Good morning. David Meyer here, standing in for Alan from sunny Berlin.
Berkshire Hathaway CEO Warren Buffett has confirmed that he “had discussions” with Uber, after a Bloomberg report suggested he offered the ride-hailing firm a $3 billion investment, but talks fell through.
However, the legendary investor told CNBC that some of the details in that report were “not correct.” Which details? That’s not clear, but here’s the gist of the story:
According to Bloomberg, Buffett’s $3 billion wasn’t necessarily the biggest thing that was on offer—rather, it was his credibility and the image boost it would have given to Uber, a company that has been known to have an image problem or two over recent years.
Buffett did this with Goldman Sachs during the financial crisis—Berkshire Hathaway’s $5 billion injection into the flailing outfit gave it the bump it needed to go raise more money. But in exchange for his money and cred, Buffett got a great deal: $5 billion in perpetual preferred shares (which came with a 10% dividend) and warrants for 43.5 million additional shares, which turned into a huge ownership stake several years later.
The Bloomberg piece suggests that Buffett originally wanted to throw “well above $3 billion” at Uber, but Uber CEO Dara Khosrowshahi wasn’t even keen on the $3 billion figure, and tried to get it down to $2 billion in order to give Buffett a smaller potential share of the firm. Unable to agree on the terms, the parties walked away.
It seems Khosrowshahi’s confidence stemmed at least partly from the whopping $9.3 billion investment Uber had just received from Japan’s SoftBank, increasingly the power player in the tech sector. Uber isn’t desperate for cash right now. But that’s probably not the whole story.
The fact is, Uber’s image is lot better these days than it used to be under scandal-prone Travis Kalanick. Khosrowshahi has done his best to convey level-headedness and contrition for Uber’s past sins—an expensive endeavor, as detailed in a recent Wall Street Journal piece about big corporate apology tours.
But this tonal shift isn’t merely a PR exercise. Note, for example, Uber’s by-the-books dealings with U.S. transport regulators in self-driving-car crash investigations—a stark contrast with Tesla’s approach to the same issue, characterized by public spats with the officials. OK, so a lot of people are annoyed at the way Uber exited South East Asia, by suddenly handing a huge monopoly to rival Grab (which is also backed by SoftBank,) but—at least as far as investors are concerned—that’s a far cry from the sort of bad behavior that previously almost defined Uber.
It appears Khosrowshahi felt comfortable with turning down not only Buffett’s cash, but his cachet too. That’s a remarkable turn of events for all involved.
More news below.
A note from Alan: Apologies yesterday for mistakenly saying that Syngenta has been renamed in the wake of its purchase by ChemChina. It hasn’t.
It seems EU Trade Commissioner Cecilia Malmström was right—according to multiple reports, President Donald Trump will go ahead with steel and aluminum tariffs on imports from the European Union. The official announcement is expected today. If it goes ahead as predicted, expect swift retaliation from Europe, slapping big tariffs on imports from the U.S. TIME
The Volcker Rule, a key plank of the Dodd-Frank banking law that limits banks from making speculative investments with the money they hold, is likely to be relaxed after the Federal Reserve’s board unanimously voted for its loosening yesterday. “The agencies responsible for implementing the rule see many opportunities to simplify and improve it in ways that will allow firms to conduct appropriate activities without undue burden, and without sacrificing safety and soundness,” said Fed chair Jerome Powell. The proposal is now open for a 60-day public comment phase. The Hill
The Chinese AI company SenseTime has just raised $620 million from investors such as Fidelity and Silver Lake. Just months ago, it raised $600 million from the likes of Alibaba and Temasek, and last year it pulled in $410 million. SenseTime, which says it’s profitable, works in the field of image recognition, which is red hot due to its application in everything from self-driving cars and entertainment to finance and retail. CNBC
Korean Air’s Cho family is reportedly being investigated on suspicion of tax evasion and breach of trust. Prosecutors raided the company’s offices in Seoul, following reports that the police would like to arrest the wife of chairman Cho Yang-ho. The chairman’s daughters have generally been the ones in the news—Heather, who was jailed over a “nut rage” incident in 2014, and Hyun-min, who more recently threw water at someone in a business meeting. BBC
Around the Water Cooler
Asian equities bounced today, and European stocks seemed to be cautiously following suit, apparently because there’s vague hope of Italy’s populist coalition getting its government-forming plans back on track. The Asian performance followed reports of solid growth in Chinese industrial output. Of course, everyone in China and Europe remains nervous about the impact of those U.S. tariffs. Bloomberg
Chinese Tech Pushback
Everyone loves Chinese tech stocks right now, no? Apparently not. According to a Wall Street Journal report of the Sohn Investment Conference in Hong Kong this week, one presentation pitched a hedged options trade on Tencent, and another recommended shorting JD.com. That’s a stark contrast to the view of Wall Street analysts, who are pretty unanimous in calling Tencent a “buy.” WSJ
The award for yesterday’s weirdest news probably goes to Arkady Babchenko, the Russian journalist who everyone thought had been assassinated in Ukraine on the Kremlin’s orders, showing up alive and well. He and the Ukrainian authorities had staged his murder in order to thwart an actual Russian plan to kill him, he said in a press conference. Babchenko apologized to his wife, who found him in a pool of blood and really believed he subsequently died in the ambulance. Pretty much all observers say this was a catastrophically stupid idea that played into the Kremlin’s hands. Guardian
Saudi Arabia’s big reform push was reportedly largely authored by none other than the SCL Group, better known as the parent company of scandal-struck Cambridge Analytica. According to the New York Times, SCL “provided a psychological road map of the kingdom’s citizenry and their sentiment toward the royal family, even testing potential reform steps as they charted a path forward to preserve stability.” NYT