DealBook Briefing: Where Is Tesla’s Money?

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DealBook Briefing: Where Is Tesla’s Money?Good Thursday morning. (Was this email forwarded to you? Sign up here.)

Everyone wants to know where Tesla’s cash will come from

Elon Musk’s declaration that he’s (potentially) taking his electric carmaker off the public markets has everyone’s attention, from Wall Street to regulators. The big question: How will he pay for it?

Bankers at Goldman Sachs, Citigroup and elsewhere on Wall Street are feverishly trying to figure out how to make the plan work — and secure an advisory role — despite being in the dark on Mr. Musk’s efforts.

Their current thinking, according to the NYT: A full buyout is probably a nonstarter, but buying out enough shareholders to let the company delist its stock is more possible, and could be worth up to $20 billion.

Meanwhile, the S.E.C. is investigating whether Mr. Musk just violated securities laws. It’s the last two words of his tweet that count here: “funding secured.” If they’re not entirely true, he’s probably in trouble.

Investors are as likely as the regulator to push Mr. Musk to put up or shut up, and to tell them exactly where that funding was secured. (SoftBank turned him down, for starters.)

Short sellers of Tesla shares, who lost more than $1 billion after Mr. Musk’s tweets, are holding firm. They think a deal won’t happen, in part because they believe no one will want to back it.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Jamie Condliffe in London.

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Uber confronts a growth-stunting precedent

The New York City Council has passed legislation that pauses licensing of most new ride-hailing cars for a year, and sets pay rules for drivers. Mayor Bill de Blasio hopes it will “stop the influx of cars contributing to the congestion grinding our streets to a halt.”

Uber is warning of higher prices and wait times. But the company, and its competitor Lyft, are probably most worried about the risk that other governments will follow suit.

With an Uber I.P.O. on the cards for next year, anything that restricts explosive growth could cost them dearly.

Trump’s company gets a tax gift

One of the most-debated parts of last year’s tax overhaul was the treatment of so-called pass-through entities, businesses whose profits are treated as individual income for their owners.

Now, we have details about how it will work, and business groups are getting most of what they wanted. The Trump Organization may be an especially big winner, as Jim Tankersley of the NYT explains:

The regulation could also be a win for the president himself, because of how the regulation defines businesses that rely primarily on the “reputation or skill” of their owners to earn money. Those businesses are excluded from taking the deduction, but the regulation defines them narrowly, in a way that appears to allow the companies of the Trump Organization to qualify for the tax break at least in part.

America hits Russia and China, but ignores their budding alliance

The Trump administration will impose new sanctions against Russia, in response to the attempted assassination of a former spy in England. They block American companies from exporting any products with a national security purpose, from integrated circuits to gas turbines.

Meanwhile, the U.S.-China trade war continues to simmer. The latest: China will impose 25 percent tariffs on $16 billion of U.S. goods on Aug. 23, matching new American ones.

But Jamil Anderlini of the FT warns that America risks cementing a special relationship between Moscow and Beijing, when trying to split them might serve U.S. interests better:

Their tightening embrace is as much about antipathy towards the U.S. and the U.S.-dominated global order as their rapidly growing common interests. This presents an opportunity for Washington to drive a wedge between them before their alliance becomes unbreakable.

It’s hard being Steven Mnuchin

Bloomberg Businessweek has an in-depth profile of the Treasury secretary, describing his difficulties in government. Mr. Mnuchin, claims the article, has seriously struggled to protect his turf at the Treasury from rivals like Commerce Secretary Wilbur Ross, the trade representative Bob Lighthizer and the trade adviser Peter Navarro. Talks with Beijing show the problem:

China asked the U.S. for one person with whom to negotiate economic matters. Trump designated Mnuchin to be the point person, which, according to multiple sources, was fine with Chinese officials, who preferred dealing with the moderate Treasury secretary. But in May, when Mnuchin traveled to Beijing for negotiations, Trump also dispatched Ross, Lighthizer, Navarro, and Kudlow to accompany him. (A Treasury spokesman says Mnuchin asked Ross and Lighthizer to join.) Predictably, there were tensions within the U.S. delegation. A White House official says Mnuchin and Navarro argued repeatedly, including in rooms where the Chinese could hear them.

But Mr. Mnuchin keeps his head down, and avoids publicizing his disagreements with President Trump.

“Sometimes he’ll agree with me, and sometimes he won’t agree with me,” Mr. Mnuchin told the magazine. “He’s the president of the United States. And he got here because he understands lots of issues.”

Big health care deals face headwinds

Both CVS and Cigna hoped that huge takeovers could future-proof their businesses. CVS struck a deal to buy Aetna, a health insurer, and Cigna went after Express Scripts, a pharmacy benefit manager. But their efforts to reshape health care are hitting serious roadblocks:

■ The American Medical Association opposed the CVS deal, arguing that it might reduce competition and raise drug prices.

Carl Icahn spoke out against the Cigna deal, saying that a main factor behind the transaction — Amazon moving into health care — is a reason not to do it.

Both deals may be too far gone to stop. But it’s all a reminder that mega-mergers can’t solve everything.

Mixed reactions to Magic Leap’s next step

The world’s most-hyped augmented-reality start-up, Magic Leap, has raised over $2.3 billion over seven years. Much of that has come from very big names: JPMorgan Chase, Morgan Stanley, Andreessen Horowitz, Alphabet, Alibaba. Expectations are huge.

But its first consumer headset, the $2,300 Magic Leap One, has received mixed reviews. From a positive take by Joanna Stern of the WSJ:

The Lightwear glasses make digital objects sometimes look so real that they play tricks on your mind. I certainly didn’t think the flying robot I placed in the corner was genuine, yet the steam coming out of his jets looked like it was from a tea kettle. During one demo, I picked up an actual chess piece just to confirm it wasn’t another illusion.

And a more negative view from Adi Robertson of the Verge:

It didn’t feel categorically different from something like HoloLens — which was released two years ago, and has a second generation on the horizon. I’m not convinced Magic Leap’s photonics chip is practically that different from other mixed reality waveguides, or that Magic Leap is doing something other companies couldn’t replicate.

Revolving door

Shari Redstone is reportedly looking to replace Les Moonves as CBS’s C.E.O. (NBC News)

Anders Colding Friis will step down as Pandora’s C.E.O. after the jewelry maker cut its profit forecast. (Bloomberg)

The speed read

Deals

■ Albertsons called off its takeover of Rite Aid after shareholder opposition. (NYT)

■ The drug maker Mylan may sell some businesses — or the lot — as it struggles with falling treatment prices. (Bloomberg)

■ Goldman Sachs’s trading arm is chasing a tanker of liquid natural gas. (WSJ)

■ Manbang Group, a Chinese truck-hailing app, is reportedly hoping to raise money at a $10 billion valuation. (WSJ)

Politics and policy

■ Representative Chris Collins, Republican of New York, was charged yesterday with insider trading. (NYT)

■ Missouri voters rejected a law limiting union powers. (NYT)

■ Saudi Arabia is ordering fund managers to sell Canadian assets, and its citizens to leave Canada, to punish the country for supporting rights activists. (WSJ)

■ A co-founder of Oculus, Palmer Luckey, makes a case for Silicon Valley to work with the military. (WaPo)

Tech

■ Tech companies may have banned Infowars, but its smartphone apps are soaring in popularity. Plus: How misinformation can cause violence, and why Twitter might yet regret letting Infowars stay.

■ Why are some things on Amazon so cheap? Because they’re stolen. (Information)

■ Online stock-trading platforms have glaring security holes. (Wired)

■ How Google is developing its censored search engine for China. (Intercept)

Best of the rest

■ You may think you have a choice of auditors. You don’t. (FT)

■ The asset manager GAM is losing investor support. (FT)

■ America’s national deficit grew by $75 billion, about 20 percent, over the past year. (Axios)

■ How new moms who run start-ups make their lives work. (WSJ)

You can find live updates throughout the day at nytimes.com/dealbook.

We’d love your feedback. Please email thoughts and suggestions to bizday@nytimes.com.

Original Article

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