On February 28, 2017, Vice Chairman Lee Jae-yong and four other senior executives of Samsung were indicted on corruption charges following a 90-day investigation by a special prosecutor.
President Trump to Repeal Dodd-Frank
President Trump Scales Back Dodd-Frank
The Dodd-Frank Wall Street Reform and Consumer Protection Act, better known as the Dodd-Frank Act (the “Act”), is a financial reform package passed during the Obama administration as a response to the financial crisis of 2008. The Act, signed into law in 2010, re-designed Wall Street and the American financial industry. Banks and other financial institutions were forced to undergo a series of new regulatory exams and cut back on their lucrative, but illiquid, private equity and hedge fund investments. The Act created new governmental agencies and strategies to oversee mid-sized banks all the way up to multi-billion-dollar firms. Now, seven years after its enactment, President Donald Trump has pledged to significantly reduce and repeal the Act.
Snap’s IPO and Lack of Shareholders’ Rights
Snap Inc. (“Snap”) recently filed its IPO with the SEC. The intended IPO of the parent company of the messaging app Snapchat has already been heavily debated and various commentators have criticized Snap’s intended governance structure.
Unilever Heads Back to the Drawing Board after Takeover Bid is Withdrawn
Unilever, a British consumer goods company, is exploring alternative methods for expansion after Kraft Heinz withdrew their $143 billion takeover bid in February. The takeover would have created an industry stalwart and giant within the packaged food and consumer goods realm. The original offer intended to pay shareholders $50 a share in a cash-stock combination.
Workers Reject Union at Boeing’s South Carolina Facilities
On February 15, despite efforts from the International Association of Machinists and Aerospace Workers (IAM), seventy-four percent of approximately 3,000 eligible employees voted to reject unionization of Boeing’s Dreamliner assembly line in North Charleston, South Carolina.
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Auto Lenders’ Use of GPS Tracking and Kill Switches Prompts FTC Investigation
Amidst a steady increase in subprime auto loans, lenders are utilizing new surveillance technologies to mitigate their risk. Finance companies, credit unions, and auto dealers use GPS tracking to monitor borrower’s locations and “kill switches” to remotely disable vehicles. Lenders say these devices allow them to extend loans to more Americans with poor credit as they can locate the vehicle if a borrower defaults on payments and repossession is necessary.
Companies’ Values vs. Trump’s Immigration Ban: Where Is the Line?
In early February, about 130 tech companies including Apple, Facebook, Google and Microsoft, filed an amicus brief in opposition to President Trump’s immigration ban. The ban represents “a significant departure from the principles of fairness and predictability that have governed the immigration system of the United States for more than fifty years” states the amicus brief, written by Andrew Pincus of Mayer Brown LLP. In practice, President Trump’s executive order makes it difficult for U.S. companies to recruit, hire and retain some of their most talented employees, as well as threatens their ability to attract investments. Though most large tech companies signed the brief, two big players IBM and Oracle, among others, refused to do so.
IBM’s chief executive Virginia Rometty not only refused to sign the brief but also sent an open letter to President Trump expressing support in her capacity as the company’s CEO. Rometty offered specific ideas she believes “will help achieve the aspiration [Trump] articulated and that can advance a national agenda in a time of profound change.” IBM’s current and former employees, accompanied by the “IBMers” community, repudiated Rometty’s support for Trump and refusal to sign the amicus brief. In response, they signed a petition asserting that IBM’s core values of diversity, inclusiveness and ethical business conduct are against Trump’s ban. In addition, IBM employees are publicly refusing to participate in any U.S. government contracts which violate constitutionally protected civil liberties.
Oracle is facing a similar situation. In December, co-chief executive Safra Catz declared that the company is “with [Trump] and will help in any way [it] can.” Like IBM, Oracle refused to sign the amicus brief. In response, three young women employees started a petition asking the company to change its mind. As of today, Oracle has declined to comment on this employee-led push.
In general, however, the tech industry stands with the values echoed by the Never Again pledge. In signing the pledge, almost 3,000 tech workers have agreed not to participate in the creation of any government order to build or share any database that will be used to target people based on race, religion or national origin. The pledge recognizes tech companies’ prior complicity in human rights violations. For example, the pledge cites IBM’s collaboration in 1939 with Nazis to digitize and streamline the Holocaust, resulting in the deaths of millions.
Nowadays, when you enter any company’s webpage and read its core values you will see words such as diversity, respect and inclusivity. Whether these companies really believe in those values or are merely adopting them to adhere to trends is up for debate. Now that President Trump and his ban have condoned racism, executives such as Rometty and Catz are willing to lend their powerful technology to help the government find targeted people. The huge concern here is whether IBM and Oracle will help repeat history and contribute to millions of deportations, families’ separation, and in the worst-case scenario, death. This is the time for executives to recall the values that they presumably stand for and begin abiding by them. Companies must protect their employees and their clients against any kind of racism, and respect the constitutionally protected civil liberties that have defined the U.S. for years.
Companies’ Values vs. Trump’s Immigration Ban Where Is the Line (PDF)
Toshiba Chairman Quits Over $3.4 Billion Loss
Toshiba, the Japanese technology conglomerate, has spent the better part of a decade and billions of dollars situating itself as one of the most prominent players in the global nuclear power industry by buying up rivals. Although Toshiba’s growth has been impressive, it has resulted in a financial disaster that appears to be growing worse.
In December 2016, Toshiba warned that it would need to write off “several billion U.S. dollars” because of its purchase of American construction firm CB&I Stone & Webster, a firm that specializes in projects involving nuclear power. This potential write-off triggered alarm in the financial industry given that Toshiba’s nuclear subsidiary in the United States, Westinghouse, bought the business for $229 million. Westinghouse’s 2015 purchase of CB&I Stone & Webster was geared towards winning more business in the spheres of decontamination, decommissioning, and plant projects. Following the warning announcement, Toshiba’s share price dropped 12%.
On February 14, Toshiba announced that it planned to write off more than $6 billion and withdraw from the business of building nuclear power plants as the impact of its disastrous bet on the American nuclear industry started to rock Japan’s corporate landscape. Following this announcement, Toshiba’s Chairman, Shigenori Shiga confirmed that he would resign, putting an end to weeks of speculation about the chairman’s future.
Toshiba has announced that it is set to report a net loss of 390bn yen, or $3.4 billion, heading into March 2017. This volatile situation has caused analysts to predict that the company’s future may be at risk. In a last-ditch attempt to preserve the value of the company, Toshiba has already announced their plans to sell off a portion of its successful memory chip department in order to raise funds.
Prior to the current scandal, Toshiba had been struggling to recover after news broke in 2015 that the company had overstated profits for seven years, a revelation that prompted the former chief executive to resign.
The company said that it will reorganize its nuclear business under Toshiba’s President, Satoshi Tsunakawa, in order to ensure stricter monitoring. Tsukanawa has said that the company is currently looking for potential partners to acquire a stake in Westinghouse. He bowed to the crowd at the news conference to apologize for “troubling investors and stakeholders.”
U.S. Banks Plan to Use Cellphones as a Substitute for ATM Cards
Major banks like J.P. Morgan Chase, Bank of America, and Wells Fargo all have plans to roll out thousands of ATM machines this year that will be accessible using cellphone technology alone.
These new machines give customers the ability to obtain cash or make deposits without the use of a traditional ATM card. Customers who are logged into their mobile banking apps on their phones can use N.F.C. (Near Field Communication) chip readers on the new machines in order to gain access to their accounts. J.P. Morgan Chase has already introduced this technology in several hundred ATM machines in four test cities across the United States. Bank of America already provides this service to users who have compatible phones and certain wallet apps, but they plan to bring this cardless option to all of their machines by the end of 2017.
With the introduction of this new technology comes both security advantages and disadvantages. One distinct benefit of using mobile technology instead of ATM cards will be a reduction in “skimming”, which is the process by which a scammer steals card information in order to access an individual’s bank account. However, this new innovation still has its flaws. A Chase customer recently had $2900 stolen from her account when a thief obtained her login credentials, installed the Chase app on his phone, and used it to access her account at one of Chase’s new machines. Chase claimed it used this incident to strengthen its security measures.
In general, there is agreement that mobile ATM transactions are much faster than traditional card transactions. One bank even noted that its average transaction time dropped from 45 seconds to 10 seconds.
Many experts believe that ATM cards will remain a part of our financial ecosystem, but to what extent remains to be seen.
U.S. Banks Plan to Use Cellphones as a Substitute for ATM Cards (PDF)
Snap Aims for Valuation of More Than $20 Billion in IPO
Snap Inc., the parent company of Snapchat, is positioned to be one of the biggest initial public offerings in the technology industry in years. The company will have the ticker symbol SNAP and is expected to begin trading early March. Snap has an expected potential value of about $22.2 billion, with its midpoint being close to $20.9 billion based on offerings in the range of $14 to $16 per share. Despite being lower than the $25 billion that Snap anticipated, it is significantly higher than the $16.5 billion that the company valued itself last year.
At a similar stage of the offering process, Snap will trail Facebook, as Facebook was valued at around $86 billion. Yet, Snap will greatly exceed Twitter’s valuation of $12 billion back in October 2013.
Snap will be beginning a two-week tour with three of Snap’s top executives to sell investors on one of the most promising and fruitful IPOs this year. The three executives include co-founder and chief executive Evan Spiegel, chief strategy officer Imran Khan, and chief financial officer Andrew Vollero. This tour officially began on Thursday, when Morgan Stanley hosted the executives to speak with its sales force. Goldman Sachs, another underwriter, installed the Snap’s Spectacles vending machine in its lobby.
Snap’s investors have questioned whether Snap has the ability to maintain its use growth rate, especially given Facebook’s recent additions in Instagram that mirror much of Snap’s features. While this may be so, Snap maintains that it averaged around 158 million users a day last year, and has focused its primary efforts in North America and Europe, as opposed to worldwide.
Additionally, investors are wary about Snap’s ability to maintain profits. Despite the company’s loss of $154 million last year, its revenue grew from $58.7 million in 2015 to $404.5 million last year. This boosted revenue stems from Snapchat’s decision to provide services for both users and advertisers. Starting off a platform for people to send disappearing messages, Snapchat has evolved to allow users to create “stories” and play with filters that have face-swaps or paid-for content.
Yet, one caution for investors is that they will have minimal influence in the company’s management, as the co-founders will be retaining about 89 percent of the voting shares. The shares in the offering will not include voting rights.
With so much speculation, Snap’s IPO is one to watch. Snap’s IPO may reflect the market’s appetite for other tech IPOs and may affect Snap’s reputation as one of today’s leading technology companies.
Snap Aims for Valuation of More Than $20 Billion in IPO (PDF)