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   DealBook: Biden’s TikTok problem
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             June 21, 2022
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            <h2 class="css-12n1aic el2acgh0" style="color:#000;font:700 25px/32px arial,sans-serif;margin:0 0 10px">
             Did Biden drop the ball on TikTok and China?
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             An
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              explosive report
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             from BuzzFeed raises more questions about whether TikTok, the Chinese-owned video app, exposes the personal information of Americans to Beijing. It also puts President Biden’s China policy under a new spotlight
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              as China’s economic power continues to grow
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             — and the Biden administration continues to take
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              a decidedly softer approach
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             than its predecessor. (The New York Times has not independently verified BuzzFeed’s reporting.)
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Here’s a quick TikTok recap.
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             During Donald Trump’s presidency, the Committee on Foreign Investment in the U.S., which reviews outside investments with national security in mind, opened an investigation into TikTok. Trump used its results to issue an executive order forcing ByteDance, TikTok’s Chinese parent, to divest the company. That is what led TikTok to strike a deal to sell to Oracle and Walmart. But when Biden took office, he did not enforce the divestment order — and ByteDance didn’t sell. Concerns about China’s access to personal information stored by TikTok, though, remained. Earlier this year, TikTok
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              was working on a deal
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             to store its data on Oracle servers to please regulators, and the BuzzFeed article says such a deal is still in the works.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Chinese engineers had access to data on Americans as recently as this year, BuzzFeed reports.
             </span>
             “Everything is seen in China,” a member of TikTok’s trust and safety department reportedly said in a meeting last September, and U.S. employees had to ask their Chinese colleagues to explain how data from U.S. users was flowing. The article also cites concerns by experts that, whatever measures ByteDance puts in place, China could still force it to hand over data. It hasn’t hesitated to
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              push tech companies around
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             in recent years.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The deal with Oracle is supposed to be the solution.
             </span>
             Shortly before BuzzFeed published its article, TikTok
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              announced
             </a>
             that it was moving all the data from its American users through servers controlled by Oracle. But it also said it would still store its own backups of that information. And TikTok itself has
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              acknowledged
             </a>
             the risk that employees in China might get access to data stored in the U.S. TikTok
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              said in a blog post
             </a>
             on Friday that it was “working closely with Oracle to develop data management protocols that Oracle will audit and manage to give users even more peace of mind.” It also outlined other operational changes, including a new department to solely manage U.S. data.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The article raises questions about Biden’s approach to TikTok and Chinese deal-making.
             </span>
             “Not following through with a TikTok ban was a huge mistake” on the part of the U.S., said
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              Palmer Luckey
             </a>
             , the founder of Oculus. More broadly, U.S. regulatory scrutiny seems to have
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              helped minimize
             </a>
             further Chinese investment in the country, but despite warnings that regulators might look again at a
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              score of past investments
             </a>
             , they have taken little apparent action. And while Congress is threatening to crack down on
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              U.S. companies’ investments in China
             </a>
             , it is far from certain a bill will pass. For Biden, the timing of the BuzzFeed story is awkward, given that he is also weighing
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              a rollback
             </a>
             of another remnant of Trump’s tough-on-China era: tariffs on Chinese goods. With midterm elections ahead, will he risk rattling the youth vote by taking another look at TikTok?
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             Over the holiday weekend, which included the busiest travel day of the year, staffing shortages caused
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              widespread flight disruptions
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             . And a pilot shortage has prompted American Airlines to
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              stop flying to Toledo, Ohio, and Ithaca and Islip, N.Y.
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             , in September.
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              President Biden says he may move to pause the federal tax on gasoline.
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             The move would
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              provide some relief for Americans struggling with gas prices
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             , which are hovering at around $5 a gallon. The White House is grappling with how to address record inflation.
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              Ernst &amp; Young’s breakup plan would bring multimillion-dollar payouts for partners.
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             The proposal to
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              split its auditing and consulting businesses
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             , which relies on optimistic growth forecasts, could be implemented late this year and would mean that the consulting business would go public, The Wall Street Journal reported.
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              European countries lean more on coal.
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             Out of concerns about Russia choking its gas supply,
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              Germany’s economy ministry said it would increase its dependency on coal-fired power plants
             </a>
             and store more gas. The Dutch government declared an
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              “early warning” stage
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             of a natural gas crisis because of Russia’s tightening of supplies.
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              Elon Musk says there are still some “unresolved matters” for the Twitter deal.
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              In an interview with Bloomberg
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             , he also reiterated that he was waiting to hear how many fake or automated accounts were on the platform. When asked whether he would support Trump in a 2024 presidential election, Musk said: “
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             at this point.”
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             A stock-market bet for Bitcoin skeptics
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             As crypto holders watch the market tank, skeptics can begin
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              betting against Bitcoin
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             on the New York Stock Exchange today. The S.E.C. greenlit a new exchange-traded fund late last week from the investment manager ProShares that rises in value when the price of Bitcoin plummets, as it has recently. Over the weekend, Bitcoin’s price
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              fell below $20,000
             </a>
             for the first time since 2020, and it even slipped below $18,000 at one point before climbing back above $21,000 today.
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The new fund, the ProShares Short Bitcoin Strategy E.T.F., does not directly buy or sell Bitcoin.
             </span>
             Instead, it places wagers on futures contracts on the Chicago Mercantile Exchange that pay off when the price of Bitcoin dips. The firm also launched the first Bitcoin futures E.T.F. last fall, which bets that prices will rise, and amid the market struggles, ProShares’ C.E.O., Michael Sapir, says the timing feels right for this more pessimistic venture. “There probably is no better environment for it,” Sapir told DealBook.
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              The fund is launching when the price of Bitcoin has plunged.
             </span>
             It is down 70 percent from its high in November. And the total value of all cryptocurrencies has fallen to about $1 trillion, from about $3 trillion in November. Much of the recent selling has been driven by collapses in so-called stablecoins — cryptocurrencies that were supposed to maintain a set value. But if those collapses don’t lead to wider problems in the crypto market, Bitcoin’s price could rebound.
            </p>
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             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Some are still waiting for an E.T.F. that holds actual cryptocurrencies.
             </span>
             Bitcoin enthusiasts have long wanted to offer a fund that buys and holds the crypto itself,
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              with no success
             </a>
             so far. The S.E.C. chairman, Gary Gensler, contends that the barely regulated, always-on global Bitcoin market is too wild and unreliable, distinguishing it from futures funds based on the Chicago exchange, which is highly regulated and serves registered professional traders. Notably, Grayscale Bitcoin Trust — a crypto fund for accredited investors, currently trading at a
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              deep discount
             </a>
             — ran an ad and letter campaign to
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              bolster its application
             </a>
             to convert to an E.T.F. this year, and Grayscale has threatened litigation if it is denied. A decision is expected by early July. But with crypto markets now showing all the vulnerabilities regulators most feared, a former top S.E.C. official tells DealBook those crypto fund dreams probably won’t come true any time soon.
            </p>
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             “I no longer live with or wish to be related to my biological father in any way, shape or form.”
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             <span style="font-style:italic;font-size:inherit">
              — Elon Musk’s transgender daughter, in a
             </span>
             <span style="font-style:italic;font-size:inherit">
              <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
               petition to change her name
              </a>
             </span>
             <span style="font-style:italic;font-size:inherit">
              to align with her gender identity that she filed in April.
             </span>
            </p>
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             Selling cars the Tesla way
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             In 2019, Tesla took heat for its decision to sell cars only online. Auto industry experts argued that whatever bad feelings people had about dealerships, they were essential to the business.
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         <tbody>
          <tr>
           <td align="left">
            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The online strategy, championed by Tesla’s chief Elon Musk, appears to be proving the naysayers wrong.
             </span>
             Combining direct sales with a limited number of stores and service centers, Tesla dominates the fast-growing electric car market, even as other manufacturers struggle to sell cars because of a shortage of computer chips,
             <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
              The Times’s Paul Stenquist writes
             </a>
             .
            </p>
           </td>
          </tr>
         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
        <table cellpadding="0" width="100%">
         <tbody>
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              The approach could have major ramifications for the auto industry.
             </span>
             Most carmakers and auto dealers are doing well right now because scarcity has pushed up prices for both new and used cars. But they may have to eventually adopt some of the changes Tesla has introduced.
            </p>
           </td>
          </tr>
         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
        <table cellpadding="0" width="100%">
         <tbody>
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           <td align="left">
            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              Why the industry may need to change its ways:
             </span>
            </p>
           </td>
          </tr>
         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
                Online car shopping is popular
               </span>
               — and not just with people buying electric cars, said Michelle Krebs, an executive analyst for Cox Automotive. “Our data shows consumers want to do more of the process online, but most don’t want to eliminate the dealer visit altogether,” Krebs said.
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
                It also cuts down on costs.
               </span>
               Ford’s distribution and advertising costs per car are about
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                $2,000 higher than Tesla’s
               </a>
               <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
                ,
               </span>
               the C.E.O. of Ford Motor, Jim Farley, said at an investor conference this month. Farley said Ford wanted to
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                sell electric cars only online
               </a>
               at nonnegotiable prices, without keeping lots of them at dealerships.
              </span>
             </li>
            </ul>
           </td>
          </tr>
         </tbody>
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       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
        <table cellpadding="0" width="100%">
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            <p style="color:#000;font:normal 17px/25px georgia,serif;margin:0 0 15px">
             <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
              But there are hurdles to shifting sales online:
             </span>
            </p>
           </td>
          </tr>
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       </div>
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              <span style="font-size:17px;line-height:25px">
               <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
                State laws can make it hard or impossible for automakers to deal directly with customers
               </span>
               and often require established automakers to sell through franchised dealers. Some states, like Texas, offer rebates for buying electric vehicles, but only to those who buy from franchised dealerships.
              </span>
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              <span style="font-size:17px;line-height:25px">
               <span style="font-weight:700;font-size:inherit;font-family:arial,sans-serif">
                Some Tesla owners complain that repairing or fixing problems with their cars can be an ordeal.
               </span>
               It has far fewer service centers in the U.S. than more established automakers. And while Tesla technicians make home visits for minor repairs, only the service centers can handle some larger problems.
              </span>
             </li>
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            <h3 class="css-132hdgt e8bxl341" style="color:#000;font:700 16px/24px arial,sans-serif;margin:8px 0 25px 0;letter-spacing:.2px">
             THE SPEED READ
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              Deals
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            <ul class="css-27qc8p e1darl2c0" style="color:#000;font:20px georgia,serif;text-align:left;padding-left:50px;list-style-type:square;margin-bottom:10px">
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Kellogg said it would
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                split into three public companies
               </a>
               by spinning off its North American cereal and plant-based businesses. (Reuters)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                JetBlue raised its offer for the budget airline Spirit
               </a>
               , as it dukes it out with Frontier. (WSJ)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               The food giant
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Mondelez is buying Clif Bar
               </a>
               for $3 billion. (CNN)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               “Why
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                a $33 Billion SPAC Deal
               </a>
               Couldn’t Pay Its Bankers” (Bloomberg Opinion)
              </span>
             </li>
            </ul>
           </td>
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              Policy
             </span>
            </p>
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       <div style="margin:0 auto;max-width:600px;width:100%">
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            <ul class="css-27qc8p e1darl2c0" style="color:#000;font:20px georgia,serif;text-align:left;padding-left:50px;list-style-type:square;margin-bottom:10px">
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Medicare
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                could have saved as much as $3.6 billion
               </a>
               by buying certain drugs from a Mark Cuban-backed pharmacy, researchers found. (WSJ)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Semiconductor companies told Congress
               </a>
               they will take their manufacturing elsewhere if the government does not increase funding for plants in the U.S. (NYT)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Goldman Sachs raised its projected likelihood of a recession
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                to 30 percent from 15 percent
               </a>
               . (Reuters)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               A nationwide train strike in England brought it to a standstill,
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                exposing economic unease
               </a>
               . (NYT)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               “
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                How Elites Misread Public Opinion
               </a>
               ” (Politico)
              </span>
             </li>
            </ul>
           </td>
          </tr>
         </tbody>
        </table>
       </div>
       <div style="margin:0 auto;max-width:600px;width:100%">
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              Best of the rest
             </span>
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            <ul class="css-27qc8p e1darl2c0" style="color:#000;font:20px georgia,serif;text-align:left;padding-left:50px;list-style-type:square;margin-bottom:10px">
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Disney’s C.E.O., Bob Chapek, is
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                struggling to contain the fallout
               </a>
               from the company’s response to Florida’s “Don’t Say Gay” legislation. (FT)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               China’s once hot, hot housing market
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                has cooled
               </a>
               . (NYT)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               Jay-Z’s free Bitcoin lessons for residents of the
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                Brooklyn housing project where he grew up
               </a>
               are running into skepticism. (Guardian)
              </span>
             </li>
             <li class="css-11scvta e1y8brq21" style="line-height:27.5px;margin:0 0 10px 0">
              <span style="font-size:17px;line-height:25px">
               An anonymous bidder paid
               <a class="css-5nb5nb et1n85g0" style="color:#286ed0;-webkit-text-decoration:underline;text-decoration:underline;font-family:inherit;font-size:inherit">
                $19 million for a private lunch with Warren Buffett
               </a>
               , four times the winning bid in a previous charity auction. (CNN)
              </span>
             </li>
            </ul>
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