Exxon Meets Microsoft in the Permian Basin

Out on the desert plains of west Texas, while searching for the Permian Basin, you may find yourself lost in geological time and space. This vast collection of basins, reefs, and platforms stretches across a land area of 86,000 square miles, nearly the size of Ghana and slightly larger than Belarus. Containing the world’s thickest deposit of rocks from the Permian geologic period, spanning 47 million years some 299 million years ago, the Permian Basin stretches from the southeast corner of New Mexico down to the Rio Grande, placing it on the Texas side of an international border and possibly a wall.

So what makes this stretch of beautiful, austere, yet otherwise unremarkable land so highly valued? Under this land lies a veritable bonanza of shale oil, a fossil fuel source extracted from sedimentary oil shale through a series of complex chemical processes. The Permian Basin is an epicenter for the shale oil boom and is poised to dramatically place the U.S. back into pole position as a top producer of hydrocarbon fuel.

Oil company Exxon has recently signed an agreement with Microsoft to use their “cloud technology” services to efficiently extract the basin’s oil shale resources, “[c]overing 9.5 billion barrels of oil and natural gas across 1.6 million acres.” Given that Microsoft has long lagged behind its competitor Amazon in furnishing cloud services, Microsoft’s investors are keenly interested in this highly lucrative and long-term contract. The company intends to deploy sensors, statistical analysis, and remote data storage (i.e. “internet of things,” “machine learning,” and “cloud storage” respectively) to help Exxon rapidly and efficiently take advantage of the Permian Basin’s resources, likely with recent gestures by Saudi Arabia’s Aramco to expand its natural gas holdings in the Red Sea in mind.

Alas, we must ask as investors, consumers, and, most importantly, global citizens whether another “oil boom” is what we need as the pressures of climate change bear down on our local ecologies and economies. The rugged interior of west Texas, especially the Trans-Pecos, has long been an environmental haven and one of the most biodiverse parts of the United States. Rapid natural resources extraction in the region will not only contribute to the global fossil fuel addiction, thus contributing to climate change, but will likely harm a far too undervalued ecological region. As Exxon and other companies face the prospect of securities litigation, they run the risk of further damaging their reputation and their bottom lines. Microsoft may wind up with a far better deal out of this arrangement than Exxon in the coming years.

Exxon Meets Microsoft in the Permian Basin

Hudson Yards Received Big Tax Breaks, But Don’t Compare it to Amazon

The New York Times reported that Hudson Yards, the 28-acre complex of office buildings and luxury housing, has received almost $6 billion in government assistance and tax breaks. This deal follows the failed Amazon headquarters deal, where Amazon would have received $3 billion in tax breaks and created 25,000 jobs.

Hudson Yards is an expansive real estate development that will be home to many high-end retail shops, major corporations’ headquarters, and luxury apartments and condos. New York City spent about $2.4 billion to extend a subway line to the site and is providing $1.2 billion for four acres of parks and open spaces within the complex. These numbers are included in the $6 billion number cited above.

The project’s adversaries say wealthy businesses should pay their fair share and should not rely on government incentives to take on projects. Opponents specifically criticize Hudson Yards developers’ receiving over $1 billion in property tax breaks. However, supporters say the government incentives will pay for themselves by creating a new business district, thousands of new jobs, and making significant overall improvements to the neighborhood at large.

Many are comparing Hudson Yards to the Amazon deal, however, that comparison is misguided for a number of reasons. First of all, the project was first conceived following September 11th, when New York was in a state of economic downturn and overall disarray. Nobody knew what the future held for New York City and the housing crisis was not what it is today. Indeed, 20 years in the making, the tax breaks and incentives the wealthy developers have received appear suspect. However, it is understandable that New York City, in the wake of a crisis, would jump at an opportunity to create more housing and a new business district that would be sure to bring in money in years to come. In comparison, in the current economy and housing crisis, the harm the Amazon deal would cause is much more foreseeable and unnecessary. Indeed, it would create jobs, but those jobs would be for relatively high earners who will add stress to the city’s housing predicament.

Similarly, the projects themselves are vastly different. Hudson Yards is adding 4000 units of housing to New York City’s market, including 400 below-market-rate units accessible through the city’s affordable housing lottery. Though Amazon would have created a vast number of jobs, most of those jobs would have been for software engineers and other skilled workers. In comparison, Hudson Yards will have numerous restaurants and retail stores, which will create unskilled jobs. Additionally, the expansion of the subway line and the creation of parks will require manual labor.

All in all, it is unfortunate that cities need to incentivize large companies to take on projects. The property tax cuts are particularly discouraging. But it will take tax reform across the board to resolve this issue. Corporations simply will not spend the money unless they have no alternative option. Cities will continue to strive for long-term, wide-scale economic benefits, even when they might harm individual taxpayers in the interim.

Hudson Yards Received Big Tax Breaks, But Don’t Compare it to Amazon

Kraft Heinz Faces Class-Action Lawsuit

On February 27, a proposed class-action lawsuit was made public alleging Kraft Heinz, CEO Bernardo Hees, and Brazilian private equity firm 3G Capital concealed injury to Kraft Heinz’s brands and internal operations. The company is the fifth-largest food and beverage company globally and owns brands such as Capri Sun, Jell-O, Kool Aid, and Lunchables. The lawsuit comes on the heels of 3G’s questionable sale of $1.23 billion in stock sixth months prior to the processed foods company’s abysmal earnings report late last month. Kraft Heinz Co took a $15.4 billion write-down on its iconic Kraft and Oscar Mayer brands, signaling a broader shift by consumers to healthier and cheaper private-label products. In response, the company slashed its dividends and announced that it would be subject to an accounting probe by the U.S. Securities and Exchange Commission.

The lawsuit further alleges that the defendants acted in concert to allow 3G to sell the stock at artificially inflated prices. In response, Hees explained in an interview with Reuters that the transfer was made within a “window to liquidity” for an investor exiting a 3G fund.

Though shareholder lawsuits are common following unexpected bad news, it is no surprise that investors are raising suspicions around the sale—while the $1.23 billion in stock was sold by 3G at a share price of $59.83 each, other investors are left struggling to make sense of a 27.5% drop in stock price. The plunge is perhaps most surprising because of Kraft Heinz’s other largest controlling shareholder—Warren Buffett’s Berkshire Hathaway. Buffett’s investing strategy has long emphasized timeless American classics, such as Coca-Cola and Wells Fargo, with all five of his largest positions being in American companies. However, with changing consumer tastes and an abundance of alternatives within the marketplace, it is unclear as to whether the hit will be limited to Kraft Heinz alone. Buffett and Berkshire Hathaway are not named as defendants in the case.

Kraft Heinz Faces Class-Action Lawsuit

Surviving Brexit? US Companies Should Prepare to Avoid Massive Brisruption

Ahead of the March 29 date when the United Kingdom (UK) is set to leave the European Union (EU), U.S. companies are fright with worry about the worse-case scenario. Brexit, short for “British Exit,” reflects the UK’s decision to leave the EU, a political and economic union of 28 countries which trade with each other and allow citizens to move freely between the countries. After British Prime Minister Theresa May’s exit agreement defeat in January, not too many remain hopeful of a smooth transition period.

What does all this mean for U.S. companies? In a “no-deal” scenario, the UK would sever all ties with the EU with immediate effect, providing no guarantees to citizens’ for rights of residence and significantly disrupting businesses through lengthy tailbacks of lorries, new checks on cargo, and overall instability. Travel might also be affected, making what used to be an easy trip for salespeople, technical personnel, and executives and drawn out process of clearing customs and less assurance of easy movement.

What’s more, Brexit has already impacted the flow of the U.S. economy. The day after the Brexit vote in 2016, the Dow fell 610.32 points, reflecting investors’ growing lack of confidence in the market. When the euro and pound fell, both increased the value of the dollar, which has the opposite effect of making American shares more expensive for foreign investors. The weakened pound also makes U.S. exports to the U.K. more expensive, and as American’s fourth-largest export market, it affects the U.S. farming and manufacturing sectors. A no-deal Brexit will not only affect U.S. stocks, but bond yields might also take a hit, forcing investors and other entities into government bonds for more safety. This means an effect on investment and retirement accounts for regular Americans.

There’s no use in ruminating over what the U.S. could have done to preliminarily prepare. What matters now is getting on the front-end of what could prove a bumpy ride. U.S. companies using the U.K. as a gateway to free trade with the other 27 EU nations might start considering creative and innovative solutions for a new gateway. On the up-side, Brexit as a symbol of anti-globalization could mean that the UK is taking a step down from the financial main stage. With the uncertainty flowing through the U.K. about the ability to keep its international clients, U.S. preparation could mean significant gains and a chance to reclaim its place as stable global finance giant.

Surviving Brexit – US Companies Should Prepare to Avoid Massive Brisruption

Bay Area Students ICE out Tech Companies

Tech companies have long regarded elite schools like UC Berkeley and Stanford as rich talent pools integral to their hiring pipelines. And since the schools receive fees from the companies for the privilege of recruiting on campus, the relationship is generally considered to be a symbiotic one.

However, in recent months, students at Berkeley and Stanford have protested the on-campus recruiting efforts of companies including Salesforce, Amazon, and Palantir because of their contracts with Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP).

Student groups like Students for the Liberation of All People (SLAP) at Stanford, with the support of national organizations such as Mijente and the Immigrant Defense Project, allege that by providing services such as facial recognition, hiring technology, and predictive deep learning systems to ICE agents, these companies are not only complicit in but profiting off of the humanitarian crisis along the southern border.

Palantir, for example, has a $41 million contract with ICE to provide an Investigative Case Management system, partly supported by FALCON, another Palantir platform that tracks immigrants’ cross-border activities. Microsoft contracts with ICE to provide cloud computing software and deep learning for identification of immigrants. Palmer Lucky, the controversial founder of VR company Oculus, has been working on a defense technology company that would create a “virtual border wall” using infrared sensor, radar, and cameras.

Student activism serves as yet another example of how tech companies are being asked to reconcile their profit-seeking behavior with both their largely progressive employee base and their largely progressive public image. While as public companies, Salesforce, Microsoft, and Amazon have a fiduciary duty to maximize profits for their shareholders, the recent blowback has shown that there are limits to putting profits over people—limits that, if they have enough of a chilling effect on these companies’ recruiting pools—are bad for business.

Bay Area Students ICE out Tech Companies

Federal Judge Kicks Class Action Brought by Shoplifters

A federal judge in the Northern District of California dismissed a class action lawsuit against Walmart and several other retailers in February. The class representatives were three individuals who shoplifted from Walmart stores in Georgia, Texas, and Florida. They alleged that the retailers engaged in a racketeering conspiracy by forcing them to either enroll in restorative justice classes or face prosecution.

Each of the retailers partnered with Corrective Education Company (CEC), a Utah-based firm. The shoplifters claimed that the retailers routinely took suspected shoplifters to a back room to threaten them with arrest and prosecution. Suspected shoplifters were allegedly forced to both provide a signed admission of guilt and pay up to $500 to enroll in a CEC class. CEC would reportedly award the retailer a portion of the enrollment fee.

The court initially found that it lacked personal jurisdiction over Walmart and most of the other retailers. The shoplifters therefore turned to a provision in the federal racketeering statute that gives courts personal jurisdiction over any defendant who participates in a “single nationwide conspiracy.” However, they could not demonstrate the existence of a nationwide conspiracy without proof that any of the retailers knew the other defendants were partnered with CEC.

Ultimately, the shoplifters chose not to sue CEC. But, CEC has seen its fair share of legal trouble. In 2017, a California Superior Court convicted CEC of extortion under California law. San Francisco City Attorney Dennis Herrera praised the decision and added that “we should all be concerned about privatizing our justice system.” CEC told KTVU that it was “dismayed” by the ruling and felt sorry for future shoplifters who could face “a lifelong scarlet letter because of one bad choice.”

Federal Judge Kicks Class Action Brought by Shoplifters

The Curious Case of Tesla

Tesla had a very public and turbulent 2018. Tesla has always been a unique company. When the Model S first came out, most people had never seen anything like it: an all-electric car with a computer sized display screen, and speed, matching or beating the top sports cars on the market. While Tesla has always seemed to be at the forefront of innovation, its founder, Elon Musk, as well as issues with production and reliability have plagued the company.

Most recently, Tesla announced that it would be closing most of their retail shops and focusing on online sales. This comes after a seemingly endless array of bad news coverage. In August and September of 2018, Musk began to create waves in the media with his increasingly erratic behavior. He was filmed smoking weed on a podcast, he had a very public relationship called into question, tweeted baseless and derogatory statements about a Thai rescue diver, and caught the eye of the SEC with his tweets about taking Tesla private.

As a result of this, Tesla’s stock tumbled to more than 30% below the all-time high they hit in 2017. In addition, the Chief Accounting Officer, Dave Morton, resigned after only a month on the job, citing concerns about the public attention the company garnered. While Tesla finally announced the long promised $35k Model 3, this news was delivered alongside plans to make price cuts on all of their models and the announcement of retail closings. Tesla shares closed Monday down 10% just in the past month. While they have expanded and begun to deliver model 3 orders in Europe, they simultaneously lost the Consumer Reports recommendation due to Model 3 reliability issues.

Through all of the turmoil, Tesla remains a groundbreaking company and Musk recently revealed plans of a new crossover car in their lineup, the Model Y. It remains to be seen which force will prevail: Musk’s erratic behavior and Tesla’s inability to sustain consistent and reliable growth, or Tesla’s forward thinking and innovative work product which continues to push the boundaries of society’s views on the car industry. With the onslaught of Tesla stories in the news daily, it may not take too long to find our answer.

The Curious Case of Tesla

Regulators Put Another Kibosh on TPG/Vodafone Decision Date

The Australian Competition and Consumer Commission’s website once again serves as a burial ground for the TPG/Vodafone merger. Regulators have dropped the provisional date to approve TPG Telecom LTD’s proposed merger with Vodafone Group PLC’s Australian arm.

This is the latest in a series of delays by the Commission. The Commission reportedly needs more information from both parties before it can set a new date. The ACCC is concerned that the proposed merger would reduce competition and raise prices, just as regulators are concerned about the proposed T-Mobile/Sprint merger in the States.

Four players dominate Australia’s mobile telecommunications industry, including TPG and Vodafone. Unsurprisingly, the proposed merger triggers antitrust concerns. Should the merger not go through, TPG would need to offer cheaper mobile plans with larger data allowances in order to compete with Vodafone. Consumers would appreciate this as much as the Australian government. However, Vodafone’s chief executive has a more optimistic opinion of the merger. He claims that the resulting entity would give other market leaders — such as Telstra and Optus — a reason to cut costs. Another win for consumers.

The $15 billion “merger-of-equals” would result in a major rival to Telstra and Optus. Vodafone shareholders would end up with 50.1% of the resulting company, and TPG shareholders would own the other 49.9%. The icing on the cake? The two companies also signed a joint venture agreement to purchase a 5G spectrum at an upcoming government auction. Competition down, high-speed up.

The two companies hope for a merged entity capable of a fixed and mobile offering. But, the merger was expected to go through in 2019. With recent delays, the future of the proposed telecom giant remains to be seen.

Regulators Put Another Kibosh on TPG_Vodafone Decision Date

Employee Advocates Place Pressure on Google to End Forced Arbitration

While the existence of mandatory arbitration clauses in consumer and employment agreements is pervasive, certain big-name tech companies are taking a stand against this forced method of alternative dispute resolution. Since 1992, the amount of non-unionized employers with mandatory arbitration clauses buried within their employment agreements has skyrocketed. It is estimated that more than 60 million American employees have worked under these agreements. The consequences have been great. Many sexual harassment claims have been forced out of a public judicial forum and placed behind closed doors. Uber, for example, was publicly criticized for its use of forced arbitration to silence victims of sexual assault. In response, Uber has since rescinded all arbitration agreements with any employee claiming sexual assault or harassment. Facebook and Google followed suit late last year by announcing that they will longer force those with sexual assault or harassment claims to settle through forced arbitration. Although this is a substantial step toward empowering employees with less bargaining power, neither Uber nor Facebook have completely eradicated forced arbitration clauses within their employment contracts.

Google, on the other hand, announced on February 21, 2019 that it will no longer require mandatory arbitration clauses in any of its employment agreements. This marks a significant stride towards holding employers accountable by providing a meaningful avenue for employees to publicly redress their grievances. However, this was not a result of a single unitary actor. A group of Google employees led the charge, and amidst this tremendous victory, the activist are not stopping to celebrate.

The “Googlers for Ending Forced Arbitration” are a group of Google employees who joined forces to end the use of mandatory arbitration clauses in the employment and consumer context. After a prominent social media campaign in early January, Google finally succumbed to the Googlers’ demands. Nevertheless, one week after Google’s big announcement, six Google employees followed lawmakers to Congress in support of a proposed law that would limit the reach of the Federal Arbitration Act. The proposed bill, FAIR Act, would reduce instances of mandatory arbitration in the employment and consumer context.

This presents an illustrative example of how employees can enact widespread changes within their own company and beyond by standing up and speaking out. Perhaps Google’s latest move will assist with expanding the prohibition of mandatory arbitration. One thing is certain: individual activism and grassroots organization is a powerful advocacy tool.

Employee Advocates Place Pressure on Google to End Forced Arbitration

Trump Administration Sends Mixed Signals on High-Skilled Immigrants

Despite hopes of reprieve, the Trump Administration has steadily increased its rejections and delays of H1-B visa applications. This comes on the heels of previous restrictions, adding a layer of complexity to the application process.

The H1-B visa, often referred to as the high-skill visa, is often used for professionals like programmers and engineers. In the United States, immigrants apply for one of several types of visas, each of which has its own requirements. The H1-B program has faced criticism in the past. Many of its recipients, especially those employed by Indian consulting firms like Tata and Infosys, are believed to not be very highly skilled despite dominating the process. Furthermore, it is highly oversubscribed, with annual lottery rates reaching a mere 35% in 2018. Despite extremely high public support for high skilled immigration the process remains difficult.

Nonetheless, although the United States is widely considered friendly to immigrants—it is consistently one of the most immigrant-friendly nations in polls—it is no longer viewed as attractive as in the past. The American immigration system has long been unique but also remarkably complex and difficult. The number of people receiving visas decreased by 12% last year. This has been particularly acute for high-skilled immigrants. In order to compete for globally itinerant talent, other countries have created special visas and immigration programs, like Canada’s Global Skills visa or China’s Thousand Talents program. Indeed, one website, Move2Canada.com, noted that last year its most popular group was American technology workers.

The Trump Administration has sent mixed signals. The early message from the Trump campaign, and then his administration, was centered around ugly statements about immigrants of any kind. President Trump has remained unequivocal in his calls to reduce illegal immigration and low-skilled immigration, but since taking office he has at times embraced high-skilled immigration, calling for more immigration of foreigners with special skills. Nonetheless, in 2018 he supported the Cotton-Perdue RAISE Act, which would have sharply reduced immigration both low- and high-skilled.

Trump Administration Sends Mixed Signals on High-Skilled Immigrants