Good Thursday morning. Congrats to our colleagues Jodi Kantor, Megan Twohey and Rebecca Corbett, who may get the “Spotlight” treatment. Breaking: Jim Chanos is betting against the parent companies of Dunkin’ Donuts and Burger King. On today’s earnings calendar: Amazon, Microsoft, PepsiCo and Lazard. Some links require subscriptions.
Facebook can afford to clean up its act
The tech giant has promised to spend a lot of money on improving its operations after the Cambridge Analytica scandal. It’s not yet clear quite how much — Mark Zuckerberg told analysts yesterday that the company was still working on making its products “good for people and good for society.” And his chief technology officer, Mike Schroepfer, told U.K. lawmakers this morning that Facebook would vet British political ads next year.
What’s now apparent: These controversies are yet to hurt the bottom line.
Facebook’s first-quarter earnings featured a 63 percent jump in profit and a 49 percent rise in revenue. And roughly 70 million new monthly active users.
Peter Eavis’s take: If Facebook wants to spend more on protecting its community, it can: Its operating earnings are equivalent to 46 percent of its revenue. But its expense numbers haven’t provided clear evidence that the company is going the extra mile yet.
The key assessment, from the Pivotal analyst Brian Wieser:
Elsewhere in tech: Twitter did well in the first quarter — but where is its growth coming from? Why changing tech companies may be a job for tech employees. Amazon’s HQ2 is likely to push up its neighbors’ rents. YouTube Kids has new parental controls. Nasdaq is open to future cryptocurrency trading. What happened as Mt. Gox fell.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.
Is the problem with I.P.O.s a ‘middle-market tax’?
It’s not just regulations like Sarbanes-Oxley that put smaller companies off public listings, argues Rob Jackson, a Democratic S.E.C. commissioner — it’s the fact that they pay on average 7 percent of proceeds raised in their offerings, way more than bigger clients.
From Mr. Jackson’s speech in Cleveland yesterday:
He suggests the S.E.C. should make underwriters disclose more about the costs of going public, including companies’ potential losses from underpricing, and that bankers should do more to explain why they’re worth their fees.
How NFL owners worried about protests and their business
One thing that emerged a summit between owners and players last fall, according to an audio recording obtained by the NYT, was the league’s worry about President Trump continuing to attack the N.F.L. for the protests — and denting its roughly $13 billion in revenue.
What Jeffrey Lurie, the owner of the Philadelphia Eagles, said, according to the NYT:
Bob Kraft of the New England Patriots, a friend of Mr. Trump, said:
The political flyaround
• Several Supreme Court justices appeared skeptical about overturning President Trump’s immigration ban. How the White House got better at these cases.
• The head of the Office of the Comptroller of Currency, Joseph Otting, bought financial stocks until he took up the position in November. And Mick Mulvaney wants to end the C.F.P.B.’s public database of consumer complaints.
• Emmanuel Macron criticized the Trump administration’s planned metals tariffs, saying, “Commercial war is not the proper answer.” Congress remains a hurdle in revising Nafta.
• Scott Pruitt plans to spread blame for his embarrassments at the E.P.A. But is he losing the White House?
• Michael Cohen plans to plead the Fifth in Stormy Daniels’s lawsuit. Jeff Sessions wouldn’t say whether he has recused himself from the Cohen investigation.
• The chairman of the Senate Banking Committee, Mike Crapo, criticized Citigroup and Bank of America for moving to limit gun sales. (Bloomberg)
• Under the new tax code, are REITs better off not being REITs? (Bloomberg)
• The Justice Department is reportedly investigating whether Huawei violated U.S. sanctions on Iran. (WSJ)
Deutsche Bank is finally, and drastically, shrinking itself
Under its new C.E.O., Christian Sewing, the German lender plans to cut back U.S. trading and its U.S. and Asia corporate finance teams, and look at slimming down its global equities business. That portends big cuts to its staff of 97,130.
“There is no time to waste,” Mr. Sewing told analysts this morning, after Deutsche reported a 79 percent drop in first-quarter earnings. “The call to action is simple: Focus, grow revenues and significantly reduce costs.”
Elsewhere in financial services: A former UBS trader, Andre Flotron, was acquitted of market manipulation. The F.T.C. has charged Lending Club with deceiving customers about fees. A coordinated cyberattack hit seven of the U.K.’s biggest banks last year. The activist investor Edward Bramson is expected to meet with Barclays’ C.E.O. in coming weeks. What Henry Kravis and Bill Ackman have to say about philanthropy.
Why AT&T needs a Time Warner deal more than ever
For the same reason its sales and earnings missed analyst estimates: It’s seeing fewer higher-paying subscribers for traditional DirecTV services and more cord-cutters. Tablet and smartwatch subscriptions were up, but phone ones were down. Its archrival, Verizon, has also lost phone subscribers, but has done better job at finding new ones elsewhere.
More what Time Warner and its brands — HBO, Turner, Warner Brothers — offer AT&T, from Tara Lachapelle of Gadfly:
More on 21st Century Fox: Meet the advisers who benefit if Comcast or Fox buy Sky. Liam Proud of Breakingviews thinks that Sky shareholders shouldn’t bet on a bidding war. Chris Hughes of Gadfly thinks Comcast should pay more. Will Comcast try to break up Disney’s bid for Fox assets? And why has TCI reportedly built up a 4 percent stake in Fox?
The deals flyaround
• Peter Thiel won’t bid for Gawker after all. (WSJ)
• Could Bain Capital’s bid for Toshiba’s memory-chip unit become a casualty of a U.S.-China trade war? (FT)
• G.E. reportedly spurned interest from Danaher in its life-sciences unit. (WSJ)
• Saudi Arabia hopes to sell $10 billion of state assets by 2020. (FT)
• Bain Capital and Advent International are reportedly potential bidders for Eli Lilly’s animal-health unit. (Bloomberg)
• Hearst has bought a stake in Gear Patrol, a publisher with a flair for e-commerce. (WSJ)
• Elliott Management’s U.K. arm agreed to buy the bookseller Waterstones. (FT)
• TPG has hired John Kerry, the former secretary of state, as a senior adviser to its Rise fund. (Bloomberg)
• BP has appointed Helge Lund, the former C.E.O. of BG Group and Statoil, as chairman. (FT)
Quote of the day
We’ll let Kanye West take it away:
The speed read
• Ford will stop making sedans for North America. (NYT)
• Foreign executives at the Beijing auto show put limited hopes in promises to open up the industry. (NYT)
• Boeing aims to have a new facility ready in China by the end of the year. (WSJ)
• What analysts will be listening for when Mario Draghi speaks today. (NYT)
• Venezuela’s state oil company owes ConocoPhillips over $2 billion, an international tribunal ruled. (NYT)
• An interview with Ferrari’s biographer: “In Italy, there was the pope and then there was Enzo.” (NYT)
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