The focus of the Facebook IPO turned again to the wealth of founder Mark Zuckerberg. The issue is so much more important than the company itself, or its new investors, that Bloomberg reported Zuckerberg will be worth more than Steve Ballmer. Ballmer has spent decades laboring at the top, or near the top, of Microsoft (NASDAQ: MSFT), the old-world tech titan of the 1980 and 1990s. The people who have become really rich in the past year are the founders of LinkedIn (NYSE: LNKD), Groupon (NASDAQ: GRPN) and Zynga (NASDAQ: ZNGA). Zuckerberg is about to take his spot at the top of that pyramid. And Ballmer gets pushed down the list, at least until Facebook’s stock drops.
Walmart Sued over Bribery Scandal
The California State Teachers Retirement System (CalSTRS) sued Walmart (NYSE: WMT) because the world’s largest retailer may have violated Mexican and U.S. laws. At issue is the alleged bribery scandal at Walmart’s Mexico operations. “By utilizing the derivative action, CalSTRS is seeking to remedy the damages sustained by Wal-Mart as a result of alleged gross misconduct by Wal-Mart’s executive officers and directors,” CalSTRS Chief Executive Officer Jack Ehnes said in the statement. The trouble with the suit may be that nothing has been proven about Walmart’s conduct in Mexico. The New York Times made a very compelling report about the behavior of senior management in light of events in Mexico. It could be some time before the paper’s story is completely vetted. Nonetheless, the CalSTRS action will open the door to more suits by institutional investors, and maybe individual ones. Walmart’s legal costs will rise even more than they would have just to be involved in internal investigations, as well as those that will be made by the U.S. and Mexican governments.
Spirit Airlines Under Scrutiny
One of the favorite business stories in the press this week concerns a Spirit Airlines (NASDAQ: SAVE) plan to charge as much as $100 for big carry on bags. The airline sets its ticket prices so low that large fees are its only means to make money. It has taken the industry strategy to charge for baggage, meals, headsets and WiFi to a new level. Spirit management shrugged off suggestions. In essence, they said, Spirit is still one of the most inexpensive airlines. And it does fly planes with seats, engines and pilots. In light of those things, the complaints are overblown.
Whither Gasoline Prices?
Gasoline prices have stopped falling, at least for a day. The AAA Fuel Gauge report showed the cost for a gallon of regular based on the national average was $3.802. That is statically flat with $3.803 the day before. The price is down from $3.826 a week ago and $3.928 a month ago when it was assumed the price almost certainly would top $4 this summer. Recent data show that the U.S. economy continues to be in a period of modest growth. The Iran sanctions crisis was supposed to have gone away. But famous economist Nouriel Roubini said there likely would be a clash among Iran, Israel, and the U.S. after the American elections. That, he forecasts, will cause a huge rise in oil prices, and the price of oil derivatives like gasoline. Then the world may be thrown into a period of deep depression lasting years. Or, perhaps there will be no war, the economies of Europe will fall more deeply into recession, the GDP growth of China will slow and gas prices will drop toward $3.50.
Douglas A. McIntyre
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