Business

➚ BUY: Breakups. The US Justice Department sued today to break up Live Nation. And DuPont is splitting itself into three parts for the second time in five years, following General Electric, Kellogg, and other titans of the conglomerate age in slimming down.

➘ SELL: Unions. The failure of an organizing vote at a Mercedes plant in Alabama points to trouble ahead as unions look to press their recent success in the South, historically hostile ground. Red states are pushing back.

Nvidia profits rise 628%... Goldman Sachs plans Saudi HQ… Gorman gets out of the way… Regional bank runs were worse than we thought… A $444 million fat-finger trade costs Citi… OpenAI can read The Wall Street Journal now…

777, the investment firm and sports buyer now fending off angry creditors, has sold one of its US insurance businesses to hedge fund Knighthead Capital, people familiar with the transaction said, raising some cash as it tries to avoid a bankruptcy filing.

The company previously announced the sale of the business, Merit Life, which offers retirement policies in the US, to an unnamed buyer in September after a process that drew bidders including Josh Harris’ 26North and hedge fund Hildene Capital, the people said. That deal fell through as 777’s problems mounted, including an investigation by the Justice Department and a slew of creditor lawsuits. Knighthead, best known recently for engineering Hertz’s emergence from bankruptcy and its subsequent, disastrous bet on electric vehicles, has agreed to pay about $25 million.

There are two kinds of money managers these days: those with an insurance arm, and those that want one. Investment firms have been racing to replicate Apollo’s money-spinning annuities business, which sells retirement and life insurance policies that will pay out decades from now and invests the cash into its own deals.

KKR, Carlyle, Brookfield, Blackstone, Ares, Sixth Street, Blue Owl, and Golden Gate all own, or partly own, life insurers. BlackRock is currently looking for a minority stake in one, people familiar with the matter said. As of last summer, US private equity firms owned 137 insurers and controlled one in every $15 paid by policyholders, according to the industry’s own tally.

The result has been a drastic shift on Wall Street, with a shadow financial system of insurance premiums funding corporate buyouts and credit card portfolios. 777 pushed that model beyond its factory settings, putting policyholders’ money into European sports teams, payday lending, and other risky ventures, and its financial distress — it hired bankruptcy advisers earlier this month — has focused attention from rivals and regulators on the private-equity industry’s insurance gold rush.

Knighthead and 777 did not respond to requests for comment. 26North and Hildene declined to comment.

Google wrote the US government a cashier’s check in an effort to get its closely watched advertising antitrust trial heard by a judge, rather than a jury that can award damages.

Matt Stoller from the antitrust hardline think tank American Economic Liberties Project, called it “the weirdest attempted payoff ever.” The government’s decision to make itself a plaintiff in the case is also pretty weird.

The Justice Department alleges that Google’s dominance in online advertising raised prices for advertisers including the US Army, Census Bureau, and other federal agencies. Damages cases can be heard by juries, and the DOJ likes its odds in front of a panel of ordinary citizens.

By paying the government’s alleged damages — the amount is redacted, but I’m told it’s less than $1 million on total government ad buys of around $100 million — Google hopes to moot that argument. “Particularly complex cases should be resolved by judges rather than juries,” the company argued.

Abdulla bin Touq al Marri is the United Arab Emirates’ minister of economy.

The Emirati delegation took over a floor at the St. Regis in midtown Manhattan this week, pitching Western investors on setting up shop in the Gulf nation. It was al Marri’s third trip to the US since becoming the UAE’s economy minister in 2020 and he said the sell is getting easier. “I used to come and convince. Now everyone understands the UAE, and I don’t need to convince.”

He wouldn’t be drawn on cooling trade with Israel or the Emirates’ economic competition with Saudi Arabia. He stressed the UAE’s growing trade agenda and surprised me with an answer about the AI race.

Liz Hoffman: Has the geopolitical situation in the Middle East changed your pitch, or changed how Western investors are thinking about the region?

Abdulla bin Touq al Marri: When we pitch the UAE, we pitch openness, we pitch stability, we pitch visionary leadership. Stability is a key part, given that we are in the eye of the storm. It has been stable for the last 50 years, and will be stable for the next 200 years.

The whole supply chain globally needs to be redesigned and reengineered, and the UAE can play a big role. We are at the center of the world. You wake up at 8am, it’s midday in Japan, and when it’s midday in UAE, it’s 8am in London, and at 5pm it’s early morning here in New York.

The sense in the West is that Gulf money is now coming with strings attached that it didn’t used to have, that you want to see investments in-country and not just financial returns.

Yes. Any investment has to have a return but also money coming back. We have a target to diversify our economy away from oil and gas, and the returns as well of these investments should be equivalent to the returns of oil and gas.

You’re trying to make the Emirates a global home for AI. What’s your advantage?

It’s language. You can access all North Africa, the Arabic speaking countries. So how do you take down the barrier of AI not just focusing on one language? That’s the edge.

Waiting for the upgrade: Nvidia’s ability to keep selling its current model of AI semiconductors while teasing its powerful next-gen model isn’t just key to the company’s fortunes. Nvidia’s chips underpin billions of dollars of borrowing by companies in the AI supply chain. Loans to CoreWeave and Lambda Labs use their stockpiles of Nvidia chips, as well as data-center contracts with giants like Microsoft, as collateral, which means any drop-off in sales or manufacturing hiccups that ding their value could put borrowers in a tight spot.

CEO Jensen Huang said yesterday, when Nvidia announced a 628% spike in profits, that demand for the current chips outstrips supply. But rumblings that Amazon might slow its purchases or that the new chips, code-named Blackwell, might be slower in arriving, are on investors’ minds.

Cry for Argentina: New York is trying to make it harder for hedge funds to score huge paydays off the sovereign bonds of shaky governments. A bill working its way through the state legislature would ban the practice — tested by Elliott in its famous naval tussle with Argentina and since perfected by others — of buying up defaulted bonds and suing to enforce a judgment. About half of the world’s sovereign bonds, some $800 billion, are issued in New York. Egypt, Pakistan, and Sri Lanka are paying more than 60% of all government revenue on bond interest, and Ukraine is on default watch.

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