new benefits from unionized workers is illegal,” said a spokesperson from Workers United in a statement to Fortune. “For Starbucks to claim otherwise is simply a lie and blatantly disregarding federal labor law.”
Starbucks did not immediately respond to Fortune’s request for comment.
Starbucks adds employee benefits to help with student debt, build savings accounts
Starbucks (SBUX) is adding two new employee benefits ahead of its Investor Day on Tuesday — a savings account with Fidelity and student loan management tools.
In letter to U.S. "partners," what Starbucks calls employees, Chief Partner Officer Sara Kelly said the inspiration for the benefits, which begin September 19th, came from its collaborative sessions with partners at stores across the country.
"One of the top ideas we have heard is support for partners who want to better manage their finances – from navigating student loans to getting better at saving," Kelly said.
Ron Crawford, SVP of benefits at Starbucks, told Yahoo Finance "a large portion" of partners are in college.
The Student Loan Management Benefit is intended to help partners manage their student loans through a partnership with the online tool benefit platform Tuition.io. This is in addition to the company's existing Starbucks College Achievement Plan, which allows eligible partners to receive total upfront tuition coverage for a first-time Bachelor’s degree through Arizona State University’s online program. Crawford hopes the benefits provide partners with the proper online tools and resources to help them get "reorganized" ahead of student loan payments going back into effect on Dec. 31, 2022, as well as the opportunity to cancel $10,000 in debt.
"We estimate that we've got about a third of our partners who have student loan debt. It's probably somewhere in the neighborhood of $20,000 to $25,000, which usually means a monthly payment of a couple of hundred dollars," Crawford said
My Starbucks Savings, the second new benefit offering, is intended to help partners save for the "unexpected," according to a company press release. In partnership with Fidelity, partners can contribute a portion of after-tax pay on a recurring basis directly from their paycheck to an individual savings account. As an incentive, Starbucks will contribute $25 and $50 credits at certain milestones.
"Any of our partners who open up one of these savings accounts and just start off with a $5 per paycheck contribution, when we see that we will drop $50," Crawford explained. "Every quarter thereafter, we see that they're still doing at least the $5 and they've got a balance of $50, then we will drop in $25 per quarter going forward."
Starbucks plans to contribute up $250 per eligible partner.
"We're really trying to do here is build a behavior, build a savings muscle, because that's what our partners are asking for, that they're wanting to save, but they struggle with how to get it done," Crawford added.
The new benefits, however, will not be offered to partners who work in unionized stores or in have been in the process of petitioning or voting to unionize after the date of May 3rd, when Starbucks announced a $1 billion dollar investment plan in its employees.
"The law doesn't allow us to unilaterally give them [to these locations], but ... as part of collective bargaining, we will obviously have this as one of the options through the process of the bargaining with those unionized stores," he explains.
According to National Labor Relations Board (NLRB) records, 233 Starbucks stores have voted in favor of unionization as of Wednesday, August 31, and 214 of those stores have been certified by the agency while 48 stores have voted against a union and 11 are currently being challenged.
The new benefits are the first to be announced since the Seattle-based chain named Laxman Narasimhan as incoming CEO, effective October 1st. The company noted that the benefits are an extension of nearly 30 the coffee giant has offered throughout the years.
Crawford said the benefits will ultimately lead to better customer service. "All of these programs that we've added through the years, what we have found is that when we make an investment in our partners, they in turn, provide an excellent customer experience to our customers."
Leslie Patton
Mon, September 12, 2022
(Bloomberg) -- Howard Schultz took the helm of Starbucks Corp. more than five months ago pledging a massive reinvention of one of the world’s largest restaurant companies. Until now, the details have been vague -- but that’s expected to change at Tuesday’s presentation to investors.
Starbucks is expected to explain plans to redesign cafes -- with analysts saying the company will likely home in on delivery and carryout-friendly formats. The company is also under pressure to deliver more financial details on what those makeovers will cost in the long term, and what impact kitchen upgrades and higher salaries will have on the bottom line.
“It’s a pretty long list of things that need to be sorted out,” said Ben Wong, an analyst at Motley Fool Asset Management, which owns about 136,000 shares. “How much are the continued investments in the employees and stores, and how much is that going to impact margins?”
On Monday, Starbucks shares rose 1.1% at 10:22 a.m. in New York. The stock has lost about 23% this year, more than the 14% decline of the S&P 500 Index.
Since becoming interim chief executive officer in April, Schultz has said the company is overhauling the Starbucks experience along five broad points, but there’s still uncertainty about what they mean in practical terms over a longer horizon. The company, which has said it’s spending about $1 billion in fiscal 2022 on higher wages and improved stores, suspended its financial guidance for the year amid uncertainty in the key growth market of China.
Incoming CEO
Starbucks removed one key question mark earlier this month when it announced Laxman Narasimhan will succeed Schultz as CEO. The 55-year-old, who’s coming from UK consumer-goods maker Reckitt Benckiser Group Plc, will join the Seattle-based company in October and embark on an extended tour of its operations before becoming CEO in April.
The period will be crucial for realizing Schultz’s vision for the company. Starbucks in the past has closed and relocated less-profitable locations, and is now closing some stores due to security problems while adding more drive-thrus and delivery-focused stores. Remodeled cafes also are supposed to make baristas’ jobs easier and less stressful.
Key hurdles include a unionization drive which has grown to more than 200 US locations, and uneven performance in China amid ongoing pandemic restrictions. Wong flagged both China and the labor push as adding layers of uncertainty for investors.
Starbucks’s move to raise US barista wages to an average of $17 an hour and give additional bumps to more tenured staff hasn’t stopped the union drive that’s become increasingly contentious. The company is trying to convince employees that they’ll be better off if they don’t unionize.
The pay increases, along with supply-chain and commodity inflation, have weighed on Starbucks profitability despite menu price hikes.
Equipment Details
Meanwhile, the lack of specifics around additional equipment and technology expenses is keeping a lid on the share price, according to BTIG LLC analyst Peter Saleh, who expects the company to “provide a lot more detail” at the investor event, including information on capital investment and what that means for long-term profitability.
“They have more cash on the balance sheet than they need,” he said in an interview. “And I don’t know where they’re going to spend it, or how they’re going to spend it.”
Starbucks had more than $3.2 billion in cash and short-term investments as of July 3. After returning as interim leader, Schultz’s first move was to suspend the company’s buyback program, saying the money could better be spent on stores and employees. Thus far, the chain has been deploying new coffee brewers and warming ovens, improving training and experimenting with new types of stores.
Any changes to the store format are of crucial importance for Starbucks, which came up with its concept of the “third place,” where customers spend time between work and home. While Starbucks has always said the third place won’t go away, it has been building smaller locations geared to pickup and delivery. And about 90% of its new stores include car lanes -- taking a page from fast-food chains rather than relaxed coffeehouses.
Starbucks, which has more than 15,000 stores in the US, is poised to accelerate store growth under the new CEO, Credit Suisse analyst Lauren Silberman said. She predicts cafe layouts will be adapted to better accommodate to-go orders. For example, Starbucks could add pick-up shelves, such as those used by Chipotle Mexican Grill Inc., to get customers in and out faster.
“I don’t see it as much as complete remodels as reconfiguration,” she said of the plan to update locations. Silberman also sees a more personalized Starbucks app coming, with features such as text messages and games to engage diners.
Starbucks is betting its presentation can win over skeptical investors who have sold off the stock in recent months amid economic uncertainty and profitability concerns.
“In order for the stock to perform, then a lot of those issues probably have to be resolved,” Wong said. “Everyone is looking forward to the upcoming investor day.”
EU Weighs Price Cap on Power From Renewables, Nuclear
Ewa Krukowska, Alberto Nardelli and Lenka Ponikelska
Tue, September 13, 2022
(Bloomberg) -- The European Union is zeroing in on a plan to cap energy companies’ profits and channel the cash to consumers, as it steps closer to energy rationing in a bid to tame the crisis.
The Commission wants to cap revenues from lower-cost power generators; introduce a levy on fossil fuel companies’ excess profits; and introduce a mandatory consumption cut.
Commission President Ursula von der Leyen’s plans still need to be finalized and ultimately signed off by member states and there are deep divisions as to how to address the crisis. Already the most controversial idea -- to cap the price of imported Russian gas -- has been shelved for more talks. But gas prices are already falling, at least in part because of European action.
The bloc is also trying to create tools to ease volatility in energy markets as surging prices have made for ballooning margin calls. Several national governments have taken steps already -- boosting market confidence and helping to ease prices. The Commission is working with European banking regulators, “assessing issues related to the eligibility of collateral and margins, and possible ways to limit excessive intra-day volatility,” according to a draft document.
The challenge will be to find an EU-wide solution that would fit each of the member states with their varying sources of energy, wealth and industrial strength. Von der Leyen sets out her plans on Wednesday, and the Czech rotating presidency has called another emergency meeting for Sept. 30.
The proposals are:
Capping the power-generation revenues of renewable and nuclear companies at 180 euros per megawatt hour
A temporary levy on companies in oil, gas, coal and refinery industries of at least 33% of their extra profits. Based on pre-tax profits of fiscal year 2022 that are more than 20% higher than the average of the three years starting in 2019. It’s exceptional and temporary and up to member states to apply.
A target to cut overall consumption by 10% and a mandatory goal lowering demand during selected peak hours by 5%
Shares in oil producers TotalEnergies SE and Repsol SA declined on Tuesday. But utility stocks rose on the news, with the Stoxx 600 Utilities Index climbing 0.4%. John Musk, an analyst at RBC said the cap was still “well above what companies may have been planning for pre-Ukraine,” and the measures “won’t discourage future renewable investment.”
Ewa Krukowska, Alberto Nardelli and Lenka Ponikelska
Tue, September 13, 2022
(Bloomberg) -- The European Union is zeroing in on a plan to cap energy companies’ profits and channel the cash to consumers, as it steps closer to energy rationing in a bid to tame the crisis.
The Commission wants to cap revenues from lower-cost power generators; introduce a levy on fossil fuel companies’ excess profits; and introduce a mandatory consumption cut.
Commission President Ursula von der Leyen’s plans still need to be finalized and ultimately signed off by member states and there are deep divisions as to how to address the crisis. Already the most controversial idea -- to cap the price of imported Russian gas -- has been shelved for more talks. But gas prices are already falling, at least in part because of European action.
The bloc is also trying to create tools to ease volatility in energy markets as surging prices have made for ballooning margin calls. Several national governments have taken steps already -- boosting market confidence and helping to ease prices. The Commission is working with European banking regulators, “assessing issues related to the eligibility of collateral and margins, and possible ways to limit excessive intra-day volatility,” according to a draft document.
The challenge will be to find an EU-wide solution that would fit each of the member states with their varying sources of energy, wealth and industrial strength. Von der Leyen sets out her plans on Wednesday, and the Czech rotating presidency has called another emergency meeting for Sept. 30.
The proposals are:
Capping the power-generation revenues of renewable and nuclear companies at 180 euros per megawatt hour
A temporary levy on companies in oil, gas, coal and refinery industries of at least 33% of their extra profits. Based on pre-tax profits of fiscal year 2022 that are more than 20% higher than the average of the three years starting in 2019. It’s exceptional and temporary and up to member states to apply.
A target to cut overall consumption by 10% and a mandatory goal lowering demand during selected peak hours by 5%
Shares in oil producers TotalEnergies SE and Repsol SA declined on Tuesday. But utility stocks rose on the news, with the Stoxx 600 Utilities Index climbing 0.4%. John Musk, an analyst at RBC said the cap was still “well above what companies may have been planning for pre-Ukraine,” and the measures “won’t discourage future renewable investment.”
Twitter Shareholders Approve $44 Billion Musk Acquisition
Move comes as outspoken Tesla CEO continues to fight to get out of the deal over spam and fake accounts.
ELLEN CHANG
Twitter shareholders gave the go head on Sept. 13 for Tesla CEO Elon Musk to acquire the social media platform and take it private, but the deal could still fall apart in a legal battle this fall.
Shareholders voted for the $44 billlion bid by Musk, who is attempting to back out of the deal.
Twitter has sued Musk for breaking the agreement, leading to a five-day trial in Delaware Chancery Court that is slated to start on Oct. 17 unless the two parties reach an agreement before then.
Musk has cast doubt on the number of fake accounts on Twitter, claiming the company was not as transparent in the number it reported.
Twitter has said that less than 5% of monetizable daily active users were either fake or spam. The company said it provided Musk with enough data and details to meet the deal's requirements.
Musk attempted to add whistleblower allegations to support his disputed takeover of the social media company. He was granted the request on Sept. 6 by Chancellor Kathaleen McCormick of the Delaware Chancery.
"Twitter has represented that the anticipated risk of harm has materialized over the course of this litigation," Chancellor McCormick wrote. "Twitter 'has suffered increased employee attrition' which 'undermines the company's ability to pursue its operation goals."
Musk's attempt to delay the October trial was denied during the hearing.
Musk Has a Rocky History With Twitter
The saga of Musk's bid for Twitter began in April when Musk revealed in a Securities and Exchange Commission Form 13G that he had acquired a 9.2% stake in Twitter.
On April 14 he made a takeover bid for Twitter at $54.20 a share, which was a 38% premium to Twitter's stock price.
Twitter's board then voted to adopt a poison pill allowing current shareholders to buy shares at a discount, but by April 25, the company had reversed course and accepted Musk's offer.
Musk appeared to be pleased with the board's vote and worked to secure outside funding for the proposed deal since most of his net worth was tied up in Tesla shares.
He worked to reassure shareholders and investors on May 26 by announcing that he had closed out his margin loans linked to Tesla shares. Musk also pledged another $6.25 billion in equity to fund the takeover.
A couple of weeks before announcing the financing for the deal, Musk said that the deal was "temporarily on hold" on May 13.
This was first time that he mentioned Twitter's own stats on fake accounts.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," Musk said.
Musk has continued to focus on Twitter's self-reported percentage of fake users. He withdrew his offer on July 8 saying the deal should be canceled because of disagreements about the number of spam bots, or fake accounts, on the platform, according to a SEC filing.
By July 12, Twitter chose to sue the billionaire to enforce the original merger agreement.
ELLEN CHANG
Twitter shareholders gave the go head on Sept. 13 for Tesla CEO Elon Musk to acquire the social media platform and take it private, but the deal could still fall apart in a legal battle this fall.
Shareholders voted for the $44 billlion bid by Musk, who is attempting to back out of the deal.
Twitter has sued Musk for breaking the agreement, leading to a five-day trial in Delaware Chancery Court that is slated to start on Oct. 17 unless the two parties reach an agreement before then.
Musk has cast doubt on the number of fake accounts on Twitter, claiming the company was not as transparent in the number it reported.
Twitter has said that less than 5% of monetizable daily active users were either fake or spam. The company said it provided Musk with enough data and details to meet the deal's requirements.
Musk attempted to add whistleblower allegations to support his disputed takeover of the social media company. He was granted the request on Sept. 6 by Chancellor Kathaleen McCormick of the Delaware Chancery.
"Twitter has represented that the anticipated risk of harm has materialized over the course of this litigation," Chancellor McCormick wrote. "Twitter 'has suffered increased employee attrition' which 'undermines the company's ability to pursue its operation goals."
Musk's attempt to delay the October trial was denied during the hearing.
Musk Has a Rocky History With Twitter
The saga of Musk's bid for Twitter began in April when Musk revealed in a Securities and Exchange Commission Form 13G that he had acquired a 9.2% stake in Twitter.
On April 14 he made a takeover bid for Twitter at $54.20 a share, which was a 38% premium to Twitter's stock price.
Twitter's board then voted to adopt a poison pill allowing current shareholders to buy shares at a discount, but by April 25, the company had reversed course and accepted Musk's offer.
Musk appeared to be pleased with the board's vote and worked to secure outside funding for the proposed deal since most of his net worth was tied up in Tesla shares.
He worked to reassure shareholders and investors on May 26 by announcing that he had closed out his margin loans linked to Tesla shares. Musk also pledged another $6.25 billion in equity to fund the takeover.
A couple of weeks before announcing the financing for the deal, Musk said that the deal was "temporarily on hold" on May 13.
This was first time that he mentioned Twitter's own stats on fake accounts.
"Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users," Musk said.
Musk has continued to focus on Twitter's self-reported percentage of fake users. He withdrew his offer on July 8 saying the deal should be canceled because of disagreements about the number of spam bots, or fake accounts, on the platform, according to a SEC filing.
By July 12, Twitter chose to sue the billionaire to enforce the original merger agreement.
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