More stories

  • in

    Bill Ackman is done with activist short-selling, will focus on quieter, long-term approach

    Bill Ackman, founder and CEO of Pershing Square Capital Management.
    Adam Jeffery | CNBC

    Investor Bill Ackman said Tuesday that he will no longer take part in vocal activist short selling campaigns, a practice he engaged in that led to one of the most colorful battles in Wall Street history.
    “Despite our limited participation in this investment strategy, it has generated enormous media attention for Pershing Square. In addition to massive amounts of media hits, our two short activist investments managed to inspire a book and a movie,” Ackman said in his annual letter. “Fortunately for all of us, and as importantly for our reputation as a supportive constructive owner, we have permanently retired from this line of work.”

    The decision came years after his five-year battle against Herbalife ended with massive losses in 2018. The founder and CEO of Pershing Square Capital Management had placed a big bet against the nutritional supplement maker he accused of running a pyramid scheme.
    “We exited because we believed that the capital could better be deployed in other opportunities, particularly when one considered the opportunity cost of our time,” Ackman said in the letter. “The aphorism that you ‘don’t need to make it back the way you lost it’ has always resonated with us.”
    At the height of his fight against Herbalife, Ackman famously engaged in an on-air verbal brawl with Carl Icahn on CBNC. The battle inspired Scott Wapner’s book “When the Wolves Bite: Two Billionaires, One Company, and an Epic Wall Street Battle.”
    Ackman also shorted mortgage loan companies FannieMae and FreddieMac in 2007 before the great financial crisis, which turned out to be successful bets.

    Pershing Square 3.0

    Entering the 19th year of Pershing Square, Ackman said he’s ready to take his firm to the next era to focus on long-term, “quieter” bets.

    “We have had the opportunity to get to know many boards and management teams, and we have built a reputation as a constructive, long-term, and helpful owner,” Ackman said. “The result is that all of our interactions with companies over the last five years have been cordial, constructive, and productive. We intend to keep it that way as it makes our job easier and more fun, and our quality of life better. So, if it is helpful to call this quieter approach Pershing Square 3.0, let it hereby be so anointed.”
    In January, Ackman bought over 3 million shares of Netflix to become a top 20 shareholder. More recently, he built a new stake in Canadian Pacific Railway, a company that the activist investor helped overhaul years ago.
    Ackman said about 30% of our equity portfolio is invested in music and video streaming — UMG and Netflix, while 26% in restaurants and restaurant franchising — Chipotle, Restaurant Brands and Domino’s. He also owns sizable stakes in Lowe’s, Howard Hughes and Hilton.
    “We expect that each of these companies will grow their revenues and profitability over the long term, regardless of recent events and the various other challenges that the world will face over the short, intermediate, and long-term,” Ackman said in the letter.

    WATCH LIVEWATCH IN THE APP More

  • in

    NBA's Cavaliers reach jersey patch deal with steel company Cleveland-Cliffs

    The Cleveland Cavaliers agreed to terms on a jersey patch sponsorship deal with hometown steel manufacturer Cleveland-Cliffs.
    Cleveland-Cliffs is traded on the New York Stock Exchange under the ticker symbol “CLF.” It has a market cap of over $16 billion.
    The Cavs are one of the most surprising teams in the NBA this year, and they have a good chance of making the playoffs.

    Darius Garland #10 of the Cleveland Cavaliers shoots over Admiral Schofield #25 and Chuma Okeke #3 of the Orlando Magic during the second quarter at Rocket Mortgage Fieldhouse on March 28, 2022 in Cleveland, Ohio.
    Jason Miller | National Basketball Association | Getty Images

    The Cleveland Cavaliers have a new jersey patch sponsorship. The NBA franchise agreed to terms with hometown steel manufacturer Cleveland-Cliffs, the parties announced Tuesday.
    Terms of the deal were not publicly made available, but according to people familiar with the agreement, it matches the Cavs’ previous sponsorship agreement with tire manufacturer Goodyear. That pact was valued at a reported $10 million per season.

    The people declined to be named because the deal terms are private.
    The agreement comes at a good time for Cleveland-Cliffs. The Cavs are one of the surprise teams in the NBA this season, and they appear headed to the postseason. The team is seventh in the NBA’s Eastern Conference. The last time the team made the playoffs was when LeBron James led them to a fourth-consecutive NBA Finals in 2018, losing to the Golden State Warriors.
    Cleveland-Cliffs would get increased national exposure if the Cavaliers make the playoffs, as postseason berths mean more television impressions for jersey patch partners.
    Cleveland-Cliffs is traded on the New York Stock Exchange under the ticker symbol “CLF.” It has a market cap of over $16 billion.

    Cavs’ new jersey patch
    Photo: Zack Yohman

    In a statement announcing the partnership, Cavs CEO Len Komoroski called the company “the fabric of life here in Northeast Ohio.” Komoroski added the agreement is “very appropriate and relevant for Cliffs to be represented, literally, on the fabric of the Cavs player jerseys.”

    In this new agreement, Cleveland-Cliffs will get in-arena signage at Rocket Mortgage FieldHouse, building off its current sponsorship deal with the team, which features an arena entrance naming rights slot. However, Cleveland-Cliffs will not obtain the Cavs’ practice jersey patch asset or virtual floor signage for local broadcast games. Teams can package those assets in jersey patch deals to increase value.
    NBA jersey patches have grown in popularity in the sports sponsorship marketplace. Since the NBA started its jersey patch program in 2017, team deals made the league roughly $150 million annually. That figure is expected to increase to more than $200 million for the 2021-22 season.
    To date, the Brooklyn Nets have the most expensive patch deal. In September 2021, CNBC reported the Nets make $30 million per year from online trading platform WeBull. That agreement eclipsed the Golden State Warriors’ $20 million per season deal with Japan-based e-commerce company Rakuten. That deal was extended last year and expires after the 2022-23 season.
    Newer NBA team patch agreements should increase the league’s sponsorship revenue, which reached a record $1.46 billion for the 2020-21 regular season, according to estimates by IEG, a sports partnerships consultancy firm.

    WATCH LIVEWATCH IN THE APP More

  • in

    Last chance to avoid a 50% penalty on required withdrawals is April 1 for some retirees

    If you turned age 72 during the second half of 2021, the deadline for your first annual required withdrawal from retirement accounts is April 1, 2022.
    In many cases, it’s the last chance to avoid a 50% penalty on the amount needed to be withdrawn.

    Tetra Images

    If you turned age 72 during the second half of 2021, the deadline for your first annual required withdrawal from retirement accounts is April 1. In many cases, it’s the last chance to avoid a hefty penalty.
    These required minimum distributions, known as RMDs, apply to both traditional and Roth 401(k) plans, 403(b) plans and other workplace plans, along with most individual retirement accounts. There are no RMDs for Roth IRAs until after the account holder dies.

    Before 2020, RMDs started at age 70½, but if you were born on July 1, 1949, or later, you can now wait until age 72.
    More from Personal Finance:There’s still time for 2021 IRA contributionsThe bond market is flashing a warning sign a recession may be comingBiden’s budget includes $14.8 billion for Social Security
    Typically, you can calculate RMDs by dividing your end-of-year account balance by a “life expectancy factor” provided by the IRS, and you must do this for each eligible account.
    For example, if your 401(k) balance is $1 million and your life expectancy factor is 24.6, you must withdraw roughly $40,650 by the deadline to avoid a penalty.
    Generally, you must take RMDs by Dec. 31, but there’s a one-time extension until April 1 for the first withdrawal if you were born after June 30, 1949.

    However, if you wait until April 1 for the first RMD, you’ll have to take two in 2022 — your 2021 RMD by April 1 and your 2022 RMD by Dec. 31.

    And it’s easy to miss that second withdrawal, according to certified financial planner Brandon Opre, founder of TrustTree Financial in Huntersville, North Carolina.
    “I usually recommend that clients take the combined RMD now to avoid confusion later, as well as the potential to forget to take it,” he said.
    Moreover, the IRS updated its life expectancy tables for 2022, which means you’ll need to use the old table for 2021 (listed here) and the new one for 2022 (included here), according to the agency. 
    The penalty for missing either RMD is 50% of the amount you needed to withdraw by the deadline.

    Consider the tax consequences

    DNY59 | E+ | Getty Images

    If you’re taking two RMDs in 2022, you’ll also need to consider the tax consequences of boosting your income, said Tommy Lucas, a CFP and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
    For example, retirees with income above a certain threshold may trigger an extra charge for Medicare Part B and Part D, known as the Income Related Monthly Adjustment Amount. 
    The base amount for Medicare Part B in 2022 is $170.10 per month, but payments start to increase for single filers with a modified adjusted gross income over $91,000 (or $182,000 for joint filers).
    Both Medicare Part B and Part D use MAGI from two years prior, so added income in 2022 may cause higher premiums in 2024. More

  • in

    Goldman Sachs is buying corporate retirement plan robo-advisor NextCapital

    Goldman Sachs has agreed to acquire NextCapital, a Chicago-based fintech firm that provides automated advice to corporate retirement plan participants.
    The bank said Tuesday in a release that the deal, the terms of which were not disclosed, will be completed in the second half of this year. The acquisition ranks among the top five asset management deals New York-based Goldman has done, according to the Financial Times.
    Goldman and rivals are jockeying to deepen relationships with key cohorts like corporate employees and diversify revenue by bulking up in money management, which is typically a steadier revenue source than trading and other Wall Street activities.

    A sign is displayed in the reception area of Goldman Sachs in Sydney, Australia.
    David Gray | Reuters

    Goldman Sachs has agreed to acquire NextCapital, a Chicago-based fintech firm that provides automated advice to corporate retirement plan participants.
    The bank said Tuesday in a release that the deal, the terms of which were not disclosed, will be completed in the second half of this year. The acquisition ranks among the top five asset management deals New York-based Goldman has done, according to the Financial Times, which first reported the move.

    Goldman and rivals including Morgan Stanley and JPMorgan Chase have amped up their acquisitions in both fintech and asset management in recent years. The banks are jockeying to deepen relationships with key cohorts like corporate employees and diversify revenue by bulking up in money management, which is typically a steadier revenue source than trading and other Wall Street activities.
    “This acquisition furthers our strategic objective of building compelling client solutions in asset management and accelerating our investment in technology to serve the growing defined contribution market,” Goldman CEO David Solomon said in the release.
    NextCapital was founded in 2014 and most recently raised venture funds in 2020, when it said it had a total of $85 million in funding.
    The deal gives Goldman another tool to offer clients ways for employees to improve retirement outcomes. The bank, known for its Ayco personal financial management offering, said it already has about $350 billion in assets under supervision for defined benefit and defined contribution plans.
    “Employers are looking to provide their employees tailored solutions and customizable advice that can better support individual saving and investing needs,” said Luke Sarsfield, global co-head of Goldman’s asset management division. “We believe personalization represents the future of retirement savings and will drive the next wave of innovative retirement solutions.”

    Stock picks and investing trends from CNBC Pro:

    WATCH LIVEWATCH IN THE APP More

  • in

    Sen. Elizabeth Warren says billionaires should pay more taxes to help the 'next Elon Musk'

    Elon Musk and fellow billionaires should pay it forward in taxes to support the next generation of entrepreneurs, Sen. Elizabeth Warren told CNBC on Tuesday.
    “I’m happy to celebrate success, but let’s remember, Elon Musk didn’t make it on his own. He got huge investments from the government, from taxpayers,” the Massachusetts Democrat said.
    Warren’s comments come after the Biden administration on Monday proposed what it calls the Billionaire Minimum Income Tax, which she said she supports.

    Elon Musk and fellow billionaires should pay it forward in taxes to support the next generation of entrepreneurs who can make a difference, Sen. Elizabeth Warren, D-Mass., told CNBC on Tuesday.
    “I’m happy to celebrate success, but let’s remember, Elon Musk didn’t make it on his own. He got huge investments from the government, from taxpayers, from those public school teachers and those minimum wage workers who’ve been paying their taxes all along to get that business up and running and help see it through rough times,” Warren said on “Squawk Box.”

    The Massachusetts Democrat was referring to the billions of dollars in U.S. government grant funding, subsidies and incentives that for years have helped two of Musk’s companies — Tesla and SpaceX. Electric cars and commercial space travel were anything but sure bets in their early years. But now, Tesla has a stock market value of more than $1 trillion and SpaceX is one of the most valuable private companies in the world.
    “When you make it big … let’s also ask that you pay a fair share in taxes. The 99% pay about 7.2% of their total wealth in taxes every year. That top one-tenth of 1% pays less than half as much. That’s not right. Make an investment so the next Elon Musk gets a chance to make it big as well,” she later added.
    Warren’s comments come after the Biden administration on Monday proposed what it calls the Billionaire Minimum Income Tax, which will require American households worth more than $100 million to pay at least 20% of their income in taxes. Over half the revenue could come from households worth upwards of $1 billion.
    The senator expressed support for the bill, in line with her tough stance on wealth taxes. Warren has previously supported legislation taxing the wealthy, proposing with other Democrats the so-called Ultra-Millionaire Tax Act in 2021 that would levy a 3% total annual tax on wealth exceeding $1 billion and a 2% annual wealth tax on the net worth of households and trusts ranging from $50 million to $1 billion. She also made taxing the rich a cornerstone of her unsuccessful bid for the 2020 Democratic presidential nomination.
    Regarding Musk’s massive tax bill, around $11 billion in 2021, after he sold $14 billion in Tesla stock that year, Warren argued that Musk paid very little in past years, which is not an option for most Americans.

    Musk is richest person in the world, according to Forbes’ Real-Time Billionaire List, which pegs his net worth at over $290 billion.
    In February, Musk boasted in a tweet that last year he paid the highest tax bill ever in history for an individual in the U.S.
    In 2018, when he was also one of the richest people in the world, Warren said, “How much did Elon Musk pay that year? We actually saw his taxes that year and the answer is: He paid zero. The public school teacher did not have the option to pay zero in 2018 or in 2021.”
    Warren was citing a ProPublica investigation that found Musk paid zero dollars in 2018 federal income taxes. Musk has said he paid no taxes in 2018 because he draws no salary.
    “All we’re saying is, when you make it to the top, to the very tippy, tippy top, then pay something in so everybody else gets a share,” Warren said. “Nobody got rich on their own.”
    — CNBC reporter Lora Kolodny contributed to this report.

    WATCH LIVEWATCH IN THE APP More

  • in

    Covid upended the labor market, and now these workers are using their leverage to push for unions

    Warehouse and store employees seeking union membership feel they have no seat at the table.
    They’re looking for better pay and working conditions, and they want a say with management in day-to-day operations. 
    “I think young people are breaking away from the expectation of previous generations that this is the way it is,” said one 22-year-old union member.

    Workers stand in line to cast ballots for a union election at Amazon’s JFK8 distribution center, in the Staten Island borough of New York City, U.S. March 25, 2022.
    Brendan Mcdermid | Reuters

    The Covid pandemic pushed Americans to reconsider how and where they work, resulting in a tight labor market, rising wages and what’s been dubbed the Great Resignation. It also spurred workers, many of them younger, at big companies such as Amazon and Starbucks to flex their newfound leverage with union movements.
    Warehouse and store employees seeking union membership feel they have no seat at the table. They’re looking for better pay and working conditions, and they want a say with management in day-to-day operations. 

    “Employees are feeling powerless, and this solidarity gives them some power,” said Catherine Creighton, director of Cornell University’s Industrial and Labor Relations branch in Buffalo, New York.
    Emma Kate Harris, a 22-year-old retail sales specialist at the newly unionized REI Co-Op in Manhattan, has been with the company for three years, and she wants to see more understanding from her bosses.
    “Our managers and higher management throughout the rest of the co-op don’t necessarily understand what it is to actually be on the floor for 8½ hours a day for 32 or 40 hours a week,” said Harris. Workers at the recreation and camping goods store organized with the Retail, Wholesale and Department Store Union, or RWDSU.
    REI told CNBC in a statement it is “committed to sitting down in good faith to negotiate a collective bargaining agreement.”
    Then again, this isn’t your grandparents’ organized labor push. Young workers like Harris taking part are driven by a desire to improve the workplace, even if they might not stick around to see the changes come to fruition like union laborers of the past did. Some have little to no experience with unions prior to getting involved in campaigns, but they recognize their power in the current labor environment.

    “I think young people are breaking away from the expectation of previous generations that this is the way it is. And I think that my generation is starting to look more at the way it could be and the way it should be,” Harris said.
    While it may seem like unions are surging again, however, the numbers tell a conflicting story about the state of organized labor in America. In 2021, the union membership rate for government and private sector employees fell to 10.3% from 10.8% in 2020, according to the Bureau of Labor Statistics. Private sector union membership fell slightly in 2021 to 6.1% from 6.2% the prior year.
    But at the same time, American approval ratings of unions are near an all-time high. Gallup polling from September 2021 shows 68% of Americans approve of labor unions — the highest reading since a 71% approval rating in 1965. They’re particularly popular among the younger members of the workforce. Adults ages 18 to 34 approve of unions at a rate of 77%.

    Richard Bensinger, union organizer with Starbucks Workers United and a former organizing director of the AFL-CIO, told CNBC earlier this year the movement was a “generational uprising.” The Starbucks union campaign, which began in Buffalo and has now notched eight wins in three states, has spread quickly to cafes across the country and is led by many workers in their early 20s, he said.
    Isaiah Thomas is a warehouse worker in Amazon’s facility in Bessemer, Alabama. The 20-year-old said he joined the company in September 2020 as a way to help pay bills and for his college education at the University of Alabama, Birmingham. But he told CNBC he took a semester off to focus on the campaign, which is also seeking to organize with RWDSU.
    “I believe that, in order to bring about the change that I want to see, I have to be really involved in it,” he said. “And when I saw this opportunity come about, and I knew that it would impact my co-workers in my own life very positively, I threw myself in and I’ve been going 100% ever since then.”
    The public part of the vote count in Alabama will happen later this week. “We look forward to having our employees’ voices heard. Our focus remains on working directly with our team to continue making Amazon a great place to work,” Amazon spokesperson Kelly Nantel told CNBC in a statement.
    A second union voting drive is under way in Staten Island for Amazon workers.

    How companies are handling it

    Companies, particularly publicly traded firms, must strike a delicate balance when their employees start to organize. Not all shareholders will believe unionizing is good for the bottom line, while others will think employees should be treated more fairly, according to Peter Cappelli, professor of management and director of the Center for Human Resources at the Wharton School.
    “The calculus that a company has to make on this, in this context where you could be more aggressive, and increase the probability of winning the election and damage your brands, how do you think about that, if all you’re thinking about is, let’s say, keeping your shareholders happy?” Cappelli said. “It’s not an easy needle to thread.”
    Some companies take it a step further and hire consultants, such as Joe Brock, president of Reliant Labor Consultants. 
    Brock was a former union president with a Teamsters local in Philadelphia. He said he became disillusioned with what happens behind the scenes with unions, particularly when contracts are being negotiated. He said companies sometimes call him proactively to make presentations to employees to discourage them from joining a union. Other times, they reach out to him after a campaign has started.
    Brock resists the term “union busting” and described his job as something more nuanced.
    “The threat of the union is a valid one, I think it causes a lot of workplaces to revisit policies and make some changes; I see it all the time,” Brock said. “I also see where they don’t address it, and they want me to come in and be the union buster, and my firm doesn’t do that. We don’t go in and lie to employees. We tell them that this could work out well for them. But it could also work out very poorly.”
    — CNBC’s Betsy Spring contributed to this article.

    WATCH LIVEWATCH IN THE APP More

  • in

    Consumers have saved more than $100 billion in health savings accounts

    Health savings account assets eclipsed $100 billion in January, according to Devenir.
    HSAs are available to consumers with a high-deductible health insurance plan. They carry a triple tax break.
    Just 7% of accounts have at least some portion of the funds invested in mutual funds or other investments.

    Morsa Images | Digitalvision | Getty Images

    Health savings accounts eclipsed $100 billion by the end of January, according to Devenir, an HSA investment consultant, as more consumers use the tax-advantaged accounts to save for future health costs.
    The firm forecasts HSA funds will hit $150 billion by the end of 2024.

    “The growth is really accelerating in HSA assets,” said Jon Robb, senior VP of research and technology at Devenir.
    Consumers had about 32 million total HSAs by the end of 2021, an annual increase of 8%, according to a semiannual study published by the consulting firm.

    More from Your Money Your Future:

    Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

    Assets had grown to $98 billion as of Dec. 31, 2021, up 19% from the prior year, and hit $100.7 billion as of Jan. 31.
    Federal law established HSAs in 2003.
    The accounts are available to consumers with a high-deductible health plan and allow for savings in a bank-like account or investments in order to fund future health-care expenses.

    Companies began adopting high-deductible health insurance plans for their workers more regularly over the past decade, Robb said. They help organizations save money by shifting more costs onto employees. These plans carry a lower monthly premium for consumers, but leave them on the hook for larger out-of-pocket bills before cost-sharing components kick in.

    HSAs carry a triple tax advantage for consumers: Contributions aren’t taxed going in, the money grows tax-free and withdrawals don’t incur income tax if used for qualifying medical expenses. Consumers’ balances roll over each year.
    By comparison, 401(k) plans offer a two-tier tax break: on investment growth and, depending on the type of 401(k), on funds either going in or coming out of the account.
    Financial experts generally recommend paying for current health costs out of pocket and investing HSA funds, if possible. That gives time for the money to grow to cover likely higher health costs in retirement age. Consumers can even use HSA money to reimburse themselves later for out-of-pocket health-care bills, if they keep the receipts as proof.

    However, just 7% of all accounts have some of their money invested in mutual funds or other investments — suggesting most consumers use HSAs as a spending rather than savings account.
    “A lot of people don’t have the ability to pay for things out of pocket and hold onto the receipt,” Robb said.
    “It’s still a small percentage that are investing,” he added. “That number has been growing rapidly over the last few years.” More