Three of the nation’s biggest banks are asking shareholders to reject racial-equity resolutions after they expressed solidarity with the Black Lives Matter movement last year.
Citigroup Inc.
C,
+0.37%,
Wells Fargo & Co.
WFC,
+1.25%
and Bank of America Corp.
BAC,
+0.82%
were among the many large U.S. companies to make public statements of support in response to widespread protests last summer after the police killings of George Floyd and Breonna Taylor. In recent days, they have all officially opposed shareholder groups’ calls for them to conduct and publicize racial-equity audits and other changes, saying they are already doing enough to address equity issues.
The shareholder proposals urge the banks to examine their practices and policies and identify ways to “avoid adverse impacts on nonwhite stakeholders and communities of color,” something the banks says is unnecessary because they are juggling different, related initiatives and/or have committed money to such issues internally and externally. The proposals are included in proxy statements to shareholders, which allow for the companies to support or oppose shareholder resolutions and explain why ahead of a vote at their annual meetings.
For more: Companies declared ‘Black lives matter’ last year, and now they’re being asked to prove it
CtW Investment Group wrote in its proposal to Citi shareholders that the bank “has a conflicted history when it comes to addressing racial injustice within the communities it serves.” The group provides examples, including Citi getting fined by the Treasury Department in 2019 for failing to offer all customers mortgage discounts and credits; its required minimum maintenance fees and minimum daily balances; and the fact that it has only one Black executive in the C-suite (Chief Financial Officer Mark Mason).
“While we disagree with the overall approach in this proposal, we are completely aligned with its stated goal of addressing racial inequity in the financial sector,” Citi said in its proxy filed Wednesday.
The bank pointed to its $1 billion commitment to providing greater access to banking and mortgages for communities of color, plus making investments in Black businesses. It also said, “As recently as September 2020, Citi released a 104-page report on the economic cost of Black inequality in the United States titled ‘Closing the Racial Inequality Gaps,’” and said its efforts on these issues are available to the public.
Citi is also recommending shareholders vote no on a couple of other racial equity-related resolutions, such as adopting a “Rooney Rule” policy to increase diversity in its board of directors and disclosing its direct and indirect lobbying activities in a report.
See also: Women could pave the way for ESG investing in the U.S.
CtW also mentioned minimum requirements for deposits and fees in its Bank of America resolution, adding that the Treasury Department found in 2018 that the bank offered proportionately fewer home loans to minorities than white applicants in Philadelphia, and that BofA’s C-suite is just 8% Black.
Bank of America said in its proxy released last week that it has committed $1 billion to supporting minority-owned businesses, jobs initiatives in Black and Hispanic communities, affordable housing and donations to historically Black colleges and universities and more. It also touted its work with “consumer advocates in the design and marketing of our financial services and products” and its efforts to diversify its workplace and leadership.
In its proposal at Wells Fargo, the Service Employees International Union Pension Plans Master Trust mentions the bank’s record of discriminatory lending practices that have led to different lawsuits and a settlement with the Department of Justice in 2012, as well as settlements of employment-discrimination claims.
Wells Fargo, which released its proxy Tuesday, said it is conducting a “human rights impact assessment,” and that it will release a summary of those results and the actions it plans to take in response. The company also said it is making efforts toward diversity, equity and inclusion in its workplace and among its top ranks.
Dieter Waizenegger, executive director of CtW, worked with the SEIU on the shareholder proposals. While he said he “welcomed” the banks’ pledges on racial equality and justice issues, “as investors, we believe a critical part of this work is an independent assessment of the effectiveness of these promises.”
Read: This California investor predicts a 10-year ‘good economy’ revolution that shoves the sharing economy aside
The shareholder groups also had pointed out that the banks’ political and charitable donations have contradicted their stated commitments to justice and equity.
Wells Fargo “has donated to Senator Tom Cotton, who called for military air strikes on Black Lives Matter protests, as well as other members of Congress with racist records,” the SEIU shareholder resolution says.
CtW said “Citi donated $242,000 during the 2020 election cycle to 74 members of Congress who are rated ‘F’ by the NAACP,” and that Bank of America has been involved in issuing “judgment obligation bonds, a portion of which was used to pay for police related settlements” in Los Angeles.
Both Wells Fargo and Bank of America have donated to police departments that “bypass normal procurement processes to buy equipment for police departments, including surveillance technology that has been used to target communities of color and nonviolent protestors,” the shareholder resolutions say.
Goldman Sachs Group Inc.
GS,
+0.95%,
Morgan Stanley
MS,
+1.60%
and JP Morgan Chase & Co.
JPM,
+1.03%
are facing similar shareholder proposals, and have yet to release their proxies. This article will be updated when they do.
“Everyone told me I was wrong,” DeSantis, a Republican, said in a fundraising appeal on Tuesday, drawing attention to his defiance against the pandemic. “I faced continued pressure from radical Democrats and the liberal media, but I refused to back down. It’s clear: Florida got it right.”
Despite far fewer rules and restrictions, Florida lands nearly in the middle of all states on a variety of coronavirus metrics. The state has had about 3% more Covid-19 cases per capita than the US overall, but about 8% fewer deaths per capita. More than 32,000 Floridians have died of Covid-19, and the state’s per capita death rate ranks 24th in the nation.
“Those lockdowns have not worked. They’ve done great damage to our country,” DeSantis said Tuesday at a news conference in Tallahassee. “We can never let something like this happen again. Florida took a different path. We’ve had more success as a result.”
DeSantis — who, at 42, is the nation’s youngest governor — is standing out among his peers and seizing upon what he and his supporters believe is a vindication for their policies.
Lockdowns and school openings are suddenly a new measure for voters to hold governors and other elected officials accountable, a sign that the politics of the pandemic could open an uncertain chapter for many holding public office. He will be among the governors putting his record to the test when he runs for re-election next year.
“We still have millions of kids across this country who are denied access to in-person education,” DeSantis said at the news conference. “We still have businesses closed in many parts of this country. We have millions and millions of lives destroyed.”
‘It would not be booming if it was shut down’
With spring on the horizon, DeSantis suddenly appears to be in a position of strength compared to some of his fellow governors, including many of whom took far more restrictive approaches to the fight against coronavirus that caused a trickle-down effect on the economy.
He is not facing a potential recall like California Gov. Gavin Newsom, under investigation like New York Gov. Andrew Cuomo or being second-guessed for lifting a statewide mask mandate like Texas Gov. Greg Abbott.
DeSantis refused to implement a mask mandate in the first place, making him an outlier a year ago. At the time, he was hewing closely to President Donald Trump’s playbook, which he argued at the time was good for business.
The unemployment rate in Florida is 4.8 %, according to the latest figures from the US Bureau of Labor Statistics, compared to 6.8% in Texas, 8.8% in New York and 9% in California.
“If you look at what’s happening in South Florida right now, I mean this place is booming. It would not be booming if it was shut down,” DeSantis said last month as a crush of tourists began arriving. “Los Angeles isn’t booming. New York City’s not booming. It’s booming here because you can live like a human being.”
Florida has recorded about 9,204 cases per 100,000 people and about 150 deaths per 100,000 people, according to the latest data from Johns Hopkins University. Across the country overall, there have been about 8,969 cases per 100,000 people and 163 deaths per 100,000 people.
Despite far more stringent restrictions, California only ranks one spot better than Florida in both measures. Its death rate is about 5% lower than Florida’s, which means about 1,500 lives could have been saved in Florida if the state’s death rate matched that of California.
Still, comparing one state to another is complicated and often counterproductive, said Jason Salemi, an associate professor of epidemiology at the University of South Florida College of Public Health who maintains his own Covid dashboard. For example, he said, the humidity of Florida and the density of New York City offer entirely different scenarios for fighting coronavirus.
“What I’d love to ask about Florida is, if we had done things differently in Florida, what would it have looked like?” Salemi told CNN. “If you use those metrics of where Florida is relative to a lot of other states, we’re looking middle of the pack. So no, it hasn’t been a disaster in that we’re leading in mortality per capita in cases per capita.”
He added: “It’s not always about doing well relative to your peers. It’s how can we prevent as much morbidity and mortality from the virus while keeping an eye on what’s happening with our economy.”
He said Florida has also benefitted from local ordinances requiring masks and restricting the sizes of gatherings. DeSantis has prohibited cities and counties from fining people for refusing to wear masks and is stirring outrage among local officials by pushing to strip their authority to put such rules in place at all.
Throughout the pandemic, it’s that defiant and often combative DeSantis who has increasingly become the darling of Republicans. He declines most interview requests, including from CNN, even as he frequently appears on Fox News and other propaganda platforms. He has been locked in one fight after another with the state’s media over transparency on Covid statistics and other issues.
Yet his policies have boosted his standing inside his party, all but certainly closing the door to any Republican challenges. Potential Democratic contenders are already circling.
Rep. Charlie Crist — who served as Republican governor of the state from 2007 to 2011 and switched parties in 2012 — is among the Democrats thinking about challenging DeSantis for re-election next year. He said he intended to make up his mind before summer.
Asked how he thought Florida had withstood the pandemic, Crist said: “It’s a mixed bag, to be candid.”
“We have a light at the end of the tunnel feeling and that really is a godsend,” Crist told CNN in an interview in his office here. “On the other hand, there’s about 33,000 of my fellow Floridians that are dead now. And that’s incredibly sad, tragic and beyond unfortunate. So how are we doing? Well, we’re slugging through it like the rest of the country is and just doing the best we can.”
Crist and other Florida Democrats are calling for a US Justice Department investigation into whether DeSantis gave preference to donors after invitation-only vaccines clinics were set up in at least two upscale communities. The exclusive Covid-19 clinics allowed about 6,000 people to jump ahead of tens of thousands of seniors on waitlists in Manatee and Charlotte counties, where the drives happened.
“Was there preference given to certain Caucasian wealthy, Republican communities?” Crist said. “Because it certainly looks like it.”
A spokeswoman for the governor has dismissed the accusation, saying: “The insinuation that politics play into vaccine distribution in Florida is baseless and ridiculous.”
‘I think he took a gamble and it worked out’
Here in Florida, where beaches along the Atlantic Ocean and on Gulf of Mexico are crowded this week in ways not seen for more than a year, the complete story of the pandemic has yet to be written, as President Joe Biden inherits the challenge and has accelerated vaccines here and across the country. Yet health experts and local officials worry that a parade of spring break vacationers could contribute to a spike in Covid-19 cases.
Tom Golden, who owns a restaurant and bar along the busy stretch of Central Avenue in downtown St. Petersburg, said he didn’t have much of an opinion on DeSantis a year ago. But with his business not only surviving, but thriving, he offers a measure of credit to the governor.
“When he went into office, I wasn’t sure what to expect,” Golden said in an interview just before lunch on a sunny morning this week. “But he didn’t do anything to hurt me as a business owner or me as a Floridian. So fine with me.”
After businesses were allowed to open after being shuttered for several weeks late last spring, Golden said he recalls having mixed feelings about the balancing act of keeping the economy alive and protecting the public’s health.
“Well, of course, as a business owner I supported it, but as a human being, I kept thinking that it’s a horrible position to be in,” Golden said. “It’s a hard one to measure. I think he made a good decision.”
Conversations with more than a dozen Floridians offered a wide assessment of views about DeSantis’ handling of the coronavirus crisis. Several people suggested they were not initially supportive him, but in hindsight found themselves approving of his decision to reopen the economy and schools.
A woman strolling down the St. Petersburg Pier spoke about her grandchildren in California, who have attended school virtually for the last year. She said she believes the Florida approach was better, given the temperate weather and ability to be outside. She declined to be identified by name, but praised DeSantis’ decisions that have allowed the orchestra to resume playing here and the economy to thrive.
Molly Minton, who works as a laboratory supervisor, said she recalls being dispirited as she drove home from work and saw crowded bars and restaurants. Looking back, she said, she is glad many small businesses were able to stay open and believes Florida was simply lucky in many respects.
“I think he took a gamble and it worked out,” Minton said of the governor.
In a sprawling state of more than 21 million people, where some estimates say about 1,000 new residents arrive every day, many people said they had no opinion of DeSantis at all and didn’t know much about him.
He was born in Jacksonville and raised on the Gulf Coast just north of here in Dunedin, and he had a love for baseball that sent his team to the Little League World Series. Later, he played outfield while studying at Yale. He graduated from Harvard Law School and worked as a Naval prosecutor, including a stint in Iraq as a Navy JAG lawyer advising a SEAL team.
In 2012, he won a seat in Congress and was elected governor in 2018 two months after he turned 40. He was largely unknown during the primary campaign until he won the endorsement of Trump, who became aware of him through frequent appearances on Fox News.
Now, DeSantis is seen by many grassroots conservatives as a potential 2024 presidential candidate. That path depends on his gubernatorial reelection next year.
His long-range future, of course, also depends on the outcome of the rest of the pandemic. Yet it’s clear he hopes to make that his new calling card, which he telegraphed in a fundraising appeal for Republican governors that he sent to supporters on Tuesday.
“Right now,” DeSantis wrote, “my state of Florida is one of the only states that said no to oppressive lockdowns and has become an oasis of freedom for Americans.”
Here’s one possible all-clear signal. COVID-19 is no longer a “tail risk” for investors, the first time since February 2020, says Bank of America in its latest fund manager survey. A tail risk is an unlikely event that could cause outsize losses or gains.
Scroll down for that chart.
Meanwhile, the Federal Reserve’s two-day policy meeting begins on Tuesday, and investors will be on the lookout for any hawkish signals that could take some steam out of stocks. The premarket is showing some mixed action after some disappointment over retail sales.
But many remain stuck into the idea of a post-pandemic boom, at least in the U.S. as vaccinations roll out.
Read: Value stocks are making a comeback. Don’t get left behind, these analysts say
That has kept the records coming for the Dow Jones Industrial Average
DJIA,
+0.53%
and S&P 500
SPX,
+0.65%
and those stocks geared toward a recovery. Our call of the day comes from strategists at Bank of America, who offer up 17 stocks to buy for the three R’s they see coming — recovery, reflation and rerating.
Strategists Jill Carey, Savita Subramanian and Ohsung Kwon say the economy has reached the mid-cycle phase, where inflation typically is strongest. In prior such phases, excluding the technology bubble, small-caps have outperformed larger ones, and value has beaten growth.
Uncredited
The Bank of America team says there are two reasons to like those stocks: many of the companies they highlight are still not expensive, and active funds aren’t positioning for that rising inflation, with heavier exposure to mega than smaller caps.
Uncredited
Uncredited
Onto the stocks (nearly half are small-to-midcap companies)…
Alcoa
AA,
-1.49%
— BofA has a share price target $37 for the miner. Aluminum prices could go either way, but global demand growth is a plus for Alcoa.
Axalta Coating Systems
AXTA,
-0.70%
— Share price target £37 for the global coatings group. The pace of automobile recovery will be key and a stronger dollar and lower raw material costs could be a boost.
Broadcom
AVGO,
+4.34%
— Share price target $550. Risks for the semiconductor company include sensitivity to U.S.-China trade relations and competition in networking, smartphone and other markets.
Hess
HES,
-1.40%
— Share price target $95. Among the energy company’s risks are oil and gas prices, as well as slowing developments in drilling.
Marriott International
MAR,
+2.24%
— Share price objective $150. Economic weakness and worse-than-expected spending by businesses and consumers are among the risks for the hospitality company.
Walt Disney
DIS,
-0.20%
— $223 price objective for the entertainment giant that has “best in class assets.” Downside risks include slowing ESPN growth from people deciding not to keep a cable television subscription, weaker consumer confidence, and low theme park attendance. Also watch out for potential film flops.
As for the rest, they like CNH Industrial
CNHI,
+0.59%,
Comcast
CMCSA,
+0.77%,
Emerson Electric
EMR,
-1.39%,
Herc Holdings
HRI,
+1.98%,
Knight-Swift Transportation
KNX,
-0.67%,
Occidental Petroleum
OXY,
-4.34%,
Parker Hannifin
PH,
+0.75%,
Principal Financial
PFG,
-0.45%,
Robert Half International
RHI,
-1.11%,
Union Pacific
UNP,
-0.66%
and World Fuel Services
INT,
+0.08%.
The chart
Here’s that “tail risk” chart from the latest BofA monthly fund manager survey. Bigger risks are higher-than-expected inflation and a “tantrum” in the bond market.
Uncredited
The markets
Dow and S&P futures
YM00,
-0.06%
ES00,
+0.08%
are flat, while Nasdaq-100 futures
NQ00,
+0.52%
are up. European stocks are higher
SXXP,
+0.62%.
It was also an up day for Asian markets. Elsewhere, oil
CL.1,
-1.39%
and the dollar
DXY,
-0.06%
are weak and bitcoin
BTCUSD,
-2.98%
is backing further away from the $60,000 hit over the weekend.
The buzz
Retail sales dropped a bigger-than-expected 3% in February, though they surged a revised 7.6% in January. Import prices rose 1.3%. That data will be followed by industrial production and a National Association of Home Builders index. Aside from the Fed meeting kickoff, investors will also be watching the outcome of a an auction of 20-year Treasury bonds.
Ray Dalio, the founder of Bridgewater, the world’s biggest hedge fund firm, declares investing in bonds as “stupid” and investors should stick to a “well-diversified portfolio.”
AstraZeneca
AZN,
+0.72%
AZN,
+3.37%
shares are higher after Jefferies upgraded the drug company to buy from hold. AstraZeneca has been in the hot seat as several European countries suspend its COVID-19 shots over reports of blood clots from inoculations.
Finnish telecoms group Nokia
NOKIA,
+0.52%
NOK,
+1.90%
is cutting up to 10,000 jobs to save $716 million over two years.
A team from the U.S. government’s highway safety agency is headed to Detroit to investigate a “violent” crash after a Tesla
TSLA,
+2.05%
vehicle drove under a semitrailer, leaving two people critically injured.
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Investors who bet against stocks are targeting special-purpose acquisition companies, one of the hottest growth areas on Wall Street. The dollar value of bearish bets against shares of SPACs has more than tripled to about $2.7 billion from $724 million at the start of the year, according to data from S3 Partners.
Some of the stocks under attack belong to large SPACs that surged in recent months, in part because they were backed by high-profile financiers. A blank-check company created by venture capitalist
Chamath Palihapitiya
that plans to merge with lending startup Social Finance Inc. is a popular target, with 19% of its shares outstanding sold short, according to data from S&P Global Market Intelligence. The short interest in
Churchill Capital Corp. IV,
a SPAC created by former investment banker
Michael Klein
that is merging with electric-vehicle startup Lucid, more than doubled in March to about 5%.
Others are wagering against companies after they combine with SPACs. Muddy Waters Capital LLC announced last week it was betting against
XL Fleet Corp.
, a fleet electrification company that went public in December after merging with a SPAC. XL has since said Muddy Waters’s report, which alleged XL inflated its sales pipeline and made misleading claims about its technology among other issues, had “numerous inaccuracies.”
XL’s stock price dropped the day Muddy Waters released its report by about 13%, to $13.86, from its prior close on March 2. Shares closed Friday at $12.79.
Shares of
Lordstown Motors Corp.
fell nearly 17% Friday after Hindenburg Research released a report saying the electric-truck startup had misled investors on its orders and production. The company, which merged with a SPAC in October, said the report contained half-truths and lies. The short interest in Lordstown shares rose to 5% from 3.4% in the week before the report’s publication, according to data from S&P.
“SPACs are an area of focus,” said Muddy Waters’s
Carson Block.
The veteran short seller said SPACs largely make up the universe of companies he views as both “abysmal” and relatively free from technical challenges, such as high short interest, which can make betting against them difficult.
SPACs are shell firms that raise capital by issuing stock with the sole purpose of buying or merging with a private company to take it public. They are dominating the market for new stock issues, becoming a status symbol for celebrities while pumping the value of acquisitions, like betting company
DraftKings Inc.,
into the tens of billions of dollars.
Hedge funds that buy into SPACs early see them as a way to make lofty returns without much risk. Individual investors are attracted by the chance to get positions in newly public companies that they could rarely purchase through traditional IPOs. The Securities and Exchange Commission issued a statement on Wednesday warning that it “is never a good idea to invest in a SPAC just because someone famous sponsors or invests in it.”
A monthslong rally in the stocks lost steam recently amid a broad selloff in technology and high-growth companies. An index of SPAC stocks operated by Indxx fell about 17% from mid-February to March 10, while the Nasdaq Composite Index declined about 7.3% over the same period.
“These are all momentum stocks, and a lot of people want to short them,” said
Matthew Tuttle,
whose firm Tuttle Tactical Management runs an exchange-traded fund that allows investors to hold a portfolio of SPAC stocks. Mr. Tuttle is preparing to launch an ETF that bets against “de-SPAC” stocks of companies that have merged with a SPAC—like electric-truck manufacturer
Nikola Corp.
and baked-goods maker
Hostess Brands Inc.
—and a separate fund that invests in the stocks.
Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ
Postmerger companies are particularly attractive to short because they have larger market capitalizations, making their shares easier to borrow, and because early investors in the SPACs are eager to sell shares to lock in profits, analysts and fund managers said.
Short sellers borrow stocks they believe are overvalued and immediately sell them, hoping to repurchase the shares for a lower price when they need to be returned and to pocket the difference. The strategy proved dangerous in recent months when individual investors organized on social media to push up stocks like GameStop Corp., forcing short sellers to buy shares and cap their losses, helping to drive prices still higher.
Continued strong investor demand for SPACs could catch short sellers in a similar squeeze. Shorting SPACs can also be risky because their shares have a natural floor at $10, the price at which they can be redeemed before a merger, and because they are prone to sharp price moves, analysts said.
Still, the portion of shares sold short in SPACs and their acquisitions is climbing.
A blank-check company created by venture capitalist Chamath Palihapitiya that plans to merge with lending startup Social Finance Inc. is a popular target.
Photo:
Brendan McDermid/Reuters
Some are betting against stocks they believe rose too fast, to unsustainable valuations. The price of bioplastics company
Danimer Scientific Inc.
nearly tripled to $64 in the first six weeks of the year after it was bought by a SPAC. The short interest in Danimer stock has climbed to 8.5% from around 1% in January, and its share price has traded down to about $42, according to data from S&P.
Others are making bearish bets to hedge against potential losses in SPAC stocks they own.
Veteran short seller
Eduardo Marques
cited SPACs and their boosting the number of U.S.-listed stocks as a short-selling opportunity, according to a pitch for a stock-picking hedge fund called Pertento he plans to launch this year. America’s roster of public companies had shrunk from the mid-1990s onward, but that trend has recently reversed, partly because of SPACs.
Their popularity has helped spark new Wall Street offerings.
Goldman Sachs Group Inc.
this year started offering clients set baskets of similar stocks to short, pitching them as a way to hedge SPAC exposure, people who have seen the offering said. Clients typically customize the baskets Goldman offers, which are thematic and sector-focused, such as on bitcoin and electric vehicles.
Kerrisdale Capital founder
Sahm Adrangi
started shorting postmerger SPAC companies earlier than most, with a public bet in November against the stock of frozen-food maker
Tattooed Chef Inc.,
which still trades above its price at that time. But the stock has fallen about 13% during the recent market slump.
“We saw these stocks go up a lot and now that people are de-risking, these highflying SPACs are coming down to earth,” Mr. Adrangi said.
—Amrith Ramkumar and Mike DeStefano contributed to this article.
SHARE YOUR THOUGHTS
How long do you think the SPAC boom will continue, and why? Join the conversation below.
Write to Matt Wirz at matthieu.wirz@wsj.com and Juliet Chung at juliet.chung@wsj.com
Critics are blasting President Biden for taking credit for the COVID-19 vaccine rollout — and failing to thank former President Trump for initiating Operation Warp Speed, which produced the jab within one year.
In his first prime-time address Thursday night, Biden praised his administration for taking a “war footing” when it comes to combatting the virus, assuring every American will be eligible for a vaccine starting May 1.
Pundits like Fox News host Sean Hannity took aim at Biden for trying “to take credit for everything that Donald Trump did on COVID-19,” noting that three vaccines were already in development by the time Biden took office.
“There were already a million vaccines being administered into peoples’ arms every single day when Biden was sworn in, 36 million doses had already been distributed,” Hannity said.
He continued, “Joe, you want unity? Why don’t you just thank Donald Trump? You want us all to get along, you say. No Trump, no vaccine, Joe. Stop trying to take credit for something, frankly, you had nothing to do with. Nothing.”
Joe Biden was accused of “taking credit for everything that Donald Trump did on COVID-19” by Fox News.Alex Wong/Getty Images
Ronna McDaniel, the chair of the Republican National Committee, accused Biden of “not being straight with Americans,” including “on vaccines.”
“He is claiming Operation Warp Speed never existed,” she tweeted.
Sen. Bill Hagerty (R-TN) also blasted Biden for his remark.
“Tonight, @POTUS Biden showed no grace or appreciation for the leadership that led to Operation Warp Speed and the development of a safe and effective vaccine,” Hagerty tweeted.
Many critics believed that Donald Trump deserves all the credit for the COVID-19 vaccine.EPA/Oliver Contreras / POOL
Former New York Congresswoman Nan Hayworth agreed that Trump deserves all the credit.
“‘MY Administration,’ says President Biden, over and over again,” she tweeted. “The ONLY reason he can do any of the things he’s doing for vaccines and vaccination is Operation Warp Speed. The ONLY President deserving extraordinary credit here is President TRUMP!”
Johnson & Johnson Covid-19 Janssen Vaccine boxes being stored at the US Department of Veterans Affairs’ VA Boston Healthcare System’s Jamaica Plain Medical Center in Boston, Massachusetts on March 4, 2021.JOSEPH PREZIOSO/AFP via Getty Images
Conservative commentator Katie Pavlich wrote, “Biden taking credit for the vaccine is just absolutely astonishing, but not surprising.”
On Wednesday, Trump issued a statement saying Americans would be waiting years for a COVID-19 vaccine if it weren’t for him.
A medical worker prepares a COVID-19 vaccine in Washington, DC on Monday, March 8, 2021.Kevin Dietsch / Avalon
“I hope everyone remembers when they’re getting the COVID-19 (often referred to as the China Virus) Vaccine, that if I wasn’t President, you wouldn’t be getting that beautiful ‘shot’ for 5 years, at best, and probably wouldn’t be getting it at all,” Trump said.
The $1.9 trillion stimulus bill is aimed at shoring up the pandemic-stricken U.S. economy through tried-and-true fiscal measures like expanded unemployment aid and direct stimulus checks. But the legislation also includes a relatively novel measure that offers a form of guaranteed income to parents of children under 18, or what one expert calls “a baby step toward universal basic income.”
That’s because the relief bill includes an overhaul of the Child Tax Credit (CTC), a 24-year-old part of the nation’s tax law that today primarily benefits middle- and upper-income families. The American Rescue Plan overhauls the CTC by expanding the benefit from $2,000 annually to as much as $3,600 per child. It also includes more low-income households and doles out the credit’s benefit through monthly cash payments.
Those changes could have a major impact on millions of families, especially low-income households and those whose earnings can fluctuate from month to month. More than 4 million children could be lifted out of poverty, particularly children from Black or Latino families, according to analysis from the Center on Budget and Policy Priorities.
The expanded CTC will require about $100 billion in additional federal spending. Columbia University researchers estimate that it will generate more than $800 billion in benefits to society through better health for children and their long-term outcomes.
“It’s a big deal,” said David Wessel, director of The Hutchins Center on Fiscal and Monetary Policy at The Brookings Institution. “It’s one of the most significant steps we’ve taken to lift children out of poverty. In many other countries, the government subsidizes families with children because they are the ultimate investment in the future.”
The House on Thursday approved the $1.9 trillion coronavirus relief package passed by the Senate. The aid measure could receive President Joe Biden’s signature in the coming days.
House passes $1.9 trillion coronavirus relief…
03:30
Wealthy countries such as Sweden and Ireland provide “child allowances” — direct payments to families to help with the cost of raising children. With the overhaul of the CTC, the U.S. will be joining those countries — albeit temporarily — in providing direct aid on a recurring basis to families with children.
“It puts us in the same league of other Western capitalist democracies,” Wessel added. “It is a baby step toward universal basic income, or guaranteed income, and it’ll be interesting to see how it works in practice and how it’s perceived by the public.”
Up to $3,600
The CTC has helped millions of families over the years, but its peculiar design meant that it sometimes bypassed the poorest families. Families who owed little or no income taxes were only eligible for up to $1,400 per child, rather than the $2,000 benefit provided to wealthier families, according to the Brookings Institution.
About 27 million children don’t currently receive the full tax credit, said Kris Cox, deputy director for Federal Tax Policy at the Center on Budget and Policy Priorities. “The current design of the child tax credit is upside down,” Cox added.
That created a lopsided impact, with lower-income families less likely than wealthier families to benefit from the tax credit. In fact, about 40% of the tax credit went to families earning more than $100,000, while only 15% was directed to households with less than $30,000 in income, Brookings noted.
“We want the tax code to lift our low-income families up, and it wasn’t doing that,” said Joanna Ain, associate director of policy at Prosperity Now, a nonprofit focused on expanding economic opportunities for low-income households.
Under the American Rescue Plan, the CTC would be expanded to $3,600 for each child under 6 and $3,000 for each child between 6 to 17 years old (the credit previously excluded children who were 17.) Those amounts would also be available to all low-income families, marking a shift from its prior limits for poor families.
The provision also includes income cutoffs for higher-income households, similar to the stimulus checks’ income thresholds. Single taxpayers earning up to $75,000 and married couples earning up to $150,000 would receive the full credit of either $3,000 or $3,600 per child, but the payments would be reduced for people with earnings above those thresholds.
Families who earn too much to qualify for the expanded tax credits could still claim the base $2,000 credit for their children provided their incomes are below the current thresholds of $200,000 for single taxpayers and $400,000 for married couples.
Monthly payments — for a while
Aside from those changes, the CTC would be partially paid out on a monthly basis, rather than claimed once per year when people file their tax returns. In other words, a family with two children under 6 would qualify for $7,200 in CTC payments, or $600 in monthly payments.
But there’s a hitch: The monthly payments would run only from July through December of this year, with the other half of the CTC paid when people file their tax returns. In other words, households would receive six months of monthly income, and then would receive the rest of the CTC through their tax refund.
Even so, receiving guaranteed monthly income for half of 2021 could be a game changer for many low-income families, experts say. Low-income households have been particularly hurt by the pandemic’s economic impact, partly because they are more likely to work in jobs that couldn’t shift to remote work.
“We see so much volatility in a person’s paycheck throughout the year, especially low income families’ paychecks,” Ain said. “The stability of having an amount of money that comes each month will improve their quality of life.”
The expansion of the Child Tax Credit is only designed for one year, which means the program may revert to its previous form in 2022. But policy experts are hopeful that lawmakers may extend the expansion, especially if it proves popular with voters. If the provision is not extended, millions of families could see the recurring aid end after the holidays.
To be sure, the Biden administration and some congressional Democrats have acknowledged their goal to make the expansion permanent as part of their Build Back Better agenda, signaling they consider an investment in children will pay off through a stronger economy overall.
“These things don’t tend to go away” once they’re enacted, Wessel noted.
CBS News’ Sarah Ewall-Wice contributed to this report.
In political coverage, and especially on cable news, every issue seems to be polarized to the Nth degree.
Either you argue that Donald Trump did an incredible job and Joe Biden is doing a horrible job, or you insist the opposite is true. Taking a more nuanced position is often dismissed as being wishy-washy.
I have been saying for weeks that while President Biden is moving aggressively to ramp up the troubled vaccine program, President Trump deserves credit for creating Operation Warp Speed—and rarely gets any from the press.
Apparently, I was right, at least according to the New York Times.
Yep, the newspaper that spent four years investigating and often denigrating Trump has looked at the progress on vaccines and delivered, well, a fair and balanced report. The story yesterday by Sharon LaFraniere describes “a more mixed picture, one in which the new administration expanded and bulked up a vaccine production effort whose key elements were in place” when Biden took over from Trump. “Both administrations deserve credit, although neither wants to grant much to the other.”
Biden’s key moves were using the Defense Production Act to help Pfizer obtain the needed heavy machinery to expand a factory; pushing Johnson & Johnson “to force a key subcontractor into round-the-clock operations,” and getting the rival company Merck to join forces with Pfizer. The president announced yesterday the government will obtain an additional 100 million doses from J&J by year’s end.
MEGHAN, HARRY AND THE MEDIA: HOW A HOSTILE RELATIONSHIP PRODUCED AN OPRAH MOMENT
But the Times also acknowledges that “Biden benefited hugely from the waves of vaccine production that the Trump administration had set in motion. As both Pfizer and Moderna found their manufacturing footing, they were able to double and triple the outputs from their factories.”
And then there’s the predictable sniping as officials from both administrations take shots at each other over the development of the shots. In fact, as I was finishing this column, Trump issued a statement: “I hope everyone remembers when they’re getting the Covid-10 (often referred to as the China Virus) Vaccine, that if I wasn’t president, you wouldn’t be getting that beautiful ‘shot’ for 5 years, at best, and probably wouldn’t be getting it at all.” Got it.
While the public is polarized as well, I believe there’s more common sense in the country than inside the Beltway hothouse.
The House gave final approval yesterday to Biden’s $1.9-trillion Covid aid package. Recent polls show broad support for the legislation, including about a third of Republicans, as well as for the president’s handling of the pandemic. But not a single congressional Republican voted for the bill—and that’s what has dominated the coverage.
Biden is slated to deliver a prime-time speech tonight to tout his legislative victory—and a president who passed up that opportunity would be guilty of political malpractice. But what Biden hasn’t been doing much this week—or any week, actually—is dealing with journalists. Politico says he’s planning a “media blitz” to sell the benefits of the massive package. There will be “fewer scripted events and private dealings with lawmakers, more interactions with the press and appearances before the public.”
But is that true? That would mean more than holding the overdue news conference that Jen Psaki says is coming sometime this month. It would mean a round of interviews with journalists, not just one or two with sympathetic opinion hosts.
As for marketing the benefits of this lengthy and complicated measure, that makes sense. Since the GOP has been unloading on questionable programs that satisfy left-wing groups, Biden and his team are well-advised to make sure Americans know how the money will help their bank accounts, schools and vaccine programs.
SUBSCRIBE TO HOWIE’S MEDIA BUZZMETER PODCAST, A RIFF OF THE DAY’S HOTTEST STORIES
The coverage will play up the partisan warfare; that’s how Washington works. What you won’t see emphasized is that Biden is adding $1,400 stimulus checks to the 600 bucks approved under Trump—and the larger total is exactly what the ex-president, late in the game, insisted he wanted.
General Electric Co. is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s
AerCap
AER 1.62%
Holdings NV, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.
Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.
The
GE
GE 0.29%
unit, known as GE Capital Aviation Services, or Gecas, is the biggest remaining piece of GE Capital, a once-sprawling lending operation that rivaled the biggest U.S. banks but nearly sank the company during the 2008 financial crisis. GE already took a major step back from the lending business in 2015 when it said it would exit the bulk of GE Capital, and a deal for Gecas would represent another big move in that direction.
It would also represent another significant move by GE Chief Executive Larry Culp to right the course of a company that has been battered in recent years by souring prospects for some of its top business lines and a structure that has fallen out of favor with investors.
With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease Corp. It leases passenger aircraft made by Boeing Co. and
Airbus SE
as well as regional jets and cargo planes to customers ranging from flagship airlines to startups. Gecas had $35.86 billion in assets as of Dec. 31.
AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft. The company has experience in deal making, paying around $7.6 billion in 2014 to buy International Lease Finance Corp. AerCap’s revenue last year was about $4.4 billion, down from around $5 billion in the previous few years.
The aviation business has been hit hard by the Covid-19 pandemic, which has resulted in a sharp drop in global travel and prompted airlines to ground planes. Some airlines have sought to defer lease payments or purchases of new aircraft. Gecas had an operating loss of $786 million on revenue of $3.95 billion in 2020. GE took a roughly $500 million write-down on the value of its aircraft portfolio in the fourth quarter.
Combining the companies could afford cost-cutting opportunities and help the new entity weather the downturn.
Separating Gecas could help GE with its efforts to shore up its balance sheet and improve cash flows. Despite a recent increase, GE’s share price remains below where it was before significant problems in the company’s power and finance units emerged in recent years.
The Boston company has a market value of around $119 billion after the shares more than doubled in the past six months as it posted improving results. Still, the stock has fallen by about three-quarters from the peak just over 20 years ago.
Mr. Culp became the first CEO from outside of GE in late 2018 after the company was forced to slash its dividend and sell off businesses. The former
Danaher Corp.
boss has sought to simplify GE’s wide-ranging conglomerate structure further, as other industrial giants such as Siemens AG and
Honeywell International Inc.
have done in recent years.
Activist investor Trian Fund Management LP, which has owned a significant position in the company since 2015 and holds a seat on its board, has supported such changes.
Early in his tenure, Mr. Culp said he had no plans to sell Gecas, a move his predecessor
John Flannery
had considered after the unit drew interest from private-equity firms pushing further into the leasing business.
Mr. Culp has sought to even out cash flows and refocus on core areas. Operations he has parted with include the company’s biotech business, which was purchased by Danaher in a $21 billion deal that closed last year. GE also sold its iconic lightbulb business in a much smaller deal last year, and previously said it was unloading its majority stake in oil-field-services firm Baker Hughes Co.
GE has cut overhead costs and jobs in its jet-engine unit while streamlining its power business. The pandemic continues to pressure the jet-engine business, GE’s largest division, however.
The company also makes healthcare machines and power-generating equipment, and the rest of GE Capital extends loans to help customers purchase its machines and contains legacy insurance assets too.
AerCap is based in Ireland and Gecas has headquarters there as well. The aircraft-leasing industry has long had a significant presence in Ireland due to the country’s favorable tax regime and the importance of Guinness Peat Aviation in the development of the sector. (A deal between GE and AerCap would reunite two companies that bought their main assets from GPA.) The industry has gotten more competitive as Chinese companies have gained market share, however, and the combination could help the new group stem that tide.
Shares in aircraft-leasing companies plummeted along with much of the market in the early days of the pandemic as demand from major airlines, who lease planes to avoid the costs of owning them, evaporated. But many of the major lessors’ stocks have recovered lost ground and then some in the months since as lockdowns ease and the outlook for travel improves.
AerCap’s Chief Executive Aengus Kelly said on its fourth-quarter earnings call this month that he expects airlines to shift more toward leasing planes as they rebuild their balance sheets, in what would be a boon to the company and its peers.
“Their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time,” he said. “The priority will be to repay debt or government subsidies.”
—Thomas Gryta contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Emily Glazer at emily.glazer@wsj.com
It was Jan. 4, and Chamath Palihapitiya was ready to tease another deal. “Shooters Shoot,” he tweeted to his followers, along with a GIF of Alec Baldwin berating weary salesmen to “Always Be Closing.” The retweets and likes for the “Glengarry Glen Ross” reference came fast and furious. “We’re ready,” one follower replied.
Three days later, when Mr. Palihapitiya announced his intention to take online lender Social Finance Inc. public via a “blank-check” company, Reddit message boards popular with the day-trading crowd lit up. One fan called it a “stock that you buy with hopes of transforming you into a millionaire”—even though SoFi did not expect to be profitable until 2023 and faced stiff competition.
Mr. Palihapitiya is the man of the market moment. The founder of tech-investing firm Social Capital Holdings Inc. has charmed Wall Street to raise billions of dollars to bring startups public. Amateur traders hang on his every word for clues about his next target—and for the insults he hurls at the high-finance elite. (Hedge funds, he said last April, deserved to get wiped out when coronavirus shutdowns devastated the economy.)
Wall Street has always had its rock stars.
Warren Buffett’s
carnival-like annual meeting, after all, is nicknamed “Woodstock for Capitalists.” But Mr. Palihapitiya, a former
Facebook Inc.
executive who now has 1.4 million
Twitter
followers, belongs to a new class of market influencers—social-media savants who’ve figured out how to take shots at the establishment while taking its money.
Mr. Palihapitiya, left, is a Sri Lankan immigrant to Canada whose family got by on welfare payments when he was a child. He moved to the U.S. during the dot-com era and eventually worked for Facebook Inc.
Photo:
Brian Ach/Getty Images for TechCrunch
No one has marshaled the twin forces reshaping markets—the blank-check boom and the retail-trading surge—quite like Mr. Palihapitiya. So far this year, as of Thursday, 225 companies that use money from initial public offerings to buy established businesses have raised roughly $71 billion—a figure that accounts for more than 70% of all public stock sales, according to Dealogic data. These outfits are known as “blank-check” firms or SPACs, an acronym that stands for special-purpose acquisition companies.
Ordinary investors, homebound and flush with cash, are fueling the surge. Social Capital raised $3.7 billion for five SPACs last year and filed confidentially to raise money for seven more, according to people familiar with the matter. They have helped make Mr. Palihapitiya a fortune—at least on paper. Their structure gives Mr. Palihapitiya the right to buy one-fifth of its outstanding shares at discount prices. That means he is sitting on a mountain of gains.
SoFi, a decade-old startup that made its name refinancing student loans, is his latest prize. He and his bankers pitched some of Wall Street’s top firms to participate in the deal, and Mr. Palihapitiya’s pull with stalwarts like money manager
BlackRock Inc.
was a big reason why the lender spurned other SPAC suitors and accepted Mr. Palihapitiya’s offer, according to people familiar with the matter.
He unveiled the $8.7 billion deal to the public on Jan. 7—on CNBC and on Twitter, naturally. Nearly 65 million shares of Mr. Palihapitiya’s
Social Capital Hedosophia Holdings Corp.
V changed hands that day, more than all but 22 U.S.-listed stocks, according to Dow Jones Market Data. IPOE, as it is known, closed up 58% at $19.14, even though the deal wasn’t final and the SPAC had no real assets yet.
Leaving Facebook
A Sri Lankan immigrant to Canada whose family got by on welfare payments when he was a child, Mr. Palihapitiya graduated from the University of Waterloo and worked at
Bank of Montreal
before moving to the U.S. during the dot-com era. He joined Facebook in 2007 to help grow its user base after stints at a venture-capital firm and America Online; he left in 2011 after he said Mark Zuckerberg denied his request to start a mobile-phone business and later emerged as a critic of his former employer.
He used the money he made at Facebook to fund a lifestyle of billionaire whimsy. He is a partial owner of the Golden State Warriors, a three-time contestant in the World Series of Poker and a cryptocurrency evangelist who said he paid $1.6 million in bitcoin for an undeveloped property in Lake Tahoe. “When BTC hits $100k, I’m going to buy @GoldmanSachs and rename it Chamathman Sachs,” he recently tweeted the weekend before he also publicly toyed with running for governor of California.
Chamath Palihapitiya, far left, is a partial owner of the NBA team Golden State Warriors and a three-time contestant in the World Series of Poker.
Photo:
Poker Go
Recently, Mr. Palihapitiya has been touting a plan to “fix climate change,” as he tweeted last month. He has approached potential investors about raising billions of dollars for a partnership with tech giants on climate efforts, people familiar with the matter said.
The year he left Facebook, he founded Social Capital with a mission of backing young startups that want to solve the world’s toughest problems. He gravitated to SPACs as a way to provide an alternative path to the public markets for startups that didn’t want to deal with the costs, hassle and uncertainty of a prolonged registration process.
Mr. Palihapitiya called the idea “IPO 2.0.” A SPAC avoids many of the rules governing a traditional IPO by executing a reverse merger between a corporate shell that raised the money and a private company that takes both the cash and the shell’s stock listing. Mr. Palihapitiya raised money for his first SPAC, Social Capital Hedosophia Holdings Corp., in 2017.
Not everyone was enamored with that first SPAC attempt. Tech companies, including
Slack Technologies Inc.
where Social Capital was an early investor, rebuffed Mr. Palihapitiya’s efforts to take them public via his SPAC, according to people familiar with the matter.
During this period Mr. Palihapitiya often frustrated his colleagues with his extended absences from the office and meetings. Those absences would occasionally cause him to miss fundraising meetings he had set up for himself and
Tony Bates,
a former Skype CEO who joined Social Capital to lead a growth-investing unit Mr. Palihapitiya launched in 2017, some of the people said.
Mr. Palihapitiya’s now ex-wife was a partner at Social Capital. While they were still married, he traveled with a new woman he was dating, according to people familiar with the matter. Partners left. Many other projects, including a credit-investing fund, fell by the wayside. Nonetheless, Social Capital was able to earn an annualized internal rate of return of 33% in its first eight years, it said in its most recent annual letter.
Mr. Palihapitiya got his big break as a SPAC investor from billionaire Richard Branson.
Mr. Palihapitiya, fourth from left, got his big break as a SPAC investor from billionaire Richard Branson, pictured here with a gavel in his hand.
Photo:
Richard Drew/Associated Press
Virgin Galactic Holdings Inc., Mr. Branson’s space-tourism company, called off a roughly $1 billion financing deal with Saudi Arabia’s Public Investment Fund in October 2018, after the Saudi government was linked to the disappearance of journalist Jamal Khashoggi.
Throughout 2019, Mr. Palihapitiya, Mr. Branson and their teams spent months negotiating a deal to take Virgin Galactic public through a SPAC merger. Over meetings in Park City, Utah, and at Mr. Branson’s Necker Island in the Caribbean, the two sides hammered out an arrangement that included a $100 million personal investment from Mr. Palihapitiya. The deal, which valued the company at roughly $2 billion, closed that fall.
Mr. Palihapitiya went viral in April 2020, just as he began fundraising for two additional SPACs. After appearing on CNBC to urge the government not to bail out wealthy investors in airlines and other hard-hit companies, he gained about 100,000 new followers on Twitter, according to social-media data company Captiv8 (Social Capital is an investor in Captiv8).
“We’re talking about—a hedge fund that serves a bunch of billionaire family offices? Who cares?” Mr. Palihapitiya said. “They don’t get to summer in the Hamptons? Who cares!”
The rant endeared him to amateur investors. “Through all the pain watching all of our portfolios go up in flames the past few weeks, this motherf—er came in and spoke for all us and really put a smile on my face,” one trader wrote in a post on Reddit’s WallStreetBets that was upvoted about 2,000 times.
Meanwhile, Mr. Palihapitiya was reeling in Wall Street investors. Before coronavirus lockdowns put an end to schmoozing, he hosted dinners and meetings to pitch his SPACs to hedge funds. When the SPACs made their market debut in April, hedge funds, the target of his flamethrowing, were the primary buyers.
Mr. Palihapitiya found big targets for two of his SPACs last fall, taking house-flipping startup Opendoor Labs Inc. public in a deal worth $6.3 billion and insurance-tech startup
Clover Health Investments Corp.
to market at a $4.4 billion valuation. Big institutional investors including BlackRock, Fidelity Investments and Healthcare of Ontario Pension Plan pumped hundreds of millions of dollars into the deals alongside Mr. Palihapitiya.
Mr. Palihapitiya took insurance-tech startup Clover Health Investments Corp. public via a SPAC at a $4.4 billion valuation. Here a nurse practitioner for Clover Health takes a patient’s blood pressure.
Photo:
John Taggart/Bloomberg News
“It was like this guy walks on water,” said Michael Edwards, deputy chief investment officer of Weiss Multi-Strategy Advisers LLC, who invested in Mr. Palihapitiya’s first SPAC. “Everything he does is going to be oversubscribed.”
In December and March, Mr. Palihapitiya sold 10 million shares of Virgin Galactic to free up more than $300 million for other ventures, according to securities filings. (He indirectly co-owns another 15.75 million shares through an investment vehicle). Mr. Palihapitiya and the other managers of the SPAC that took Opendoor public are sitting on paper gains of about $475 million on the warrants and discounted shares they received through the IPO of the SPAC, as well as for their participation in a related private placement of the SPAC shares, according to estimates based on an analysis of securities filings by Michael Ohlrogge, a professor at New York University’s law school.
Mr. Palihapitiya is separately looking to start a new family of SPACs for biotech companies, some of the people said.
How much Mr. Palihapitya earned or invested personally is more difficult to discern from the filings. He highlights that he invests hundreds of millions of dollars in private placements accompanying his SPAC deals, a decision that helped sway Opendoor and SoFi to take his offers, according to people familiar with the matter. But it is sometimes unclear how much of that money is coming directly from him or from investment firms he helps manage. The Securities and Exchange Commission proposed new guidance in December for SPAC sponsors to provide more disclosure around their compensation arrangements.
Hype Man
People who know and have worked with Mr. Palihapitiya describe him as a great salesman but a poor manager. When Social Capital decided to transition away from a traditional venture-capital firm in 2018 to be more of a holding company for startups, many employees learned they would be losing their jobs from a Medium post Mr. Palihapitiya published, a person familiar with the matter said.
Mr. Palihapitiya’s skills as a hype man, though, are particularly well-suited to the features of SPACs. Unlike in a traditional IPO, executives and sponsors of SPAC transactions can make projections about the company’s future revenue and profits. Because such deals are structured as mergers, SPAC sponsors don’t have to worry about restrictions on talking openly about a business before its shares start trading.
Mr. Palihapitiya takes advantage of these loopholes. He talks his deals up on Twitter, which his lawyers then submit to the Securities and Exchange Commission to comply with stock-solicitation rules. Mr. Palihapitiya arranged with CNBC extended airtime on the days his deals were announced and went through slides from his investor presentation, according to people familiar with the matter. CNBC declined to comment. YouTube and
Amazon.com Inc.’s
Twitch have also approached him about moving his deal announcements to their live-video streaming services, some of the people said.
Mr. Palihapitiya talks his deals up on Twitter, which his lawyers then submit to the Securities and Exchange Commission to comply with stock-solicitation rules. Mr. Palihapitiya also arranged with CNBC extended airtime on the days his deals were announced, according to people familiar with the matter.
Photo:
David Paul Morris/Bloomberg News
As many as 70% of the investors in Mr. Palihapitiya’s SPACs are everyday investors, these people said. He allocates a small percentage of the shares in the offerings of his SPACs for that crowd, with an eye toward getting his underwriters to increase their share above 50%, the people said.
Alex Cruzado watched each of Mr. Palihapitiya’s CNBC clips after seeing his April 2020 rant. The 20-year-old university student living in Geneva, Switzerland, bought shares in IPOE on the day of the SoFi announcement and later posted positive reviews of it on WallStreetBets.
“For companies like Opendoor and SoFi, the fact that he talks about it and makes a public announcement directs people in,” Mr. Cruzado said in an interview. “He’s really great at marketing… [but] there’s no significant value he adds but that branding and packaging,” Mr. Cruzado said.
During his Jan. 7 appearance on the business network to elaborate on SoFi’s merits, Mr. Palihapitiya offered his thoughts on how SPACs are helping to reduce wealth inequality by letting ordinary Americans get earlier access to future blue-chip companies.
“How do you do that? You’re not going to do that by owning
American Express.
Those companies are dormant legacy businesses. That game is over. You need companies like SoFi. You need companies like Opendoor, like Clover and others,” he said.
The moderators of WallStreetBets later banned its millions of members from posting about SPACs. “They are too easily pumped to allow on a subreddit of our size,” one wrote at the time.
Mr. Palihapitiya jumped into the fray in late January when traders, inspired by posts on WallStreetBets, bid up
GameStop Corp.
and other beaten-down stocks, dealing painful losses to hedge funds that had bet the stocks would fall.
“This is some insane, crazy, baller shit: r/wsb just ran over one of the most successful hedge funds around,” Mr. Palihapitiya tweeted, linking to a Wall Street Journal article about hedge fund Melvin Capital Management’s emergency cash infusion.
In solidarity, he bought GameStop call options. He closed his position the next day and donated the proceeds.
When Robinhood Markets Inc. and other online brokerages restricted trading in hot stocks, enraging investors, Mr. Palihapitiya went on the attack. Robinhood executives were “corporatist scumbags” who “should go to jail,” he said on his podcast, “All-In.”
On Jan. 28 and 29, he told his Twitter followers that he turned Robinhood down when the startup was raising money years ago—and that Robinhood was misleadingly monetizing user data. He suggested they ditch the app and use SoFi, instead. A Robinhood spokeswoman declined to comment.
Over each of the two days, shares of the SPAC merging with SoFi notched double-digit gains. Retail interest was so strong that Robinhood placed limits on users’ ability to purchase them lest the brokerage have to deposit additional collateral with its clearinghouse to cover the trades. Of the 51 stocks in which Robinhood restricted trading on Jan. 29, Mr. Palihapitiya was tied to four.
In early February, investors in Mr. Palihapitiya’s SPACs were reminded that there is risk in taking unproven companies public quickly. Short seller Hindenburg Research published a report on Feb. 4 accusing Clover Health of failing to tell investors about a Justice Department investigation into its practices and misleadingly marketing its services to the elderly. Hindenburg previously exposed irregularities at electric-truck startup
Nikola Corp.
after it merged with a SPAC.
“Chamath has done a masterful job marketing himself, capitalizing on the recent chaos with GameStop and WallStreetBets to align himself with “everyday” investors – but his public persona strikes us as the sugar that helps the poison go down,” Hindenburg wrote in the report.
Clover said the report was full of inaccuracies and mischaracterizations. In a response published last month on Medium, Clover’s CEO and president said Hindenburg framed its report around Mr. Palihapitiya “in order to sensationalize what is otherwise a rather underwhelming piece of research.” Mr. Palihapitiya took to—where else—Twitter to defend Clover, saying he and the company would have been happy to have met with Hindenburg: “Instead, they chose to take the cheap path of screaming into the ether.”
The tweet got more than 3,000 retweets and 17,000 likes, but, since then, Clover shares are down 44%.
—Amrith Ramkumar contributed to this article.
Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Maureen Farrell at maureen.farrell@wsj.com
A worker carries a broom past closed stores at the Tanger Outlets center in Atlantic City, N.J. Shares of Tanger surged on Thursday.
Angus Mordant/Bloomberg
Tanger Factory Outlet Centers
took a wild ride on Thursday, the latest hot potato stock caught in a short squeeze.
The mall operator has a high amount of short interest, currently more than 33% of its shares, according to FactSet. That makes it among the most heavily shorted stocks along with
GameStop
(30.2%),
Rocket Cos.
(39.7%), and
GoodRx Holdings
(27.6%), according to MarketWatch data.
Shares of Tanger (ticker: SKT) jumped 22% Thursday morning to hit a 52-week high before settling down. By midafternoon, they had lost steam completely and were down 5.4%. The stock is up 38% over the last year, compared with a 20% one-year gain in the
S&P 500.
Malls have been among the most downtrodden stocks during the pandemic, forced to temporarily close locations and restrict the number of shoppers while also juggling budget-strapped tenants facing the same challenges.
Tanger has been a topic on a Reddit forum called WallStreetBets. One post from Wednesday said “SKT is about to reach its highest point since may 2019 and it’s the second most shorted stock after GME. You know what to do!”
“Lets make this explode,” the post says. “Help bring this stock to the spotlight and make it the new GME.”
A spokesman for Tanger wasn’t immediately available on Thursday.
WSB on Reddit is the forum where stock trading enthusiasts share ideas. It’s also a big focus of those investigating the run-up in
GameStop
(GME),
AMC Entertainment Holdings
(AMC), and other stocks a few weeks ago in a trading frenzy described as retail investors going after professional short sellers.
The average rating of the six analysts who publish research on Tanger is Underweight, the equivalent of a Sell. Full-year 2020 revenue fell 10%, to $370 million, according to FactSet.
