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Peltz May Have Won After All: DealBook Briefing

Sam Altman of Y CombinatorCredit...Lucy Nicholson/Reuters..

Happy Wednesday. We’re waiting to see when — or if — the Justice Department moves to block AT&T’s bid for Time Warner. And we’re watching the latest twists in the Senate’s tax overhaul efforts. (Want this in your own email inbox each morning? Here’s the sign-up.)

• AT&T and Time Warner are still waiting for the Justice Department to decide when — or if — it will move to block their $85.4 billion deal.

• Nelson Peltz’s fund said that he had indeed emerged victorious in a proxy battle with Procter & Gamble.

• A banking watchdog that found its teeth under President Barack Obama is losing its bite.

It was the biggest corporate proxy fight in history. The activist investor Nelson Peltz wanted a seat on Procter & Gamble’s board, arguing that the company should be broken up. He and the company waged very expensive campaigns to sway investors to their point of view.

Last month, after a nail-biting vote, the company announced that Mr. Peltz did not get enough votes to prevail. He disputed the result, leaving unresolved his bid to bring about change at a company whose share price has lagged that of its peers for a decade.

On Wednesday evening, the fight gained another level of intrigue. Both Procter & Gamble and Trian Fund Management, Mr. Peltz’s investment firm, announced another preliminary vote count by the independent inspector of elections had found that Mr. Peltz may have, in fact, been elected to the board.

What was the count? Mr. Peltz appeared to have edged out Ernesto Zedillo, a former president of Mexico, by a margin of approximately 0.0016 percent of outstanding shares, according to Procter & Gamble.

Procter & Gamble said it expected the inspector’s final tally of votes in the coming weeks.

Remember when tech companies were up in arms over a provision in the Senate’s tax bill in which stock options and restricted stock units would be taxed upon vesting, rather than exercising? When Uber, Sam Altman of Y Combinator, and others wrote a letter to Congress urging that the change be undone?

That part of the tax bill is gone now.

When the Senate introduced an updated version of its legislation — the same one that introduced tying the tax overhaul to repealing the individual insurance mandate — this week, it eliminated the options provision. In fact, start-up employees can now defer paying those taxes until there’s an opportunity for them to sell their vested stock.

A recap of why tech companies were worried:

Some start-up employees could owe big tax bills without being able to pay, since privately held companies’ shares are generally harder to sell. Bigger unicorns could draw money from outside investors to let employees cash out — Uber already has — but younger start-ups have no such recourse.

Companies could pay more cash compensation, using up precious cash flow. Or they could go public — if they make it that far. Tech employees might forgo working at younger companies because they couldn’t pay as much. “We legitimately can’t figure out how this is going to work,” one start-up adviser told DealBook’s Michael J. de la Merced.

Fred Wilson of Union Square Ventures, who had been an outspoken opponent of the previous initiative, was exuberant:

I’m thrilled and I want to thank all of you who called your elected officials and those in the Senate Finance Committee who clearly understand the importance of equity compensation to the start-up model.

— Michael J. de la Merced

The Office of the Comptroller of the Currency was once one of the friendliest regulators in Washington, but after the financial crisis of 2008, it became one of the fiercest. That’s changed under President Trump.

The changes are happening without congressional action or a rule-making process, but instead through the pen of the agency’s interim leader, Keith A. Noreika, who has deep connections to the industry.

Among the shifts: Making it easier for Wall Street to offer payday-style loans and clashing with the Consumer Financial Protection Bureau.

High-interest loans illustrate the divergent views of the two agencies: Less than an hour after the consumer bureau unveiled the final version of rules to rein in the payday-lending industry, which charges triple-digit annual interest rates on short-term loans, the banking regulator effectively took the opposite route.

But changes may be coming soon to the C.F.P.B. after its director, Richard Cordray, announced his plan to step down this month.

Mr. Cordray was appointed by President Obama to a five-year term that was to end in July 2018. Under his leadership, the agency has extracted nearly $12 billion in refunds and canceled debts for 29 million consumers — making the C.F.P.B. a source of loathing for Republicans and industry alike.

Mr. Cordray’s departure clears the way for President Trump to reshape the agency and for Mr. Cordray to perhaps run for governor in Ohio, his home state.

Lisa Donner, executive director of Americans for Financial Reform, said Mr. Cordray did “exemplary work on behalf of the American public.” She added:

There is lots more work for the CFPB to do, and we will remain vigilant in demanding that it stick to the task. The next director of the CFPB needs a track record of standing up for consumers.

– Randy Pennell

From Dinesh Nair, Bloomberg:

SoftBank aims to deploy up to $15 billion in a new city called Neom that Crown Prince Mohammed bin Salman plans to build on the Red Sea coast, the people said, asking not to be identified as the information is private. The Japanese company’s Vision Fund also plans investments of as much as $10 billion in state-controlled Saudi Electricity Co. as part of efforts to diversify the utility into renewables and solar energy, the people said. SoftBank also will have some of its portfolio companies open offices in Neom, they said.

I’m hearing that the Vision Fund piece, at least, is accurate.

Remember that Saudi Arabia is the cornerstone investor in SoftBank’s soon-to-be-$100 billion Vision Fund.

Extra credit: Reread Farhad Manjoo’s column from last week on Saudi Arabia’s complicated relationship with the tech industry, some of which is interwoven with its Vision Fund position.

— Michael

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The headquarters of Time Warner in New York. Today’s Time Warner is the byproduct of many rounds of spinoffs and acquisitions.Credit...Adrees Latif/Reuters

From The Daily Mail:

The Alibaba founder Jack Ma needs just 22 minutes to defeat some of the world’s best fighters. It helps that his company was the one making it happen.

Mr. Ma is the star of a new movie, “Gong Shou Dao,” which follows Mr. Ma’s character, a practitioner of Tai Chi, through a gantlet of action stars that includes Jet Li.

Mr. Ma emerges victorious, only to be greeted by three other formidable fighters: the action star Jason Statham and the boxers Manny Pacquiao and Gennady Golovkin. So... sequel?

Here’s the trailer.

Today could be the day that the Justice Department finally sues to block AT&T’s $85.4 billion takeover bid for the media giant, according to Rich Greenfield of BTIG. Or maybe not: Michael has heard that’s a possibility — but also that settlement talks have been continuing.

In his blog post, Mr. Greenfield lays out what we’ve heard is a longstanding concern among regulators about the last big “vertical merger” of broadband and media companies, Comcast’s takeover of NBCUniversal. To win approval, Comcast agreed to several rules about how it would provide NBCUniversal content to rivals, in a consent decree meant to prevent anticompetitive behavior.

Mr. Greenfield writes:

We have long sensed regulators throughout the government felt the Comcast NBCU consent decree failed. Whether or not Comcast specifically violated the exact terms of the consent decree, we believe regulators feel the spirit was violated with Comcast pushing the envelope as far as possible.

Attorney General Jeff Sessions didn’t address questions at a House Judiciary Committee hearing yesterday about possible political interference in the Time Warner deal, saying only that his team always strove to act professionally. But Brian Stelter of CNN pointed out an interesting question that Mr. Sessions declined to answer.

Critics’ corner

• Michael Wolff asserts of the deal, “Even when directly told that the White House didn’t like it, and that senior Trump officials were saying it was going down, AT&T put its fingers in its collective ears.” (Hollywood Reporter)

• Matt Stoller of the Open Markets Institute writes, “Both Democrats and Republicans have to be careful not to open the door to an equally dangerous prospect — of dangerous monopolists wielding flimsy or even untrue political threats to justify their concentrations of power.” (WaPo)

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Senator Orrin G. Hatch, Republican of Utah, delivered opening remarks during a Senate Finance Committee hearing on Tuesday.Credit...Tom Brenner/The New York Times

Multiple factors have shifted after the Senate included a repeal of the individual insurance mandate in the latest version of its tax bill. (Doing so helps the Senate stay below its $1.5 trillion budget deficit limit.)

• Can the Senate majority leader, Mitch McConnell, get 50 votes now? Susan Collins, who was already urging changes to the plan, was a critical vote in defeating the last several attempts to replace the Affordable Care Act. But including the mandate could sway more conservative senators toward the “aye” column.

• Will lawmakers be happy with a proposal to make all of the tax cuts, except for the corporate one, expire in 2025, creating a fiscal cliff where many voters’ tax bills would jump in 2026?

The House is scheduled to vote on its tax bill on Thursday, and it’s expected to pass. The Senate is expected to vote after Thanksgiving. If its bill passes, there’s then the arduous work of reconciling the two. (As we noted yesterday, the economist Alec Phillips of Goldman Sachs believed that the chances of a tax package being signed were looking better — but that was before the latest version of the Senate bill came out.)

Cui bono?

• At a WSJ C.E.O. Council event where Gary Cohn was being interviewed by the newspaper’s editor in chief, Gerard Baker, only a few audience members’ hands went up when asked if they plan to increase their companies’ capital investments. Mr. Cohn asked: “Why aren’t the other hands up?” (@nataliewsj)

• In a national survey of 9,504 adults conducted for the NYT by SurveyMonkey, 78 percent of respondents said they did not believe that a tax cut for their employer would mean a raise for them. (NYT)

• Other beneficiaries of the tax plans as currently written: commercial real estate firms and companies that hold patents and other intellectual property offshore. (WSJ, Bloomberg)

How much worse can things get? Shares in the embattled conglomerate have fallen more than 12 percent in the days since the company’s C.E.O., John Flannery, unveiled his transformation plan. That was enough of a plunge to leave Boeing as the biggest American industrial company by market value.

But the bigger crisis is existential, according to John Gapper of the FT:

I shall miss the soul of GE’s old machine. If a company is just a mechanism for monitoring businesses with what Mr. Flannery calls “a very critical, analytical, dispassionate eye”, the market itself is a competitor. GE used to amount to more than that.

Analysts have either lowered their price targets or are considering it, CNBC reports.

Extra credit: Remember when Trian Partners asserted that G.E. could be valued at about $40 to $45 a share by the end of this year? The fund hopes you don’t.

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Credit...Fred Prouser/Reuters

Both the WSJ and CNBC now report, citing unidentified sources, that the former Pimco chief executive is a candidate to become the Federal Reserve’s vice chairman. Suffice to say, he would be an unusual pick for the Trump administration.

Mr. El-Erian has the qualifications. But he’s also what some of President Trump’s backers would consider a “globalist”: He had an international upbringing as the son of an Egyptian diplomat, and his economic views generally mesh well with those of the departing Fed chairwoman, Janet Yellen.

Then again, Jerome Powell, the White House’s nominee for Fed chairman, doesn’t represent a sharp break from Ms. Yellen’s policies, either.

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A line at an A.T.M. on Tuesday in Caracas, Venezuela.Credit...Juan Barreto/Agence France-Presse — Getty Images

The next big, messy default of a country may be near after credit ratings agencies said that the Maduro government had failed to meet some obligations. That has drawn in hedge funds which specialize in distressed sovereign bonds, while more traditional investors — who held billions of dollars’ worth — are fretting or fleeing.

The world news flyaround

• Zimbabwe’s military said that it had custody of President Robert Mugabe, but denied that it had begun a coup. (NYT)

• As many as 17 people detained in Saudi Arabia’s anti-corruption campaign have required medical treatment for abuse by their captors, putting Crown Prince Mohammed bin Salman at risk of a backlash. (NYT)

• Analysts at UBS this week: “A sharp and sustained rise in the price of oil would only follow if we were to see more serious political turmoil in Saudi Arabia, or through an escalation of proxy wars in the wider region.”

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Credit...David Goldman/Associated Press

The Dallas Cowboys owner denied yesterday that he has received a “cease-and-desist” warning from the N.F.L. owners who are negotiating a contract extension for commissioner Roger Goodell, after he tried to block it. But he also pressed for a delay in the process, telling CBS Sports Radio, “We just need to slow this train down and discuss the issues at hand in the N.F.L.”

Could things go nuclear? ProFootballTalk, citing an unidentified source, reported earlier this week that some owners had been discussing how to strip Mr. Jones of his ownership. In his radio interview, Mr. Jones said called that “laughable and ridiculous.”

Extra credit: Dom Cosentino of Deadspin takes a look at how the Cowboys owner became the league’s “shadow commissioner.”

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Credit...Nick Cote for The New York Times

• The Morgan Stanley analyst Brian Nowak asserted this week that Jeff Bezos’s behemoth could eventually have a market capitalization of $1 trillion. (Axios)

• “The conventional wisdom is that wholesale margins are thin, but Amazon operates on even thinner margins,” Ana Gupte of the investment bank Leerink said, referring to drug wholesalers fearing that the e-commerce giant could wipe out their profits. (FT)

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The federal courthouse in Richmond, Va., where Toys “R” Us filed for bankruptcy. The bankruptcy court there offers several features attractive to the executives, bankers and lawyers trying to get an edge in Chapter 11 cases.Credit...Justin T. Gellerson for The New York Times

According to Michael Corkery and Jessica Silver-Greenberg of The NYT, the reasons the city in Virginia has become the new hot spot for Chapter 11 filings, like that of Toys “R” Us, include:

• Its speedy “rocket docket” for processing cases

• Precedents favorable to debtors

• A willingness to approve high legal fees (Toys “R” Us’s lawyers at Kirkland & Ellis are billing as much as $1,745 an hour).

Each weekday, DealBook reporters in New York and London offer commentary and analysis on the day’s most important business news. Want this in your own email inbox? Here’s the sign-up.

You can find live updates of DealBook coverage throughout the day at nytimes.com/dealbook.

Follow Andrew Ross Sorkin @andrewrsorkin, Michael J. de la Merced @m_delamerced and Amie Tsang @amietsang on Twitter.

We’d love your feedback as we experiment with the writing, format and design of this briefing. Please email thoughts and suggestions to bizday@nytimes.com.

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