Disney vs. Florida

Not so special anymore

Yesterday, the Florida Senate voted to revoke special benefits that, since the 1960s, have given Disney the ability to essentially self-govern a vast area around its Disney World theme park and issue tax-free municipal bonds. The state’s House, which like its Senate is led by Republicans, is expected to vote for the measure today.

It’s a rapid unraveling of a long relationship. Last month, Disney C.E.O. Bob Chapek, facing a backlash from employees, spoke out against Florida’s so-called “Don’t Say Gay” law, which prohibits classroom discussion of sexual orientation and gender identity until the third grade, and limits it for older students as well. Gov. Ron DeSantis, who is eying a 2024 presidential run, has hit back, calling the company “Woke Disney,” and saying it no longer deserves its long-held special status. “If Disney wants to pick a fight, they chose the wrong guy,” DeSantis wrote in a recent campaign fund-raising email.

This is about more than taxes, with broader implications for Disney, Florida and all of corporate America:

For Disney: The company’s theme parks are flying, thanks to looser pandemic restrictions and higher-priced ticket sales. The loss of Disney’s special tax district could put a dent in that growth, and it would also restrict the company’s ability to develop the land it owns and tap state resources to do it.

For Florida: The biggest issue is nearly $1 billion in tax-free bonds that have been issued by Disney. Florida law says that if a special tax district is dissolved, the responsibility to pay those bonds reverts to local governments. Democratic state lawmakers say that the interest on those bonds equates to an additional tax burden of $580 per person for the 1.7 million residents of neighboring Orange and Osceola counties, which would also have to step in and provide many of the public services for the area that are currently funded by the company. Disney employs about 80,000 people in Florida.

For corporate America: Disney’s clash with Florida is the latest example of how companies’ growing willingness to speak out on social and political issues puts them in conflict with some lawmakers. Last year, Georgia politicians threatened to raise taxes on Delta after the airline spoke out against the state’s restrictive voting laws. More recently, Texas lawmakers have said they would bar Citigroup from underwriting the state’s bonds unless the bank revoked its policy to pay for employees to travel out of state for abortions, which are severely restricted there.

“I don’t think this is going to stop companies that have a strong reputation and value system,” Paul Argenti, a professor at Dartmouth’s Tuck School of Business, told DealBook. “It’s a real test of what is the Disney value system and what they are willing to stand up for.” Lloyd Blankfein, the former Goldman Sachs C.E.O., tweeted that Disney’s special tax status may not have been a good policy when it was first adopted, but DeSantis’s recent move looks like “retaliation” for the company’s stance on unrelated legislation. “Bad look for a conservative,” he said.

HERE’S WHAT’S HAPPENING

The Justice Department appeals to reinstate the transportation mask mandate. It will challenge the ruling by a federal judge in Florida who struck down the mandate on Monday, with the C.D.C. declaring that the mask rule was necessary to prevent the spread of the coronavirus. Meanwhile, Gov. Kathy Hochul of New York urged people to take “common sense” safety measures, as New York City prepared to raise its Covid alert level amid rising cases.

Workers at an Apple store in Atlanta move to form a union. If they are successful, it would be the first of the tech giant’s stores in the U.S. to unionize. The move reflects increasing momentum in service-sector unionization, with recent union wins at Starbucks, Amazon and REI locations.

The Obamas are leaving Spotify. Barack and Michelle Obama will not renew their production company’s lucrative podcasting contract with the streaming service, Bloomberg reports. In a speech at Stanford today, the former president is expected to speak about the scourge of falsehoods online, as he wades deeper into the public fray about how misinformation threatens democracy.

Nestlé raises prices steeply, suggesting that inflation will persist. The world’s largest food company said today that the prices it charges for products rose by more than 5 percent on average in the first quarter, the biggest jump in that quarter since at least 2012. The largest increases, of more than 7 percent, were in pet food and bottled water.

Chinese energy giant Cnooc surges in Shanghai debut. The company’s listing comes months after it was delisted from the New York Stock Exchange to comply with a Trump-era executive order banning American investment in companies that the U.S. says aid China’s military. Cnooc raised $4.4 billion in the offering.

Tesla’s mixed message

Tesla reported its latest quarterly earnings yesterday and, no, the company’s C.E.O., Elon Musk, did not talk about his attempt to buy Twitter. (Musk could fund the purchase, in part, by selling some of his Tesla shares or using them as collateral for loans.)

Musk instead kept the discussion focused on Tesla, delivering some good and bad news to the electric carmaker’s shareholders. The company’s shares rose 5 percent after the results were released.

The good: Tesla made a $3.3 billion profit in the first three months of the year, up from $438 million a year earlier and the biggest quarterly profit since the company’s creation. Tesla sold 310,000 vehicles in the first quarter, up almost 70 percent from a year earlier.

The bad: Tesla said it resumed “limited production” in Shanghai after a three-week shutdown, but “persistent” supply-chain problems and the rising cost of raw materials mean that it expects its factories to run below capacity for the rest of 2022. Despite concerns that supply-chain issues could hamper the company’s growth, Musk told analysts that his “best guess” was that Tesla would produce 1.5 million cars this year, meeting the company’s goal of 50 percent sales growth.

The lithium interlude: Musk said that soaring prices for lithium, a key material in batteries, had forced the company to raise prices, potentially slowing the pace at which people switch to electric vehicles. Soaring demand for the metal has given producers 90 percent profit margins, Musk said. “Do you like minting money? Then the lithium business is for you,” Musk said. He hinted that Tesla could get more involved in the supply chain for raw materials but didn’t say whether it would expand into mining metals like lithium directly.

What’s Happening With Elon Musk’s Bid for Twitter?

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The offer. Elon Musk, the world’s wealthiest man, made an unsolicited bid worth more than $43 billion for the social media company. Mr. Musk said that he wanted to make Twitter a private company and that he wanted people to be able to speak more freely on the service.

Twitter’s response. The social media company countered the offer with a defense mechanism known as a “poison pill.” This well-worn corporate tactic makes a company less palatable to a potential acquirer by making it more expensive for them to buy shares above a certain threshold.

What’s next? Major questions remain about Mr. Musk’s bid for Twitter, including whether he will pursue a hostile takeover. While Mr. Musk races to secure funding for his offer, Apollo Global Management is considering offering debt financing in a bid for Twitter.

Tesla’s expectation-beating results unlocked three more tranches of Musk’s performance-linked compensation package, Reuters reports. The latest payout includes stock options worth about $20 billion, giving Musk more financial firepower to spend on, say, the shares of a certain social networking company.

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“While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty.”

— Bill Ackman, who said yesterday that his hedge fund Pershing Square had sold all of its stock in Netflix, which it bought for more than $1 billion in January. The sale, which comes after the streaming company’s shares plunged on weak subscription growth, saddled Pershing Square with a $400 million loss. And Netflix’s troubles could be a warning sign for the streaming industry as a whole.

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Debating the future of France

President Emmanuel Macron of France and his far-right rival Marine Le Pen went head-to-head in a debate last night, ahead of the country’s presidential runoff election on Sunday.

The latest polls give Macron 55 percent of the vote over Le Pen’s 45 percent, but the margin has narrowed recently. Macron, who won his first term in 2017 by routing Le Pen 66 percent to 34 percent, is intensely disliked by some, and many see him as elitist and out of touch with ordinary French people. A victory for Le Pen, who is skeptical of the benefits of the E.U. and NATO, and favors closer ties with Russia, would represent a major realignment of France’s role in the world.

A lot is at stake, and not just for France. Economic issues hold the key to the election, as policies to address rising inflation and inequality dominated the campaign. In last night’s nearly three-hour debate, the only one before Sunday’s vote, the candidates traded barbs about Russia, pension reform, taxes and inflation, though neither delivered a knockout blow, The Times’s Roger Cohen writes from Paris.

• Le Pen focused her attacks on Macron’s economic plan, calling his attempt to raise the retirement age to 65 from 62 an “intolerable injustice.” Under her program, full pensions would be payable between 60 and 62.

• Macron suggested that Le Pen couldn’t pay for her plan,given France’s ballooning debt, incurred under its emergency pandemic measures.

• Le Pen called Macron a “punitive ecologist,” saying that his environmental policies would aim to lower France’s carbon footprint too rapidly, pushing up prices.

• Macron said Le Pen was in the pocket of Russia. He alluded to a multimillion-euro loan from a Russian bank to Le Pen’s National Rally party, formerly the National Front, in 2014. The loan is still not repaid and is now held by a company with ties to the Russian military. “When you speak to Russia, you speak to your banker,” Macron said.

Further reading: Here’s what you need to know about the election and how the race is playing out among France’s influential political cartoonists.

THE SPEED READ

Deals

• Elon Musk’s tunnel-making venture, The Boring Company, raised funds at a $5.7 billion valuation. (CNBC)

• Melvin Capital, which suffered during the meme-stock rally, is reportedly weighing closing its current fund and starting up a new one. (CNBC)

• Serena Williams is reportedly among the investors behind a consortium bidding for Chelsea Football Club. (Sky News)

Russia-Ukraine war

• The U.S. announced a new set of sanctions, targeting a Russian commercial bank and a crypto mining company. (NYT)

• Treasury Secretary Janet Yellen walked out of a G20 meeting in protest when Russia’s finance minister began to speak. (NYT)

• “The Russian Oligarch With the Most to Lose” (WSJ)

Policy

• The F.A.A. wants to make its “zero-tolerance” policy for unruly airline passengers permanent. (Axios)

• Britain’s financial regulator has published rules to bring more women into boardrooms. (FT)

• A bill going through California’s State Assembly would regulate the use of worker surveillance technologies. (Protocol)

Best of the rest

• Robots may soon be working in nursing homes in Minnesota, helping to fill a labor gap in the industry. (NYT)

• Coinbase opened up its long-awaited social network, allowing select customers to buy, sell and trade NFTs. (Quartz)

• The British sports-car maker Lotus is adding a battery-powered S.U.V. to its lineup. (NYT)

• “How Inflation Has Shrunk Your Dollar” (NYT)

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