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USDA Gives Food Makers Until 2022 to Label Products With GMOs

U.S. food companies must label products containing genetically engineered ingredients by 2022, federal regulators said, a victory for manufacturers who pushed for more time before disclosing use of the controversial crops.

The new rules for labeling “bioengineered foods” also allow companies to skip labeling some ingredients, including refined sugars and corn syrups that often are made from genetically modified crops. That decision, outlined Thursday by the U.S. Department of Agriculture, is a win for food makers that argued…

Source: WSJ.com: US Business
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Morgan Stanley says it’s ‘outright bullish’ on Asian markets

Asian markets have hit the bottom and will likely turn around in 2019 due to China’s expansionary monetary policies to help spur economic growth, a Morgan Stanley strategist said on Thursday.

raised its benchmark interest rate a quarter-point as markets expected. Hours later, on Thursday, the Chinese central bank left its short-term borrowing rates unchanged.

Beijing is beginning to ease monetary policy “in really quite a major way,” Garner said.

Other measures taken by Beijing to boost economic activity include lowering property mortgage rates in some cities and the rollout of a policy tool — known as the targeted medium-term lending facility, that’s aimed at encouraging loans to small and private firms, he noted.

Morgan Stanley recently upgraded its call for emerging market stocks from “underweight” to “overweight” for 2019, while U.S. equities were downgraded to “underweight.”

The cycle is shifting favorably for the Asian markets, particularly in China, said Garner.

He said markets in Asia already “reached their troughs” in late October or early November and that the investment bank is “outright bullish on markets out here” in the region.

Many investors are jittery due to the recent slide in the U.S. markets, but there’s been “so much focus on the S&P and its decline, I think that people are largely missing that turning point in our markets,” said Garner.

Morgan Stanley expects large emerging markets such as China, India, Indonesia and Brazil to perform well in the second half of the year.

“Their acceleration will be in stark contrast to the deceleration underway in the U.S.,” said Garner.

Source: Business News
Author: Continue reading Morgan Stanley says it’s ‘outright bullish’ on Asian markets

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European stocks open lower after Fed hikes rates

European markets opened lower on Thursday after the U.S. Federal Reserve raised rates for the fourth time in 2018.

STOXX 600 was 0.6 percent lower shortly after the opening bell, with all sectors and major bourses in negative territory.

Officials at the Federal Reserve voted to hike interest rates by 0.25 percent on Wednesday, although President Donald Trump had been pressing the central bank for a more dovish policy outlook.

Meanwhile, Asian markets saw shares slide on Thursday, with Japan’s Nikkei shedding 3.3 percent to reach nine-month lows.

Back in Europe, the Bank of England’s Monetary Policy Committee is preparing to announce its latest interest rate decision. The MPC voted unanimously to maintain rates of 0.75 percent at its last meeting. Investors expect the BoE to hold rates this month.

Thursday will also see Russian President Vladimir Putin hold his annual news conference at 0900 GMT.

Source: Business News
Author: Continue reading European stocks open lower after Fed hikes rates

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US futures point to more trouble for stocks at Thursday’s open

U.S. futures fell during trade on Thursday morning stateside after all three major indexes dropped following the Federal Reserve’s decision to hike interest rates.

Fed decided to hike its benchmark overnight lending rate by one quarter point on Wednesday. The Dow Jones Industrial Average fell more than 350 points following the Fed’s decision and pushed the major indexes to new lows for the year.

The Dow, S&P 500 and Nasdaq Composite all notched new closing and intraday lows for 2018 on Wednesday.

For traders, the Fed’s statement and Chairman Jerome Powell’s subsequent press conference did not suggest that the central bank would slow its pace of rate hikes as quickly as some had hoped. Markets took a leg lower during Powell’s comments that the central bank would continue to reduce the size of its balance sheet at the current pace.

“I think that the run-off of the balance sheet has been smooth and has served its purpose,” Powell said during a news conference. “I don’t see us changing that.”

The Dow and S&P 500, which are both in corrections, are on track for their worst December performance since the Great Depression in 1931, down more than 8 percent and 9 percent, respectively, this month. The S&P 500 is now in the red for 2018 by 6.3 percent.

The Dow has lost over 1,250 points this week.

Source: Business News
Author: Continue reading US futures point to more trouble for stocks at Thursday’s open

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Facebook explains how Netflix, Spotify, and others used the info they got

Facebook on Wednesday evening published a blog post explaining why it allowed Spotify, Netflix and the Royal Bank of Canada to read, write and delete private user messages, as was reported by the New York Times on Tuesday.

fell by more than 7 percent on Wednesday, one of the worst days for the stock in 2018.

Throughout the year, Facebook has been mired by a number of scandals related to its treatment of users’ privacy and the handling of their data. Facebook shares are down more than 25 percent so far this year and down nearly 40 percent since a peak in July.

Source: Business News
Author: Continue reading Facebook explains how Netflix, Spotify, and others used the info they got

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Cramer Remix: If you can handle the allegations, these companies could be profitable long-term plays

In some cases, buying shares of companies facing lawsuits can pay off if you’re patient and willing to withstand headline risk, CNBC’s Jim Cramer said Wednesday.

the Qualcomm-Apple dispute, the lawsuits facing Johnson & Johnson for alleged ties between its talc and cancer, the Malaysian government’s fraud allegations against Goldman Sachs, the District of Columbia’s recently announced case against Facebook and the potential for litigation against Allergan for selling breast implants that allegedly cause cancer.

If Apple loses the Qualcomm-Apple battle, it could have more downside, Cramer admitted. But if the iPhone maker settles with Qualcomm, the stock could bounce, the “Mad Money” host said.

As for Johnson & Johnson, while a loss could hurt the company, the stock has already shed more than $50 billion in market value, Cramer said. He suggested waiting a week and seeing if the story dies down before buying.

Goldman Sachs will likely have to settle with Malaysian authorities, but that debacle will likely end there, even if it takes months, he said.

Facebook’s Cambridge Analytica ties might hurt in the short-term as that lawsuit progresses, he added, but he didn’t think they would derail the company’s business model.

And Allergan is a wait-and-see situation for Cramer, who said that while the danger of its implants was well-known, the headline risk will be high for the foreseeable future.

“Every one of these lawsuits is a serious taint,” he acknowledged. “However, the stocks have already been hammered. It’s more headline risk going forward. But if you can handle the negative headlines and you can be very patient, I actually think you’re getting some very nice long-term buying opportunities, but the operative term — please — is, indeed, long term.”

Cramer was surprised stocks didn’t plunge even further on the Federal Reserve’s Wednesday decision to hike interest rates by a quarter-point.

The Dow Jones Industrial Average, the S&P 500 and the Nasdaq all sank to new lows for 2018 after the Fed’s announcement, in which the central bank also forecast two more hikes in 2019, down from three as previously stated. The Dow gave up what had been a 381-point intraday gain to close 351 points lower.

“If anything, I was surprised at how well the averages held up today,” Cramer said. “You could easily argue that we should’ve been down 1,000 Dow points. [It] would’ve made a ton of sense given what I heard.”

“But because the market was already so oversold, the worst it’s been since the lows in February, the downside was more limited,” he explained.

Click here for his take on the Fed’s decision and where stocks go from here.

Wall Street may have balked at Micron Technology’s most recent earnings report, driving shares of the chipmaker to a new 52-week low Wednesday, but the company’s CEO told CNBC that the weakness wouldn’t last very long.

The “most important thing is that the end-market demand drivers for memory and storage continue to be vibrant,” Sanjay Mehrotra, president and CEO of Micron, told Cramer in an exclusive interview on Wednesday.

Shares of Micron shed more than 6 percent in after-hours trading following the company’s Tuesday earnings report, which missed analysts’ earnings and revenue estimates. The stock lost another 7.92 percent in Wednesday’s session.

But Mehrotra said that Micron and other companies in the semiconductor space were working to fix the supply-demand imbalance that has plagued commodity chipmakers in recent months.

Click here to watch and read more about his interview.

With Amgen, Teva Pharmaceuticals and Eli Lilly all chasing market share with new drugs for treating migraines, the path to success is “a horse race between three great companies,” Eli Lilly’s CEO, Dave Ricks, told CNBC on Wednesday.

In September, Eli Lilly received approval from the Food and Drug Administration for its migraine treatment, Emgality. While Amgen and Teva’s competing treatments had already been approved by then, Ricks told Cramer in an interview that the battle was far from over.

“We’re three or four months behind Amgen, one month behind Teva,” he said on “Mad Money.” “It’s a horse race between three great companies, but we have some skills that we think will come into play.”

Ricks, whose company’s diabetes and psoriasis drugs have enabled it to raise its 2019 outlook, said Eli Lilly’s technology and ability to reach customers could be major advantages in treating migraines, which affect roughly 30 million Americans.

Click here to watch and read more about his interview.

Cramer also checked in with chartist Carley Garner, who argued that stock market pessimism was peaking and stocks could be close to a “sustained rebound.”

Garner, co-founder of DeCarley Trading and the author of Higher Probability Commodity Trading, said charts of the U.S. dollar suggested that it was overbought “or at least … overheated,” Cramer said, meaning that U.S.-based international companies could soon get “a real boost.”

She also noted that even at Wednesday’s lows, the market was only down 15 percent from its all-time highs.

“In short, she thinks that the 2017 rally got a little ahead of itself, so we needed to spend 2018 digesting these enormous gains, which we’ve been doing,” Cramer explained. “Maybe we need another pullback to finish the process, but from a technical perspective, Garner believes the recent declines are unremarkable.”

All in all, her interpretation of the charts suggested “that the pessimism may have gotten overblown here, even with a hostile Federal Reserve, and there’s a case to be made that the market could potentially be ready to rebound,” the “Mad Money” host continued. “Although she could just as easily see a further 7 percent decline here, so perhaps you should keep your head down. Where am I? I know the market’s really oversold. I kind of want to split the difference. I think we can rally, and then I think we get slammed again. Why? Because the Fed is not on your side.”

Click here to watch the full video of Cramer and Garner’s analysis.

In Cramer’s lightning round, he rattled off his responses to callers’ stock questions:

Cyberark Software Ltd.: “I like Cyberark. Why? Because safety against cyber-terror never takes a vacation.”

Washington Prime Group: “Oh my god, 20 percent yield. I mean, what does that tell you? If that’s not a red flag, what’s a red flag? That’s worse than having a touchdown called back when you’re playing Dallas. I’ve got to tell you, I don’t trust it. I don’t trust it. It’s a little stock, but you can still lose, and that one’s scary to me.”

Disclosure: Cramer’s charitable trust owns shares of Apple, Johnson & Johnson and Goldman Sachs.

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Source: Business News
Author: Continue reading Cramer Remix: If you can handle the allegations, these companies could be profitable long-term plays

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Pfizer, Glaxo Strike Deal to Put Focus on Prescription Drugs

Pfizer, which sells drugstore staples like Advil, plans to combine its consumer-health unit with GlaxoSmithKline’s.

Pfizer, which sells drugstore staples like Advil, plans to combine its consumer-health unit with GlaxoSmithKline’s.


Photo:

carlo allegri/Reuters

Pfizer
Inc.


PFE -1.01%

and

GlaxoSmithKline


GSK 0.84%

PLC plan to combine their consumer health-care units and eventually spin off the joint venture, creating the world’s largest seller of drugstore staples like Advil and Sensodyne toothpaste.

The deal will free up both companies to concentrate on prescription medicines, which tend to be more profitable if also higher risk. The new business today could command a market valuation of about $42 billion, according to Mick Cooper, an analyst at Trinity Delta, a research house. Combined sales were $12.7 billion last year.

The joint venture represents an unexpected conclusion to a yearlong process by Pfizer to shed its consumer business, as it and other pharmaceutical companies focus on higher-margin prescription drugs. While Glaxo has shared that focus, the British drugmaker had remained committed to its consumer business, which its chief executive led before her promotion to the top job last year.

The planned spinoff also represents a breakup of Glaxo, which currently generates around a quarter of its revenue from consumer products, compared with 7% at Pfizer.

Glaxo will hold a 68% stake and New York-based Pfizer the remaining 32% in the new joint venture. Among its other brands are nicotine-replacement gum Nicorette, heartburn tablets Tums and Centrum multivitamins.

The new business today could command a market valuation of about $42 billion, according to Mick Cooper, an analyst at Trinity Delta, a research house.

As a stand-alone consumer health-care business, it would be rare. Similar operations typically are part of big pharmaceutical companies, such as

Sanofi
SA

and Bayer AG, or consumer-goods giants, like Procter & Gamble Co. and Reckitt Benckiser Group PLC.

Companies have used the steady revenue of over-the-counter drugs to help them smooth out boom-and-bust cycles for blockbuster treatments. For Glaxo, without its consumer health-care business, that role will fall to the vaccines business, which has relatively stable revenue flows. Pfizer also sells vaccines, as well as generic drugs.

“There are benefits to having a broader structure but these are significantly outweighed by the value creation of the deal we are announcing today,” Glaxo Chief Executive Emma Walmsley said on a call with reporters.

Ms. Walmsley said the increased cash flow from the joint venture would allow her company to invest heavily in its pipeline of new medicines. Melding the two consumer businesses would also allow for cost cuts: Glaxo and Pfizer said they expect savings of £500 million ($631 million) a year by 2022.

On Wednesday, Glaxo shares gained 3.8% in London trading, while Pfizer fell 1% in New York.

Consumer products used to be integral to many big drug companies, but their businesses have diverged in recent years. Prescription drugs treat deadly, debilitating and rare diseases and require different research, sales and manufacturing capabilities.

Compounding for Consumers

Combining the consumer health-care divisions of Glaxo and Pfizer would create the world’s largest over-the-counter drugmaker.

Revenue

by segments, 2017

Older

medicines 40%

Pharmaceuticals

Newer medicines

58%

4

Rare diseases

Inflammation

8

Oncology

12

18

Internal

Vaccines

17

Vaccines

11

Consumer

Consumer

7

26

GlaxoSmithKline

$38 billion

Pfizer

$53 billion

Notes: GlaxoSmithKline’s revenue is converted at the rate of £1 = $1.26; Percentages may not add to 100% due to rounding.

Source: the companies

Sales of over-the-counter medicines also can’t match the growth potential of prescription drugs. For one, big retailers with a strong online presence like Amazon.com Inc. and Walmart Inc. are squeezing margins in what is termed the “Amazon effect.”

Those same retailers are also increasing competition through store-brand products. Earlier this year Amazon launched some over-the-counter items with Perrigo PLC.

The Glaxo-Pfizer joint venture will expand the global reach of the U.S. company’s consumer brands and buttress negotiations with major retailers, said Ashtyn Evans, an analyst at Edward Jones & Co.

For Pfizer, Wednesday’s deal represents a swan song for departing Chief Executive Ian Read, who tried selling the company’s consumer division outright but failed after pricing the business too high, according to people familiar with the matter. Under his tenure, Pfizer shed noncore businesses, notably its animal-health business, which is now an independent public company called Zoetis Inc.

Glaxo had been interested in Pfizer’s consumer division when it was on the block, but walked away because it didn’t want to acquire the business outright, according to Ms. Walmsley. Instead, the U.K. company this year bought Novartis AG’s stake in the pair’s consumer health-care venture for $13 billion.

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Recasting the Pfizer transaction as an all-equity deal was more appealing, Ms. Walmsley said.

Dialing back on consumer health will allow incoming Pfizer CEO Albert Bourla to focus further on ratcheting up prescription-drug sales after the company weathered several years of patent expirations, including that of the cholesterol fighter Lipitor. He takes the helm on Jan. 1.

For Glaxo, the deal is Ms. Walmsley’s biggest move yet to reshape the company.

Since becoming CEO in April 2017, Ms. Walmsley has bulked up the prescription-drug business with the $4.16 billion purchase of cancer drugmaker

Tesaro
Inc.,

while shedding Glaxo’s nutrition business in a $3.75 billion sale to

Unilever

PLC. She has also shaken up the company’s top ranks and cut several scientific programs to concentrate on researching drugs that focus on immunology or that have a genetic basis.

Pfizer and Glaxo aren’t alone in off-loading slower-growing businesses in favor of prescription-drug pipelines.

Bristol-Myers Squibb
Co.

on Wednesday announced the sale of its French consumer-health-care business Upsa to Japan’s

Taisho Pharmaceutical Holdings
.

Meanwhile, those drugmakers sticking with consumer health care have made acquisitions. In recent years, Sanofi bought Boehringer Ingelheim’s consumer business and Bayer snapped up Merck & Co.’s over-the-counter medicines.

Write to Denise Roland at Denise.Roland@wsj.com

Appeared in the December 20, 2018, print edition as ‘Pfizer, Glaxo Set Deal For Health-Care Units.’

Source: WSJ.com: US Business
Author: Continue reading Pfizer, Glaxo Strike Deal to Put Focus on Prescription Drugs

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Marlboro Maker Nears Deal That Values Juul at $38 Billion

E-cigarette startup Juul has grown quickly in its short existence.

E-cigarette startup Juul has grown quickly in its short existence.


Photo:

eva hambach/Agence France-Presse/Getty Images

Altria Group
Inc.


MO 1.00%

is nearing a deal to take a 35% stake in e-cigarette startup Juul Labs Inc. at a roughly $38 billion valuation, according to people familiar with the matter, an investment that would make Juul one of the most valuable private companies.

Altria Is Nearing a Deal to Take a 35% Stake in Juul

The $12.8 billion cash injection could be announced as soon as this week, the people said. It would more than double what Juul was valued at just a few months ago, a sign of how quickly the startup has been growing and Altria’s desire to find growth outside its shrinking cigarette business. The Wall Street Journal earlier reported on the discussions.

At $38 billion, three-year-old Juul would be worth more than several well-known Silicon Valley startups, including Airbnb, the home-sharing service; Elon Musk’s space venture SpaceX; and three times as much as Pinterest. Juul’s valuation would be on par with the market capitalization of public companies such as

Delta Air Lines
Inc.,


DAL -1.93%

Target
Corp.


TGT -3.80%

and

Ford Motor
Co.

The rich valuation comes at a time that the San Francisco company is under fire from regulators, educators and public health officials over its popularity among children and teens. Juul says its products are designed to help adult cigarette smokers switch to a less-harmful way to inhale nicotine, but the company’s own research shows its sleek device has hooked many people who had never smoked or had quit smoking.

Juul, which has about 1,500 employees, was on track for $2 billion in annual revenue. It has outperformed its internal forecasts from its last funding round, according to a person familiar with the matter. The company has profit margins as high as 75%, the person added, which is much higher than traditional tobacco.

The investment would give the Marlboro maker greater access to a rapidly growing but increasingly controversial segment of the nicotine market. It would also expand Altria’s reach beyond the U.S. Currently,

Philip Morris International
Inc.

sells Marlboro and other Altria brands outside the U.S. Juul products are sold in Canada, the U.K., Israel and Russia, and the company has expansion plans in Europe and Asia.

Some Juul employees have been upset by their company’s talks with Altria, saying it is a betrayal of the startup’s mission to help cigarette smokers switch to less-harmful products. In an all-hands meeting after the Journal first reported the discussions, Juul Chief Executive Kevin Burns told staff that any deal would have to meet criteria including Juul maintaining full control of the company, employees having the option to cash out shares and the new investor taking actions to support Juul’s mission, according to a person familiar with the matter.

A deal with Altria would give Juul access to better shelf space at retailers and marketing access to millions of cigarette smokers.

Youth use of e-cigarettes has soared over the past year, thanks largely to Juul’s thumb-drive shaped vaporizers, whose sales have skyrocketed since mid-2017. One out of every five high-school students—more than three million teens—reported using e-cigarettes recently, according to a federal survey conducted this past spring.

Altria’s stock had declined nearly 30% over the past year as the company grappled with declines in traditional smokers and a potential U.S. ban on menthol cigarettes.The Richmond, Va.-based company is now pivoting to areas of growth in the market. Earlier this month, Altria made a $1.8 billion investment in Canadian cannabis company

Cronos Group
Inc.

That deal will give Altria access to a growing part of the industry as marijuana becomes legalized in more markets.

Altria’s pursuit of Juul signals a lack of confidence in a heat-not-burn device called IQOS that it hopes to market in the U.S. in a partnership with Philip Morris International. The product, which heats tobacco but doesn’t burn it, has gained traction in Japan and other countries, but its prospects in the U.S. are unclear.

In January, an advisory committee to the Food and Drug Administration said scientific evidence was insufficient to support an ambitious marketing claim proposed by Philip Morris that switching to IQOS from cigarettes reduces the risks of tobacco-related disease.

A Philip Morris spokesman said six million cigarette smokers around the world have switched to IQOS. “No other innovation has yet approached the tremendous reduction in cigarette use that IQOS has achieved in such a short period of time,” he said.

Juul, like many other e-cigarette devices, is sold without formal FDA approval and has been able to advertise on social media unlike traditional cigarette brands. The FDA has given e-cigarettes already on the market several years before they must apply for approval.

To combat underage use, the FDA recently imposed restrictions on the sale of certain flavors of e-cigarettes that it says appeal to teens. Juul refills with non-tobacco flavors such as mango and cucumber account for a sizable chunk of its sales, according to analysts.

Juul has taken steps to restrict sales to minors, including pulling all but its mint, menthol and tobacco-flavored products from bricks-and-mortar stores. It continues to sell all its flavors on its website, which it says has age verification technology. The company has discontinued its use of U.S. social media.

Altria recently discontinued its own e-cigarette products, sold under the MarkTen and Green Smoke brands, which had failed to gain much traction in the marketplace.

Write to Dana Mattioli at dana.mattioli@wsj.com, Jennifer Maloney at jennifer.maloney@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

Appeared in the December 20, 2018, print edition as ‘Altria Deal Lifts Juul to Top Echelon.’

Source: WSJ.com: US Business
Author: Continue reading Marlboro Maker Nears Deal That Values Juul at $38 Billion

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SoftBank’s Biggest Backers Balk at Planned $16 Billion Acquisition of WeWork

SoftBank’s Vision Fund is already a major investor in WeWork after acquiring nearly a fifth of the company with a $4.4 billion investment last year.

SoftBank’s Vision Fund is already a major investor in WeWork after acquiring nearly a fifth of the company with a $4.4 billion investment last year.


Photo:

Richard B. Levine/Newscom/Zuma Press

Key investors in

SoftBank Group
Corp.’s


9984 -4.72%

giant tech fund have balked at a planned $16 billion investment in co-working startup WeWork Cos., leaving SoftBank Chief Executive Masayoshi Son to find an alternative as his ambitions hit up against the limits of his financial firepower.

Government-backed funds in Saudi Arabia and Abu Dhabi, according to people familiar with the matter, have told SoftBank executives they have concerns about SoftBank’s negotiations to buy a majority of money-losing WeWork, whose industrial-chic workspaces and short-term leases have made it one of the world’s hottest startups.

SoftBank’s Vision Fund is already a major investor in WeWork after acquiring nearly a fifth of the company last year with an investment of $4.4 billion at a valuation of $20 billion. SoftBank subsequently committed another $4 billion, including a $3 billion commitment last month at a $45 billion valuation. The new investment would value WeWork at around $36 billion, the people said, and would bring SoftBank and its affiliates’ total investment in the company to more than $24 billion.

Saudi Arabia’s Public Investment Fund, or PIF, and Abu Dhabi’s Mubadala Investment Co. contributed the bulk of the nearly $100 billion raised by the SoftBank Vision Fund. Their size gives them an effective veto over certain investments and a loud voice in validating Mr. Son’s moves.

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The pushback against the new WeWork deal is unusual for the freewheeling Mr. Son, who typically gets to invest as he pleases. The 61-year-old executive has transformed SoftBank from a stodgy Japanese cellphone provider into one of the most influential technology investors in the world, bending investors to a vision based more on instinct than traditional financial analysis.

Some of the people said that PIF and Mubadala have questioned the wisdom of doubling down on WeWork, and have cast doubt on its rich valuation. The company is on track to lose around $2 billion this year, and the funds have expressed concern that WeWork’s model could leave it exposed if the economy turns down, some of the people said.

PIF and Mubadala are both heavily invested in real estate, and have told SoftBank executives they would prefer the fund stick to technology bets, some of the people said.

The deal under discussion would include $10 billion from SoftBank to buy out most existing outside shareholders, plus another $6 billion in new capital for WeWork over the next three years, according to people familiar with the matter. The deal would leave WeWork Chief Executive Adam Neumann with control of the company, one person said. The companies are hoping to announce the deal early next year, although talks are fluid and it could still fall apart.

Mr. Son still hopes the sovereign funds will let the Vision Fund pay for some of the deal, one of the people said. SoftBank is considering other ways to fund the deal, including using its own cash, raising debt and bringing in outside investors, the person said. It may use the proceeds from the initial public offering of its Japanese telecom business.

SoftBank already carries heavy debt: nearly ¥18 trillion, or roughly $158 billion, as of Sept. 30

Mr. Son, who has backed other companies including Uber Technologies Inc. and Indian e-commerce company Flipkart, has occasionally encountered skepticism from his investors and board members, but generally they have gone along.

The pushback from Mubadala and Saudi Arabia’s PIF shows Mr. Son is testing his most enthusiastic backers. It also raises questions about the broader risk appetite of investors who have thrown money at fast-growing startups, no matter how unprofitable, in hopes of future profits.

Under the deal being discussed, SoftBank would buy out existing investors at a valuation of around $22 billion, subject to a shareholder vote. The additional money put into the company would come in $2 billion chunks in each of the next three years at a higher valuation, the people said.

The Wall Street Journal first reported the WeWork talks in October.

Beyond its massive size, the prospective deal would be unusual in that it would leave Mr. Neumann in control of WeWork despite the fact that SoftBank would own most of the company and provide the new capital. Mr. Neumann currently controls WeWork’s board, and his shares give him 10 times as many votes as other investors’ shares, according to company filings. As of late last year, he controlled a limited liability company that owned 30% of WeWork.

WeWork has spent years marketing itself like a tech company, and Mr. Neumann has compared it to Amazon.com Inc., saying that office space is to WeWork what books were to Amazon: just the beginning.

Some analysts say it more closely resembles an old-school office-leasing company, and have warned that if demand for office space and rent prices fall, WeWork could be stuck with fixed-rent leases for 10 to 15 years.

If WeWork becomes a huge hit, it would bolster Mr. Son’s record of prescient bets, and be a boon to SoftBank’s shareholders. Mr. Son invested $5 million with Chinese entrepreneur Jack Ma for a fledgling e-commerce company, Alibaba, that went on to become a behemoth.

WeWork has spent heavily on new office space as it has grown. While executives years ago predicted strong profits by now, losses have recently grown faster than revenue. WeWork took in $1.2 billion in revenue in the first nine months of the year, but spent twice as much, posting a $1.2 billion net loss. WeWork has said the losses reflect heavy investment in growth, and individual offices are profitable once they are leased.

The deal talks come at a turbulent time for SoftBank and Saudi Arabia, which committed $45 billion to the Vision Fund. The Saudi connection to the murder of journalist Jamal Khashoggi and the war in Yemen have sparked a growing backlash against the kingdom and its crown prince, Mohammed bin Salman.

A few venture capitalists and a Democratic congressman representing Silicon Valley, Ro Khanna, have called on companies to reject Vision Fund money.

Write to Liz Hoffman at liz.hoffman@wsj.com, Eliot Brown at eliot.brown@wsj.com and Maureen Farrell at maureen.farrell@wsj.com

Source: WSJ.com: US Business
Author: Continue reading SoftBank’s Biggest Backers Balk at Planned $16 Billion Acquisition of WeWork

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Carlos Ghosn Closer to Release as Bid to Extend Detention Without Bail Is Rejected

TOKYO—Nissan Motor Co.’s former Chairman Carlos Ghosn moved closer to being released on bail after the Tokyo District Court took the highly unusual step of rejecting a request by prosecutors to extend his period of detention without the possibility of bail.

Mr. Ghosn remained in jail Thursday pending a likely appeal of the Tokyo court’s decision by Japanese prosecutors. If that appeal is also turned down, Mr. Ghosn’s lawyer will seek bail, said a person familiar with Mr. Ghosn’s defense.

Source: WSJ.com: US Business
Author: Continue reading Carlos Ghosn Closer to Release as Bid to Extend Detention Without Bail Is Rejected