DealBook Briefing: The World Reckons With a New Oil Order

https://www.nytimes.com/2019/09/16/business/dealbook/saudi-arabia-oil.html

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Good Monday morning. Updates from the Saudi government on the Aramco plants that were attacked could help determine whether the country will move forward with an I.P.O. for the state-owned oil giant. (Was this email forwarded to you? Sign up here.)

Crude oil prices posted their largest-ever jump in a single day, as Saudi Arabia continues to tally the damage caused by drone strikes on its state-owned petroleum giant, Saudi Aramco.

The price of Brent oil futures shot up as much as 20 percent, its biggest jump since the benchmark was created 30 years ago. It has since retreated a little bit to a 9 percent increase.

Shares in European airlines were down at least 3 percent in morning trading, while those in oil companies were up by about the same amount.

Why the attack is so notable: The Aramco plants that were targeted are crucial to the company’s operations. If they are offline, for even a short while, it could drastically reduce the output of Saudi Arabia, the world’s biggest oil exporter.

Among the questions on the minds of companies, politicians and investors around the world:

• When will Saudi oil production return to its level before the attack? The country aims to restore part of its output today, but when things will return to normal remains unclear.

• How will the Saudis respond to the attack, for which Iranian-backed Houthi rebels in neighboring Yemen claimed responsibility?

• How will the U.S. respond? Secretary of State Mike Pompeo quickly blamed Iran, though President Trump so far has not. Mr. Trump did say the U.S. was “locked and loaded,” but some commentators think that America doesn’t have many moves left to play to punish Tehran.

• How will this affect Aramco’s I.P.O. plans? Lingering doubts among potential investors could harm the prospects of the stock offering.

The big picture: The world’s energy markets may not recover fully. Though oil prices may go down, lingering concerns about the fragility of the world’s petroleum supply may reverberate for a long time. And America’s shale boom may not be enough to pick up the slack if there’s a lengthy disruption in Saudi oil production.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.

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Purdue Pharma entered Chapter 11 last night as part of a legal settlement with states and municipalities over the drugmaker’s role in the opioid crisis. But the legal battle is far from over.

The filing was meant to shield the company from more than 2,600 federal and state lawsuits. Under the settlement agreement, Purdue will become a public benefit trust, with profits from the sale of drugs like OxyContin used to pay plaintiffs’ claims and finance drug research. The company’s founding Sackler family would also pay $3 billion to victims.

But 26 states have refused to sign off. They dispute the value of the settlement, which Purdue has put at $10 billion. And they think that the Sacklers, several of whom were executives at Purdue, aren’t paying enough out of their own pockets.

Attention on the Sacklers only increased after Friday, when New York officials said they had tracked about $1 billion in wire transfers by the family, including through Swiss bank accounts. State officials said the moves suggested that the Sacklers were trying to shield their wealth from legal settlements.

More: The defendants in a huge opioid civil lawsuit, including retail pharmacy chains and drug distributors, are seeking to disqualify the judge overseeing the case.

The co-working company is expected to launch the road show for its initial public offering this week, after unveiling big changes to its corporate governance on Friday. But the jury’s still out on whether prospective investors will want to buy in, Michael de la Merced and Peter Eavis of the NYT write.

WeWork is hoping that reducing the influence of its C.E.O., Adam Neumann, will make the I.P.O. more attractive. His voting power was cut back, while the board will name a lead independent director. And Mr. Neumann’s wife won’t have a say in who would succeed him as C.E.O.

But the I.P.O. is still expected to value the company at as little as $15 billion, compared with the $47 billion that it was valued at in January. And it’s unclear whether WeWork will earn enough from the I.P.O. to get access to $6 billion in bank financing that is tied to the offering’s success.

It’s still unknown whether WeWork will go through with the stock sale. Mr. Neumann is reportedly keen to press forward with the I.P.O., but his bankers have urged caution, and some at SoftBank, the company’s biggest investor, have urged the company to delay the stock sale.

The turbulence is a sign that the party may be over for many hot tech I.P.O.s. Investors have soured on so-called “unicorns” — start-ups whose valuation exceeds $1 billion — amid concerns that they are likely to remain unprofitable for a long time.

The iPhone maker is headed to court this week in Luxembourg to fight “the world’s biggest tax case,” Stephanie Bodoni and Aoife White of Bloomberg write.

Apple was ordered to pay $14.4 billion in taxes by Margrethe Vestager, the E.U.’s antitrust chief, citing deals with the Irish government that allowed the tech giant to pay less than other companies. The E.U. General Court will now weigh whether that punishment should stand.

President Trump and Apple’s C.E.O., Tim Cook, have pushed back against the order. Mr. Cook has called the decision “total political crap,” and Apple is arguing that the E.U. “retroactively changed the rules.”

The case could have major implications for other tech companies. A court ruling could empower or halt Ms. Vestager’s tax inquiries into fiscal deals done by Amazon and Alphabet, Google’s parent company, Ms. Bodoni and Ms. White write. But a verdict won’t come for months.

More: Ms. Vestager wants to toughen up the E.U.’s data privacy laws.

Nearly 50,000 of the carmaker’s employees went on strike overnight, after the United Automobile Workers’ current bargaining agreement with the company expired, Neal Boudette of the NYT reports. It is the biggest work stoppage at a private employer in years.

It was the U.A.W.’s first walkout since 2007, and comes after the union and G.M. failed to make headway on negotiations over improved wages, workers bearing more responsibility for their health care costs and more.

A big point of contention is reopening idled plants. “Although the company has been earning substantial profits in North America — and it made $8.1 billion globally last year — it has idled three plants in the United States as car sales slide and overall demand for vehicles weakens,” Mr. Boudette writes.

G.M. said it had offered to invest more than $7 billion into U.S. plants, add 5,400 jobs, and increase pay and benefits. The strike comes at a bad time, as auto sales slow in the U.S. and China, and autonomous driving and electric-car technologies require more investment.

The G.M. strike may set a template for talks with other carmakers. The WSJ notes that the U.A.W. represents nearly 150,000 factory workers across the U.S., including at Ford and Fiat Chrysler as well as G.M.

A committee of Boeing’s board is expected to deliver its recommendations this week for how the company can design and build safer airplanes, David Gelles and Natalie Kitroeff of the NYT report.

The committee will “call for several meaningful changes to the way the company is structured,” Mr. Gelles and Ms. Kitroeff report, citing unnamed sources.

Their recommendations include changing the reporting structure for Boeing engineers, creating a new companywide safety group and altering the cockpit design of new planes to accommodate pilots with less training.

In the last five months, the four-member committee interviewed safety experts, dozens of Boeing employees and executives from other organizations for the report.

The committee did not investigate the two 737 Max crashes, which killed a total of 346 people, but “their findings represent the company’s most direct effort yet to reform its internal processes after the accidents.”

Bob Iger of Disney has stepped down from Apple’s board, as competition heats up between the two companies over streaming.

John Cryan, the former C.E.O. of Deutsche Bank, will become the next chairman of the Man Group, the big hedge fund.

The online grocery delivery company Instacart has hired Seth Dallaire, an Amazon executive, as its first chief revenue officer.

Carrier Global has hired Timothy McLevish, a former executive at Walgreen Boots Alliance, as its new C.F.O.

Deals

• The Hong Kong Stock Exchange reportedly plans to woo shareholders of the London Stock Exchange, after the British exchange rejected its $36.6 billion takeover bid. (FT, NYT)

• J. Crew filed to spin off its Madewell brand, its best-performing division. (WSJ)

• The valuation of Juul has reportedly fallen 20 percent since Altria invested in the e-cigarette company late last year, when it was valued at $38 billion. (CNBC)

• Dream Global Real Estate Investment Trust, a Canadian real estate company, agreed to sell itself to Blackstone for $4.7 billion. (Reuters)

• Chinese companies have become net sellers of assets instead of buyers for the first time this decade. (FT)

Politics and policy

• A Chinese train maker, the world’s largest, has contracts in major American cities. Congress may block it from securing new contracts. (NYT)

• Joe Biden praised pharmaceutical companies at a fund-raiser on Saturday, despite widespread Democratic Party criticism of the industry’s focus on profits. (Bloomberg)

• House Speaker Nancy Pelosi and Senator Chuck Schumer said they would join President Trump for a ceremony to sign into law proposed gun-control legislation, putting pressure on Republican lawmakers to back the bill. (NYT)

• New allegations of sexual misconduct by Justice Brett Kavanaugh while he was a college student have drawn demands for his impeachment from Democratic politicians. (NYT)

Jeffrey Epstein

• The Harvard law professor Lawrence Lessig defended his support for a former M.I.T. official who accepted donations from the financier. (NYT)

• Stanford disclosed that it had received a $50,000 donation from Mr. Epstein in 2004, as universities comb through their records for gifts from him. (Bloomberg)

Trade

• A bipartisan group of lawmakers is trying to curtail President Trump’s authority to levy tariffs. (WSJ)

• For years, Germany’s economy prospered because of global trade while France’s more domestically focused economy suffered. The tables have now turned. (FT)

Tech

• The House Judiciary Committee sent letters to Amazon, Apple, Facebook and Google demanding scores of documents, including personal emails from top executives, as part of an investigation into their business practices. (NYT)

• Google will post a list of more than 20 employee rights at its headquarters as part of a settlement with the National Labor Relations Board. (CNBC)

• A new generation of facial-recognition cameras is testing Britain’s tolerance for surveillance. (NYT)

• A California lawmaker trying to weaken the state’s privacy laws is married to a top executive of Ring, the video doorbell maker owned by Amazon. (Politico)

• Senators Chuck Schumer and Tom Cotton will urge the F.C.C. to consider whether two Chinese telecom companies should be barred from operating in the U.S., citing national security concerns. (NYT)

Best of the rest

• As the authorities work to understand a surge in vaping-related lung illnesses, a small-town drug bust offers a closer look at the vast black market for vaping supplies. (NYT)

• Investors are piling back into stocks and unwinding huge bets on safer assets. (WSJ)

• Thousands of former Wells Fargo employees who were fired after the bank’s fake-account scandal say they have been effectively blacklisted from the banking industry. (WSJ)

• The N.B.A.’s Toronto Raptors have introduced a new line of team-branded hijabs in an effort to be more inclusive to fans of all cultures. (NYT)

• R.I.P. MoviePass. (NYT)

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