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Judge Deals AT&T a Setback: DealBook Briefing

From left, Randall Stephenson, AT&T’s chief executive, David McAtee, AT&T’s general counsel, and Daniel Petrocelli, the lead trial lawyer for both Time Warner and AT&T.Credit...Shannon Stapleton/Reuters

Good Tuesday. Here’s what we’re watching:

• Judge deals AT&T a setback in fight with Justice Department

• Billionaire investor Steven A. Cohen lost a bid to seal a sex discrimination lawsuit against his investment firm.

• Corporate leaders are discussing whether the finance industry can help regulate gun sales.

• Walmart’s fourth-quarter earnings missed expectations.

• Facebook is still facing blowback for an executive’s tweets about Russian electoral meddling.

• Qualcomm’s revised bid for NXP raises questions about Broadcom’s pursuit of the company.

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The telecom company had asked for internal communications between the White House and the Justice Department regarding AT&T’s $85.4 billion acquisition of Time Warner.

On Tuesday, a judge ruled that AT&T was not entitled to those documents, saying the companies had not “made a credible showing that they have been especially singled out.”

AT&T has argued that the Justice Department has unfairly singled out its proposed merger with Time Warner partly to stay in favor with the White House. President Trump has been a vocal critic of Time Warner’s news network, CNN, and said before the election that the deal should be stopped.

The bigger picture

Cecilia Kang of the NYT:

The decision puts a crimp in AT&T’s defense for its $85 billion proposed merger with Time Warner. And it is a big win for the Justice Department, which would like to avoid attention on the role of politics in its decision to stop the deal. The merger would transform the media landscape by combining a television and movie giant with one of the nation’s biggest media distributors.

The trial is set to begin on March 19.

For the first time, and after much protest, public companies must report their employees’ median pay and compare it with that of the chief executive. The Dodd-Frank Act, passed nearly eight years ago, required the disclosure, and firms are now disclosing it in proxy reports for 2017.

Companies, lobbyists and some compensation experts spent years criticizing the rule, arguing that it revealed little about pay trends and was of little use to shareholders. The Institute for Policy Studies, a liberal-leaning think tank, on Tuesday noted that Honeywell was the first United States corporation to release the ratio. The company’s C.E.O., Darius Adamczyk, had a total pay package of $16.8 million in 2017, which was 333 times the pay of the median employee.

The rule allows certain companies to exclude some foreign employees from the calculation of the ratio. Honeywell excluded workers from several countries where pay is most likely lower than in the United States. “The 333:1 ratio that Honeywell is reporting most likely would be even wider if Honeywell took all its workers into account,” the Institute said.

— Peter Eavis

A federal judge in Manhattan, in a brief order, rejected a motion filed by lawyers for Mr. Cohen and his firm, Point72 Asset Management, to temporarily seal a complaint filed last week by Lauren Bonner, an employee of the firm. Mr. Cohen’s lawyer had asked the judge to seal the lawsuit, which alleges the firm underpays female employees and fosters a hostile workplace for women, pending the resolution of another motion to push the matter into arbitration.

Judge Analisa Torres of Federal District Court in Manhattan said the request to seal the entire complaint was “not narrowly tailored” and was inconsistent with the “presumption of public access” to court records.

Lawyers for Mr. Cohen had sought to seal the order because it contained details of other employees’ compensation packages. The lawsuit also detailed a testosterone-fueled “boys’ club” atmosphere in which men commented frequently on women’s bodies and belittled their abilities.

— Matthew Goldstein

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Credit...Joshua Lott/Getty Images

Andrew writes:

My latest column, on how banks and credit card companies could restrict support of gun sales in the wake of last week’s school shooting, has stirred up chatter in the business world. I’ve heard from people throughout corporate America overnight since it was published. Many said privately that they want to look at what they can do.

More from the column:

There is precedent for credit card issuers to ban the purchase of completely legal products. Just this month, JPMorgan Chase, Citigroup and Bank of America banned the use of their cards to buy Bitcoin and other cryptocurrencies.

To be clear: Those three banks won’t let you use your credit card to buy Bitcoin, but they will happily let you use it to buy an AR-15-style semiautomatic rifle — the same kind of gun used in mass shootings in Parkland; Newtown, Conn.; San Bernardino, Calif.; Las Vegas; and Sutherland Springs, Tex.

Elsewhere in gun regulation: President Trump expressed some openness to tightening background checks.

The United States Treasury Department is flooding the market with debt. On Tuesday, the government sold $179 billion worth of debt.

Bloomberg reports:

“Concerns about the U.S. borrowing cap had forced the Treasury to trim the total amount of bills it had outstanding, but that’s no longer a problem and the government is now busy ramping up issuance. Financing estimates from January show that the Treasury expects to issue $441 billion in net marketable debt in the current quarter and the bulk of that is likely to be in the short-term market.”

That’s been a regular question since the tax overhaul was signed into law last year. Analysts at Goldman Sachs in a note over the weekend shed some light on the answer.

• “Companies have pointed to a modest increase in investment as one destination for the incremental cash flow from tax reform. Consensus estimates for 2018 capex have increased by $17 billion (3 percent) since the passage of tax reform.”

• Last month 39 S.&P. 500 companies increased their dividend, while for the first since 2012 no companies cut their payments.

• Buying back shares remains a priority of companies, Goldman writes. Over the past 2 ½ months, S.&P. 500 firms have announced $171 billion of buybacks, $67 billion of which has come this year, a 22% increase from the same period in 2017.

In the same note, Goldman also took a closer look at this earnings season.

By many measures, corporate earnings are the strongest they have been in the past decade. Goldman points out:

• Companies in the S.&P. 500 are set to report that profit grew 15 percent last quarter. That’s the fastest pace since 2011.

• The percentage of companies beating estimates is at its highest level since 2010. The percentage beating sales forecast is at its highest since 2004.

But the stock reaction to S.&P. 500 companies either beating or missing expectations “has been muted relative to history.”

The reason? Investors are more focused on tax reform and earnings forecasts for 2018, Goldman writes. Analysts have raised their 2018 earnings estimates for companies in the S.&P. 500 by 7 percent so far this year.

Some context

Higher profit margins because of the lower corporate tax rate are driving much of the increase in this year’s earnings forecast. A point that becomes clearer by looking at 2018 sales estimates. Analysts have increased their revenue forecasts by only one percentage point and much of that increase comes from higher oil prices boosting forecasts for energy companies.

Remember when the company said that it was changing its name from Long Island Iced Tea and shift its corporate focus to virtual currencies?

Well, new developments have come up:

• Long Blockchain has named a new C.E.O., Shamyl Malik.

• It plans to spin off its beverage division into the publicly traded Long Island Brand Beverages by June 30, and the company’s last C.E.O., Philip Thomas, will be on the new business’ board.

• And last week, Nasdaq informed Long Blockchain that it planned to delist the company because its stock price had traded too low. Long Blockchain’s market cap as of this morning was $31.9 million, below Nasdaq’s threshold, after shares in the company tumbled amid the great crypto crash of early 2018. The company is appealing.

— Michael de la Merced

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Credit...Roger Kisby for The New York Times

Here’s why the company’s shares are down 10percent — their biggest fall since 2015 — after its fourth-quarter earnings report:

• The company earned $1.33 a share, while analysts had expected $1.37.

• Operating income fell 28 percent, to $4.5 billion, thanks to charges tied to the closing of Sam’s Club stores.

• E-commerce sales rose 23 percent during the quarter, a slower pace than in previous quarters.

• Full-year sales growth expectations went down by close to half, to 1.5 percent to 2 percent, in part because of Sam’s Club and a curb on the sales of tobacco products.

What the company’s chief, Doug McMillon, said:

“We’re making real progress putting our unique assets to work to serve customers in all the ways they want to shop.”

— Michael de la Merced

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Facebook has provided some information about pages linked to the Russian effort to influence the 2016 election, but it has not given all the information it has at its disposal.Credit...Eric Thayer for The New York Times

Days after Rob Goldman, its vice president of advertising, tried to clear up misconceptions about the company’s role in the 2016 presidential election, Facebook still finds itself in hot water. President Trump took the tweets as proof that Russia didn’t try to help him win, while critics said they contradicted Robert Mueller’s indictment.

Mr. Goldman apologized in an internal Facebook post. But his tweets — which contained inaccuracies — suggested that Facebook executives still don’t understand how central the company was to Russia’s misinformation campaign, according to Nicholas Thomson of Wired.

More from Kevin Roose of the NYT:

In real-world terms, a part of Facebook still sees itself as the bank that got robbed, rather than the architect who designed a bank with no safes, and no alarms or locks on the doors, and then acted surprised when burglars struck.

Josh Hendler, the former head of tech for the Democratic National Committee, told the WSJ, “It was an almost perfect example of Silicon Valley overconfidence and lack of sophistication when it comes to politics.”

The tech flyaround

• One sign of how highly Google and Facebook value A.I.: The researchers sit near their C.E.O.s. (NYT)

• Is Google’s ad blocker for the Chrome browser good for the web? (NYT)

• Washington’s mayor, Muriel Bowser, toured San Francisco to promote her city’s tech bona fides. (WaPo)

• And Washington has granted Elon Musk’s Boring Company permission to do a little digging. (WaPo)

• Snapchat and Nike’s partnership during the N.B.A. All-Star Weekend highlighted the social network’s future in e-commerce. (Recode)

• Sony is planning an A.I.-based ride-hailing system for Tokyo. (Reuters)

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Credit...Graham Walzer / The New York Times

With Qualcomm raising its offer for NXP to $127.50 a share from $110, it may have finally found a way to beat back its persistent and unwanted suitor. Broadcom has said a higher NXP bid would be a deal-breaker (as of this morning, however, Michael hears that it isn’t clear whether it will walk away).

The new offer may have come at an opportune time: I.S.S., the influential proxy adviser, recommended that Qualcomm shareholders vote for four of Broadcom’s six board nominees. (But that too falls short of Broadcom’s goals. The company’s C.E.O., Hock Tan, has said he would walk away if the entire slate wasn’t elected.)

A question: Elliott Management, which campaigned against the $110-a-share offer, is on board with the new one. But will Qualcomm’s shareholders accept paying more for NXP?

It and other hedge funds stand to be big winners from Qualcomm’s raised offer.

Bloomberg points out that Elliott, Soroban Capital Partners, Pentwater Capital Management and Farallon Capital Management own 47 percent of NXP’s shares.

The deals flyaround

• Albertsons plans to buy Rite Aid to better compete with Amazon, Walmart and Walgreens. (Albertsons)

• BHP Billiton’s C.E.O. will meet with Elliott Management to discuss changing its corporate strategy. (Bloomberg)

• SoftBank wants a seat on Swiss Re’s board as part of any minority investment. But Patrick Jenkins of the FT ponders whether Masa Son can become a digital Warren Buffett.

• The marketing company Engine Shop has bought T Burns Sports Group, the consultancy founded by Terrence Burns, who worked on eight winning Olympic and World Cup campaigns, including Pyeongchang’s. (Sports Pro Media)

• How Spotify’s privately traded shares could influence its direct listing. (WSJ)

• The head of Arcadia, which owns Topshop, denied being in talks to sell it to a Chinese textile giant. (FT)

• ValueAct has bought 5.4 percent of Merlin Entertainments, which owns Madame Tussauds, as U.S. activists continue to seek targets in Europe. (FT)

• Temenos of Switzerland is near a deal to buy Fidessa, a British maker of financial software, for more than £1.3 billion. (FT)

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Credit...Carolyn Kaster/Associated Press

• President Trump has endorsed the Senate campaign of Mitt Romney, whom he once called “one of the dumbest and worst candidates in the history of Republican politics.”

• Public support for the tax overhaul is rising, according to a survey by the NYT and SurveyMonkey. It has also made BlackRock more optimistic about stock prices. Republicans are divided over whether the Office Management and Budget should get involved in tax rules.

• The recent budget deal takes a step toward a federal rescue for as many as 200 multi-employer pension plans. (NYT)

• The Office of Financial Research, Washington’s financial storm forecaster, is foundering. (WSJ)

• How Michael Cohen, Mr. Trump’s longtime personal lawyer, used intimidation, hush money and a top tabloid publisher to protect his client. (NYT)

• The Trump administration is continuing to dismantle Obama-era L.G.B.T. policies. (Politico)

• The California assemblywoman Cristina Garcia, a leading voice for #MeToo, has been accused of sexually harassing staffers. (WaPo)

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Credit...Marvel/Disney

An estimated $201.7 million in three-day ticket sales in the U.S., and $235 million in four-day sales. The fifth-biggest U.S. box office opening ever, not adjusted for inflation. An estimated $387 million in sales worldwide. (Oh, and a soundtrack that’s leading Billboard’s chart.)

Has Disney’s latest blockbuster erased the notion that there aren’t big audiences for movies with largely black casts? More from Brooks Barnes of the NYT:

Richard Gelfond, chief executive of IMAX, the large-format movie exhibitor, which played “Black Panther” in more than 60 countries, championed Disney for delivering “content that is compelling on its face but also bridges the gap between different cultures, and ultimately is a reflection of the shared values of moviegoers all over the world.”

Random musings (spoilers ahead!): What effect would Wakanda opening itself up have for global trade balances? What would happen to mining stocks? How would its immigration policies work if the country’s ruler says, “In times of crisis, the wise build bridges?” Does Wakanda have its own blockchain technology?

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The police in Phuket, Thailand, said attackers held a young Russian man in his apartment until he transferred about $100,000 worth of Bitcoin to their control.Credit...Chalong Police station

Investors have been held hostage until they paid Bitcoin or Ether ransoms worth millions of dollars, as criminals increasingly target at the crypto-rich. The worst part: There’s no way to halt or reverse a Bitcoin transfer.

Solutions discussed at a recent conference included hiring security, setting up “duress wallets” to fool hostage takers, and keeping Bitcoin fortunes secret.

Elsewhere in virtual currencies: China’s crackdown on crypto hasn’t dented investor enthusiasm there. Prime Shipping Foundation, which struck the first freight deal settled in Bitcoin, plans an initial coin offering And retail investors would suffer most if the digital money markets collapsed, according to S. & P. Global Ratings.

Where Bitcoin is today: About $11,490, according to CoinMarketCap.

Critics’ corner

• Mark Carney of the Bank of England says Bitcoin has failed as a currency. (Reuters)

• Paul Singer of Elliott Management called virtual currencies “one of the most brilliant scams in history.” (Business Insider)

• Sarah Tavel of Benchmark thinks digital money has a bright future but many I.C.O.s are “complete scams.” (Recode)

• John Flint, HSBC’s incoming C.E.O., is a virtual currency skeptic too. (Bloomberg)

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Credit...Kai Pfaffenbach/Reuters

• Deutsche Bank is cutting 250 to 500 investment banking jobs, unnamed sources say. (Bloomberg)

Bernie Sinniah, Citibank’s global head of foreign exchange solutions, is stepping down after 38 years at the bank. He’ll be replaced by Sam Hewson. (FT)

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Credit...Mike Cohen for The New York Times

“In this case, we were not talking about politics. We were talking about the basic values of the country.”

— Ken Frazier, the C.E.O. of Merck, on why he spoke out against Mr. Trump’s unwillingness to condemn the white nationalist attack in Charlottesville, Va.

• HSBC’s full-year results missed expectations, partly because of the collapses of Steinhoff International in South Africa and Carillion in Britain. (WSJ)

• Private equity bosses face an uncomfortable choice between becoming corporations, potentially bolstering their valuations, and staying as partnerships to keep taxes lower. (FT)

• WeWork’s C.E.O. doesn’t just want to lease communal offices. He wants to transform how people work, live and play. (NYT)

• Britain’s prime minister, Theresa May, is considering a contingency plan that would involve holding back billions of pounds in Brexit payments if the E.U. does not give Britain the trade deal it wants, unnamed sources say. (Bloomberg)

• The European Central Bank has asked Latvia to freeze payments to its third-largest lender, ABLV Bank, after the U.S. Treasury Department said it may label the firm a money launderer for North Korea. (Bloomberg)

• Fox News is planning a stand-alone subscription service, available without a cable package. (NYT)

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

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