National

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Best Buy is the latest retailer — joining Kroger and others — to say "organized crime" is weighing on its bottom line.

Why it matters: Companies say profits took a hit for all sorts of reasons. It's not every day that theft is a scapegoat.

Best Buy says there was a jump in groups stealing merchandise. They say it's happening across the country, but Northern California is a hot spot. (Walgreens says theft forced store closures there, though crime stats may not support that.)

"You can see that pressure in our financials and, more importantly, frankly, you can see that pressure with our associates," CEO Corie Barry told Wall Street today, noting they will now lock up merchandise and hire security "in some instances."

The bottom line: Best Buy — which also called out supply chain costs, among other problems — saw its stock fall 12%, the worst decline since March 2020.

Best Buy sees spike in shoplifting, pressuring profits

Companies say profits took a hit for all sorts of reasons. It's not every day that theft is a scapegoat.

Shopping

Retail

Axios Pro: Deals

A federal jury said Tuesday that Walgreens, CVS and Walmart recklessly distributed pain pills in two Ohio counties and played a hand in the hundreds of overdose deaths that plagued the communities, AP reports.

Why it matters: It's the first verdict for pharmacy companies in a case involving the opioid crisis, per AP. The verdict — with a judge set to rule on damages this spring — could set a precedent for other local governments that seek to hold pharmacies accountable.

Details: Pharmacies distributed around 80 million prescription painkillers in Trumbull County between 2012 and 2016, or 400 for every resident, according to AP.

Around 61 million pills circulated in Lake County in the same time frame.

Attorneys for the three pharmacy giants argued they had policies in place to minimize the dispensing of pills and that doctors had ultimate authority over prescriptions.

The counties countered that pharmacies were blaming everyone but themselves and that they contributed to a public health crisis that taxed the region’s courts, social services and law enforcement.

Their attorney said the flood of pills cost the counties about $1 billion each, per AP.

What they're saying: CVS Health spokesperson Michael DeAngelis said in a statement that they "strongly disagree" with the decision and will seek to appeal the ruling. 

"[T]the simple facts are that opioid prescriptions are written by doctors, not pharmacists; opioid medications are made and marketed by manufacturers, not pharmacists; and our health care system depends on pharmacists to fill legitimate prescriptions that doctors deem necessary for their patients."

Worth noting: Several opioid manufacturers and drug distributors are facing criminal investigations from the Department of Justice for similar concerns about the flow of prescription painkillers.

Jury holds pharmacies responsible in groundbreaking opioids case

The three pharmacy giants recklessly distributed pain pills in two Ohio counties, the jury said.

Photo: Paul Weaver/SOPA Images/LightRocket via Getty Images

Opioid addiction

Opioids

The U.S. faces a range of health care flashpoints — unaffordable drugs, opioids, vaping — as we debate whether to adopt universal care. For now, the Affordable Care Act is the law of the land, but Republicans want to issue it a final death blow.

Health

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

Dollar Tree will raise prices from $1 to $1.25 on most of its products by the end of April, the company announced Tuesday.

Why it matters: Dollar Tree, which has sold products at $1 for 35 years, was among the last of the major U.S. dollar store chains to retain its $1 price. The change is a reflection of the pressure on low-cost retailers amid rising inflation, CNN notes.

For decades, Dollar Tree looked to cheaply sourced goods — and rock-bottom costs to get them to stores — to deliver the $1 price tag some communities have come to rely on, Axios' Courtenay Brown writes.

Details: Keeping prices at $1 forced Dollar Tree to stop selling some customer favorites, the company said.

The $1.25 price point will enable Dollar Tree to "return to its historical gross margin range by mitigating historically-high merchandise cost increases, including freight and distribution costs, as well as higher operating costs, such as wage increases."

The company said that 91% of shoppers surveyed during the initial testing phase indicated they would shop at Dollar Tree with the same or increased frequency.

The decision is permanent and not a "reaction to short-term or transitory market conditions."

What they're saying: "Lifting the one-dollar constraint represents a monumental step for our organization and we are enthusiastic about the opportunity to meaningfully improve our shoppers’ experience and unlock value for our stakeholders," President and CEO Michael Witynski said in a statement.

Most things at The Dollar Tree will now cost $1.25

Dollar Tree was among the last of the major U.S. dollar store chains to retain its $1 price.

Photo of a person walking in the parking lot outside a Dollar Tree store 

A Dollar Tree store in Bowie, Maryland. Photo: Jim Watson/AFP via Getty Images

Chile's centrist candidates were completely shut out in Sunday's first-round vote, which now heads to a runoff election between a far-right and a far-left candidate.

Why it matters: The outcome of the second round of voting on Dec. 19 will have repercussions for an increasingly polarized Chile and how the country's economy, which is supported by key natural resources such as copper, is handled.

The details: Gabriel Boric, a 35-year-old leftist Congress member and former student leader, will face off against José Antonio Kast, an ultraconservative 55-year-old lawyer who has defended Augusto Pinochet's dictatorship.

Kast got 27% of the votes — the most of all candidates — on Sunday.

Boric champions levying more taxes on companies, reforming pensions, and increasing financing and tightening regulations to try to reduce the environmental effects of state-owned mining company, Codelco.

Kast proposes privatizing that company and possibly raising export taxes or output royalties on copper, which could increase the metal’s price.

Chile is the world's largest producer of copper and second-largest of lithium, both key for electronics and for manufacturing renewable energy technologies.

Context: The Andean nation is the most economically advanced country in Latin America and the Caribbean, though it's still plagued by socioeconomic inequalities.

Tensions regarding those inequalities came to a head in massive protests two years ago, which led to a constitutional revision process.

Currently, Chile is ruled by the 1980 Constitution, drafted by the Pinochet regime and which critics say is excessively rigid for issues such as social security reforms.

The convention drafting a new constitution has put forth progressive proposals that might hinge on whoever is elected in December.

The big picture: Since its return to democracy in 1990, Chile has had center-left and center-right presidents. That will change with Boric or Kast.

Chile's future government will fall on a political extreme

Chile's centrist candidates were completely shut out in Sunday's first-round vote.

A voter casts her ballot during national elections on November 21, 2021 in Arica, Chile. 

A voter casts her ballot during national elections on Nov. 21, 2021 in Arica, Chile. Photo: John Moore/Getty Images

Chile

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

Media Trends

Axios Media Trends

STAT had a banner year in 2020, and executives say they expect continued growth for the foreseeable future. 

Why it matters: "I've never for a moment worried about a post-pandemic dip because the past two years catapulted us into a whole new league in terms of readership, reach and our brand identity," said STAT co-founder and executive editor Rick Berke. "There's no turning back from what we were pre-pandemic."

Details: "From 2020 to 2021, our revenue has soared 40 percent, exceeding our projections: specifically, subscription revenue is up 24 percent; advertising, 51 percent, and events, 79 percent," Berke said in a memo to staff. 

The company has been profitable for some time, and STAT chief business officer Angus Macaulay says it's "expecting to be profitable next year" as well. 

By year-end, the company will have around 80 employees, up from about 50 at the end of 2020. The company plans to continue hiring next year.

The company has doubled its engineering and product teams.

STAT's business relies on three main revenue streams: subscriptions, advertising and events. While all three sectors have expanded, events — even virtually — have shown the biggest growth. 

"Our plan next year is to go back to in-person events," Macaulay said, barring any pandemic issues. STAT hosts three major summits each year that focus on specialized topics like health tech and scientific discovery. Tickets go for about $300 per person.

On the subscription front, Berke says, "We're putting more and more behind the paywall and it's paid off." STAT was one of the first media companies in the U.S. to drop its paywall for COVID-19 coverage last year.

"Our ad business is soaring, but if we lost it tomorrow, we'd still have a huge financial foundation," Berke said. The company relies on donations and philanthropic support to underwrite key features and projects.

STAT began experimenting with a few new businesses this year.

It soft launched STAT Trials Pulse — a real-time clinical trial data and trends product with machine learning company Applied XL —  earlier this year.

It has hired a head of community to build programs that connect readers and subscribers. 

STAT also launched its second podcast and says it has a third on the way about the intersection of race and science. Its documentary film about prosthetics is being broadcast on Nova, a science television program produced by WGBH in Boston.

The big picture: Most news media companies have seen traffic dwindle this year in response to a new presidency and less news interest in COVID-19. 

But Berke says STAT's audience continues to grow because it's built up a reputation for authoritative coverage around all health and science stories. 

"We don't hang our hat solely on COVID coverage and we never have," Berke says, citing new projects tracking underlying racial inequities in health and medicine and coverage of the FDA’s decision to approve the first new treatment for Alzheimer’s.  

One of the company's biggest investigations this year uncovered ways Epic, the country's largest electronic health records vendor, was selling algorithms to hospitals that delivered inaccurate information.

"Our coverage this year has proven that we're not a one-trick pony," he said. One example: STAT last month launched a beat specifically on cancer. 

What to watch: STAT's initial seed funding came from owners John Henry and Linda Pizzuti Henry in 2015. The couple also owns The Boston Globe. Linda serves as chief executive of Boston Globe Media Partners.

"I think Linda has made no secret that she sees STAT as a model for other potential niche publications for the overall Boston Globe Media," Berke said. 

The pandemic put STAT on the map

"There's no turning back from what we were pre-pandemic."

News media

Media

Reproduced from UNC Hussman School of Journalism and Media; Chart: Axios Visuals

Lawmakers, local reporters and journalism advocates are sounding the alarm over a takeover attempt of local newspaper group Lee Enterprises by Alden Global Capital, a hedge fund known for cutting journalists at local papers to maximize profits.

Why it matters: Roughly half of America’s daily newspapers are already controlled by investment groups. Alden's takeover would make it a clear majority. 

The big picture: Alden already owns hundreds of papers through its majority ownership of MNG Enterprises, known commonly as Digital First Media. 

It acquired the remaining stake of Tribune earlier this year, making it the second-largest newspaper owner in the country. 

Alden acquired a 6% stake in Lee Enterprises via MNG Enterprises in early 2020, when billionaire Warren Buffett sold his Berkshire Hathaway newspaper operations to Lee Enterprises for $140 million. 

Lee Enterprises is home to many storied local newspapers, including The Omaha World-Herald, The Richmond Times-Dispatch, and Winston-Salem Journal.

Purchasing Lee Enterprises would essentially create a local news duopoly between Alden and Gannett/Gatehouse, which merged in 2019. 

Details: On Monday, Alden Global Capital announced an offer to acquire Lee Enterprises for $24 per share, a 30% premium on Lee's share price at market close on Friday.  

Investors seemed thrilled. Lee's stock jumped 26% Monday on the news. The deal values Lee Enterprises at about $141 million. 

Local reporters were clearly rattled. "Gut-wrenching scenario for Nebraska newspapers and anyone who cares about preserving robust local news," tweeted Sara Gentzler, a state government reporter for the Omaha World-Herald.

Policymakers also expressed concern, but it doesn't seem like there's any real regulatory threat standing in Alden's way. 

“It is deeply concerning that hedge funds continue to gobble up local news companies, gut newsrooms and then rake in short-term profits while starving communities of a vital resource," said Sen. Ron Wyden  (D-Ore).

An antitrust expert told Axios that it appeared unlikely the deal would face major regulatory hurdles, given that the newspapers Alden is buying generally don't compete head-to-head with its current properties.

Yes, but: Some experts argue that the Biden administration's Department of  Justice should take a different approach when evaluating the harm of this merger and other local media consolidation deals. 

The DOJ typically evaluates mergers based on whether they will lift prices or cause consumer harm. Steven Waldman, president and co-founder of Report for America, argues the DOJ should consider whether deals like this could possibly cause harm to a community. 

"The traditional approach to antitrust is not going to help local communities and the local news crisis," Waldman said. "It has to be looked at through a revised approach to antitrust that looks at other harms."

What to watch: Wyden and other Democratic senators introduced a bill earlier this year to help fund local news through government tax credits. 

While these efforts are incremental, they are meant to offer relief to local newspapers.

Wyden said he supports the bill "so that the local newspapers that remain won’t feel pressured to sell to these corporate raiders."

Be smart: Local news used to be mostly run by family businesses. But they've increasingly become attractive to investment firms like Alden, which focus on identifying industries and companies in terminal decline and consolidate them to squeeze out more profits.

Local news, both in print and broadcast, is a perfect target for investment firms using this strategy. Newspapers and linear television are being replaced by digital alternatives, but still have sizable ad businesses for now. 

Alden is essentially betting that those industries will die slower than people expect. 

Notorious hedge fund sparks panic about death of local news

About half of America’s daily papers are controlled by investment groups.

chart of companies that own the most U.S. newspapers, as of 2020

Pro Rata

Axios Pro Rata

Jonathan Bush sounded improbably chipper when we spoke, in the wake of Monday's news that Athenahealth would be sold for $17 billion by the activist hedge fund that had forced him out of the company he founded.

"I knew you'd be calling, so I picked an unnecessary argument with my wife to get it all out first," he said.

That's always been Jonathan Bush. Unconventional. Heart worn bluntly on his sleeve. And, in the mind of Paul Singer and some other investors, the right man to start a health-tech company and the wrong man to lead it once mature.

Backstory: Athenahealth was an early winner in the digitization of health records and billing, founded in 1997 and going public a decade later.

Both the company and Bush were also the occasional targets of short-sellers, including David Einhorn.

When revenue growth slowed in the late teens, and the stock price stagnated, Singer's Elliott Management took aim. Months after getting the cold shoulder from Athenahealth's board, which by early 2018 would be chaired by former GE CEO Jeff Immelt, Elliott went hostile.

Reports of Bush acting inappropriately at work and at home began to surface, some based on old court documents, with rampant speculation that Elliott was slamming its steel-toed boot on the scale (this was shortly after allegations that Elliott had used private investigators in a different campaign).

Bush stepped down. Elliott and private equity firm Veritas Capital took Athenahealth private in 2018 for $5.7 billion, which was less than the $6.5 billion it originally offered. Bush called it "a steal."

Fast forward: Bain Capital and Hellman & Friedman, both of which kicked the tires back in 2018, agreed to buy Athenahealth for $17 billion. Elliott and Veritas will retain minority stakes, with a source saying their combined position is expected to be worth just under $1 billion.

Athenahealth is now almost as valuable as Cerner, one of the two dominant hospital EHR vendors alongside Epic Systems. The buyers' basic thesis is that the total addressable market is massive and still growing, particularly for independent docs, which means they can succeed as a top contender.

It's the second mega-buyout of a health-tech company in 2021 for Hellman & Friedman, which was part of the $30 billion takeover of Medline. In other words, it knows how to find the financing and is one of few firms (along with Bain) that could write this sort of check.

Bush went on to found another startup called Zus Health, which recently raised Series A funding led by Andreessen Horowitz.

Elliott pulled the old private equity playbook of tearing down to build back up. It sold Athenahealth's campus for $525 million and wound down some ancillary efforts to focus on organic growth of its core business. Today, its revenue and headcount are significantly higher than they were in 2018.

Bush says he respects Bain and H&F, but remains disappointed by how things went down with Elliott: "They behaved in a very bad way and profited from it. It's not about them really — blame not the bird of prey — but that regular shareholders weren't the ones who got the gains."

Elliott's retort, of course, would be that shareholders weren't getting gains under Bush (though he quit before the buyout, so round and round the rhetoric can go.).

The bottom line: This new deal represents a new chapter in the Athenahealth story, but not the final one.

Elliott wins the Athenahealth battle (again)

Elliott pulled the old private equity playbook of tearing down to build back up.

Athenahealth

Gaming

Axios Gaming

Niantic, an S.F.-based maker of augmented reality games like "Pokémon Go," raised $300 million from Coatue at a $9 billion valuation.

Why it matters: This is about the metaverse that Meta isn't interested in building.

History: Niantic previously raised $480 million, most recently in 2019 at a $4 billion post-money valuation. Existing backers include Alsop Louie Partners, Javelin Venture Partners, CapitalG, IVP and Spark Capital.

The bottom line: Niantic's vision is the world we already see around us, but with a digital overlay on top of it. Not a virtual world that people immerse themselves in with VR goggles or by way of a video game world like "Fortnite." 

Some of Niantic's recent games have struggled, but over a billion downloads of "Pokémon Go" make a strong case that it may be the ones to figure this all out. 

"Pokémon Go" maker Niantic now worth $9 billion

This is about the metaverse that Meta isn't interested in building.

 illustration a Pokémon Go logo. Photo: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

Video games

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

The Washington Post has hired Miki King — the company's former chief marketing officer, who most recently served as the President of Genius Media Group — to run The Post's Arc XP software arm. 

Why it matters: The hire underscores The Post's commitment to growing its software arm as a significant revenue stream to support its journalism. 

The Post currently makes most of its money from ads and subscriptions, but software sales are increasingly becoming a third major business line for the company.

Catch up quick: The Washington Post launched Arc Publishing in 2015 as an in-house tech division that built and licensed publishing software to other media companies. 

Today, it serves a slew of businesses in addition to media and entertainment publishers, including sports teams, cryptocurrency companies, and financial services firms. 

Many of the clients it serves are increasingly focused on transactions between businesses and consumers. This year Arc XP added added e-commerce and video hosting capabilities.

Earlier this year, Arc Publishing rebranded to Arc XP to reflect its broader focus.  Arc XP's products are cloud-based and rely heavily on Amazon Web Services (AWS). 

Details: King, who starts officially on Nov. 29, says her goal in the next year is to accelerate the growth of Arc XP's sales team and to grow the business globally.

Arc XP currently serves customers across 28 countries and most U.S. states. King says Arc XP is looking to expand more into Latin America and Western Europe, as well as Africa. It currently serves clients in Mexico, Argentina, Brazil, Korea and the UAE, in addition to hundreds of local news sites and businesses in America.

Much of King's experience at Genius, which was recently acquired by Santa Monica-based MediaLab, was working with enterprise clients. That focus will translate to her new role at The Post. 

"The goal for Arc XP is to really to help brands optimize their digital presence," King said. She noted that developing products that support everything from cryptocurrency to sports betting is going to be inevitable. 

"We're in the very early stages on betting and gaming," she said. "It's a space that there could be an opportunity for us, but conversations have been preliminary to-date."

King will report to both publisher and CEO Fred Ryan and chief information officer Shailesh Prakash. Scot Gillespie will remain CTO and GM of Arc XP.

By the numbers: Currently, Arc XP's technology is licensed to over 1,900 sites, up from about 1,500 in April, per The Post. 

King says she expects Arc XP to bring in $100 million in revenue "in the next 3-5 years."

There are around 250 people that work for Arc XP alone, per King. For context, The Post has roughly 1,000 journalists. 

"The Post has really doubled down on expanding corporate functions dedicated to Arc XP, including in human resources, legal, finance and analysis roles," she said.

The Washington Post's owner Jeff Bezos has thrown his weight behind both Arc XP and The Post's ad tech division, Zeus Technology. 

"As we moved from news publishers to enterprise, that was very much of interest and supported by Jeff Bezos," King said. "He has been very much involved in every large strategic decision related to Arc XP."

Washington Post chief revenue officer Joy Robins told Axios in September that Zeus Technology work will hit nine figures in revenue "easily" next year.

The big picture: Several media companies, including Vox Media and Minute Media, have launched tech businesses as a way to fund journalism in recent years. 

But King says those firms are not The Post's biggest competitors. "I often do think our greatest competition is the trend of organizations that to want to go at it alone," she said.

She said Arc XP also sees opportunities in providing strategic insight and advisory services to companies building their own software.

What to watch: While it's long been rumored that one day The Post might spin out Arc XP, King says that's not in the cards for now. 

"As of today, my role is not one tied to an exit strategy," she said. "The conversation with our leadership team has really been one about how can we  accelerate growth."

"Arc is well on track to be a $100 million company, I don't think that's a path to a spin-off, but we'll see how things unfold."

Washington Post taps its former CMO to lead tech division

Miki King will head Arc XP,  the Post company's publishing software subsidiary.

Photo credit: Jackie Hicks, Photo courtesy of The Washington Post

Washington Post

Retail Deals

Brand management firm Authentic Brands Group on Monday announced that a group led by private equity firms CVC Capital Partners and HPS Investment Partners acquired a significant ownership stake at an enterprise value of $12.7 billion.

Why it matters: The lofty price tag and the deal's structure are a departure from the kind of traditional leveraged buyouts that have been prevalent in the retail sector.

Creative dealmaking may be necessary going forward, in light of the high valuations companies can command on the public markets.

Inside the deal: The new investment totals $3.5 billion, at a valuation that works out to 17x pro forma EBITDA, according to a source briefed on the matter.

Pro forma EBITDA through September incorporates the financial performance of Reebok, the sneaker company Authentic Brands acquired for $2.5 billion in August.

Background: CVC, which had been a rival bidder for the sneaker brand, approached ABG in August about a potential investment. And there had been ongoing talks between HPS and Authentic Brands CEO Jamie Salter about an investment for years.

What’s next: Leonard Green & Partners and some members of ABG's leadership team sold shares in the transaction, though all remain stakeholders. Existing shareholder BlackRock Long Term Private Capital, which invested in 2019, did not sell.

While today's deal precludes an IPO for the time being, ABG, the parent of retail brands such as Brooks Brothers and Forever 21 is now aiming for a listing in 2023 or 2024, per a CNBC report.

Authentic Brands Group, after buying Reebok, raises $3.5 billion

This isn't how private equity usually does retail.

Authentic Brands Group earlier today announced it was selling a stake to a group led by private equity firms CVC and HPS, foregoing an IPO.

Private equity firms Bain Capital and Hellman & Friedman acquired Athenahealth, an electronic health records vendor for physician practices, for $17 billion.

Why it matters: This is one of the largest leveraged buyouts of the year, and it means the previous private equity firms that took Athenahealth private in 2018 — Veritas Capital and Evergreen Coast Capital, a subsidiary of Elliott Management— tripled their investment.

By the numbers: Athenahealth is now almost as valuable as Cerner, the dominant hospital electronic health records vendor that has a market cap of $21.6 billion.

The big picture: Private equity firms have flocked more into health care over the years, especially in 2021.

Some of the other major, most recent PE-backed deals involve medical supplier Medline, hospital chains LifePoint and Kindred, outsourcing firm QHR Health and a new mental health provider called Geode Health.

Private equity firms buy Athenahealth, again

Athenahealth is trading private equity hands after a strained 2018 buyout.

Tuesday's economy & business stories