Morning Cents: June 24, 2020

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June 24, 2020 – Colleges spend millions on pandemic safety measures, Dell explores a spinoff for VMware and Facebook’s German antitrust troubles.

Today’s newsletter 1,230 words, an 8-minute read. Let’s get to it:

Colleges Spend Millions to Prepare to Reopen Amid Coronavirus

As the world tries to return to some form of normalcy, colleges around the country are attempting to reopen and map out safety measures. Schools are spending a ton on the acquisition of plexiglass, face masks, hand sanitizer and other health products to minimize risk when students return. Even in preparation, these are becoming multi-million-dollar expenditures.

Why It Matters

Higher education is taking a beating from the pandemic – many schools face severe budget crunches due to lower enrollment and tuition revenues, refunded housing fees and costs tied to shifting online. Even some of the well-resourced schools have turned to fundraise measures. 

Reopening campuses is still contingent on the approval of local health officials, and many are hopeful as some have brought back student-athletes for voluntary workouts. But for many of these institutions to survive, a return to campus is imperative. Otherwise, things could go the way of the University of Akron, which eliminated six of its 11 colleges in May as part of coronavirus cost-saving measures, according to Cleveland.com.

Numbers to Consider

  • $309,000 – The University of Central Florida’s bill for ordering 250,000 disposable masks.
  • $57 Million – The budget gap Chapman University is facing with the price tag for protective measures at $8.3 million and an expected 10 percent reduction in its student body.
  • $50 Million – Purdue University’s budget for safety measures, which included buying five miles of plexiglass.

Full Story: (WALL STREET JOURNAL)

Dell Explores Spinoff of $50 Billion Stake in VMware

In a move to boost its underperforming shares, Dell Technologies Inc. is evaluating options on what to do with VMWare Inc. Dell originally acquired a majority share of the cloud-computing company in 2016. Nothing is set in stone, but Dell’s options include spinning off VMware, unloading its stake entirely or buying up the rest of the company.

Why It Matters

VMware is one of the most valuable assets in its parent company’s possession, and Dell is trying to remind the market of that. Dell’s market value is around $36 billion, while its stake in VMware is worth roughly $50 billion. Splitting the businesses could be a way to emphasize value in one or both.

Despite VMware’s strong position in the cloud-computing market, Dell’s shares have barely budged since returning to the market in 2018. “That is despite a more-than-50% rise in the same period for the tech-heavy Nasdaq Composite Index, which set a record high Tuesday as investors pile into stocks of companies that are thriving amid the coronavirus lockdowns,” The Wall Street Journal writes.

Dell is in the early stages of this process and doesn’t necessarily have to make a move. It can’t really do so until September 2021 anyways. At that point, Dell could spin VMware off tax-free because of a rule requiring both firms involved in a spinoff to have operated continuously for five years.

Numbers to Consider

  • 81 Percent – Dell’s stake in VMware, which has a market value approaching $63 billion.
  • $149.23 – VMware’s share price as of Wednesday morning.
  • $49.01 – Dell’s trading price on Wednesday morning as well.

Full Story: (WALL STREET JOURNAL)

Antitrust case against Facebook’s ‘super profiling’ back on track after German federal court ruling

Germany’s antitrust case against Facebook is “back on track” after a federal ruling overturned its appeal. Facebook drew scrutiny for the practice of creating “super profiles” or combining user data across multiple platforms such as WhatsApp and Instagram without consent.

Why It Matters

In March 2016, Germany’s Federal Cartel Office opened a probe into Facebook’s data gathering practices. Three years later, the FCO concluded it found abuse and ordered the tech giant to stop compiling user data across platforms without explicitly obtaining consent. Facebook appealed and won, receiving a temporary stay. But that twist was overturned Tuesday.

In a press release, the court said Facebook abused its dominant position in the German market; finding the “super profiling” of users negatively impacts people’s personal autonomy, violating the European Union’s data protection laws and representing antitrust concerns. It also helps Facebook amass more substantial ad revenues. The court also pointed out “if thriving competition existed in the social network market there may well be a more privacy-friendly offer from Facebook. Instead, you get none,” Tech Crunch writes.

In terms of the next steps, the FCO can demand Facebook creates a plan within four months on how to phase out this behavior. Though, any breakup of Facebook’s data practices will probably drag out for a while as the company pursues other legal avenues. It could potentially be months or years before the FCO can enforce its order.

Numbers to Consider

  • 32 Million – Facebook’s monthly users in Germany in 2019, according to DW.com.
  • $242.24 – Facebook’s share price Wednesday morning.
  • 63.43 Percent – Facebook’s market share in Germany, according to Statcounter GlobalStats.

Full Story: (TECH CRUNCH)

A Quick Look

U.S. Stock Futures Drop as Coronavirus Infections Surge

  1. “Futures tied to the S&P 500 dropped 0.8%, suggesting the benchmark index will open lower in New York. The stocks gauge has risen for six of the past eight trading days, boosted by indicators showing a rebound in economic activity after a steep downturn in the spring,” The Wall Street Journal writes.
  2. The market decline emerged as new pockets of Covid-19 pop up across the country, raising concerns about a second wave. But also weighing on stocks is the U.S.’s consideration of imposing $3.1 billion worth of tariffs on products from the U.K., France, Germany and Spain.

Full Story: (WALL STREET JOURNAL)

Worth Your Time

Golden Parachutes: You would think companies in bankruptcy, struggling to pay creditors and suppliers, would divert their money to the best possible avenue. If paying chief executives massive bonuses are just that, these firms passed with flying colors. CEOs at J.C. Penny, Whiting Petroleum and Hertz, all shelled out payments to its C-suite despite financial turmoil. (NEW YORK TIMES)

There Will Be Baseball: Major League Baseball plans to impose an abbreviated 60-game season after negotiations with its players’ union eventually hit the wall. Some form of baseball is better than none, and losing the season could have been catastrophic. The rising number of coronavirus cases around the country remains a considerable hurdle for MLB’s July return. (WALL STREET JOURNAL)

Trump’s Social Media Clash: Twitter retook action against President Trump Tuesday after hiding one of his tweets behind a warning label. The tweet controversially threatened state violence, which the tech giant says violated its rule against “abusive behavior.” Twitter, a rare enforcer of its platform rules, also hid another tweet from the president in the early days of the protests spurred by the killing of George Floyd. (TECH CRUNCH)

Facebook’s Indian Telecom Play: Facebook seems to be dodging antitrust minefields left and right, but the firm came out unscathed in its proposed $5.7 billion acquisition of a 10 percent stake in Indian telecom giant Jio Platforms, a subsidiary of Jaadhu Holdings. The Competiton Commission of India gave its blessing Wednesday, even after antitrust concerns arose. (TECH CRUNCH)

A Couple Cents Content

If you think you missed out on NKLA, Justin Oh takes a look another potential opportunity with electric truck company Hyliion (Tik Tok)

I became a professional sports owner yesterday – So, I decided to blog about it (Post)

In case you missed it, check out Monday’s live show with Justin Oh (YouTube)

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See you tomorrow!

— Justin Birnbaum

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