fortune--2020-01-08--New Laws Meant to Close Down Tax Havens and Shut Loopholes Could Have the Opposite Effect

Bed Bath & Beyond Stock Plunges on What CEO Calls ‘ Unsatisfactory ’ Fiscal Third Quarter Results

Thanks to a change in Irish law, Google in the U.S. will do something it hasn’t in years: own outright its intellectual property, including patents, trademarks, branding, and more.
For years, Google and other companies employed a legal tax avoidance strategy called the Double Irish, Dutch sandwich. Here’s how it works: Using complex multi-national structures, they transferred ownership of intellectual property to wholly owned subsidiaries in low- or no-tax regions and then licensed the material back to the rest of the company. Profits turned into “license fees” and thus avoided taxes.
One of the Irish laws that made the tactic possible expired on Jan. 1, 2020 due to international pressure from many countries—the U.S., France, the U.K., and Spain, for example—that were tired of losing tax revenue to low-tax Ireland, among other havens.
Some of the pressure came through political organizations as well like the EU and Organisation for Economic Co-operation and Development (OECD). Other efforts have been unilateral.
France went the furthest, introducing a digital tax last year, a “stick” that targeted the likes of Google parent Alphabet, Facebook, and Uber to pay up. On the “carrot side” side of things, Congress in the U.S. used the 2017 tax overhaul to create incentives for companies to repatriate overseas profits and expand U.S. operations, including job creation and investment in equipment and facilities.
However, corporate ingenuity and the law of unintended consequences blunted—sometimes completely—many of these attempts.
Best laid plans
It all comes down to, of course, money.
“Back in the 90s, the U.S. was much more cavalier about letting U.S. companies move their intellectual property offshore,” says Jay Darby, a tax partner at Sullivan & Worcester. But once American companies found that “intellectual property and money are interchangeable,” they found ways to license their own property and legally shift profits.
Companies in other countries took notice, and the race was on.
“Companies will always engage in aggressive tax strategy,” says Maureen Monaghan, a partner in the international tax practice of law firm Fox Rothschild. “They have to because if they don’t do it, their competitors are going to do it [and gain an advantage from lower costs]. And they’re run by people, and all people like to reduce their taxes.”
Such countries as Ireland, the Netherlands, and Luxembourg enabled the shifts and made money from fees and increased economic activity from all the accounting and tax work that came their way. “It was a numbers game,” says Jason Gerlis, global head of consultancy solutions for TMF Group—Americas. Those countries made their income on volume.
Eventually, elected officials on the other end of the loophole, facing challenging economic times and a dwindling tax base, began to challenge the tax dodges popping up around them in the hopes of bringing the revenue back to their countries. To remedy the situation, they needed revised laws across all countries. Soon enough, the European Commission, the OECD, and the U.S. all began to apply pressure.
“The 39 members of the [OECD] are treaty-bound to … enact the given regulatory reform,” says L. Burke Files, president of risk management firm Financial Examinations & Evaluations. Similarly, EU members must implement their own versions of European Commission decisions.
Results began to take hold around 2014. “Ireland has been an enthusiastic participant in the OECD process,” says James Farrell, head of strategic policy at IDA Ireland, a government agency that courts foreign investment. That process goes by another ancronym—BEPS, or base erosion and profit shifting. “Changes were made to Ireland’s corporate tax residence rules to…shut down known structures, such as the so-called ‘Double Irish,’ which were designed to exploit gaps in U.S. anti-avoidance rules.”
The Netherlands also reformed its rules in the face of European Commission pressure, as the TMF Group’s Gerlis notes in slightly less delicate phrasing.
“The Dutch effectively changed their legislation because they didn’t believe they could any longer get away with it,” Gerlis says.
So what happened?
The end of the sandwich
Less than a month since the end of its Double Irish, Dutch sandwich strategy, it’s unclear exactly what Alphabet’s tax strategy will be. A statement sent by the company to Fortune read: “In line with the OECD’s BEPS conclusions and changes to US and Irish tax laws, we’re now simplifying our corporate structure and will license our IP from the US, not Bermuda.” The company said over the last ten years, its “global effective tax rate has been over 23%, with more than 80% of that tax due in the US.”
But that statement has some misdirection, perhaps inadvertent, built in. Alphabet is weighting its calculation largely to before the tax changes, which dropped statutory rates from 35% to 21% and required the company to pay a $7 billion one-time transition tax.
Finding a replacement for the sandwich, as many other companies have already done, will be critical. As the company has explained in every 2019 quarterly earnings statement so far available, one of the primary reasons its effective tax rate remains below statutory levels in the U.S. is “foreign earnings taxed at lower rates.”
Apple began a transition to a new tax strategy several years ago, as revealed in the notorious Paradise Papers. The company shifted one of its subsidiaries to the Channel Island of Jersey, 12 miles off the coast of Normandy, France, which had a 0% tax rate for foreign corporations—a move nicknamed the “Green Jersey,” Monaghan says. That subsidiary owned rights to some of Apple’s intellectual property, as the BBC reported in November 2017.
The Jersey subsidiary sold the rights to another Apple Irish subsidiary, according to Monaghan, which could now license the IP both within and outside Apple. The cost of “buying” the IP would offset years of profits—which, when talking about licensing IP to Apple, were really shifted its other businesses. The Irish subsidiary will also be able to deduct interest payments to the Jersey one, which financed the transaction.
“So, you have very low-taxable profits,” Monaghan says—and lots of money being made. “By April 2018, economists estimated Apple onshored [to Ireland] $300 billion of intellectual property from Jersey in Q1 2015, apparently the largest recorded BEPS action in history.” With it shifted $40 billion in profits. “This was equivalent to over 20% of Irish GDP,” says Monaghan.
Apple did not respond to a request for comment. The company did address the 2017 story in a blog post, claiming, among other things, that “no operations or investments were moved from Ireland” and that it “pays every dollar it owes in every country around the world.” The same blog post did note that the company changed the “residency of our Irish subsidiaries.” Also, a company holding ownership of IP might not be considered an operation or investment.
Unintended consequences
While designed to raise tax revenues, the 2017 U.S. tax rules could have some unexpected—and undesired—consequences.
“The effects of the 2017 reform are still going to take a while to be measured,” Monaghan says. “The international provisions are completely new and unprecedented. Since the reform was enacted, it’s estimated that Treasury has issued a thousand pages of regulations.”
Some provisions could unwittingly do the opposite of what legislators originally intended. For example, the 2017 U.S. law created a 13.125% tax on foreign income from intellectual property—Foreign-Derived Intangible Income (FDII). Under FDII rules, companies are taxed on all income beyond a certain percent of their tangible assets, like machinery and facilities, held overseas. The more tangible assets overseas, the higher the deduction.
“There is a bit of a perverse incentive to put your tangible assets abroad” to lower the ultimate taxes on intangible asset income, says Monaghan. Some manufacturing companies could shift even more jobs and operations to other countries as a result, she notes. “Various features of the Tax Cuts and Jobs Act [of 2017], if not corrected, may actually enhance Ireland as a U.S. corporate tax haven,” Monaghan adds. It will take time to see the size of any effect.
But not everything promises a rosy future for corporations. Further progress on the OECD front is “precarious,” according to Brian Jenn, a tax partner with law firm McDermott Will & Emery and former deputy international tax counsel for the Department of Treasury. When the OECD took up digital taxes—like those of France on such companies as Amazon and Facebook—U.S. Treasury secretary Steven Mnuchin sent a letter on behalf of the Trump administration in opposition.
“That letter really froze the process,” Jenn says. “Theoretically all the countries but the United States could agree to something, but that doesn’t seem like anything more than a theoretical possibility.”
Instead of one clear set of international rules, corporations could suddenly face a world without a coherent agreement and, instead, find unilateral actions by many nations. “I think the risk is that companies will be double-taxed,” Jenn says, which isn’t what countries were suggesting.
In other words, a sandwich of quite a different sort.
More must-read stories from Fortune:
—That great 2019 S&P rally? It has big warning signs for 2020
—The relationship between geopolitical crises and market outcomes isn’t simple
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What a $1,000 investment in 10 top stocks a decade ago would be worth today
Subscribe to Fortune’s forthcoming Bull Sheet for no-nonsense finance news and analysis daily.


fortune--2020-01-08--The Sweet Nostalgia of the ‘Israel Loves Iran’ Project

This is the web version of raceAhead, Fortune’s daily newsletter on race, culture, and inclusive leadership. To get it delivered daily to your inbox, sign up here.
I recently stumbled upon this lovely TEDxJaffa talk given by Ronny Edry, an Israeli graphic designer. It’s from 2012, back when most people still felt strongly that Facebook connected people—and the relationship between Israel and Iran was fraught in familiar ways.
Edry told the story of an unusual poster he made: a photo of himself holding an Israeli flag, with his young daughter perched on his hip, over which boldly colorful text declared, “Iranians, We Will Never Bomb Your Country, We ❤ You.”
He made the poster in response to a conversation he heard at the grocery store in Israel, where the owner and customers worried about Iranian bombs coming their way. The fear: They were going to get ten thousand missiles a day reigning down on their heads.
“‘Ten thousand missiles.’ This is the context,” said Edry. “This is where we are now in Israel. We have this war with Iran coming for 10 years now, and we have people, you know, afraid. It’s like every year it’s the last minute that we can do something about the war with Iran. It’s like, if we don’t act now, it’s too late forever, for 10 years now.”
A graphic designer makes posters, so he made the “We ❤ You” poster, shared it on Facebook, and went on with his life. “Most of the time, I make posters, I post them on Facebook, my friends like it, don’t like it, most of the time don’t like it, don’t share it, don’t nothing, and it’s another day,” he said good-naturedly.
But this poster was different.
Suddenly, Erby had friends from Iran. And they were surprised and grateful. “Because you have to understand, in Israel we don’t talk with people from Iran. We don’t know people from Iran. It’s like, on Facebook, you have friends only from—it’s like your neighbors are your friends on Facebook. And now people from Iran are talking to me.”
And then he had a sudden rush of orders for posters—from other Israelis who wanted photos of themselves with the same language. So, he decided to make it a thing. “I went to my neighbors and friends and students and I just asked them, give me a picture, I will make you a poster. And that’s how it started.”
Click through to hear his sweetly funny tale—it’s definitely better in his voice—and the many, many beautiful posters he made from Israeli and Iranian Facebook messages, as well as the posters Iranian designers made in return. You’re going to want to watch all the way to the end, trust me.
Edry’s thing turned into a thing.
Enjoy this bit of hope from way back in 2012, when Israelis and Iranians swapped posters and got to know each other better, and when Facebook helped make life a little bit better for a volatile corner of the world.
Where there’s a ❤ there’s a way.
Ellen McGirt
@ellmcgirt
Ellen.McGirt@fortune.com
On Point
BAFTAs so white? The British Academy of Film and Television Arts announced its annual BAFTA award nominees yesterday, with only white actors in all the major acting categories. The #BAFTAsSoWhite hashtag was swift. “Neither Lupita Nyong’o, Jennifer Lopez, or Jodie Turner-Smith were nominated for their outstanding and challenging performances. But Margot Robbie was nominated for saying 10 lines in 'Once Upon a Time in Hollywood'? The BAFTAs are moving backwards,” tweeted activist and attorney Benjamin Crump. Click through for the full weight of the missed opportunities.
Too Fab
Economists take on racism and sexism in their profession The annual meeting of economists was held last weekend in San Diego, and there were visible signs that the scientists were facing some overdue facts. There were panels on racism and sexism in their profession; someone held “office hours” specifically to help victims of sexual harassment and abuse. But outgoing American Economic Association (AEA) president and former Federal Reserve chair Ben S. Bernanke says more is coming, including procedures for investigating code of conduct violations and punishing offenders. A 2018 report found widespread sexual abuse across the sciences, but the racial and gender gap in economics is wider than in other fields. Do you think it matters that the people who set economic policy have unaddressed issues with misogyny and race? Send incoming president AEA Janet Yellen all the power vibes, please.
New York Times
The “Bushwick Birkin” is having more than a moment The Telfar Shopping Bag is a simple but elegant carry-all tote, comes in three sizes, and is affordably priced. But Telfar Clemens, the bag’s designer, has created a fashion sensation, a “Brooklyn-based status symbol” that has been seen on the arm of celebrities like Solange and influencers on social media. The bag debuted in 2015 but didn’t catch fire until 2017, when Clemens won the top prize of $400,000 at the CFDA/Vogue Fashion Fund Awards. The Liberian-American who grew up in Queens says his clothes are “genderless, democratic, and transformative,” and accessible to people who aren’t white and rich. People LOVE the bag and the joyful buzz around it. “I have always felt super-black, like black as fuck, but I feel extra black as fuck when I wear this bag,” says Raven Baker, a Brooklyn-based video producer and social-media editor.
The Cut
Silvio Horta, creator of Ugly Betty, has died Horta was responsible for adapting the hit Colombian telenovela Yo soy Betty, la fea, into the groundbreaking series that ran on ABC from 2006 to 2010. He served as showrunner and head writer for the award-winning series, which followed the travails of Betty Suarez, a brilliant Mexican-American woman who lands a job at a fashion magazine. Series star America Ferrara expressed her shock on Instagram, adding, “His talent and creativity brought me and so many others such joy [and] light. I’m thinking of his family and loved ones who must be in so much pain right now- and of the whole Ugly Betty family who feel this loss so deeply.” Silvio died by suicide yesterday in a Miami hotel. He was 45.
Variety
On Background
Why does Puerto Rico have so many earthquakes? Turns out, the magnitude 6.4 earthquake which jolted Puerto Rico yesterday was not an aberration—since December 28, some 400 earthquakes of a magnitude of 2 or greater have been recorded in the region. Aftershocks are still continuing. Why? “There’s just a lot of complicated tectonics happening in a really close area,” Wendy Bohon, an earthquake geologist at the Incorporated Research Institutions for Seismology (IRIS) tells National Geographic. The story explains the science behind the “earthquake swarms” that characterize the island’s unique tectonic vulnerability, while noting the human cost. “These people have been through a lot,” says Bohn.
National Geographic
A “Catfish Queer” tells all Confession: I’ve never watched the television show Catfish, the MTV series about online relationships and, uh, disappointment. But this essay from Maddy Court, a writer from Appleton, Wis., offers more than a simple review. The self-described “queer spending-the-summer-in-my-hometown” sad sack who had little to do after earning her MFA sweetly chronicles a world of love, questing, and identity, and a deeply specific kind of longing. “Catfish is populated by fat queers, rural queers, poor queers, disabled queers, and queer people of color,” she begins, and their commoditized drama reveals some important truths about the world. While the show and its hosts are far from perfect, the show “has been serving diverse, bittersweet queer representation for almost a decade and it seems like nobody notices.”
Autostraddle
Poet Nikki Finney: History tells us there is always a renaissance of the arts in a society when war has been declared This is one of the many important tidbits gleaned from this interview with poet, professor, and 2011 National Book Award-winner Nikki Finney, a thoughtful and dedicated South Carolinian who has mined her life experience for rich insights. She discusses her upcoming book, Lovechild’s Hotbed of Occasional Poetry, due this year. One poem is dedicated to her father, the first black justice of the South Carolina Supreme Court. “My mother gave birth to me but my father gave birth to my sense of justice and fairness,” she writes.
Scalawag Magazine
Quote
"During bad circumstances, which is the human inheritance, you must decide not to be reduced. You have your humanity, and you must not allow anything to reduce that. We are obliged to know we are global citizens. Disasters remind us we are world citizens, whether we like it or not."
—Maya Angelou in an interview with CNN (2011)


fortune--2020-01-08--This Startup Is Creating a Massive Health Care Map and Just Raised $50 Million

What You Need to Know Before Buying CBD Oil or Treats for Your Pet

This is the web version of Brainstorm Health Daily, Fortune’s daily newsletter on the top health care news. To get it delivered daily to your in-box, sign up here.
Happy Wednesday, readers.
Komodo Health has raised $50 million in a funding round led by Andreessen Horowitz, the firms tell Fortune. Komodo, a five-year old startup, will use the money to scale up its digital health ambitions—with the ultimate aim of leveraging a health care “map” to fuel everything from more effective drug development to gleaning insights about health disparities across the country.
“Over the course of the last five years, we have taken a thesis and really put it into action,” Komodo co-founder and CEO Arif Nathoo tells Fortune. “We’ve had north of 100% year-over-year growth, but we’re not burning a ton of cash.”
That combination sparked the interest of investors focused on the biopharmaceutical space—especially those interested in leveraging health care data to improve patient outcomes while boosting company’s bottom lines.
“It was clear to me that Komodo had basically built a better mousetrap when it comes to health care data analytics,” Andreessen Horowitz partner Jorge Conde tells Fortune. “There’s a reason 19 out of the 20 top biopharma companies have already signed on to use Komodo’s services.”
Komodo takes data from hospitals, pharmaceutical companies, insurers, and other firms across the medical industry and then deploys artificial intelligence to suss out the most useful nuggets. This type of analysis could, for instance, give doctors and hospitals insights about why certain patient demographics have worse health outcomes.
“We provide this ability into millions of patient journeys in the U.S. and use that to better predict the future,” says Nathoo.
Komodo co-founder and president Web Sun says he hopes the company’s tech will one day be the equivalent of Amazon Web Services for health care. “AWS became the platform for everyone to do what they’re doing,” Sun tells Fortune.
“If there’s a way for us to shorten the cycle to insight, that’s what spells success for us. Instead of spending five years getting the data, companies can leverage our software and platform to get this information and insight much sooner.”
Read on for the day’s news.
Sy Mukherjee
sayak.mukherjee@fortune.com
@the_sy_guy
DIGITAL HEALTH
Google AI may be just as good (and even better) at spotting breast cancer as doctors. A new study published in the journal Nature (it should be noted, from Google Health researchers and a bevy of experts from Imperial College London and other universities) finds that Google's AI was able to identify breast cancer through de-identified mammograms with more effectiveness than a regular old doctor. In fact, the study found that the algorithm was able to suss out cancer with both fewer false positives and false negatives. The use of AI in radiology and image scanning appears to be the most promising use of the technology in the real world to date. (Nature)
INDICATIONS
Lung cancer deaths are falling, and drugs may be a major reason. Cancer death rates fell 2.2% between 2016 and 2017—a massive year-over-year decline driven largely by a sharp drop in lung cancer deaths, according to the American Cancer Society (ACS). One driving factor may be a new generation of drugs that specifically target lung cancer (alongside continued declines in smoking rates)—and since the data only extends to 2017, the lung cancer death rate could actually fall even more, as several treatments have been approved to tackle lung cancer in the past few years. Merck's immunotherapy Keytruda was a pioneer in this space. (Reuters)
THE BIG PICTURE
Study suggests talc powder isn't a significant risk factor for ovarian cancer. Talc powder manufacturers have been in the hot seat over allegations that popular products used for feminine hygiene may be linked to ovarian cancer. A new study from the National Institutes of Health (NIH), however, finds that there isn't a significant risk of ovarian cancer from talc use. The study took data from more than 250,000 women (a so-called "pooled analysis") about their use of talc products—although it doesn't break down exactly which products the women used. (NPR)
REQUIRED READING
Vaping Industry Gets a Minty Respite from Trump's Flavor Ban, by Associated Press
Layoffs Loom at Three SoftBank-Backed Startups, by Polina Marinova
Congress Focuses on Iran and Impeachment as Health Care Takes a Back Seat, by Nicole Goodkind
Facebook Deepfake Video Ban May Set Off 'Cat and Mouse' Game, by Alyssa Newcomb
Sign up for other Fortune newsletters.


fortune--2020-01-08--U.S.-Iran Standoff Pushes Saudi Aramco Shares into Correction Territory—and Analysts Expect it to Dr

U.S.-Iran Standoff Pushes Saudi Aramco Shares into Correction Territory—and Analysts Expect it to Drop Further

When Saudi Aramco was road-showing its record-setting IPO in November, it warned investors of a number of particularly fearsome risks. Chief among them was “that terrorism and armed conflict may materially and adversely affect the company and the market price of the shares.”
Less than a month after Aramco’s trading debut and investors are having to stomach precisely that.
The turmoil in the region since the United States killed Iranian military commander Gen. Qassem Soleimani in a drone attack in Iraq last week has driven home the Saudi oil company’s vulnerability in an unstable region, contributing to a near 12% drop in the share price since hitting a peak on Dec. 12 that briefly valued the company at more than $2 trillion.
Iran struck back for Soleimani’s killing early Wednesday, firing ballistic missiles at two Iraqi bases housing U.S. troops. Investors in Riyadh are feeling the collateral damage.
Fears that Saudi Aramco, guardian of Saudi Arabia’s vast oil wealth, could be caught up in any conflict between Iran and the United States have outweighed the boost to the oil company’s revenues from a surge in the oil price since Soleimani was killed.
Drone attacks
“I think there’s general agreement that the recent movement we’ve seen in the share price has been due to the escalation in geopolitical tensions in the region,” said Salah Shamma, head of investment, Middle East and North Africa, at Franklin Templeton Emerging Markets Equity.
The drone attacks on Saudi Aramco installations in September, which knocked out half of Saudi oil production, were “still fresh in investors’ minds,” he told Fortune. “There are assumptions out there that Aramco installations or other oil installations could be targeted (in any hostilities) so I think that is … weighing down the share price,” he said.
Houthi rebels in Yemen claimed responsibility for the September attacks, but the United States went ahead and blamed Iran, U.S.-allied Saudi Arabia’s arch rival.
Iran has in the past threatened to close the Strait of Hormuz, a key transit route for Saudi crude exports, if the country were threatened.
Cyber sabotage
Another danger cited by Saudi Aramco in its IPO prospectus was the risk of cyber attack. Back in 2012, thousands of computers at Saudi Aramco were disabled by a cyber attack that some security experts blamed on hackers working on behalf of Iran.
There could be a more traditional explanation too for the share sell-off. Some analysts contend Saudi Aramco shares were hugely over-valued to start with, and believe the steady three-week decline is only the beginning of a protracted slide.
All eyes will be on the shares again on Thursday for another reason. Tomorrow marks the end of the period during which the underwriter, Goldman Sachs, can exercise an option to sell more Aramco shares to the public to satisfy those still wanting more shares following the initial strong demand. The IPO was subscribed 4.65 times.
Analysts expect Goldman Sachs to announce on Thursday, or soon afterwards, that it has taken up the option, raising the number of shares sold to investors by 15% to 3.45 billion, creating a free float of 1.725% of Saudi Aramco shares. The market will already have soaked up those shares, so the announcement should not have a big impact on the price.
If this so-called “greenshoe” option is exercised, it will raise the value of Saudi Aramco’s IPO to $29.4 billion, smashing the previous record IPO set by Alibaba in 2014. But even that achievement won’t distract from the weaker share performance of late.
Neil Beveridge, senior oil analyst at brokerage Bernstein, said he believed the decline in Aramco’s share price was “primarily linked to valuation.”
“Our target price for the stock is 25.50 riyals which is significantly below the current stock price,” Beveridge told Fortune.
Saudi Aramco shares closed Wednesday at 34.20 riyals down 0.44%. That’s still about 7% above 32 riyal initial float price.
Only place to go is ‘down’
Bernstein last month gave Saudi Aramco shares an “underperform” rating and valued the company at $1.36 trillion, a full 25% less than its current market value of $1.82 trillion.
After the company hit a market value of $2 trillion soon after listing, “the only place to go from there was really down, and that’s what we’ve seen, so I think it’s largely profit taking,” Beveridge said.
Allen Good, an Amsterdam-based equity analyst with investment research firm Morningstar, said he believed Aramco’s shares were over-valued, although they would be supported for some time by its large base of Saudi retail investors, who have been promised a one-for-10 bonus share if they hold on to the shares for six months.
“The Iran situation probably brings back to the forefront the risk around Aramco’s production base being concentrated solely in Saudi Arabia,” he told Fortune.
Since the Soleimani attack, Aramco shares have fallen by 2.7%, a touch less than the main Saudi share index, which is down 3.3%.
Some analysts wouldn’t be surprised if Aramco shares were to fall further, perhaps even below the IPO price at some point. Morningstar has put a fair value on the shares of 26 riyals and “theoretically we’d expect it to converge with our fair value over time,” Good said.
Beveridge said that with 5 million retail investors there would be a lot of political pressure not to see Saudi Aramco’s stock drop too far. But he pointed to the precedent of PetroChina, whose shares soared after its 2007 IPO to value the company at more than $1 trillion, before falling back to be worth around a quarter of that by the end of the following year.
“The idea that just because you’ve got a lot of retail investors participating in it means it can’t go down—I don’t think that’s correct. I think it will probably trade at something of a premium to fair value. I do think ultimately that fundamentals will mean that it underperforms other global oil majors,” he said.
The IPO is the cornerstone of Saudi Crown Prince Mohammed bin Salman “Vision 2030” plan to diversify the Saudi economy and lessen its reliance on oil. But initial plans to sell up to 5% of Aramco shares on an international exchange to raise up to $100 billion were abandoned in favour of a listing confined to the Saudi stock exchange of Tadawul.
The IPO, driven by an intensive local advertising campaign, drew strong interest from individuals and institutions in Saudi Arabia and the Gulf. But Western investor interest was low because many thought the price was too high and because many had concerns about investing in the world’s biggest oil company at a time when global warming is prompting a switch to renewable energy.
More must-read stories from Fortune:
—2020 Crystal Ball: Predictions for the economy, politics, technology, etc.
—Why you actually may want to buy “bears” in a bull market
—5 CEO exits that sum up the memorable business year that was 2019
—What $1,000 in 10 top stocks a decade ago would be worth today
—Apple’s stock soared 89% in 2019, highlighting the company’s resilience
Don’t miss the Bull Sheet, Fortune’s newest newsletter on the markets and market makers.


fortune--2020-01-08--Holiday Return Deadlines Loom for Most Major Retailers

They say it’s the thought that counts, but sometimes that’s just not true.
We all get some holiday gifts that just don’t hit the target. It could be clothes that are the wrong size. It could be something that’s simply nowhere close to your style. Or it could be something you already have. Whatever the reason, you want to take it back. The question is: How long do you have?
The answer? Not much longer, in a lot of cases.
Return policies vary by retailer—and they can be especially complicated during the holiday period. If your gift was a clearance item or used, you likely won’t have the opportunity to take it back. And some stores insist upon a receipt or identification.
If you’re fairly certain you won’t have problems returning whatever the gift you’d rather forget might be, however, here’s how long you have to do so.
Retail return policies for holiday 2019
Amazon
Return deadline of Jan. 31 for purchases made between Nov. 1 and Dec. 31, 2019.
Apple
Return deadline of Jan 8 for purchases made between Nov. 15 and Dec. 25, 2019.
Bath & Body Works
“Return anything, anytime for any reason. 100% Guaranteed”
Best Buy
“Almost every purchase made throughout November and December can be returned through January 14, 2020.”
Bloomingdale’s
Most items can be returned within 365 days
Fry’s
Return deadline of January 14 for purchases made between Nov. 29 and Dec. 24, 2019.
Gamestop
Return deadline of Jan 15 for purchases made between Nov. 1 and Dec. 24, 2019.
Guess
Returns accepted within 45 days of purchase for items bought between Nov. 28 and Dec. 15, 2019.
L.L. Bean
Items may be returned within 365 days of purchase.
Macy’s
Tech accessories and Apple products purchased between Dec. 1 and Dec. 31, 2019 can be returned until Jan. 8, 2020. Jewelry, watches, small electrics, social dresses, and Backstage merchandise purchased between Nov. 1and Dec. 31, 2019 can be returned until January 31, 2020.
Marshall’s
Return deadline of Jan 23 for purchases made between Oct. 14 and Dec. 25, 2019.
Neiman Marcus
Return deadline of Jan 31 for purchases made between Nov. 1 and Dec. 25, 2019.
PetCo
Returns accepted within 60 days of purchase.
T.J. Maxx
Return deadline of Jan 25 for purchases made between Oct. 13 and Dec. 24, 2019.
Target
Most unopened items sold by Target in new condition and returned within 90 days of purchase will receive a refund or exchange. (Apple products and smart phones must be returned within 14 days starting Dec. 26.)
Walmart
Return window for products with 14- or 30- day return policies will begin on Dec. 26, if item was purchased between Oct. 24 and Dec. 25. No change to items with 90-day return windows. (Marketplace items excluded.)


fortune--2020-01-08--Missile Strike vs. Cyberattack: How Iran Retaliates

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.
After the U.S. killed top Iranian military commander Qassem Suleimani in a drone strike on Jan. 2, Iran’s leaders vowed to take revenge.
Retaliation arrived last night. In the early hours of morning local time, the Iranian military fired more than a dozen missiles at two Iraqi bases housing U.S. troops, chief Pentagon spokesperson Jonathan Hoffman confirmed in a statement. No troops were harmed in last night’s attack, President Donald Trump said at a Wednesday morning press conference, while announcing additional economic sanctions on Iran.
Until last night, speculation had run rampant about what form Iran’s potential retaliation might take. Among the most frequently cited possibilities were cyberattacks. (See all the coverage.)
Iran was in a tricky situation. It was expected to display a show of force, but not so strong that it would provoke an outsized response. Iran’s Supreme Leader Ayatollah Ali Khamenei had stipulated that retaliation must be “direct and proportional” to the U.S.’s attack, according to the New York Times. An airstrike might fall within those parameters.
“Iran took & concluded proportionate measures in self-defense,” said Iranian foreign minister Mohammad Javad Zarif in a tweet. “We do not seek escalation or war, but will defend ourselves against any aggression.” (Iranian state media reported, without presenting evidence, that 80 soldiers were killed and 200 more wounded in the strike.)
The thing about cyberattacks: They’re less showy than missiles, and they require ample preparation. “Cyber is not a magic button. It takes a lot of planning, particularly for it to be something proportional to the killing of a top leader in your country,” says Oren Falkowitz, a National Security Agency alumnus who runs the cybersecurity startup Area 1 Security. “Most of the things you can do quickly are ankle-biting or uninspiring.” (See, for instance, the recent defacement of an obscure U.S. government website.)
If Iran had hooks in critical infrastructure in the U.S. that could be turned toward destructive (or, in the worst case, lethal) ends, its hackers still might wish to hold their fire. That’s because when attackers exploit network vulnerabilities to cause damage, they are effectively burning their assets, says Jake Williams, another ex-NSA hacker who leads the cybersecurity firm Rendition Infosec. “They’re gonna want to save bullets to fire later,” he says, especially if physical warfare remains a possibility.
This isn’t to say that cyberattacks can be dismissed. The U.S. Department of Homeland Security has warned businesses to be on the lookout for Iranian cyber threats. Iranian disinformation and digital intrusions have been ramping up for months since tensions began flaring with the U.S., according to Sandra Joyce, head of global intelligence at cybersecurity firm FireEye. Some previous examples of Iranian cyber might: Its hackers are believed to have used malware to destroy tens of thousands of computers at Saudi Aramco in 2012, to have pummeled companies like Bank of America and JPMorgan Chase with so-called distributed denial of service attacks around the same time, and to have infiltrated a dam north of New York City soon after.
Iran is likely to continue trying to penetrate U.S. and other foreign businesses. Every precaution should be taken to secure networks against intrusion.
Robert Hackett
Twitter: @rhhackett
Email: robert.hackett@fortune.com
THREATS
Pick up the phone. The FBI requested help from Apple to bypass the "lock" screens on two password-protected iPhones believed to have belonged to a Saudi national who killed three people in a shooting at Naval Air Station Pensacola, Florida, last month. Apple said in a statement that it had given the law enforcement agency "all of the data in our possession." The incident echoes the FBI's attempts to compel Apple to assist in accessing the contents of an iPhone used by a terrorist in San Bernardino, Calif., in 2015.
Put the money in the bag. Hackers are holding Travelex, the foreign money exchange, for ransom. The company's websites have been down across Europe, the U.S., and Asia since Dec. 31st, the date of the alleged ransomware attack. The sites display a message that they are temporarily inaccessible due to "planned maintenance."
Don't touch that dial. Facebook is banning "deepfakes," hyper-realistic video forgeries from its websites and apps, though the company will still permit ones created for the purposes of parody or satire. Meanwhile, the New York Times got its hands on an internal memo penned by Facebook's head of virtual reality, Andrew Bosworth, urging employees not to use their privileged access to Facebook's systems to mess with President Donald Trump's reelection campaign.
Going once, going twice, sold. Consulting firm Accenture has agreed to buy Symantec's cybersecurity services business for an undisclosed sum. Intent on continuing to beef up its cybersecurity chops, Accenture is acquiring the unit from Broadcom, a chipmaker which bought the assets from Symantec in the fall for $10.7 billion. Broadcom is retaining Symantec products relating to so-called endpoint security and data loss prevention.
"Let's see who this really is." (spoken in best Fred from Scooby-Doo voice)
ACCESS GRANTED
Disinformation is a fast-growing threat. Look no further than the subterranean world of "black PR," a shady industry in which people pay unscrupulous firms to propagate fake news. BuzzFeed News and the Reporter, a Taiwanese investigative news site, teamed up to expose the manipulative marketing tactics.
Peng Kuan Chin pulled out his phone, eager to show the future of online manipulation. Unseen servers began crawling the web for Chinese articles and posts. The system quickly reorganized the words and sentences into new text. His screen displayed a rapidly increasing tally of the articles generated by his product, which he dubs the “Content Farm Automatic Collection System." With the articles in hand, a set of websites that Peng controlled published them, and his thousands of fake social media accounts spread them across the internet, instantly sending manipulated content into news feeds, messaging app inboxes, and search results. "I developed this for manipulating public opinion,” Peng [said].
FORTUNE RECON
How Close Is Iran to Building a Nuclear Bomb? by Jonathan Tirone
My Predictions for Artificial Intelligence in 2020 by Jonathan Vanian
PlayStation 4 Becomes Second Best Selling Home Video Game Console of All Time by Chris Morris
The Driverless Car Moonshot Is Over by Clifton Leaf
Viral Video App TikTok Is Here to Stay by Polina Marinova
Pharma Needs to Stop Chasing Shiny Objects and Start Embracing Practical Technology by Paul Hudson
ONE MORE THING
How—and why—do U.S. government agencies generate codenames? The methods and motives vary between the FBI, CIA, and Secret Service, as this story in Mel magazine, a men's magazine founded by the CEO of Dollar Shave Club, explains. For kicks and giggles, here are some presidential monikers: "Lancer" (JFK), "Rawhide" (Ronald Reagan), "Tumbler," then "Trailblazer" (George W. Bush), "Renegade" (Barack Obama), and "Mogul" (Donald Trump).


fortune--2020-01-08--How Neil Young’s Eccentric Online Home Was Born

Neil Young mostly recorded his first masterpiece, 1970’s After the Gold Rush, in his Topanga Canyon basement, and nearly 50 years later, his monument to his life is being honed in a garage office in Pasadena.
This quirky project, the Neil Young Archives, cost “well over a million dollars” out of pocket, his late manager, Elliot Roberts, estimated last year. Earthy and tactile yet slightly surreal, it looks like an early computer game à la Myst. Most importantly—as Young is fond of saying—it “sounds like God.”
“Some people get right into it and others find it a little challenging the first couple of times,” Young’s technology assistant, Phil Baker, admits to Fortune. “But it’s all Neil. It’s his vision.” (Young was not available to comment for this piece.)
The archives began as a physical release series in 1989 and launched as a free website in 2017, before pivoting to a subscription service in 2019. The site contains Young’s entire catalog—from his 1963 single as part of the Squires, “Aurora,” to his 2019 album with Crazy Horse, Colorado—in the highest bit rate your system can handle. Soon, Young promises, his long-shelved 1975 album Homegrown will be revealed.
“I should have shared it. It’s actually beautiful,” he said about Homegrown in a post last month.
Like everything else on NYA, Homegrown will be streamable in the highest audio resolution your system can handle. This has been a long time coming—decades, even. In their 2019 memoir To Feel the Music, Young and Baker tell the story of how they’ve been trying to save high-resolution audio for years.
“High resolution = fine screen,” Young writes in the book. “Low resolution = chicken wire.”
The seeds were planted in 1989
The first Neil Young Archives release was a truncated 1970 show with Crazy Horse, 2006’s Live at the Fillmore East. Three years later, a much more expansive boxed set arrived: Archives, Vol. 1 (1963–1972), 10 Blu-rays, a DVD, and a CD that had been 20 years in the making.
Even Young found Archives, Vol. 1 cumbersome. “Those who got it went, ‘Holy shit, what is this thing? This is insane,’” he wrote in To Feel the Music. (At press time, a factory-sealed copy is hanging out on eBay for $995.95.)
Since then, Young has steadily put out Archives releases physically (the last few 1970s-era live albums: 2018’s Roxy: Tonight’s the Night Live and Songs for Judy, and 2019’s Tuscaloosa.) But he’s always been unhappy with the limited audio quality of CDs, MP3s, and Spotify. Seven years ago, he tried to fix the problem himself.
The rise and fall of Pono
In 2012, Young told his label, Warner Music Group, that he wanted to create a high-resolution music player and download service, using a DAC (digital-to-analog converter) system to restore the luster of good vinyl.
Despite preferring high-resolution music on his own time, Steve Jobs wouldn’t integrate it into Apple devices, citing a lack of demand. Young felt this was harmful to music and began publicly calling the audio “compromised.” “You’ve got to believe that if he’d lived long enough, he’d do what I’m trying to do,” Young said soon after Jobs’ death. (In life, Jobs was furious about Young’s anti-Apple crusade: “Fuck Neil Young, and fuck his records.”)
Young wanted his music player to support 24-bit, 192 kHz files, which is leaps and bounds beyond CD quality (16-bit, 44.1 kHz)—and to some naysayers, too high quality, surpassing what the ear is capable of hearing. But as Baker lays out in To Feel the Music, the pair have basic scientific truth on their side—by its nature, an analog master contains more information than a lossy digital file.
To get his idea off the ground, Young recruited entrepreneur Mark Goldstein, software engineer Jason Rubenstein, and industrial designer Mike Nuttall. He also called up Baker, a veteran hardware developer who worked for everyone from Atari to Polaroid, designed gadgets like Apple’s PowerBook 1400 and the Stowaway folding keyboard, and wrote From Concept to Consumer, a 2008 book on how to develop products and bring them to market.
“It seemed quite interesting to me,” Baker wrote in To Feel the Music. “Of course, anything would seem interesting when it might involve working with Neil Young.”
Young’s quest to preserve high resolution audio included music player Pono. dhlovelife
Young has always been a techie at heart, captivated by classic cars and cutting-edge gadgets. In 1990 he began kicking around an idea called “DiscoChron—The Chronology of Music,” a “visual way to look at music in the context of time” that looks and works like a pinball machine. Four years later, Young cocreated Trainmaster Command Control, a mobile electronic system for model railroads, and made a website about his hobby under the name “Clyde Coil.” One section, the Hi-Rail Times, is a silly faux-newspaper sloganed “All the news that’s rail.”
Pono was his more high-profile—and high-stakes—concept to date, but it had a rough ride from design to shipment.
As Young’s recording and touring schedule took him away from his corporate duties, Pono’s company, PonoMusic, cycled through prospective CEOs, eventually finding its man in Silicon Valley investor John Hamm in 2013. Company partner Bob Stuart of Meridian Audio never delivered promised memory-saving software, according to Baker, leaving the team in the lurch.
Pono also needed to build an online storefront from the ground up—fast. (Baker compared this to “creating iTunes in six months.”) Despite a successful Kickstarter campaign and early enthusiasm from users, some of the reviews were less than kind.
Ars Technica called it “a tall, refreshing drink of snake oil.”
“Buying a Pono means paying for sounds you’ll never hear,” Slate claimed in 2015.
In May 2016, as outlined in To Feel the Music, the back end of the Pono store, Omniphone, filed for bankruptcy—and a month later, Apple bought it up and ordered it to shut down all operations. In December 2017, Pono shut down.
“I may end up going to my grave and be banging my head against my gravestone trying to get somebody to understand about what’s happening to music!” Young wrote in To Feel the Music.
Young relents on streaming
All through PonoMusic’s ups and downs, former board member Gigi Brisson had suggested a pivot to streaming. At the time, Young wouldn’t budge, a decision he later regretted.
“That was one of my biggest mistakes, not listening to Gigi,” he wrote in To Feel the Music. “She was not limited by her technical knowledge and recognized that high-res streaming would be of huge value…I was blind to that.”
During Pono’s tailspin, one of its software engineers, Kevin Fielding, bent Young’s ear about Orastream, a Singaporean high-res audio service that pioneered adaptive streaming, which detects the limitations of the listener’s audio system and sends the highest possible bitrate.
Young invested out of pocket to keep Orastream going and worked with its engineers to make alterations, calling the new version XStream. (Later, he renamed it “XStream by NYA,” inspired by Beats by Dr. Dre.) While banging his head against the wall trying to drum up XStream interest from executives, Young had an epiphany.
“Why not use it on just my own music to show that it could be done?” he wrote in To Feel the Music. “High resolution could be streamed, and I could prove it on my own turf, with my own music.”
The Neil Young Archives website is born
In 2016, Young began developing the Neil Young Archives website with project leader and archivist Hannah Johnson and Toshi Onuki, a Tokyo-based art director.
“I’m responsible for the look and feel of the site and app,” Onuki tells Fortune. “I pretty much touched every single corner of the site.”
Early on, Young asked Onuki to make NYA “[not] look like a website.” Onuki was forced to break basic rules of user interfaces and experiences and saturate the site with graphics. Coated in vivid browns and beiges, the site is the online equivalent of a comfortable leather boot.
“I have to say that Neil’s approach is not conventional,” Onuki says.
Young requested that the Neil Young Archives “[not] look like a website.” Neil Young Archives
Then it all had to work on mobile. “Figuring out how best to represent that information on a small screen, as well as make it intuitive, was very challenging,” Scott Andrew, the founder of New Wave Digital Media, tells Fortune. (He ultimately had to skip the site’s file cabinet visual, info cards, and user playlists for Android and iOS.)
Neil Young Archives was originally programmed by A Different Engine (A.D.E.), a Berkeley-based web application design firm that joined on a “friend of a friend” basis via Onuki. “I just came into work, and that was what I got to do,” A.D.E.’s former engineer, Jason Aeschliman, tells Fortune. “Which was amazing.”
A Different Engine was asked to incorporate anachronistic physical machines, like switches, needle-dials, and a keyhole, and realistic paper and metal textures throughout the UI. There are few images that Young, who was born in 1945, wouldn’t recognize as a child.
“We designed NYA with images of real analog objects I grew up with that I can relate to,” Young wrote in To Feel the Music. “I know it’s a throwback. I am too.”
“But,” he stressed, “the real meat is the sound.”
Pull any Young album from the file cabinet, flick a realistic-looking switch between its “320 [kbps]” and “master” settings, and hear the difference for yourself.
Since the 1970s, Young has directed idiosyncratic movies under the name Bernard Shakey. NYA’s Hearse Theater, which plays concert films and documentaries on a schedule, represents this side of him. At press time, the feature presentation is Hometown, a documentary of a Young 2017 solo concert directed by wife Daryl Hannah under the name “dhlovelife.”
A.D.E. programmed the Archives website up to the point of its paywall. “The winds can change quickly on that project,” Mike Ryan, the founder of A.D.E., tells Fortune. “They were expecting fairly low profit from [launching the subscription service], but we got 200,000 sign-ups in the first 48 hours.”
“I think the popularity of it has blown everybody away,” Gordon Smith, the company’s executive producer, tells Fortune. (A Different Engine is no longer involved with Neil Young Archives.)
Today, NYA is run by roughly half a dozen employees who work remotely or in “a couple of offices,” including the Pasadena location, according to Baker.
“We’re focusing on finding the archive material, cataloging it, and putting it onto the website,” Baker says. “It’s just a lot of curation that goes on day-to-day.”
‘A newspaper life’
Perhaps foreshadowed by the Hi-Rail Times, Neil Young Archives sports the NYA Times-Contrarian, a cranky newspaper focusing on music and politics. And, yes, Young usually plugs the copy into the site’s back end himself.
“I know someone that helps him occasionally, but for the most part…” Baker tells Fortune, trailing off with a laugh. “There’s no hierarchy behind it. It’s Neil.”
In his paper, Young keeps fans abreast of new Archives releases, wrings out his environmental anxieties, and writes touching tributes for loved ones, like his ex-wife, Pegi Young, and manager Roberts, who both died in 2019.
Besides, journalism runs in the family: His father, Scott Young, was a prolific Canadian novelist and sportswriter who wrote over 45 books as well as articles for Sports Illustrated, The Saturday Evening Post, The Globe and Mail, and other publications.
“I spend a lot of time on [the Times–Contrarian],” Young writes in To Feel the Music. “Perhaps living my father’s dream of a newspaper life.”
New tiers
These days, Young is thinking of putting out everything in the can at once. Last year an anonymous fan wrote a letter to the Times-Contrarian about their “Uncle Eddie,” concerned that the ailing 76-year-old won’t live to hear all of the music.
“He wants to know why you don’t just put all this material out now. Just dump it all out on the NYA website,” they entreated. “He wants you to know that he can’t buy it if he’s dead.”
“That really bums me out,” Young wrote in response. “I have been talking with our team about releasing them all here in 2020.” (This wouldn’t just mean Homegrown, but other shelved solo and Crazy Horse albums, like 1976’s Chrome Dreams, 2000’s Toast, and 2012’s Alchemy.)
“He wants to accelerate the release of a lot of content,” Baker says. “He’s got lots of people working on it in the studio and the archivists working full time.” At press time, they’re thinking of creating a special “Uncle Eddie” tier, or boiling everything into one tier for a slightly higher price.
A ripple effect
In the long run, Young wants the Archives to be more than a curiosity shop, a memory box, a time capsule. Eventually, he sees the whole planet as preserving its music like this.
“Sometimes I imagine NYA as the first step to a World Music Archives,” he wrote in To Feel the Music. “WMA Universal, WMA Warner Brothers, WMA Sony, WMA Blue Note, WMA Vanguard, WMA Folkways, each with their own little place…wouldn’t that be nice?”
A look inside the Neil Young Archives. Neil Young Archives
In the now, the music industry is quietly catching up with Young.
“He’s been influencing the streaming world,” Dan Hesse, the former CEO of Sprint who’s credited as a “sage” on the NYA site, tells Fortune. “Tidal came out with a higher resolution—still not high resolution—but higher. Then Qobuz came out with even higher still. And then the big gorilla, Amazon, came out with high-definition streaming music.” (Young appeared in an ad for Amazon Music HD in 2019.)
Shouldn’t “the big gorilla” and its ilk be seen as competitors? “Neil doesn’t think so,” Hesse says. “Neil couldn’t be more thrilled to see the ‘competitors’ bring the music to everybody. That’s why he’s doing it.”
“He was way ahead of the curve, spreading the gospel, the good news about 24-bit audio,” Dan Mackta, the managing director of Qobuz, tells Fortune. “Neil Young Archives is the realization of his dream. All he can do is put together the ultimate service with what he controls.”
“He’s demonstrating with the Archives that you can stream high-res,” Hesse says.
In “Driftin’ Back,” a 27-minute jam with Crazy Horse from 2012’s Psychedelic Pill, Young addresses how bad resolution affects his art. “When you hear my song now, you only get 5%,” he sings.
“You used to get it all!” he continues. “You used to get it all!”
But at the dawn of a new decade, Young fans are finally “getting it all”—and then some. Run your credit card, rifle through some yellowing documents, and crank a good set of headphones—and you’ll grasp the essence of a true giant.
More must-read stories from Fortune:
—Could Disney have more faith in X-Men spinoff The New Mutants than Fox did?
—What the 2020 Golden Globes tells us about this year’s Oscars
—Nicolas Pesce on his R-rated Grudge reboot
—Inside 1917: designing a World War I battlefield
—Little Women director Greta Gerwig and cast reveal how they reinvented a feminist classic
Follow Fortune on Flipboard to stay up-to-date on the latest news and analysis.


fortune--2020-01-08--‘A Complete Overload on the System.’ Congress Focuses on Iran and Impeachment as Healthcare Takes a

‘A Complete Overload on the System.’ Congress Focuses on Iran and Impeachment as Healthcare Takes a Backseat

As tensions between Iran and the United States intensify, as well as confusion over U.S. military strategy, Congress once again finds itself facing an overwhelming crowded agenda and tough decisions about what to prioritize—this time during a presidential election year.
House Speaker Nancy Pelosi (D-Calif.) announced Monday that Democrats would introduce and likely vote on a war powers resolution around Iran before the end of this week. The resolution comes in response to President Donald Trump’s recently ordered airstrike that killed Iranian Major General Qassem Soleimani.
The resolution would require congressional approval before any more military action in the region take place. It’s expected to pass the House, but flounder in the Senate.
Can Trump declare war without Congress?
While the power to declare war technically “resides in Congress,” the last time the Legislative Branch actually used that constitutional authority was during World War II. Since then, the president has slowly grabbed more wartime power.
Fed up with the power grab during the Vietnam War, Congress passed 1973’s War Powers Resolution which only allows the president to order military force:
If Congress has approved of an attack
If Congress has declared war
If there has been a national emergency “created by attack upon the United States, its territories or possessions, or its armed forces.”
The bill also requires the president to give Congress written notice of any military action within 48 hours of its occurrence and to consult with Congress before engaging in warfare “in every possible instance.”
Any debate around Trump’s airstrike will likely be about whether there was any real national emergency and whether he purposefully ignored his mandate to consult with Congress beforehand.
The president, however, has the ability to veto any legislation passed under the War Powers Resolution, meaning that Congress and Senate need a two-thirds supermajority to overturn any military action enacted by the president. In 2018, Trump successfully vetoed legislation passed under the resolution that would have stopped him from sending aid to Saudi Arabia for their fight against Yemen.
No Congress has ever been able to get the supermajority to overturn a president’s veto and order a stop to military action ordered by the commander-in-chief.
A number of other Representatives and Senators are working on provisions that deal with the War Powers Resolution that they’re asking the House to consider.
Senator Bernie Sanders (I-Vt.), in conjunction with Progressive Representative Ro Khanna (D-Calif.), has introduced a bill to defund any military action against Iran that doesn’t receive Congressional approval first.
Senator Kirsten Gillibrand (D-N.Y.) said Tuesday that she had urged Congress to consider her resolution to limit the President’s ability to conduct war to a maximum of two years.
“It is Congress’s constitutional duty to declare war,” said Gillibrand in a statement. “Congress has abdicated that duty over the last several years and it needs to retake that responsibility so we can keep America safe.”
The various wartime restrictions come as the House remains in a deadlocked battle over the rules of the forthcoming Senate impeachment trial of President Trump.
Articles of impeachment, trade, Roe v. Wade
Pelosi has been withholding the articles of impeachment from Senate in an effort to exert pressure on Republican leadership to allow for witnesses to be questioned during the trial.
Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday that he had the votes to begin hearings without having the articles in hand, sending Pelosi into an emergency meeting with her leadership team that evening to figure out her next steps.
Either way, it is incredibly unlikely the Senate will kick Trump out of office.
“This represents a complete overload on the system,” said Brad Bannon, a Democratic pollster and CEO of Bannon Communications Research. “There have already been hundreds of House bills passed with no action in the Senate, and now you can really kiss those goodbye. Things are already gridlocked. They already can’t handle what’s on their plate.”
Congress began the year with promises to tackle a bevy of important legislative issues ahead of the 2020 election including a trade deal, regulating prescription drug prices and negotiating the 2021 budget. Republicans meanwhile, presented their own legislative initiative: A request for the Supreme Court of the United States to reconsider their ruling in 1973’s Roe v. Wade which legalized abortion federally.
Bannon now doubts those Democratic initiatives will be addressed.
“The possibility of war and the impeachment trial is all Congress can deal with, and I’m not even sure they can deal with those two things,” he said. “This is going to suck all of the oxygen out of Washington.”
Impeachment vs. healthcare
After months of impeachment hearings, public perception remains largely unchanged about whether Trump should be removed from office for his alleged crimes.
According to an amalgamation of national polls by FiveThirtyEight, about 45% of all Americans supported removing the president on Oct. 1, 2019. The latest polls, on Jan. 3, 2020 found that 47% of Americans wanted Trump out, a change that falls within the margin of error. The polls also fall cleanly along party lines.
Early polling shows a similar split between Americans who support Trump’s strike on Soleimani. A HuffPo-YouGov poll found that 43% of voters approved of the strikes and 38% disapproved, with 19% still unsure.
“This is going to be a divisive issue and a big argument in Congress,” said Bannon. But, like impeachment, the debates will be unlikely to move public perception, he added.
Also, like impeachment, any bills passed by the Democratically-controlled House already have their fate sealed: They’ll likely fade away in the Republican-led Senate.
Bannon, who just recently returned from spending time on the presidential campaign trail in Iowa and New Hampshire said that presidential candidates aren’t spending much time talking about impeachment or even about limiting Trump’s ability to order strikes in Iran.
“They’re still focusing mostly on healthcare because they know that’s what’s driving voters,” he said. “When they make these appearances in early primary states, they’re not hearing about impeachment, they’re hearing about people struggling to stay afloat with medical debt.”
An October study by Beacon Research/Guardian found that the plurality of voters, at 28%, said controlling the cost of healthcare was their top priority.
“I think Pelosi is thinking that the next President will be a Democrat with a bold healthcare plan, and until then, inaction on healthcare hurts the GOP more anyway,” said Bannon.
More must-read stories from Fortune:
—Donald Trump and the power of incumbency
—How the UN’s climate efforts could change the business world
—The wealthiest members of Congress—and how they made their millions
—USPS could privatize as early as next year
—2020 Crystal Ball: Predictions for the economy, politics, technology, and more
Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.


fortune--2020-01-08--Layoffs Loom at Three SoftBank-Backed Startups

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Oh man, it’s not looking good in the land of Softbank-backed startups.
Zume Pizza, the pizza-delivery and food-logistics startup, raised $375 million in funding from SoftBank at the end of 2018, which valued the startup at approximately $2.25 billion. That was a big leap from its prior private valuation of $170 million.
In November 2018, I asked, “Now, we eagerly await to see what Zume does with this avalanche of capital. It can’t just be spent on pizza, can it?”
Well, for one, it hired a lot of people, but as we’ve learned time and time again, money can’t solve all problems. Following an executive exodus, Zume is laying off 53% of its staff, according to a source close to the situation. The layoffs are reportedly a cost-cutting measure.
Trouble is also brewing at Getaround, the car rental company that raised a $300 million Series D round led by SoftBank in 2018. In a blog post, Getaround CEO Sam Zaid said the startup would continue to invest in product and technology, while also reducing field operations and the size of several global teams. This is startup speak for: We’re eliminating jobs. “Announcing layoffs is not the news we had hoped to share in the New Year, and it was the hardest of decisions given the talented and incredibly passionate team we’ve assembled,” Zaid wrote.
The Information reported that Zaid seemed to place some of the blame on the recent struggles of its deep-pocketed investor. According to the story, “Zaid called SoftBank a ‘thoughtful partner,’ but added that the world’s largest tech investment fund has ‘had their own challenges, and it’s hard to say that doesn’t have a ripple effect across their whole portfolio.’” The Information reports the company will lay off approximately 150 employees, roughly one-fourth of Getaround’s staff.
Finally, OYO, the hotel chain that has been called “SoftBank’s jewel in India,” plans to lay off approximately 2,000 people by the end of January, according to a report in the Economic Times.
Anyway, all this is to say that many of the CEOs who gobbled up SoftBank cash are proving that the mentality of “Why not just raise more?” is a double-edged sword. I still think about what Benchmark’s Sarah Tavel told me in 2018:
“There’s a lot of strength and value to having a lot of capital, but as you know, there’s a lot of damage that having a lot of capital can do to a company. It can diffuse focus, it can cover up things that aren’t working inside it, and it can stop the leadership from understanding the mechanics of its own business.”
NEW UNICORN ALERT: I often joke that a bunch of the products and services I use end up as unicorns. There’s Rent the Runway, Glossier, StitchFix, Canva, and Calm. And now I can add ClassPass to that list. (I don’t know about you, but my imaginary portfolio is lookin’ fiiine.)
ClassPass, the studio fitness and wellness platform, raised $285 million in Series E funding at a $1 billion valuation. The company will use the capital to accelerate its international expansion, grow its corporate wellness offering and continue adding wellness activities to its platform, like facials and massages.
“This is more than we sought out to raise. We were oversubscribed,” says ClassPass CEO Fritz Lanman. “But we brought it in from two great partners to finish our global footprint.”
L Catterton and Apax Digital co-led the round, and were joined by investors Temasek.
I wrote in 2017 that ClassPass had undergone quite a bit of change in an effort to focus on profitability—it reworked its business model, discontinued its popular unlimited class option, and hiked membership prices. All of this caused backlash from users, and it’s unclear whether the company is profitable or close to being profitable, but Lanman and founder Payal Kadakia said it was ultimately good for the company’s bottom line.
Read more at Fortune.com.
Note: This story previously said Zume was laying off 80% of its staff, according to media reports, but a source close to the company told Term Sheet the number was closer to 53%.
Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com
VENTURE DEALS
- AvePoint, a Jersey City-based provider of data governance, protection and migration solutions, raised approximately $200 million in Series C funding. Investors include TPG Sixth Street Partners and Goldman Sachs.
- Indigo Agriculture, a Boston-based agricultural tech company, raised $200 million in funding. Investors include FedEx and Pacific Western Bank.
- HighRadius, a Houston, Texas-based order-to-cash and treasury management software, raised $125 million in Series B funding. ICONIQ Capital led the round, and was joined by investors including Susquehanna Growth Equity and Citi Ventures.
- Evolv Technology, a Waltham, Mass-based developer of weapons-screening and threat detection systems, raised $30 million in funding. Investors include Finback Investment Partners, Bill Gates, DCVC, General Catalyst Partners, Lux Capital, and SineWave Ventures.
- Pieces Technologies, a Dallas, Texas-based healthcare artificial intelligence and technology company, raised $25.7 million in Series B funding. Concord Health Partners led the round, and was joined by investors including Children’s Health of Dallas and OSF Healthcare System.
- The Guild, an Austin-based hospitality startup, raised $25 million in Series B funding. Investors include Maveron, Convivialite, and the Nicol Investment Company.
- Virtual Incision Corporation, a Lincoln, Nebraska-based medical device company, raised $20 million in a Series B+ funding. Bluestem Capital led the round, and was joined by investors including PrairieGold Venture Partners and Genesis Innovation Group.
- Sweepr, a Dublin-based customer care platform for the connected home, raised $9 million in Series A funding. Investors include the Amazon Alexa Fund.
- NinjaTrader, a Chicago-based provider of trading software and brokerage services to active traders, raised funding of an undisclosed amount. Long Ridge Equity Partners led the round, and was joined by investors including DRW Venture Capital.
HEALTH & LIFE SCIENCES DEALS
- Elysium Health, a New York-based life sciences company, raised $40 million in Series C equity and debt funding. GISEV Family Office led the round, and was joined by investors including Mayo Clinic Ventures, Western Technology Investment, General Catalyst, Morningside Ventures, and Breyer Capital.
- VectivBio, a Switzerland-based clinical-stage biotechnology company, raised $35 million in funding. Investors include Versant Ventures, OrbiMed, Novo Holdings, BPI France, Tekla Healthcare Investors, Inserm Transfer Initiative and Cowen Healthcare Investments.
- Eyevensys, a France-based clinical-stage biotechnology company developing non-viral gene therapies for retinal and other ophthalmic diseases, raised $30 million in Series B funding. Boehringer Ingelheim Venture Fund led the round and was joined by investors including Pontifax, Bpifrance, CapDecisif, Inserm Transfert, the Global Health Sciences Fund and Pureos Bioventures.
- TwinStrand Biosciences, a Bellevue, Wash.-based genetic sequencing technology company, raised $16 million in Series A funding. Madrona Venture Group led the round, and was joined by investors including Alexandria Venture Investments, Ridgeback Capital and Sahsen Ventures.
PRIVATE EQUITY DEALS
- Edgewater Midstream, a Houston, Texas-based provider of independent midstream solutions, raised $400 million from EnCap Flatrock Midstream and the Edgewater management team. Financial terms weren't disclosed.
- The Halifax Group recapitalized TriMech, a Glen Allen, Va.-based provider of computer-aided design and engineering software. The seller was McCarthy Capital. Financial terms weren't disclosed.
- Provation Medical, Inc, which is backed by Clearlake Capital Group, acquired MD-Reports, a Staten Island, N.Y.-based provider of electronic medical record, practice management, and report writing software. Financial terms weren't disclosed.
- NSA Industries, a portfolio company of Ironwood Capital , acquired Vitex Extrusions, a Franklin, N.H.-based manufacturer of metal extrusions. Financial terms weren't disclosed.
- Valet Living, a portfolio company of Ares Management, acquired Trojan Waste Solutions, a San Antonio, Texas-based doorstep waste and recycling provider. Financial terms weren't disclosed.
- Healthgrades, a portfolio company of Vestar Capital Partners, acquired Evariant, a Farmington, Conn.-based healthcare consumer and physician engagement company. Financial terms weren't disclosed.
- Springbrook Software, a Portland-based provider of payments software for local government, was acquired by Accel-KKR. Financial terms weren't disclosed.
IPOs
- China Railway, a state-owned rail network, seeks to raise $4.3 billion in an IPO. Read more.
EXITS
- Croft & Bender sold Astra Group Holdings, an Atlanta-based provider of general contracting and related construction services, to Equix. Financial terms weren't disclosed.
- Swander Pace Capital sold Voortman Cookies Limited, a Canada-based seller of cookies, to Hostess Brands. The deal is valued at approximately $320 million (C$425 million) in cash.
- Saw Mill Capital sold Pine Environmental Services, a Windsor, N.J.-based provider of environmental test & measurement equipment solutions. Financial terms weren't disclosed.
- WindRose Health Investors recapitalized Medical Knowledge Group, a New York-based provider of medical communication and data analysis services. The buyer was Court Square Capital Partners. Financial terms weren't disclosed.
FIRMS + FUNDS
- Platinum Equity, a Beverly Hills, Calif.-based private equity firm, raised $10 billion for its latest global buyout fund, Platinum Equity Capital Partners V.
PEOPLE
- Masha Khusid joined Drive Capital as a partner.
- Lincoln Road Global Management promoted Jagrit Rai to senior associate.
- TA Associates promoted Ethan Liebermann and Kevin Masse to managing director; and Lovisa Lander, Aditya Sharma, and Amara Suebsaeng to principal; Stefan Dandl, Jérémy Dréan, and Jessica (Cohen) Gilligan to senior vice president;
- Abris Capital Partners promoted Paulina Pietkiewicz, Edgar Kolesnik and Adrian Stanculescu to partners.
- Berkshire Partners named Matt Gooch, Saad Hasan and Ben Levy as managing directors.
- Mark Villanueva joined Union Square Advisors as a managing director.
- TCG promoted Michaela Venuti to vice president.
- Mark Satran joined AE Industrial Partners as a senior managing director.
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fortune--2020-01-08--Carlos Ghosn Seeks to Settle Scores in Press Conference After Escaping Japan

Carlos Ghosn went on the attack against Japan’s criminal justice system less than two weeks after becoming the world’s most famous fugitive with a daring escape to Lebanon.
“I was brutally taken from my world as I knew it,” the former head of Nissan Motor Co. and Renault SA said in Beirut on Wednesday, addressing a press conference for the first time since his arrest for financial crimes over a year ago. “I was ripped from my family, my friends, from my communities, and from Renault, Nissan and Mitsubishi.”
Ghosn’s flight from Japan, an escape worthy of a Hollywood spy thriller, marked the latest twist in a saga that began with his stunning arrest at Tokyo’s Haneda airport in November of 2018. Now free to speak his mind, the 65-year-old is seeking to salvage his legacy, blighted by allegations of understating his income and raiding corporate resources for personal gain at Nissan. He’s also under investigation in France.
After more than a year in Japan’s criminal justice system, including months locked in a cell, Ghosn has scores to settle. Proclaiming his innocence, he has accused Japanese prosecutors and government officials of conspiring to topple him.
Earlier, his team attacked Nissan, saying the Yokohama-based automaker had sacrificed him. “That investigation was never about finding the truth,” they said in a statement. “It was initiated and carried out for the specific, predetermined purpose of taking down Carlos Ghosn to prevent him from further integrating Nissan and Renault.”
Ghosn was facing trials that could have landed him in prison for more than a decade when, last week, he bolted to Lebanon in a private jet from Osaka’s Kansai International Airport to escape what he described as a “rigged Japanese justice system.” The Mediterranean country doesn’t have an extradition agreement with Japan.
Now that he’s slipped from Japan’s grasp, Ghosn is taking his case to the court of public opinion — an arena where he gained a wealth of experience during two decades as one of the world’s most prominent and media-savvy business leaders.
His arrest cast an unflattering light on Japan’s legal system, where prosecutors can grill suspects repeatedly without their lawyers present and enjoy an almost 100% conviction rate. Under the terms of Ghosn’s bail, the court had restricted contact with his family, including his wife Carole, with whom he was forbidden to speak without seeking permission. On Tuesday, Tokyo prosecutors pushed back, obtaining an arrest warrant for Carole Ghosn on suspicion of giving false testimony.
Nissan also went on the offensive Tuesday, saying its internal investigation in the lead-up to Ghosn’s arrest found “incontrovertible evidence of various acts of misconduct” by the former executive. Nissan pledged to take “appropriate legal action” against him for any harm caused to the company.
The carmaker has already spent more than $200 million on lawyers, investigators, and digital forensics in its investigation of Ghosn and former executive Greg Kelly, people with knowledge of the matter said, asking not to be identified because the information isn’t public. Kelly, who remains in Japan, has also denied wrongdoing.
Ghosn helped lead Nissan back from the brink two decades ago, following its rescue by Renault. It made him a hero in Japan for a time, complete with a manga, or comic series, celebrating his corporate exploits. As the alliance between Renault and Nissan prospered — bringing in Mitsubishi Motors Corp. in 2016 — Ghosn became the indispensable man at the center of the partnership.
Yet his compensation led to persistent criticism in Japan and France, and resentment grew at Nissan over the lopsided shareholder structure that left Renault with 43% of the Japanese carmaker, while Nissan owns just 15% of Renault. Given its bigger size and superior earnings performance in recent years, Nissan has sought more sway in the alliance, including a reduction in Renault’s stake.
Ghosn’s pledge to “speak freely” at the media conference has fueled concern his remarks could rekindle the mutual suspicion that has plagued relations between the carmakers since his arrest.
Emerging accounts of Ghosn’s escape while under near round-the-clock surveillance have transfixed the business world.
On Sunday, Dec. 29, he reportedly left his house in Tokyo, wearing a hat and a surgical-style mask, and took a bullet train to Osaka. That evening a Bombardier jet took off from the private-jet terminal of Kansai International Airport bound for Istanbul — with Ghosn apparently concealed in a large black case that was too big to fit into the airport’s baggage-scanning machines.
Reaching Istanbul’s Ataturk Airport, he changed planes while inside a box. The second jet took off shortly after for the brief flight to Beirut.
In Lebanon, where Ghosn grew up and has citizenship, he’s highly regarded for his business successes, and has even appeared on a postage stamp. Shortly after his arrest in Tokyo in 2018, a Beirut billboard proclaimed: “We are all Carlos Ghosn.”
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fortune--2020-01-08--Trump Announces New Sanctions on Iran Unless Nation ‘Changes Its Behavior’

President Donald Trump said Wednesday that Iran appears to be “standing down” and no Americans or Iraqis were harmed in Iran’s missile strike on two Iraqi bases housing U.S. troops.
Speaking from the White House, Trump seemed intent on deescalating the crisis, indicating that he would not retaliate militarily for the strikes. Instead, he said the U.S. would immediately put in place new economic sanctions “until Iran changes its behavior” after that country’s most brazen direct assault on America since the 1979 seizing of the U.S. Embassy in Tehran.
The attack came days after Trump authorized the targeted killing of Gen. Qassem Soleimani, the head of Iran’s elite Quds Force. Iran had pledged to retaliate, bringing the two countries closer to the brink of war.
Trump credited an early warning system “that worked very well” for the fact that no Americans or Iraqis were killed. He added that Americans should be “extremely grateful and happy” with the outcome.
He reiterated his position that “Iran will never be allowed to have a nuclear weapon” and called for new nuclear negotiations to replace the 2015 nuclear deal from which he withdrew the U.S.
Trump also announced he would ask NATO to become “much more involved in the Middle East process.”
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—The wealthiest members of Congress—and how they made their millions
—USPS could privatize as early as next year
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fortune--2020-01-08--The Number of Women in the Senate Hits a New Record

Good morning, Broadsheet readers! Payal Kadakia’s ClassPass is a unicorn, the race for Labour leader kicks off, and the number of women in the Senate reaches an historic high. Have a wonderful Wednesday.
EVERYONE'S TALKING
- And then there were 26. On Monday evening, Kelly Loeffler was sworn in as Georgia's newest senator. The businesswoman and political neophyte was appointed by the state's governor Brian Kemp (who you may recall from his 2018 race against Stacey Abrams) to fill the seat of retired Republican Sen. Johnny Isakson.
Loeffler's official entry into the Senate didn't get much press—perhaps because she will actually have to run for the seat in November, and will face a tough race if current GOP Rep. Doug Collins decides to throw his hat in the ring. (In tapping Loeffler, Kemp ignored pressure from President Trump to appoint Collins, an administration loyalist, to the seat.)
But there is an aspect to Loeffler's confirmation that's worthy of note: As acknowledged by Sens. Dianne Feinstein (D–Calif.) and Susan Collins (R–Maine), she becomes the 26th woman in the Senate—setting a new record. In a short joint statement, the legislators say: "This is the most women to ever serve in the Senate, and it comes at a time when we need more diverse voices in politics, not fewer.... It took 27 years to go from two women to 26, and we should be able to reach equal representation in the Senate much more quickly. We look forward to that day.”
In addition to helping the body achieve that historic record, Loeffler is also only the second female senator ever to represent her state. The first was Rebecca Latimer Felton, who was sworn in on Nov. 21, 1922, and whose tenure lasted one day. (In an important reminder that not all "firsts" are worthy of celebration, the Washington Post's The Lilly reports that Felton was a white supremacist: Read the full story here.)
Will Loeffler manage to hold on to seat come November? We'll have to wait and see, but regardless, let's hope that after all the votes are tallied, the record she set this week has been broken.
Kristen Bellstrom
kristen.bellstrom@fortune.com
@kayelbee
Today's Broadsheet was produced by Emma Hinchliffe.
ALSO IN THE HEADLINES
- Going, going, Ghosn. After former Nissan chairman Carlos Ghosn escaped detention in Japan for Lebanon, Japan has issued a warrent for the arrest of Ghosn's wife, Carole Ghosn. She is suspected of lying in sworn testimony about her husband's alleged financial crimes. A spokeswoman for Ghosn said she was allowed to leave that testimony last April without charges and called the warrant "pathetic." Wall Street Journal
- Class act. Studio fitness platform ClassPass raised a mega $285 million funding round—vaulting the company past a $1 billion valuation and into unicorn territory. It's the latest female-founded startup to reach the milestone, and founder and chairman Payal Kadakia (like Rent the Runway's Jennifer Hyman before her) is nearly nine months pregnant at the time of the news. Fortune
- A CES controversy. Ivanka Trump spoke at the Consumer Electronics Show in Las Vegas yesterday and highlighted the administration's work with tech companies to retrain workers. Her appearance as a keynote speaker at the trade show, which has struggled with diversity, drew scorn from some women in technology. Brianna Wu, a video game developer who is running for Congress in Massachusetts as a Democrat, tweeted that the selection was "a lazy attempt to emulate diversity." Associated Press
- The week in Warren. Sen. Elizabeth Warren debuted a new plan to roll back provisions in a 2005 bankruptcy law that made it harder for consumers to file for bankruptcy. The proposal revives an old fight with Vice President Joe Biden. Warren also got the Vogue treatment this week.
MOVERS AND SHAKERS: Pantegrion Capital CEO Alicia Syrett joins the board of NewAge Beverages Corporation. 20th Century Fox TV promoted president of creative affairs Carolyn Cassidy to president.
IN CASE YOU MISSED IT
- Ready, set, Labour. The race to choose Labour's new leader and deputy leader in the U.K. formally began on Monday. Rebecca Long Bailey, Lisa Nandy, Jess Phillips, and Emily Thornberry are among the candidates. Read up on their positions here: Guardian
- Reading list/watch list. Stacey Abrams will publish a book next summer about voting rights. (It's not her first book—remember her career as a romance novelist?) And Michelle Obama is heading to IGTV, for a series produced with ATTN on the Instagram platform that will chronicle first-generation college students' freshman years.
- Defining mortality. Are we thinking about maternal mortality wrong? Physician Chavi Eve Karkowsky argues that the current definition ignores deaths related to mental health, substance abuse, and more issues that shouldn't be considered separate from pregnancy. Slate
- On the road. LGBTQ people often face concerns about safety while traveling. So how does that affect their careers? In a survey, queer women business travelers report dealing with extra research and preparation or worries about work trips that their colleagues don't. The Human Rights Campaign advises companies to consider their employees' needs when assigning or supporting work travel. Vice
ON MY RADAR
The Zora Canon: The 100 greatest books ever written by African American women Zora
What goes into the production of a new Girl Scout Cookie brand Fortune
The high cost of having a baby in America The Atlantic
The slow horror of climate change infertility MEL Magazine
QUOTE
"I put everything I have into whatever I’m doing or thinking about at the moment. So it’s not right when people say I’m self-absorbed. I think I’m just absorbed."
-Elizabeth Wurtzel, the author of Prozac Nation. She died at 52 yesterday.


fortune--2020-01-08--This Specialty Pencil Shop Charms Everyone From Creative Professionals to Stationery Lovers

Walking into Caroline Weaver’s empire in New York City feels like stepping into an Instagram photo. It’s ironic, given that her shop is dedicated to a tool many consider to be a relic of a time gone by—a product rendered obsolete by the same invention: the Internet, which in turn gave way to Instagram.
But CW Pencil Enterprise is possibly the only pencil specialty shop of its kind worldwide.
And it turns out people are still buying pencils. “I can’t do much market research because there is no other shop [like ours],” says Weaver. “But there’s somebody in every demographic of person in the world who uses pencils and cares deeply about them.”
The paradox of leading a successful retail business in the era of all things online isn’t lost on Weaver, 29, who believes that specialty shops will stay relevant as long as their competence in their chosen specialty is kept paramount.
“If you have a specialty shop, you also have to staff it with people who just know everything about what they’re selling,” she says. “I think that’s the most important thing: We can make recommendations. We know about everything. People need to feel like they’re not being taken advantage of because of a fad or a novelty of a niche of things. It’s a serious business where serious people go to buy tools that they need or tools that they love.”
The storefront of CW Pencil Enterprise on Orchard Street in Lower Manhattan. CW Pencil Enterprise
Weaver launched as an online-only venture but decided to open a brick-and-mortar store in 2015. She eventually outgrew her first space and moved to her current one, also on the Lower East Side of New York City, in October 2017.
The fulfillment of a promise of expertise is obvious upon meeting Weaver and asking her for a pencil recommendation. “I’d ask you a few questions,” she says when prompted about her usual guidance. Those questions include, Are you right-handed or left-handed? Left-handed folks inevitably grapple with a smearing problem. Do you need an eraser at the end of the pencil?
The store advertises that it offers “the best pencils from around the world for all your graphite needs, handpicked by pencil experts.” CW Pencil Enterprise
Weaver must find a way to narrow down the over 250 pencils available in the shop during any given day. These hail from at least 15 different countries and, contrary to popular belief, not all pencils are created equal. Although the traditional wood-cased pencil has been made the same since the 1800s (graphite, clay, and water), companies around the globe have been trying to perfect the product—and define what that perfection even looks like—in recent times.
To modify the original recipe, gurus have used different woods, played around with the origin of the graphite, and even added other ingredients to the classic mixture. The NanoDia pencil, by Japanese company Mitsubishi, for example, features “diamond particles that are supposed to make it stronger and hold its point longer,” Weaver explains. The inventiveness of the Japanese is what, according to her, catapults the country to the forefront of the pencil world. “I think anyone in Germany would probably tell you that Germany [is renowned in the pencil-making universe] but, in general, among analog writing people, the [consensus] is that Japan is [on top],” she says.
CW Pencil Enterprise is a bright but minimalist pencil specialist stocking writing implements, gifts, and accessories. CW Pencil Enterprise
It should come as no surprise, then, that Weaver sees a physical store of her kind to be potentially successful only in New York or Tokyo, a city she just visited for a press conference in connection with the launch of her book in Japanese. Published in 2017, The Pencil Perfect: The Untold Story of a Cultural Icon chronicles the history of the pencil from the 17th century through today. Weaver is working on yet another book, scheduled to print in February, which will include photographs of different pencils printed alongside historical factoids about each one.
“Most pencil companies that exist now have been around for at least 100 years, and almost all of them are still family-owned,” she says. “There are all these stories to tell. It’s kind of amazing.”
That’s a lot to say about pencils, which prompts the question: What is it about the product that excites Weaver so much? CW Pencil Enterprise
Although highly trafficked, the CW Pencil Enterprise shop couldn’t exist without supplemental help from the still-thriving online store. “I think these days, if you’re going to have a successful retail store, you’re going to have to have an online presence,” says Weaver, adding 70% of all the store’s online revenue comes from international orders.
Wanting to open a second “closet-size” store solely dedicated to adhesives for quite some time, Weaver saw an opportunity to combine the two ideas when signing a lease at her current location, which granted her more space than needed to sell pencils. “We have a lot of people who come here just to buy a ton of stickers,” she says. “I would rather have one shop exactly the way that I wanted it to be than have a lot of shops [that lose] that really personal feeling.”
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fortune--2020-01-08--ClassPass Raises $285 Million—and Hits Unicorn Status

Studio fitness and wellness platform ClassPass has raised $285 million in funding from investors in Peloton and Equinox, making the company the latest female-founded startup to achieve a $1 billion unicorn valuation.
Founded in 2013 by Payal Kadakia, who now serves as executive chairman, and currently led by CEO Fritz Lanman, ClassPass raised the mega-round to accelerate its international expansion, grow its corporate wellness offering, and continue adding wellness activities, like facials and massages, to its existing studio fitness markets. “This is more than we sought out to raise. We were oversubscribed,” says Lanman. “But we brought it in from two great partners to finish our global footprint.”
This Series E round was led by L Catterton and Apax Digital, with participation from existing investor Temasek. L Catterton is known for its investments in Equinox Holdings and Peloton and as the former owner of Xponential Brands, which includes Pure Barre. “We are confident that ClassPass is poised to grow into one of the most prominent wellness brands of the new decade,” Marc Magliacano, managing partner at L Catterton’s Flagship Fund, said in a statement. Magliacano will join ClassPass’s board of directors, as will Apax Digital managing partner Daniel O’Keefe.
After a recent expansion throughout Europe, ClassPass operates in 28 countries. In the past year, the company has signed 1,000 employers, including Etsy, Facebook, Gatorade, Glossier, Google, Morgan Stanley, Southwest Airlines, and Under Armour, to its corporate wellness program, an alternative to employer-subsidized gym memberships.
ClassPass has struggled to land on a sustainable business model. When it launched in 2013, the startup offered a $99-a-month membership that provided access to an unlimited number of fitness classes in New York. The company repeatedly raised prices before introducing a credits-based system, which it overhauled last year to incorporate fluctuating class prices based on the studio’s availability and demand. Consumers now pay between $19 and $199 a month for between 10 and 130 credits that can be redeemed for classes.
Lanman and Kadakia say that the company has cleared those hurdles, and that ClassPass is growing its category and potential markets. “Markets that three or four years ago we didn’t think would work, like Manila, Bangkok, or Kuala Lumpur, now have the best studio fitness partners we’ve seen,” Lanman says. To continue its international expansion, ClassPass will look to add more cities throughout Europe and to enter central and South America.
The unicorn valuation follows another recent trend, too. Kadakia—like Rent the Runway’s Jennifer Hyman when her company reached this milestone last year—is nearly nine months pregnant. “We’re sending the right message, making sure people understand it’s possible,” Kadakia says of the timing.
“We’re excited and proud as a female-founded company,” Lanman adds, “to achieve this valuation milestone, and to be the first of the 2020 decade.”
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