🐂 Unusual Successor

Markets

Yesterday, the stock market experienced a decline, marking the end of a nine-day positive trend for the Dow and the S&P 500 suffering its most significant setback since September. FedEx saw a drop in its stock value following disappointing quarterly results and a reduction in its revenue projection for the upcoming year, attributed to subdued demand.

Tech

Tesla’s battle with Sweden could be better

Nordic solidarity against a common adversary has not been seen on this scale since the era of Gjermundbu helmets. Since October, a collective movement has been underway as Swedish workers and labor unions, joined by counterparts from neighboring countries, engage in a widespread strike against Elon Musk's electric vehicle company, Tesla.

The catalyst for this unrest occurred on October 27 when approximately 130 mechanics across 10 garages in Sweden walked off their jobs. This action was prompted by Tesla's refusal to enter into a collective bargaining agreement with the influential Swedish union IF Metall, despite nearly 90% of Swedish workers being covered by such agreements. Musk's well-known stance against organized labor clashed with the prevailing labor norms in Sweden.

The initial strike triggered a series of solidarity actions:

• Hydro Extrusions, a Swedish vendor for Tesla, announced that its workers would not produce a component for the company.

• Unions representing workers involved in painting cars, cleaning Tesla's offices, and servicing 70 charging stations in the country joined the movement, setting aside their tools in solidarity.

• Postal workers refrained from delivering license plates to Tesla, prompting a legal battle initiated by the company to bypass mail services and collect the plates independently. However, an appeals court judge ruled against Tesla, leading to further discontent among unions.

• The Swedish Transport Workers' Union declared a cessation of trash pickup at all of Tesla's workspaces in the country.

The ripple effect extended beyond Sweden:

• Dockworkers in Denmark refused to unload Teslas.

• Unions in Finland and Norway prepared to halt business associated with Tesla if an agreement was not reached soon.

• Sixteen regional investors conveyed strong objections to Tesla's board, and PensionDanmark and Denmark's teacher pension fund divested a combined $100 million in Tesla stock.

While Tesla has not responded publicly, it is in the process of hiring a "Nordics public policy" expert. Looking ahead, this labor strife may not be the last challenge Musk faces, as the United Auto Workers announced plans to organize Tesla and other nonunionized carmakers across the United States.

Finance

Warner Bros. and Paramount honchos in merger talks

If you thought the media landscape wasn't consolidated enough, recent reports from various publications, relying on anonymous sources, suggest that the two key players are exploring early talks about a potential merger. CEO David Zaslav of Warner Bros. Discovery is said to have had discussions with Paramount Global CEO Bob Bakish regarding the prospective deal. Additionally, Zaslav is reported to have engaged in conversations with Paramount Chair Shari Redstone, who is keen on selling the company to address its debt and has explored other potential buyers. However, if these two media giants strike a deal, it is likely to draw scrutiny from antitrust regulators.

Consumer

Once high-flying Bird files for bankruptcy

Yesterday, the electric scooter company Bird, once the fastest startup to achieve a $1 billion valuation, filed for Chapter 11 bankruptcy protection. Founded in 2017, Bird went public via a Special Purpose Acquisition Company (SPAC) in 2021 with a debut valuation of $2 billion. However, within just a year, its value plummeted to $70 million, resembling a forsaken scooter left by the roadside. Following a further decline in share prices, Bird was delisted from the New York Stock Exchange in September. The company aims to leverage the bankruptcy process to liquidate its assets. It's noteworthy that Bird's Canadian and European units are excluded from the bankruptcy proceedings and will continue to operate normally.

Retail

FTC bans Rite Aid from using AI facial recognition

This week, the third-largest drugstore chain in the United States, Rite Aid, faced regulatory scrutiny as federal authorities alleged that the company failed to inform customers about its use of facial recognition software during their purchases, leading to false identifications of individuals buying items like batteries and Alka-Seltzer.

In response to the Federal Trade Commission's (FTC) accusations of causing "emotional and reputational harm" to customers in certain stores from 2012 to 2020, Rite Aid agreed not to employ facial recognition technology for the next five years. The FTC outlined concerns related to Rite Aid's facial recognition system, including:

• Incorrectly flagging innocent customers as shoplifters on numerous occasions, including an incident involving an 11-year-old girl.

• Generating over 900 match alerts for a single individual's picture in its database across 130 stores during a five-day period.

• Predominantly being used in areas with significant Black, Latino, and Asian communities, where it was more prone to producing false-positive matches.

Although Rite Aid accepted the ban, the company asserted its disagreement with the FTC's allegations and highlighted that it discontinued the use of facial recognition technology more than three years ago.

The prevalence of facial recognition is expanding in various sectors, including retail and event venues. Notably, earlier this year, Madison Square Garden faced criticism for employing the technology to deny entry to lawyers involved in lawsuits against the company.

Fashion

Hermes heir wants to leave his fortune to gardener

A former gardener of a billionaire might find himself unexpectedly inheriting a vast fortune, and remarkably, he doesn't need to embark on a perilous journey up Mount Doom to secure it.

Nicolas Puech, a billionaire linked to the Hermès luxury brand through familial ties, is contemplating a unique strategy to alter the destiny of his wealth by considering the adoption of his 51-year-old former gardener. If this adoption were to transpire, the green-thumbed individual could potentially inherit a substantial portion, at least half, of Puech's estimated $13 billion estate.

However, the feasibility of this plan is contingent on navigating the strict and intricate adult adoption laws in Switzerland, where they both reside. Adding complexity, Puech's proposal faces legal hurdles from his own charity, the Isocrates Foundation, with which he has an existing inheritance contract. If Puech, who is not known to have biological children, were to abruptly adopt an heir, a minimum of 50% of his Hermès shares would be directed to the adopted son, contrary to the foundation's expectations. The Isocrates Foundation has labeled this potential move as "void and unfounded."

Speculation surrounding this unusual succession plan suggests a connection to a longstanding corporate dispute between Hermès and the luxury conglomerate LVMH. According to reports, Puech found himself estranged from the family due to his involvement in the feud, leading to his departure from the Hermès board and purportedly causing a rift with other family members. Both Puech's lawyer and Hermès have refrained from commenting on the matter.