E-commerce, unsurprisingly, plays a rapidly expanding role in the global economy. A report from the World Trade Organization estimated that in 2016 alone the value of e-commerce transactions totaled $27.7 trillion. Spurred by advances in computing power, increased analysis of consumer behavior and tailored platforms to facilitate online transactions, e-commerce’s growth is a direct reflection of the increased digitalization of the economy.

Given e-commerce’s presumptive incompatibility with existing trade regulations, organizations like the WTO continue to struggle with how to comprehensively and fairly regulate, or de-regulate, the online marketplace. Further, the difficulty of accurately amassing relevant data, as well as the complexity of addressing a global market with many international players who often have disparate interests, creates additional hurdles that prohibit the WTO from making any meaningful progress. As a result, outdated regulatory frameworks remain in place. As Japan’s trade minister poignantly noted, “The current WTO rules don’t match the needs of the 21^st century.”

In response to this regulatory lag, 76 of the WTO’s members agreed to actively negotiate and set forth trade-related e-commerce rules beginning in March 2019. Representatives from Japan and the European Union were amongst the first members who signaled their interest, and China recently confirmed its willingness to participate as well. The members who will engage in the negotiations represent a breadth of perspective across both developed and emerging e-commerce markets. But the initiative markedly lacks at least one significant participant in the e-commerce space—India. In 2018, India’s e-commerce sales were projected to reach over $32.7 billion. The absence of India’s representation in these negotiations, despite its role in the global e-commerce landscape, might create a blind spot in proposed regulations. Nevertheless, the group remains open and other countries, including India, may still elect to join.

The initial Joint Statement issued by the members specifically points to the “unique opportunities and challenges faced by Members.” This is perhaps meant to acknowledge the fact that while these negotiations will focus on e-commerce and trade, the forthcoming adoption of new regulations will inevitably have broader economic and socio-political effects. Issues ranging from the digital divide, to personal privacy, to the concentration of market power could be impacted by the regulations. The potential for expansive influence increases the need for a multifaceted and collaborative approach when designing any proposal. In this spirit, Canada has already established an online questionnaire where Canadian stakeholders can provide their views on e-commerce and better inform Canada’s position in future negotiations with other members.

The renewed focus on regulating e-commerce signals a progressive and cooperative approach to addressing a considerable part of the international economy. Hopefully, the fact that 76 WTO members have agreed to participate signals a strength of buy-in from multiple constituents and an end to passive, ineffective regulation.

WTO to Tackle E-Commerce

Goldman Sachs’ board of directors authorized the potential claw back of a number of top executives’ compensation pending the outcome of the 1MBD scandal. Ex-CEO Lloyd Blankfein and CEO David Solomon are among the executives who could have to pay back stock awards.

The board of directors responded to increasing scrutiny around Goldman Sachs’ role in the 1MBD scandal. Last year, the Justice Department claimed that $2.7 billion had been misappropriated from a Malaysian sovereign wealth fund. Goldman’s exposure stems from the bank’s arrangement of three large bond offerings in 2012 and 2013. Nearly half of the $6.5 billion in earnings for the Malaysian fund were misused to pay for kickbacks, fine art, jewelry, and bribes. The scale of the fraud committed—and the murkiness of the transactions—begs the question: What did Goldman executives know?

That question was partly answered when Tim Leissner, Goldman’s former Southeast Asia chairman, pleaded guilty to conspiring to commit money laundering and conspiring to violate the Foreign Corrupt Policies Act. The government also filed charges against another former Goldman Sachs banker and a Malaysian financier, both of whom the government claimed were central to the embezzlement plot.

Goldman has worked to paint these individuals as rogue bankers who conspired to defraud the fund for their own benefit. However, the charging documents indicate that the prosecutor may be reluctant to accept Goldman’s “bad apples” defense. The government alleged that Goldman perpetuated a culture of prioritizing deal-making with little regard for regulations. While the government may have left the door to indictment open, such actions are exceedingly rare. Rather, all signs point to Goldman paying a hefty fine and presumably returning to business as usual.

Goldman Sachs Likely to Escape Accountability

On the hook for billions of dollars in wildfire liability, Pacific Gas and Electric Corp. filed for Chapter 11 bankruptcy protection on January 29th. Despite PG&E’s precarious finances, shares rose 16.5 percent and its market value soared to over $7 billion in the hours after the bankruptcy filing. Though executives claim that insolvency is “the only viable option,” in many ways PG&E will benefit from bankruptcy proceedings.

PG&E faces lawsuits for dozens of wildfires in 2017 and 2018 and is currently under investigation for contributing to the deadly Camp Fire in November, in which 86 people died. The company has estimated that its liability will exceed $30 billion. However, this number is far from certain. Investors are betting that PG&E’s actual liabilities will be much lower after the company beats many of the wildfire claims in bankruptcy court. Further, the liabilities will not hit the company all at once; many of the lawsuits will take years to resolve.

PG&E has used its financial uncertainty as an excuse to benefit from bankruptcy. Bankruptcy protection shields the company from further claims and buys executives more time to figure out next steps. The filing also eases financial pressures by allowing the company to delay payments to creditors and to take out more loans. Further, bankruptcy court gives PG&E leverage to renegotiate contracts with clean energy suppliers.

While PG&E stands to benefit, the immediate costs of the utility company’s bankruptcy likely will be borne by consumers. Though interim CEO John Simon promised customers no disruption and that “the power and gas will stay on,” PG&E hopes to achieve this by hiking electricity bills. Thus, filing for bankruptcy puts pressure on regulators and elected officials to allow PG&E to raise customer rates to cover losses and ensure that its 16 million customers continue to have power.

PG&E’s bankruptcy highlights the urgent need for California to rethink how it assigns responsibility and pays for wildfire disasters. As fire seasons become more destructive, this is not the last time that PG&E will face massive wildfire liability.

PG&E Files for Bankruptcy as Wildfires Liability Looms

Twilio, the “mightiest unicorn” of Silicon Valley, first went public in 2016 at a $1.2 billion valuation. Just last week, the company was soaring with a valuation of $11.2 billion. Twilio is a developer-centric communications platform focused on providing easy access to global telecommunications companies. This is accomplished by turning archaic and decentralized services into a convenient one-stop shop. The company started off with simple APIs for messaging, phone calls, and recording but has since expanded to upwards of fifty different APIs for all types of services.

SendGrid is another communications platform, originally debuting at $700 million but currently valued at around $2 billion. In contrast to Twilio, SendGrid services email. This is the claimed “missing channel from Twilio” that Twilio CEO Jeff Lawson says the company has been trying to avoid. Following a ski trip full of cloud and business software leaders sharing a common investor, Bessemer Venture Partners, SendGrid CEO Sameer Dholakia and Lawson came to an agreement. Twilio had made bids for SendGrid since 2017, but all were rejected by Dholakia because he thought the “offers [were not] good enough” and would rather continue with their planned IPO. Now, with an accepted offer of $2 billion in an all-stock transaction, Twilio’s acquisition of SendGrid allows them to expand their market into email and other Internet communication. Lawson already considers his company an irreplaceable “super-network” of communications “light years ahead” of their competitive field. If the acquisition comes to fruition—as it is currently pending authorization by the SEC—Twilio will become “the unquestioned platform of choice for all companies looking to transform their customer engagement.”

The marriage of these two companies reveals the drive for a ubiquitous communications platform for developers and entrepreneurs, who would much rather spend time innovating than slogging through mundane tasks of setting up robust communication channels. Built on a similar idea to Amazon’s AWS (cloud computing services), Twilio is one of the many companies offering up infrastructure-as-a-platform, which saves smaller developers the time and capital by chalking up their economies of scale at a fraction of the cost it takes to build an independent network. Twilio has already brought in $168.9 million from their latest quarter’s financials by servicing around 60,000 active customers, including technology giants Uber, Airbnb, Yelp, Facebook, and Netflix.

In 2016, JP Morgan analyst Mark Murphy commented that “it is very possible that Twilio will compound its growth nicely for many years to come.” And indeed, in the three years since Twilio has been public, their dominance illuminates their path to becoming a lasting pillar in the technology industry. So long as companies retain the need to communicate with customers, Twilio’s service will remain an economically relevant choice.

The Implications of Twilio’s Multibillion Dollar Acquisition of SendGrid

Today, if you walk through a number of major cities, you will likely see an electric scooter laying on a nearby sidewalk. These new e-scooters are a part of a recent boom that began in Santa Monica, California. The scooters offer customers a quick and efficient form of travel, similar to that of an Uber and Lyft while also creating less of an environmental impact. The process of acquiring this new efficient form of travel is simple: download the proper application to select the scooter and then leave the scooter at the end of your ride for the next person.  Although the process sounds simple enough, the regulations governing the use of these scooters are vast and have become a source of contention between start-ups and city officials.

This contention has been consistent in recent years as many startup businesses have flooded major cities with their new inventions without seeking proper permission from officials and agencies. This has subsequently lead to feelings of frustration amongst city officials, who quickly have to accommodate and regulate these new products.

The city of Portland is seeking to get ahead of this budding issue, and the eventual flooding of e-scooters, by creating a four month pilot program to investigate data regarding their everyday use. This program allows the city to place a limit on the overall number of scooters within the city and create a detailed report regarding usage and injuries. At the conclusion of the program, the city was successfully able to access and research the use of the e-scooters and provide permits to businesses accordingly. Although the permits and limitations allow the city to regulate the e-scooter market, these regulations have begun to limit the agency of start-ups and have reciprocally affected the ability to run a profitable business.

This leads us to question whether it is possible to balance the two competing interests of the businesses and cities alike. In reality, there is a way for both budding tech companies and the cities to reach a combined solution. An effective solution would be to allow for businesses to innovate while maintaining safety and efficiency within the city. This solution would require adequate transparency between both start-up businesses and cities alike. Transparency, along with a similar pilot program used in Portland, would provide tech companies the agency needed to create while also offering the city the necessary information to create regulations that would govern technological innovations. If other cities are successfully able to recreate both the pilot program and the relationships between e-scooter businesses and city officials in Portland, similar mutual relationships are possible in other cities.

Scooters, Start-Ups, and Stifled Innovation

The Camp Fire was one of the most devastating in California history. In addition to devastating over 18,000 structures and 153,336 acres, the Camp Fire claimed the lives of 86 people and the entire town of Paradise, California. While recently cleared of liability for the Tubbs Fire in Sonoma, many fire victims and Californians are still asking if PG&E, California’s gas and electric utility provider, is to blame for the Camp Fire and many others. PG&E and the public are still investigating to what extent electric sparks from its power lines may have contributed to the ignition of these fires.

Nevertheless, PG&E finds itself in a unique position among parties bearing potential liability for the fire. First, as a public utility, it has faced significant pressure from the California Public Utilities Commission to make operational changes that would reduce the risk of fire in the future. Second, as one of the few entities from whom a successful liability action may yield substantial damages for the lost lives and property of the fire victims, PG&E is one of the few possible defendants with the ability to pay.

It is precisely PG&E’s size and pocketbook that has led to a deluge of potential suits against the company for damages and for public regulation interests. These suits have led PG&E to prepare for bankruptcy as its CEO, Geisha Williams, makes her departure from the company.

What does it mean when a company like PG&E files for bankruptcy? A utility company with a state-sanctioned monopoly over the foundational provision of power to a state of nearly 40 million people can’t just fold and exit the marketplace. It is ultimately in the state’s and its people’s interest to ensure that some company is providing power and heat. In this sense, a Chapter 11 filing is one means of limiting the extent of operational costs while continuing operations. Another means to deal with the cost of these liabilities is to simply pass them on to consumers as higher utility prices.

The public may, however, see another option for reining in an essential service provider. While it wouldn’t be helpful to break PG&E’s natural monopoly by licensing other utility providers to build electric lines and generators, it may make sense to break PG&E up into regional divisions. Much like the breakup of Bell Corporation into regional entities like Bellsouth, these regional PG&Es could be held more accountable by the state and local public.

This possibility of breaking up PG&E is contingent on whether PG&E is too large to sufficiently monitor its vast infrastructure for safety, or even too large to be sufficiently punished into making changes by lawsuits and the state public utility commission. If it turns out that the best means of regulating PG&E to be more attentive to how it contributes to the state’s fires, we may see the state pioneer a new wave of antitrust action centered on the utilities it controls. From a legal torts perspective, however, showing that PG&E’s alleged negligence was either sufficient or necessary to start the fires still remains a difficult obstacle for many fire victims seeking damages.

Upheaval at PGE

After closing the last of its U.S. stores in June 2018, Toys R Us signed off with a sincere message on its website to “Play on!” While the message was probably meant to thank the fallen retail giant’s millions of loyal customers, companies like Ollie’s Bargain Outlet may have taken it as business advice.

Ollie’s is a discount store that specializes in selling household name items at extremely low prices. Despite its wacky cartoon mascot and advertisements that poke fun at itself, the company has experienced serious growth. Since its IPO in July 2015 at $16/share, Ollie’s has continued to surpass its quarterly growth projections. Ollie’s stock price has more than quadrupled to $78/share, and the company has expanded to over 300 “semi-lovely” locations.

Much of Ollie’s success comes from its business strategy of purchasing mass amounts of brand name items in liquidation sales. Ollie’s passes most of that discount to its customers. As a result, Ollie’s can sell many items at prices below even Amazon listings.

Ollie’s CEO Mark Butler admitted that the recent surge in large retailer bankruptcies “created a perfect storm” for his company. Toys R Us opted to completely liquidate rather than continue to pursue reorganization. The company’s main suppliers, Hasbro and Mattel, were therefore left with tons of inventory and no buyers. Ollie’s happily stepped in and spent $70 million to purchase the overstock at a significant discount.

Ollie’s also strategically takes over the vacant stores of bankrupt companies. Ollie’s purchased 12 former Toys R Us stores for just $42 million in a bankruptcy auction. The move may boost Ollie’s brand recognition and facilitate the company’s expansion into states like Texas.

Ollie’s is looking forward to taking advantage of the closings of other retail giants like Sears. While the dominance of online retailers has contributed to the downfall of businesses like Toys R Us, it has provided fertile ground for companies like Ollie’s to thrive. Perhaps business models like Ollie’s will be all that remains of the brick and mortar store in the next few decades.

Eccentric Bargain Store Chain Takes Advantage of Toys R Us Bankruptcy

The recent government shutdown has significantly affected the initial public offering (IPO) timelines of startups hoping to go public in 2019. Due to the shutdown, law firms and investment banks ventured into the unfamiliar territory of trying to complete an IPO without a fully functioning SEC. Among the companies affected include tech startups Airbnb, Uber, Lyft, and Pinterest. Normally, the SEC employs 4,436 workers, but during the shutdown, only 285 were working. Furthermore, with the recent stock market volatility due to factors like the U.S. trade war with China and fears of an upcoming economic downturn, companies are eager to go public as soon as possible while valuations are still high.

Despite the inability of the SEC to sign-off on pre-IPO documents, companies have opted to bypass the SEC’s approval. Under the Securities Act of 1933, an IPO registration statement can become automatically effective, without SEC input, 20 calendar days after filing with the SEC. Biopharmaceutical company Gossamer Bio, leveraged this loophole and commenced its IPO on January 24^th, offering 14.375 million shares at $16 per share. This approach, however, is not without both market risk, as companies need to price their stock 20 days before listing, and legal risk, with potential future litigation pointing to the irregular IPO circumstances.

Although the government shutdown has temporarily ended, the damage may have already been done. Over the last two years, on average, it took tech companies seven exchanges with the SEC over 144 days from first engagement to IPO. Therefore, with a long IPO process, a record breaking government shutdown, and an unpredictable Trump administration, companies may strategically favor private financing or M&A over raising capital from the public markets. This combined with an IPO market that is quickly cooling down may further delay startups from becoming publicly traded companies.

The Woes of IPOs from the Government Shutdown

For many in the United States, electric vehicles (EVs) are practically synonymous with Tesla. In the past eight years, Tesla has almost singlehandedly launched the EV marketplace into the public eye. Its stock has risen from $19 in its 2010 IPO to right around $300 today – a 1,700% increase.

That market dominance might soon change, however. Big-time corporate investors have flooded into the EV marketplace, placing huge bets on a variety of EV startups across the globe. For example, Lucid, an EV startup based in Silicon Valley, has secured a $1 billion investment from Saudi Arabia. The company, through its Lucid Air vehicle, is aimed at the luxury market. Proterra, a company aiming to launch electric buses, has attracted corporate investments from GM, BMW, and Daimler totaling nearly $900 million. The boom in EV startup investments has taken many by surprise and possesses huge implications for the auto industry, but also a variety of other markets and industries as well.

The biggest question that everyone seems to be asking: is it really the end of petroleum-powered cars? Even a few years ago, that prospect would seem highly unlikely, if not outlandish. Indeed, even today, many remain skeptical about the prospect of EVs becoming mainstream. In a survey executed by KPMG last year, three quarters of auto industry executives remained highly skeptical of EVs overtaking the traditionally petroleum-based marketplace. Most expressed concerns about the often prohibitively high infrastructure costs while others found issue with technological deficiencies like recharging times.

But the sheer magnitude of the latest corporate investments may potentially assuage many of these concerns and change that discussion. With these heavy bets placed on the development of more effective electric technology, corporations and governments alike seem to be moving in the same direction. Norway and India have each discussed 2030 deadlines for banning gasoline and diesel cars; France, Great Britain, and even California have discussed bans by 2040. Automobile companies like GM have already pledged to going all-electric in the near future.

How viable these bans and their timelines actually are is another discussion fraught with its own issues. But in any event, this massive boom in investment is signaling an equally massive change in the more than century-old petroleum vehicle marketplace. Whether the electric vehicle will become the dominant player is anyone’s guess, but plenty of corporate players are now willing to bet that it is.

The End of the Petroleum Vehicle?

Last Wednesday night, January 23, 2019, BuzzFeed announced its layoff plan in a memo sent to employees by Jonah Peretti, the company’s CEO and co-founder. The leading digital media company plans to reduce its workforce by 15%, or a total number of about 220 employees.

The layoff plan first affected the news division of BuzzFeed last Friday. Many teams within the news division, including the health desk, national desk, and LGBT desk suffered reductions in their workforces. While BuzzFeed News has received awards for its reports, it recently faced some scrutiny after publishing an article alleging President Trump directed his former lawyer, Michael Cohen, to lie to Congress.

According to the memo, the purpose of the layoff is to “reduce costs” and “maintain growth.” This restructuring may also help BuzzFeed to have more control over its operations and direction in the constantly changing digital media market. Peretti assured employees these layoffs would “improve [Buzzfeed’s] operating model so [the company] can thrive and control [its] own destiny, without ever needing to raise funding again.” Simply put, BuzzFeed is trying to “hit profitability” this year in an effort to ease the pressure imposed by venture capitalists. The profitability of a financed company is a major concern for VC firms. The more profitable start-ups are, the more proceeds VC firms can secure. As time passes by, VC firms then tend to push the company’s management to make changes in order to increase profitability.

BuzzFeed is a typical example of digital media companies struggling to survive in light of declining advertising revenue. After Facebook cut down the “visibility of articles and videos from publishers,” many media companies, like BuzzFeed, Vox Media, Refinery29 and Group Nine, faced diminishing advertising revenues. These companies had to figure out new revenue sources in this new landscape. Last November, Peretti even suggested a merger between the top internet publishers in the hopes of having greater bargaining power against tech giants like Facebook and Google.

In a recent interview with the New York Times, Peretti said: “From a business standpoint, money is a means to an end.”

BuzzFeed Starts to Layoff 15% of its Workforce to Hit Profitability