|Bid||179.38 x 800|
|Ask||179.72 x 1000|
|Day's range||179.08 - 180.68|
|52-week range||121.60 - 187.05|
|Beta (3Y monthly)||0.94|
|PE ratio (TTM)||33.81|
|Earnings date||28 Jan 2020 - 3 Feb 2020|
|Forward dividend & yield||1.20 (0.67%)|
|1y target est||202.43|
(Bloomberg Opinion) -- China’s most ubiquitous company is hiding one of its most valuable assets. That needs to change.Tencent Holdings Ltd., best known for the WeChat messenger that almost everyone in the country uses, has a growing fintech business. But it’s getting overshadowed by the games and social media divisions. By spinning it off into a new company, with a move to a separate listing, management could unlock as much as $230 billion in value. That would make the entity China’s fourth-largest listed company and the world’s sixth-biggest financial services firm.Such a move could help Tencent retake some of the limelight that it’s about to share with Alibaba Group Holding Ltd. once that company lists in Hong Kong. Alibaba’s fintech unit, Ant Financial Services Group, already functions as a separate business with the e-commerce giant holding a 33% stake. At Tencent, fintech and business services accounted for 26% of revenue last quarter. The Shenzhen-based company is due to report third-quarter earnings late Wednesday.I estimate that revenue from Tencent’s fintech business grew in excess of 70% last year.(1) The vast majority of that was payments. Yet Tencent also offers other products such as wealth management and has a 30% stake in WeBank, China’s first online-only bank, which was founded five years ago. Data on its fintech profits are hard to ascertain, yet information disclosed by Alibaba shows that Ant Financial was unprofitable last year, so Tencent could be in a similar boat. That’s not necessarily a bad thing. The two rivals are startups in the classic sense, using fast revenue growth driven by marketing and incentives to gain ground fast. A major reason why both have lost money in recent years is due to low take rates, the commissions received from processing payments, because they’ve offered discounts to consumers and merchants. A turnaround could be near, Sanford C Bernstein senior analyst David Dai wrote in a recent series on China’s fintech sector. He estimates that a maturing market will ease cut-throat competition and allow both companies to take a greater share of the money that sloshes through their payments platforms.As a result, Tencent’s payment business (TenPay) alone could be worth $137 billion, compared to $127 billion for Ant’s AliPay, the Bernstein team figures. HSBC Holdings Plc uses two methodologies(2) to come up with an estimated value of around $128 billion. Throw in the other products, and Bernstein calculates a base-case valuation for Tencent’s fintech unit of $160 billion, going as high as $230 billion. This indicates that 40% to 58% of Tencent’s current market cap is locked up in this hitherto hidden division. Bernstein has a base case of $210 billion for Ant, reaching as high as $320 billion.Payments spinoffs have proven to be lucrative in the past. EBay Inc. proved it with PayPal Holdings Inc. in 2015, with the latter posting a 177% normalized return since then, outpacing the 145% rise in the S&P Data Processing sub-index which includes Visa Inc. and Mastercard Inc. PayPal also trounced both eBay (35%) and the S&P 500 (49%). Square Inc., another payments provider, has been one of the hottest stocks of the past decade, returning more than 590% since its initial public offering in 2015.A more recent example comes from India, where Walmart Inc. is reported to be spinning off payments business PhonePe from local e-commerce company Flipkart Group, which it acquired last year. That transaction could turn a $20.8 billion startup into two unicorns with a combined value of more than $30 billion. Tencent doesn’t need to rush to list this fintech unit. Appetite for mega IPOs is likely to be satiated by Alibaba’s Hong Kong listing and that of Saudi Aramco over the next few months. And there’s a long runway of big startups ready for their moment in the sun. By merely making it a separate entity, management can signal intent and allow investors to start re-rating Tencent’s stock accordingly.An offering may not even be necessary, since Tencent is already sitting on more cash than it needs. Instead, the company could distribute shares in Tencent Fintech to existing shareholders, and then directly list the stock. That’s similar to the approach advocated by activist investor Dan Loeb for a Sony Corp. split.Tencent is sitting on a bright light in this fintech unit. Time to let it shine.(Updates to include reference to third-quarter earnings schedule in third paragraph.)(1) The "others" category includes fintech, cloud, film & TV. Tencent noted that fintech is the major component and gave a figure for cloudbut not content.(2) HSBC Approach 1: valuation per user. Approach 2: Using Tencent operating margins applied to its payments business, then comparing to peers.To contact the author of this story: Tim Culpan at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Chinese payments giants Alipay and WeChat Pay, long a source of worry among competitors abroad, plan to open up their platforms to foreigners visiting the mainland as regulators ease restrictions.The apps, which dominate payments across the world’s second-largest economy and have even supplanted cash at some businesses, announced the plans in rapid succession after previously requiring users to have local accounts. Opening up to visitors may give an incremental boost to spending on the platforms -- but for overseas firms, it has big implications, potentially helping pave the way for future adoption abroad.“Although there will be some revenue coming from the foreigners using the card, the more interesting aspect is how seamless the cross-border Alipay and WeChat Pay experience is becoming,” said Zennon Kapron, founder and director of research consultant Kapronasia.Behind the scenes, China’s central bank recently told a number of payments firms they will soon be allowed to plug foreign cards into their apps for use in China, according to two people with knowledge of the situation. Previously, regulatory concerns about money laundering and cross-border cash flows had prevented that from happening. The central bank offered no immediate comment to an inquiry sent by fax.The move will provide relief to some of the more-than 30 million people who visit China annually and sometimes struggle to find alternate payment methods. Alipay and Tencent account for 94% of the country’s mobile-payment market.Already, Alipay and WeChat Pay’s logos are visible in stores and taxis in major cities around the world as the firms focus on helping Chinese travelers there. The expectation across the industry is that the apps will someday use that infrastructure to attract locals in those destinations.To be sure, the ability to work with credit cards is still pending. In its announcement, Ant Financial’s Alipay laid out a system that will work around current restrictions and can start immediately.Alipay said it’s letting travelers use a prepaid card service provided by the Bank of Shanghai. That means customers will have to periodically top off that account, which will be limited in amount.In contrast, Tencent Holdings Ltd.’s WeChat Pay intends to let people more directly connect their existing cards to its app. Visa described that plan in a statement of support early Wednesday in China, saying it will essentially enable its cards to work across China.“This is a great step forward, both for consumers traveling to China and the overall payments industry,” Visa said. “This partnership means that we’ll be working towards an environment where Visa cardholders will be able to use their Visa card in China at the millions of places where WeChat Pay is accepted, instead of having to rely on cash.”The companies didn’t provide a time frame.Tencent, acknowledging that it’s working under guidelines from regulators, said it has been discussing cooperation with U.S. card-network operators Visa, Mastercard, American Express and Discover as well as Japan’s JCB to support the linking of overseas credit cards to Wechat Pay.(Updates with researcher’s comment, regulatory guidance, statistics on market from third paragraph.)To contact Bloomberg News staff for this story: Lucille Liu in Beijing at email@example.com;Heng Xie in Beijing at firstname.lastname@example.org;Lulu Yilun Chen in Hong Kong at email@example.comTo contact the editors responsible for this story: Jun Luo at firstname.lastname@example.org, David ScheerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Facebook (FB) shares have jumped 11% in the past month and the social company recently topped quarterly estimates amid ongoing political scrutiny. The question is should investors buy Facebook stock right now?
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Pocket Cast or iTunes.U.S. hiring was unexpectedly resilient in October and prior months saw sharp upward revisions, validating the Federal Reserve’s signal of a pause from interest-rate cuts and indicating consumers will extend the record-long expansion despite weak business investment and trade tensions.Stocks rose to fresh records and Treasuries fell after the strong report.Payrolls increased 128,000 after an upwardly revised 180,000 advance the prior month, according to a Labor Department report Friday that exceeded the median 85,000 estimate in Bloomberg’s survey. That includes a General Motors Co. strike-driven 41,600 decline in automaker payrolls and 20,000 temporary census workers leaving their jobs.The jobless rate edged up to 3.6% from a half-century low, as black unemployment fell to a new record low of 5.4% Average hourly earnings climbed 3% from a year earlier, matching projections after an upward revision the prior month, though the 0.2% monthly gain was slightly below estimates.Click here for Bloomberg’s TOPLive blog on the jobs report.The report supports Fed Chairman Jerome Powell’s assessment this week that the U.S. economic outlook remains solid and the job market “strong” -- allowing the central bank to take a breather after a third straight interest-rate cut -- despite a persistent trade war with China and an increasingly dim global situation. With businesses pulling back on fixed investment, solid gains in hiring and wages will help drive growth and support President Donald Trump’s bid for re-election in 2020.“Overall the labor market is holding up very, very nicely,” Michael Brown, principal U.S. economist at Visa USA Inc., said by phone. “There’s no signs here the consumer is losing any momentum.”Fed policy makers are “probably on hold for a while,” Brown said. “Today’s report certainly supports the Fed view that they have provided accommodation and they’ll take a little victory lap.”Revisions added 95,000 jobs for the prior two months, bringing the three-month average to 176,000, though gains remain below 2018 levels.Minutes after the report, Trump tweeted that it was a “blowout” number and even more impressive when accounting for revisions and the GM strike. The president touted an “adjusted” employment gain of 303,000, which economic adviser Larry Kudlow said adds back in 60,000 jobs related to the strike on top of the revisions and census jobs.What Our Economists Say“The labor data continue to corroborate a moderation in the pace of economic activity in the latter half of the year, but the resilience in the pace of hiring signals that growth is cooling, not collapsing.”-- Carl Riccadonna, Yelena Shulyatyeva and Eliza WingerClick here for the full reaction note.A note of caution came separately Friday in the Institute for Supply Management’s factory purchasing managers index. That gauge trailed estimates for October and signaled the sector contracted for a third straight month, with the weakest production level since the last recession.The jobs data come on the heels of reports this week including third-quarter gross domestic product. The economy grew at a 1.9% annualized pace as consumer spending grew 2.9% -- a step down from gangbusters growth in the prior period but exceeding last year’s average. Stocks also hit a record high, even as the figures showed business investment fell for a second straight period and the most since 2015.“This was certainly a very solid labor market report,” Fed Vice Chairman Richard Clarida said in a Bloomberg Television interview. “We have ongoing growth in the economy, we have inflation near our objective so the economy is in a very good place.”Manufacturers subtracted 36,000 jobs, the biggest drop since 2009, though it would likely have been a gain without the effects of the strike. Still, even excluding the impact of the walkout, the sector has become increasingly fragile amid slowing global growth, a strong dollar and an ongoing trade war with China.The strike may also have hit wages in October. Average hourly earnings rose 0.2% from the prior month, below estimates, following little change the prior month. Annual wage gains have cooled since hitting a peak of 3.4% early in the year. Hours worked were unchanged at 34.4 per week.The job gains were led by leisure and hospitality, education and health services and professional and business services. Construction and finance also posted gains. Even retail jobs rose, registering back-to-back gains for the first time in more than a year following seven straight declines.The participation rate, or share of working-age people in the labor force, increased to 63.3%, the highest since 2013, as more Americans were pulled from the sidelines and into the workforce.The U-6, or underemployment rate, ticked up to 7% from the lowest since 2000; some analysts see this figure as a more accurate reflection of the true labor market as it includes part-time workers who’d prefer a full-time position and those who aren’t actively looking.(Updates with Fed vice chairman’s comment, ISM index, Kudlow comment.)\--With assistance from Jordan Yadoo, Sophie Caronello, Katia Dmitrieva and William Edwards.To contact the reporter on this story: Reade Pickert in Washington at email@example.comTo contact the editors responsible for this story: Scott Lanman at firstname.lastname@example.org, Vince GolleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Follow Bloomberg on LINE messenger for all the business news and analysis you need.Malaysia is trying to overcome its reliance on low-skilled foreign workers as it tries to move up the economic ladder. But that’s hurting some key industries in the country.The country aims to reduce the number of overseas workers by more than 130,000 in five years, while getting companies to hire more high-skilled Malaysians and turn to automation to become a more developed economy. Local businesses say they’re doing so, but still need low-skilled foreigners to fill jobs harvesting palm fruits and doing laundry.Small and medium enterprises -- which made up 38% of gross domestic product last year -- along with manufacturers and plantations say they’re facing labor shortages that could threaten their growth. The biggest problem for SMEs is hiring enough workers to meet immediate sales orders, according to the Federation of Malaysian Manufacturers. Labor shortage is also among the main challenges for the plantation industry, IOI Corp said.While Prime Minister Mahathir Mohamad has given up his goal of turning Malaysia into a high-income country by next year, he’s still pushing the economy to rely more on high-tech industries and less on resources. Restricting low-skilled foreign workers, who officially account for 15% of the labor force -- the real number may be much higher -- is one part of that move.Malaysia isn’t alone in its struggle to navigate immigration policy to benefit the economy. Singapore is opening the spigots slightly for higher-skilled foreign workers, especially in prized financial technology jobs, while issuing fewer work permits for low-skilled roles such as in retail and hospitality. Similarly, Thailand has unrolled a “Smart Visa” to attract highly-skilled foreign labor across 10 targeted industries.How Governments Use Immigration to Boost Their EconomiesWage Subsidies“Cheap foreign labor disincentivizes companies from investing in more productive capital and technology,” Malaysian Finance Minister Lim Guan Eng said in announcing wage subsidies this month. Local workers hired to replace foreigners will get incentives of as much as 500 ringgit ($120) per month for two years, and their employers can get as much as 250 ringgit. The initiatives would create 350,000 jobs for Malaysians in five years, Lim said.The government will also impose a stricter levy system to reduce overseas workers and crack down on human trafficking by conducting sweeps and requiring companies to carry out more rigorous audits.Local companies laud the government’s move to reduce dependence on foreign workers as a promising long-term goal. In the short term, however, the adjustment is painful.Dirty, Dangerous“SMEs are constrained in their ability to grow” by how long it takes to approve foreign-worker applications, the Federation of Malaysian Manufacturers said in an email. Local employees remain “the first choice of labor supply but in many cases, to no avail.”Most of the jobs taken up by overseas workers are considered dirty, dangerous and difficult -- reasons locals shy away from such work, MIDF Research said in a note.IOI echoes the view, saying Malaysians prefer to work in the service industry and in cities rather than rural plantations. The palm-oil producer is turning to machines to reduce its dependency on foreign labor and to boost productivity and cost efficiency.“But it doesn’t totally eliminate our need for foreign workers,” the company said.\--With assistance from Michelle Jamrisko.To contact the reporter on this story: Anisah Shukry in Kuala Lumpur at email@example.comTo contact the editors responsible for this story: Nasreen Seria at firstname.lastname@example.org, Yudith Ho, Michael S. ArnoldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The vast majority of big and small web retail companies are increasingly looking abroad for growth opportunities, data from Visa shows.
(Bloomberg Opinion) -- If someone woke from a coma and saw that the S&P 500 Index was up 21% for the year and reaching a new record high on Monday, the immediate reaction would most likely be that everything is great. But that’s far from true.The list of reasons stocks should be down is much longer than the one for why they should be up. The economy has slowed, and a majority of chief financial officers anticipate a recession within a year. Earnings have stopped growing, and estimates are being cut. Stock valuations are high. The U.S.-China trade war has not been resolved. Congress has started an impeachment inquiry against President Donald Trump. On the other hand, the Federal Reserve is easing monetary policy, but that’s only because the outlook has deteriorated.So why are equities roaring ahead? The answer comes down to a handful of stocks: Apple Inc., Microsoft Corp., Visa Inc., MasterCard Inc. and Oracle Corp. Those five companies account for half of the S&P 500 tech sector, which has surged 30.2% for the year. Exclude that sector and the S&P 500 would be up only about 14%, according to DataTrek Research. That’s still good but nothing special when compared with the returns in the rest of the world, with the MSCI All-Country World Index excluding the U.S. having gained 12%.Therein lies the hidden risk embedded in the market, which is that any missteps by any of these highfliers could spell doom for equities more broadly. It also underscores just how lacking in breadth this latest leg up has been. For one, the percentage of stocks on the New York Stock Exchange closing above their 200-day moving averages has dropped to 53% from 59% in mid-September.Not only that, but the spread between the share of S&P 500 members closing at 52-week highs and the share at 52-week lows has been in a general downtrend since June.To be sure, it’s not unusual that a handful of stocks have led the broader market higher. Before this year, it was the FAANG group of stocks: Facebook Inc., Apple, Amazon.com Inc., Netflix Inc., Google parent Alphabet Inc. and a few others. A few years ago, AQR Capital Management’s co-founder and chief investment officer, Clifford Asness, published a paper examining the impact of individual stocks on the S&P 500 from 1994 to 2014. What he found was that while the S&P 500 rose 9.3% a year, the top 10 stocks accounted for 4.1 percentage points of that gain on average.Then there’s the awkward fact that smaller stocks that make up the vast majority of the market are down about 11% from their records reached in August 2018 based on the S&P Small Cap 600 and Russell 2000 indexes.This stock market has delivered plenty of surprises, and betting against it has been a losing proposition. In January, when the S&P 500 was trading at about 2,600, the median estimate of about 25 Wall Street strategist surveyed by Bloomberg was for it to end the year at 2,913. It surpassed that level in April and ended Friday at 3,203. But those same strategists are more cautious, predicting the benchmark to drop to 3,000 by the end of the year.Of course, they could raise their forecasts, but that would be awkward given the trend in profits and the slowing economy. Third-quarter earnings are tracking at a 3% decline from a year earlier, and forecasts for the fourth quarter have been cut to a gain of 1.2% from the 5.4% increase that was forecast at the end of July, according to Cantor Fitzgerald. The S&P 500’s price-to-earnings ratio, at just shy of 20 times, is the highest since last October, just as the benchmark was beginning a tumble that led to a 14% drop in the final three months of the year.All that suggests investors need to look beyond the headlines about yet another record.To contact the author of this story: Robert Burgess at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Robert Burgess is an editor for Bloomberg Opinion. He is the former global executive editor in charge of financial markets for Bloomberg News. As managing editor, he led the company’s news coverage of credit markets during the global financial crisis.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Amazon.com Inc.'s earnings miss and weak holiday forecast elicited a similar reaction seen by many recent tech unicorns, IPO Edge Editor-in-Chief John Jannarone told Cheddar TV in a live interview. Jannarone pointed out that Amazon, with a mere 4% net income margin, is vulnerable to a reversion to sustained losses in the event of an […]
(Bloomberg) -- Shares of Visa Inc. rose 0.8% in early Friday trading after the company reported earnings and issued forecasts that topped expectations. Analysts used the same phrase -- “better than feared” -- to describe Visa’s results as they’d used to characterize a report by fellow payments company PayPal Holdings Inc. on Thursday.Visa stock rose the most since Feb. 1 on Thursday to close 2.8% higher, while PayPal closed up 8.6% at the highest since Sept. 23. Visa and Mastercard Inc. have outperformed so far this year, with Visa rallying 34% and Mastercard gaining 43%. That compares with a 26% gain for PayPal, and a 20% rise in the S&P 500.Here’s a sample of the latest commentary:Morgan Stanley, James FaucetteVisa makes “compounding earnings growth look easy,” Faucette wrote in a note, as it delivered “another quarter of strong double digitrevenue/earnings growth, with 2020 guidance implying more of the same.”Faucette said that investors are “likely to be positively surprised by slightly better cross border and international growth.” He’s “encouraged by progress in longer-term opportunities.” Maintained overweight rating, lifted price target to $207 as valuation was rolled forward to 2021.MoffettNathanson, Lisa Ellis“Visa’s results were about as in line as they could be, which for Visa means really good,” Ellis wrote. She flagged fiscal 2019 revenue growth of 11% and earnings per share growth of 18%, along with forecasts pointing to “more of the same” in 2020.She added that Visa’s “core volume metrics were in-line, if still a bit sluggish.” And most of the call was spent, as usual, she said, on “strategic topics, with a particular focus on Visa’s new offerings.” Rates Visa buy, with a target price of $210.Bernstein, Harshita Rawat“We remain bullish and view Visa (and Mastercard) as a ‘clean’ secular growth story in payments,” Rawat wrote. “Despite investor concerns, macro appears largely stable, and Visa (and Mastercard’s) earnings are somewhat resilient even in a downturn,” while there’s probably upside from compounding earnings-per-share growth.In the quarter, results were largely in line with expectations when adjusted for non-operational items, including accounting, taxes and interest expense, Rawat said. Revenue was also in line when adjusted for accounting, as “modest weakness” in services and other revenue was offset by lower incentives, stronger international transactions, and data processing revenue.Visa’s 2020 forecast was “modestly ahead of buy-side expectations,” she added, noting that the outlook was a key investor focus going into the results as “many investors were cautious on macro and lapping of a strong pricing year.” Rates outperform, price target $200.Jefferies, Trevor WilliamsVisa’s earning-per-share beat was driven by “top-line upside and a lower tax rate,” Williams wrote. Initial 2020 guidance was in-line with Jefferies expectations, and may have been “better than some feared.”“We continue to like the near-term set-up with a 10%-plus discount to Mastercard despite EPS growth converging, full pricing impact in the first half of 2020, FX headwinds easing, and believe Visa Direct can drive upside,” he saidg(Updates share trading in first and second paragraphs.)To contact the reporter on this story: Felice Maranz in New York at email@example.comTo contact the editors responsible for this story: Catherine Larkin at firstname.lastname@example.org, Steven FrommFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The Trump administration’s point person for overhauling the federal student loan system abruptly resigned Thursday after calling for the government to wipe out most of the nation’s $1.6 trillion of student debt.A. Wayne Johnson -- a Republican and former financial services executive who U.S. Education Secretary Betsy DeVos had appointed to a series of senior roles -- said that the federal government needs to wipe out the first $50,000 of debt owed for higher education by some 42 million Americans. That would jump-start economic growth by eliminating more than $900 billion of federal student loans -- and completely erase the debt for the vast majority of borrowers, he said.“As a banker, you recognize problematic situations and you deal with it through write-offs,” Johnson, who formerly worked at financial companies including First Data Corp. and Visa Inc., said in an interview. “From an economic standpoint, it is absolutely the right thing to do.”Johnson joins Senators Elizabeth Warren and Bernie Sanders, both Democratic candidates for president, in demanding mass debt forgiveness, a growing movement fueled by a generation of overburdened Americans who say they paid too much for an education that failed to provide the earnings boost that would justify the cost.Johnson appears to be betting that debt forgiveness will appeal to Republicans too. He’s using the forgiveness plan to launch his candidacy for the seat held by U.S. Senator Johnny Isakson, a Georgia Republican whose retirement at the end of 2019 will give Governor Brian Kemp the power to appoint an interim successor. More than 1.5 million people in the state collectively owe almost $61 billion on their federal student loans, U.S. Education Department data show.Nationwide, a 1% tax on employers’ earnings would provide more than enough funding to cover the government’s debt writedowns -- losses that would result anyhow, Johnson said, because much of the nation’s student loan debt ultimately won’t be repaid.About a fifth of borrowers are in default, Education Department data show, and millions more are behind on their bills. Borrowers as a group are paying down about 1% of their federal debt every year, an earlier Bloomberg Businessweek analysis found -- the equivalent of a former student annually reducing the balance of a typical $30,000 college loan by just $300.Stands OutAs a Republican, and as a former Trump administration official, Johnson stands out from the crowd of Democrats clamoring for debt relief. After a career in financial services, Johnson enrolled in a doctorate program in higher education at Mercer University and wrote his dissertation on student loans. His former boss, DeVos, last week criticized Democratic proposals to cancel debt by arguing it’d be unfair to the millions of Americans who never went to college but ultimately would foot the bill through taxes.Johnson’s plan includes two separate provisions meant to address criticism that it’d be unfair or insufficient. First, Johnson wants the federal government to reimburse past borrowers who’ve already paid off their loans with as much as $50,000 in income tax credits. Second, he’d eliminate the federal loan program and replace it with $50,000 in grants to cover college tuition and work training and licensing programs.It was a chance meeting with a struggling borrower from Utah that prompted Johnson to reconsider the role that student debt plays in people’s lives, he said. The man had never been late on a bill, but his initial $40,000 balance had ballooned to some $120,000 after years of postponing his payments. The borrower asked Johnson if his agency would negotiate a final payment that would allow him to pay less than he owed.“Like millions of Americans, every day he woke up owing more than the day before,” Johnson said. “That’s when I said, ‘This is nuts.’”To contact the reporter on this story: Shahien Nasiripour in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, Daniel Taub, Ben HollandFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Visa's shares have grown very consistently, but one concern I would have about these payment processing firms are their rich valuation multiples, which have inflate with their stock prices.
(Bloomberg) -- Mark Zuckerberg was ready for a Congressional interrogation on Facebook Inc.’s cryptocurrency project. On the stand for more than six hours Wednesday, he got a lashing on every other controversy facing the social media giant, too.The 35-year-old chief executive officer arrived on Capitol Hill prepared to defend the company’s plans for Libra, describing the advantages of a global digital coin that would help open up financial systems to the poor and underbanked around the world. From the start of his testimony to the House Financial Services Committee, however, lawmakers made it clear that beyond the questions they had over the new currency, they are skeptical that Facebook should be trusted with the tremendous power it has amassed over 2.7 billion global users.https://t.co/K2g4PUIriZ— Bloomberg Crypto (@crypto) October 23, 2019 During the CEO’s lengthy appearance, many of Washington’s grievances about Facebook were laid bare. There were heated questions about Facebook’s refusal to fact-check political ads; accusations of rampant child exploitation on the platform; Facebook’s move to encryption and the impact that would have on the ability to obscure criminals; the company’s continued problems with election interference heading into the 2020 presidential election; what it’s doing to prevent “deepfakes,” or manipulated videos; and critiques of its poor record on workforce diversity.“I think you can appreciate using a person’s past behavior to determine their future behavior,” said Representative Alexandria Ocasio-Cortez, a first-term Democrat from New York. “In order for us to make decisions about Libra, we have to dig into Facebook’s past behavior in respect to democracy.” She then dove into a line of questioning about what Zuckerberg knew and when regarding the Cambridge Analytica data-privacy scandal that erupted in 2018.Committee Chairwoman Maxine Waters set the tone early on in a tweet she sent just as the hearing got underway.“Facebook has allowed election interference, released private data, violated civil rights laws, among other offenses & now they’re trying to launch a BigTechTakover by creating this mysterious ZuckBuck?”Waters, a California Democrat, said Facebook should stop work on its cryptocurrency project until the company addresses a series of unrelated “deficiencies” in its social-media business.Zuckerberg vowed to try to address lawmakers’ concerns but also said he hoped to “address the risk of not innovating. I don’t know if Libra is going to work, but I believe in trying new things.”He also conceded that it has been “a challenging few years for Facebook.” The company has acknowledged the unauthorized use of private user information by U.K. research firm Cambridge Analytica, shut down several state-backed disinformation campaigns, been targeted with multiple antitrust investigations and been hammered for taking money to publish false political advertising.Facebook has gone to great lengths to try to rehabilitate its image. For years, Zuckerberg had described his social network’s purpose as “connecting the world,” but that mission ended up as a grow-at-all-costs strategy that created blind spots on how the platform could be used in harmful ways, such as live-streaming terrorist shootings and attacks. Zuckerberg last testified to congress in April 2018, answering 10 hours of questions about how Facebook allowed app developers to collect data on users, and how the platform was used by Russia to influence the 2016 presidential election.The company spent a record $4.8 million on lobbying in the third quarter, according to federal disclosures filed Monday, up 70% from the same period a year earlier. Since October 2018, Facebook has hired 12 external lobbying firms to supplement the 11 lobbyists it counts among its own employees, according to the company’s filings. Facebook brought on many of the outside firms to support the launch of Libra.Waters has been one of the loudest critics in Congress of Facebook’s effort to create the Libra digital token. When the social-media giant first announced its plans in June, she almost immediately demanded that the company halt development. Government officials and central bankers in Europe have also raised concerns about how the project would protect users’ privacy and prevent criminals from using it to launder money.Facebook sent David Marcus, the executive who leads the company’s blockchain team and has so far served as the de-facto leader for Libra, to address the same committee in July. He too spent much of his time defending his employer for its previous missteps, and trying to convince Congress that people will be able to use Libra without ever having to use Facebook.Zuckerberg reiterated Wednesday that he has no intention of launching the cryptocurrency without approval from U.S. regulators. That was a point of contention and confusion before the Libra Association was officially formed this month.Though he has made the promise before, Zuckerberg took it a step further on Wednesday, saying that Facebook could even be forced to leave the Libra Association entirely if the group decides to move forward with the currency without approval from U.S. regulators. It’s an unlikely scenario, but Zuckerberg’s suggestion that Facebook could abandon a project it started is meant to appease lawmakers who have pushed back aggressively. Zuckerberg said he wants the project to meet or even exceed U.S. government standards.At the same time, Zuckerberg made the case that if the U.S. doesn’t lead in innovation, specifically in areas like cryptocurrency, then China will leap ahead.“We can’t sit here and assume that because America is today the leader that it will always get to be the leader if we don’t innovate,” he said.But members of Congress poked holes in Zuckerberg’s argument that Libra would improve America’s dominance in finance around the world. If that were the case, why would Libra need a home base in Switzerland, with a global roster of members and need to be backed by multiple currencies beyond the U.S. dollar? How would the currency actually work, and would it allow transactions that were anonymous or non-refundable?Zuckerberg didn’t have many answers. The Libra product is still just an idea, and its launch will require agreements by association members on how it will function and fit within global regulatory frameworks. He said he didn’t know whether other Libra members were planning to contribute money to back the currency, and that the idea of anonymous transactions is still “an open question.”Facebook originally had 27 partners that planned to join it in the Libra Association, which is supposed to share in the governance of the cryptocurrency. Recently about a fourth of those original members dropped out, including PayPal Holdings Inc., Mastercard Inc. and Visa Inc. Ann Wagner, a Missouri Republican, said the departure of those members was a disturbing sign. Zuckerberg said some of Libra’s early partners abandoned the project probably because it was risky and because of the intense regulatory scrutiny. Facebook has made an effort to make clear that the social network won’t be solely responsible for managing Libra.Several lawmakers questioned Facebook’s motives for basing the Libra Association in Switzerland instead of in the U.S. A big part of other crypto companies’ decision to set up in the country is the flexible tax treatment they can get. There has also been much clearer regulatory guidance from the Swiss compared to U.S. regulators like the IRS or SEC. And Zuckerberg said he views the financial infrastructure in the U.S. as outdated.Zuckerberg, who has a personal interest in cryptocurrencies, came prepared with lofty arguments about Libra’s purpose: It could help reduce income inequality by giving people -- including 14 million in the U.S. without access to bank accounts -- an easier, faster and cheaper way to send money around the world. At the same time, it would secure America’s international financial leadership, since Libra would be backed mostly by the U.S. dollar, especially if the cryptocurrency is allowed to launch prior to similar planned efforts in China.But lawmakers pushed Facebook to clearly outline the business reasons for the project -- beyond the pitch meant to appeal to regulators. Facebook envisions Libra being incorporated into the company’s various messaging apps including WhatsApp and Facebook Messenger. The company believes that the currency could help benefit its existing advertising business, or create opportunity for new revenue streams. Zuckerberg said in the hearing that Libra will eventually help boost Facebook’s ad prices, but he later said Libra is more than a business plan and that he’s “certainly not doing this because I am trying to make more money.”At the hearing’s end, there was still no consensus on what lawmakers would need to be comfortable with the project. It’s still unclear what agencies or bodies will regulate Libra and when it will actually launch.Patrick McHenry, the ranking Republican on the committee, said he’s not sure lawmakers learned anything new.“We don’t have a deeper understanding of how Libra would work.”Zuckerberg will have another attempt to clarify when he responds to potentially hundreds of pages of written questions from the legislators.\--With assistance from Joe Light.To contact the reporters on this story: Kurt Wagner in San Francisco at email@example.com;Sarah Frier in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Jillian Ward at email@example.com, Molly SchuetzFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.