fortune--2020-03-09--Why focusing on a startup’s ‘exit strategy’ stifles innovation

What’s your exit strategy?
That’s a common question posed to entrepreneurs who helm venture-backed startups. Will you sell? Will you IPO? The so-called “exit strategy” serves as a way to explain how the company’s investors can ultimately cash out and generate a return.
In a new op-ed, Stanford Law School professor Mark A. Lemley and Stanford Law student Andrew McCreary argue that the focus on the “exit event” — particularly exit by acquisition — is preventing disruptive competition, cementing tech monopolies, driving companies to shelve innovations, and undermining the promise of Silicon Valley.
As Lemley writes, “Silicon Valley changed the world. And it did so because founders and venture capitalists wanted to win tomorrow’s markets, not sell out to those who had already won yesterday’s.”
According to their research, more than nine in 10 “exiting” venture-backed companies sell out to other firms. Rather than promote competition and innovation, venture capital just further “cements incumbency.”
From Lemley and McCreary’s op-ed:
Antitrust agencies should be much more skeptical of incumbents buying startups. We should presumptively ban incumbent monopolists from acquiring competitive startups, something the Clayton Act already gives regulators the power to do. But we should also worry about companies buying startups that don’t directly compete but that offer a possible platform for making the existing market obsolete. So antitrust agencies should also aggressively investigate mergers in complementary industries, like Facebook’s acquisition of WhatsApp or Google’s purchase of DoubleClick, even if the companies aren’t yet direct competitors at the time of the purchase.
It’s interesting to consider as the industry continues to talk about what to do with its entrenched tech monopolies. And we’ve seen some massive acquisitions lately — Visa’s $5.3 billion purchase of Plaid, PayPal’s acquisition of Honey for $4 billion, and Intuit’s acquisition of Credit Karma for a monster $7.1 billion.
But if the volatility in the public markets continues, don’t be surprised to see even more companies foregoing IPOs in favor of M&A.
Read the full op-ed here.
VALUATION DISCOUNT: WeWork first led a $32 million funding round for women’s workspace startup The Wing in 2017 and its 2018 funding round resulted in a 21% ownership stake in the company. At the time, the company was valued at approximately $365 million.
In January, WeWork sold its stake in The Wing to a group of investors including GV (formerly Google Ventures) and CAA Ventures as part of its plan to divest from non-core businesses. According to a new report in Bloomberg, the sale implied a valuation for The Wing of about $165 million, a notable decrease in value. Investors also put in an additional $15 million of funding “in the form of a convertible note slated to convert at a roughly $365 million valuation when the company raises future capital,” the story notes.
Read more here.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- INSIGHTEC, an Israel-based company focused on incisionless brain surgery, raised $150 million in Series F funding. Koch Disruptive Technologies led the round.
- Lightbend, a San Francisco-based developer of a reactive application development platform, raised $25 million in funding. Dell Technologies Capital led the round, and was joined by investors including Bain Capital Ventures, Blue Cloud Ventures, Greylock Partners, IBM, Intel, Juniper Networks, and Shasta Ventures.
- Hungry, an Arlington, Va-based catering marketplace that connects businesses with independent chefs, raised $20 million in Series B funding at a valuation of more than $100 million (pre-money). Evolution VC Partners led the round.
- Goodlord, a London ‘proptech’ startup that offers cloud-based software to help estate agents, landlords and tenants manage the rental process, raised £10 million ($13 million) in Series B funding. Finch Capital and Latitude Ventures led the round, and were joined by investors including Oxx Capital.
- Touchland, a personal use hand sanitizer brand, raised $1.75 million in funding. Ben Bryce of Align Ventures and Spring St. Group led the round.
PRIVATE EQUITY DEALS
- Firmenich, Ardian, and Tikehau Capital agreed to acquire Les Dérivés Résiniques et Terpéniques, a France-based developer of plant-based chemistry. Financial terms weren't disclosed.
- Bessemer Investors acquired Leonard Valve Company, a provider of water temperature control valves and monitoring services. Financial terms weren't disclosed.
- Madison Dearborn Partners and CoVant Management agreed to acquire AEVEX Aerospace, an Arlington, Va.-based provider of full-spectrum, mission-critical airborne intelligence, surveillance, and reconnaissance technology solutions. Financial terms weren't disclosed.
- ClearCourse, which is backed by Aquiline Capital Partners, acquired Felinesoft, a Bristol-based digital solutions provider. Financial terms weren't disclosed.
- Susquehanna Growth Equity made a significant minority investment in Clutch Co, a Washington D.C.-based B2B ratings and reviews platform for IT, marketing, and business service providers. Financial terms weren't disclosed.
- Altus Capital Partners sold GED Integrated Solutions, a supplier of fully-integrated insulating glass. Financial terms of the transaction were not disclosed.
OTHER DEALS
- Accenture (NYSE: ACN) acquired Context Information Security, a U.K.-based cyber defense consultancy. Financial terms weren't disclosed.
IPOs
- Albertsons Companies, a Boise, Id.-based grocery chain, filed for an $100 million IPO. It posted $60.5 billion in revenue and income of $131 million in 2018. Cerebus (44.3% pre-offering) and Bessemer (14.9%) backs the firm. It plans to list on the NYSE as “ACI.” Read more.
- Zentalis Pharmaceuticals, a New York-based biotech developing therapies for cancers, filed for an $100 million IPO. Recurium Equity, Matrix Capital Management, and Viking Global back the firm. It plans to list on the Nasdaq as “ZNTL.” Read more.
- Lyra Therapeutics, a Watertown, Mass.-based biotech developing drug and delivery solutions for ear, nose, and throat diseases, filed on Friday for an $58 million IPO. It has yet to post a revenue and posted losses of $16.3 million in 2019. Perceptive Advisors (32.4% pre-offering) and North Bridge Venture Partners (17.3%) back the firm. It plans to list on the Nasdaq as “LYRA.” Read more.
- Ayala Pharmaceuticals, a Rehovot, Israel-based biotech focused on small molecule therapeutics for rare and aggressive cancers, filed for a $50 million in an initial public offering. It has yet to post a revenue and posted losses of $8.8 million in 2018. Israel Biotech Fund (35% pre-offering), aMoon (25%), and Harel Insurance Company (18.5%) back the firm. It plans to list on the Nasdaq as “AYLA.” Read more.
FIRMS + FUNDS
- Arkin Holdings, an Israel-based life sciences investment firm, raised $140 million for its fund, Arkin Bio-Ventures II.
- Frontline Ventures, a Dublin and London -based venture capital firm, raised $80 million for its new fund, Frontline X. Financial terms weren't disclosed.
PEOPLE
- Portag3 Ventures named Chris O’Neill as a partner.
- Neil Tolaney joined TCV as a general partner.


fortune--2020-03-09--After first 737 Max crash, why did Boeing’s pilot warning fail to stop second plane from going down?

Trump confidants in quarantine as US grapples with virus

Eight days after a Boeing Co. 737 Max went down in the Java Sea, killing all aboard, the planemaker issued a worldwide warning to pilots identifying the malfunction that triggered the crash.
The bulletin, which was followed almost immediately by a similar notice from U.S. regulators, listed the symptoms cockpit crews faced in such an emergency and explained how to counteract it. News reports described the problem.
Yet less than five months later a second 737 Max went down, slamming into a field in Ethiopia, after suffering the same malfunction. As the one-year anniversary of that crash approaches, many questions remain about why the two pilots lost control.
Was the bulletin’s technical language clear enough? Did Boeing and the regulators who signed off on the warning underestimate the chaos of alarms blaring in the cockpit of the doomed jet? Could the pilots have been fatigued or sick? Should, as one whistle-blower has suggested, Ethiopian pilots have gotten more training on the malfunction?
“I think that’s a central question: Why?” said Jeffrey Guzzetti, the former head of the FAA’s accident investigation bureau. “There’s all kind of potential underlying threads.”
A flaw in the design of the 737 Max has already been identified as a main reason for the crash of a Lion Air plane near Jakarta. The Ethiopian Aircraft Accident Investigation Bureau hasn’t released its findings but a preliminary report out last April showed a similar malfunction also occurred on that flight.
The Ethiopian investigators are poised to release an interim report on the March 10 crash in coming days. A draft of the report focuses on Boeing’s flawed design according to people who have seen it.
Ethiopian government officials and the airline have steadfastly defended the pilots. Transport Minister Dagmawit Moges in April said they followed “all the procedures repeatedly.” Airline Chief Executive Officer Tewolde GebreMariam has bristled in interviews over implications that the crew didn’t perform properly.
Mourners of victims of the crashed Ethiopian Airlines plane during the mass funeral at Holy Trinity Cathedral in Addis Ababa, Ethiopia, on March 17, 2019. SAMUEL HABTAB—AFP/Getty Images
A committee of the U.S. Congress on Friday issued its own preliminary findings on the Max and said its design and development “was marred by technical design failures, lack of transparency with both regulators and customers, and efforts to obfuscate information about the operation of the aircraft.”
Boeing added a flight-control feature called the Maneuvering Characteristics Augmentation System, or MCAS, which was programmed to automatically drive down the nose in some circumstances, without adequately assessing its risks, Indonesia’s National Transportation Safety Committee concluded in October.
The company assumed pilots would respond to a malfunction of MCAS within four seconds, but the Lion Air crash and an incident on the same plane a day earlier showed that wasn’t realistic, the investigation found.
Yet the environment was different for the Ethiopian crew.
Boeing’s bulletin on Nov. 6, 2018, and an emergency directive by the U.S. Federal Aviation Administration didn’t specifically name MCAS, but the system was widely identified in news reports within days.
The bulletin listed nine possible symptoms in such a failure. If any of them occurred while the plane tried to nose down on its own, the directive said: “do the Runaway Stabilizer NNC ensuring that the STAB TRIM CUTOUT switches are set to CUTOUT and stay in the CUTOUT position for the remainder of the flight.”
In the nomenclature of aviation, that meant perform an emergency checklist shutting off power to the motor driving down the nose and keep it off.
The directive was made a part of the Ethiopian carrier’s manuals. Within two days of Boeing’s notice, a senior Ethiopian Airlines pilot had emailed the company’s crews to reiterate the warning, according to records reviewed by Bloomberg News.
Teasing out clues for why Captain Yared Getachew and copilot Ahmed Nur Mohammod reacted the way they did is critical, according to several former crash investigators and safety experts. Not only will it help shed light on the grounded 737 Max’s flaws and whether initial warnings were adequate, but it also is relevant to broad issues of pilot training and competency, they said.
According to the Ethiopian preliminary report, the pilots took several vexing actions.
They performed an important step in Boeing’s recommended emergency response to the malfunction: shutting off power to the electric motor that was driving down their nose. But they then restored power shortly before losing control.
They also left the plane’s throttle set to takeoff power, which prompted it to fly faster than its maximum allowable speed and made it far more difficult to control. Other actions, such as trying to activate the autopilot, appear to have been opposite of what they should have done in the emergency.
It would be easy to simply point the finger at the pilots, but that doesn’t take into account the calamitous conditions in the cockpit, said John Cox, a former airline pilot and president of the consulting company Safety Operating Systems.
A failed sensor was triggering multiple errors and warnings, including a loud thumping noise on the captain’s control column signaling — falsely, it turned out — the plane was nearing an aerodynamic stall. They also had unreliable airspeed and altitude readings.
It’s unfair “sitting in an office saying they should have known” how to respond, Cox said. Investigators should examine how the chaos would have impacted the pilots’ performance, he said.
Another area investigators should review is the adequacy of the Boeing bulletin, Cox said. While it mentioned the multiple failures that could occur at the same time, it didn’t expressly warn crews about how chaotic they could be, he said.
Such pilot warnings have been criticized as inadequate in previous accidents, Guzzetti said.
The U.S. National Transportation Safety Board, for example, criticized the FAA for a similar type of warning it issued to pilots after an earlier model of the 737 crashed near Pittsburgh in 1994.
“It should be something they are looking at,” Guzzetti said. “How effective was the wording, the presentation and the prioritization?”
While it will be impossible to know exactly what Getachew and Nur were thinking during the frantic five-minute flight, crash investigations typically follow a basic script to get clues.
They take a close look at pilots’ lives in the days prior to the crash for signs of illness, fatigue or other personal factors that could affect their actions.
In the Lion Air crash, investigators found that the captain was sick and the copilot had been called in at 4 a.m. as a substitute for the scheduled crew member.
The type of training that pilots received and how well they performed in their careers are also areas that can help investigators understand accidents.
Nur, the 25-year-old Ethiopian copilot who was almost new to the plane, might get attention from investigators. He had only 361 hours of flying experience in his brief career and less in the 737: 56 hours in the Max and 151 hours in other models of the plane. He had been flying the aircraft for less than 90 days.
Pilots’ training and skills have been relevant in multiple previous accidents.
Both of the Lion Air pilots had exhibited problems in those areas, Indonesian investigators found. Most significantly, the copilot had had difficulty locating checklists and performing in emergency scenarios.
A Canadian man who was a pilot for Ethiopian Airlines before resigning last year said he tried before the crash to warn the carrier that crews weren’t adequately prepared.
In the months after the Lion Air accident, Bernd Kai von Hoesslin frequently quizzed copilots he worked alongside about the MCAS bulletin and most of them couldn’t answer detailed questions, he said in multiple interviews with Bloomberg News.
The airline called von Hoesslin a disgruntled former employee and disputed his allegations in statements. The airline “strictly complies with all global safety standards and regulatory requirements,” it said in a Twitter post last year.
Von Hoesslin submitted records to the U.S. NTSB, which is participating in the probe, but hasn’t been contacted by Ethiopian investigators, he said in an email.
The quality of training at the airline should also be a part of the investigation, said Roger Cox, a former NTSB investigator and airline pilot.
Representatives of the airline didn’t respond to requests for comment on this story.
Were crews adequately taught to be comfortable flying a plane manually during an emergency? Were junior pilots coached to speak up when a captain made a mistake? Were they given realistic emergency scenarios during training?
These are not just questions that could help explain why the Ethiopian crew lost control, but probing them for answers could help improve safety across the world, Cox said.
“Have you done enough to ensure that those guys together have an adequate ability to handle an emergency?” he said. “It’s an extremely important question to ask.”
More must-read stories from Fortune:
—Why the U.S. is so far behind other countries in coronavirus testing
—Travel insurance is booming, even though it doesn’t help flight changes and cancellations
—H&M wants to help other fashion houses become sustainable—for a fee
—10 journalists who deserve justice immediately
—Fortune Explains: Tariffs and trade wars
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-09--Why women in Mexico are planning a nation-wide strike

Good morning, Broadsheet readers! Elizabeth Warren flips the switch, we meet a doctor leading the anti-COVID charge, and women in Latin America have had enough. Have a meaningful Monday.
– IWD protests. As The Broadsheet mentioned on Friday, International Women’s Day has its roots in radical movements that saw female workers take to the streets to demand equity.
Women across the world channeled that spirit on IWD yesterday, as tens of thousands publicly demonstrated to press for more labor protections and greater rights.
Some public events were called off because of the coronavirus outbreak, but many went on despite counter-protests and police blockades.
Halting violence against women was the rallying cry of protesters in some Latin American countries, where femicide can be rampant.
In Chile, an estimated 150,000 protesters gathered in the capital of Santiago to call for abortion access and an end to gender-based violence. In Sao Paulo, Brazil, about a thousand women protested right-wing President Jair Bolsonaro as well as violence against women.
The alarming trend of violence against women in Mexico—10 were killed per day last year—is expected to prompt an all-out strike by women there today. The country has 21 million registered female workers and many of them are expected to stay home from work and school in protest. Big employers like Walmart are supporting the action by allowing their female workers to participate.
Overall violence has escalated in Mexico in recent years, but women, more so than men, are vulnerable to it in their own homes. Twenty-five percent of Mexico’s female homicide victims are killed in the home, compared with 10% of male victims, the Washington Post reports. Activists in Mexico also are dissatisfied with what they see as an insensitive response to the crisis from President Andrés Manuel López Obrador, who’s blamed past free-market policies for the uptick in femicide and has accused his political rivals of fueling today’s strike.
“I’m going to disappear,” Xochiquetzalli Calles, a 27-year-old single mother, told WaPo. “That’s how I’m going to make people conscious of what’s happening to women.”
The strike could cost Mexico City alone some $300 million.
“We are a generation of women that has woken up,” a Santiago protestor named Valentina Navarro, 21, told Reuters. “We are not afraid to speak out and struggle.”
Claire Zillman
claire.zillman@fortune.com
@clairezillman
ALSO IN THE HEADLINES
- Biden booster. California Senator and former presidential hopeful Kamala Harris endorsed Joe Biden for the Democratic nomination on Sunday despite being one of the former vice president's most vocal critics earlier in the primary contest. She said she would “do everything in my power″ to help elect him. Associated Press
- Warren's weekend. The Boston Globe has an inside look at the final days of Sen. Elizabeth Warren's campaign for the Democratic nomination, including a scene in which a reverend delivered a pre-debate rap-style prayer: "Look around see what you see: a lot of old boys who begin with a ‘B.’" Meanwhile, Warren poked fun at herself during a Saturday Night Live cameo, and she filmed an epic "Flip the Switch" video with Kate McKinnon, who impersonates Warren on SNL.
- IWD advice. To mark International Women's Day, Fortune asked 15 top business leaders to name the personality trait that they think has fueled their success. One answer: "A focus on effective communication—and it all starts with the ability to really listen," says Lockheed Martin CEO Marillyn Hewson. Fortune
- Coronavirus gender gap. Chinese researchers have again found that women are more likely to survive the coronavirus than men. But another study reveals a different kind of toll the epidemic is taking: researchers found that female doctors, nurses, clinical assistants and medical students in mainland China outside of Hubei Province, the outbreak epicenter, were more likely to report experiencing anxiety, depression or insomnia during the epidemic. South China Morning Post
MOVERS AND SHAKERS: Wells Fargo’s chairwoman, Elizabeth A. Duke, has resigned. She was expected to face tough questions from Congress this week about the bank's history of consumer abuses. HuffPost editor-in-chief Lydia Polgreen is leaving the website to become head of content at Gimlet Media, a podcast company.
IN CASE YOU MISSED IT
- Doctor is in. Who is Dr. Deborah Birx, an appointee to President Donald Trump's new coronavirus task force? Birx holds the role of ambassador at the State Department for overseeing its global AIDS response; she's spent three decades researching H.I.V. and devising public health strategies to combat it. She's a holdover from the Obama administration, which speaks to her political savvy. “Thank God she’s in charge,” says Katy Talento, a former health policy advisor for Trump. New York Times
- Still behind bars. Saudi Arabia imprisoned a group of female activists in 2018 for campaigning for women's right to drive. Even after the kingdom granted women that right, the group remains detained; they're expected in court again this week. "I think that the best thing to do is to free all these people and to show that, yes, [Saudi Arabia is] changing. And we are freeing them because they didn't do anything wrong," says Lina al-Hathloul, who's sister Loujain is in jail. NPR
- The 'Sabrina Effect.' Women's college basketball is having something of a moment as attendance at games skyrockets at some schools. The trend can be traced, in part, to the popularity of Oregon phenom Sabrina Ionescu; her team now accounts for 58% of all basketball game attendance at the university. Other schools are reporting bumps too. Wall Street Journal
- Face of a movement. This piece profiles Piera Aiello, who was elected to the Italian Parliament in 2018. Aiello campaigned without showing her face—because as a Mafia informant in the 1990s, she lived under the witness protection program. Today, she lives under her own name, with a police escort, representing Sicily and fighting to protect others who speak out against the Mafia. New York Times
ON MY RADAR
It’s among the world’s hardest sled runs. Why weren’t women allowed to use it? New York Times
A 1963 Klan bombing killed her sister and blinded her. Now she wants restitution Washington Post
‘They’re hiding something’: Southwest flight attendant speaks out about severe reactions to uniforms Philadelphia Inquirer
Driving trucks, blasting rocks: Women break the mold at Burkina Faso gold mines Reuters
PARTING WORDS
"[W]e began to see the needle moving when we said that this is smart economics."
-Goldman Sachs Managing Director Dina Powell McCormick on the progress of women's empowerment


fortune--2020-03-09--As people eat out less, food delivery startups surge

This is the web version of Data Sheet, Fortune’s daily newsletter on the top tech news. To get it delivered daily to your in-box, sign up here.
On this bleak morning for the market and the world due to the coronavirus, I’m choosing to accentuate the positive:
The CEO of Uber, Dara Khosrowshahi, last week suggested that a downturn in the company’s rides business due to coronavirus-caused macroeconomic headwinds could be partly balanced by increased orders for its surging food-delivery unit, Uber Eats. He also trumpeted Uber’s acquisition of Cornershop, a grocery delivery company in several Latin American markets and Canada.
Uber isn’t the only business to think delivery will thrive when people are confined to their homes. Shares of Meituan in China have surged as the company has responded to demand there. Publicly traded Grubhub in the U.S., which has faced a withering assault from funny-money-funded competitors, also has revived. (Quartz had a good overview of this.) The point here isn’t so much to celebrate profiteering during a tragedy as to highlight examples of a dynamic market that responds to unanticipated needs.
Similarwise, much has already been made of the newfound popularity of Zoom Video Communications in a time when travel has been severely restricted. As it happens, the CEO of Zoom, Eric Yuan, will speak tomorrow night at a Fortune Brainstorm Tech dinner in San Francisco. (Hugs and hand shaking are off limits.) We invited Yuan to speak just before the crisis hit U.S shores and only because the company has been one of the few successful recent tech IPOs. We’ll let you know what he says.
In China, a product called DingTalk has also exploded in use due to the confinement of so many workers. This review is less than flattering about DingTalk but interesting all the same. DingTalk, by the way, is owned by Alibaba and began as a response to the success of WeChat, owned by Tencent. I visited the DingTalk development team in Hangzhou in 2018, which seems like a lifetime ago.
I had been wondering if improved hygiene would lead not only to slowed transmission of the novel coronavirus but also a decrease in common flu cases. It turns out that public health officials in Japan think that’s exactly what is happening. A decrease in influenza, which Donald Trump recently learned is a consistent killer, would be a silver lining in this global tragedy.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
Uncontained. As the number of infected cases confirmed in the U.S. passed 500 over the weekend, fallout from the novel coronavirus outbreak continues to spread. Organizers of the South by Southwest arts and technology festival called off the event on Friday. Apple joined other major California tech companies in asking most employees to work from home. Meanwhile, with federal virus-testing efforts flailing, the Bill & Melinda Gates Foundation is rolling out its own tests for Seattle-area residents.
Innocent bystander. Feel like your location privacy data doesn't matter much? Tell that to Zachary McCoy of Gainesville, Florida. He became a suspect in a burglary because location data from Google put him near the invaded home around the time of the crime. “I was using an app to see how many miles I rode my bike and now it was putting me at the scene of the crime," McCoy told NBC News. "And I was the lead suspect.” Prosecutors eventually dropped McCoy as a suspect. Privacy still matters in Australia, though. Regulators there filed a lawsuit against Facebook over data shared with Cambridge Analytica five years ago.
A new way in. Following the discovery last week of a security flaw in Intel processors, another group of researchers announced they had found a different vulnerability in chips from Advanced Micro Devices.
FOOD FOR THOUGHT
As Adam mentioned, food delivery services like Uber Eats may be benefiting from an increase in usage due to the current coronavirus outbreak. Former Fortune writer Erin Griffith, now at the New York Times, has a timely profile of a competitor in that market: DoorDash. She explains the startup's one big problem it must address if it wants to go public:
Of all the issues hanging over DoorDash, the most pressing is whether it can turn a profit. On this, [DoorDash CEO Tony] Xu pointed to DoorDash’s past. Until recently, he said, the start-up was so scrappy that it did not serve its employees elaborate snack spreads and he personally delivered meals in a beat-up Honda. DoorDash turned a profit in certain cities.
“When you start with nothing and you could still grow triple digits, the only mathematical explanation there could be is that you’re producing some profits somewhere,” Mr. Xu said.
IN CASE YOU MISSED IT
Does the Hummer EV make sense? Culturally, no. Economically, absolutely By Eric C. Evarts
5G’s promise: A new heartbeat for healthcare By Jennifer Baljko
Connected vehicles will make our roads safer—but only with regulators’ help By Michael Moskowitz
SoftBank Vision Fund Chief Rajeev Misra says time will disprove his critics By Polina Marinova
15 powerful women share the personality trait that’s key to their success By Fortune Editors
Germany’s freedom from speed limits may be running out of road By Steve Perlberg
(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)
BEFORE YOU GO
Douglas Adams' brilliant science fiction spoof The Hitchhikers Guide to the Galaxy first aired as a BBC radio broadcast on March 8, 1978. That means Sunday was the 42nd anniversary of the show, a critical number that, in the series, Adams jokingly determined was the answer to life, the universe, and everything. BBC replayed the original episodes, and the script and subsequent novels Adams wrote have also been reprinted in new editions. Worth a look if you're in need of some lighter fare to divert you from today's headlines.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-03-09--Here are some of the most extreme ways companies are combatting coronavirus

Stay in the know on how the coronavirus outbreak is impacting the global business economy with our new daily newsletter Outbreak.
It’s official: the first cases of coronavirus stemming from a corporate meeting have surfaced.
Biogen Inc. announced that three employees have been infected after attending a meeting in Boston last week. With 100,000+ cases of coronavirus worldwide (including now over 200 in the U.S. and over 160 in the U.K.), many big companies have are realizing the severity of the spread, and going to extremes to curtail the odds that their employees pick up the virus at work.
Splitting up employees, deep cleans, and mandatory work from home
Amazon (who confirmed one employee in Seattle tested positive), Facebook, Microsoft, and Google are all now asking employees in the Seattle area to work from home, following an outbreak in Washington state that has already reportedly claimed 10 lives, with 70 confirmed cases. Some are also amending interviewing processes, with Google conducting all interviews virtually, and Facebook and Amazon are altering interviewing processes to limit in-person meetings or put them on hold for now. Google also canceled its flagship developers conference, I/O, and has banned all international travel.
As the first case of coronavirus was confirmed in Oregon, Nike and Columbia conducted deep cleans of their facilities. Nike, “out of an abundance of caution,” said it closed its faculties for the deep clean, including all buildings, facilities, and even fitness centers, at the company’s world headquarters, according to Greg Rossiter, Nike’s global communications director, in an email.
Apart from deep cleans, other companies are increasingly encouraging employees to work from home. Twitter and Square (both under CEO Jack Dorsey) “strongly” encouraged their employees (some 9,000 people) earlier last week to work from home.
And on Friday, Facebook told its employees in the Bay Area to start working from home; the company also canceled all events in the Bay Area. “Based on guidance from Santa Clara County today, we are strongly recommending that all Bay Area employees and contingent staff work from home starting [Friday],” Anthony Harrison, Facebook’s company spokesperson, said in a released statement.
In the U.K., firms have been instituting some increasingly cautious measures to prevent a spread. UBS is requiring employees to fill out forms about their health, and banning employees or visitors from entering London offices if they have flu-like symptoms.
Still others like big-time hedge fund manager Greg Coffey are banning staff from using public transportation (the tube, in London), instead offering to pay for taxi rides to and from Kirkoswald Asset Management.
Meanwhile, HSBC evacuated the 10th floor in its Canary Wharf building, sending 100 people home and telling all employees in that building to work from home, after an employee was confirmed to have caught coronavirus. The bank has ordered a deep clean of the floor, which houses the bank’s research department.
Additionally, after an infected HSBC employee entered an S&P Global office, the company announced it were telling employees in its Canary Wharf office to work from home. “Following confirmation that a person who recently visited S&P Global’s offices at 20 Canada Square has been diagnosed with COVID-19, as a safety precaution we are have decided all S&P Global employees based in Canary Wharf should work from home until further notice,” S&P Global told Fortune in a statement. The company has about 1,200 employees in that office.
Other banks like JPMorgan Chase are starting to split up trading and sales employees in New York and London offices to reduce the impact on staff if coronavirus spreads to one of the offices. “Dividing our workforce into different locations improves our ability to serve clients continuously while reducing the health risks associated with physical contact should a case arise,” Marc Badrichani, who leads global sales and research, and Troy Rohrbaugh, the head of global markets, wrote in a memo to employees Thursday. Banks like Bank of America and Goldman Sachs are following suit, splitting up traders and sales employees (or planning to, respectively).
Others like Goldman Sachs, Citi Group, and Morgan Stanley are testing disaster recovery sites in London and the U.S., per the Financial Times, and are even going to measures like installing screens in traders’ homes. According to the report, Barclays is planning to split its trading floor staff into three groups, spread between its Canary Wharf headquarters, their own homes, and a back-up site at Northolt (near London).
More must-read stories from Fortune:
—Why plunging Treasury yields are so alarming
—Furious Robinhood customers want payback following two day outage
—Why investors suddenly turned on pot stocks
—With stocks down sharply are we approaching”buy” territory? Not by a longshot.
—Why it’s so hard to find the next Warby Parker
Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-03-09--Silicon Valley needs to build out, not cash out

In Silicon Valley, the most important thing to think about when starting a company is how you’re going to end it. The venture capital funding model that dominates the tech industry is focused on the “exit strategy”—the ways funders and founders can cash out their investment.
Today, that focus is preventing disruptive competition, cementing tech monopolies, driving companies to shelve innovations, and undermining the promise of Silicon Valley.
While in common lore the exit strategy is an initial public offering, in practice IPOs are increasingly rare. Most companies that succeed instead exit the market by merging with an existing firm. Venture capitalists and founders paid in stock don’t want to build a business for the long term. They want to cash out, preferably as soon as possible.
But public offerings increasingly take too long for venture capitalists to complete this change in ownership. Once one year faster than acquisitions, time to exit by IPO is now one to two years longer, per our research. Venture capitalists generally expect to make 12-20% year on the money they invest across all the startups they fund. The easiest way to do that is to sell the company.
Innovative startups are especially likely to be acquired by the dominant firm in the market, particularly when they are venture funded. Incumbents are the most eager and best able to understand how an upstart could eat their lunch—far before others can see the upstart’s value. Even assuming others see that value, incumbents are the most willing to pay for it, even if—perhaps especially if—they plan to shut the upstart down. The incumbent wants to hold onto its sales in a monopoly market, continuing to sell units at higher prices while avoiding further investment in quality and innovation. Taking over a challenger means that the incumbent won’t face competition.
Today, more than nine in 10 exiting venture-backed firms sell out to other firms, according to our research. Once thought to spur competition, venture capital may in fact cement incumbency.
This focus on exit, particularly exit by acquisition, is destroying the promise of Silicon Valley. Imagine if the titans of industry a century ago (or even a generation ago) were interested not in growing their businesses, but in cashing out as quickly as possible. We wouldn’t have most of the industries we have today.
Silicon Valley’s focus on the exit strategy leads to concentration in the tech industry, reinforcing the power of dominant firms. It short-circuits the development of truly disruptive new technologies that have historically displaced incumbents in innovative industries. And because incumbents often buy startups only to shut them down, intentionally or not, it means that the public loses access to many of the most promising new technologies Silicon Valley has developed.
It helps explain why the normal cycle of new companies driving out old monopolies seems to have stalled in the tech industry, where we found that the main incumbents are all at least 15 years old—an eternity in Internet time.
That has sparked concern among the public and presidential candidates from both parties. It has even surprised scholars normally sure the market can solve its own problems. Some argue that antitrust should break up big firms. Others think we should declare that parts of those firms—such as their data—be considered essential to competition and made available to others.
But those are blunt instruments; breaking up a Facebook or a Google may do more harm than good. Worse, those advocating breakup or regulation are fighting the last war. Trying to dislodge an entrenched monopoly by regulating it or breaking it up is hard and uncertain work. And it misses the bigger picture: Historically, a new company has always come out of nowhere and disrupted that monopoly. It is that disruption we have lost and need to get back.
In the paper we published late last year in SSRN, we suggest a number of ways to break the cycle of acquisition by incumbents, including both carrots and sticks. We can offer carrots to encourage innovative startups to stay in the market. We can also change venture capitalists’ incentives, offering them ways to cash out without selling out.
IPOs require extensive, expensive legal diligence that can take a year or more. Even after this process finishes and some shares start trading, securities law and private contracts typically “lock up” venture capital shares for six or more months. Public policy and practical concerns also make it hard to sell shares to financial owners outside the public markets. We should change tax and securities laws so that IPOs or secondary market sales are easier and mergers more difficult. As a result, we will encourage free-standing businesses to keep operating.
But those carrots need to be coupled with sticks. We should change the antitrust laws to focus on who is acquiring startups. Right now it’s too easy for incumbents to buy startups that might challenge them. Mergers beneath $200 million in value are no longer reviewed by the antitrust agencies. And when larger acquisitions do trigger review, the government rarely takes an anti-merger position.
Antitrust agencies should be much more skeptical of incumbents buying startups. We should presumptively ban incumbent monopolists from acquiring competitive startups, something the Clayton Act already gives regulators the power to do. But we should also worry about companies buying startups that don’t directly compete but that offer a possible platform for making the existing market obsolete. So antitrust agencies should also aggressively investigate mergers in complementary industries, like Facebook’s acquisition of WhatsApp or Google’s purchase of DoubleClick, even if the companies aren’t yet direct competitors at the time of the purchase.
These solutions won’t alone fix the problem of today’s entrenched tech monopolies. But they will allow the next generation of companies that might displace the tech giants to make it to market.
Silicon Valley changed the world. And it did so because founders and venture capitalists wanted to win tomorrow’s markets, not sell out to those who had already won yesterday’s. We should make sure founders and venture capitalists keep incumbents on their feet and don’t tire of the chase. And that means venture capitalists and tech companies must—as Steve Jobs urged Stanford’s graduating class in 2005—“stay hungry.”
Mark A. Lemley is the William H. Neukom professor at Stanford Law School.
Andrew McCreary is a student at Stanford Law School.
More opinion in Fortune:
—Coronavirus shows why we need vaccines before, not after, an outbreak
—How Democrats’ impeachment campaign helped Trump
—Being a CEO is more tenuous than ever. How I survived 30 years at Aflac
—How Warren Buffett built Berkshire Hathaway
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Listen to our audio briefing, Fortune 500 Daily


fortune--2020-03-10--The Philadelphia brewery born with a social conscience

Coronavirus may not be all bad for tech .
Consider the ‘ stay at home ’ stocks

Craft beer continues to be a booming business in America. According to the Brewers Association, the number of breweries nationwide has nearly doubled in just four years, from 3,814 in 2014 to over 7,300 in 2018. And while so many seem to start in the same way—a group of friends go from home brewing beer in their garage to opening a proper brewery—Tess Hart and her husband, Bill Popwell, had a different approach.
The couple were drinking a beer in Chile’s oldest brewery, Cervecería Austral, when they got the idea to start their own business. It wasn’t the taste of the beer that led to the inspiration, but rather the feeling they got from being inside the brewery. “The experience of community we felt transcended borders and languages,” Hart says. “There was something so unifying about sharing a beer together.” Last fall, Hart and Popwell, along with brewer Kyle Carney, founded Philadelphia’s first triple-bottom-line brewery, Triple Bottom Brewing, which puts as much importance on community and the environment as it does on profit.
The pair met at Brown University, and while Popwell went on to work for AmeriCorps, Hart worked in community and economic development for nonprofits and a strategy consulting firm. After visiting craft breweries on days off, and whenever they traveled, an idea took root.
“It’s not just the beer, it’s about the environment,” Hart says. “People go there looking for a story, not just a drink. And they start to connect with each other.”
Triple Bottom Brewery was founded and is run by Tess Hart along with two partners: her husband, Bill Popwell, and brewer Kyle Carney, who has a degree in brewing and distilling, plus experience at respected craft breweries like San Diego’s Stone Brewing. Tess Hart
Hart and Popwell saw breweries and community development as intertwined. They envisioned a for-profit business that also supported society and the environment. The couple both got MBAs at Yale, and Hart continued to flesh out the idea during one of her classes. She got an overwhelmingly positive response from her classmates. “We were creating something that made it so easy for people to feel like they were participating in a positive impact without really changing their lifestyles,” Hart says.
They chose to pursue the business in Philadelphia, partly because Hart grew up in the area and partly because, at the time, the city had the highest poverty rate of any major city—as well as the fastest growing millennial population. (Though Philadelphia is no longer home to the fastest-growing millennial population, it remains among the poorest big cities in America, according to a study by Pew Charitable Trusts.)
“It’s so crazy that those could coexist in the same place and really just not intersect,” says Hart. “These two trends were happening independently of each other and there was this feeling of Philly on the rise, but we still had so many people who were not a part of that.” The business they envisioned would speak to people who have been shut out of opportunity, bringing them into the fold through jobs, and it would also speak to the spirit of growth and excitement that was attracting an increasing millennial population. “We wanted to bring those two experiences together in a way that we weren’t really seeing elsewhere.”
Triple Bottom Brewing opened just a few months ago in Philadelphia’s Spring Garden neighborhood. Tess Hart
In 2016, even before securing a space for their brewery, Hart and Popwell began to meet with community leaders and organizations to learn about the neighborhood and discuss partnerships. Today, Triple Bottom works with three “fair chance” employment partners—Project HOME, the Mural Arts Restorative Justice Program, and the Youth Sentencing & Reentry Project—for help hiring and supporting their team. That team, including part-time employees, gets paid time off. Employees can also take part in a new 10-week internship program, in which team members can learn new skills, like digital marketing or event planning.
As the environment is one prong in the triple bottom line, the company is also focused on sustainability practices. The brewery is powered entirely by renewable energy. Hart and Popwell installed a wastewater treatment system that minimizes the impact of their brewery wastewater, and they either compost or donate spent grain—a byproduct of brewing beer—to farmers. Hart says most initiatives on their wish list are very expensive and are still on the agenda.
Though the company focuses on more than just profit and brewing, its lineup of beer is as impressive as it should be for this idea to work. Brewer Kyle Carney previously worked at Stone Brewing Company in San Diego and Pennsylvania’s Weyerbacher before joining the Triple Bottom team.
Instead of taking inspiration from a passion for home brewing, Hart says she was driven to start a company that focused on three things: beer, people, and planet. Tess Hart
Less than six months in, the lofty, light space is filled with neighbors drinking pints of beer that all have names that are a nod to Philadelphia culture. A hazy New England IPA is called Training Montage in reference to Rocky, and Random Drumline, the Belgian farmhouse ale, is named after a distinctly Philly phenomenon of a haphazard parade of percussionists, usually with someone dressed in an Elmo costume.
And while Triple Bottom is one of the very few businesses in Philadelphia to operate on this model, the brewers don’t want to be an outlier for long. “Our hope is that this sort of becomes business as usual,” Hart says. “It’s why we are a for-profit business, because we want to show that you can do this and be a success.”
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fortune--2020-03-10--Coronavirus may not be all bad for tech. Consider the ‘stay at home’ stocks

As coronavirus closes schools and pushes classes online , it ’ s ‘ exposing hard truths about the digital divide @ @ @ @ @

As investors head to the exits over coronavirus fears, savvy stock-pickers may find value in some of the companies that are discarded in the panic. One person’s trade can be another person’s treasure.
Tech may be one industry that stands out.
As bosses order employees to work from home, conference organizers cancel events, and consumers hole up, tech companies that cater to “remote” activities could offer upside. These businesses may get a lift from people staying indoors, even as other parts of the economy falter.
Call them the “stay at home” stocks. Think video conferencing, video games, video streaming, and food delivery. Any company that sells alternatives to in-person interaction could be a winner.
Working from home
The poster child stay-at-home stock: Zoom Video Communications, a company whose video conferencing service lets people chat virtually. Its app has been rising in popularity as businesses order workers to clear out of offices. Amid Monday’s market rout, during which the S&P 500 index plunged more than 6%, Zoom closed mostly unchanged at $113.40 after dropping nearly 10% during mid-day trading.
Another pick in the video conferencing arena is Alibaba, whose DingTalk unit also provides video conferencing software. Though it is just one small part of the ecommerce giant’s operations, DingTalk has been catching on in China, ground-zero for the coronavirus outbreak. Students there are using the technology to attend classes remotely amid school closures (even if it’s against their will).
Alibaba has slipped lately. Shares are down 8.4% over the past month, about half that springing from Monday’s carnage. The company has a price-to-earnings ratio—a common measure of how expensive a stock is— of about 21, which could signal a buying opportunity considering that its much-smaller rival, JD.com, has a price-to-earnings ratio of 34.
Ordering takeout
Everyone has to eat, even in an epidemic. That makes a compelling case for food deliverer Grubhub, whose share price on Monday recovered roughly half its losses—about $2 of $4, per share—by market close, ending just under $50 per share.
Food delivery can be a tough market though. Grubhub faces stiff competition from rivals like DoorDash, a startup with a gut-punching $13 billion private valuation, and Uber, with its fast-growing Uber Eats division. (Uber shares are down nearly 30% over the past month, but the food delivery business could cushion further downside from travel-wary passengers taking fewer rides.)
Of course, people could tighten their belts and forgo the extra spending on food delivery altogether.
Catering to couch potatoes
Shut-ins may stave off cabin fever with tech entertainers, such as video game makers. Stuck on the couch, people could start spending more money with Activision Blizzard (which shed $2.60, or 4.4%, on Monday), Electronic Arts (dropped $6.70, or 6.3%), or Nintendo (down $1.50, or 3.4%). They could also look to Tencent, the parent of the Chinese everything app WeChat and a major backer of Fortnite-designer Epic Games, among other studios, which fell 4.5%.
Video streamers are an obvious choice too. High-flying Netflix and Amazon, with its Amazon Prime streaming service, come to mind. Apple’s nascent Apple TV+ could win fans, though the iPhone-maker will likely struggle for some time with disruptions to its hardware supply chain in China. Disney, with its new Disney+ streaming service, offers another choice, though a slowdown at its theme parks is inevitable.
Staying fit
If coronavirus keeps catching on, sweat-seekers may opt for alternatives to germy gyms. Already, shares in Planet Fitness, the iron-pumping chain, are down 36% from a record high of nearly $88 last month.
As yoga studios and spin classes clear out, substitutes could take their place. Peloton, maker of Internet-connected, stationary workout bikes, could attract new customers. But the high price of Peloton’s products—a cycle runs more than $2,000, not including annual subscriptions—could easily land them on the discretionary spending chopping block if the world slips into a prolonged downturn.
Staying at home
The “stay at home” stocks are by no means sure bets, of course. If the coronavirus continues its rampage, the fallout could precipitate a global recession and hammer the stock market more than it has already. Tech stocks frequently trade at high price-to-earnings ratios, meaning they can be volatile and quick to deflate in a downturn.
But if people are forced to stay indoors, these tech stocks might be among the most attractive bets.
More must-read stories from Fortune:
—Google Doodle celebrates International Women’s Day
—Growing coronavirus threat weighs on Apple
—When will PlayStation 5 and Xbox Series X debut?
—NASA hiring new astronauts for the first time in four years
—WATCH: Best earbuds in 2020: Apple AirPods Pro Vs. Sony WF-1000XM3
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.


fortune--2020-03-10--Markets roar back after Monday’s historic sell-off

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Greetings from lockdown land. After a miserable Monday, today’s markets are…on the mend. Up nicely, actually.
We’re a long way from any meaningful recovery. Nobody is calling this the end of the rout. But, after yesterday, investors will take it. Let’s take a closer look where investors are putting their money.
Markets update
Green screens. Led by energy and financial stocks, Asia and Europe are up solidly this morning, and the U.S. future are pointing northward as well. Yesterday, was one—another one—for the record books. Europe’s bourses. The oil markets. The Dow. The S&P 500 and Nasdaq. They all had days to forget, with the U.S. indices falling the most since the height of the financial crisis 12 years ago.
The Dow closed a mere 210 points from bear territory on Monday. Hours before that, a markets analyst sent me a note reminding reporters that yesterday marked the 11-year-anniversary of the start of the bull market. So, happy belated birthday, bulls. 🎉🎉🎉
This morning, crude, commodities, the dollar and Treasurys are all up. Gold is down. Investors are hoping the Trump Administration can deliver on a promised stimulus plan. And a growing number of analysts predict the European Central Bank will cut rates later this week and buy more assets. All that points to the start of a risk-on day.
But clouds are still on the horizon. Deutsche Bank has joined the ranks of the banks contending with coronavirus contagion in the office. Air France is slashing flights this month, as is Qantas. And, dear reader, Italy is the first country to issue a nationwide lockdown in a bid to stop the spread of the deadly coronavirus.
The Italian authorities are betting that a few weeks of restricted travel and self-containment may prove a hit to the economy in the short term, but will help its aging population and healthcare system get through the crisis.
Italians have a word for that kind of wishful thinking: magari. Translation: God willing.
Italy is the third largest eurozone economy. Northern Italy, a portion of the country that includes the industrial and financial hubs of Milan, Turin and the Veneto city of Treviso, already has been slowed to a grind with coronavirus infections raging. Putting the rest of the country in lockdown will almost certainly put the economy into recession.
Cue today’s chart.
***
As the chart above shows, the Italian economy in 2019 eked out growth of 0.3%. And the projection for 2020, even before the virus outbreak, was for an even worse 0.2% uptick. You can throw out that prediction. The new lockdown rules mean no travel, no public events, no museums, no evening meals at restaurant. No masses even, a tough pill for pilgrims.
This will devastate tourism and Italy’s consumer economy, two reliable engines of growth. And so economists are betting that Italy will fall further behind its euro-area peers in the coming quarters. A protracted downturn will almost certainly plunge the already weak government into further in-fighting.
Investors are getting jittery. Milan’s FTSE Mibtel fell more than 11% on Monday, and the spread between Italian and German bonds has soared in the last month, signaling investors see Italy as a bad bet for their money.
All that said, Italians so far seem to be doing a decent job of adjusting to the new reality. Not being able to meet friends for an aperitivo, or seeing family for Sunday dinner (my mother-in-law’s lasagna and roast will be sorely missed) will be a big test of the nation’s resolve. But it’s not as if we’re confined to the couch.
The sun is shining this morning. My favorite bar is still open. I can pop in for a world-beating espresso (90 euro cents) or take a walk up over the catacombs just beyond my apartment to clear my head. Niente male, as the Romans would say. Not bad.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Looking for more detail on coronavirus? Fortune has a new pop-up newsletter. The aptly named Outbreak will keep you up to date on the latest news surrounding the coronavirus outbreak and its impact on business and commerce globally. Sign up here.
And, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Back to the future. Will stock markets bounce back to their highs once the coronavirus scare recedes? Fortune’s Shawn Tully scours the records to see what history tells us about the chances of the market making a full recovery by year-end. Hint: don't bet on it.
Don’t panic. Is this your first stock market crash? Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, offers some timely tips and reassurance to young investors experiencing their first market meltdown—or those of us in denial that this bull market could possibly come to an end.
Wealth league shake-up. The world’s 500 wealthiest people lost a combined $238.5 billion in Monday’s market rout. That’s the biggest daily plunge since the Bloomberg Billionaires Index began tracking that number in October 2016. The market mayhem is reshaping the ranks of the world’s richest, Bloomberg reports. Wildcatter Harold Hamm’s fortune, for example, plunged by almost half to $2.4 billion, ejecting him from the 500-member index.
Market candy
Let’s test your market history knowledge with a quiz. Monday’s market crash felt like the end of the world, but where did it rank among the biggest one-day percentage losses in the history of the S&P500?
Answer: Monday’s 7.6% drop in the S&P 500 was only big enough to creep into the top 20 worst days in history, at number 19, according to FactSet. It was dwarfed by the 20% fall on another Black Monday—October 19, 1987. The 2,000-point drop in the Dow Jones Industrial Average Monday was by far the largest points drop of all time but, in percentage terms, the 7.79% fall ranked as the 11th biggest in history.


fortune--2020-03-10--This is no temporary market decline

This is no temporary market decline

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning.
Well, it had to happen, folks. The bull market is over. Not officially… yet. Yesterday’s market drop was the biggest since the onset of the Great Recession in 2008. But it left the S&P 500 down 19% from its peak—just shy of the 20% drop used to define a bear market. Don’t worry, though; we will get there.
Could the market’s decline be temporary? A brief fear-and-algorithm-driven bout of investor insanity? I don’t think so. The causes are real. The steadily increasing numbers of coronavirus infections suggest we are heading into pandemic territory in the U.S. and elsewhere, and the result will be increasingly widespread business closings and travel shutdowns. Meanwhile, the breakdown between Saudi Arabia and Russia has eliminated the any hope of a recovery in oil prices, and likely will lead to bankruptcies in the shale oil business. Oil stocks topped the worst performers in the S&P 500 yesterday, and even giants Exxon and Chevron were both down about 10%.
Optimists are hoping for a short-lived downturn, with the markets recovering before the end of the year. Is that likely? Well, no…as Fortune’s Shawn Tully documents here.
Is a recession inevitable? Well, maybe not inevitable…as those of us who lived through the 1987 market crash know. (And by the way, I called that one right…as you can read here.) But this is different than that. It’s driven by fundamentals that seem very likely to lead to a significant downturn in economic activity.
What can you do about? Refinance! Rates have hit an all-time low, and mortgage refinance applications are up 224% from a year earlier. Thirty-year fixed rate loans have fallen to 3.29%; 15-year fixed rate loans can be had for 2.79%.
As for the markets this morning, a small recovery has been rolling through Asia (Nikkei 225 up 0.9%, Shanghai Composite up 1.8%) and Europe (Stoxx 600 up 4%), and futures suggest the U.S. will follow suit.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
TOP NEWS
Italian lockdown
Italy's coronavirus lockdown has been extended from Lombardy to the entire country of around 60 million people—that means no domestic or international travel, no big public gatherings or sporting events, and no open cinemas or schools or universities. Prime Minister Giuseppe Conte: "We have no time to adapt, numbers tell us we have a spike in infections, people in intensive care and deaths…Our habits must change right now." What's more, Italian lenders have suspended all mortgage payments. BBC
Trump measures
President Trump will this afternoon seek to calm nerves with "very major" proposals for easing coronavirus-induced economic pain. The measures may include a payroll tax cut, help for those earning hourly wages, and loans for small businesses. Wall Street Journal
Ikea and Alibaba
Ikea's flat-pack furniture has been made available on a third-party website through an official partnership for the first time. The lucky partner is Alibaba, which Ikea hopes will help it reach more Chinese consumers. Ikea is calling this a test—it's been considering such a move for a couple years. RTÉ
Infineon and Cypress
Infineon's share price popped by over 6% after the Committee on Foreign Investment in the United States (CFIUS) found no issues with its proposed $10 billion takeover of Cypress Semiconductor. Infineon took a knock last week after reports suggested CFIUS would advise President Trump to block the deal. Reuters
AROUND THE WATER COOLER
Oil woes
Yesterday's sudden drop in the oil price (which was only slightly ameliorated today) immediately caused players at the heart of the U.S. shale boom to announce cuts in production and activity. There are also fears of layoffs and even bankruptcies in the sector, with ripple effects predicted for the banking industry. Fortune
Saudi gamble
Saudi Arabia's decision to launch an oil price war could threaten the kingdom's modernization drive, with a drop in petrodollar income hitting spending, infrastructural projects and the Saudi deficit. One Saudi analyst told the Financial Times: "There’s going to be a heavy price for Saudi Arabia and other oil producers. They couldn’t have picked a worse time." FT
Agricultural drones
Will the coronavirus outbreak stimulate a stronger move to automation? That's the effect that seems to be occurring in Chinese agriculture, where drone-makers are seeing an increase in demand—though subsidies from central government might be playing a part there. CNBC
Rich men
Jack Ma, who only lost $1.1 billion in yesterday's stock-market bloodbath, is now officially Asia's richest person—Reliance chair Mukesh Ambani ceded the title after losing $5.8 billion. Other big losers: LVMH chief Bernard Arnault ($4.4 billion); Amazon CEO Jeff Bezos ($5.6 billion); and the sagacious Warren Buffett ($5.3 billion). Fortune
This edition of CEO Daily was edited by David Meyer.


fortune--2020-03-10--As coronavirus closes schools and pushes classes online, it’s ‘exposing hard truths about the digita

As coronavirus closes schools and pushes classes online, it’s ‘exposing hard truths about the digital divide,’ FCC commissioner says

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A school district in suburban Seattle ordered 23,500 students to stay home for two weeks on Friday, in what is likely the beginning of a broader shut down of the education system in response to the coronavirus epidemic. Meanwhile, schools outside New York City began closing Monday, as universities from Stanford in California to Princeton in New Jersey have started cancelling classes and moving them online.
One key factor informing the decisions to close schools is that online education can help replace classroom learning. Just as the corporate workforce is shifting to remote, online work, the U.S. is counting on the Internet to embark on what one expert has described as “a vast unplanned experiment in mass home-schooling.”
But there is a major obstacle standing in the way of moving to virtual schools: The country’s broadband resources. Simply put, there is not enough Internet capacity in some places, and, more critically, broadband is out of reach of many who need it.
“The coronavirus is exposing hard truths about the digital divide in this country,” FCC Commissioner Jessica Rosenworcel tells Fortune. “Everyone doesn’t have broadband, and that has consequences if people need to remain at home to educate themselves.”
The actual number of Americans lacking access to high speed broadband is a source of dispute. While the FCC has suggested the number is around 21 million, Rosenworcel says the actual number is much higher, because the agency uses a methodology that concludes everyone in a census block is wired, if even a single subscriber has broadband. According to Gigi Sohn, a former senior FCC staffer who is currently a Distinguished Fellow at the Georgetown Institute, the real number of Americans lacking high speed Internet is around 141 million.
In New York City, the Internet’s remote education problem is clear. According to Rosenworcel, 29% of the city’s households lack dedicated broadband access. This is a troubling prospect, if New York’s more than one million students must suddenly take online classes, many of which would presumably include a heavy video component.
And while students without broadband may be able to get by with cellular mobile devices, Rosenworcel notes some families face data caps on their monthly phone plans.
Sohn, meanwhile, worries about ISPs that serve areas outside the suburbs. “Connectivity in a lot of those places is really slow,” she says, “where there is connectivity.”
Could a Hurricane Katrina solution fix coronavirus’s Internet problem?
Last week, Senator Maria Cantwell (D-Wash.), whose home state of Washington is the epicenter of the virus in the U.S., sent a letter to FCC Chairman Ajit Pai, asking to invoke a section of the 1934 Communications Act to facilitate at-home connectivity for school children. Pai and the FCC have yet to provide a formal response to Cantwell’s inquiry, but Rosenworcel says she is pressing her fellow commissioners and the country’s ISPs to convene, in order to prepare a coordinated response to the virus crisis.
History provides precedents that could inform the FCC’s decision making. These include World War II, when the federal government created a ration book system to allocate scarce items like meat, sugar, and cooking oil. This wartime example raises the question of whether the government could take special measures—in the event the coronavirus closes schools in many parts of the country—to provide broadband to children forced to learn from home.
Rosenworcel argues such measures are warranted, and could be put in place to help people access broadband during the coronavirus outbreak.
One specific measure the FCC could undertake, she says, is to work on expanding programs, already in place in some school districts, where schools and libraries provide mobile hotspots to low income children—some of whom rely on McDonald’s and other fast food restaurants to do their online homework.
Another precedent is the federal response to Hurricane Katrina in 2005, which saw the FCC expand the agency’s Lifeline program to ensure victims displaced by the disaster had access to cell phone service.
When Fortune reached out to the biggest U.S. ISPs for comment, Windstream, which services primarily rural areas across 18 states, pointed to Lifeline as a means to subsidize phone and Internet use for low income households.
Lifeline, however, has been a recent target of conservatives in Washington, D.C., who argue the program has been a source of fraud and waste—meaning any efforts to expand it would be politically fraught.
Yet another solution could come in the form of a bill proposed by Sen. Chris Val Hollen (D-Md.). The proposed law would use the proceeds from certain spectrum auctions to fund a trust that would ensure all school-age children have access to home Internet.
“These are big picture ideas that we should have put in place a long time ago,” Rosenworcel says.
In the meantime, Sohn urges ISPs to act on their own to help Americans during the coronavirus outbreak.
“ISPs love to boast about how they help communities, veterans, differently-abled Americans, and so on,” Sohn says, suggesting the companies could provide free or very low cost service to low-income households, if even on a temporary basis. “Here’s an opportunity for them to step up during a national crisis and make sure that everyone in their service area has adequate connectivity.”
To that end, Comcast points to its Internet Essentials program, which provides broadband for $10 per month to those who qualify. (Typically, people who qualify for federal assistance programs are eligible for the low-cost service.) A spokesperson for Cox, which offers a low-income program of its own, tells Fortune it is in “active discussions about how we can help school systems with a large population of students who need to learn from home.”
But if the technology isn’t widely available, Rosenworcel says, the crisis will only deepen. Lacking proper Internet connectivity is no different than having respirator masks, hand sanitizer, or testing kits at the ready.
“We have a reckoning coming about our readiness to respond,” Rosenworcel says, “and a complacency that tech will solve it.”
Update: This story originally misattributed a Cox spokesperson as pointing to Lifeline as an option for low-income Internet users. The story has been updated to note that Cox offers a low-cost Internet service of its own.
More must-read stories from Fortune:
—Google Doodle celebrates International Women’s Day
—Growing coronavirus threat weighs on Apple
—When will PlayStation 5 and Xbox Series X debut?
—NASA hiring new astronauts for the first time in four years
—WATCH: Best earbuds in 2020: Apple AirPods Pro Vs. Sony WF-1000XM3
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fortune--2020-03-10--‘If we sanitize, it will be fine:’ Cruise fans ignore U.S. warning against setting sail

At the world’s busiest cruise port, thousands of vacationers paid little heed to a government warning that Americans should avoid setting sail on the massive ships.
Passengers lined up at Norwegian Cruise Line Holdings Ltd.’s Miami terminal Monday to board the Norwegian Sky, with few expressing concerns about contracting the new coronavirus that’s infected more than 113,000 people worldwide.
Michelle Yaminitsky, a 20-year-old student at North Carolina State University, and three of her friends booked a five-day cruise to the Bahamas two months ago for their spring break vacation. Norwegian had offered them a credit to sail at a later date, but this was the only time they could all go together.
“We definitely heard a lot of criticism for going on it,” Yaminitsky said. “But we decided if we sanitize, it will be fine.”
The coronavirus has been stressing health systems around the world, pressuring economies and battering stock markets. Cruise lines have been slammed after more than 700 people on a Princess ship tested positive near Japan, while another that docked in California Monday had at least 21 cases. The U.S. State Department warned that citizens should avoid taking cruises, particularly those with underlying health conditions.
Carnival Corp. shares tumbled 20% amid a market rout on Monday, while Royal Caribbean Cruises Ltd. slid 26% and Norwegian plunged 27%. In less than two months, the three U.S.-based operators have lost about $47 billion in market value.
But the scene at PortMiami suggested that at least some cruise fans are undeterred by the virus.
At a passenger unloading zone across from the Norwegian terminal, baggage handlers were busy taking suitcases from travelers arriving in cars. Kevin Moore, a 46-year-old longshoreman, said PortMiami was busy as usual despite the government’s warning.
Still, there were precautions: When Moore came into work, he had to have his temperature taken before his shift began.
Alex Mrouge, 20, Albert Hilbert, 22, and Mike Williams, 22, also said they aren’t worried about the coronavirus as they waited to board the Norwegian Sky for a spring break trip.
Mrouge said as long as he avoids contact with a lot of people, he should be fine. “And if you do, wash your hands,” he said.
“Worse comes to worst, we get quarantined,” Hilbert said.
The prospect of a quarantine worries Ee Thao, a 35-year-old Norwegian Sky passenger from Minneapolis, who said staying on the ship for an extended period would be difficult since she and her husband wouldn’t be able to get home for their kids and work. Still, she wasn’t going to back out of the trip she had been planning for a year.
“I wasn’t too worried about the virus,” Thao said. “We were going to go regardless of what happened.”
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—Some of the most extreme ways companies are combating coronavirus
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—Growing coronavirus threat weighs on Apple
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fortune--2020-03-10--‘This is a bloodbath for U.S. oil:’ Price plunge will test how robust the shale boom really is

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Coronavirus was already giving oil prices a year to remember.
But on Monday, as a breakdown between Russia and Saudi Arabia spiraled into an all-out price war, crude futures plunged 25% to $30/barrel, hitting a four-year low with a single-day drop not seen since the outbreak of the Gulf War.
That plunge prompted companies including DiamondBack Energy and Parsley Energy, players in the Permian basin at the heart of the U.S. shale boom, to immediately announce cuts in production and activity. It also fueled already-mounting worries that sinking demand and a looming debt crunch could spur widespread cost-cutting, layoffs, and even bankruptcies.
The shale boom is known for being notoriously robust. But amid sinking demand and looming debt, its endurance may finally be put to the test.
Boom into bust?
Before this weekend’s disastrous OPEC meeting, oil prices were already facing a serious problem: coronavirus.
The virus hit China early, quarantining whole cities and putting a hold on the manufacturing engine that has made the country the world’s second largest oil consumer, after the U.S. That undercut demand, forcing analysts to repeatedly trim forecasts and fueling a price drop that was only partially balanced out by a supply outage in war-torn Libya.
By Monday, the International Energy Agency was forecasting that oil demand would actually decline in 2020—by 90,000 barrels/day—the first contraction since 2009, amid the financial crisis.
Meanwhile, the shale industry was facing its own problem: debt, and lots of it.
According to Moody’s, the North American oil and gas sector is facing $86 billion in debt—between rated bonds, term loans, and revolving credit facilities—that comes due in the next four years.
That includes $22 billion worth of debt coming due just this year, according to S&P Global, a looming financing crunch that was worrying analysts even before the price shock.
Now, with oil hovering at about $30/barrel late on Monday, most operators in the region won’t be able to break even. Most analysts put the break-even rate at a minimum of $40/barrel, and some as high as $55/barrel.
At current prices, that debt “will become increasingly hard to refinance, and as such we can expect a large increase of bankruptcies over the next 12 months,” said Chris Midgley, head of global analytics at S&P Global Platts.
Prices below $40/barrel alone would trigger a wave of “brutal cost cutting” in an industry that has already trimmed much of the fat, says Fraser McKay, head of upstream analysts at energy consultancy Wood Mackenzie.
“Discretionary spend would be slashed, including buybacks and exploration. But given the lack of excess in the system, the cuts to development activity will be necessarily fast and brutal,” McKay added. The sector would react “immediately,” he said.
The expected impact of the rout was already hitting equities on Monday, sending 40 U.S. energy stocks down at least 30% by late Monday afternoon, with stocks like Matador Resources Co., Diamondback Energy, and Noble Corp down around 63%, 44%, and 35% respectively.
The sector en masse has suffered a 44% drop year to date, per the S&P 500 Energy Index.
The fallout could have very real consequences to those who work in the sector. As oil historian Gregory Brew tweeted on Monday: “Just to emphasize, this is billions of dollars disappearing from balance sheets across the country. The shock from this will be felt immediately. Rigs will shut down, thousands will be laid off, activity on the major fields will slow to a crawl,” he wrote. “This is a bloodbath for U.S. oil.”
Just to emphasize, this is billions of dollars disappearing from balance sheets across the country. The shock from this will be felt immediately. Rigs will shut down, thousands will be laid off, activity on the major fields will slow to a crawl. This is a bloodbath for US oil — Gregory Brew (@gbrew24) March 9, 2020
A tight squeeze
Shale has experienced price shocks before—for much of the 2010s, it created them.
In the early 2000s, the U.S. lagged behind countries like Saudi Arabia and Russia in the global oil market. But starting around 2010, fracking technology centered on the oil-rich region called the Permian basin, spanning 75,000 square miles largely in west Texas, produced a surge of oil, more than quadrupling daily output, according to the EIA.
An employee wears a hat signed by U.S. Vice President Mike Pence during his tour of a Diamondback Energy oil rig in Midland, Texas, on April 17, 2019. Monday’s oil price plunge prompted companies like DiamondBack, a player in the Permian basin at the heart of the U.S. shale boom, to immediately announce cuts in production and activity. Callaghan O’Hare—Bloomberg via Getty Images
The shale boom—referring to the kind of sedimentary rock the resources are extracted from—totally upended the global energy industry. It transformed the U.S. from an importer to a frequent exporter, putting it on track to one day become the world’s largest source of crude, and flooded global markets with an abundance of oil.
That sunk prices and ultimately spurred years of production cuts by OPEC, led by Saudi Arabia, in an effort to stabilize prices. But those lower prices, even as oil demand continued to rise, also put pressure on the shale producers themselves, forcing many of them into years of cutbacks that leave little fat left to trim.
“There are fewer companies that still hold a face card they haven’t played, much less an ace in the hole,” said Cliff Vrielink, a partner at of law firm Sidley who specializes in energy, in reference to the moves companies have already made to reduce costs and debt.
“As to what comes next, the fear is that the price war will not end any time soon, which means this downturn will not turn around quickly—if so, the pain will reverberate across the industry and be felt by the producers, lenders and equity investors,” Vrielink said.
And this time, prices aren’t merely facing oversupply, they’re facing the demand shock of coronavirus, too.
“Contrary to 2014-2016, when market imbalances primarily stemmed from the supply side, the coronavirus demand shock could combine to create a level of short-term pressure not seen since the mid-1980s. Stay tuned,” said Paul Sheldon, Chief Geopolitical Advisor at S&P Global Platts.
All doom and gloom?
While the drop has been dramatic, some say the sector’s hedging will protect it from the worst of the drop—and that a sector notorious for continuing to produce record amounts of oil no matter the price may still have room to shake this off.
“The nature of U.S. shale production suggests that while there may be consolidation, its recovery time can be quick and a dramatic reduction on the number of wells does not necessarily result in significantly reduced production,” David L. Goldwyn, chairman of the Atlantic Council’s energy advisory group, said in a comment.
Others think the impact will merely be delayed until later this year.
“There will be a lag time in the industry reaction time due to service commitments and cash flow support from hedges,” with modest production growth already locked in for the second quarter, said Artem Abramov, head of shale research at Oslo-based consultancy Rystad. But after that, the cuts would be expected to shear back oil production through the remainder of 2020 and into 2021, he says.
For energy investors, while the perfect storm of uncertainty, depressed demand, increasing competition, and low profitability will be a major blow to the domestic U.S. industry, the oil historian Gregory Brew tweeted.
“It wont kill it entirely, but it will certainly depress investment.”
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—Coronavirus may be the straw that breaks the back of oil fracking
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fortune--2020-03-10--Coronavirus cases are  pushing Italy’s hospitals to the brink

Europe’s largest coronavirus outbreak is putting unprecedented strain on the Italian health-care system, with hospitals in the worst-affected areas close to the breaking point.
Italy went from having a handful of cases to the second-largest death toll after China in less than three weeks, flooding intensive-care units with hundreds of patients. If the government’s efforts to contain the spread are unsuccessful — and the lax enforcement of a travel ban bodes ill — experts warn that a new influx would be nearly impossible to manage.
Lombardy, the region around Milan that accounts for more than a fifth of Italy’s economic output, is by far the worst-affected part of the country. It had 5,469 cases, including 440 in intensive care, as of Monday afternoon.
Finding more acute care beds is a “race against time,” Lombardy’s top health official, Giulio Gallera, said in a phone interview. “As of now the region’s health-care system is holding up well, but if the increase in the number of infected people in need of intensive care doesn’t slow down we could have issues.”
More than 80% of the region’s 1,123 acute care beds are dedicated to coronavirus, after many other patients have been moved elsewhere and 223 extra places have been opened to cope with the emergency. About half of those are occupied, Gallera said.
Newspapers and WhatsApp groups are rife with personal accounts from doctors on the front lines of the epidemic. When new patients come in with pneumonia, a symptom of advanced coronavirus infections, doctors have little time to decide whether to assign them intensive-care beds, ventilation machines or respirators that could make the difference between life and death.
Some doctors have said that they sometimes make the call on who gets treatment based on the age of the patient. In some areas, hospitals are suspending other treatments to focus personnel on the contagion.
Specialists Conscripted
A doctor who asked not to be named because of potential repercussions painted a dire picture of the situation in a hospital in Milan. While the coronavirus is best known for causing severe disease in elderly patients, even some young people are affected, the doctor said, and without sufficient beds and ventilators, some can’t be treated.
The hundreds of patients needing treatment for pneumonia have swamped the supply of available specialists, the Milan doctor said. Physicians such as gastroenterologists, who normally focus on the digestive system, have been conscripted to help out with lung patients, and they’re still not enough, the doctor said.
Gallera said about 150 more acute care places will open up in the next week. Whether this will be enough to keep up with the spread of the contagion depends on how effective the government’s containment measures prove to be.
System ‘Overwhelmed’
“The best we can do with the quarantines is slow down the number of cases,” said Mike Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. “Italy right now from a health-care standpoint has overwhelmed its health-care system.”
On Sunday, the government ordered sweeping travel restrictions for most of the north of the country, with movement allowed only for demonstrable work reasons or medical emergencies.
While checks appeared to be slowly getting stricter, initially enforcement seemed almost nonexistent, with airports open and thousands of people traveling from their workplaces in the north to their native towns in the south. Late Monday, Italy moved to extend the lockdown throughout the country.
The fear is that those who left the north before the restrictions were expanded have taken the contagion with them, risking new outbreaks in areas where the health-care system is weaker. An Italian health ministry report from 2017 said the overall level of care in some southern regions — including Campania, where Naples is located, and Calabria — was sub-standard.
“We have a health-care system in southern regions, especially south of Naples, where we actually have very few facilities,” said Prisco Piscitelli, an epidemiologist and vice president of the Italian Society of Environmental Medicine. Their ability to cope may be “even worse with the increased number of occupied beds in hospitals and intensive-care units.”
Hospital berths are only part of the answer. Italy is also suffering from a shortage of doctors. As many as 1,500 leave the country every year after finishing their specialization, according to doctors’ association Fnomceo.
New Doctors
The government last week announced a plan to hire 20,000 new doctors, nurses and hospital employees. In the meantime, medical authorities are avoiding quarantining doctors who have come in contact with coronavirus patients, telling them to keep working unless they show symptoms of the infection or test positive.
The rest of Europe is watching closely. Maurizio Cecconi, a professor at Humanitas University in Milan and incoming president of the European Society of Intensive Care Medicine, told his fellow doctors to stock up on equipment like face masks and establish criteria for dealing with suspected cases.
“We are seeing a high percentage of positive cases being admitted to our intensive-care units — in the range of 10% of all positive patients,” he wrote in a letter to a professional organization signed along with two colleagues. “We wish to convey a strong message: Get ready!”
Cecconi said he hasn’t seen his family in two weeks as he’s been working non-stop. Getting the public to comply with the government restrictions is more important than anything doctors can do, he said.
“If people stay at home, we will avoid a catastrophe,” he said in an interview. “As doctors, we are begging you.”
More must-read stories from Fortune:
—How coronavirus is affecting the global concert industry
—Coronavirus is mutating: Chinese scientists find second strain
—Some of the most extreme ways companies are combating coronavirus
—How Europe is adapting to the coronavirus outbreak
—China’s box office was supposed to surpass North America’s this year.
—Growing coronavirus threat weighs on Apple
—Nearly half of American travelers are reconsidering their international trips due to coronavirus
Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus outbreak and its impact on global business.


fortune--2020-03-10--Stock market mayhem sees Jack Ma crowned Asia’s new richest man

The wealth destruction caused by Monday’s market collapse is reshaping the ranks of the world’s richest people.
Wildcatter Harold Hamm’s fortune plunged by almost half to $2.4 billion by the end of the day, a drop that bumped him from the 500-member Bloomberg Billionaires Index. Fellow oil magnate Jeff Hildebrand also fell off the ranking while Lukoil PJSC executives Leonid Fedun and Vagit Alekperov lost a combined $5 billion.
While energy moguls sustained the biggest shellacking in percentage terms, losses cascaded across industries and continents.
India’s Mukesh Ambani, who began the morning as Asia’s richest person, lost $5.8 billion, ceding the title to Jack Ma, who lost a comparatively modest $1.1 billion. Frenchman Bernard Arnault, chairman of luxury-goods giant LVMH, was Europe’s biggest decliner with a $4.4 billion drop. Amazon.com Inc. founder Jeff Bezos shed $5.6 billion and Berkshire Hathaway Inc.’s Warren Buffett lost $5.3 billion. Carnival Corp. Chairman Micky Arison’s stake in the beleaguered cruise line operator slid almost 20% to $2 billion.
All told, the world’s 500 richest people lost a combined $238.5 billion on Monday. That’s the biggest daily plunge since the index began tracking the number in October 2016. The losses include declines in publicly traded assets and estimated drops in the values of private companies — as is the case with Hildebrand’s Hilcorp Energy — that Bloomberg calculates using public peers. More than a half-trillion dollars has been erased from the combined fortunes of the top 500 so far in 2020.
“The near-term market focus is likely to remain on the virus’s spread across Europe and the U.S., and on stress in the financial markets,” Mark Haefele, UBS Group AG’s chief investment officer of global wealth management, said in a note to investors.
Spreading Virus
U.S. stocks ended the day down more than 7.5% in the worst day on Wall Street since the financial crisis as investors absorbed the prospect of an oil price war triggered by the breakup of the OPEC+ alliance and mounting concerns about how the spreading coronavirus will affect the global economy.
While 92% of the index entrants lost money on Monday, there were a few winners.
China’s Qin Yinglin added $536 million to his net worth as shares of his Muyuan Foodstuff Co. rose 4.3%. Li Xiting, chairman of Chinese medical equipment maker Shenzhen Mindray Bio-Medical Electronics, gained $143 million, bringing his net worth to $13.7 billion.
Two billionaires took to Twitter to urge calm amid the panic. Bridgewater Associates founder Ray Dalio advised to “look for the opportunities” and former Goldman Sachs CEO Lloyd Blankfein stressed the fundamental strength of the U.S. economy.
“Fear” may drive further losses in markets, Blankfein said, “but expect quick recovery when health threat recedes.”
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—How coronavirus is affecting the global concert industry
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—Some of the most extreme ways companies are combating coronavirus
—How Europe is adapting to the coronavirus outbreak
—China’s box office was supposed to surpass North America’s this year.
—Growing coronavirus threat weighs on Apple
—Nearly half of American travelers are reconsidering their international trips due to coronavirus
Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus outbreak and its impact on global business.


fortune--2020-03-09--Cruise ship with 21 confirmed Covid-19 cases finally docks in California

The cruise ship forced to idle for days off the coast of California because of a cluster of novel coronavirus cases aboard arrived in port Monday as state and U.S. officials prepared to transfer its thousands of passengers to military bases for quarantine or return them to their home countries.
The Grand Princess pulled into the Port of Oakland with more than 3,500 people aboard—21 confirmed to be infected with the new virus. Passengers lining the balconies waved and some left the cabins where they had been in isolation to go onto deck as the ship entered the port near San Francisco.
As it pulled under the Golden Gate Bridge, passenger Karen Schwartz Dever said “everyone was hollering and clapping as we entered the harbor.”
Workers wearing gloves and yellow protective gear placed a large tent by a platform that passengers will use to disembark. At least 20 buses and five ambulances were parked nearby, and officials have said those needing acute medical care for any reason will get off first.
The unloading will take up to three days, officials have said. How many travelers will get off the ship Monday wasn’t clear.
U.S. passengers will be flown or bused from the port — chosen for its proximity to an airport and a military base — to bases in California, Texas and Georgia for testing and a 14-day quarantine. The ship is carrying people from 54 countries, and foreigners will be whisked home.
About 1,100 crew members, 19 of whom have tested positive for COVID-19, will be quarantined and treated aboard the ship, which will dock elsewhere, California Gov. Gavin Newsom said.
For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia.
The vast majority of people recover from the new virus. According to the World Health Organization, people with mild illness recover in about two weeks, while those with more severe illness may take three to six weeks to recover. In mainland China, where the virus first exploded, more than 80,000 people have been diagnosed and more than 58,000 have so far recovered.
In an effort to stop the virus’ spread, Italy will impose travel restrictions and other strict public health measures nationwide starting Tuesday. And a combination of coronavirus fears and plunging oil prices sent stocks on Wall Street plummeting Monday.
The virus has infected 600 people in the United States — including the director of the agency that runs the airports in New York and New Jersey — and at least 26 have died, most in Washington state. U.S. Surgeon General Jerome Adams said communities will need to start thinking about canceling large gatherings, closing schools and letting more employees work from home, as many companies have done after an outbreak in the Seattle area.
Several universities have begun online-only courses, including the University of Washington, Stanford University and Columbia University. The largest school district in Northern California, with 64,000 students, canceled classes for a week when it was discovered a family in the district was exposed to COVID-19. Georgia’s fourth-largest school district, which has more than 93,000 students, closed its schools for at least one day after a teacher at two middle schools was confirmed to have coronavirus.
The Grand Princess had been held off the coast since Wednesday because of evidence that it was the breeding ground for infections tied to a previous voyage.
Passengers from the previous voyage have tested positive in California and other states. Six Canadians who were on the Grand Princess from Feb. 11 to 21 were also confirmed to have the virus.
Current passenger Laurie Miller, of San Jose, said she and her husband were told that anyone who was getting off Monday had already received a written notice and luggage tags.
“Not us!” she said in a message. “This is an absolute circus.”
The California governor and Oakland mayor sought to reassure people that none of the cruise ship passengers would be exposed to the public before completing the quarantine. Officials were trying to decide where the ship and its crew would go next.
“That ship will turn around — and they are currently assessing appropriate places to bring that quarantined ship — but it will not be here in the San Francisco Bay,” Newsom said Sunday.
The State Department warned against travel on cruise ships because of “increased risk of infection of COVID-19 in a cruise ship environment.”
Another Princess ship, the Diamond Princess, was quarantined for two weeks in Yokohama, Japan, last month because of the virus. Ultimately, about 700 of the 3,700 people aboard became infected in what experts pronounced a public health failure, with the vessel essentially becoming a floating germ factory.
More must-read stories from Fortune:
—How coronavirus is affecting the global concert industry
—Coronavirus is mutating: Chinese scientists find second strain
—Some of the most extreme ways companies are combating coronavirus
—How Europe is adapting to the coronavirus outbreak
—China’s box office was supposed to surpass North America’s this year.
—Growing coronavirus threat weighs on Apple
—Nearly half of American travelers are reconsidering their international trips due to coronavirus
Subscribe to Fortune’s Outbreak newsletter for a daily roundup of stories on the coronavirus outbreak and its impact on global business.