A film provocateur meets the global elite
Amid the crowd gathered at the World Economic Forum, Oliver Stone — an unexpected attendee — easily stands out. The filmmaker behind “Wall Street” and “Platoon” has a history of jabbing the political, business and social elite with projects that advance controversial ideas: Think about his films focused on Vladimir Putin, Edward Snowden, John F. Kennedy and more.
Mr. Stone came to Davos with another provocative movie, which advocates for an issue long whispered about here but rarely said aloud: nuclear power as a force for good. In “Nuclear Now!,” which premiered at the Venice Film Festival, he argues that nuclear has been unfairly maligned by oil companies and others to make the public fearful about its safety.
For Mr. Stone, nuclear is the only existing technology that could help meaningfully bring down carbon emissions from energy, and its danger has been drastically overstated, even in light of disasters like the failure of the Fukushima power plant in 2011.
The Davos crowd appeared eager to listen. The theater screening “Nuclear Now!” here was packed — to the point of attendees sitting on the floor. The film was financed in part by two Davos veterans: Roksana Ciurysek-Gedir, a financier, and Zachary Bogue, a venture capitalist and the husband of the former Yahoo C.E.O. Marissa Mayer.
The appetite for the film may be because of people’s eagerness to find realistic solutions for climate change, according to Mr. Stone. “Despite our investments in renewables, it’s not improving our carbon emissions because we haven’t tackled the core issue — eliminating fossil fuels,” he told DealBook. “Climate change has forced us to take a new look at nuclear power.”
Seen and heard at Davos: India’s power minister, Raj Kumar Singh, defended his country’s imports of Russian oil and gas during a panel on the food and energy crises, moderated by The Times’s Andrew Ross Sorkin. And executives are debating the short-term impacts of China’s reopening, including whether a burst in spending could exacerbate inflation, or if supply chain easing will be enough to offset that, DealBook hears. Meanwhile, “green hushing” has been a hot topic, with one P.R. adviser telling DealBook he’s recommending that companies stay out of politics and not talk about climate initiatives.
Elsewhere in and about Davos:
HERE’S WHAT’S HAPPENING
Microsoft prepares another round of layoffs. The software giant will reportedly announce as soon as Wednesday that it will cut more jobs, adding to layoffs it made last year. It isn’t clear how many positions will be affected, but Sky News reports that it may be in the thousands.
China could suffer a surge in Covid deaths during the Lunar New Year holiday. The country may see coronavirus-related deaths reach 36,000 a day, according to forecasts by the research firm Airfinity. The increase in infections would put pressure on China’s already embattled health systems over the next two weeks.
Albertsons can pay out a $4 billion dividend. Washington State’s highest court declined to hear a lawsuit by the state’s attorney general seeking to block the move, which would precede the grocery chain’s sale to Kroger. It’s a victory for Albertsons as it faces more regulatory scrutiny over the sale.
A Tesla engineer testifies that a video promoting self-driving technology was staged. In a deposition taken as part of a wrongful-death lawsuit, the head of the company’s Autopilot division said Tesla workers had planned out the car’s route in advance and that drivers had participated in test runs. The 2016 video had claimed no human input was needed.
Twitter reportedly suffers a 40 percent drop in daily revenue. A senior engineering executive told employees that the year-on-year decline came as more than 500 of the company’s top advertisers had paused spending on its platform, according to The Information. It’s the latest sign of how cash-strapped Twitter is becoming; another is an auction of goodies from the company’s San Francisco headquarters.
Why a crypto rebound is a big deal
Crypto bulls are extending one of the most unlikely rallies of the year so far, pushing Bitcoin above $21,000 for a second day. That means the digital currency has now recouped all its losses since the collapse of FTX in November.
The rising tide has lifted most crypto boats. Even some beaten-down tokens — including FTX’s in-house token, FTT — have rebounded as investors bet the Fed will slow its pace of interest rate increases, leading to a broad rally of risky assets. Shares in Coinbase, the publicly traded crypto exchange, have also jumped over the past week.
But crypto analysts are divided on whether the rally is sustainable. Skeptics argue that the fundamentals for a long-term rise are missing, making the recent jump a risky bet for investors.
Meanwhile there’s some good news for FTX creditors. Lawyers at Sullivan & Cromwell, the law firm advising on the bankruptcy of the fallen crypto exchange, disclosed on Tuesday that the company’s assets were worth roughly $5.5 billion, including $1.7 billion in cash and $3.5 billion in crypto assets. That makes this wider crypto rally significant for FTX creditors — if it lasts.
Sam Bankman-Fried saw cracks appearing in his crypto empire before its implosion, reports The Times’s David Yaffe-Bellany. Government documents obtained by The Times indicate that the FTX founder was fully aware of the ballooning losses at FTX’s sister trading arm, Alameda Research, and that it had borrowed $13 billion from FTX to get out of the hole.
The revelation could be a cornerstone of prosecutors’ fraud case against Bankman-Fried, who will stand trial in October.
Elsewhere in crypto:
Silvergate, a California bank that pivoted to crypto lending, reported a $1 billion loss in its most recent quarter as FTX’s collapse and the wider slump in crypto assets hit its bottom line.
The news site Semafor plans to buy out Bankman-Fried’s ownership stake in itself, which is worth nearly $10 million, The Times reports. (Vox Media and ProPublica previously said they would also return Bankman-Fried’s contributions.)
Barry Silbert, founder of the crypto conglomerate Digital Currency Group, which is now under investigation by the S.E.C., is trying to keep the firm out of bankruptcy but remains optimistic about the year ahead. “There’s no question about our survival,” he told The Wall Street Journal.
Japan sticks to its outlier approach
The Bank of Japan maintained its policy of aggressively buying up sovereign bonds and keeping interest rates in negative territory this morning, after weeks of market speculation that it would change tack. The decision, which followed a two-day meeting, sent the yen to its lowest level against the dollar in almost three years and pushed Japanese stocks higher, as the country remains firmly in stimulus mode.
Japan stands out among G7 nations. The B.O.J. has kept its monetary policy loose, in sharp contrast to its central bank peers, which have moved in the opposite direction: raising borrowing costs and offloading trillions in securities from their balance sheets as they try to bring down decades-high inflation.
Japan’s economic problems are very different. The country has been mired in a cycle of prolonged stagflation — the B.O.J. is forecasting inflation at 1.6 percent this year — and has been trying to boost investment. In December, the B.O.J. changed its policy on sovereign bond purchases — known as “yield curve control” — to lure Japanese investors back into the market for treasury notes. That caused yields on government bonds to surge.
That policy has been costly. The B.O.J. said it had spent $265 billion on sovereign bonds since Dec. 20 to try and keep bond yields within its target range — “a whopping 6 percent of annual G.D.P.!”, Deutsche Bank pointed out in a note to clients this morning. But Haruhiko Kuroda, the bank’s governor, defended the policy as “sustainable,” saying it would take time for the yield-curve decision to play out.
Investors looking for a pivot may have to wait for the next B.O.J. governor. Mr. Kuroda, the B.O.J.’s longest serving governor, will step down in April, and his last meeting will be in March. Analysts expect little change in policy until a successor is named.
“It’s playing a game with the U.S. economy and people’s lives that I think is irresponsible.”
— Wendy Edelberg, a senior fellow in economic studies at the Brookings Institution, on the debate in Washington over whether Congress should raise the debt ceiling to allow the country to pay its obligations, including to Social Security recipients and federal contractors.
Corporate America braces for more activism
After years of declines, the business of shaking up companies for profit returned with a vengeance in 2022, according to Lazard’s latest annual report on shareholder activism. Data compiled by the investment bank showed that the strategy was increasingly popular worldwide, and across industry sectors.
And 2023 looks likely to continue that pace, as evidenced by new campaigns like Nelson Peltz’s against Disney.
Last year was the biggest for activism since 2018. According to Lazard, 235 campaigns were executed last year. Nontraditional activists — including institutional firms, private equity shops and individual investors — were responsible for 23 percent of campaigns, nearly double the historical average.
That has big ramifications for corporate boards, who need to worry about an ever-growing range of potential activists. “The big headline-grabbing activist funds, they are not really driving the biggest level of activity anymore,” Rich Thomas, a Lazard managing director, told DealBook. “It’s really a broader group of hedge funds engaging in activism and institutional investors that occasionally engage in this or haven’t engaged in this.”
Companies are no longer getting a reprieve for external events. Investors were willing to give corporate boards a break in 2020 and 2021, given shocks to the system like the pandemic and the supply-chain crisis. But that’s changing as stock underperformance rattles investors. The S&P 500 fell more than 19 percent in 2022, its worst year since 2008 during the height of the global financial crisis.
To bolster a lagging stock, activists focused this year on pushing companies to sell themselves or divest divisions, as opposed to revamping operations. (M.&A.-focused demands represented 41 percent of all campaigns last year, according to Lazard.) “Where the real money is is around those strategic and transactional activism theses, as opposed to operational ones,” Thomas said.
No company is too big to avoid activism. It isn’t just Disney facing restive shareholders: Last year investors took on giants like BlackRock, Danone and Salesforce. But even a relatively small or unknown activist can still shake up a corporate titan, given the growing trend of activists “swarming” on a company once it has become a target.
“When a branch breaks, it brings down many others with it,” Thomas said.
THE SPEED READ
More than a third of Congress got campaign funding from FTX executives. (CoinDesk)
Global oil demand is set to hit a record high this year as China reopens, according to the International Energy Agency. (FT)
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