Kodak Stock Price Drops 29% After Federal Loan Paused: Live Updates – The New York Times


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President Trump signed an executive order on Saturday to defer withholding of certain payroll taxes from September through the end of the year.Credit…Anna Moneymaker for The New York Times

Over the weekend, President Trump instructed the Treasury Department to defer withholding of certain payroll taxes from September through the end of the year. The measure, one of four executive actions signed by the president to offer pandemic relief, is being referred to as a “payroll tax holiday.”

Since Mr. Trump is only suspending the tax, not cutting it, the money that companies would cease to withhold would have to be repaid next year barring legislative action. For companies, this will require complex accounting maneuvering. For workers, it could mean an unwanted tax liability in 2021, making a tax break more of a headache.

“This is not a holiday, because there’s a bill at the other end of it,” said Isaac Boltansky, an analyst with the research firm Compass Point.

Some employers expressed frustration with the uncertainty Mr. Trump’s order has created.

“I would rather just keep paying the payroll tax as it is now and deducting from the employees,” said Arnold Kamler, the chief executive of the bicycle company Kent International. “If it does go into effect, we’ll be very up front with the workers and tell them don’t spend it, just put it away.”

The Treasury Department is expected to release information about how the payroll tax suspension will work.

David French, senior vice president of government relations at the National Retail Federation, said that the group had told members to be ready for additional guidance about the policy.

“Clearly there are a lot of unresolved issues with it,” Mr. French said on Monday.

If every business in the United States deferred their payroll taxes to the end of the year, it would add up to $40 billion per month to the paychecks of Americans, JPMorgan Chase said in a research note on Monday.

But many companies and employees might be hesitant to opt into the program because it is not clear whether Congress will eventually forgive the deferred taxes, or if the full sum will be due at a later date.

“Some employees may not want to do this at all if they perceive that maybe Congress isn’t going to follow up with legislation to forgive this,” said Pete Isberg, vice president of government relations for ADP, a payroll specialist that serves more than 800,000 businesses. “It’s a little bit of a risk that Congress may not act, and if you’re deferring a significant amount of taxes the reality is, a few months later, you’re going to have to come up with that cash and pay those taxes.”

Furthermore, the rollout itself may be extremely expensive and time-consuming for businesses. The payroll tax rate does not usually change in the middle of the year, said Mr. Isberg, and the shift will require businesses to reprogram their payroll systems.

“Things of this magnitude normally take six months or so for orderly programming,” said Mr. Isberg.

Many businesses are likely to hold off on making any decisions until they receive additional guidance from the federal government. One option some employers might consider is to continue withholding the tax and repay workers later if it is eventually forgiven. That option would, of course, defeat the purpose of stimulating the economy now when it could use the help.

The moves are part of a shake-up by WarnerMedia’s new chief executive, Jason Kilar, Credit…Aaron P/Bauer-Griffin, via Getty

WarnerMedia began a significant round of layoffs on Monday that will see its ranks decline by 600 people, according to two people with knowledge of the layoffs who were not authorized to speak publicly. It comes after the company’s corporate restructuring Friday in which three top executives were ousted.

The majority of the job losses were at Warner Bros. Entertainment. More layoffs are expected, the people said. The company has a global work force of 7,000.

As part of the overhaul, Jeffrey R. Schlesinger, president of Warner Bros. Worldwide Television Distribution will depart, as will Ron Sanders, president of Worldwide Theatrical Distribution. Kim Williams, chief financial officer of Warner Bros. Entertainment, will also exit the company.

“Jeff, Ron and Kim are all highly valued members of my senior leadership team, and we will be forever grateful for the many meaningful and lasting contributions each of them has made to Warner Bros,” said Ann Sarnoff, chief executive of Warner Bros. and the newly announced head of WarnerMedia’s Studio and Networks Group. “I think them all for their dedication and years of service, and wish them the very best in their next chapters.”

The moves are part of a shake-up by WarnerMedia’s new chief executive, Jason Kilar, who was helmed the company since May. Mr. Kilar is realigning WarnerMedia to put more emphasis on its new streaming service, HBO Max, which pulled in 4.1 million subscribers in its first month.

WarnerMedia is a division of AT&T.

The Main Street program is a new effort for the Fed, and it has gotten off to a rocky start.Credit…Ting Shen for The New York Times

The Federal Reserve released detailed data on Monday on its first-ever attempt to get loans to midsize businesses, and the figures show that the program is reaching a diverse — if tiny — set of borrowers.

The numbers run through July 31 and account for $92.2 million in loans, which is about half of what the so-called Main Street program has backed so far, based on more recent data cited by a Fed official last week. The program’s 13 loans through July 31 went to a range of companies — including a dentist, a concrete company, a lighting company, a roofing company and a casino.

The smallest loan, for $1.5 million, went to Pablo Alfaro Group, a Florida real estate company. The largest, for $50 million, went to an entity associated with Mount Airy, the Pennsylvania casino.

The Main Street program is a new effort for the Fed, and it has gotten off to a rocky start. First announced in late March as part of the Fed’s broad pandemic response package, the program is meant to funnel loans to midsize businesses, especially those who are too big for government small-business loans but too small to tap stock and bond markets to raise money.

The Fed is protected against losses on the loans by funding from the Treasury Department, money Congress earmarked to support the Fed’s emergency lending push in its coronavirus response legislation.

Lawmakers have questioned why it took so long to get the program running — Main Street did not purchase its first loan until July 15 — and why so little of its $600 billion capacity is being used. One member of the congressional commission that is overseeing the program called it a “failure” at a hearing last week.

But the president of the Federal Reserve Bank of Boston, Eric Rosengren, said at the oversight hearing that he expects program activity to pick up with time.

Commercial banks originate the midsize business loans, and the Fed buys 95 percent of them. According to the data released Monday, the majority of the loans through July 31 were made through the City National Bank of Florida.

Mr. Rosengren, whose central bank branch runs the effort, said last week that more than $600 million in loans were in some stage of approval. He also indicated that Main Street could be used more often if virus conditions worsen in the fall, causing a tightening of private credit.

The Fed’s disclosures also showed that it had purchased about $12 billion in already-issued corporate bonds and corporate bond exchange-traded funds through July 29, part of another first-time program that it unveiled earlier to keep the market for big-company debt functioning.

The Fed has been shifting away from exchange-traded fund purchases and toward individual bond buying, guided by a broad market index of its own design.

Households became more pessimistic about their employment prospects in July after months of gradual improvement, a Federal Reserve Bank of New York survey showed.

Unemployment expectations — measured as the average chance that the U.S. unemployment rate will be higher one year from now — increased in July after three months of decline, ticking up to 39.3 percent from 35.1 percent the prior month, according to the monthly Survey of Consumer Expectations.

That prediction of higher joblessness ahead is notable, because the unemployment rate is already elevated and stood at 10.2 percent in July, higher than at any point in the 2007 to 2009 recession. The souring outlook came as coronavirus cases ticked up across much of the nation, causing some places to hit pause on reopening plans. Real-time trackers suggest the rebound in consumer spending may have stalled against that backdrop.

People also perceived a higher chance of losing work over the coming year, based on the survey, an internet-based panel of 1,300 households. They put the average probability at 16 percent in July, up from 15 percent in June.

The survey wasn’t all bad news. Households judged their chances of finding a job in the case of unemployment to have improved slightly, and their expectation for income growth held steady, albeit well below 2019 levels.

MGM Resorts reported a net loss of $857 million for the second quarter, compared to a profit of $43 million during the same period last year.Credit…Ethan Miller/Getty Images

Barry Diller’s media and technology company IAC announced on Monday that it had acquired a 12 percent stake of MGM Resorts International for $1 billion, betting on the value of building out MGM’s online gaming infrastructure at a time when the coronavirus is keeping many gamblers stuck at home.

“What initially attracted us to MGM, besides its leadership in leisure, hospitality and gaming, was an area that currently comprises a tiny portion of its revenue — online gaming,” Mr. Diller, the chairman and senior executive of IAC, said in a statement.

Mr. Diller added that the move, in the midst of the global pandemic that has dealt a devastating blow to the gambling industry, might surprise some investors, but it represents the “opportunistic zeal” of the company. One billion dollars would have bought about six percent of MGM’s shares at the start of this year.

“We believe MGM presented a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a pre-eminent brand in a large category with great potential to move online,” the company said in a letter to shareholders. “IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique.”

The move comes shortly after IAC’s separation from Match Group, the parent company of the dating site Match.com, which Mr. Diller said left IAC with $3.9 billion in cash and no debt. MGM’s stock was up 20 percent after the announcement Monday morning.

Beginning in March, casinos across the country were forced to close because of the pandemic, and though many opened back up over the summer, they did so with limited capacity. On July 30, MGM Resorts reported a net loss of $857 million for the second quarter, compared to a profit of $43 million during the same period last year.

No other major U.S. airline has bought an oil refinery, a cyclical business known to produce modest profits.Credit…Dustin Sonneborn for The New York Times

Jet fuel is known as the steady eddy of the refinery business, a predictable profit maker that balances the seasonal gyrations of gasoline and diesel sales. But for airlines, it is a headache — a big and unpredictable expense that confounds managers.

So Delta Air Lines tried a bold experiment: It bought an oil refinery in 2012 outside Philadelphia, the first such purchase by a major U.S. airline. When jet fuel prices were high, as they were then, Delta figured the refinery, which turns crude oil into the stuff that planes, cars and trucks burn, could offset some of its expenses and perhaps even make money.

“A lot of energy guys hate it, and I can understand why, because we’re taking money out of their pockets,” Ed Bastian, the airline’s current chief executive and then president, said at an industry conference in 2012.

But the refinery made only modest profits some years and lost money in others. This year, as the coronavirus hammered demand for air travel, it has become a liability for Delta, widely considered by analysts as one of the best-run airlines in the country.

Executives at Delta and its refinery declined requests for comment.

Credit…Stefani Reynolds for The New York Times

The Eastman Kodak Company’s stock tumbled nearly 30 percent on Monday after a U.S. government agency said it would pause a potential $765 million loan to the company for the production of pharmaceutical ingredients in the United States.

The U.S. International Development Finance Corporation said in a tweet on Friday that “recent allegations of wrongdoing raise serious concerns” and it would not proceed with the deal until the allegations were cleared.

Kodak is facing allegations of insider trading after its chief executive, Jim Continenza, received 1.75 million stock options the day before the potential loan from the government was announced. The announcement of the deal caused Kodak’s shares to spike more than 1,000 percent.

The potential loan, which was announced last month, was an effort by the Trump administration to start to chip away at the United States’ dependence on foreign countries for medicines. Under the project, Kodak would produce critical drug components from its headquarters in Rochester, N.Y.

On Friday, Kodak said it had created a special committee to review internal activity around the loan announcement, and said it would offer no further public comment during that review.

Stocks rose on Monday, with Wall Street coming ever closer to a record, even as investors faced continued uncertainty over Washington’s support for businesses and unemployed workers and continuing tension between the United States and China.

After a turbulent start to the day, the S&P 500 was slightly higher by late afternoon. Shares in Europe also climbed.

The gains on Wall Street were capped by a retreat in shares of large technology companies. The Nasdaq composite fell nearly half a percent.

As small as it was, though, the gain in the S&P 500 put it less than 1 percent below its high, which it reached in late February before the sudden spread of the coronavirus shut down the American economy, leading to mass layoffs and business closures in the United States. Stocks went into a tailspin before a mix of government spending and central bank policy aimed at bolstering the economy helped reassure investors.

That spending is again a focus on Wall Street, after President Trump on Saturday signed a number of executive actions aimed at restoring unemployment benefits that had expired and providing relief for renters and student borrowers. But the moves are legally questionable, because they circumvent congress, and unlikely to have immediate, meaningful impact on the economy.

The prospects for an agreement among Democrats and Republicans in Congress, are up in the air. Lawmakers have largely left the capital to return to their home districts, and it is unclear when negotiations over the bill will resume.

Treasury Secretary Steven Mnuchin said on CNBC on Monday that the White House was “prepared to put more money on the table,” to come to an agreement. “If we can get a fair deal, we’re willing to do it this week,” Mr. Mnuchin said.

The strain between Washington and Beijing also continued on Monday as the United States sent its highest level delegation to visit Taiwan since severing official ties with the island in 1979. China, which claims the territory, said on Monday that it would impose sanctions on 11 Americans, including several senators — an apparent response to an announcement on Friday by the Trump administration of sanctions on Carrie Lam, Hong Kong’s chief executive, and 10 others for their roles in cracking down on political dissent.

A Saudi Aramco offshore oil platform in 2018. The giant oil company will continue paying a large dividend despite sharply lower profits.Credit…Mohamed Alebn Alshaikh/Saudi Aramco, via Agence France-Presse — Getty Images

Saudi Aramco, the world’s largest oil company, said on Sunday that its quarterly earnings plunged more than 73 percent compared to a year ago, as lockdowns imposed to curb the coronavirus pandemic drastically cut the demand for oil and slammed prices.

Despite the steep fall in earnings, to $6.6 billion from $24.7 billion, the company said it would continue paying a quarterly dividend of $18.75 billion, almost three times its cash flow. Aramco is locked into paying such a large amount — $75 billion a year — because of commitments made in the run-up to its initial public offering last year.

Nearly all of the dividend money will go to the Saudi government, which owns more than 98 percent of the company.

Continuing to pay such a large dividend distinguishes Aramco from other oil giants, like BP and Royal Dutch Shell, which have recently cut their payouts to preserve capital in difficult times.

“While other oil companies are taking the opportunity to reset the dividend, Aramco are somewhat locked into the IPO commitments,” said Neil Beveridge, an analyst at Bernstein, a market research firm. Mr. Beveridge estimated that Aramco is likely borrowing around $12 billion to pay the dividend.

Recently, a surging Apple dethroned Saudi Aramco as the world’s most valuable company. Apple now has a market capitalization of about $1.9 trillion compared to about $1.76 trillion for the Saudi company.

Applying for unemployment benefits in Helena, Ark. The expiration at the end of July of the extra $600 a week in those benefits has created a crisis for the estimated 30 million people relying on that money.Credit…Houston Cofield for The New York Times

President Trump, in announcing his executive measures on Saturday, said he was bypassing Congress to deliver emergency pandemic aid to needy Americans. But his directives are rife with so much complexity and legal murkiness that they’re unlikely, in most cases, to bring fast relief — if any.

Because Congress controls federal spending, at least some of Mr. Trump’s actions will almost certainly be challenged in court. They could also quickly become moot if congressional leaders reach an agreement and pass their own relief package. Speaker Nancy Pelosi of California on Sunday dismissed Mr. Trump’s actions as unconstitutional and said a compromise deal was still needed. Treasury Secretary Steven Mnuchin said he would be open to further talks with Democratic leaders: “Anytime they have a new proposal, I’m willing to listen.”

Mr. Trump’s executive steps on Saturday focused on four areas: extending supplemental unemployment benefits, suspending some payroll taxes, extending relief for student loan borrowers and offering eviction relief. Of the four, the student loan memorandum seems likely to be the least controversial and the easiest to carry out.

But his various executive actions did not include several forms of relief that have been part of recent negotiations, including lump-sum payments to citizens and additional relief for small businesses.

“It’s been a bit of a wild ride,” said Sam Zaid, chief executive of the car sharing start-up Getaround.Credit…Kelsey McClellan for The New York Times

When the coronavirus pandemic first hit in March, many technology start-ups braced themselves for The End, as business dried up, venture capitalists warned of dark times ahead and restructuring experts predicted the beginning of a “great unwinding” after a decade-long boom.

Five months later, those doomsday warnings have not translated into the drastic shakeout that many had expected.

Funding for young companies has stayed robust, particularly for the larger start-ups. Some of them, like the stock trading app Robinhood and Discord, the social media site, have pulled in hundreds of millions of dollars in new capital in recent months, boosting their valuations. And initial public offerings of tech companies have come roaring back, alongside a surging stock market.

“Things generally are substantially better than our worst fears 90 days ago,” said Rich Wong, an investor at Accel, a Silicon Valley venture capital firm.

Still, it’s been a hectic period for some firms. Getaround, a car sharing start-up, started the year by laying off 150 employees and scaling back some operations. Two months later, with the spread of the coronavirus, business got even worse, with further layoffs.

But in May, business bounced back when people began using the start-up’s cars to get on the road again. Getaround’s revenue in the United States for the year is now 40 percent above where it was a year ago. Last month, it brought back all of its furloughed employees and started hiring again.

“We have seen a very, very fast recovery,” said Sam Zaid, Getaround’s chief executive, adding that he was now raising more cash. “It’s been a bit of a wild ride.”