Bloomberg

(Bloomberg) — China’s regulatory crackdown threatens to reverse a surge in underwriting fees for U.S. investment banks like Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley.

Companies based in China have been the most prolific foreign issuers of equity in New York during the pandemic. But the budding $50 billion flow of U.S. initial public offerings and secondary stock sales is at risk after new regulatory scrutiny surrounding cybersecurity firms.

“China’s increased oversight of overseas listings by Chinese companies, announced by the State Council on July 6, could halt unicorn listings in 2H in Hong Kong and the U.S,” Bloomberg Intelligence analyst Sharnie Wong wrote in a note. “Their combined share of Chinese IPOs may drop to less than 40% of deal value in 2H from 55% in 1H, assuming deal value halves sequentially.”

Investment banks have raised $49.2 billion in U.S. stock offerings over the past year for companies based in China and their largest holders, a 452% increase from the previous 12 months. That includes more than $23 billion in IPOs and another $26 billion through secondary offerings.

The heavier deal flow has provided an uptick in fees to the banks. For example, Didi Global Inc.’s $4.4 billion IPO alone generated $89 million in fees for a syndicate that included Goldman, Morgan Stanley and JPMorgan Chase & Co. among other U.S. underwriters.

Some banks are more exposed than others. Over the past year, Goldman has led all banks with a 17% share of this market, according to data compiled by Bloomberg, with BofA and Morgan Stanley also in the top three. Of course, this is a drop in the bucket: Goldman made about $311 million in fees from these deals, compared to $55.6 billion in net revenue for the 12 months to June 30.

Goldman Sachs declined to comment. Representatives for Bank of America and Morgan Stanley didn’t immediately return a request for comment.

Still Attractive

While the past year’s momentum might be in jeopardy, a strong pipeline of of Chinese companies should continue to advance U.S. listing plans. That’s according to Pruksa Iamthongthong, the senior investment director of Asian equities for Aberdeen Standard Investments.

“For a mainland company, the key considerations would be whether the U.S. remains an attractive IPO destination, given its market depth and breadth, and whether a listing closer to home in Hong Kong might be a better alternative,” she said.

The Hong Kong market could prove to be less of a geopolitical risk than New York for companies looking to go public outside of mainland China, Iamthongthong added.

Since Didi debuted on June 30, no Chinese company has successfully priced a U.S. IPO with proceeds of more than $22 million. Eight of the last ten cross-border listings from China are trading below their IPO price, a sign of how hard IPOs have gotten hit by the growth in regulatory pressure.

The latest deal that appears to be stung by the crackdown and ensuing selloff is Hello Inc. The Shanghai software maker withdrew its U.S. listing on Tuesday, the day it was expected to debut. But some of these deals could still get done. And if they shift to Hong Kong, the Western banks will still benefit — although with lower fees.

Read more: Chinese Bike-Sharing Startup Hello Scraps Plans for U.S. IPO

After companies go public, particularly from the technology sector that’s been the focus of China’s crackdown, they are often seen as candidates for secondary offerings. This has traditionally promised more fees for U.S. underwriters.

The largest China-U.S. secondary offering of the past year, a $4.2 billion offering in Pinduoduo Inc., brought in $47 million in fees that were paid almost entirely to just Goldman and BofA, according to data compiled by Bloomberg.

Equity capital markets is just the start. The regulatory crackdown has also reduced the use of debt to fund overseas M&A to a seven-year low as the White House pushes Wall Street to more broadly reconsider its presence in China and Hong Kong.

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©2021 Bloomberg L.P.

(Bloomberg) — The first of five former eBay Inc. employees who were convicted of running an elaborate cyberstalking conspiracy against a couple who put out an e-commerce newsletter was sentenced to 1 1/2 years in prison for his role in the plot.

Former senior global security manager Philip Cooke, who spent 27 years with the Santa Clara, California, police department before going to work for eBay, was sentenced on Tuesday in federal court in Boston. The U.S. had sought 2 1/2 years, while his lawyers asked the judge to order home confinement.

The macabre campaign against Ina and David Steiner of Natick, Massachusetts, whose EcommerceBytes blog has been critical of eBay, included anonymous threatening tweets and menacing deliveries, such as a bloody pig mask, live insects, a funeral wreath and a book on surviving the death of a spouse, according to the U.S.

The former employees, not including Cooke, traveled to Boston, rented a van and conducted surveillance on the couple’s home, the government alleges. Investigators say the squad also tried to break into the couple’s garage to place a tracker on their vehicle.

Read More: Bizarre EBay Stalking Campaign With Pig Mask Spurs Lawsuit

The conduct in the case was “just nuts,” U.S. District Judge Allison Burroughs said on Tuesday before sentencing Cooke, 56.

“The idea of all these grown people sitting around coming up with this plan is unfathomable to me,” she said.

EBay, which wasn’t charged, has said it was “extremely cooperative with the investigation in helping state and federal authorities figure out what had happened and collect evidence of the crime.”

Cooke admitted he took part in a security team planning meeting in San Jose for the conspiracy against the Steiners. In August 2019 Cooke texted two thumbs-up emojis to a co-worker in a chat about the campaign. He also tried to help the team mislead local police.

Cooke said “a twisted sense of loyalty to all the wrong people” led him to forget about the victims.

“I spent years protecting people, but I failed to do that for you,” he told the Steiners, who were in the courtroom. “I’m very sorry.”

In addition to apologizing to the Steiners, Cooke also apologized to Natick Police. He lamented his choices that “betrayed good cops around the country.”

“I never thought I’d be that guy, but I am and I’m disgusted for it,” he said.

Federal prosecutors said in a court filing that while Cooke’s role was not as central to the campaign as that of his superiors in security, he betrayed “the idea behind the badge he once wore” and failed to try to stop his co-workers from traveling to the Steiners’ home.

The Steiners are suing eBay and the seven former employees the U.S. has accused of conspiracy. They claim they are victims of “corporate terrorism” that has caused them continuing psychological harm.

Ina Steiner said she is still plagued by anxiety and fear.

“There’s one place where you’re supposed to be safe, home,” she told the judge. “The people who attacked me took that away from me.”

David Steiner said they attended in person because they wanted Cooke to see “we were not a faceless concept at the end of a tweet, or email, that we were flesh and blood human beings deeply affected by his actions.”

Read More

• Ex-EBay CEO’s Texts Triggered Scare Campaign With Cockroaches
• EBay’s Alleged Stalkers Exposed After Boston Couple’s Sleuthing

(Updates with Cooke’s statement in eighth paragraph.)

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©2021 Bloomberg L.P.

(Bloomberg) — Workday Inc. shares fell the most in eight months on news that Amazon.com Inc. stopped using its human resources software.

Amazon ended a deal to roll out the software, Business Insider reported Tuesday, sending shares down as much as 7.8%, the most intraday since Nov. 20. Workday confirmed the news in a statement, saying the decision was made 18 months ago because of the e-commerce company’s “unique set of needs.”

“Our relationship with Amazon remains strong with the Amazon Web Services partnership intact and other Amazon subsidiaries — such as Audible, Twitch, and Whole Foods — successfully using our system,” the Pleasanton, California-based software maker said in the statement.

The shares pared their loss after Workday’s statement, declining 5.9% to $224.51 at 2:21 p.m. in New York. The stock was little changed this year through Monday’s close.

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©2021 Bloomberg L.P.

(Bloomberg) — U.S. companies that provide critical services or have high-value trade secrets should be required to improve their cybersecurity and report hacking attacks to the federal government, national security officials and senators said Tuesday.

The attack on Colonial Pipeline Co. in May, which forced the shutdown of the largest fuel pipeline in the U.S. until the company paid $4.4 million in ransom, represents “a total face-plant failure,” Senator Sheldon Whitehouse said during a Senate Judiciary Committee hearing on what to do about ransomware attacks.

“We now have a situation in which you can have critical infrastructure companies fail at meeting basic standards of cyber hygiene, and we’re OK with that,” Whitehouse, a Rhode Island Democrat, said. “We don’t have to regulate everybody in the world. But if you’re critical infrastructure we should no longer tolerate this voluntary regime with big companies who know their infrastructure is critical and fail.”

Whitehouse has introduced legislation with Senator Lindsey Graham, a South Carolina Republican, that would create cybersecurity and breach reporting requirements for certain companies. Whitehouse called on the Biden administration to promptly work with lawmakers to prepare the legislation.

The Justice Department also wants Congress to pass legislation requiring certain companies to notify the federal government about ransomware attacks, Richard Downing, deputy assistant attorney general, testified. The requirement should be for breaches that affect critical supply chains and high-value trade secrets, Downing said.

The department is also seeking help from Congress to improve the ability to disrupt criminal activity and enhance the ability to prosecute those carrying out attacks, who often live in countries that are off-limits to U.S. investigators such as Russia and China, Downing said.

Downing said that Russia is at the top of the list of countries that protect criminals. The U.S. has found connections between criminals carrying out ransomware attacks against U.S. companies and Russian intelligence agencies, Downing said.

“I wouldn’t say that the government of Russia is behind these attacks. However, we do believe they aren’t doing what they could be doing to suppress these attacks,” Downing said.

Although there was bipartisan support for new legislation, the hearing also aired criticism along party lines. Senator Ted Cruz, a Texas Republican, said President Joe Biden has “responded to an extreme threat with extreme weakness” after attacks.

Downing, the Justice Department official, said that “most of the ransom paid by the Colonial Pipeline was recovered,” despite criticism of the administration’s performance.

(Updates with Justice Department official in final paragraph)

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©2021 Bloomberg L.P.

(Bloomberg) — Shares of Amazon.com Inc. traded on a Canadian stock exchange for the first time after Canadian Imperial Bank of Commerce launched a new product for investors who want to own U.S. stocks while hedging their currency risk.

The first Canadian depositary receipts, or CDRs, are listed on Neo Exchange, an upstart equity market that competes with the Toronto Stock Exchange. They’re modeled on American depositary receipts, which have been used for decades by U.S. investors to buy shares of foreign companies without having to trade through a foreign exchange.

Trading volume on the Amazon CDRs was modest on the first day, with 9,668 shares exchanged as of 1 p.m. in Toronto. The price at that time was C$22.62; each CDR represents 0.005 of a share of Amazon, which was trading at $3,604.65 in New York.

Elliot Scherer, managing director and head of sales at CIBC’s Wealth Solutions group, said the idea for CDRs came in response to complaints from clients who’ve seen their U.S. stock gains reduced by a rise in the Canadian dollar.

“The S&P 500 was making all these all-time highs, Canadians in Canadian dollar terms weren’t seeing that big lift,” said Scherer.

Currency Hedge

Last year, the S&P 500’s 16.3% increase was cut to 14.4% in Canadian dollars. In 2019, a strong loonie lopped more than 6 percentage points off the U.S. equity benchmark’s 28.9% gain.

The Canadian depositary receipts are designed to allow investors to buy foreign shares in loonies. There’s a built-in hedge so that the investor’s returns are based on how the stock performs, regardless of moves in the exchange rate.

Retail investors who handle their own portfolios and have “no easy way” to hedge currency risks are the product’s initial target, Scherer said. However, CIBC aims to gain traction with investment advisers as well, he said.

CIBC and Neo Exchange plan to offer CDRs soon for Alphabet Inc., Apple Inc., Tesla Inc. and Netflix Inc., the companies said in a statement.

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©2021 Bloomberg L.P.

(Bloomberg) — The first of five former eBay Inc. employees who were convicted of running an elaborate cyberstalking conspiracy against a couple who put out an e-commerce newsletter was sentenced to 1 1/2 years in prison for his role in the plot.

Former senior global security manager Philip Cooke, who spent 27 years with the Santa Clara, California, police department before going to work for eBay, was sentenced on Tuesday in federal court in Boston. The U.S. had sought 2 ½ years; the defense, home confinement for whatever period the court might order.

The macabre campaign against the couple, whose EcommerceBytes blog has been critical of eBay, “included anonymous threatening tweets and menacing deliveries, such as a bloody pig mask, live insects, a funeral wreath and a book on surviving the death of a spouse, according to the U.S. The former employees traveled to Boston, rented a van and conducted surveillance on the couple’s home, the government alleges. Investigators say the squad also tried to break into their garage to place a tracker on their vehicle.

Read More: Bizarre EBay Stalking Campaign With Pig Mask Spurs Lawsuit

The conduct in the case was “just nuts,” U.S. District Judge Allison Burroughs said on Tuesday before sentencing Cooke, 56.

“The idea of all these grown people sitting around coming up with this plan is unfathomable to me,” she said.

EBay, which wasn’t charged, has said it was “extremely cooperative with the investigation in helping state and federal authorities figure out what had happened and collect evidence of the crime.” 

Cooke admitted he took part in a security team planning meeting in San Jose for the conspiracy against Ina and David Steiner of Natick, Massachusetts. In August 2019 Cooke texted two thumbs-up emojis to a co-worker in a chat about the campaign. He also tried to help the team mislead local police, who were unraveling the scheme.

Federal prosecutors said in a court filing that while Cooke’s role was not as central to the campaign as that of his superiors in security, he betrayed “the idea behind the badge he once wore” and failed to try to stop his co-workers from traveling to the Steiners’ home.

The Steiners are suing eBay and the seven former employees the U.S. has accused of conspiracy. They claim they are victims of “corporate terrorism” that has caused them continuing psychological harm.

Read More

• Ex-EBay CEO’s Texts Triggered Scare Campaign With Cockroaches
• EBay’s Alleged Stalkers Exposed After Boston Couple’s Sleuthing

(Adds details and context starting in second paragraph.)

More stories like this are available on bloomberg.com

©2021 Bloomberg L.P.

(Bloomberg) — The world’s biggest crypto exchange, Binance, is looking for a new chief executive officer as it’s retooling to address concerns of regulators from around the world, current CEO Changpeng “CZ” Zhao said in a news conference call Tuesday.

Facing a slew of probes and consumer warnings, Binance plans to change its mindset from being a tech startup to acting as a financial institution, with all related licensing and compliance procedures in place, Zhao said. The company, which previously said it is not based anywhere, also plans to establish multiple headquarters around the world, and to appoint senior people steeped in compliance as regional CEOs, Zhao said. It’s also applying for licenses “everywhere,” he said.

The strategy shift comes as Binance is being scrutinized in the U.S. by the Justice Department, the Internal Revenue Service and other agencies. Earlier this month, Thailand’s Securities and Exchange Commission filed a criminal complaint against Binance. The Cayman Islands’ financial regulator said Binance wasn’t authorized to operate in the territory.

“Longer term, playing within the rules, 100% compliant, it’s much better to play within the confines of that,” Zhao said. “That trade-off is very, very clear.”

Founded in 2017, much later than many other exchanges, Binance has quickly gained market share by being more aggressive and paying less attention to regulations than rivals such as Coinbase Global Inc. It’s now the world’s biggest crypto spot as well as derivatives exchange. It also issues its own coins, such as Binance Coin, which has a $52 billion market cap — the fourth-biggest among cryptocurrencies in the world.

While the company already has a compliance department with several hundred people, it’s planning to further boost compliance hires, especially of senior people. Some of the senior people steeped in compliance could become Zhao’s successors, he said.

“Being CEO of any company is a very demanding job, I don’t mind taking a break,” Zhao said. “We are serious enough to look for a compliance background person to lead the organization. I would be honored to lead Binance as a regulated financial institution until we find someone who may do a better job than I do.”

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(Bloomberg) — Atos SE is exploring a sale of legacy information technology businesses, including some outsourcing operations, as it focuses on higher-growth areas, people with knowledge of the matter said.

The French company is studying a divestment of some lower-margin IT units as it seeks to address a slide in its stock price, the people said, asking not to be identified because the information is private. Atos has said it will announce the results of a strategic review of non-core assets this week.

Atos has also been considering a management reshuffle that would see some executives depart, two of the people said. The company needs to “clearly and forcefully articulate the near-term steps it’s taking to reverse the disastrous start to 2021,” Bloomberg Intelligence analyst Tamlin Bason wrote in a research note this month.

“Color on the company’s plan to increase exposure to digital services, and decrease its reliance on legacy services facing secular pressures, will be critical to regaining investor confidence,” Bason said.

Shares of Atos rose as much as 3% in Paris trading Tuesday. The stock remains down 45% this year, giving the company a market value of about 4.5 billion euros ($5.4 billion). Atos has been moving away from commoditized businesses such as outsourcing and pushing into new areas including big data and cybersecurity.

While exploring steps to turn around the company, Atos has discussed a range of options from selling non-core assets to a breakup of the company or selling stock to a new investor, the people said. Deliberations are ongoing, and there’s no certainty they will result in a transaction, according to the people.

A representative for Atos declined to comment.

The French company this month lowered its full-year revenue growth forecast and operating margin targets, citing a decline in its legacy infrastructure business. Atos said in a July 12 statement that it expects to improve on all its key performance indicators in 2022 after a year of transition. One day last week, Atos shares closed at their lowest level since 2014.

Atos abandoned a plan to acquire U.S. rival DXC Technology Co. in February after investors and the target shunned the transformational deal that would have created an IT giant.

(Updates with detail on KPIs in penultimate paragraph.)

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(Bloomberg) — Activistion Blizzard Inc. Chief Executive Officer Bobby Kotick responded to the threat of an employee walkout with an all-staff email Tuesday, apologizing and calling the company’s recent actions “tone deaf.”

Employees at Activision Blizzard called for the walkout on Wednesday to protest the company’s responses to a recent sexual discrimination lawsuit and demanding more equitable treatment for underrepresented staff.

In Kotick’s message, the CEO said the company had hired law firm WilmerHale to conduct a review of its policies and promised “swift action” to ensure a “safe environment” and to stamp out harassment. Kotick also promised that the company would take steps including personnel changes, encouraging diversity in hiring and removing inappropriate in-game content. 

The controversy at Activistion Blizzard started last week, after California’s Department of Fair Employment and Housing sued the publisher behind games like Call of Duty and World of Warcraft, detailing disturbing incidents of sexual harassment and assault and a culture in which women faced unequal pay and retaliation. Activision called the allegations false and distorted in a statement last week, and Fran Townsend, executive vice president for corporate affairs, sent a letter to staff echoing that claim.

Infuriated Activision employees have spoken out on social media, and more than 2,000 staff signed an open letter calling the company’s responses “abhorrent and insulting.” Now they’re planning a strike.

The walkout is being organized by a group of employees at the subsidiary Blizzard Entertainment, where the majority of the lawsuit’s allegations were focused. In a statement to Bloomberg, the workers said their goal was to “improve conditions for employees at the company, especially women, and in particular women of color and transgender women, nonbinary people, and other marginalized groups.”

The strike will take place outside of Blizzard’s campus in Irvine, California, on Wednesday.

The employees are demanding:

• That Activision ditch mandatory arbitration clauses “in all employee contracts, current and future.”
• New practices for recruiting, interviewing, hiring and promotion that facilitate better representation “agreed upon by employees in a company-wide Diversity, Equity & Inclusion organization.”
• The publication of data on relative compensation, promotion rates and salary ranges for employees “of all genders and ethnicities at the company.”
• That a diversity task force be allowed to hire a third party to audit the company’s leadership, hierarchy and HR department. “It is imperative to identify how current systems have failed to prevent employee harassment, and to propose new solutions to address these issues.”

This is the second major organizing effort from Blizzard in about the past 12 months. Last year employees shared their salaries on a public spreadsheet and sent a letter of demands to management to ask for more equitable compensation. That action led to very little response, employees said.

Collective action is rare in the video-game industry, which has no unions in North America. A representative for the Blizzard employees organizing this walkout said they were not currently discussing unionizing.

(Updates to add details from Bobby Kotick’s message to staff starting in the first paragraph. )

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