fortune--2020-06-05--What is Genius Brands? The little-known stock rose over 2,000% in the past month

Genius Brands International, a children’s media company, has seen its stock skyrocket an incredible 2,000% in the past month. But upon news of a stock sale on Thursday, the company lost a winning streak with investors.
The media company produces and markets animated children’s shows and other brands, including Rainbow Rangers on Nick Jr., Llama Llama on Netflix, and Stan Lee’s Superhero Kindergarten, voiced by Arnold Schwarzenegger, soon on Amazon Prime and Alibaba.
The company’s stock has seen a massive surge since May 1, and volume has been high amid a flurry of announcements. One catalyst? In May, Genius Brands said on June 15 it would be launching a network called Kartoon Channel, which CEO Andy Heyward described in a letter to shareholders as “‘Netflix for kids,’ except it is free,” that would be available on Apple TV, Roku, Amazon, and other platforms. The company also announced it would be selling toys for its show Rainbow Rangers, developed with Mattel, at Walmart this summer.
The Beverly Hills–based company has also announced four stock sales in May (including a $9 million direct offering to shareholders on May 18). Though the stock jumped 97% from Tuesday’s close to Wednesday, it broke its bullish streak Thursday after Genius Brands announced the company had registered a sale of up to 60.1 million shares by stockholders. By the close on Thursday the stock was down over 13%, closing at $6.86 per share.
“We are not selling any securities in this offering, and we will not receive any of the proceeds from the sale of shares of our common stock by the selling stockholders,” Genius Brands said in a Securities and Exchange Commission filing.
While investors have obviously responded well to the news releases in the past month, the stock has become a favorite among short-sellers—and has also drawn the ire of short-seller Citron Research, which tweeted Thursday, predicting the stock would go to “$1…fast.”
$GNUS to $1…fast The lowest form of retail investor. Consider: LTM $GNUS rev $5 mil mkt cap $800 mil compare to leader WildBrain (teletubbies) LTM revenue of $332 million mkt cap $175 mil Not to mention massive dilution at $GNUS. Stock Promotion — Citron Research (@CitronResearch) June 4, 2020
The stock had, until recently, been out of compliance with the Nasdaq’s rule for stocks to trade at no less than $1 per share, trading at $0.31 on May 1, but announced on May 28 that it had regained compliance—narrowly avoiding being delisted—by trading above $1 for 10 days straight.
It seems some investors, at least, weren’t too happy to have missed the rally on the way up.
https://twitter.com/murphyferguson/status/1268230556225024000?s=21
Genius Brands’ stock trading was halted on the Nasdaq numerous times on Wednesday and Thursday amid volatility.


fortune--2020-06-06--New York City’s lockdown is costing $173 million per day. Is it still worth it?

Has the market lost its mind ?
Probably .
But there ’ s a slim chance that equities are entering @ @ @ @ @ valuations

The coronavirus crisis is shrinking New York City’s economy on a scale far more vast than the squeeze on any other U.S. metropolis. The Big Apple so exceeds the rest of urban America in damage suffered mostly because it’s the epicenter of the outbreak and also because an extremely high proportion of its workforce is employed in restaurants, bars, hotels, theaters, and retail, all businesses hyper-vulnerable to the collapse in tourism that has pounded the world’s most visited destination.
Still, New York isn’t just getting hit hardest because of the virus’s big early onslaught and the mix of fragile industries. The New York State and City governments are helping sharpen the sharpest-of-all contractions by imposing the toughest, tightest, longest-standing shutdown in America.
The state and city are sticking to the latest-starting, most extended reopening schedule in the nation even though New York began making astounding gains in the reduction of COVID-19 cases in mid-April, and came extremely close to satisfying nearly all the high hurdles for a reboot weeks ago. That ultracautious approach may well be the right choice for saving lives and preventing another spike in infections.
It’s worth asking: How much of a bite is the lockdown taking from the previously thriving New York economy? And how much “bang for the buck” is the city getting measured in the commerce it’s sacrificing for what look like relatively small improvements in health metrics?
The city and state maintained a strict shutdown as the city closed in on all the metrics for reopening, so the economy has already shouldered significant extra costs to reach small improvements. The authorities are also keeping the most expensive restrictions in place for at least another five weeks, and probably a lot longer, although the city has hit all the targets, and is on course to ace most of them.
We don’t know how much tragedy the city avoided in fewer hospitalizations and deaths in the past few weeks as the metrics showed only incremental gains, or how much the slow easing will safeguard the health of its 8.4 million residents. There is certainly no way to put a price on saving a human life. But unemployment, and economic pain and anxiety have a cost too, and it’s worth running the numbers showing how the deadweight from the lockdown is crushing the size of New York’s economy and punishing employment.
As we’ll see, it’s impossible to put a number on the extra load caused by stretching out the initial full lockdown, and requiring a long schedule for reopening that could ban restaurants from seating customers indoors until July or even later, although the State will allow outdoor dining as early as June 22. Clearly, that amount is a relatively small addition to what a shorter lockdown would have exacted. But it’s still not insignificant, because the overall burden is so gigantic. We’ll get to detailed numbers in a moment. But here’s a look at the size of that burden––you may want to take two deep breaths and a swig of scotch before reading on. Fortune estimates the stoppage’s total hit to the New York economy for 2020 is $63 billion, or $173 million a day. New York’s bill per resident is twice as high as that facing the rest of America west of the Hudson River.
On a personal note, I’m a New Yorker, a resident of the Chelsea neighborhood north of Greenwich Village. I’ve been awed as the streets previously emptied by coronavirus have in recent days been replaced by thousands of protestors marching against police brutality in the wake of the George Floyd’s death. New Yorkers have taken masking and social distancing relatively seriously to this point, and it’s unclear what effect the recent protests will have on New York’s caseload or lockdown measures, at least from a disease prevention standpoint.
What I and some economists are pondering however, is the “marginal” benefit the state and city are achieving by leaving heavy restrictions in place so much longer than other cities, and at what cost. That cost obviously isn’t anything like the full $173 million a day, since an unfettered reopening wouldn’t come close to restoring New York to last year’s dynamism. But it’s still big.
New York reached most of its reopening metrics weeks ago
Gov. Andrew Cuomo ordered a full shutdown on March 20, then established four separate phases for reopening that apply to all of the state’s 10 regions, including for New York City. Businesses with a low risk of infection are permitted to resume operations in the earlier phases, followed by more vulnerable sectors. Each phase must be in place for at least 14 days before the region can move to the next phase. If infections spike during the designated two-week period, the state can extend the interval before the next phase begins until the outbreak recedes.
New York City is scheduled to begin phase one on June 8, when construction projects and manufacturing businesses may reopen, and retailers are free to provide goods such as shoes and electronics for either curbside or in-store pickup. In phase two, people can visit real estate offices, car showrooms, hair salons, and a number of other professional services sites, and return to work in office buildings.
It isn’t until phase three that restaurants for dining in, malls, and in-store retail will reopen, and all theaters and conference venues must remain shuttered until phase four. Hence, the earliest the city’s stores and restaurants can reopen is July 8. Of course that date could be pushed back for weeks, and neither the city nor the state has established guidelines for restaurants or shopping, although Mayor Bill de Blasio has talked about imposing strict limits on the number of seats that can be occupied in eateries. By contrast, Georgia opened restaurants on April 27, followed by Texas on May 1, and Florida followed on May 15.
New York State established seven requirements for reaching phase one, and the city set three of its own. It’s worth noting that the city has either satisfied, or come extremely close to satisfying, all of these benchmarks for weeks. By early May, the city had met five of the state’s seven criteria, including both a 14-day decline in hospitalizations and hospital deaths, and provision of sufficient testing, and two of the city’s three standards, fewer than 200 hospital admissions per day, and a less than 15% daily rate of infection, a bogey it reached around May 5.
On two state standards, having sufficient capacity to make at least 30% of hospital beds and ICU beds available, New York City was just a shade short for weeks before reaching the benchmark in late May. For example, on May 4, it hit 26% in hospital beds and 21% in ICU beds, and by around May 18, it was regularly registering 28% or 29% in both categories. The one city regulation where it lagged was “fewer than 375 critical care cases in public hospitals.” Yet by mid-May, the number was already in the low 400s.
The one out of the 10 metrics where the city was far off the mark until recently: new hospitalizations of less than two per 100,000 residents, meaning around 84 new admissions per day. On May 4, that number was more than twice the limit, but it was falling fast, and by May 18, hospitalizations per 100,000 had fallen to 1.8.
Put simply, the city had satisfied six of the 10 criteria by early May, met a seventh by mid-month, and by that point was within a few percentage points on two others and maybe 50 critical care patients over the limit on the final requirement. It’s also important to note that New York City is no longer an outlier in new cases. According to city statistics, it’s now averaging fewer than 600 new cases per day, or six per 100,000, and between 4% and 5% of tests are proving positive. By contrast, the nation outside of New York is registering about 6.8 positive new readings per 100,000 tests, and the positivity rate is also about 5%.
The pandemic is ravaging employment and shrinking the economy
The two areas share a daunting theme: Both employment and the economy are faring far worse than in the rest of the U.S. In 2019, New York added 100,000 jobs, raising the rolls by a healthy 1.8%, and its unemployment rate stood at 4%. Retail and leisure, and hospitality, are particularly big employers. Combined, the Big Apple’s restaurants, bars, and hotels provide jobs for 800,000, equal to the rosters for professional and business services and health care, and twice the workforce in finance.
Those eating, drinking, and tourism venues are the pandemic’s bull’s-eye. The Independent Budget Office (IBO), a city agency that produces excellent forecasts on its economy and budget, predicts a staggering reduction of 474,000 jobs from the fourth quarter of 2019 to the close of 2020, shrinking the job base by 10.1%. About 150,000 of those losses are coming in retail, and another 120,000 in leisure and hospitality. All told, the IBO expects New York’s unemployment rate to peak at around 11.9% in the second quarter of 2021, far above its prediction for the U.S. of under 10%.
Moving to the impact on the city’s economy, the dollar decline in output isn’t an easy number to find, but it’s important. Neither the city nor the state provides an estimate for the city’s GDP, or the output of goods and services comparable to a country’s national income. I was able to approximate the figure from data provided by the U.S. Department of Commerce, which gives GDP for every county in America. According to Commerce’s Bureau of Economic Analysis, New York City’s GDP is approximately $900 billion; I was able to confirm that figure with experts on background.
Once again, the damage to New York’s GDP is much bigger than for the rest of America. The reason is twofold. First, New York produces far more dollars in goods and services relative to its population and number of businesses than the nation as a whole. New York’s GDP per capita is over $105,000, compared with $67,000 for the U.S. overall. “New York has a greater concentration in high-output industries such as finance, professional and business services, and health care than, say, a Midwestern city with strong dependence on manufacturing,” says George Sweeting, the IBO’s deputy director.
Second, the fall in output is much steeper than the nation’s average. Even though bedrock New York industries such as banking and technology haven’t seen a big drop in business or sweeping layoffs––their workforces are proving extremely productive from home––the fortunes of retail, and leisure and hospitality encompassing restaurants and bars weigh heavily. According to IBO, those two sectors account for 17% of all of New York’s wages, exceeding finance at 10% and equal to professional and business services.
The hit to hosting and entertaining is so devastating that the overall damage exceeds America’s norm. A report prepared for New York State by Boston Consulting Group, N.Y. COVID-19 Preliminary Economic Impact Assessment, forecasts (without citing a dollar number) that the city’s GDP will drop by 7% in 2020. That’s 30% more than the federal government’s estimate of a negative 5.4%.
By my estimates, a 7% decline would shave that $63 billion from New York’s GDP this year. That amounts to $7,500 for every resident in the city, although not nearly all of that drop is accounted for by wages; a large portion is also lost profits and investment. The pandemic is shrinking GDP across America by only half that amount, around $3,900.
Everything about New York is outsize, and, unfortunately, so are its losses from COVID-19. Whether the city and state drove those costs higher without getting much extra improvement or safety in return will be the subject of many studies in years to come. It’s a question that right now has no answer. But it’s worth asking.


fortune--2020-06-06--A ‘golden goose’ loses its luster: Why Beijing is willing to risk Hong Kong

In 1984, when British Prime Minister Margaret Thatcher agreed to return Hong Kong to Chinese sovereignty in 1997, ending 156 years of British rule, architects of the accord assured residents that communist leaders in Beijing would find it in their best interest to preserve the colony’s freedoms.
Were Hong Kong’s new overseers to encroach on the city’s legal system, freewheeling financial markets or unfettered press, it was often argued, they would risk “killing the golden goose”—whose shiny eggs enriched Chinese and foreigners alike.
And for decades, that assumption held true. Hong Kong prospered under a curious arrangement known as “one country, two systems.” Troops from the People’s Liberation Army marched across the border and took up residence in garrisons around the territory, including one overlooking Victoria Harbour. But they remained mostly out of sight. Hong Kong boomed as a kind of half-way house, whose residents understood China’s language and culture but also spoke English and operated according to British laws and financial traditions.
Hong Kong banks and family businesses financed factories that sprang up along the Pearl River Delta in neighboring Guangdong province. Hong Kong’s port handled mainland export cargo. Foreign businesses flocked to the city to open regional headquarters. And as mainland businesses matured, the Hong Kong stock exchange helped them raise billions in new capital from global investors.
The city set its own tax rates and even used its own separate currency. Hong Kong residents were permitted civil liberties unimaginable across the border.
But Hong Kong’s golden goose has lost its former luster—at least in the eyes of Chinese President Xi Jinping. A vote in May by China’s National People’s Congress to approve a sweeping new security law for Hong Kong, bypassing the city’s legislature, makes clear that China’s current leadership is determined to rein in Hong Kong’s independence even if it jeopardizes the city’s role as a global financial capital.
Shrugging it off
The stated aim of Beijing’s national security law is to prevent and punish acts of secession, subversion, terrorism or foreign interference in Hong Kong affairs. But critics have decried it as a way for China’s central government to crack down on protests that have engulfed Hong Kong for months, assert influence over the city’s independent judicial system, and roll back liberties like the right to protest, free speech, and an open press.
Communist Party delegates on May 28 attend the closing session of the National People’s Congress, at which a new draft security bill for Hong Kong won near-unanimous approval. Kevin Frayer—Getty Images
The day after Beijing announced the new security law, Hong Kong’s Hang Seng Index plunged 5%, its biggest drop in five years. The U.S., Britain, Canada, and Australia issued a joint statement condemning the proposal. U.S. Secretary of State Mike Pompeo declared that he can not certify to Congress that Hong Kong continues to enjoy a “significant degree of autonomy” from mainland China. Days later President Trump vowed to revoke special trade privileges the U.S. has conferred on Hong Kong since 1992.
Hong Kong’s special trade status currently excludes the city from U.S.-China trade policies, meaning, for instance, that Hong Kong is not subject to U.S. tariffs that were levied on Chinese imports in the trade war.
The U.S., Trump said, would also “take necessary steps to sanction [People’s Republic of China] and Hong Kong officials directly or indirectly involved in eroding Hong Kong’s autonomy.”
Yet apart from blustery denunciations of Trump’s press conference in China’s state media, Beijing has shrugged off U.S. threats. A spokesperson for the Ministry of Foreign Affairs of China in Hong Kong said in a press conference Wednesday that the law will have “no impact whatsoever on Hong Kong’s high degree of autonomy, the rights and freedoms of Hong Kong residents or the legitimate rights and interests of foreign investors in Hong Kong.”
A new flock
One reason for this relative indifference is that Hong Kong plays a far smaller role in China’s economy today than it did in 1997. The city’s GDP accounts for less than 3% of China’s total economic output today, down from more than 18% before the handover.
In a sense, China has hatched and grown a flock of new geese. Hong Kong is now China’s fourth-largest city by GDP after decades as China’s most prosperous, trailing Shanghai, Beijing and neighboring Shenzhen. Hong Kong’s shipping port, once the world’s busiest, slipped to eighth place last year, eclipsed by ports in other Chinese cities including Shanghai, Ningbo, Shenzhen, Guangzhou, and Qingdao. Traffic in Shanghai alone exceeded 43 million twenty-foot equivalent units, more than double the 18 million TEUs handled in Hong Kong.
From the 1980s through the early 2000s, Hong Kong’s port was the gateway to and from mainland China, and flourished as the mainland shipped more goods to the rest of the world. The development of large container ports on the mainland, however, allowed other Chinese cities to ship their goods abroad directly and reduced the importance of Hong Kong as a middleman.
What’s more, Beijing alone now boasts two airports that are larger than Hong Kong’s. Shanghai has a bigger Disneyland. Beijing, Shenzhen, and Huangzhou are home to multi-billion dollar tech giants—such as Baidu, Tencent, and Alibaba, respectively—for which there is no equivalent in the former colony.
Hong Kong also has lost its monopoly on technical expertise as Beijing has made concerted efforts to retain its most promising talent.
In 2008, the Chinese government launched a policy called the Thousand Talents Plan to lure Chinese nationals studying and working overseas back home. This plan sought to reverse mainland China’s trend of losing its top research scholars to opportunities abroad, and has returned some 6,000 people each year to China. At the same time, over the last decade, more Chinese students attending foreign universities are choosing to repatriate each year, drawn home by a strong Chinese economy. In 2011, China sent 339,700 students abroad and welcomed 186,000 students back home after they had completed their studies. In 2018, China sent 662,000 students abroad and 519,400 came back, according to China’s Ministry of Education.
Yu Yongding, a prominent Chinese economist, argues that the 2008 global financial crisis marked a crucial turning point in China’s reliance on Western capital markets and Hong Kong’s role as a gateway to global investors. The financial crisis was a wake-up call for China to ratchet up efforts to build its own financial centers outside of Hong Kong that could support the country’s transition to a more consumption-oriented economy.
The plan started with Shanghai.
All eyes on Shanghai
In the wake of the crisis, China’s leaders announced an initiative to transform Shanghai into a global financial hub by 2020, promising major infrastructure investments into the city’s port and transportation system, as well as tax incentives and a host of market liberalization measures to attract foreign capital and boost the city’s stock exchange.
At the time, China’s premier, Wen Jiabao, seemed to realize that these measures would threaten Hong Kong’s status as the country’s financial center. He admonished Hong Kong to “more vigorously enhance its competitiveness in international finance and shipping, otherwise it will fall behind.”
An aerial view of the Yangshan Container Port in Shanghai, China on May 14, 2020. Shipping volume at Shanghai’s port has surged in recent years, lessening the country’s dependence on Hong Kong’s hub. Feature China/Barcroft Media/Getty Images
In the last decade, Shanghai’s stock exchange has grown into one of the largest in the world, and its market capitalization now even outpaces Hong Kong’s.
Yet foreign business executives still see Shanghai’s exchange as hamstrung by excessive government control and its reliance on the RMB. Hong Kong’s relative independence from such oversight is a main reason its exchange remains a more attractive destination than Shanghai for foreign capital, as is its U.S. dollar peg. Hong Kong’s exchange has been the world’s top IPO destination in seven of the past 11 years.
Xi may have concluded that, even if the dream of transforming Shanghai into Hong Kong eludes him, it is enough for him to remake Hong Kong in the image of Shanghai.
‘Just another Chinese city’
Indeed, Xi and his allies seem far more willing than any Chinese leader since Mao Zedong to trade away growth for the sake of greater stability and control.
Xi’s predecessors might have taken a more “pragmatic view” on resolving the Hong Kong protests and allowed the city a greater degree of autonomy, said Steve Tsang, the director of the SOAS China Institute in London. “After Xi became leader in 2012 I think he took a much harder-line interpretation” of Beijing’s dealings with the former colony, Tsang said.
In retrospect, the passage of the security bill appears part of a carefully considered strategy to take a more forceful approach in dealing with unrest in Hong Kong, even if it puts Beijing on a collision course with Washington. Critics of that approach warn that Xi risks rendering Hong Kong’s unique hybrid model into “just another Chinese city.” But that appears to be an outcome Xi can live with and may, in fact, prefer.
Pro-democracy protesters march on a street on December 8, 2019 in Hong Kong. Beijing’s new national security law is seen by critics as an effort to quell dissent in the city. Anthony Kwan—Getty Images
Last November, pro-democracy parties in Hong Kong won landslide victories in district council elections, an outcome that caught Beijing by surprise. Ma Ngok, a professor of government at the Chinese University of Hong Kong, argues that, as the odds that Hong Kong’s legislature would approve pro-Beijing policies deteriorated, Xi and his allies reversed tack, and began preparations for using the national parliament to enact the security law.
To lay the groundwork for that new strategy, Ma says, Xi appointed trusted officials to top government posts that handle Hong Kong’s affairs. In January, Xi named Luo Huining, who helped carry out Xi’s anti-corruption campaign, as the new director of the Hong Kong Liaison Office, the most senior Chinese Communist Party official in the city. In February, he appointed Xia Baolong, a close ally with experience strengthening party supervision of Christian churches in the eastern Chinese province of Zhejiang, as head of the cabinet-level Hong Kong and Macau Affairs Office.
Autonomy as a necessity?
Many global experts have warned that the new security measures could trigger an exodus of foreign businesses from the city, with some companies shifting operations to Singapore or Tokyo. Already thousands of Hong Kong residents are preparing to emigrate from Hong Kong as the laws take effect. Wealthy residents have reportedly begun moving their funds to other markets in recent days on concerns the new legislation will allow Chinese authorities to seize their wealth. Some 30% of American businesses and at least one prominent Japanese investment bank have signaled their intent to scale down operations in Hong Kong in response to the law.
But many foreign businesses, especially those in the finance sector, may see the new security rules as irrelevant to their operations in Hong Kong. Michael Spencer, Deutsche Bank’s Asia Pacific chief economist, recently told the Financial Times that he doesn’t expect the new law to significantly affect his bank’s operations in Hong Kong. “There may be added scrutiny on payments to Hong Kong, but fundamentally we do not see a reason today to expect any restrictions on capital flows between the U.S. and Hong Kong,” he said.
In some ways, the heightened tensions between the U.S. and Beijing, including the rift over Hong Kong’s economy, may provide a boost to Hong Kong’s capital markets. With U.S. lawmakers pressing for tighter disclosure rules for the nearly 200 mainland companies listed on U.S. exchanges, some of these companies, particularly China’s state-owned enterprises, may opt to exit American exchanges as the friction between Washington and Beijing rises.
Already venture capitalists are warning the Chinese tech companies in which they invested to avoid U.S. listings. Major Chinese tech companies like e-commerce giant JD.comand NetEase, a Chinese online gaming behemoth, are now pursuing secondary listings on Hong Kong’s exchange.
For now, Xi and his allies seem less intent on preserving the golden goose than on keeping their ducks in line.


fortune--2020-06-06--Step aside, gents. Lagarde and Merkel take the lead in rebuilding Europe’s economy

Europe’s monetary and fiscal titans are finally moving in lockstep as a wave of German stimulus buttressing additional central-bank easing heralds the prospect of a new era of policy coordination in the region.
Those measures to aid the economic pickup from the coronavirus crisis, announced within half a day of each other in Berlin and Frankfurt, followed a groundbreaking shift toward creating a European recovery fund in Brussels supported by joint borrowing.
Germany needed to act “courageously and decisively,” Chancellor Angela Merkel told German broadcaster ARD in an interview late Thursday as she defended the government’s unprecedented spending spree. “Luckily in the good times we have acted in a way that enables us to do this now.”
Each initiative is already substantial, but combined they’re quite the show of force. They also suggest that Europe, which has long struggled to find common ground over economic policy, is more than ever exhibiting a sense of collective purpose.
“The shift in policy making at the European level has been tremendously significant,” said Neville Hill, chief European economist at Credit Suisse in London. “It’s not only capable of allowing the euro-area economy to recover well from the near-term crisis, but it does raise the prospect of a better, and a better-balanced, policy framework in the European Union once it’s recovered.”
At the center are two women who can draw on unique experience of prior financial market turmoil. Germany’s long-serving chancellor oversaw two days of tense negotiations to clinch a 130 billion-euro ($147 billion) stimulus push, after Merkel brought her government round to sharing its fiscal might to back the EU’s new borrowing tool.
Meanwhile, European Central Bank President Christine Lagarde, a former French finance minister and International Monetary Fund chief, has kept her institution at the forefront of crisis firefighting, while bluntly telling governments that it can’t do the job alone. Policy makers expanded bond purchases by 600 billion euros on Thursday, and could still add to that in future.
“The ECB is acting much more aggressively than it has ever done before, and so is the German government,” said Nick Kounis, an economist at ABN Amro in Amsterdam. “The policy response has been much more rapid and coordinated and focused compared to the global financial crisis.”
Stimulus Salvo ECB unveiled more easing action on Thursday Emergency bond-buying increased to 1.35 trillion euros
Program horizon extended until June 2021
Maturing proceeds will be reinvested at least until end of 2022
Some of the debt the ECB will buy will be German — conveniently issued to pay for the country’s new stimulus. That fiscal-monetary connection is already well underway in countries such as the U.K., where the central bank and government have emphasized their coordination.
A mark of success for euro-area officials came in the form of Italian 10-year bond yields, which dropped to the lowest level in two months on Thursday. That narrowed the spread over German debt that’s long been a warning signal for officials. It had spiked in March, when Lagarde mistakenly suggested the ECB wasn’t interested in keeping it in check.
The emergency that has provoked Europe’s economic actors into changing their ways remains pressing. Lagarde said on Thursday that the region’s contraction in the second quarter will be “unprecedented” — leading to a near 9% slump this year.
“An ambitious and coordinated fiscal stance remains critical,” she added.
57 Measures
Germany — the region’s biggest economy — is set to weather that better than partners such as Italy, though officials in Berlin still anticipate the worst loss of output since the aftermath of World War II.
With that in mind, Merkel’s stimulus exceeded expectations. The package, including 57 measures from a sales-tax cut to a bonus for parents, was tailored to ensure as wide a reach as possible.
Such German efforts are turning a page for the country after years of balanced budgets, driven by an orthodoxy of fiscal rectitude. They also mark a faster response than in 2009.
“With the pandemic under control and substantial fiscal support in place, Germany looks well-placed to bounce back in the second half,” says Bloomberg economist Jamie Rush.
Similarly, the ECB has acted swiftly and boldly, in contrast to the slow-motion reaction, punctuated by years of policy wrangling, that followed the financial crisis and subsequent debt turmoil in the region.
Europe’s next frontier for policy making is likely to focus on the EU recovery fund, which will pool borrowing powers with a view to distributing aid as needed.
It’s yet to be endorsed by all governments and could be watered down. But if it takes shape, it will begin to redress an imbalance in the design of the euro, which fused monetary policies without symmetry on the fiscal side.
With “the combination of German fiscal expansion and the EU recovery fund — as well as nobody talking about austerity despite the big fiscal slippage due to the coronavirus — finally a joint Europe is coming together,” said Jens Peter Sorensen, chief analyst at Danske Bank A/S.


fortune--2020-06-06--Second City CEO steps down amid claims of racism at theater

Government job losses are piling up , and it could get worse

Andrew Alexander, the CEO and co-owner of famed The Second City improv theater, said he is stepping down after a former performer leveled accusations of racism against the comedy institution.
In a lengthy letter posted on the company’s website, Alexander said he “failed to create an anti-racist environment wherein artists of color might thrive. I am so deeply and inexpressibly sorry,”
He vowed Friday that he will be replaced by a person of color.
The originally Chicago- and Toronto-based Second City was an early training ground for “Saturday Night Live” players including John Belushi, Dan Aykroyd, Gilda Radner and Chris Redd, among other comedy stars such as Keegan Michael-Key and the company produced “SCTV” TV series in the 1970s and ’80s.
Alexander’s announcement Friday followed online criticism from Second City alumnus Dewayne Perkins, an actor, comedian and writer (“Brooklyn Nine-Nine”). Perkins said the company had refused to hold a benefit show for Black Lives Matter unless half of the proceeds also went to the Chicago Police Department, and it also created obstacles for performers of color.
His tweets were in reply to a Second City tweet posted last week in support of Black Lives Matter amid protests around the country over the death of George Floyd, a black man who died at the hands of police in Minneapolis.
In a tweet noting Alexander’s resignation, Perkins had a one-word comment: “Oop.”
The London-born Alexander said he is “fully removing myself from overseeing The Second City’s operations and policies and will divest myself from the company as it stands.”
A Second City statement Friday laid out steps the company planned to take regarding the hiring and training of artists of color, along with diversifying its theater audiences and making donations to fight oppression and support black-owned businesses and schools.


fortune--2020-06-06--Apple preparing monthly payment plans for iPads, Macs, and AirPods

Apple Inc. is preparing to allow customers to buy many of its products, including iPads, Macs and AirPods, over monthly installments via its Apple Card credit card.
The Cupertino, California-based technology giant is planning to roll out the service in the coming weeks, according to people familiar with the plan. The offering will let customers buy a product through Apple and split up the cost over several months with interest-free payments.
The company will offer a 12-month interest-free payment plan for iPads, Macs, the Apple Pencil and iPad keyboards, as well as the Mac XDR Display monitor, and six months with no interest for the AirPods, Apple TV, and HomePod, the people said.
An Apple spokeswoman declined to comment.
The payments will be managed through the Apple Card section in the Wallet app on the iPhone and charges will be added to a customer’s monthly Apple Card bill. Apple started a similar program for the iPhone last year, offering 24 months no interest.
The program is similar to those by carriers selling phones and other products, offering consumers another avenue to purchase these items with monthly payments.
The service is also designed to spur enrollment for the Apple Card, a joint effort with Goldman Sachs Group Inc., and boost sales of Apple products by letting users split up the cost over time. It will be compatible with Apple’s education discounts, the people said.
Apple Chief Executive Officer Tim Cook said on the company’s second-quarter earnings call in April that the company would launch an installment payment service for products beyond the iPhone, but he didn’t specify timing or features.


fortune--2020-06-06--Idaho offers $1,500 bonus for people to return to work

Idaho residents on unemployment could receive a one-time bonus of up to $1,500 to return to work under a plan Gov. Brad Little announced Friday.
The Republican governor said the incentive is intended to help get the state’s economy going again. Part-time workers would receive $750.
“Now is the time for us to provide Idahoans with the financial incentive to return to work and ensure our economic rebound is swift and robust,” Little said.
The state’s unemployment rate has rocketed to 11.5% with more than 100,000 unemployed. But Idaho is in the third stage of Little’s four-stage plan to reopen during the coronavirus pandemic, and there are signs the economy is turning around. Nearly all businesses can now open under the guidelines.
Little said he’s concerned that enhanced unemployment benefits could add up to more than a potential worker could make going back to work. Through May 30, Idaho residents have received about $312 million in unemployment insurance benefits through federal and state programs.
Little said the incentive bonus payments made on a first-come, first-served basis could help persuade workers to return to the job.
“I think people are ready to go back to work,” Little said, but added that people need to feel safe returning. The virus “is not going to be eliminated until there is either a great treatment or most likely a vaccine. We have got to manage this.”
The money for the payments is coming from $100 million of the $1.25 billion Idaho received in federal rescue money.
Alex Adams, Little’s budget chief, said the $100 million will likely only last long enough to cover incentive payments for about 70,000 workers. But Adams said the program could be supplemented with leftover money from a $300 million program to help Idaho small businesses.
Little has taken criticism from fellow Republicans following his March 25 stay-at-home order for Idaho’s 1.75 million residents as virus cases accelerated. Idaho’s economy began shutting down in mid-March as the coronavirus pandemic appeared suddenly in the state and spread.
But state health officials say the virus is manageable at the moment based on various criteria having to do with infection rates and the availability of health care facilities to respond to a sudden outbreak.
If all goes well, stage 4 will start on June 13, with gatherings of more than 50 people allowed. But even in stage 4, precautions are included that limit occupancy in bars and require social distancing in theaters and other large venues.


fortune--2020-06-06--Government job losses are piling up, and it could get worse

Second City CEO steps down amid claims of racism at theater

Jobs with state and city governments are usually a source of stability in the U.S. economy, but the financial devastation wrought by the coronavirus pandemic has forced cuts that will reduce public services — from schools to trash pickup.
Even as the U.S. added some jobs in May, the number of people employed by federal, state and local governments dropped by 585,000. The overall job losses among public workers have reached more than 1.5 million since March, according to seasonally adjusted federal jobs data released Friday. The number of government employees is now the lowest it’s been since 2001, and most of the cuts are at the local level.
“With that comes a decline in essential public services,” Lee Saunders, president of the American Federation of State, County and Municipal Employees, said on a conference call with reporters this week. For instance, “911 calls are taking a long time to be answered.”
Clean drinking water and trash pickups also are being affected in some places, he said.
Tax revenue from businesses walloped by coronavirus restrictions has plummeted, forcing cuts by cities and states that rely on that money. It’s likely to get worse in the coming months unless Congress delivers additional aid to states and cities.
Several states are projecting tax revenue will be down 20% or more for the fiscal year starting next month, and governments are facing rising costs resulting from the virus and the police and National Guard response to protests over racial injustice and police brutality.
The layoffs and furloughs are coming amid calls for governments and school districts to do more to respond to the outbreak — from hiring workers to find those who had contact with people infected with the coronavirus to additional janitors needed to sanitize schools and make them safe for students and teachers to return.
“It’s going to make it very, very difficult to reopen schools in the fall because you need more money, not less money to reopen,” said Randi Weingarten, president of the American Federation of Teachers.
In the Chicago suburbs, Lyons School District No. 103 laid off health aides at its six schools. One of them, Maureen Jacobsen, said she was told the workers, who give students medicine and first aid for minor injuries, were being laid off in anticipation of a new requirement that each school has a nurse. A district official did not return a call Friday.
So at 58, Jacobsen is working on her resume for the first time in 21 years. She said the students at Robinson Elementary will be affected by not having her there to help them when school resumes next fall.
“When they go back, they’re looking for the familiar,” Jacobsen said. “I could tell you that I had 280 kids in my building, and I knew their names.”
She may be on the leading edge of permanent layoffs for government employees.
The federal numbers do not provide precise breakdowns, but many of those out of government jobs so far have been temporarily furloughed. And some of the first to go were those whose absence would not be felt deeply when stay-at-home orders were in effect.
For instance, the Pittsburgh Parking Authority furloughed its three dozen enforcement officers and meter technicians. In Michigan, nearly two-thirds of state government workers have been furloughed through July. And in North Carolina, more than 9,000 state Department of Transportation employees have been told to take unpaid time off by June 26.
But union officials warn that the cuts could become deeper and permanent as budgets are ironed out. New Jersey Gov. Phil Murphy said his state alone could lose 200,000 government jobs.
Some permanent cuts already have been made or proposed. Last week, the Pennsylvania Turnpike Authority voted to lay off 500 toll collectors as part of a move to make the road system cashless. And California Gov. Gavin Newsom is calling for 10% salary cuts for many state government employees.
Lily Eskelsen Garcia, president of the National Education Association, said the impact will be biggest in lower-income areas.
“A 30% cut in a poor school district’s budget means you just lost your arts program, you just lost your sports program,” she said. “We are going to have to lay off one teacher in each grade.”
And the first workers to be cut also could be the most vulnerable.
“Very often the first people who will go will be all the administrative staff, the public works department and custodial staff and many, many people who are low paid, who are women, who are black and brown,” said Hetty Rosenstein, New Jersey director of Communications Workers of America, the largest union of state government employees there.
Unions and bipartisan groups are pushing Congress to send state and local governments more help quickly. Following a $2.2 trillion coronavirus aid package in March, the Democratic-led House last month approved an additional $3 trillion bill, which includes $1 trillion for governments. But Senate Majority Leader Mitch McConnell has said his chamber will not agree to such as large amount — or anything quickly — as the economy reopens.
For Ashley Sims, a library assistant in Louisville, Kentucky, being furloughed when libraries were closed did not cause a financial strain. With a $600 weekly boost in unemployment benefits as part of a federal response to the crisis, she said her pay has been higher than when she was working.
But there are worries about permanent layoffs. Sims, who’s president of the library workers union, said she may consider a voluntary layoff to save the jobs of some of her coworkers.
She said many who rely most on libraries are lower-income people and immigrants who can’t afford computers and use them to search for work, among other tasks.
“It would be an incredible loss,” Sims said. “Libraries are the lifeblood of communities.”


fortune--2020-06-06--How Joe Biden won the nomination

How Joe Biden won the nomination

It seemed easy to write off Joe Biden.
The former vice president came across as easily blindsided at debates. The crowds at his presidential campaign speeches were far from stadium size. Other Democratic candidates such as Bernie Sanders, Elizabeth Warren and Pete Buttigieg each had moments of radiating a kinetic energy, while Biden appeared to be conserving his resources.
But Biden had name recognition.
He is able to connect on an emotional level with people who have experienced personal loss, as he has. And as Barack Obama’s wingman for eight years, Biden was a reminder to many Democrats of what a president should be.
The opening contests in the 2020 nominating race in Iowa, New Hampshire and Nevada were humbling losses for Biden. Then came a commanding victory in South Carolina with help from African American voters. Rivals departed the race, and within days his coalition expanded to make him a lock for the nomination that was officially secured Friday night.
This is how Biden won.
It’s an account drawn directly from more than 40,000 people from AP VoteCast surveys in 17 states that voted between Feb. 3 and March 17. The result is a rich portrait of a diverse Democratic electorate eager to oust President Donald Trump. The issues confronting the nation intensified since Biden took an overwhelming lead in the primary as the United States now faces a pandemic, a recession and civil unrest due to racial inequality.
Moderate voters
A majority of Democratic voters wanted to put a moderate with practical policy proposals in office over a liberal with bold ideas. This should not be a surprise, given that 58% say they are moderate or conservative. At the same time, the surveys show a slim majority (53%) of voters say they prefer a dramatic overhaul of Washington, compared with 45% who want a return to a pre-Trump era.
Voters who wanted to restore the political system went for Biden over any other candidate, whether they wanted a liberal or a centrist. Sanders, a Vermont senator who is a self-described democratic socialist, had an advantage over Biden among those who wanted fundamental change and a liberal candidate. But even among those who support a sweeping transformation and centrist policies, 38% backed Biden.
Older voters
A solid 61% of primary voters were older than 45 — a group that firmly supported Biden. His advantages among this group offset his weakness with younger voters. The demographic composition of Democratic voters was a barrier for Sanders. Voters under 30 were a key component of Sanders’ coalition but made up just 15% of the electorate. The pattern is similar among self-described liberals and people who saw themselves as falling behind in the economy.
Iowa and New Hampshire were false indicators
The opening contests failed to set the tone for the rest of the country. Biden finished fourth in the Iowa caucuses on Feb. 3 and fifth in the New Hampshire primary about a week later. While those states got the bulk of attention from candidates, the results failed to sway voters elsewhere. Iowa and New Hampshire were whiter and much more supportive of sweeping change than the states that followed on the election calendar.
More important, the moderate vote was fractured in those places.
Before South Carolina, no candidate had earned more than one-third of this group. In New Hampshire, for example, about 6 in 10 voters identified as moderate or conservative. Roughly 3 in 10 went for Buttigieg, the former mayor of South Bend, Indiana. About one-quarter backed Minnesota Sen. Amy Klobuchar. Only about 1 in 10 supported Biden. By contrast, Sanders enjoyed a relatively clear advantage among liberals, with Massachusetts Sen. Warren well behind vying for those votes.
Salvation in South Carolina
South Carolina’s Feb. 29 primary gave Biden a much needed comeback. It was the first heavily African American state to have a say, and 64% of African American voters supported Biden. The state’s voters were more enthused about restoring the Obama era compared with voters in Iowa and New Hampshire. About 7 in 10 considered themselves to be moderate or conservative. More than half were nonwhite, unlike the roughly 9 in 10 white voters in Iowa and New Hampshire.
The delegate count was high enough in South Carolina that it shook up the field. Within 72 hours, Buttigieg, Klobuchar and billionaire Tom Steyer decided to set aside their presidential ambitions, clearing the way for Biden to build out his coalition.
Late deciders
Biden cemented his status a few days later during the Super Tuesday primaries on March 3. He won 10 states, including Texas, Massachusetts, North Carolina and Virginia. One key: voters making their choice in the few days before the elections, in what turned out to be a reflection of the momentum coming out of South Carolina. Across eight of the states with presidential primaries that day, 37% of voters said they made up their minds in the last few days. About half of them went to Biden.
Biden expanded his coalition among liberals, college graduates and even younger voters. Electability was at the forefront of many voters’ minds. In Minnesota, a potential November battleground, 60% of voters said it would be harder for a nominee with strong liberal views to win in the general election.
All before coronavirus and George Floyd’s death
Throughout the primaries, Democratic voters said health care was the most important problem facing the nation. Climate change trailed in second place. The economy ranked a distant third. This made sense in the moment as the U.S. was coasting through the longest expansion in its history and the unemployment rate was at a half-century low of 3.5%.
But less than two weeks after the Super Tuesday primaries, everything changed.
The coronavirus pandemic has caused the unemployment rate to rocket to 13.3%, something not seen since the Great Depression. A survey in May from The Associated Press-NORC Center for Public Affairs Research found nearly 70% of the workers who lost their jobs expected to be rehired, compared with close to 80% just a month before, as the grim realities of restaurant closures and shuttered businesses become clearer.
Then there was another turn in May after the death of George Floyd in Minneapolis, which has sparked protests across the country for racial equality. Civil rights now has joined the economy as a dominant national issue.
During the primary, race relations fell behind health care, the economy and climate change as the most important issues for South Carolina Democrats, according to VoteCast. But voters trusted Biden most on racial matters, with a plurality, 39%, saying he would be the best Democrat to address that issue.
After months of campaigning from his basement, Biden emerged this past week to give a speech in Philadelphia.
“We can’t leave this moment thinking we can once again turn away and do nothing,” he said. “The moment has come for our nation to deal with systemic racism. To deal with the growing economic inequality in our nation.”


fortune--2020-06-06--5 key takeaways from a surprising jobs report

No one saw it coming — 2.5 million job gains in May and a lower unemployment rate.
Economists, political aides and business leaders had been bracing for another horrific month of job cuts and swelling unemployment. In April, the coronavirus shutdown had caused 20 million-plus job losses. Mounting applications for unemployment benefits had suggested that the misery continued through May.
It didn’t. The gap between what was expected and what happened when the Labor Department issued the jobs report Friday morning was so vast that it raised some doubts about its accuracy. But as analysts dug into the numbers, they found the numbers to be correct and suggested that the pessimistic forecasts might have mainly reflected how hard it is to gauge economic performance during a pandemic.
Here are five major takeaways from a jobs report that showed the economy faring better than believed, even if the overall picture remains bleak, with many millions still jobless and unemployment well into double digits.
Is the unemployment rate really 13.3%?
The drop in the unemployment rate was a shocker. Economists had expected the rate to approach 20%, driven up from 14.7% by job losses topping 8 million. Their forecasts woefully missed the mark. Part of the explanation is the difficulty of assessing data when the situation is changing so quickly.
But it also reflects an acknowledged difficulties by the Labor Department’s Bureau of Labor Statistics in its information-gathering. Millions of people appeared to be erroneously classified by the survey as not working but employed. These people should have been classified as on temporary layoff and therefore unemployed. Had they been counted correctly, the jobless rate would have been roughly 3 points higher — 16% — the government said.
The same issue marred the April jobs report. In that case, the unemployment rate would have been roughly 5 points higher than the 14.7% reported.
The jobs report is drawn from a pair of surveys. A survey of households establishes the unemployment rate. A separate survey of employers determines how many jobs were added or lost. Response rates for these surveys were lower than usual in May because of the viral outbreak. But the government still gathered enough responses to produce the jobs report.
“The household survey response rate, at 67 percent, was about 15 percentage points lower than in months prior to the pandemic,” the report noted.
The Labor Department also includes a broader measure of unemployment. This measure includes not only people who are out of work and looking for a job but also people who stopped looking or who were reduced to part-time hours. That rate was 21.2% in May.
Persistent racial inequality
The past 10 days have achingly illustrated the persistence of systemic racism in the United States. Protests emerged in nearly every major U.S. city after George Floyd’s killing at the hands of Minneapolis police officers. The May jobs report pointed to the multitude of disadvantages that African-Americans endure.
Their unemployment rate ticked up last month from 16.7% to 16.8%. By contrast, unemployment for whites fell to 12.4% from 14.2% in April.
Why did the rate rise for African-Americans? More of them began searching for work in May and weren’t necessarily hired. This meant that the number of officially unemployed African-Americans seeking jobs rose by 87,000 to 3.3 million.
But white people who began job hunts were mostly hired: The number of unemployed white people fell by more than 2 million.
African-American women have suffered the brunt of layoffs. Before the pandemic, their unemployment rate was lower than it was for black men. But that relationship inverted during the past two months. African-American women are now more likely to be jobless.
The racial disparities run counter to the odd assertion made Friday by President Donald Trump that Floyd was “looking down” from heaven with admiration for the May jobs report.
“It’s a great day for him, it’s a great day for everybody, this is a great, great day in terms of equality,” Trump said, ignoring the figures that show otherwise.
Temporary layoffs
It’s not just the job totals that matter — it’s where the gains came from.
There were 2.7 million people who had been temporarily laid off and returned to their jobs in May. This was essentially the lowest-hanging fruit of any recovery. They are people who could quickly return to offices, restaurants, stores and factories that had gradually resumed operations. This left 15.3 million people who were temporarily laid off and still awaiting to return. Even if May’s pace of job growth could be sustained — something most economists doubt — it would take at least six months to bring them all back to work.
More part-timers
The May jobs report revealed a curious increase in people saying they working part-time for “non-economic” reasons. The number of part-timers in this category grew by 2 million in May, a major driver of the overall gains.
This category is important because it excludes part-timers who can’t work as many hours as they’d like because of poor business conditions. Instead, these workers are working fewer hours because of issues involving child care, school and other family obligations. It hints at a likely economic drag if schools and child care centers can’t fully re-open.
There was also an increase in “self-employed” workers. This number rose by 401,000 in May to 7.9 million. That figure is still about 1 million jobs below its pre-COVID-19 levels. But it still suggests that parts of the the economy began to pick up last month.
Still worse than the Great Recession
It was an uplifting jobs report after so many bleak numbers. But it’s worth putting those numbers into context next to the Great Recession, the severe downturn that started in late 2007 and ended in mid-2009. The Great Recession was caused by a housing bust and financial market collapse, a far more gradual decline than what the coronavirus caused.
But even with the solid hiring in May, the current jobs picture is still worse than in the Great Recession. During that downturn, unemployment peaked at 10% in October 2009. That is 3.3 points lower than the current rate. With the Great Recession, it took until 2016 for the unemployment rate to return to pre-downturn levels.
In the aftermath of the pandemic, U.S. employers would have to replicate the strong gains from the May jobs report for the next seven months to return the country to where it was in February. This means the results of the June jobs report, to be released early next month, will be a critical test of the potential recovery’s strength.


fortune--2020-06-06--A mental health crisis is unfolding in the workplace. COVID-19 and racial injustice are to blame

Gitte Klitgaard experienced déjà vu recently while taking bacon and eggs from her freezer to thaw for breakfast the next day.
“Wait, I just did that?” she asked herself, thinking she had done exactly the same thing earlier in the day. Or maybe it was the week before. It was hard to tell because her days were becoming indistinguishable from each other.
As Klitgaard thought about it, she realized she was having more of these surreal moments ever since shelter-in-place rules went into effect in her country, Sweden, in March. Working from home day in and day out because of the coronavirus pandemic was taking a mental toll on Klitgaard, a software development consultant and regular speaker at tech conferences.
Her days were becoming more repetitive, blurring into a loop, akin to what Bill Murray’s character in the 1990s movie Groundhog Day experienced, minus the jokes. “I was shocked when I started counting and realized I had been home for eight weeks,” Klitgaard says. “I would have guessed four or five. Days are blending together.”
Klitgaard’s feeling of monotony is becoming increasingly common for workers who are still under shelter-in-place orders, according to several mental health experts. Additionally, people are more likely to feel hopeless, that there’s nothing they can do to stop the deadly virus that has claimed over 350,000 lives globally.
Adding to the coronavirus fears are concerns about rising unemployment that has created an economic crisis rivaled only by the Great Depression. Economic malaise coupled with prolonged isolation and uncertainty about when the pandemic will end has led the health care foundation Well Being Trust to estimate that roughly 75,000 Americans may die from so-called deaths of despair, the suicides and overdoses from alcohol or illicit drugs.
The unrest in cities across the country following the death of a black Minneapolis resident, George Floyd, while in police custody, is compounding the problem. The violence and destruction, coupled with concerns about racial equality and police bias, can make people feel unmoored.
“It was already so much. COVID was already so challenging for everyone,” says Michael Boroff, a behavioral health program manager at the health care firm Crossover Health. “We are already hearing from our therapists that this is the focus from their sessions—this has made things even harder for people.”
Underlying racial tensions have long been the “elephant in the room,” Boroff says. Communities of color have been dealing for decades with the trauma that comes from racial inequality. Adding to the trauma is that COVID-19 appears to be hitting communities of color even harder, according to data from the Kaiser Family Foundation. Some of the struggles for nonminority communities include dealing head-on with serious issues of race that they may not have otherwise tackled, he explained.
“We are also being confronted with facing our privilege head-on and reckoning with that,” Boroff says. “It’s a very hard process, but it’s a very necessary one.”
The expected mental health crisis underscores an important role companies play in providing employees with social connections and feelings of self-worth and belonging. As Well Being Trust chief strategy officer Benjamin Miller says, “Companies can create a psychologically healthy workplace, where people can feel taken care of and feel safe.”
As unemployment continues to balloon, Miller says that the already intense social isolation people feel could magnify, leading to self-destructive behaviors. Work “sets good boundaries” for people, Miller says, explaining that “we don’t drink at noon.” Losing one’s job essentially means losing those boundaries, which could lead to more people habitually drinking to deal with their anxiety.
“We joked about quarantinis,” Miller says. “Now it’s much less funny—alcohol is a real issue for a lot of people.”
Workers are experiencing real, prolonged trauma
Alison Holman has been studying trauma for the past three decades, researching how society copes with distressing events and the physical damage those events create in the human body, leading to heart problems and other disorders. Although the coronavirus pandemic has been around only for a few months, Holman, an associate professor in nursing at the University of California at Irvine, believes that “it is the worst event of my lifetime, and I think the worse event of many people’s lifetimes.”
Unlike tragedies like the Sept. 11 terrorist attacks and the Boston Marathon bombings, the coronavirus pandemic is a “chronic stressor” with “numerous secondary stressors,” says Holman.
“You lose your job or you’re told to work from home, so what do you do?” Holman says. “You’re homeschooling your kids, running a full-time household, trying to stay safe while getting groceries—the stress is just remarkable.
“This pandemic is a very, very serious threat to the health and well-being of our country,” Holman says.
Indeed, Andrew Potter, the founding partner of business software startup TileFive, believes trauma caused by the coronavirus pandemic is akin to that of the war in Afghanistan, in which he served three tours. Potter, who has undergone mental health treatment to help him deal with the trauma of the battlefield, is concerned that the pandemic will exacerbate workers’ pre-existing mental health illnesses.
“Going to war is what put them over the edge,” Potter says of veterans who suffer from post-traumatic stress syndrome. As war was the “tipping point” for these veterans to experience major mental illness, Potter worries that the coronavirus pandemic may do the same to others, magnifying unresolved trauma from their lives that they haven’t dealt with.
As Potter says about how COVID-19 has impacted his life and his business, “there’s so much stuff that is out of our control.”
“I’m not going to put my family or company in the position to stress over the things we can’t control,” Potter says. He’s telling his employees that they need to give themselves “permission to not be perfect.”
“That’s been really helpful to be able to say, ‘Hey this does hurt, it does suck, but we’ll get through it,’” he says. “That alone takes a weight off your shoulders.”
How to cope in crisis
During the pandemic, it’s crucial for managers to be empathetic to employees, says Cathleen Swody, a founding partner of the executive coaching firm Thrive Leadership. This means that CEOs must consider more how they appear to workers, who may be struggling financially and resent seeing their chief’s opulent mansion or luxurious swimming pool during corporate video calls, as both Swody and Klitgaard have heard about some executives doing recently.
“It’s like watching Michael,” Swody says, comparing those executives to the oblivious CEO from the sitcom The Office. “He’s just not seeing how it’s coming across.
“Personally put yourself in their shoes,” Swody says about executives and their relationship to rank-and-file employees.
She also suggests that executives point to the “mission of the organization,” explaining the important role their businesses may serve in providing certain crucial services or catering to customers who are more directly involved in addressing the coronavirus pandemic.
Crossover Health’s Boroff recommends that employees pay attention to warning signs that indicate potential mental health issues. Poor sleeping habits, overeating, or having trouble concentrating can all be signs of increased stress, he says.
Practicing meditation and focusing on tasks or projects you can control are some ways people can manage their anxiety during the current crisis, Boroff says.
“I’m a big proponent of labeling feelings as they happen,” Boroff says, referring to the process of thinking about why you may be feeling a certain way. “We have science that shows the very act of labeling emotions as they happen can actually dampen the intensity of that emotion.”
Harvard Medical School physician Chris Palmer says that workers need to be open to seeking mental health treatment if they find they are having trouble adapting. Too often during crisis, people avoid seeking help because they mistakenly believe that it’s only the crisis causing their intense feelings of depression or anxiety rather than the calamity worsening underlying mental illnesses, Palmer explains.
“Unfortunately right now, as far as we can tell, I don’t think that the pandemic is changing people’s perceptions of mental illness,” Palmer says, referring to the cultural taboo.
For Klitgaard the software development coach, she has recently been hosting webinars intended to help workers better manage their stress and anxieties. In one recent virtual conference, she explained some simple steps that employees can take to feel just a little bit better. Just the act of asking someone “How are you?” can be a way to connect to a person during this crisis. And if you lose your cool, that’s okay. Just make sure that “if you yell, go apologize the next day,” she says.
Most importantly, if you feel you need some help, don’t be afraid to reach out to professional help, she says. Connecting with a mental health expert could be a saving grace.
“I’m lucky enough to be medicated, so I don’t go into the huge dark pits anymore,” Klitgaard says.


fortune--2020-06-06--From beekeepers to giant pension funds, activist shareholders are being silenced by the coronavirus

Christoph Koch didn’t get into activist investing to boost his stock portfolio. He did it for his honeybees.
In the spring of 2008, the German beekeeper nearly lost his livelihood when his bees started dying—at first in small numbers, then in big bunches. Up and down Germany’s Upper Rhine valley, honeybees perished by the millions. It became national news, triggering an investigation that pinned the likely cause of death on the pesticide clothianidin.
Even before the die-off, most beekeepers and farmers knew all about clothianidin, a bestselling insecticide developed by Bayer Crop Science, a division of the German agrochemical giant. It’s designed to keep crop-munching pests out of the cornfields. A growing body of scientific research, though, says the pesticide does real harm to pollinators like honeybees too. Clothianidin is the neonicotinoid family, so named because it’s chemically similar to nicotine, and some pollinators get hooked on it, studies show.
By the spring following the great bee die-off, Koch had become a Bayer shareholder and started protesting at annual shareholder meetings (AGMs, as they’re called) in Bonn. In subsequent years he got inside, where he addressed the board directly at the AGMs.
Each year Koch makes the strip to Bonn to confront the company that he says killed his bees.
In recent years, he’s escalated his broadsides against Bayer management. Last spring he took to the podium to criticize the company for its $63 billion merger with Monsanto, saying it’s neither good for Bayer’s bottom line nor for the health of Europe’s honeybees.
Beekeepers are a huge activist force in Europe. And for good reason. According to the European Commission, insect pollinators—in particular, the honeybee—are an economic marvel, contributing 22 billion euros in value to Europe’s agriculture sector. With so much on the line, Koch’s presentation at the Bayer AGM was eagerly awaited. When it was his turn to speak, he urged fellow shareholders to vote out the board. “Ladies and gentlemen,” he implored, “be brave and show the red card!”
The German beekeeper Christoph Koch speaks to German media outside the 2019 Bayer AGM in Bonn. He has been attending annual shareholder meetings since 2009. Courtesy of Christopher Koch
He was hardly the only Bayer investor who was in a foul mood last year. Outside the AGM meeting hall, all manner of protesters showed up. There were other aggrieved beekeepers, teenage Fridays for Future climate activists, and shareholders disgruntled by the stock price. The Roundup weed-killer lawsuits were sinking the share price, and change was in the air. “It was the biggest protest I’ve ever seen. And I’ve been protesting there for years,” Koch told Fortune.
In the end, shareholders issued a rare vote of no confidence against Bayer CEO Walter Baumann, but he clung to his job.
Koch figured the 2020 meeting, scheduled for late April, would be the perfect time to pile on the pressure.
He never got that chance: This year, annual shareholder meetings are, by design, off-limits to shareholders.
A protest banner reading “Bayer and Monsanto: Stay away from our land” hangs from a tractor during a demonstration outside the 2019 Bayer AG annual general meeting in Bonn. Jasper Juinen—Bloomberg/Getty Images
Shareholder activism in the age of COVID
The coronavirus has effectively muzzled activist protests. Since the work-from-home revolution took hold, there’s nobody in those glass buildings to protest anyhow.
And, by order of social distancing rules, AGM meetings (those that haven’t been canceled) have nearly all gone virtual, presided over by a few company executives and their IT staff. In Germany, a last-minute federal law required companies to change the rules for AGMs.
Koch and his fellow Bayer activist shareholders weren’t completely muted. Bayer allowed shareholders to submit questions to the board in advance; 245 were read aloud at the AGM. But speechifying, a tradition at shareholder meetings, was nowhere to be found on the agenda.
“I know shareholders would have wanted their chance to speak” as in the past, said Tino Andresen, a Bayer spokesperson. “But we did answer all their questions. Two-hundred-forty-five is quite a big number.”
Dissatisfied with the new rules, Koch posted a trio of protest videos to YouTube. Combined, they have generated less than 500 views. He was hoping for a bigger bang.
“They did respond to my question,” he said, “but it’s not what I had in mind.”
Shareholder rights
Annual shareholder meetings are a vital date on the corporate calendar. In many parts of the world, for example, companies need to schedule a shareholder resolution to vote on keeping the board of directors intact, or any matters that involve shareholders’ stock ownership—from raising new capital to executing buybacks. “In Germany, without a shareholders’ resolution, there would be no dividend for the year. You also need a shareholder vote to authorize the management to repurchase treasury shares,” says Staffan Illert, a Düsseldorf-based partner at Linklaters.
In normal years, it’s convenient to hold such weighty votes at an AGM, when a quorum is present. AGMs are also a big deal because they give influential shareholder groups the occasion to press for change: to push, for example, for a greener business model, to promote gender and racial diversity on the executive team, or to advocate for a reshuffle of a less independent-minded board.
COVID-19 has largely silenced this kind of stakeholder activism, though. Companies are experimenting with more interactive Q&As, but when you’re trying to push for meaningful change, Zoom hardly cuts it.
“In order to allow for shareholders meetings to happen at all this year, substantial cuts in shareholder rights, including the right for information and the possibility to file counter-motions, needed to be made,” said Illert. “Hence, there is substantial criticism from shareholders and shareholder associations. I would be surprised if the kind of virtual arrangement that we’re seeing this year would become a standard for the future.”
Still, the effect has been a powerful one. According to Lazard, nearly all forms of activist investor campaigns have collapsed since the outbreak of the pandemic. “As corporate behavior and priorities change in this new market paradigm, so too will activists’ ability to publicly agitate for change,” Lazard wrote in its most recent activist investor report.
Some activists appear more willing to give companies a pass this year, but they’re still wary that some pandemic-era restrictions, matched with the zeal to take more big events on the corporate calendar virtual, could become a new standard.
Being there “does make a big difference”
In the U.S., which has a longstanding tradition of faith-based activist investors, Sister Nora Nash, director of corporate social responsibility for the Sisters of St. Francis in Philadelphia, says she’s making the best of the situation. “So far, so good” is how she describes her experiences with virtual AGMs. On the plus side: She’s been able to sign in and register her question at a battery of meetings, including sometimes multiple per day.
But she adds, “We would prefer not to have virtual meetings, because it does make a big difference.”
Nash is a steady presence at such meetings. She pushes companies on their labor practices, human rights records, and environmental standards. Being in the room brings an extra urgency, she finds. Nash typically mingles with board members before and afterward to get a “different perspective” from the company and other shareholders. Such interactions strengthen long-running relationships, she says. Most of that is lost in a virtual AGM.
Christopher Cox, associate director at Seventh Generation Interfaith Coalition for Responsible Investment in Milwaukee, sees a different danger in social-distancing activists out of the room. It has the effect of exacerbating the shareholder-management divide. Transparent, responsive companies will go out of their way to make the process fair, he says. The rest will take advantage of how a digital format can minimize even the most urgent calls to action.
“It would seem that a company that does not want to face its shareholders can find in a virtual meeting all the tools at their disposal to make sure a shareholder is not heard,” Cox says.
That’s especially troubling as labor concerns over mass furloughs and layoffs amid the pandemic mount, he says. But it’s also a reminder that corporate executives would do well to open their ears to new ideas and raising their standards—wherever they come from.
“Executives of corporations are wise if they allow for the voice of the shareholder,” he says. “They seem to think only really wealthy folk have good ideas.”
But small-time agitators-for-change and Wall Street heavyweights are on the same page in one key area: No companies will get a pass on good governance this year, or ever. “Companies can still demonstrate that they have effective leadership,” BlackRock‘s global head of investment stewardship said in March at the height of the pandemic. “In times of crisis that becomes more apparent, not less apparent.”


fortune--2020-06-07--What shape will the recovery take? U-shape, check mark, square root symbol, and swoosh are all on th

What shape will the recovery take? U-shape, check mark, square root symbol, and swoosh are all on the table, say economists

The U.S. economy’s descent into a crisis certainly looks like a straight line down. What shape the recovery might take on the way up is an entirely different story.
As economists try to make sense of what a recovery might look like, the only real certainties have been an unpredictable virus, dismaying data, and massive (yet improving) unemployment numbers in the near term.
While unemployment modestly ticked down to 13.3% in May, it skyrocketed in April, hitting 14.7% (and many suspect it was even higher), as over 42.6 million Americans have filed for unemployment since shutdowns began. GDP for the first quarter shrank by 4.8%, with what Wall Street uniformly touts will likely be the worst quarter—the second—still to come. That has led to economists and analysts predicting a much wider variety of lettered and shaped recoveries than we have typically seen in past recessions.
The V crowd
But as the economy begins to reopen (and equity markets have bounced nearly 40% off their March lows), some firms like Morgan Stanley and Credit Suisse in recent weeks still see a V-shaped recovery in the economy or market as a possibility. For one, Michael Wilson, chief U.S. equity strategist at Morgan Stanley, wrote in May, “We will see a V-shaped recovery for two reasons—the historic steepness of the decline in activity, and the unprecedented policy response.” And Goldman Sachs economists wrote in a May note that “we have more confidence that a large amount of activity will return fairly quickly” as the economy reopens.
While much of the fundamental economic data isn’t too encouraging yet, those like Mohamed El-Erian, chief economic adviser at Allianz, point to what he calls “high high frequency data” for optimism, like Google mobility data to show how people are getting out and shopping as reopenings take place, while other economists like Moody’s Analytics chief economist Mark Zandi are watching early data like OpenTable reservations for restaurants and ADP data for signs of growth in the economy.
For one, Brett Ryan, senior U.S. economist at Deutsche Bank, is betting all the data in the next three months will improve. “That initial bounce is the easy part. It’s when you get six months out, what does the pace of recovery look like then?” he asks. “While everybody is cheering the stock market right now, and we’re watching the mobility data and saying, ‘Wow, things are starting to bounce back, states are starting to open up and confidence is coming back a little bit,’ let’s not take a victory lap just yet.”
Despite the recent reopening optimism, the only way we’ll actually see a true V-shaped recovery, some economists say, is if there is a widely distributed and effective vaccine or treatment available—a scenario that’s unlikely to happen anytime soon.
Square root symbols, U-shapes, check marks, and pendulums
Key to gauging how quickly the economy might recover is the pace at which employment bounces back, and whether a second wave of the virus hits, economists say.
UBS Global Wealth Management senior economist Brian Rose says the firm is anticipating a U-shaped recovery, not a V. “The good news [is] that we are starting to grow again. The bad news is that we’re starting from an awfully deep hole” that will take a long time to recover from, Rose tells Fortune. That growth may look like some of the strongest growth we’ve had in a while, he argues, but “when you’re starting from this deep down, even that doesn’t get you all the way back to where you were.”
A rapid return to work is key, Rose suggests, but it’s likely going to take a long time for people to get their jobs back, especially as some businesses may disappear during the crisis. Meanwhile, even as restrictions lift, people will still worry about catching the virus until there’s a vaccine. “That’s going to put a limit on the economy,” Rose says.
Deutsche’s Ryan, on the other hand, prefers a more unusual shape: the square root symbol recovery. “A reversed square root symbol whereby the tail is below the start and gradually upward sloping,” he describes. It seems we’ve hit an inflection point at last, but the GDP contraction in the first and second quarters is going to be massive, and it will take several years for output to recover, he suggests. In fact, Deutsche Bank is estimating the unemployment rate likely won’t drop to pre-pandemic levels of around 4% until 2023, says Ryan.
One bright spot? The massive (and quick) fiscal and monetary response from the government. But while that “forceful response right off the bat in this crisis sets you up to have a more robust rebound as we come out the other side of this, it’s still going to take time,” Ryan suggests. And if the biggest threat of all (the reemergence of the virus causing a second shutdown) hits, there’s going to need to be more stimulus to bridge a second liquidity gap—something that might be more challenging to pass quickly as the election approaches, he says.
Whether that recovery looks more like a sharp square root symbol or not, “at the end of the day, it’s about job creation and bringing people back to work as quickly as possible. That is really going to determine the pace of this recovery,” Ryan tells Fortune.
Others like Moody’s Zandi are more blunt: “A V-shaped recovery is out of the question. That’s not happening,” he says, as the virus is doing “meaningful structural damage to the economy.” Instead, he’s seeing a Nike swoosh shape, or a check mark. As businesses ramp up in the coming months, it might feel like a V-shaped recovery, he says, “but on the other side of the reopenings, the economy is going to go sideways until we get a vaccine or therapy that’s widely distributed and adopted.”
While the economy has “turned the corner,” Zandi predicts employment won’t fully recover until mid-decade. If a significant second wave of the virus hits, Zandi believes that could be “fodder for a depression” in the economy’s current fragile state. But even without a second wave, new fiscal rescue stimulus will be important to staving off a second recession, he says. And as we start to see bankruptcies, defaults, and foreclosures, how big that wave is will “determine a lot about the shape of the recovery,” Zandi argues. But barring a second wave and the failure of policymakers to put another fiscal package together, Zandi thinks we’ll “avoid going back into a recession.” In the meantime, we’ll see job growth in the next few months, and there will be “fits and starts” of recovery, he says.
That’s more along the lines of how Allianz’s El-Erian sees recovery. He thinks of it more as a check mark or a pendulum: Things started out in a normal state, then “violently swung” to the lockdown stage. “We are trying to find a middle way, and we’re not going to get there immediately. We’re going to oscillate around some midway of these two things,” he suggests. The good news is that the reopening thus far hasn’t resulted in massive spikes in infection, he says. But the challenge is we’re also seeing “there are difficulties in reopening when it comes to consumer engagement and operational issues on the business side,” El-Erian notes, as concerns around health will be central in people’s willingness to engage. While the progress of the reopening thus far is encouraging, “it’s early days,” he says.
But playing the letters game or not, economists like Zandi encourage caution: “The metaphor is a hurricane: You get nailed by the hurricane. You go into the eye, [and] if you don’t have radar, you think, ‘Oh, I’m okay, the worst is over. I survived. A lot of damage, but I can rebuild.’ But if you have radar, you know there’s the other side of the hurricane coming. Maybe not as powerful as the original, but maybe it is,” he says. “We don’t know.”


fortune--2020-06-07--Escaping ‘Zoom fatigue’ is surprisingly complicated

What shape will the recovery take ?
U-shape , check mark , square root symbol , and swoosh are all @ @ @ @ @ economists

Six days into stay-at-home orders in New York City, the epicenter of the novel coronavirus pandemic in the U.S., a third-grade class for Alex Freidus’s 8-year-old son started with an unusual step: a click.
Her son’s classmates and teacher appeared on the screen, smiling and waving and staring at things outside the frame. The morning group check-in, hosted on the popular virtual conferencing tool Zoom, was an attempt to approximate the social interaction the children were used to enjoying in person. During the session, which lasted just under an hour, the teacher asked the students about how they were feeling and what they had been up to at home. Every child had the opportunity to speak. Then the teacher laid out virtual lesson plans for the rest of the week.
Later that night, at the dinner table, Friedus mentioned to her son that virtual sessions would be the new routine. He frowned. “I do not like that,” he said. “It’s hard. And I don’t want to see my friends if I can’t play with them.”
In the weeks since, Freidus has negotiated with her son to get him to engage with the lessons she thinks are most critical for him. (He’s strong in math, for example, so she doesn’t push him to tune into every math lesson.) But he’s only 8. He hasn’t fully learned how to type or use a computer mouse, and she has always instilled in him that her laptop is off-limits. Online learning itself is a learning curve for him, which adds to the frustration of missing his friends.
Freidus’s son’s lamentations may ring just as true for adults starved of social interaction, let alone those who are less tech-savvy, during the pandemic. People who comply with stay-at-home orders are sacrificing in-person connection for personal and public health. For many, this has meant a transition to seemingly endless video calls.
The data already prove it out, at least for those in white-collar tech jobs: Workers are spending 29% more time in team meetings and 24% more time in one-on-one meetings than they were before the COVID-19 pandemic, according to Clockwise, the maker of a calendar assistant that optimizes employees’ work schedules. In a completely work-from-home environment, colleagues can’t drop by each other’s desks or have unplanned watercooler conversations.
Countless people have decried newfound “Zoom hangovers” or “Zoom fatigue,” calling upon experts to figure out what it is about video calls that drains us. Explanations run the gamut, as this Axios article concisely summarizes: It’s not a natural way to have a conversation. It’s difficult to make eye contact. We can see ourselves, which is distracting. Every conversation takes place in the same context—on the same screen. All of this, and more, is difficult for our brains to process.
While all of these very real phenomena are at play, that doesn’t mean that we should place undue blame on technology for the stress the pandemic has wrought, says Microsoft researcher Nancy Baym.
“Anything that’s different, even if you like it, requires some amount of adjustment,” says Baym, who has been studying online interaction since the early 1990s and is the author of Personal Connections in the Digital Age and Twitter: A Biography, among other works. “I imagine that if we keep this up over time,” she says of virtual meetings amid social distancing, “the kinds of complaints that people have will change.”
That doesn’t mean people will be onboard once they overcome the learning curve. Olga Garcia-Kaplan, a mother of three and student data privacy advocate, says that after more than a month of school via Zoom, her 12-year-old daughter’s tolerance for learning via the medium has plummeted. She and many classmates now log on with their cameras off.
“Some of them are seeing it as an invasive medium,” Garcia-Kaplan says. “It’s a lot for them to deal with, from a privacy perspective: ‘Why do I have to show my teacher my home?’ and ‘I don’t want kids who I’m not necessarily friends with to see my home, either.’”
Garcia-Kaplan’s daughter has also expressed unwillingness to discuss “how quarantine is going” with her teacher and classmates. Her reluctance to open up in that way, day after day, indicates she’s fed up with more than just the video calls.
“There’s this idea that we’re all just going to hop onto technology and get to work, and we won’t be tired,” Baym says, “Or we’re going to hop onto technology and get to work, and if we’re tired, it’s because of the technology, rather than because the world is in crisis.”
The emotional burden of the pandemic (if not the recent protests about racism and police brutality following the death of George Floyd) may make it challenging or impossible for someone to call into meetings and classes. (So may the economic one, in the case of households that don’t have Internet connections or other digital resources.) That’s why Freidus says it’s important for people in a privileged position to speak up about potential limitations—provided they feel secure in doing so without fear of recourse.
For her part, Freidus has met with her son’s teacher and school administrators to discuss the challenges students have had adapting to the virtual classroom. She herself is a former teacher, now a professor at Seton Hall University in the department of Education Leadership Management and Policy.
“I am comfortable treating some of this work as optional, but I know all families don’t feel comfortable doing that, or don’t feel confident assessing what’s most important,” Freidus says. “I think that if enough families share their stories, schools will be better informed in terms of thinking about what’s happening for kids, what the challenges are, and how they can best support the range of situations going on.”
The same could be said for workplaces. Some employees may feel more empowered than others to point out the caregiving responsibilities they and their colleagues are juggling while working from home.
If the technology is not fundamentally to blame—and inequality, divergent learning styles, and the pandemic itself are—that doesn’t mean people merely should grasp for another convenient scapegoat, Freidus warns.
“I also think that we cannot expect schools, or individualized instruction, or whatever extraordinary efforts that some educators can make, to solve the problem of a worldwide crisis,” Freidus says. “Part of it is saying: There is loss, and there is going to be loss.”
The pandemic is forcing part of society to engage in a new experiment—but it’s going to take real, longitudinal research to tease out how people respond to using videoconferencing tools on a sustained basis, Baym says. Right now, feelings about abrupt societal change are muddling feelings about virtually everything else.
“I would be really wary of taking any findings about how people feel about these tools right now and generalizing to how they’re going to feel about them in the future,” Baym says. “What I see is always a process of trying to make these technologies work for us as best they can, because we yearn to be in communication with one another.”


fortune--2020-06-07--AstraZeneca approaches Gilead for what would be biggest-ever health care merger

AstraZeneca Plc has made a preliminary approach to rival drugmaker Gilead Sciences Inc. about a potential merger, according to people familiar with the matter, in what would be the biggest health-care deal on record.
The U.K.-based firm informally contacted Gilead last month to gauge its interest in a possible tie-up, the people said, asking not to be identified because the details are private. AstraZeneca didn’t specify terms for any transaction, they said. While Gilead has discussed the idea with advisers, no decisions have been made on how to proceed and the companies aren’t in formal talks, the people added.
AstraZeneca, valued at $140 billion, is the U.K.’s biggest drugmaker by market capitalization and has developed treatments for conditions from cancer to cardiovascular disease. Gilead, worth $96 billion at Friday’s close, is the creator of a drug that’s received U.S. approval for use with coronavirus patients.
Gilead is not currently interested in selling to or merging with another big pharmaceutical company, preferring instead to focus its deal strategy on partnerships and smaller acquisitions, the people said. A representative for Gilead couldn’t be reached for comment outside of regular business hours. A spokesman for AstraZeneca said the company doesn’t comment on “rumors or speculation.”
Coronavirus Treatment
The overtures show how the pharmaceutical industry landscape could shift at a time when drugmakers are racing to find effective treatments for Covid-19. If a deal goes ahead, it would surpass Bristol-Myers Squibb Co.’s $74 billion takeover of Celgene Corp. last year as the biggest-ever health-care acquisition, according to data compiled by Bloomberg. It would also rank among the 10 biggest M&A transactions of all time.
Shares of AstraZeneca have risen about 41% over the past 12 months, making it the best performer on a Bloomberg Intelligence index of major Western pharmaceutical companies. Shares of Gilead gained about 19% over the period.
Gilead has attracted investor interest as its antiviral drug for Covid-19, remdesivir, worked its way through clinical trials in recent months. The stock is still more than a third lower than its 2015 highs. The Foster City, California-based company has seen a steady decline in sales in its hepatitis C franchise and is trying to reinvigorate its drug-development pipeline.
Remdesivir, which has an emergency use authorization from the U.S. Food and Drug Administration, has been shown in some early studies to shorten hospital stays for people with Covid-19. SVB Leerink recently forecast that sales of the drug may reach $7.7 billion in 2022.
Tamiflu Developer
Gilead has been dispensing early rounds of the drug for free, leading some investors to question how the company plans to make money from it in the future. Chief Executive Officer Daniel O’Day has said the company may spend $1 billion on the treatment this year alone.
AstraZeneca is helping to manufacture a Covid vaccine developed at the University of Oxford. The U.S. has pledged as much as $1.2 billion to support the efforts as part of Operation Warp Speed, a push to secure vaccines for America. The shot is expected to enter phase III clinical trials in June.
Gilead was founded in 1987 by Michael Riordan, a doctor with a Harvard MBA who aimed to discover treatments for viral infections after a bout with dengue fever acquired in southeast Asia. The company’s best-known successes include Tamiflu, the influenza treatment it helped develop.
The company also makes Truvada, a medicine that can help prevent HIV, as well as drugs for liver disease and inflammation. Gilead employs about 12,000 people, according to its website.
AstraZeneca is no stranger to large-scale, politically sensitive M&A. In 2014 it fended off a $117 billion approach from Pfizer Inc., a deal that attracted attention from U.S. lawmakers as it would have allowed New York-based Pfizer to lower its tax bill by redomiciling in the U.K.
Deal Slump
Health-care dealmaking has been a rare bright spot as the global pandemic and resulting lockdowns have doused the market for mergers and acquisitions. Global M&A volumes are down about 45% this year, according to data compiled by Bloomberg, and announced deals have been falling apart at a steady pace.
Excluding minority investments, dealmaking in April and May barely topped $100 billion in total, the data show, the lowest two-month period in at least 22 years.
AstraZeneca CEO Pascal Soriot, a former executive at oncology specialist Roche Holding AG, has transformed the company since taking the helm nearly eight years ago. At the time, it was struggling with an aging stable of drugs and a shortage of innovation.
He’s championed the development of Lynparza, which was initially approved for ovarian cancer but has also proved useful for treating other forms of the disease. AstraZeneca has since overtaken U.K. rival GlaxoSmithKline Plc in market value.
Last year, AstraZeneca sealed its biggest transaction in more than a decade, agreeing to pay as much as $6.9 billion to buy into a promising breast cancer treatment developed by Japanese drugmaker Daiichi Sankyo Co. The U.K. company reached a deal this month with Accent Therapeutics Inc. to potentially spend more than $1.1 billion collaborating on novel oncology therapies.
AstraZeneca shares have also been boosted by positive data from trials of its blockbuster lung cancer drug Tagrisso.