Meta’s Legal Hack Backfires

Plus: Barclays is going full Marie Kondo on its client base. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

November 29, 2023

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TOGETHER WITH

Good morning.

The only billionaire even more unassuming than Charlie Munger was possibly Munger's boss.

Munger, vice chairman of Berkshire Hathaway and, more famously, the right-hand man helping to guide Warren Buffett's investment decisions for more than a half-century, died Tuesday at the age of 99. Like Buffett, Munger had a famous no-nonsense style tailor-made for unlocking hidden corporate value across the world as Berkshire pursued portfolio investments and acquisitions. He also shared Buffett's low-key lifestyle approach, living in the same house for 60 years and drawing a $100,000-a-year salary (though his Berkshire stake of more than $2 billion was a nice supplement). Pardon our newsletter bias, but we'll salute Munger with one of our favorite quotes: "In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time — none, zero."

Morning Brief

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An old privacy thorn re-sticks itself in Meta's side.

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Barclays wants to dump some of its clients.

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Virgin gives new meaning to "when pigs fly."

Tech

Meta's Paid Ad-Free Plan Gets Hit With Privacy Lawsuit

Mark Zuckerberg's newest nemesis, Max Schrems, is like the Winklevoss twins times two.

This month Meta gave European users an exciting new way to access its services: payment. EU users can now pay for ad-free versions of Facebook and Instagram. The move was widely seen as a way for Meta to stay on the right side of European privacy laws put into place after Austrian privacy activist Max Schrems successfully sued the company. Now, that same privacy activist is back for more.

Premiumization Nein, Danke

Schrems and his nonprofit group, noyb, have been suing Facebook (as it was once called) since 2011 on EU privacy laws. After one of Schrems' legal wins, the Court of Justice of the European Union ruled in July that companies must obtain active consent from users to target them with ads — and provide a viable alternative. Meta's introduction of paid subscriptions for ad-free versions of its platforms was its way to address that rule change as well as the general tightening of European privacy laws.

But Schrems isn't letting the matter rest. On Tuesday, noyb filed a complaint with an Austrian regulator against Meta saying paying for privacy doesn't comply with Europe's GDPR privacy laws:

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Meta says that until March 1, 2024, users can pay €9.99 ($10.96) per month to use all its platforms on the web, and €12.99 ($14.25) per month to use them on iOS or Android. After that, each separate account (e.g. Facebook, Instagram) will cost an extra €6 ($6.59) to €8 ($8.78).

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That means ad-free Facebook and Instagram on your phone will run up an annual bill of €252 ($276.59). Noyb contends that a price tag that high means privacy meant to be enshrined in law becomes a luxury for the rich, citing a specific anonymous complainant who is on unemployment benefits.

"More than 20% of the EU population are already at risk of poverty. For the complainant in our case, as for many others, a 'Pay or Okay' system would mean paying the rent or having privacy," Schrems said in a statement. Meta's own public documents also suggest the price point is far higher than the average EU user is worth to Meta. The company's Q2 earnings said that, on average, an EU user brings in around $6 per month in revenue.

Dangerous Precedent: The noyb complaint also asks what kind of expense privacy would add up to if other platforms followed Meta's lead, something that it points out TikTok is already experimenting with via a small test of a $4.99 monthly ad-free plan. And you thought paying for all the different streaming services was bad enough…

- Isobel Asher Hamilton

Banking

Barclays Wants to Ditch Thousands of its Clients

Sure, sometimes less is more. But that usually applies to butter on pancakes or the right amount of cologne, not investment banking ledgers.

Still, according to a new report from the Financial Times, Barclays is considering a Marie Kondo approach to its investment banking business, with the unorthodox route of dropping thousands of clients. But in this case, decluttering is about sparking joy — and cutting costs and boosting profits.

It's Not You, It's My Bottom Line

Barclays has been stuck in something of a rut. Its market cap is among the lowest of all international major banks, with its share price sitting near its lowest point since 2020. CEO CS Venkatakrishnan has sought to cut up to £1 billion in costs, and has convened several C-suite meetings this year to explore extreme options to return more capital to investors, such as raising funds to acquire a wealth management business and sunsetting its US municipal bond trading operations, sources told the FT.

Instead, the bank is veering toward a conscious uncoupling from nearly a quarter of its least-profitable clients in the investment banking division, which has become the bank's biggest unit. Thanks to current regulations that require banks to hold equity against risk-weighted assets (RWAs), it's a move that could equate to addition by subtraction:

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The investment banking business accounts for roughly £219 billion of RWAs, or about two-thirds of the bank's total, per the FT. By dumping as many as 2,500 of the 10,000 total investment banking clients, Barclays could free up as much as 10% of the unit's RWAs without sacrificing an equal amount in revenue.

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It's an especially appealing plan, given that the vast majority of the unit's profits come from only the top 500 or so clients, and because the UK's looming Basel 3.1 post-banking crisis reforms will place even stricter rules on RWA-capital equity ratios.

Snip-Snip: While the bank considers cutting clients, it's also locked in on a more traditional method of cost reduction: layoffs. On Tuesday, the bank told staff that it may cut as many as 900 positions before the end of the year, with pink slips specifically focused on back-office divisions such as compliance, risk, finance, legal, policy and IT, according to the trade union Unite, which represents many of Barclays' UK workers. "Barclays is disgracefully cutting jobs to further boost its massive profits. This is a mega-rich bank that is already on course to make eye-watering profits this year," the union said in a statement.

- Brian Boyle

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Silent Distilleries are Quietly Taking Over the Whiskey Industry

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5-year contract for 125 barrels of American Single Malt (100% Malted Barley)

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Interested in learning more about how these contracts work, and how you can add whiskey (an asset class that has returned 296% since 2012) to your portfolio? There has never been a better time — with new, flexible investment tiers for all types of investors.

Schedule a zero-obligation call with a Vinovest Whiskey concierge today.

Industrials

Virgin Atlantic Logs First Transatlantic Flight on 100% 'Sustainable' Jet Fuel

(Photo by Bill Abbott via CC BY-SA 2.0)

It's sort of like vegan jet fuel.

On Tuesday, Virgin Atlantic conducted the first transatlantic flight by a commercial airliner fully powered by sustainable aviation fuel (SAF). But is it a one-off stunt or a flight of fancy?

That's a Lot of Carbon

Air travel accounts for roughly 2% of global emissions annually. That may not sound like a lot, but the industry's yearly total would rank among the top 10 biggest polluting nations in the world, according to the Environmental and Energy Study Institute. Similar to the automotive industry, the aviation sector is aiming to reduce fossil fuels and achieve net-zero emissions in the next few decades, but that's a lot easier said than done.

SAF, often made from tallow, cooking oils and other biomass, has been seen as one potential alternative. But environmentalists view it and Virgin's taxpayer-funded flight as little more than a gimmick and not a real solution to the problem:

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SAF isn't the same as clean air travel. Similar emissions are being released from the plane, but the life-cycle emissions — the carbon produced from capturing, processing, and distributing SAF — are roughly 70% less than that of traditional jet fuel.

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"One flight on 100% alternative fuel isn't going to change the fact that 99.9% of aviation fuel is fossil fuel and there's no great option for feedstock (raw materials) that can be scaled up sustainably." Cait Hewitt of the UK's Aviation Environment Federation said about Virgin's flight.

If You Wanna Fly, You've Gotta Burn Something: The consensus is that e-kerosene — hydrogen from renewable electricity combined with the atmosphere's carbon dioxide — is the only truly green SAF. However, SAFs are generally more than double the price of standard fuel, meaning airlines don't have the immediate incentive for significant investments. That suggests SAF's 0.1% global jet-fuel share doesn't significantly rise anytime soon.

- Griffin Kelly

Extra Upside

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Spin it: Solomon says his DJing won't distract him from getting Goldman Sachs back on track.

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Mine your business: Panama Supreme Court declares two-decade-long Canadian mining contract unconstitutional.

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Now more than ever, M&A plays a pivotal role in shaping the current economic landscape. To help guide us through the terrain, we turn to Transacted. Crafted by a seasoned former private equity investor, Transacted delivers one newsletter every Sunday that dives deep into the intricacies of each M&A deal, unraveling the compelling story that the headlines often miss. Their briefing is meticulously curated, only covering the most significant deals that happen on Wall Street. Don't settle for surface-level news — sign up for Transacted now.*

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