fortune--2020-06-25--The U.K.’s 500-year-old Royal Mail faces a world of ‘more parcels and fewer letters’ as it announces

The U.K.’s 500-year-old Royal Mail faces a world of ‘more parcels and fewer letters’ as it announces major cost cuts

Royal Mail Group, the U.K.’s national mail carrier, will undergo a vast round of cost-cutting as it attempts to adapt to a world of “more parcels and fewer letters,” according to the company’s CEO.
It’s a long-term trend that has been “accelerated” by the COVID-19 pandemic, said Keith Williams, the company’s interim chief executive. The service, which acquired its first postmaster in 1516, was privatized in 2013. The paradox of a vast increase in parcel deliveries and a drop in letters reflects the challenges faced by postal services worldwide. It also hints at what could be in store as the U.S. Postal Service faces the prospect of being at least semi-privatized, as in Canada, France, and Denmark.
Williams said the Royal Mail Group, which is split into the domestic carrier Royal Mail and GLS, an international logistics and delivery service based in Amsterdam, would restructure management to lay off 2,000 people, or 20% of the staff, alongside a reduction in capital expenditure over the next two years of 300 million pounds ($372 million), as it attempts to shift further toward its parcels business.
That came after the company announced a 31% decline in operating profit in 2019–20 compared with the previous year, as domestic parcel deliveries failed to offset an 8% decline in letter volume in the domestic Royal Mail service. In April and May, that trend was exacerbated, as domestic parcel volumes grew 37% while the country was in lockdown, and letter volumes dropped 33%—and costs skyrocketed by 80 million pounds ($90.3 million) owing to the strains of social distancing, staff sick leave, and overtime.
The pandemic has simply highlighted Royal Mail’s struggles to adapt, argued professor Paul Simmonds, a strategic management expert at Warwick Business School.
“Since before privatization, Royal Mail letter volumes have been in decline, making the company’s transformation into an efficient parcels-focused business essential,” he said. “COVID is exacerbating the decline in letter volumes, but it already existed.”
The question, instead, was whether the business was being transformed quickly enough, he added.
It’s been a rough pandemic for Royal Mail in other ways. In late May, the company’s CEO, Rico Back, was suddenly removed from his position after less than two years on the job. Back had recently announced a nearly 1.8 billion–pound ($2.23 billion) restructuring program and had faced mounting tensions over his own salary and relations with the postal workers’ trade union, the result of both the restructuring plan and criticisms that workers hadn’t been provided with sufficient personal protective equipment. A potential strike over the previous holiday season had been only narrowly avoided.
The announcement of cuts will likely exacerbate those tensions. On Thursday, Williams called postmen and women “key workers on the front line.”
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fortune--2020-06-25--Facebook tackles a persistent problem: users sharing old news

CDC : U.S. coronavirus case count is roughly 10x higher than the 2.3 million confirmed so far

Facebook plans to warn users when they’re about to share old news articles, a frequent problem on the service that can lead to others misunderstanding current events.
Users who click the share button on an article that is more than 90 days old will see a message asking whether they want to continue. The idea is to give users who may be unaware of the article’s age a heads-up while also giving them the ability to go ahead and share it if they want.
“Over the past several months, our internal research found that the timeliness of an article is an important piece of context that helps people decide what to read, trust, and share,” said John Hegeman, vice president of Feed and Stories at Facebook. “News publishers in particular have expressed concerns about older stories being shared on social media as current news, which can misconstrue the state of current events.”
Facebook had previously tried to address news literacy by introducing a button in 2018 that shows users more information about the publisher of article, helping them determine its credibility. The new notification goes a step further by helping users understand the timeliness of an article.
The new feature comes as Facebook tries to tackle misinformation on its service, something it has struggled with for years. As part of the fight, the company hired third-party fact-checkers three years ago to review articles on the site and flags those that may be sources of misinformation.
Facebook said it also plans to test other notifications over the next few months. For example, it’s considering a pop-up that would appear when users click on links about the coronavirus. Those notifications would provide users with more details about the source and direct them to Facebook’s COVID-19 Information Center, which provides content from credible health authorities.


fortune--2020-06-25--Texas governor suspends elective surgeries in major cities as the coronavirus overwhelms hospitals

Texas Gov. Greg Abbott issued an executive order on Thursday that would halt elective surgical procedures in major metropolitan areas as the state faces rapid growth in coronavirus cases and COVID-19 hospitalizations.
The sweeping order would affect health care providers in the state’s largest counties, including Harris, Dallas, Travis, and Bexar counties. “These four counties have experienced significant increases in people being hospitalized due to COVID-19, and today’s action is a precautionary step to help ensure that the hospitals in these counties continue to have ample supply of available beds to treat COVID-19 patients,” wrote Abbott.
The state’s health department said there were nearly 4,400 hospitalized COVID-19 patients in Texas as of June 24. One month ago, that number stood at 1,600. And the number of available hospital beds and intensive care unit beds have plummeted over the past few weeks with an influx of patients, especially in these major metropolitan areas, according to state data.
There have been more than 2,200 new daily cases since the beginning of the month, leading to extraordinary measures such as admitting adult patients to Texas Children’s Hospital to make up for a lack of resources.
That helps explain Abbott’s Thursday decision to once again halt elective surgeries in certain regions, as well as a pause on any further reopening of the Lone Star State. Abbott’s announcement does not, however, reverse other reopenings already underway, including many bars, restaurants, and other commercial venues.
Hospitals in the affected locales may face a cash crunch given how much money elective procedures bring in to health systems. And these procedures are by no means cosmetic. They can encompass everything from hip replacements to cancer biopsies.


fortune--2020-06-25--PPP loan fraud a ‘significant’ risk, says government watchdog

There is a “significant risk” of fraud for Paycheck Protection Program loans, the Government Accountability Office (GAO) said Thursday, urging the Small Business Administration to ramp up efforts to respond to such risks.
In a report released Thursday, the government watchdog, which is charged with overseeing spending for the CARES Act, said that “Because of the number of loans approved, the speed with which they were processed, and the limited safeguards, there is a significant risk that some fraudulent or inflated applications were approved,” the GAO said. “In addition, the lack of clear guidance has increased the likelihood that borrowers may misuse loan proceeds or be surprised they do not qualify for full loan forgiveness.”
The GAO said the SBA had limited safeguards in place and has not provided details on “how it plans to identify and respond to risks in PPP,” and urged the administration to develop more oversight plans to ensure the program’s integrity and address possible fraud. The office acknowledged that while the SBA has set up some safeguards, it has “provided limited information on how it will implement” them.
The $670 billion program was set up quickly to give small businesses emergency loans of up to $10 million that could be converted into grants, but the process has been chaotic from day one. Borrowers have struggled with quickly changing guidelines and rules from the administration that made the process (and applying for forgiveness) confusing for many.
The GAO noted that, given how quickly the administration needed to disburse funds, the SBA allowed lenders to “rely on borrower certifications to determine borrowers’ eligibility, raising the potential for fraud.” The SBA has said it will review loans over $2 million, but the government watchdog said that as of June 15, the administration hadn’t provided details on “how it planned to carry out that work, and it had not provided information on oversight plans for the more than 4 million loans of less than $2 million each.”
Meanwhile, the office maintained the SBA to date has “failed to provide information critical to our review, including a detailed description of data on loans made.” In contrast, the GAO said, “most agencies were generally able to provide GAO timely access to information for this report while executing their responsibilities during this unprecedented national crisis.”
Indeed, the GAO has been trying to procure more information from the SBA for weeks. In response to the report, the SBA said in a letter that it had indeed provided documents to the GAO and made staff available for meetings, and maintained it was “not accurate” to say the administration hadn’t planned for proper oversight, among other comments. In a separate statement following the report, Jennifer Kelly, a spokeswoman for the SBA, said “Unfortunately, the report minimizes the historic work that SBA has undertaken to implement the CARES Act and mischaracterizes SBA’s engagement with GAO.” The SBA also said in the statement “While providing emergency economic relief to millions of small businesses nationwide, SBA made senior officials available for interviews with GAO and produced hundreds of pages of documents to GAO. SBA, while carrying out work that is unprecedented in scope and scale, prioritized providing information that GAO expressly asked for and information that directly responded to GAO’s questions. SBA continues to provide additional information to GAO on a rolling basis.”
After weeks of mounting pressure, the SBA and Treasury announced on Friday the agencies would be providing more details for loans of over $150,000, including the names and business addresses of borrowers. However, loan amounts would only be disclosed in ranges, up to the $10 million cap. Based on the most recent data from the SBA, the vast majority of the over 4.7 million borrowers would remain unnamed.
Now, the GAO’s report likely confirms what lenders, lawyers, and experts have long assumed. Indeed, the “significant” risk for fraud isn’t surprising to many involved in the program.
Kevin Cohee, the CEO of OneUnited Bank, a PPP lender, recently told Fortune the bank had to work through “a lot” of fraudulent applications for PPP loans: “That was one big part of the challenge. That might be the biggest drain on the [bank’s] resources.”
Others including lawyers have long noted the risk for fraud was high for the program. “There will be fake companies, and there will be people doing fraudulent things, and no bank wants to be the one that approved that [application],” Maria Earley, a financial services regulatory and enforcement partner at international law firm Reed Smith, told Fortune back in April, days after the program began.
Thus far, the Justice Department has already brought cases against several PPP borrowers, accusing them of fraud.
Update, June 27: This article has been updated with a comment from the SBA.


fortune--2020-06-25--Actors union asks Disney to delay July opening of Florida parks too

A day after Disney said it would delay reopening its California theme parks, the union representing actors at Walt Disney World said Thursday that the company should also postpone welcoming back guests at its Florida parks which are scheduled to reopen next month after being closed since March because of the coronavirus pandemic.
The Actors’ Equity Association said that it was unclear how Disney World could “responsibly” reopen as coronavirus cases continue to soar in the Sunshine State. Florida reported having more than 114,000 confirmed cases on Thursday, a jump of about 5,000 cases over the previous day. The state has had at least 3,327 coronavirus-related deaths.
Disney World’s four theme parks are slated to start opening July 11. The theme parks resort has already reopened some hotels and its restaurant-and-shopping district. Orlando’s other major theme park resorts — Universal Orlando and SeaWorld Orlando — started welcoming back visitors earlier this month.
The actors’ union said it was concerned that not enough testing was planned for the parks’ actors who are unable to use face masks when doing their jobs — performing — unlike other park workers. The union represents about 600 actors at Disney World, out of a total workforce of 77,000 employees at the theme park resort.
“For weeks, we have made it clear to Disney that testing is a fundamental part of maintaining a safe and healthy environment for everyone, from the guests to the cast,” said Mary McColl, executive director of Actors’ Equity Association in a statement. “It is deeply disturbing that while coronavirus cases in Florida surge, Disney is refusing to provide regular testing to one of the few groups of workers in the park who by the very nature of their jobs, cannot use personal protective equipment.”
Disney World representatives didn’t immediately respond to an email seeking comment.
Florida’s seven-day average positivity rate for coronavirus tests reached 14.4% this week. By comparison, it was 3.8% on June 1 and 2.3% on May 25.
In California, Disney had hoped to reopen Disneyland and Disney California Adventure in Anaheim on July 17 after a four-month closure due to the coronavirus. But the state has indicated it won’t issue guidelines until after July 4, causing the company to delay reopening those parks.
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AP writers Terry Spencer and Freida Frisaro in Fort Lauderdale contributed to this report.


fortune--2020-06-25--The Coronavirus Economy: Picking back up with home renovations after the economic shutdown

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Sweeten is a home renovation service that matches every project with vetted general contractors. Founded in 2011, the firm offers guidance, financial protection, and a suite of online tools—at no cost to the homeowner. Based in Manhattan, Sweeten operates in the New York City tristate area, Philadelphia, Los Angeles, Miami, Chicago, Atlanta, and Nashville, with plans to expand to 10 more cities later this year.
Jean Brownhill, founder of Sweeten, a home renovation service that matches every project with vetted general contractors. Courtesy of Sweeten
Fortune spoke with Jean Brownhill, founder of Sweeten, for a new series, The Coronavirus Economy, about how the outbreak has affected her business, her thoughts on the future, and how she is working through the pandemic.
The following interview has been lightly edited and condensed for clarity.
Fortune: Could you tell me a bit about your career background? What inspired and led you to launch Sweeten?
Brownhill: I graduated from Cooper Union with a degree in architecture and went the traditional route of working for a well-known firm in New York City. After six years at two different firms, I made the jump in-house to Coach, working on their real estate development team, handling global architecture for the next four years.
After working hard and saving, I purchased my first home in Brooklyn’s Bed-Stuy neighborhood. The down payment alone was more than I ever thought I would have been able to save. On top of that, the renovation was another $125,000, which felt like crazy money.
Having spent so much time in the construction and design industry, I felt confident about launching my own remodel. However, I wasn’t prepared for what became a terrible experience. Despite my insider knowledge, I still wound up hiring the wrong general contractor. This showed me that even though I had come from the industry and spoke the same language as these contractors, there is a huge gap between what homeowners know and what they actually need to know in order to renovate. Out of my painful experience, combined with my passion for problem solving, I created Sweeten. With Sweeten, homeowners can enter the details of their renovation project and be matched with a short list of fully vetted, licensed, and insured general contractors, while having access to expert-level support to help bridge the gaps in knowledge and trust.
Sweeten has also been a boon for our contractors. The future of construction is being powered by tech innovation. Our contractors—all of whom are small to medium-sized businesses and make up 62% of all licensed contractors—are hungry for tech solutions that can evolve and enhance their business. Sweeten is helping by enabling them to provide the type of 21st-century, on-demand experience their renovation clients increasingly expect.
Founded in 2011, Sweeten offers guidance, financial protection, and a suite of online tools—at no cost to the homeowner.
When did you know the outbreak of COVID-19 would affect your company?
It was the week of March 9. Despite having thousands of projects in various stages of the pipeline, we noticed a slowdown in activity at all stages, from project leads to site visits to contracts signed. Projects that were expected to go into contract that week were now “on hold,” and conversations with homeowners became a lot more ambiguous. Our general contractors were hearing the same messages as well, which confirmed our suspicions that this might not be a short-term slowdown. Sweeten operates throughout the New York City tristate area, as well as in Chicago, Philly, L.A., Atlanta, Nashville, and Miami. Once it was announced that many of those areas would officially be sheltering in place, the offline activity came to a complete halt.
With all construction projects coming to a complete halt in March, how has your business fared? Did you need to make any budgetary changes? Were layoffs necessary?
Similar to many other businesses affected by COVID, we had to make some tough decisions. By the end of March, we needed to make changes that addressed the new realities of the market. With no idea when offline activity would return, we had to part ways with some incredible teammates to ensure the longevity of our business.
We know that great players are made in the off-season, so we began focusing our efforts on things that would set us up for success when demand returned. Resources that were normally allotted to monitoring and reporting on projects were redeployed to speed up various platform enhancements that we began in 2019. Among the projects that have been keeping us busy are improving the project posting experience to better understand and level-set renovators’ scope and budget; overhauling our marketing automation; building a new machine learning–based algorithm to create better homeowner-contractor matches; and making it possible to track and pay for completed milestones of the renovation via our platform.
How has business been progressing in the past few weeks where reopenings are happening?
With so many people working from home, homeowners realized their spaces need to be multifunctional: a place to sleep, a place to work, a restaurant, a classroom, a gym, etc. So we have seen a considerable amount of pent-up customer demand break through in recent weeks.
The customers we have been speaking to are eager to move forward with both paused and new projects. They have accelerated timelines and want more transparency and accountability given the large price tag and intimate nature of a renovation.
“With so many people working from home [during the pandemic], homeowners realized their spaces need to be multifunctional,” says Brownhill. Courtesy of Sweeten
Construction and home renovation do require workers to be indoors in relatively close proximity, but it seems like wearing masks and keeping some social distancing should be doable. Are you and your employees making any changes to your workflow to stay vigilant as the pandemic continues but also keep work projects on track?
We understand the vulnerability that comes with letting strangers into your home, so we enable strong relationships between our homeowners and contractors from the start. Initially, we send each homeowner a pre-vetted list of three to five licensed, insured general contractors. We know our contractors, we know their work, we’ve spoken to their past clients, and we know their unique specialities. We take all that into consideration when matching homeowners and contractors. [Ed. note: Sweeten contractors are not employees of the company.]
We also provide tools that allow for much of the planning process to be online, such as our new virtual site visit feature. From there, we advise both our homeowners and general contractors on best practices, designed to keep all parties safe, following all federal, state, local, OSHA, CDC, and building-specific guidelines.
Closer to home, the entire Sweeten staff continues to happily work remotely from points across the globe. And while the shift to working fully remote was jarring at first, I’ve been amazed at how quickly our team has not only adapted but thrived under the circumstances.
On a personal note, how have you been faring amid all this?
It’s been a lot—the single greatest leadership challenge of my career. I imagine many in my position are feeling the same way, and if they don’t, they most likely quit early in the storm. The levels of stress, uncertainty, and pressure this situation has created are unprecedented, and you have to be extremely focused and decisive, especially when making difficult decisions, such as expanding into new markets during an economic downturn, that can make or break you. We’re seeing those new cities reopening with strong renovation markets, illustrating that time and pressure can either smash you into rubble or create a diamond, and I’m confident that Sweeten will always shine.


fortune--2020-06-25--How a ‘creator economy’ could help writers and artists triumph over Facebook and Google

In the digital world, all creators have lived in the shadow of an existential paradox.
On the one hand, the media firms that have historically supported the livelihoods of writers, journalists, and other audio- and video-storytellers are in economic decline. As a result, it is harder for the creators to make a living. On the other hand, individual creators have never before had the kind of direct reach they do today. Many podcasters have larger audiences than the radio stations of yore. Instagram fashionistas outdo most glossy fashion magazines. And there are thousands of journalists with followerships that rival the reader base of a midsize newspaper.
The coronavirus pandemic has turned this paradox into a full-blown crisis. To many in the industry, the cause is self-evident: Big Tech platforms, especially Facebook and Google. Their dominance is painfully evident every quarter when, in lockstep, the platforms announce their ever-growing share of the advertising market while traditional media report deep declines. The demands for regulating or taxing the platforms to protect parts of the industry like the especially vulnerable news business grow louder every year.
However, the proposed remedies fail to address the deeper issue: When it comes to the creator economy, the digital world lacks some fundamental features of a well-functioning market. Black-box algorithms drive how a creator is discovered and how many viewers she reaches. It is not so much a failure as an absence of open markets, because what the platforms have created is an ecosystem designed entirely for advertising efficiency. In this world, creators are a side story.
The good news for creators is that there is a significant new technology shift underway that has the potential to revitalize the open market: a new era of frictionless payments. Two developments are enabling this: seamless payments on mobile phones; and the less glamorous technology of interbank micropayments. Thanks to biometrics on new smartphones—including fingerprint readers and face ID technology—all one needs is to tap one’s phone to make payments. In India, for instance, the Unified Payments Interface—a standard for bank-to-bank micropayments—permits transactions worth less than 10¢. Worldwide, more than 400 million people use Apple Pay, which has overtaken all other forms of contactless payment in the two years since its rollout.
Once it is as easy for creators or creative firms to charge users for a post as it is to simply post something on social media, the consequences will be far-reaching. It will enable what economists refer to as “vertically and horizontally differentiated” markets, of the kind already found in much traditional media. In a media category such as fiction, for example, there are a breadth of genres available, from literary fiction to pulp (vertical differentiation) and all shades in between. And within each genre, there are multiple levels of quality (horizontal axes of differentiation). The result is the incredible variety of books, cinema, TV, and radio that we take for granted today. The edifice of digital content built entirely on advertising supports no such sophistication.
Seamless payments as a fundamental building block of the emerging web will support a creative economy that’s more diverse and less monopolistic than today’s. New services like Patreon and email subscription platform Substack, which allow creators to collect payments from their fans, are early proofs of concept. (My own company, ScrollStack, is another.) In China, audiences have advanced the furthest in terms of relying on frictionless payments to buy content. For example, Ximalaya, a micropayments-based platform, has helped establish a multibillion-dollar market for a totally new category of audio works.
A more sophisticated market for creative works will not automatically solve all problems. Some creative endeavors simply won’t attract the number of patrons needed to support them. Many newsrooms, for example, might need to rely on philanthropic support to fund their reporting and investigative work. What made the old creative industries both prolific and culturally significant—patience and creative risk-taking—will also take time to emerge. While the technology is here now, what is still far off is the emergence of a publisher like Margaret Anderson, whose periodical The Little Review supported James Joyce for several years in the writing of Ulysses.
Yet that is no cause for despair, because micropayments on the open web are establishing the preconditions for such risk-taking by creators and producers. Without the imperative of reaching millions of “active users” for ad dollars, creators can conceive of projects that are viable at much smaller scale. This has the potential to power a better Internet of creative experimentation.
Samir Patil is the founder and CEO of ScrollStack.com a mobile-first, multilingual platform that enables creators to charge for their works.


fortune--2020-06-25--Dixie Chicks drop ‘dixie’ from their name and will now be known as The Chicks

Grammy-winning country group The Dixie Chicks have dropped the word dixie from their name, now going by The Chicks.
The band’s social media accounts and website were changed on Thursday to the refer to the new name for the band, which is made up of Martie Maguire, Natalie Maines and Emily Strayer. The band also recognized that the name was already in use by a band in New Zealand.
“A sincere and heartfelt thank you goes out to ‘The Chicks’ of NZ for their gracious gesture in allowing us to share their name. We are honored to co-exist together in the world with these exceptionally talented sisters,” the band said in a statement.
The move follows a decision by country group Lady Antebellum to change to Lady A after acknowledging the word’s association to slavery. A statement on The Chicks’ website said “We want to meet this moment.”
The Chicks, who are releasing their first new album in 14 years next month, also released a new video for their new song, “March March” that features videos and images from the recent Black Lives Matter rallies.
Lady A received criticism with their name switch after a Black singer revealed she’d been performing as Lady A for years.


fortune--2020-06-25--Wirecard shows auditing is broken. Here’s why—and how to fix it

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If there is one clear takeaway from the collapse of the once high-flying German fintech company Wirecard, which filed for the equivalent of bankruptcy protection Thursday following revelations that nearly €2 billion listed on its accounts is likely fictitious, it is this: Auditing is broken.
Wirecard’s auditors, Ernst & Young, are already being sued by some of Wirecard’s investors. EY will no doubt protest that financial reporting audits are not forensic audits; they are not designed to uncover a concerted deception involving forged account documents, as was allegedly the case with the German payments firm. And the company will likely say that once issues with Wirecard’s accounting came to light, thanks largely to dogged investigation by Dan McCrum of The Financial Times, EY refused to sign off on Wirecard’s accounts.
But McCrum and his FT colleagues started raising troubling questions about Wirecard’s accounting as early as July 2015 and published story after story that should have compelled its auditor to ask the same tough questions the journalists were posing—well before EY finally balked at signing off on Wirecard’s books in November 2019.
Of course, audit breakdowns are not unique to EY. All of the Big Four firms (as well as the firms in the next tier down) have been rocked by scandal upon scandal. In the U.K. alone, serious deficiencies have been either alleged or found in the audit of government contractor Carillion (KPMG), retailer BHS (PwC), Ted Baker (KPMG), Mitie (Deloitte), Rolls-Royce (KPMG), BT (PwC), as well as Patisserie Valerie and Sports Direct (both Grant Thornton). And that’s not even a comprehensive list. The UK Financial Reporting Council, which is responsible for supervising public company accountants, levied three times as much in fines for audit failures in the year from April 6, 2018, through April 5, 2019, the latest figures available, than the year before.
Meanwhile, in South Africa, legislators are considering trying to break up the Big Four after a series of audit failures involving both Deloitte and KPMG. In India, the failure of Deloitte’s local affiliate to catch significant financial problems at the Infrastructure Leasing & Financial Services company has led to significant scrutiny on the Big Four as whole.
The situation in the U.S. is no better, despite the existence of Sarbanes-Oxley, which passed after the 2002 Enron scandal sank Arthur Andersen and was supposed to strengthen accounting controls at public companies. That law helped establish the Public Company Accounting Oversight Board (PCAOB), a nonprofit corporation that is supposed to ensure audit quality. A September 2019 investigation by the Project on Government Oversight, a Washington, D.C., watchdog group, revealed that when the PCAOB has inspected Big Four audits, it found frighteningly high failure rates. In the most recent figures available, inspectors found Deloitte got one in five audits wrong, PwC botched 23.6%, EY screwed up 27.3%, and KPMG flopped fully 50% of the time.
What’s more, none of the firms were showing any sign of getting better; their audit failure rates bounced around considerably from year to year, but there was no clear improvement. In fact, all four firms had worse records in their latest spot checks than when the PCAOB first began inspecting audits in 2004.
Market failure
It’s time to admit the problem is not just with one accounting firm or even the oligopoly of the Big Four. Instead, auditing is an example of what economists call a market failure—one that will persist for as long as auditors continue to be paid by the companies whose books they are supposed to be scrutinizing. Under our current system of hiring and compensating auditors, there are simply too many incentives for the accountants to look the other way.
This remains true despite concerted efforts over the years to reform that incentive structure. Rules passed in the U.S. and Europe over the past two decades mandate that public companies rotate auditing firms regularly. This was supposed to prevent senior audit partners from becoming too cozy with management or falling victim to “groupthink.” Other reforms barred accounting firms from selling consulting services and tax advice to a public company while serving as its auditor. That was supposed to eliminate the conflict of interest that might make an auditor reluctant to upset management for fear of losing out on better paid tax and consulting business.
None of it seems to have done anything to reduce the incidence of audit failures. That’s because none of the reforms has actually fixed the underlying market failure: auditors are not paid by the people for whom they generate value. You see, auditors serve as a watchdog for shareholders, yes, but they also are vital to maintaining faith in public markets more broadly. True and fair financial reporting is a public good. But it is not paid for by the public.
Auditors are hired by an individual company’s board, which may or may not be a good proxy for the company’s shareholder base writ large, much less the interest of the public market as a whole. In fact, it could be argued that any individual company’s shareholders have little reason to want to hear inconvenient truths. The better a company’s results look, the more the stock will rise and the more money they are likely to make—at least in the short term. No, the only entities that benefit from the unvarnished truth are the market itself and the public more broadly.
A possible fix
How could this be fixed? Well, auditing could become a government function, paid for by taxes. But a good portion of the market failure could be remedied with a less radical solution: The auditing firms could be hired by the stock exchanges and randomly assigned to companies. The exchanges could pay for this by charging fees to companies that list on the exchanges and to brokers who trade on the market. So that none of the firms would be competitively disadvantaged by pure chance, the firms could be compensated on a sliding scale designed to reflect, at least to some degree, the complexity of the auditing assignment. For instance, accountants might earn more for auditing companies with larger market caps or higher revenues. To further improve audit quality, a firm should be paid a bonus each time it uncovers significant misreporting.
Of course, such a system would only work for publicly traded companies. In the U.K. in recent years, a number of failures by both private and public companies that were significant employers or held important government contracts have led to calls for changes in the way “Public Interest Entities” are audited. The result was The Brydon Report—named for Donald Brydon, the British businessman who chaired the committee that put it together—published in December 2018, which issued some 64 recommendations for strengthening audit quality in Britain. Some of these were bold, including the creation of a more powerful regulator, and even the creation of a whole new profession in which public company auditors would be considered a different breed from bog standard accountants. But, even as it acknowledged in its introduction that audit quality is a public good, the Brydon Report stopped far short of proposing fundamental changes in who pays for audits.
But I’m far from the first person to notice the market failure at the heart of auditing and suggest ways to fix it. Columbia University law professor and corporate governance expert John Coffee, in a paper published in June 2019, recommended that auditors should be publicly graded and that minority shareholders should be able to propose the hiring and firing of auditors, to help better align auditors’ interests with a company’s shareholders. (He also proposed auditors should be subject to class-action litigation in more parts of the world.)
Karthik Ramanna, a professor of business and public policy at Oxford University, says auditors should be stripped of their limited liability privileges and made personally liable for the financial consequences of audit failure (of course, that might also backfire, driving good auditors out of the profession).
Michael Whitmire, the CEO of accounting software company FloQast, comes perhaps the closest to what I propose here: He suggests making the PCAOB itself responsible for public company audits—paid for by a tax on public company revenues—in a November essay in CFO magazine.
In Wirecard’s case, if EY had been paid by the German stock exchange DAX, on which Wirecard’s shares were listed, and had been given an incentive bonus to find problems, would it have uncovered the malfeasance at the heart of Wirecard’s collapse? Perhaps not. But we could all be a lot more confident that it had at least tried.


fortune--2020-06-25--HBO’s ‘I’ll Be Gone in the Dark’ is a testament to Michelle McNamara and ‘survivors’ strength’

The Golden State Killer, believed to be responsible for at least 50 home-invasion rapes and a dozen murders, terrorized California during the 1970s and 1980s. But his story eventually fell off the radar even as his identity went undiscovered for decades.
In 2013, Los Angeles magazine published true-crime writer Michelle McNamara’s article detailing her attempts to track him down, which in turn led to a book. McNamara died in her sleep at 46 from an undiagnosed heart condition and accidental overdose of prescription drugs in 2016, but her book, I’ll Be Gone in the Dark, was published posthumously in 2018—just two months before Joseph James DeAngelo was arrested and charged with the crimes.
Now the book is the subject of a six-part docuseries of the same name, which premieres on HBO this Sunday. Directed by Liz Garbus (Lost Girls, What Happened, Miss Simone?), the series—like the book—delves into McNamara’s quest to identify the killer. It also offers viewers more information about DeAngelo’s background, while spending a good amount of time on the victims’ stories—many of whom hadn’t previously spoken much about their ordeals on camera.
Michelle McNamara’s posthumously released book, “I’ll Be Gone in the Dark,” takes center stage in HBO’s six-part docuseries. Robyn Von Swank/HBO
For Garbus and her team, it was important to be respectful of what the Golden State Killer’s victims had experienced. The series spends time addressing the prevailing attitude toward rape in the ’70s, why survivors and their families often kept quiet, and the “ongoing trauma and recovery” of being a victim. Getting people to open up on camera was also probably aided by the fact that they were working on “Team Michelle,” Garbus says.
“There was a sense that we were going to be taking a very serious and respectful look at the entire ordeal, and they were not going to be reduced to an exploitative sound bite,” Garbus tells Fortune.
“Everyone’s singular shared objective was to tell the story of Michelle McNamara and get to the heart of who she was, and the story of this case from the victims’ perspectives, because I think that’s a story that hasn’t quite been told,” says Paul Haynes, McNamara’s researcher, who helped complete the book as part of a collaborative effort with investigative journalist Billy Jensen and McNamara’s widower, comedian Patton Oswalt.
Haynes, who is also featured in the docuseries, found Garbus’s approach compassionate and empathetic—similar to McNamara’s work. “The flavor and the emotional resonance of the series is very consistent with that of Michelle’s book,” he says.
Actress Amy Ryan narrates excerpts of McNamara’s book in the series, but those words are also supplemented by old video footage of McNamara, as well as some email and text exchanges she had with colleagues and family. Oswalt, who is also interviewed throughout the series, played a key role in providing that access to the filmmaking team.
“He handed over her phone and her iPad and her hard drive, and we had access to all of the boxes of research that she called ‘the mother lode,’” says Garbus, who found herself relating to McNamara more than she expected, as she learned details about the author’s life. “He was really very generous and forthcoming, and he basically just wanted us to dig in there and bring as true a story of Michelle and her life and her obsessions as we could find.”
Liz Garbus (right) directs Patton Oswalt in HBO’s “I’ll Be Gone in the Dark.” Oswalt was “generous” in sharing McNamara’s research and additional information for the docuseries, the director says. Courtesy of HBO
Garbus and her team also had to adapt as the story evolved, which wasn’t entirely unexpected. “On a documentary, unlike in a scripted situation, you know you’re going for a ride,” Garbus says. “You don’t have a hard and fast mantra of, ‘This is where the film begins, and this is the end.’”
But DeAngelo’s arrest took place “literally day one of shooting,” she says. “The idea that that happened so quickly? That was very surprising to us.”
The crew used that development as an opportunity to see if anyone could “shed a light” on who the alleged killer was. As a result, some of DeAngelo’s relatives and his ex-fiancée also make appearances in the series.
“It was really hard to get those folks to open up,” Garbus says. “You just see that there’s a whole other layer of damage and trauma in the wake of a crime like this…His family members are going through their own kind of secondary trauma.”
Haynes, who spent years helping research the case, maintains that McNamara’s work played a role in the arrest.
“Even though some have argued that Michelle didn’t solve the case and the book had no influence on the case’s resolution, I’ve continuously argued otherwise, because Michelle’s involvement with this case put a spotlight on it that previously didn’t exist,” says Haynes, who admits that recent progress in the investigation has felt bittersweet in McNamara’s absence.
“Oftentimes with cold cases, municipalities have no motivation to shower resources on what they consider to be stale cases—unless of course there’s a renewed public interest,” he says. “Michelle’s persistence and the caliber of work that she was doing helped spark a level of public interest that, again, this case had never seen.”
Garbus has her own anecdote about how McNamara worked to help investigators connect the dots. The series addresses the subject of various police jurisdictions that were siloed and barely communicating with each other at the height of the Golden State Killer’s activity, which, Garbus says, was “counterproductive” to solving the case.
“Michelle was actually a factor in bringing them all together,” she says. “We didn’t have time to include this in the film, but she actually held a buffet—a beautiful dinner for all these different law enforcement agencies to come together and share information, and promised Patton Oswalt as entertainment to lure them to come in. And they did. And they all talked to each other, and we have the recording of it.”
In recent weeks, reports have suggested that DeAngelo will plead guilty on June 29, avoiding the death penalty while taking responsibility for the crimes. If true, it could offer closure to the survivors Garbus has spoken to—especially those who are not counted as part of the case owing to statutes of limitations or a lack of DNA evidence, she says, though she “can’t speak for everyone.”
While Garbus continues to track what happens next, even as episodes of the docuseries begin to air, she ultimately hopes her project can serve as a “testament to the survivors’ strength” and “a testament to Michelle and her work.”
“I really think that at the end of the day, it’s about trauma and healing and talking about it—not pushing your demons down and just hoping that they go away,” Garbus says. “But I think that what’s very clear, whether it be Michelle and her own demons, the survivors and their trauma recovery, that you can’t push them away, and that at some point they’re going to come to light, and you need people around you and time to heal.”
I’ll Be Gone in the Dark premieres on HBO Sunday, June 28, at 10 p.m. ET.


fortune--2020-06-25--In Q1, the U.S. economy had its worst quarter since 2008—and that only included two weeks of shutdow

In Q1, the U.S. economy had its worst quarter since 2008—and that only included two weeks of shutdowns

The U.S. economy shrank at a 5.0% rate in the first quarter with a much worse decline expected in the current three-month economic period, which will show what happened when the pandemic began spread across the U.S.
The Commerce Department reported Thursday that the decline in the gross domestic product, the total output of goods and services, in the January-March quarter was unchanged from the estimate made a month ago.
The 5% drop was the sharpest quarterly decline since an 8.4% fall in the fourth quarter of 2008 during the depths of the worst financial crisis since the Great Depression.
The first quarter period captured just two weeks of the shutdowns that began in many parts of the country in mid-March.
Economists believe that GDP plunged around 30% from April through the end of this month.
That would be the biggest quarterly decline on record, three times bigger than the current record-holder, a 10% drop in the first quarter of 1958.
Forecasters believe the economy will rebound in the second half of the year. The Congressional Budget Office is predicting a 21.5% growth rate in the upcoming July-September quarter followed by a 10.4% gain in the fourth quarter.
However, a handful of states, particularly in the South, have begun to report surging infections. And even with a rebound in growth if it does materialize in July, it would come after seismic losses that would mean a decline in economic output for the entire year.
While the overall GDP figure was unchanged for the first quarter, the composition shifted slightly with downward revisions to consumer spending, exports and business inventories offset by an upward revision to business investment.
The Thursday report was the government’s third and final look at first quarter GDP.
The panel of economists who have the job of declaring U.S. recessions announced on June 8 that the country had entered a downturn in February, ending the longest economic expansion in U.S. history, 128 months of uninterrupted growth that had begun in June 2009 following the downturn triggered by the 2008 financial crisis.
President Donald Trump, who has to face voters in November, has declared that the economy will come roaring back with a V-shaped recovery starting this summer.
Economists are no where near that optimistic. They are worried about the devastating impact a second serious wave of the coronavirus could have if it forced widespread shutdowns again.
“The foundation to this recovery is an improving health outlook,” said Lydia Boussour, senior U.S. economist at Oxford Economics. “Amid rapidly rising infections across many states, risks to the outlook are dangerously tilted to the downside.”
Financial markets took a sharp nosedive Wednesday, reflecting new worries about reports of rising coronavirus cases in many states.
“I can’t remember the economy facing this much uncertainty,” said Sung Won Sohn, a business and economics professor at Loyola Marymount University in Los Angeles. He said that until a vaccine is found and widely available, the high uncertainty can be expected to last.
Mark Zandi, chief economist at Moody’s Analytics, said for the country to avoid a double-dip recession, an effective vaccine needs to be available next year and new waves of coronavirus cases will need to do less damage than the first wave. Congress needs to soon pass another package of at least $1 trillion in further support for laid-off workers and struggling businesses, Zandi said.
“If any of these three things don’t happen, then the outlook is much darker,” Zandi said. “I think we are in a recovery mode right now but the economy is very fragile.”


fortune--2020-06-25--New York City prepares to reopen indoor dining, team sports, and salons on July 6

New York City is on track to start the third phase of reopening on July 6, Mayor Bill de Blasio said, a step that includes indoor dining and personal-care services.
Basketball and tennis courts, team sports and dog runs also can reopen, de Blasio said on Thursday.
“It’s important for everyone that this city keeps moving,” de Blasio said, crediting New Yorkers with adhering to social distancing and face covering regulations. “Phase 3 will have particularly important meaning for young people.”
New York City, the epicenter of the U.S. outbreak, began reopening on June 8 and entered the second phase, which includes indoor dining, on June 22.
Under state guidelines for Phase 3, indoor dining capacity is limited to 50% of maximum occupancy and all tables must be at least 6 feet apart. Employees must wear face coverings at all times, and patrons must wear them except while seated.
On June 23, 1.2% of New York City’s tests came back positive, similar to a 7-day rolling average of 1%, according to data on the state’s website. In early April, the average was 57% positivity.


fortune--2020-06-25--Small-business owners shouldn’t stop innovating during the pandemic

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Butcher shops, perhaps obviously, are not a place you’d expect to pick up vegetables.
But as the pandemic rolled across the U.S., creating lines several blocks long for many grocery stores, Meredith Schmidt’s butcher began stocking vegetables and fruits. To Schmidt, who is executive vice president and CEO of essentials and small business at Salesforce, it was an example of a small business innovating to meet rapidly shifting demand as a result of the coronavirus pandemic—giving it an edge to compete with the giants.
“I don’t have to go anywhere else besides one store, and it’s this tiny little store that I can wait outside versus [waiting] in these giant long lines at Whole Foods,” Schmidt said during a Q&A hosted by Fortune. The butcher “is going to keep that. He’s not going to change that because it added a whole new revenue stream to his shop.”
During the virtual conversation, Schmidt and Alma Derricks, founder and managing partner at brand strategy firm REV, agreed that now is not the time for companies to be digging in their heels as they seek to be resilient. Rather it’s a time for business leaders to ensure they are also innovating. Some ideas may stick, some may not—but the key is to take the risk, said Derricks.
“This is a marketplace that moves faster than we’ve ever known before. The life cycle of companies is much shorter now,” said Derricks. “For companies of every size, there’s a rule of thumb to having some portion of your business that is ready for that. That 80% is business as usual but leaving 20% to experiment, to try new markets, to try new products. I think resilience comes from having that kind of flexibility in your spine.”
During the pandemic, one major shift among small businesses has been bulking up on technology. As social distancing rules and stay-at-home orders move commerce online, small businesses, known for lagging behind in their tech, are pressured more than ever to reach customers through digital channels.
In another example of going with the flow amid the coronavirus, Schmidt cited her local bakery in San Francisco. Those on social media know well that the pandemic has cultivated a passion for bread making among amateur chefs, with a love of sourdough booming in the city of the Golden Gate Bridge. Seizing on the moment, the bakery began offering a free sourdough starter kit every Sunday morning—a move that likely also pushed customers to buy a baguette or cupcake as they were getting their freebie.
“It’s actually brought business in by looking at this phenomenon that was happening in the city, and by saying, ‘I can service that,’” Schmidt said.


fortune--2020-06-25--Macy’s cutting another 20% of corporate jobs as the coronavirus pummels sales

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The fallout of the sales collapse at Macy’s brought on by the COVID-19 pandemic continued on Thursday as the department store chain announced thousands more job cuts.
Macy’s, the largest U.S. department store company, said it was eliminating some 3,900 salaried jobs, ranging from buyers to regional managers to administration, in addition to a previous round of layoffs announced in February. The company is also trimming staffing at stores as it adjusts to a prolonged period of lower sales. In its first fiscal quarter, when all of its stores were closed for six weeks, sales fell 45% and its operating loss was around $1 billion. Macy’s will report full quarterly results next week.
While the bulk of Macy’s stores have reopened, and business is recovering gradually, the retailer’s sales are not likely to return to year-ago levels anytime soon, pressuring the company to further rein in costs.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward,” Macy’s chief executive Jeff Gennette said in a statement.
U.S. retail sales rebounded in May after a horrific April, but department stores benefited comparatively little from that upswing. What’s more, growing concerns about the big spike in COVID-19 infections in major markets such as Florida, Texas, and Arizona, where Macy’s operates many stores, along with new unemployment claims still exceeding 1 million a week have dampened expectations around retail’s recovery, especially for nonessential spending.
Macy’s moves will save it $365 million this year, or $630 million on an annual basis. The company has recently made a number of financial moves to bolster its cash position and access to credit by $4.5 billion to give it the breathing room that its smaller rivals J.C. Penney and Neiman Marcus, which both recently filed for bankruptcy protection, didn’t have.
A few weeks before the pandemic struck the United States, Macy’s had announced a splashy turnaround plan to become leaner, a smaller but better retailer, shedding 125 stores that last year brought in $1.4 billion and cutting 2,000 corporate jobs, while improving stores and refining its merchandise point of view. But that was only the latest such reorganization effort in the previous years as Macy’s has lost market share.
The department store chain also announced some initiatives at that February meeting designed to help keep some momentum it had regained during the previous holiday season, such as an expansion of its small-store concept debuted in Dallas and a modernization of its stores.
But for the foreseeable future, Macy’s will be in fire-extinguishing mode rather than reinvention mode, hurting its chances to stand out in a crowded field of competitors that have already siphoned away market share.
Rachel Shechtman, Macy’s chief brand experience officer overseeing many of its reinvention initiatives, is leaving the company, adding to the exodus in the past nine months of C-suite executives, including former president Hal Lawton, now CEO at Tractor Supply, and finance chief Paula Price.


fortune--2020-06-25--Is 2020 is the year of companies breaking up with their nostalgia-laden businesses?

Goodbye, nostalgia-laden businesses.
In May, General Electric sold its iconic lightbulb business—a line that traced back to Thomas Edison—as the company focused on non-consumer segments such as power turbines and aircraft engines.
It seems 2020 will also be known as a year of companies breaking up with their historically core units.
Olympus, the Japanese company once known to lead the photography industry, said Wednesday that it plans to exit its 84-year-old camera business. The company plans to sell the segment that has been hit hard by the rise of smartphones to Japan Industrial Partners, a private equity firm best known for acquiring Sony’s Vaio computer line in 2014, my colleague Robert Hackett reports. Financial terms weren’t disclosed.
The divestiture was long in the making. The introduction of the Apple iPhone in 2007, with its built-in and high-quality lenses, made a brutal new competitor for camera makers, with digital camera sales down 87% since 2010. If the smartphone was the camera industry’s code red, then the coronavirus was the nail in the coffin for Olympus’ photography business: On June 17, the company said that the pandemic put revenues at a “downward trend.”
And here comes the common refrain of a company burned by finicky laypeople: Like General Electric, if a deal goes through, Olympus will shift away from consumers. But its focus is not on turbines or engines: Instead, Olympus is focusing on businesses such as surgical equipment and medical devices like endoscopes. Demand for medical lines, Olympus says in a press release, “will remain unchanged against the global backdrop of aging societies and the growth of emerging countries. Olympus sees a great chance to accelerate transformation to a truly global medtech company for sustainable growth.”
No doubt others will make such a pivot in the coronavirus era. After all, isn’t that what seems to be happening at AR/VR company Magic Leap? Read more.
A gym, yes a physical one, goes public: F45 Trainings, a gym chain with over 1,900 franchises backed by actor Mark Wahlberg, went public by merging with Crescent Acquisition Corp., a special-purpose acquisition company. The transaction, a press release says, values the company at $845 million and will “accelerate F45’s continued global expansion.”
Which is great and all—I sure miss my gym—but this very much seems to be a waiting game and a gamble on timing. Much of the U.S. and the world is reopening slowly, though the threat of a second wave of coronavirus looms large. Expansion feles like a tall order at the moment. What the merger means is that F45 now has as much as $300 million in its cash coffers to survive.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Sonder, the hospitality company, raised $170 million in Series E funding valuing it at $1.3 billion. Fidelity Funds, Westcap and Inovia Capital led the round and were joined by Spark Capital, Greenoaks, Valor Equity, Greylock, Gavin Baker’s Atreides Capital, Tao Capital (Pritzker family), and Lennar.
- OJO Labs, an Austin-based homebuying brokerage solution, raised $62.5 million in funding. Wafra led the round and was joined by investors including Breyer Capital, LiveOak Venture Partners, Royal Bank of Canada, and Northwestern Mutual Future Ventures. It also acquired Movoto, a real estate search site.
- SevenRooms, a New York-based guest experience platform for the hospitality industry, raised $50 million in Series B funding led by Providence Strategic Growth.
- Hopin, a London-based virtual events provider, raised $40 million in Series A funding. IVP led the round and was joined by investors including Salesforce Ventures, Accel, Northzone, Seedcamp, and Slack Fund.
- ClickUp, a San Diego, Calif.-based workplace productivity platform, raised $35 million in Series A funding. Craft Ventures led the round and was joined by investors including Georgian Partners
- Capital Markets Gateway, a New York-based financial technology firm focused on equity capital markets, raised $25 million. Investors included Barclays, Citi, Fidelity Investments, Goldman Sachs, J.P. Morgan, and Morgan Stanley as well as existing investors including Canaccord Genuity, Franklin Templeton, StageDotO, and Shea Ventures.
- Pixellot, a Tel Aviv-based provider of sports production tech, raised $16 million in funding. Shamrock Capital led the round and was joined by investors including Altshuler-Shaham, Grupo Globo and the Akrin Family.
- Openly, a Boston-based homeowners insurance platform, raised $15 million in Series A funding. Obvious Ventures led the round and was joined by investors including Gradient Ventures and Point Judith Capital Ventures.
- Ubble, a French biometric identification startup, raised €10 million ($11.3 million) in funding. Investors include Partech and Breega.
- Landed, a San Francisco-based residential real estate company, raised $10.5 million in Series A extension funding. OMERS Ventures led the round and was joined by investors including Initialized Capital.
- Jumbo Privacy, a cybersecurity firm, raised $8 million in Series A funding. Balderton Capital led the round.
- Digibee, a Brazil-based no-code integration platform, raised $5 million in funding from GAA Investments and Laércio Albuquerque of Cisco Brazil.
- 7bridges, a London-based supply chain tech company, raised $3.4 million in seed funding. Crane Venture Partners and LocalGlobe co-led the round.
- Create & Learn, a Palo Alto-based firm teaching computer science in small online groups, raised $1.7 million in seed funding. GSV Ventures led the round.
PRIVATE EQUITY
- FTV Capital invested $35 million in Derivative Path, a San Francisco-based capital markets financial technology and services company.
- Nat Tech, a subsidiary of NTI Connect backed by Orix Capital Partners acquired Precision Design Services, Inc.’s Morris Plains, N.J.-based fiber network engineering business. Financial terms weren't disclosed.
- A consortium of investors led by Ardian agreed to acquire a 30.2% co-controlling stake in Infrastrutture Wireless Italiane SpA, a Milan-based wireless infrastructure company, from TIM S.p.A. Financial terms weren't disclosed.
- Japan Industrial Partners agreed to acquire the imaging business of Olympus Corp., a Japanese digital camera maker. Read more.
BREAKUPS, HANGUPS, AND BANKRUPTCIES
- GNC Holdings, the vitamin and herbal supplement retailer, filed for bankruptcy and plans to close at least 800 to 1,200 locations. Read more.
- Waste Management lowered its bid to buy Advanced Disposal Services (NYSE: ADSW) to $2.8 billion from $3 billion. Read more.
IPOS
- Lemonade, a New York-based provider of renters and homeowners insurance, plans to raise $270 million in an offering of 11 million shares priced between $23 to $26. SoftBank (27.3% pre-offering), Sequoia Capital Israel (10.3%) and Aleph (8.3%) back the firm. The company plans to list on the NYSE as “ LMND.” Read more.
- Accolade, a Plymouth Meeting, Pa.-based provider of a healthcare benefits management platform, plans to raise $175 million in an offering of 8.8 million shares priced between $19 to $21. Accretive (26.9% pre-offering), Andreessen Horowitz (13.2%), and Carrick Capital (8%) back the firm. It plans to list on the Nasdaq as “ACCD.” Read more.
EXITS
- Clearlake Capital Group acquired a majority stake in WhiteStar Asset Management, an investor in the syndicated bank loan space, from Pine Brook Capital Partners. Financial terms weren't disclosed.
- Accel-KKR and ParkerGale-backed ATP acquired Flightdocs, a provider of cloud-based maintenance tracking. Financial terms weren't disclosed.
- Stewart Information Services Corporation (NYSE:STC) acquired United States Appraisals, a portfolio company of Baymark Partners and Petra Capital Partners.
F+FS
- Creative Artists Agency and New Enterprise Associates formed an investment partnership called Connect Ventures. The fund will seek early-stage consumer-focused businesses with $100 million fund to start. Connect Ventures has invested in Spire Animation Studios, a new feature animation studio from Brad Lewis.
- Catalio Capital Management spun out from Camden Partners Holdings. The firm focuses on biomedical technology companies.
PEOPLE
- PAI Partners named Marc Boullier as managing director.


fortune--2020-06-25--Facebook faces ad boycott blues

Facebook faces ad boycott blues

Good morning, Data Sheet readers. Tech writer Danielle Abril here filling in for Adam.
Over the past several days, at least 10 companies, including REI, Patagonia, and Unilever’s Ben & Jerry’s, have said they would stop buying ads on Facebook during July in protest of what they say is Facebook’s failure to eliminate hate and violence on its service.
“The key is economic pressure from companies and consumers,” Jim Steyer, CEO of Common Sense, one of the boycott organizers, told me on Wednesday. “You have to hit them in the pocketbook, period.”
Part of what #StopHateForProfit wants is for Facebook to deploy a dedicated team to handle complaints from users who say they’ve been targeted for their race, religion, ethnicity, gender, or sex. The process would allow experts in the field of identity-based hate to evaluate the posts and make better and quicker decisions about how to handle the posts.
The campaign also wants Facebook to automatically remove all ads that promote hate or misinformation, areas the company has historically poorly policed. And it’s calling Facebook to increase safety in private groups by adding moderators to groups with more than 150 members.
In the past, Facebook has struggled with policing its service. Even 16 years after its founding, the company still hasn’t figured out how to effectively use automated techniques to quickly or proactively remove harmful content.
During the first quarter, Facebook was only able to remove 16% of the 2.3 million posts that violated its policy against bullying and harassment before being told about them. The company has blamed the low numbers on the difficulty finding banned content without users pointing it out.
Much of bullying and harassment is determined by the context or what was previously said or known versus by the language in the post itself, making it hard for automated systems to identify it.
But even with more blatant offenses, Facebook has decided against taking action—using freedom of speech as a defense. In the case of posts by President Trump threatening violence, for example, Facebook has done nothing. Trump recently wrote that he would use “serious force” against anyone who tried to set up an autonomous zone for protesters in Washington, D.C. Facebook responded to complaints by saying that Trump’s posts didn’t violate its policies.
Some analysts say that if Facebook took action, like Twitter has, it could show advertisers and users that it’s committed to improving. But advocacy groups say that’s not enough. They want long-lasting change in regards to hate and misinformation.
“That’s a much harder problem to solve,” said Mark Shmulik, analyst at brokerage firm AB Bernstein. “I don’t know what the silver bullet is to fix it.”
In the end, analysts say the Facebook ad boycott is unlikely to have a major impact on Facebook’s revenue. But Steyer told me that the advocacy groups don’t plan to back down after the one-month boycott is over. “There’s more coming,” Steyer said. “It’s too important for our democracy.”
Danielle Abril
@DanielleDigest
danielle.abril@fortune.com
NEWSWORTHY
Johnny be bad. What started off with a series of "pranks inspired by the 1988 movie Johnny Be Good" devolved into an outlandish cyberstalking scandal involving cockroaches, a bloody pig mask, and a harassment campaign, reported The Wall Street Journal about former eBay executives who wanted to silence the writers of a news site that eBay executives believed was too critical of the company. The Journal reported that "eBay executives tried to prove their suspicion [of] its rival Amazon.com Inc.," but "ultimately didn’t find any evidence of that."
We now take it very seriously... Amazon said it formed a "Counterfeit Crimes Unit, dedicated to bringing counterfeiters that violate the law and Amazon’s policies by listing counterfeit products in its store to justice." The move comes after recent media reports described how the online retail giant has failed to address the prevalence of counterfeit goods being sold on its service.
Deleting by default. Google, under intense scrutiny for its vast data-collection policies, said it would "start automatically deleting Google Account activities by default, rather than requiring people do it on their own," tech publication CNET reported. For new users, this means that data such as location, web browsing, and YouTube histories "will disappear after 18 months."
Bug zapping. Sony is debuting a bug bounty program for altruistic hackers to discover and report software flaws in the company's PlayStation Network and the PlayStation 4 video game console, tech publication ZDNet reported. "Sony says it plans to pay security researchers between $100 and up to $50,000 (or even higher) for vulnerabilities reported in the company's products," the report said.
Let's connect. Enterprise software firm Slack has introduced its new Connect service, which lets up to 20 organizations communicate with each other in one Slack channel, VentureBeat reported. It's part of Slack's plan to make its work-collaboration service more appealing to companies as it faces tough competition from rivals like Microsoft and Google.
FOOD FOR THOUGHT
Robert Julian-Borchak Williams of Farmington Hills, Mich. experienced a nightmare that many people of color fear: Facial-recognition technology used by law enforcement led to police officers believing that he committed a crime when in fact he did not. As The New York Times reported, Williams's experience could be the "first known account of an American being wrongfully arrested based on a flawed match from a facial recognition algorithm." Prosecutors have since apologized for the blunder and said Williams could have his case and fingerprint data expunged.
The Friday that Mr. Williams sat in a Detroit police interrogation room was the day before his 42nd birthday. That morning, his wife emailed his boss to say he would miss work because of a family emergency; it broke his four-year record of perfect attendance.
In Mr. Williams’s recollection, after he held the surveillance video still next to his face, the two detectives leaned back in their chairs and looked at one another. One detective, seeming chagrined, said to his partner: “I guess the computer got it wrong.”
They turned over a third piece of paper, which was another photo of the man from the Shinola store next to Mr. Williams’s driver’s license. Mr. Williams again pointed out that they were not the same person.
IN CASE YOU MISSED IT
Facebook ad boycott: ‘It’s not going to do anything to the company financially’ By Danielle Abril
‘Companies have no choice.’ The pandemic is forcing business to digitize By Michal Lev-Ram
How Trump’s misguided H-1B visa ban will devastate our economy By Nicky Goulimis
Why companies like Porsche and Nestle are turning to worker-owned talent site Braintrust for new hires By Jeff John Roberts
Brazil’s central bank refuses to let Facebook front-run it on payments By Robert Hackett
Russia’s online censorship machine is no longer running smoothly By David Meyer
The Segway rolls into the sunset By David Z. Morris
BEFORE YOU GO
If you need some laughs during these tough times, The Late Show has some songs from soft-rock crooner Michael Bolton for you to listen to. Since Bolton, known for his bombastic rendition of "When a man loves a women," shares the same last name as President Donald Trump's latest nemesis John Bolton, the show's producers thought it would be appropriate for the troubadour to sing excerpts from the former national security advisor's tell-all book about his time working with Trump. As Spin notes, the Late Show's parody of an Audible commercial features Bolton belting out such lines like, “Trump formed a pattern of fundamentally unacceptable behavior that eroded the very legitimacy of the presidency.” Sure, it's not as romantic as Bolton's other songs like "Said I loved you...but I lied," but it's just as emotionally charged.
This edition of Data Sheet was curated by Fortune's Jonathan Vanian.


fortune--2020-06-25--Wirecard files for insolvency, capping a wild week that saw billions vanish from its books and its f

Wirecard files for insolvency, capping a wild week that saw billions vanish from its books and its former CEO under arrest

Wirecard, the onetime darling of the DAX, has filed for insolvency.
Market observers are hard-pressed to recall such a swift and staggering fall. Just last September, Markus Braun, the then CEO of the DAX 30 company, boasted to investors that the company was on a roll, growing at 38% year over year. It was pushing into China, he said, adding that he was “delighted to be able to forecast strong growth in the fourth quarter and the coming fiscal year for our shareholders.”
That was the last time the company filed a financial report to investors.
Read more: Wirecard shows auditing is broken. Here’s why—and how to fix it
On Monday night, Braun was arrested as part of a growing accounting fraud investigation. The payment-processing specialist has yet to explain how $2.1 billion mysteriously vanished from its books, forcing the company to repeatedly delay publication of its annual financial report. With its fortunes in doubt, customers and shareholders have bailed on the company.
On June 17, the Wirecard share price stood at 104.50 euros; it’s now trading below 3 euros, a drop of more than 90% in the past week. Bank of America analyst Adithya Metuku yesterday thought it wasn’t worth much more than 1 euro, noting that the company has lost a big partner in Revolut and that the Bank of China is mulling whether to terminate its credit line, as well.
On Thursday, Wirecard issued a terse statement saying it has filed an application for insolvency with a district court in Munich, where it’s based, citing over-indebtedness. The insolvency application applies to its core payment-processing business, but, the company says, other Wirecard subsidiaries could be involved.
The company did not respond to questions from Fortune on whether it may seek to include its popular fintech banking platform, Wirecard Bank, in the insolvency proceedings.
In Germany, an insolvency application offers the company general protections from creditors. Still, it’s facing a wave of shareholder lawsuits.
The Tübingen law firm, TILP Rechtsanwaltsgesellschaft mbH, filed the first investor lawsuit against Wirecard in a Munich court last month. That was before the latest series of headlines, and the revelation of the missing billions.
Marc Schiefer, an attorney at the firm, told Fortune that more than 12,000 other Wirecard shareholders have since approached the firm seeking representation. “And we expect to have many more,” he said. “Some people just lost their whole retirement savings.”
“I’ve never seen anything like this before,” he added. “And that includes the Volkswagen scandal.” TILP had also represented Volkswagen shareholders who sought damages against the carmaker following the Dieselgate scandal.
“Here’s a Dax 30 company that seemed, officially, to be a very solid company. And now it turns out something fishy was going on,” Schiefer said of Wirecard.
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fortune--2020-06-25--What Mixer’s meltdown means for Microsoft

Microsoft’s sudden closing of its Mixer video game streaming service this week underscores the challenges of creating a strong competitor to the leaders in the field: Amazon’s Twitch and YouTube.
With Mixer, Microsoft was attempting to create a service for watching other gamers play popular titles like Fortnite. Despite years in the video game business as maker of the popular Xbox game console, Microsoft had failed to foresee the rise of game streaming.
To catch up, Microsoft bought the small Twitch-like service Beam in 2016 for an undisclosed amount and renamed it Mixer. To improve its chances, Microsoft spent big money to upgrade the service’s technology. Then, in 2019, it opened its checkbook again to poach high-profile streamer Ninja to the service, hoping he would bring his huge viewing audience with him. But they never came in large enough numbers.
“People looked at Mixer as a longer-term play,” said Remer Rietkerk, an e-sports analyst for research firm NewZoo. The company’s decision to shutter Mixer “took everyone a little bit by surprise,” he added.
Michael Pachter, a Wedbush Securities analyst, told Fortune in an email that Microsoft “taking on Twitch is analogous to Google taking on Facebook with Google+,” referring to the search giant’s failed effort in 2011 to create a popular social networking service.
“It didn’t ever develop the critical mass of streamers or of viewers to catch up,” Pachter said. “That might have happened over time, but they appear to have concluded it wasn’t worth the effort.”
By the end of 2019—months after luring Ninja—Mixer was the least popular of its peers, behind YouTube, Facebook, Twitch, Snapchat, and TikTok, the popular video-sharing service owned by Chinese tech startup ByteDance, according to Nielsen’s SuperData.
#Mixer never achieved widespread popularity despite signing on big names like Ninja and shroud. Fewer than 1 in 10 US game video viewers regularly watched on the platform. pic.twitter.com/K61fS8sIBk — SuperData (@_SuperData) June 22, 2020
Additionally, prior to closing, Mixer’s average minute audience—the average number of viewers watching the service at any given minute—was only 3% that of Twitch, SuperData said.
Prior to the shutdown announcement, the average minute audience for #Mixer was only 3% of that for #Twitch. pic.twitter.com/xCoxVyqm1M — SuperData (@_SuperData) June 24, 2020
As SuperData analyst Carter Rogers explained, Mixer, despite some innovative features like a split-screen viewing mode, was ultimately too similar to Twitch and not compelling enough to gain a mass audience. Although viewers watched Ninja play games on Mixer, they then went back to Twitch to watch other streamers instead of staying on Microsoft’s service to watch others.
In addition to closing Mixer, Microsoft said it would partner with Facebook and its gaming unit for video game live-streaming. That deal involves merging the two game-streaming communities into one and developing unspecified “game-streaming experiences” powered by Microsoft’s nascent xCloud gaming service, according to a Microsoft spokesperson.
The Facebook partnership could be crucial to Microsoft’s xCloud gaming service, which lets people stream video games from Microsoft’s cloud data centers, Rogers explained. For one thing, Facebook provides a bigger user base for Microsoft to test its xCloud service.
But it could be years before game streaming is anywhere near as mainstream as gaming using video game consoles or mobile gaming apps. And it’s a highly competitive business.
Google has its Stadia cloud game-streaming service, which has “had a rocky launch” since debuting in November, said Rietkerk. Meanwhile, Amazon is reportedly also developing a cloud game-streaming service.
Pachter speculated that a gaming alliance could open the door to Facebook buying additional cloud-computing services like online storage or machine-learning tools from Microsoft’s Azure unit. It would be a huge win for Microsoft and a major change in thinking by Facebook executives, who have long prided themselves on their data center chops and independence from cloud-computing giants like Amazon and Microsoft.
Microsoft has a partnership with video game console rival Sony, in which the PlayStation maker will use Azure cloud-computing services for its future game-streaming projects, among other initiatives.
But for now, at least, the Microsoft spokesperson said the company’s deal with Facebook is not like its partnership with Sony: Facebook will not be using any Azure services.


fortune--2020-06-25--Coronavirus cuts to CEO pay were short-lived

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As the coronavirus pandemic began to decimate American businesses in March, companies struggling financially rushed to cut executive pay as a signal to their customers and workforces: We’re in this together. But some firms that slashed CEO compensation are already—barely a quarter later—starting to reinstate it.
Michelle Leder, founder of the website Footnoted, which examines routine Securities and Exchange Commission filings, first noted the trend in the New York Times Dealbook newsletter. Darden Restaurants, the parent company behind Olive Garden and LongHorn Steakhouse, cut its CEO’s $1 million base salary to zero in early April; on June 1, the company became one of the first to restore that salary while also ending other executives’ 50% pay cuts.
Leder also noted that Rollins Inc., parent of the pest control brand Orkin, recently brought back up executive base pay; retailer the Buckle increased its CEO’s and chairman’s compensation packages from zero to a smaller 50% cut.
A Fortune search turned up more examples: The Fortune 1000 motor vehicles and parts company Meritor in early June reduced the size of pay cuts for its executives and its board directors. Another company in the same field, LCI Industries, fully restored its chief executive’s $1 million base salary. Ascena Retail Group, the company behind the Ann Taylor and Loft brands, reinstated full base pay for members of its C-suite.
While the economy is on an upswing from the depths of the pandemic’s associated economic crisis earlier this year, the effects of the downturn are certainly still being felt. The public companies that have so far restored executive pay straddle the automotive, restaurant, and retail industries. When Darden Restaurants cut executive compensation in April, its 1,800 restaurants were closed for dining in; in recent weeks, many Olive Garden locations throughout the country have reopened. Similarly, retailers have begun to see the malls their stores are located in reopen in some parts of the country.
Some of these companies may be in a stronger financial position after furloughing workers for months; Ascena, for example, furloughed retail associates and half its corporate workforce.
But for C-suite executives who earn the lion’s share of their compensation from stock awards, pay cuts were largely symbolic. So why, during a time when the nation is reckoning with inequality of all kinds, would a company want to be the first to increase the salary of its highly paid CEO—and potentially be seen as backtracking on a promise to share the burden of this crisis equally?
Ascena, for its part, noted in a filing that it was reinstating pay “to enable the company to retain and continue to motivate its [named executive officers] and other officers and employees.”
But another reason may be that bringing executive pay back up to pre-pandemic levels, while sending one message to employees and consumers, communicates something entirely different to investors. “It can signal to the market that you’re getting back to business as normal—and putting your laser-like focus on total shareholder return,” says Michael Useem, a professor of management at the Wharton School. “It’s one way of signaling to hedge fund activists that you’re back to capitalism as practiced before.” By “before,” Useem means everything from before the pandemic to before companies were expected to issue statements on racial justice to even before the Business Roundtable made a commitment to valuing other stakeholders, like employees and customers, as highly as shareholders.
That may be a message some companies want to communicate amid greater attention paid to corporate responses to social injustice, Useem says. But this first wave of companies choosing to restore executive pay—months before the end of 2020, the point that some other companies committed to suspending some executive salaries—are still making that decision early. “To do it while we’re still not even out of the first wave of the coronavirus,” Useem says, “does seem on the face to be a statement about the hypocrisy of that first statement [of halting executive pay].”
But communicating shareholder return as a top priority to investors doesn’t counter the separate—and more negative—signal these pay bumps may send to other stakeholders. “This is a great moment to hold the line on executive pay to share the pain,” Useem says. “In the long run, I think it will be borne out that shareholders are going to benefit from that.”


fortune--2020-06-25--Valuation: A crisis in the 1990s poised this aerospace stock for a great run in the 2020s

“The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
—Warren Buffett, Fortune, 1999
In a recent column, I wrote about my conviction that some aerospace companies are poised to succeed in the long run, even though the COVID-19 crisis has depressed their share prices in recent months. My firm, Gravity Capital Management, owns a few such stocks; in this column, I’ll focus on one of them that looks particularly investable at current prices.
Woodward (Ticker: WWD; $72 a share; $4.5 billion market capitalization as of market close June 24) dominates the market for jet-engine fuel systems, the components that introduce the fuel into the engine and then regulate and monitor it. The company was incorporated 150 years ago, in 1870, to regulate the motion of waterwheels. Run by Woodward family members or close associates for the next 125 years, Woodward moved from waterwheels to industrial turbines and then, in the 1930s, into aerospace controls.
Woodward focused on engineering excellence, and by the late 20th century its products were so good that, like many firms, the company began to coast on its reputation. It didn’t help that as the generations passed, it was assumed that a Woodward family member would become the next CEO; the last such CEO, in fact, started his Woodward career in lawn maintenance. The beauty of capitalism, however, is that the market’s invisible hand eventually puts its finger on such mediocrity and complacency. Smarter, hungrier competitors were out-innovating Woodward, and in the 1990s the company faced a reckoning.
In 1993 and 1994, Woodward received word from the major engine makers that it had failed to win bids for many of the new engine designs, including the CFM56, the world’s bestselling engine, which is manufactured by a joint venture between General Electric and Safran, a French company whose stock Gravity also owns. For engines on Airbus narrow-body aircraft, only one or two Woodward parts would be used; for engines on Boeing narrow-bodies, Woodward was completely shut out. Because these engines are redesigned only once every 25 years, this meant that Woodward would be disadvantaged for the next generation.
“I remember that day quite well,” says current Woodward CEO Tom Gendron, who was then leading the marketing and R&D functions at the company. “It was both the worst day and the best day of my career. Without those losses, we wouldn’t have had the impetus to change.”
Faced with such setbacks, Woodward named its first outsider CEO ever—John Halbrook, a finance executive who’d spent time at both General Electric and General Dynamics. Halbrook wasted no time changing the way business was done at the company. “For many years, our product base was fairly stable and did not require the time, energy, and expense of expanding our technology,” he wrote in the company’s annual report shortly after taking over. “Today, merely maintaining basic core technologies no longer is sufficient.”
To accelerate change, Halbrook invited Woodward’s top customers to deliver their assessment of Woodward to the company’s top 100 executives. “The first ones,” company treasurer Don Guzzardo remembers, “were brutal.” At every board meeting for the next 20 years, regaining a place on the next-generation narrow-body engine was at or near the top of the agenda—80 meetings in all, Gendron recalls.
This next engine cycle, Woodward resolved, it would win not only individual component business but business for the entire fuel system: the fuel injectors, metering valves, actuators, and pumps, all integrated into one superior system. By making such a unit, Woodward executives reasoned, they would not only add more value to the customer—they would also make it harder to replace Woodward with a competitor’s one-off components.
The goal was to make a product so good that the world’s major engine makers would find it very difficult to make a next-generation product without Woodward this time around. And over the course of the long wait for the next engine product cycle, Woodward succeeded. In the mid-2010s, it won the combustion system and a variety of other components on United Technologies’ new GTF engine, which will power 20% to 25% of the world’s next-generation narrow-body fleet. It won the entire fuel system on the GE9X, the new engine for wide-bodies. And when it came time to award the most lucrative fuel-system contract of all—for the CFM56’s successor, the LEAP, which will power 75% to 80% of the world’s new narrow-bodies—GE awarded it to Woodward without even putting it out to bid. Woodward’s system was so far beyond the competition that GE’s engineers didn’t want to consider anyone else’s product.
Woodward’s content on LEAP engines for both Boeing and Airbus will now number more than a dozen components, up from only one or two on Airbus and zero on Boeing. As a result, in a few years, as these next-generation engines enter service, Woodward will have four times the number of components in service on commercial aircraft than it did less than a decade ago. Woodward, moreover, will be the only manufacturer of most of these components. This means that they will have a sole-source position in the lucrative spare-parts market for the next 25 years. And because Woodward has already done all the upfront investment in new plants and equipment to manufacture these parts, the company is set up for a super-cycle of highly profitable growth between now and 2050.
The coronavirus, of course, throws a rather large monkey wrench into the timing of this super-cycle. These next-generation engines were introduced into commercial service only a few years ago; how can Woodward’s market-share gains develop when 90% or more of the world’s fleet is grounded and nobody is buying new planes? Compounding the delay is the fact that Boeing’s next-generation narrow-body, the 737 MAX, has been grounded for safety reasons.
While the pandemic pushes Woodward’s growth trajectory out several years, in no way does it derail it. In this way, what has happened to Woodward’s stock price, thanks to the coronavirus, is a textbook example of temporary rather than permanent loss.
Worth waiting for
As with Wells Fargo in early 2009, however, the market isn’t telling us that. Woodward’s stock is down around 40% year to date, and it’s trading for 13 times its 2019 cash earnings of $5.60. While there’s no question that this $5.60 of earnings will represent peak profits for several years, there’s also no question in my mind that at some point Woodward will blow past this number.
Woodward, let’s recall, will soon have four times the number of components in service than it did a few years ago. In 20 years, when the legacy engines are largely retired, Woodward will have much more than that. Run this math out and factor in that the spare parts carry high operating margins, and it is easy to see that at some point in the future Woodward’s earnings should double.
This earnings stream is valuable not only because it will grow; it is also highly predictable. With sole-source positions in many of its key parts, and with these key parts necessary for the maintenance of the world’s jet engines for the next 25 years, Woodward’s earnings are about as locked-in as you can find. Such annuity-like earnings streams are rare and therefore highly prized on Wall Street. Because of this, I believe that at some point Woodward will be rewarded with a multiple nearly double today’s. The best aerospace companies, including Heico, another Gravity aerospace holding that has a predictable stream of aftermarket profits, trade for 25 times earnings or even higher.
The resulting math is simple: When earnings double and the multiple roughly doubles, Woodward’s stock price will roughly quadruple. The uncertainty injected by the pandemic and the 737 MAX delays make it hard to forecast when this will occur, but we can run some simple sensitivities to determine how the stock would perform under certain scenarios. If the compounding takes eight years, we will make 18% a year, more than twice the market’s historical annual return of 7% to 8%. If it takes 10 years, we will make 14% a year. In fact, we will still earn a market-average return even if we must wait nearly 20 years for these developments.
This is why it pays to be a long-term investor. The market can zig, and it can zag, but when you buy companies with strong long-term futures you can be confident that any losses in the short-term are simply that—short-term. You can even be happy when your favorite businesses decline in their quoted stock-market value. They’re not losing you money—they’re just temporarily on sale.
Not surprisingly, Woodward executives look at it similarly. “I remember in the financial crisis, our stock plummeted,” CEO Gendron says. “People were coming to me and saying, ‘How did we lose all this value?’ I said, ‘The value of Woodward is still there. Our trading value may be down, but our intrinsic value hasn’t changed—in fact, it’s growing.’ And it’s the same this time around.”
Adam Seessel is the portfolio manager at Gravity Capital Management LLC, a registered investment adviser. Certain of the securities mentioned in the article may be currently held, have been held, or may be held in the future in a portfolio managed by Gravity. The article represents the views and belief of the author and does not purport to be complete. The information in this article is as of the publication date, and the data and facts presented in the article may change.