The Wall Street Journal - 12.03.2020

More than ever, the fate of the movie business has become dependent on its prospects on- line and internationally. While theatrical ticket sales plateau and DVD sales continue to plummet, strong growth in international streaming reve- nues powered global entertain- ment spending past $100 billion for the first time in 2019, according to data released by the Motion Picture Association. The international digital en-

business. Analysts had expressed dis- appointment in recent months that Mr. Bellemare’s promised profit improvements and debt reduction had been delayed. The train divestiture is ex- pected to reduce Bombardier’s annual revenue, which stood at $15.8 billion in 2019, by more than 50%. Its employee count is ex- pected to shrink by more than 70%to18,000. Bombardier will be left with a portfolio of business jets, the Challenger, Learjet and Global brands, which face headwinds at a time air travel is being curtailed amid the spreading coronavirus pandemic. Bombardier’s stock has dropped sharply since it announced its agreement with Alstom on March 17. The stock closed Wednesday, down more than 50% from its closing price the day after the train sale was announced last month. The slide reflects investor concerns about a potential downturn in the business-jet industry and the lengthy regu- latory approval process Bom- bardier faces for the Alstom acquisition.

company announced its fourth- quarter earnings for 2019, it had added 8.3 million subscribers in overseas markets, while domestic subscriptions fell short of expectations for the third straight quarter. At the time, Netflix said nearly two-thirds of its 167 million subscribers world-wide are from outside the U.S., where it had 60.4 million customers. More rivals are aiming to compete with Netflix, as AT&TInc. andComcastCorp. Please turn to page B4

tertainment market—including digital rentals or purchases of television and movies, plus money spent on subscription streaming services—jumped 29% to $28.2 billion from $21.9 billion in 2018. Last year, spending on digital entertain- ment in the U.S. grew by 18% to $20.5 billion. Netflix Inc., the world’s leading streaming service, has experienced booming international business as domestic gains waver amid greater com- petition. In January, when the

BYR.T.WATSON

Digital Movie Revenue Surges

Past Flat Theatrical Box Office

BombardierInc. has ousted Chief Executive Alain Belle- mare in a surprise shake-up one month after the company announced the sale of its train division to France’s Alstom SA. The Montreal train and plane maker has appointed Eric Martel, former head of Hydro Quebec, to replace Mr. Bellemare, who was hired in 2017 to turn around the strug- gling company. Bombardier’s board ap- proved the decision to remove Mr. Bellemare at a meeting Wednesday. The company is controlled through multiple voting shares by Bombardier and Beaudoin family members who are de- scendants of its founder. Mr. Bellemare couldn’t be immediately reached for comment. He had promoted the planned sale of Bombardier’s train unit, one of its two core divisions, as a necessary step to significantly reduce the company’s $9.3 billion in long- term debt. Alstom has offered to pay as much as $6.72 billion in a mix of cash and stock for the

BYJACQUIEMCNISH

BUSINESS NEWS Neiman Marcus willl close all but a handful of its Last Call discount stores.B3

FINANCE Rent-a-bank lenders evade caps on interest rates, arousing consumer anger. B10

Boeing Co. took steps to preserve cash, as the coronavirus pandemic and delays in the recertification of its 737 MAX aircraft exact a mounting toll on the aerospace giant. The Chicago-based company said Wednesday that it would freeze hiring and nonessential travel, and place new limits on overtime. A person familiar with the company’s plans also said it would soon draw down the re- mainder of a $13.8 billion loan secured last month. Those steps are in response to challenges including what is estimated to be a nearly $20 billion bill related to the freeze in MAX production and com- pensation to customers of an aircraft that has been grounded since last March after two fatal crashes. “It’s critical for any company to preserve cash in challenging periods,” said Chief Executive David Calhoun and Chief Finan- cial Officer Greg Smith in a staff memo reviewed by The Wall Street Journal. Boeing’s shares ended down 18% at $189.08, valuing the company at $106.5 billion. The cost of credit insurance for Boe- ing debt soared by two-thirds from the previous day’s close, reflecting concerns about its cash position and widespread negative market sentiment. The MAX jet has been grounded since March 2019 fol- lowing the second of two crashes that together claimed 346 lives. Boeing halted production of the passenger jet in January. Its inability to deliver new MAX jets has pressured li- quidity and forced the company to take on additional debt. Boe- ing secured a $13.8 billion bank loan last month. Those plans don’t reflect any changes to Boeing’s forecast that the MAX will be ready to return to service by the middle of this year, the person said. Federal Aviation Administra- tion chief Steve Dickson told lawmakers in Washington on Wednesday that his agency has no specific deadline for allow- ing MAX jets back in the air. But increasingly he is linking that decision to bolstering public confidence once the fleet is ungrounded. “We have no choice,” he said in a recent speech to airport of- ficials. “If the public is not con- fident in their aviation system, they simply will not fly.” On Wednesday, Mr. Dickson Please turn to page B2

BYDOUGCAMERON

Boeing

Acts to

Save Cash

As MAX

Cost Soars

INSIDE

TECHNOLOGY: ACTIVIST SEEKS SLATE OF PICKS FOR EBAY BOARD B4

Sharp Stock Moves Mark Ends of Day

S&P2741.38g4.89% S&PFINg5.52% S&PITg4.70% DJ TRANSg4.63% WSJ$IDXÀ0.12% LIBOR3M 0.773 NIKKEI (Midday)18412.24g5.17% See more at WSJ.com/Markets

BUSINESS & FINANCE

Carl Icahn has doubled down on a fight to take control of Occidental Petroleum Corp., buying up more shares of the embattled oil-and-gas producer in recent days as its stock price plummets. The billionaire shareholder activist now owns almost 10% of Occidental, he said in an in- terview Wednesday. He held a roughly 2.5% stake as of the end of last year. For almost a year, Mr. Icahn

Bombardier Ousts

Chief Executive

In Surprise Move

OPENING AUCTION

CLOSING AUCTION

9:30

10 a.m.

11 a.m. 1 p.m.

2 p.m.

3 p.m.

4 p.m.

Noon

5%

10%

15%

20%

Thelasthalfhour ofthetradingday isthebusiest.

Assetsundermanagement forpassivestrategies* $8trillion

6

4

2

0 2008 ’10 ’15 ’20†

Tradinghasshiftedtotheendoftheday, inpartdrivenbytheriseof'passive' investmentsincluding index-trackingfunds.

Percentageofdaily stock-tradingvolume, byhalf-hourintervals

Sharp stock moves are punc- tuating the final minutes of the trading day, exacerbating what has already been one of the rockiest stretches of the past decade for financial markets. Major U.S. stock indexes peaked in mid-February and have since dropped at least 19%, with the Dow Jones Indus- trial Average entering a bear market, reflecting worries that the coronavirus epidemic will halt growth and eventually tip the economy into a recession. Trading toward the end of the session Wednesday was turbu- lent and selling in the last minutes of the day pushed the Dow into its bear market. As investors have fled stocks and rushed into haven assets like government bonds, sudden late-day moves in the stock market have been a staple, cre- ating climactic swoons—and surges—right before the 4 p.m.

closing bell. The Dow has swung an average of about 300 points in the last 30 minutes of trading over the past 10 sessions—including Tuesday’s rally of roughly 400 points to end the day. That is roughly triple the average swing recorded between 12:30 p.m. and 1 p.m., when activity hovers near its lows of the day, for the same period. The volatility has at times puzzled traders as they navi- gate a tumultuous market. Some attribute the heightened activity to a yearslong trend in which more trading is taking place at the end of the day, including at the closing auction— or the final 4 p.m. trade—which determines end-of-day prices

for thousands of stocks. From the start of this year through Friday, about 23% of trading volume in the 3,000 largest stocks by market value has taken place after 3:30 p.m., according to data from Pragma LLC. That compares with about 4% from 12:30 p.m. to 1 p.m. Closing auctions have grown in volume over the past decade, in part because of the rising popularity of index funds, whose managers passively track indexes like the S&P 500, rather

than actively seeking to pick stocks. These types of investments often use closing prices as a benchmark, leading their Please turn to page B11

BYGUNJANBANERJI

Schlumberger Ltd., and a former BlackRock Inc. portfolio manager to its board. It had also set up a hedge to protect against a downturn in oil prices, though not one as fierce as the one that is occur- ring now. Other large shareholders of the Houston company—includ- ingT. Rowe Price Groupand Dodge & Cox, which together hold roughly 14% of its shares —are also frustrated with management, according to people Please turn to page B11

has done, and it cost the shareholders $47 billion.” He is seeking to replace Oc- cidental’s entire board, which includes Ms. Hollub, at its annual meeting this spring. Occidental had no comment Wednesday evening. Ms. Hollub said on an earnings call last month that Chair- man Gene Batchelder would step down and that another di- rector wouldn’t stand for re- election. The company had previously added Andrew Gould, the former CEO of

was struck, hurt by doubts about the transaction and more recently the plunge in the stock and oil markets. Ac- cording to Mr. Icahn’s calcula- tions, taking into account ex- tra stock issued to pay for the deal, shareholders have lost even more. “One thing I’ve learned in life is not to let people manage your affairs who are delusional enough to think they could outbid Chevron and outsmart Buffett,” Mr. Icahn said. “And yet this is just what the board

has been criticizing Occiden- tal’s $38 billion acquisition of Anadarko Petroleum Corp. and campaigning for the ouster of Chief Executive Vicki Hollub, the main architect of the deal. Occidental outbid its much- larger rivalChevronCorp., re- lying on $10 billion of pricey financing from another octoge- narian billionaire investor, Warren Buffett. Occidental’s market value has shrunk to less than $11 billion from more than $46 billion just before the deal

BYCARALOMBARDO

Icahn Increases Stake in Occidental to 10%

MGM postponed the release of its James Bond movie from April to November on coronavirus fears.

LISI NIESNER/REUTERS

Market rout adds to pressure on banks...................................... B11

*Includes exchange-traded and mutual funds †Through January Note: Data based on top 3,000 stocks by market capitalization, from Jan. 1 to March 6 Source: Pragma (volume); Morningstar Direct (assets under management)

Assetsundermanagement forpassivestrategies* $8trillion

6

4

2

0 2008 ’10 ’15 ’20†

Tradinghasshiftedtotheendoftheday,inpart drivenbytheriseof‘passive’investments includingindex-trackingfunds.

The Wall Street Journal - 12.03.2020

BUSINESS & FINANCE

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