How costly is the Facebook advertising boycott?
Facebook’s share price has been hit hard by the growing boycott of advertisers on its platform, which are pausing their spending to protest the network’s policies on misinformation and hate speech. As ever-larger companies joined the movement, the social network’s stock has fallen more than 10 percent from the record high it reached last week. Some $80 billion in market value (and counting) has been erased in the process.
In the past few days, big companies like Coca-Cola, Diageo and Starbucks have announced a halt to ads on all social networks, of which Facebook is the largest. Others, like Honda America, Levi Strauss and Patagonia have boycotted Facebook specifically. Together, these companies spend hundreds of millions of dollars with Facebook every year.
But as today’s DealBook newsletter notes, Facebook generated more than $17 billion in advertising revenue in the first quarter alone. Losing big brands is painful, but the bulk of the company’s sales come from millions of smaller businesses that rely heavily on the platform. And some major advertisers, like Procter & Gamble — the world’s largest advertiser — haven’t yet taken a position on the boycotts.
Can Facebook turn things around? It has rolled out new measures to flag problematic political posts and expand its policies around hate speech. Attention now turns to Facebook’s founder, Mark Zuckerberg, who is often criticized for policies that are viewed by his detractors as driven by business interests more than any moral code.
But if he were always trying to placate advertisers, the boycott wouldn’t have happened. Facebook’s recent reversal on misinformation could be proof of Mr. Zuckerberg’s malleable principles. (By extension, his prior permissiveness could be seen as placating the Trump administration in hopes of keeping regulators at bay.) But anyone who knows Mr. Zuckerberg knows that he believes in his positions — until he is forced to abandon them. — Andrew Ross Sorkin and Jason Karaian
The Fed includes Apple, AT&T and others in its corporate bond index.
The Federal Reserve on Sunday released a rundown of the corporate bonds it would buy in its bid to support the market for company debt, with automakers and technology firms among the most heavily weighted in the Fed’s index of 794 companies.
The central bank has been helping to support the secondary corporate bond market — the one for already-issued debt — by buying exchange-traded funds, which track a broad basket of bonds but trade like stocks. It announced earlier this month that it was beginning to shift its purchases to an index of corporate debt of its own design.
Over the weekend, it laid out the index’s composition, which will be recalculated every month or so. The goal of the program is to more or less track what is available out on the market and eligible for purchase based on program terms, according to the Fed, with limits applied to individual issuers.
The Fed’s approach to creating the index is fairly formulaic, which could help the central bank to defend itself if it is accused of favoritism or of “bailing out” individual companies and sectors.
Twelve sectors are represented in the index. The most heavily represented individual companies listed in the index include automotive and technology companies: Toyota Motor Credit Corporation, Volkswagen Group America, Daimler Finance, AT&T, Apple, Verizon Communications and General Electric.
The Fed’s Secondary Market Corporate Credit program is authorized to buy as much as $250 billion in already-issued bonds. A Primary Market program, which has yet to start, will buy up to $500 billion.
Even before buying any bonds, the Fed helped to unlock a wave of debt issuance by announcing the programs, as investors became confident that the central bank would backstop the market. Lawmakers have since questioned whether the central bank needs to actually buy corporate debt at all, but the Fed chair, Jerome H. Powell, has stressed the importance of following through. — Jeanna Smialek
Wall Street rises as European markets seesaw.
U.S. stocks inched higher on Monday as investors remained concerned about the persistence of the coronavirus pandemic.
The S&P 500 was up slightly, while the Dow Jones industrial average rose further as shares of Boeing rallied. Markets in Europe were modestly higher in late-morning trading, rebounding from a jagged decline earlier in the day.
Facebook dropped about 3 percent before paring some of those losses, after having dropped about 8 percent on Friday, as more big brands said they would boycott the platform because of its handling of misinformation and hate speech. On Sunday, Starbucks said it would stop advertising on all social media platforms for the time being. Shares of Twitter were also lower.
Boeing was up more than 6 percent after the F.A.A. cleared the company to begin test flights of its beleaguered 737 Max jet, a critical step that could mean the aircraft is back in service by the end of the year.
Investors have been watching nervously as coronavirus cases rise in the United States and in places where the pandemic had seemed to be under control, like Europe. Florida, Nevada and South Carolina broke daily records for new cases over the weekend. The global death total reached 500,000 on Sunday, according to a New York Times database. The number of confirmed cases passed the 10 million level.
Here’s the business news to watch this week.
💸 The biggest U.S. banks publish their capital plans after the market closes Monday, responding to last week’s stress tests by the Fed. Regulators forced banks to forgo share buybacks in the third quarter, and put a limit on dividends that analysts think will be toughest on Wells Fargo.
🗣 The House Financial Services Committee holds a hearing Tuesday to review the government’s coronavirus response programs, featuring testimony from the Fed chairman, Jay Powell, and Treasury Secretary Steven Mnuchin. It is also the last day to apply for loans from the Paycheck Protection Program, the $660 billion rescue program aimed at small businesses that has been revised several times, and still has well over $100 billion left to lend.
🇺🇸🇲🇽🇨🇦 The “new NAFTA” — formally known as the United States-Mexico-Canada Agreement, or U.S.M.C.A. — comes into force on Wednesday. The trade agreement hasn’t exactly spurred greater continental camaraderie: the U.S. recently threatened to reimpose tariffs on Canadian aluminum.
📈 Thursday is a big day for economic data, with monthly payrolls and weekly unemployment claims coming out. Economists expect that the U.S. economy added a net 3 million jobs in June, following the unexpectedly strong 2.5 million gain in May. At the same time, the latest week’s unemployment claims are forecast to come in at 1.3 million, the 15th week in a row above one million.
🗓 Noteworthy corporate earnings include the chip maker Micron Technology and the high-end office furniture seller Herman Miller today; Mrs. Butterworth’s parent, ConAgra, and the package deliverer FedEx tomorrow; and the Corona brewer Constellation Brands, the cereal giant General Mills and the troubled department store chain Macy’s on Wednesday. — Jason Karaian
Chesapeake Energy, a pioneer in extracting natural gas from shale rock across the country, filed for bankruptcy protection on Sunday, unable to overcome a mountain of debt that became unsustainable after a decade of stubbornly low gas prices.
The company helped convert the United States from a natural gas importer into a major exporter under the swashbuckling leadership of Aubrey McClendon, a company co-founder and former chief executive.
But Mr. McClendon overextended the company and amassed over $20 billion in debt before he was forced out in 2013, and Chesapeake, based in Oklahoma City, never fully recovered.
Chesapeake lost $8.3 billion in the first quarter of this year, and had just $82 million in cash at the end of March. With $9.5 billion in debt at the end of last year, it has bond payments of $192 million due in August.
In a statement, Chesapeake said it was filing for Chapter 11 protection to facilitate a complete restructuring. As part of its agreement with lenders, the company said it had secured $925 million in financing under a revolving credit facility, and eliminated roughly $7 billion of debt. It also secured a $600 million future commitment of new equity.
“We are fundamentally resetting Chesapeake’s capital structure and business to address our legacy financial weaknesses,” said Doug Lawler, Chesapeake’s president and chief executive. “Chesapeake will be uniquely positioned to emerge from the Chapter 11 process as a stronger and more competitive enterprise.” — Clifford Krauss
Three months after the coronavirus pandemic shut down offices, corporate America has concluded that working from home is working out. Many employees will be tethered to Zoom and Slack for the rest of their careers, their commute accomplished in seconds.
Richard Laermer has some advice for companies rushing pell-mell into this remote future: Don’t be an idiot.
A few years ago, Mr. Laermer let the employees of RLM Public Relations work from home on Fridays. This small step toward telecommuting proved a disaster, he said. He often could not find people when he needed them. Projects languished.
IBM came to a similar decision. In 2009, 40 percent of its 386,000 employees in 173 countries worked remotely. But in 2017, with revenue tumbling, management called tens of thousands back to the office.
Even as Facebook, Shopify, Zillow, Twitter and many other companies are developing plans to let employees work remotely forever, the experiences of Mr. Laermer and IBM are a reminder that the history of telecommuting has been strewn with failure. The companies are barreling forward but run the risk of the same fate.
“Working from home is a strategic move, not just a tactical one that saves money,” said Kate Lister, president of Global Workplace Analytics. “A lot of it comes down to trust. Do you trust your people?” — David Streitfeld
Few areas of the country rely on tourism more than Central Florida, which is home to Disney World, SeaWorld, Universal, Gatorland, Legoland and a plethora of smaller attractions. An estimated 250,000 people work in the leisure and hospitality industries, accounting for 25 percent of jobs in the area, according to the trade organization Visit Orlando.
Most workers whose livelihood depends on Orlando’s ability to attract tourists in large numbers have managed to get by as the amusement economy shut down around them — though for some it has been a struggle.
Many Americans have received one-time stimulus payments from the federal government, but Unite Here, a union representing 30,000 hospitality workers in the Orlando area, recently said that at least 1,500 members had yet to receive any unemployment payments from the state.
“We were both calling about a hundred times a day for weeks trying to get through to somebody, anybody,” said Paul Cox, a lighting, video and audio technician at the Walt Disney World Resort. His wife, Julia Cox, who has a similar professional specialty elsewhere in the Disney complex, added that “calling that number became my full-time job.”
Mr. Cox said the couple made a color-coded spreadsheet to keep track of the calls — more than 4,000 of them. — Eve Edelheit and Brooks Barnes
When the coronavirus prompted states to order residents to stay at home in March, unemployment surged around the country as huge parts of the economy slowed or stopped. Soon after, there were calls for philanthropists, charitably inclined people and even occasional donors to accelerate any giving they were planning to do.
They stepped up, it turns out, giving more and giving faster then they typically do.
According a report released on Friday from Fidelity Charitable, which has become the largest grant maker in the country by managing thousands of individual donor-advised funds, those donors have given $3.4 billion nationwide since the start of the year, up at least 28 percent from a year earlier.
“Despite the economic environment, all the uncertainty at a personal level, people looked outside of themselves and gave to charity,” said Pamela Norley, president of Fidelity Charitable.
Debra Mailman, who has spent the two years since she retired as an executive at Microsoft volunteering in disaster zones, initially slowed her giving, shocked by the sudden drop in value in the investments in her donor-advised fund.
“At the beginning of the pandemic, I did the same thing everyone did: I looked at the stock market and said, ‘Oh, my God,’” she said. “Then I held my nose and said, ‘Forget that — the money isn’t mine anymore. It will do more work out there.’” — Paul Sullivan
Catch up: Here’s what else is happening.
Walt Disney Studios pushed back the theatrical release of its live-action remake of “Mulan,” leaving July without any big-budget movie releases and delaying a hoped-for recovery at cinemas. “Mulan” is set to arrive in theaters on Aug. 21 instead of July 24.
Reporting was contributed by Jeanna Smialek, Carlos Tejada, Clifford Krauss, Salman Masood, Jason Karaian, Eve Edelheit, Paul Sullivan, David Streitfeld, Andrew Ross Sorkin, Mohammed Hadi, Katie Robertson and Brooks Barnes.