On October 22, 2015, the Berkeley Center for Law, Business, and the Economy (BCLBE) welcomed Philip J. Tendler, Partner in Pillsbury’s SF Office, for a Q&A discussion about his career and how law school can arm students with the skillset needed to succeed in the wild world of debt finance.
A former equity securities analyst in the Global Energy and Power Group at Schroders, Mr. Tendler joined Pillsbury after graduating from Boalt in 2000.
Travelling back in time, Mr. Tendler reflected on the things he learned in law school that helped him demystify the concepts and themes of finance in his practice. The conversation was weaved around two anecdotes that he shared from his time at Boalt.
Volkswagen’s cheating scandal began in September when emissions data gathered from multiple studies of its vehicles found that additional emissions were present during road tests compared to lab tests. It was discovered that several of Volkswagen’s models contained software that switches to a low-emission compliant mode when it detects an ongoing emissions test. Consequently, multiple high-ranking Volkswagen officials have resigned, including the CEO Martin Winterkorn, and the value of the company’s shares dropped significantly since September.
On October 8, 2015, the head of Volkswagen America, Michael Horn, testified in a House of Representative’s hearing about the emissions scandal. Horn claimed that the use of the software was not a corporate decision, but rather something a few employees engineered. As a result, Volkswagen has begun firing or suspending top engineers involved with the diesel engine development.
The rivalry between ride-sharing companies Uber and Lyft continues, as Uber probes further into the identity of the hacker responsible for the company’s driver data breach.
In February, Uber announced that a hacker improperly downloaded the names and license numbers of about 50,000 of the company’s drivers. Shortly after announcing the breach, Uber filed a “John Doe” suit in federal court in San Francisco, alleging that the unknown hacker violated provisions of the federal Computer Fraud and Abuse Act. Uber then filed a subpoena request for Comcast’s records, claiming that an unidentified individual using a Comcast IP address had access to the security key that was used in the data breach. U.S. Magistrate Judge Laurel Beeler granted Uber’s subpoena request for Comcast’s records, reasoning that the records would be “reasonably likely” to help find the responsible hacker.
On October 14, 2015, Square, the mobile payments start-up, made public its prospectus for its initial public offering. Private investors valued Square at $6 billion and more than two million merchants accepted five or more Square transactions last year. Even so, Square’s recent filing to raise up to $275 million revealed new information on its business and profitability. While Square reported a revenue jump to $850 million last year, a 54 percent increase from a year earlier, its losses increased to $154 million in 2014. The company also reported a loss of $77 million on $561 million in revenue over the first six months of this year. This means that Square will be pitching investors at a time when the company is unprofitable and investors’ interest in IPO’s may be weakening.
Founded in 2009, San Francisco-based Square freely distributes a square-shaped piece of hardware for mobile devices that enables simple, portable credit card processing by businesses. Square collects 2.75 percent on each transaction with a share going to credit card networks and other financial intermediaries.
Reliance on cloud storage has become an integral, and often overlooked, aspect of the daily activities of individuals and businesses throughout the world. Information stored in the “cloud” such as emails, photos, contact lists, and documents are actually stored in data centers located in many different countries. The information stored by a user is located in the data center closest to the location in which the individual or business registered their account. The purpose of these worldwide datacenters is to improve the efficiency and security of obtaining, accessing, and distributing such information. For example, Microsoft stores European users’ cloud data in its Irish data center.
An ongoing battle between Microsoft and the Department of Justice has raised many concerns among a number of tech companies that reap significant revenue from cloud computing throughout the global community. Microsoft is in the midst of an appeal from a New York Magistrate decision, adopted in full by the District Court, to uphold a warrant, compelling Microsoft to seize the emails, photos, and contacts of account data stored in Ireland and turn them over to the DoJ for a criminal investigation. On appeal to the Second Circuit, the government argues that it has the right to demand the information stored abroad by any US corporation regardless of jurisdictional issues, conflicts of laws problems, and international treaties to the contrary.
On October 14, 2015, prosecutors from the U.S. Attorney’s Offices for the District of Massachusetts and the Southern District of New York subpoenaed Valeant Pharmaceuticals for details on its patient assistance programs, drug pricing, and distribution practices.
Valeant shares fell following this announcement, closing down 4.7 percent at $168.87. The shares stumbled further by 1.2 percent a week later after the company said that it formed a committee to review allegations against the company.
The company is under attack for sharply raising the prices of its drugs, a practice illegal in most developed countries but legal in the U.S. The company defended its practice by mentioning that it hired a consultant to review this aspect of the business. The consultant found “considerable room to increase the price of both drugs.”
On October 15, Volkswagen announced plans to recall 8.5 million diesel vehicles in Europe, after Germany’s Federal Motor Transportation Authority (KBA) ordered a compulsory recall of 2.4 million vehicles in Germany earlier that day. Volkswagen’s decision to adopt a broad interpretation of the KBA order reflects the company’s challenging task to remedy the 11 million vehicles worldwide that contain illegal defeat device software, which temporarily lowers vehicle emissions for testing purposes. The KBA has demanded that Volkswagen remove the software in these diesel engines and ensure that the vehicles meet emissions standards.
A recall of 11 million vehicles by a single automaker would be among the largest in history. Volkswagen has indicated that the completion of the repairs may extend into 2017, and the cost of the repairs may exceed 6.5 billion euros. While software must be replaced in the 1.2- and 2-liter engines, the 1.6-liter models require additional expensive hardware to meet emissions standards. Furthermore, some analysts estimate that lawsuits and regulatory fines, in addition to repairs, may cost Volkswagen up to 35 billion euros. After the recall announcement, Volkswagen shares were down 3.2 percent; the company has lost over a quarter of its stock market value since Volkswagen revealed the emissions deception on September 18.
The recent slowdown of the initial public offering market has made private equity firms suffer. Private equity produce profits through two main channels: management fees based on assets, and commissions generated from the profits of the private equity funds. The latter method is their dominant moneymaking strategy. Bringing the companies in their portfolios to initial public offerings is one of the main ways that funds generate profits. As a result, a slowdown of the IPO market means that private equity firms are losing their potential profit.
Lyft, a San Francisco-based cab-hailing service, and its Chinese counterpart, Didi Kuaidi, have announced a partnership that will allow both companies to operate in each other’s countries. Starting early next year, Didi Kuaidi will allow American users to find rides in China using the Lyft app. Likewise, Chinese users entering the US will be able to find rides using the Didi Kuaidi app. The partnership will also allow the ride-hailing passengers to pay for the rides in their native currencies. From a business strategy perspective, the partnership is an alliance against a common competitor, Uber.
To date, Uber has raised over $5 billion in venture capital, and it is valued at more than $50 billion. Over the last five years, Uber has expanded its presence in 300 cities across 60 countries. In the U.S., Uber and Lyft have been fiercely competing for capital, at times forcing investors to choose sides. Lyft continues to lag behind Uber significantly in many areas. However, Didi Kuaidi’s and Carl Icahn’s recent investments in Lyft have helped raise the company’s profile in domestic as well as the international markets.
On October 14, 2015, Anthony Allen and Anthony Conti, two London-based former Rabobank traders, were the first to stand trial for criminal charges in the U.S. for allegedly manipulating the London Interbank Offered Rate (Libor) to benefit their colleagues’ trading positions.
Libor is the average interest rate at which banks borrow from one another. It serves as a key benchmark for interest rates around the world, and is widely used as a reference rate for many financial contracts including mortgages, student loans, and other consumer lending products. Trillions of dollars in derivatives and other financial instruments are tied to Libor. The benchmark rate is calculated as an average of daily bank submissions to the British Bankers’ Association (BBA).