Tuesday, August 1, 2017

Banks face huge Brexit bill; Amazon says U.S. investigating Iran sales; Coal miner talks Trump

Exciting news! A brand-new version of this newsletter – with more video and more of Quest's voice and global perspective -- will be launching in your inbox soon.

Profitable Moment

S&P excludes Snap. But what about the others?

Snap will never be able to join the S&P 500.

S&P announced today that companies like Snap that have multiple classes of voting shares are not eligible to join certain S&P indices. This move to bar such companies is to be applauded, especially in the case of Snap, which gave shareholders no voting rights at all.

As I have written before, it flies in the face of the entire raison d'etre of the capital markets that shareholders don't own and vote the company. If a company wants money without giving up control, go to a bank and borrow!

There's one part of the S&P announcement that I found odd. Multiple-class companies already in the S&P 500 don't have to leave. That means companies like Google owner Alphabet, Facebook, Berkshire Hathaway and 21st Century Fox – all of which have these split shareholdings -- can stay in, but newcomers will be shut out in the future.

S&P has given no reason for the grandfathering. To be fair, it would likely be very disruptive to throw large companies out of the index, causing many tracking funds to divest of the stock.

But it's a matter of principle. Multiple classes are either acceptable or they are not. It should not depend on when they came to market

-Richard.Quest@cnn.com

What's new... what's next

By Matt Egan and Julia Horowitz of CNNMoney

1. Banks might need $50B to cope with Brexit

A messy divorce from the European Union would be very expensive for banks in Britain. They would need to raise up to $50 billion to support new operations in Europe if Britain crashes out of the bloc, according to a new report. But take note: Many Brits say they're prepared to pay an extreme price for Brexit. Three out of five people who voted to leave in June 2016 regard "significant damage to the British economy to be a price worth paying," according to a new survey.

2. Amazon says U.S. investigating Iran sales

The U.S. government is investigating Amazon for potentially violating the country's sanctions on Iran. Amazon disclosed the government probe in documents filed with the Securities and Exchange Commission last week. The company said that between January 2012 and June 2017, it sold and delivered nearly $25,000 worth of merchandise to an Iranian embassy outside Iran, and another $8,100 to individuals with ties to the Iranian government.

3. Scaramucci says he'll pay taxes on SkyBridge

Anthony Scaramucci lost more than a job at the White House. He lost the chance to delay paying millions of dollars in taxes. Government employees can apply to defer paying taxes when they sell investments to avoid conflicts of interest. But Scaramucci's lawyer said the former White House communications director will pay those taxes when he sells SkyBridge Capital, a hedge fund business. Scaramucci, who suddenly resigned on Monday, valued his SkyBridge stake at more than $50 million.

4. Coal miner mentions Trump 13 times in IPO

Contura Energy is poised to become the third coal IPO of the year. The miner acquired the core assets of Alpha Natural Resources when it filed for bankruptcy two years ago. Contura's IPO filing mentioned "Trump" 13 times, repeatedly flagging the administration's deregulation efforts as a boost to its prospects. But Contura and other miners are also benefiting from higher prices for met coal, which is used in steel making. Another key: bankruptcy allowed the miners to start fresh by getting rid of excess debt.

5. Quick Takes:

Ending 'bailouts' for insurers could cost millions their health care coverage

Lawsuit: Fox News concocted Seth Rich story with oversight from White House

Not even Steph Curry can save retail as Under Armour cuts jobs

Qatar files WTO complaint over embargo by Gulf neighbors

Ford adds a 'mute' button for the Mustang's noisy V8 engine

Exxon, Halliburton execs protest Texas 'bathroom bill' in letter to governor

GameStop announces plans to open on Thanksgiving this year

6. What's next:

Jobs report sneak preview: The ADP's private payroll report at 8:15 a.m. ET on Wednesday could move markets. It's often looked at as a barometer of the labor market before the release of the more closely-watched government jobs report, which is due out on Friday. Economists expect the ADP report will show that companies added 185,000 jobs in July, up from 158,000 in June.

Earnings spotlight shines on Tesla: Another batch of corporate report cards are coming out on Wednesday. Before the bell, earnings are on tap from Molson Coors, Humana, Oreo maker Mondelez and CNN owner Time Warner. Elon Musk will be in the hot seat in the afternoon, with analysts likely to quiz the Tesla boss about how the company will meet enormous demand for the Model 3. More after-the-bell results are due from Square, Sturm Ruger, AIG and Prudential.

Make this newsletter better. Please send us your feedback to CNNMoneyfeedback@turner.com

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