New questions for Boeing
The trouble at Boeing is deepening after safety inspectors at Alaska Airlines and United Airlines found loose bolts on some grounded 737 Max jetliners, drawing scrutiny to the quality control process for one of the world’s best-selling aircraft models.
The findings raise questions about whether regulators will call for broader safety recommendations for the grounded Max 9 planes. They also intensify pressure on David Calhoun, Boeing’s C.E.O.
He was brought in to restore the company’s reputation in 2020 following Max crashes in Asia and Africa, but many of the core criticisms around production and the reliability of its suppliers have lingered.
Boeing’s shares tumbled 8 percent on Monday, making it the worst performer on the S&P 500. They were down nearly 0.9 percent today in premarket trading.
One focus is on whether the plane’s panel was properly attached. National Transportation Safety Board investigators said on Monday that four so-called stop bolts would ordinarily be used to keep the panel, or door plug, firmly in place. But the plug, which was recovered from a science teacher’s backyard in Oregon, was found with no such bolts. “We don’t know if they were there or if, again, they came out during the violent explosive decompression event,” said Jennifer Homendy, the N.T.S.B. chair.
The affected plane entered service in November, but had already racked up three warnings about cabin pressure, the N.T.S.B. said.
A former employee at Spirit AeroSystems, a key Boeing supplier, alleged in court documents that they warned of “excessive amount of defects” related to the door plug, according to The Lever.
Flight disruptions are expected to continue while airlines inspect Max 9s. Safety checks have already led to hundreds of flight cancellations since last week’s harrowing in-flight blowout on an Alaska Max 9.
United’s and Alaska‘s combined fleets include more than 140 of these planes. Alaska said Monday that it had found “some loose hardware” on some grounded planes, while United detected “bolts that needed additional tightening” around the door plug on roughly 10 aircraft, according to Reuters.
The turbulence is growing for Boeing. The company is set to host an all-hands meeting today in which it will stress its commitment to safety.
But customers are getting antsy: “They’ve had quality control problems for a long time now, and this is just another manifestation of that,” Tim Clark, the C.E.O. of the Middle Eastern airline Emirates and a major plane buyer, told Bloomberg.
Could the crisis spread beyond the Max 9? Fatal aircraft crashes in 2018 and 2019, which involved a different Max model, forced a global grounding of those Max aircraft that lasted roughly 20 months.
Ronald Epstein, an analyst at Bank of America, wrote to investors this weekend that greater regulatory scrutiny could slow the certification process around newer Max 7s and Max 10s. He added that “this could temporarily impact 737 Max-9 deliveries, depending on what the F.A.A. and N.T.S.B. as well as foreign regulators conclude.”
HERE’S WHAT’S HAPPENING
European regulators examine Microsoft’s ties to OpenAI. Following in the footsteps of Britain’s Competition and Markets Authority, the European Commission is looking into whether the tech giant’s blockbuster investment last year in the ChatGPT maker falls under its merger guidelines. Regulators are concerned that Microsoft’s financial backing gives it enormous sway over OpenAI, potentially endangering competition.
A privately operated lunar mission fails. Despite a successful rocket launch, errors in a robotic lander’s propulsion system have probably doomed the mission. The news raises questions about NASA’s effort to rely in large part on commercial start-ups to get scientific experiments on the moon. The agency plans to return astronauts there for the first time since 1972.
Apple sets a release date for its virtual reality headset. The iPhone maker will start selling its $3,499 Vision Pro on Feb. 2, with pre-orders starting next week. Apple has identified the device as a big part of its future, even as existing V.R. and augmented reality headsets haven’t gained mainstream popularity.
A boom time for activism
Last year was a volatile one for markets and a terrible one for M.&A. But for activist investors, 2023 was the busiest year on record with 252 campaigns worldwide, according to a new report from the investment bank Lazard.
It’s a sign that shareholders — both professional dissidents and normally quiet investors — were willing to shake up companies to bolster their financial performance despite economic and market uncertainty.
Among Lazard’s most notable findings:
-
About 183 investors undertook activist campaigns, up 21 percent from 2022, and a record 77 investors announced their first campaigns.
-
Activists won 122 board seats, up 13 percent, but in line with past levels.
-
Sixty-seven activist campaigns in North America were related to M.&A., including calls for a company to sell itself or break up, defying the slump in deal making.
-
The busiest activist investors were Elliott Management (15 campaigns), Starboard Value (8), the Asia-focused Oasis Management (7), ValueAct Capital (7) and Ancora Advisors (6).
Among the companies targeted by activists were corporate giants like 3M, Disney, Salesforce and Starbucks. That said, businesses with market capitalizations between $5 billion and $20 billion were the most common targets.
That level of activity reflects confidence among investors, according to Rich Thomas, a managing director at Lazard. “Activist campaigns are often amplified versions of the broader market,” he told DealBook. Such investors are “indicating that they’re positive on the future,” particularly in the belief that the economy and deal making will perk up.
One notable trend: Climate-related activism is down, after such campaigns surged with the rise of the so-called E.S.G. movement, which prioritizes environmental, social and governance factors. (A prominent example is Exxon Mobil’s loss to Engine No. 1, a then-nascent activist hedge fund.) As both companies and investors dial back their public support for E.S.G. causes, in part because of pushback from Republican policymakers, activist investors have become more cautious about pushing on this particular issue.
“Climate conversations have gone way down in the past year,” Kathryn Night, a Lazard managing director, told DealBook.
The money behind the Woods-Nike breakup
Tiger Woods’s decision to end his decades-long relationship with Nike has made waves throughout the sports world. For 27 years, few athletes were as inextricably linked to a brand as the golfing legend was with the Swoosh — or earned as much as he did.
The star’s exit underscores how much the business of athlete endorsements has changed during his career.
The relationship was era-defining and extremely lucrative. Woods signed with Nike in 1996, the year he turned pro at age 20, with a five-year, $40 million deal. In return, Nike became the golf apparel brand as Woods began to dominate his sport, usually wearing his now-iconic red Nike polo.
He extended the relationship multiple times over the years, signing contracts worth an estimated $660 million.
The two stuck together despite challenges. When Woods lost a number of sponsorships after news of his extramarital affairs came to light, Nike stood by him. And after Nike stopped selling golf equipment in 2016, Woods continued to wear the brand’s apparel.
Athletes today want more than cash. They’re increasingly asking for equity in the companies they endorse. Consider the tennis star Roger Federer, a fellow Nike alumnus, switching to the Swiss shoe company On, in part for a 3 percent stake. The N.F.L. players Patrick Mahomes and Christian McCaffrey also own equity stakes — Mahomes in the recovery products company Hyperice and McCaffrey in the sports drink maker Bodyarmor.
It isn’t clear where Woods will go — On said it isn’t signing him — though he’s expected to announce a new sponsor by the time he appears at the Genesis Invitational tournament in Los Angeles on Feb. 15.
Nike still has high-profile golfers on its roster, including Rory McIlroy, Scottie Scheffler and Nelly Korda.
Bitcoin bulls await the S.E.C.
The Bitcoin rally has stalled at around $46,500 on Tuesday ahead of a potential decision this week by the S.E.C. that could pave the way for the digital currency’s first spot exchange-traded fund, or E.T.F.
About a dozen firms, including the crypto asset manager Grayscale Investments and fund giants like BlackRock and Fidelity, have applied to the agency in recent months to begin offering customers a so-called spot Bitcoin E.T.F. Bitcoin has climbed more than 170 percent in the past year on hopes the agency will greenlight the E.T.F.s, bringing crypto trading further into the mainstream.
The cryptoverse is confident, despite a decade of denials. Last year, a federal court ordered the S.E.C. to review its denial of Grayscale’s Bitcoin fund application, calling the decision “arbitrary and capricious.” Since then, talks between the firms and the S.E.C. have picked up to address regulatory concerns, including around fraud and market manipulation.
“The Grayscale team continues to work collaboratively with the S.E.C. to pave the way for spot Bitcoin E.T.F.s to come to market,” a company spokeswoman told DealBook. The S.E.C. declined to comment.
The S.E.C. could still say no — despite the court ruling, and the market anticipation. The agency could deny the applications outright or it could grant approvals with strings attached, like insisting upon enhanced protections for investors, Brett Redfearn, a former director of the S.E.C. division of trading and markets, told DealBook. “It may not be an unequivocal win,” he said.
Critics are urging the S.E.C. to say no. “Approval of a spot Bitcoin E.T.F. would be a regulatory mistake of historic proportions,” wrote Dennis Kelleher, co-founder and C.E.O. of the financial reform nonprofit Better Markets, in a recent letter to the agency. He argued that changing course on Bitcoin E.T.F.s would generate “adverse consequences” for investors and others that “cannot be overstated.”
THE SPEED READ
Deals
-
Hewlett Packard Enterprise is reportedly near a deal to buy Juniper Networks, a communications infrastructure company, for roughly $13 billion. (WSJ)
-
George Casey, a senior deal maker at the law firm Shearman & Sterling, is defecting to Linklaters as his former employer prepares to merge with Allen & Overy. (Reuters)
Policy
-
U.S. lawmakers are pushing the Commerce Department to weigh restrictions on G42, a technology company controlled by the ruling family in the United Arab Emirates, because of the company’s ties to China. (NYT)
-
David McCormick, the Republican financier who is seeking to unseat Senator Bob Casey, Democrat of Pennsylvania, raised $5.4 million for his campaign last quarter. (Axios)
Best of the rest
-
Natural disasters caused more than $250 billion worth of damage last year, the hottest on record, with less than half of it being covered by insurance. (Bloomberg)
-
New research suggests that return-to-office policies haven’t bolstered companies’ profitability or stock performance. (Business Insider)
We’d like your feedback! Please email thoughts and suggestions to [email protected].
