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Coronavirus may be the straw that breaks the back of oil fracking

Consumers have some good news at the service station. Prices at the pump for gasoline and diesel are down about 6% since the beginning of the year. For that they can thank the coronavirus (now called Covid-19) outbreak—although it comes at the heavy cost of almost 47,000 people ill and 1,369 dead so far according to the Feb. 14 statistics from the World Health Organization.

At $2.42 regular and $2.91 diesel, these aren’t the lowest prices ever, but they are a big change from the respective $2.90 and $3.17 in the first week of May 2019 and a respectable drop from the $2.58 and $3.08 of the first week in January.

The continuing drop from the 2010s is owed in large part to expanding oil supplies, largely through the controversial method known as hydraulic fracturing, commonly called fracking, a talking point in the 2020 presidential campaign. High-pressure water and chemicals pumped deep underground crack shale rock open, releasing trapped oil for extraction.

“People don’t understand how important the oil shale business has been for the global oil markets,” said Adam Rozencwajg, managing partner of natural resources investment advisor G&R Associates. “In the last ten years, world oil consumption has gone up by about 13 million barrels a day. Close to 75% of that oil came from U.S. shale.”

But the most recent drop in gas prices is a result—at least in big part—of the reduced economic activity in China due to Covid-19. Economic activity and consumption of oil in China are down significantly. The International Energy Agency has cut its demand outlook by 30% in response. Prices are dropping like a stone and have already reached the point where new fracking is barely profitable, if at all.

Environmentalists might applaud, but the cheers could be muted in a few years. The fracking business has already been on shaky legs, and current conditions remind some of what eventually led to triple-digit barrel prices a decade back.

Oil and gas tumble

There’s been a sharp drop of oil prices since the year’s opening. “Brent crude and other oil indicators are down about 20% in the last 30 days, so it’s significant,” said Max Krangle, director of energy market research firm NRGExpert. “Unofficial Chinese government sources have said [national] demand is down about 20%, or 3 million barrels a day, which is a significant decline.”

Although getting reliable data out of China can at times be challenging, Krangle said “it’s not difficult to substantiate these numbers given the quarantine and the panic we’ve seen.”

The graph below shows how West Texas intermediate (WTI) and Brent per-barrel crude oil prices—the major benchmarks for the commodities—have changed since the beginning of 2010.

How much the steep drop at the end of the graph is due to China’s lower consumption because of Covid-19 is hard to say, according to Krangle. As Bill Ebanks, managing director in the energy practice of consulting firm AlixPartners notes, “an unseasonably warm winter” reducing the need for artificial heating is another factor.

According to the most recent figures from the U.S. Energy Information Agency (EIA), China is the second largest consumer of oil after the U.S.

Big reductions in China’s consumption noticeably affect world markets. “We’d say the oil market was pretty much balanced [before] the virus,” said Leigh Goehring, also a managing partner at G&R Associates. “But since the virus has started, you can definitely see the market has shifted into surplus.”

With surplus comes the falling prices that have been evident. U.S. fracking activity feels a major impact from the slide because the production process is inherently expensive.

The costly aspect of fracking is the capital investment needed in the initial drilling. Not only can wells extend downward thousands of feet, but also horizontally out at the bottom similar distances. Companies must cart in water and chemicals to pump into the ground so oil flows up. And there’s been constant new drilling: “These wells decline very quickly in their production,” Ebanks said.

Market prices put a cap on the profit any oil or gas well can make and govern whether exploration and production is economically viable. “After the U.S. attacked Iran, [oil] prices spiked up to about $65,” said Jace Jarboe, a futures and options broker with Daniels Trading. “We’re about $15 off those highs.”

For fracking, “the drop between $65 and $50 is the difference between being profitable and being unprofitable,” Ebanks said. “We’re seeing large write-offs by Shell, Exxon, and others, recognizing that the value of their reserves wasn’t what people thought they were.”

There’s an additional complication. Smaller companies, many of which had borrowed too much and were over leveraged, are getting hit even harder. “Access to capital has been shut off,” Ebanks said. “Banks aren’t lending, and there are no [monetary] infusions to be had.”

If the fracking market had been in good shape before, this might be only a painful interlude. Unfortunately, conditions were already deteriorating.

Goehring and Rozencwajg of G&R Associates said that the fracking oil rig count was down 25% year over year even before the outbreak and that shale growth between 2018 and 2019 had slowed by 55%. This year might see growth near zero.

“We believe that the great shale oil revolution in America is in the process of coming to a close,” said Goehring, who finds the current conditions echoing those of 20 years ago, when a massive shock reduced production and oil prices rose from $11 a barrell to $144 between January 1999 and June 2008.

“For oil investors, you’re probably being given another opportunity,” Goehring said. “The world will want to grow again, and the world will be looking for oil. It was coming from shale, and it won’t be coming from shale in the next upcoming decade.”

And for those whose involvement with oil is more on the consumption end, if oil prices do start racing up again in the next few years, maybe it’s time to start looking at electric vehicles and solar-powered heating.

More must-read stories from Fortune:

—Bernard Arnault was briefly the world’s richest man. Then coronavirus struck
Miracle” cancer treatments could be a blessing for investors too
—BlackRock is donating $589 million to bolster financial inclusion
—Inflation is at historic lows, so why do things seem so expensive?
—WATCH: Biggest investing opportunities and risks for 2020

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Delta CEO On Airline Seat Controversy: People Should Ask To Recline

Delta’s CEO has offered his take on the controversy sparked by a viral video of a woman in a reclined airline seat and the response by the aggravated man behind her, declaring on Friday that while “customers have the right to recline,” they should ask for permission to do so first.

In an appearance on CNBC’s “Squawk Box,” Ed Bastian talked about the proper reclining etiquette for airline travel.

The issue arose after Wendi Williams tweeted a video of what happened after she reclined her seat during a flight from New Orleans to Charlotte, North Carolina, on American Airlines subsidiary American Eagle. The passenger behind Williams, who was in the last row and could not adjust his seat, responded by repeatedly punching and jabbing her seat.

According to Williams, the man had asked her not recline her seat until he was done eating, and she complied with that request. She then reclined her seat after he was done, prompting the angry reaction ― and, thanks to Williams’ tweet, sparking the widespread debate about who was in the wrong in the incident.

An American Airlines spokesperson told Fox News on Wednesday that the airline was “aware” of the customer dispute and was “looking into the issue.”

In the incident’s aftermath, Williams has claimed on Twitter that she suffered horrible headaches for a week, losing time at work because she had to visit a doctor.

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Trump’s Worst Enemy – WSJ

After his Senate impeachment acquittal, we wrote that President Trump’s history is that he can’t stand prosperity. Well, that was fast. The President’s relentless popping off this week about the sentencing of supporter Roger Stone has hurt himself, his Justice Department, and the proper understanding of executive power. That’s a notable trifecta of self-destructive behavior even by his standards.

Mr. Trump handed another sword to his opponents when he fulminated on Twitter about the initial recommendation of a seven-to-nine…

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Direct-to-consumer ‘is no longer a fad’

Shopify collected the big bucks during the holiday shopping season, and that’s indicative of emerging retail trends, Chief Operating Officer Harley Finkelstein told CNBC’s Jim Cramer on Wednesday.

The e-commerce platform, which supplies businesses with means to sell products online, recorded almost $3 billion of global sales over the Black Friday to Cyber Monday shopping period last November, a 61% increase from the year prior.

“That is the example where direct-to-consumer is no longer a fad,” Finkelstein said in a “Mad Money” interview. “It is now a steady state, and it’s being powered by Shopify. We’re at the center of that.”

Direct-to-consumer has emerged as a key retail strategy in the age of online shopping, where brands eliminate the middleman and engage directly with consumers. Nike is one big name that has invested heavily in its direct-sales business, and Tesla Motors is another that has taken advantage of the trend.

The holiday numbers are a part of Shopify’s better-than-expected fourth-quarter earnings report. The company grew its top line by 47% year over year to $505.2 million in the December quarter, which smashed the $482.1 million that analysts estimated. On the bottom line, Shopify made 43 cents per share — up more than 80% from a year ago, when analysts were forecasting 24 cents.

“We think we can be the entrepreneurship company. While other companies are trying to build empires, we are arming the rebels,” Finkelstein said. “And, honestly, the rebels are winning.”

For the full year, Shopify’s gross merchandise volume, which measures the total value of merchandise sold on the website, clocked in at $60.8 billion, a 49% improvement from 2018. The company’s revenue, which is made up of merchant and subscription fees, came in at almost $1.6 billion for the year, a 47% increase. With 2019 earnings coming in at 46 cents per share, Shopify has turned a profit three years in a row.

“This is the story of independent brands and entrepreneurs doing really, really well, and consumers are voting with their wallets,” said Finkelstein, who has been second-in-command at the Canadian internet company since 2010. “I think Shopify is powering the entrepreneurship movement.”

Shopify is calling 2020 an investment year. The company is injecting money into growing internationally, targeting larger brands with a higher price point called Shopify Plus and building fulfillment centers in the United States, its largest market.

Shopify set aside $1 billion to develop its warehouse infrastructure to stay in the game with online retailers such as Amazon and eBay. The warehouses will be outfitted with machine-learning and robotics, powered by its $450 million acquisition of 6 River Systems.

“But let’s be clear: We are still in the early stages of that,” Finkelstein explained. “We have to get fulfillment right, because the small businesses and brands … need to compete with the big businesses, and we think we’re the company that can help them with that.”

Shopify shares popped as much as 20% off its earnings report Wednesday morning. The stock would come back down to earth during the trading day before closing at $531.25, up almost 8% from the day prior.

The stock has surged more than 33% year to date and more than 202% over the past year.

Disclosure: Cramer’s charitable trust owns shares of Amazon.com.

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Approval of T-Mobile-Sprint merger just before SoftBank’s earnings may be a ‘get out of jail free card’

The troubles don’t seem to be letting up at Japanese SoftBank Group Corp.

The highly-publicized failures of its Vision Fund’s companies are expected to weigh on earnings Wednesday, which will be presented by SoftBank’s chairman and CEO Masayoshi Son. Analysts aren’t all that optimistic, predicting a 20% drop in operating profit (some $3.1 billion, or 345 billion yen) for SoftBank’s 3rd quarter earnings (October through December of 2019 for fiscal year ending March 31, 2020, a notably rough period for the company).

WeWork seemingly started it all, as SoftBank took a massive $9.2 billion write-down on the investment in November. But since then, its Vision Fund’s companies’ woes have only seemed to multiply.

On Monday, SoftBank-backed e-commerce company Brandless Inc., which sells unbranded consumer goods, said it was shuttering and laying off 70 employees, not even two years after SoftBank invested $240 million in the startup. Although SoftBank’s WeWork investment floundered in dramatic fashion, Brandless was actually the first Vision Fund-backed startup to close down.

At Indian hotel company OYO, an announcement last month of job cuts (and potentially more in the future) is another bad sign for SoftBank, as the Vision Fund reportedly invested over $600 million over time into the company, according to Bernstein’s Chris Lane. SoftBank-backed cloud robotics and AI startup CloudMinds also announced job cuts in January. And in the wake of disappointing growth, SoftBank sold back its nearly 50% stake in dog-walking startup Wag Labs in December.

One bright spot? Approval of the Sprint-T-Mobile merger (SoftBank, which owns nearly 85% of Sprint saw its stock soar on the news). It’s “a huge get out of jail free card” for SoftBank, says Morningstar’s Dan Baker. “People were edging toward valuing the equity in Sprint at nothing if the merger didn’t go ahead, so this is a very big deal for them.”

Still, the valuations of some of Vision Fund’s unlisted companies are making earnings a murky affair. SoftBank’s fund said its gains and losses were split 50/50 on its companies in the first six months up to September, but many of the companies were unnamed.

But Baker says there “isn’t that much in the actual results” for SoftBank’s earnings. “To be honest, I don’t think anyone really looks at this company as an earnings type company—it’s a sum of the parts of a bunch of businesses,” he says. And given the ambiguity around valuations of the private some-odd 90 companies in SoftBank’s Vision Fund, “we can’t be too trustworthy.”

“We look at what they’ve done with their numbers in the SoftBank Vision Fund, … but they’re not something you can be confident about going forward,” Baker tells Fortune. For investors, the private valuations that make up SoftBank’s reported performance aren’t anything they should put too much stock in—especially in the wake of WeWork (investors have “probably lost even more confidence in what their numbers will tell us anyway,” Baker says).

What to watch

What’s not so clear is what changes might be coming to SoftBank’s strategy or corporate governance in the wake of a new activist shareholder at the table.

This quarter’s earnings come at a particularly crucial juncture for SoftBank, as the company has become the latest target of notorious activist fund Elliott Management—which reportedly invested almost $3 billion into SoftBank. Billionaire Paul Singer’s New York-based fund is infamous for shaking up its investments, and per Wall Street Journal reports, the fund is pushing SoftBank to buy back between $10 billion to $20 billion in shares under the assertion it is undervalued (SoftBank’s shares currently trade below the value of its assets).

Morningstar’s Baker, for one, isn’t certain Son will play ball in terms of making big changes in the company (one “he very much dominates,” according to Baker). But investors should tune in for any news of an official announcement of buybacks.

Still, coming off of its first quarterly loss in 14 years in the July through September period (which saw an operating loss of 704 billion yen), SoftBank is in a tough spot, right when its second massive fund is struggling to hit its fundraising goal. The new fund might be as little as half its expected $108 billion size, according to a Wall Street Journal report, as investors are growing increasingly wary of the fund’s predecessor, Vision Fund, and its mixed bag of investments (which includes Uber and WeWork). Morningstar’s Baker, for one, thinks new pressure from Elliott might actually prompt discussions about winding down the Vision Fund altogether.

Yet given Son’s reputation of glossing over failures (“He is extremely bullish and rarely mentions negatives—investors are wary of what is not being talked about,” according to Morningstar’s Baker), it’s unclear whether investors will get any more transparency this time around.

To that end, this quarter and beyond might put SoftBank in a sticky situation if it is “unable to explain how it will limit risks from future investments that fail” and “unable to show financial discipline in its investments,” Jefferies’ Atul Goyal wrote in a December note.

More must-read stories from Fortune:

—The strange tale of Jeff Bezos’s $16,840 parking ticket bill
—Stock scammers are using coronavirus to dupe investors, SEC warns
Credit Suisse braces for an awkward earnings call
—Stock scammers are using coronavirus to dupe investors, SEC warns
—WATCH: Biggest investing opportunities and risks for 2020

Subscribe to Fortune’s Bull Sheet for no-nonsense finance news and analysis daily.

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U.S. Charges 4 Chinese Military Members In Equifax Breach

WASHINGTON (AP) — Four members of the Chinese military have been charged with breaking into the networks of the Equifax credit reporting agency and stealing the personal information of tens of millions of Americans, the Justice Department said Monday, blaming Beijing for one of the largest hacks in history.

The 2017 breach affected roughly 145 million people, with the hackers successfully stealing names, Social Security numbers and other personal information stored in the company’s databases.

The four — members of the People’s Liberation Army, an arm of the Chinese military — are also accused of stealing the company’s trade secrets, law enforcement officials said.

The case comes as the Trump administration has warned against what it sees as the growing political and economic influence of China, and efforts by Beijing to collect data on Americans and steal scientific research and innovation.

“This was a deliberate and sweeping intrusion into the private information of the American people,” Attorney General William Barr said in a statement.

“Today, we hold PLA hackers accountable for their criminal actions, and we remind the Chinese government that we have the capability to remove the Internet’s cloak of anonymity and find the hackers that nation repeatedly deploys against us,” he added.

The case is one of several the Justice Department has brought over the years against members of the PLA. The Obama administration in 2014 charged five Chinese military hackers with breaking into the networks of major American corporations to siphon trade secrets.

The criminal charges were filed in federal court in Atlanta, where the company is based.

The indictment, which details efforts the hackers took to cover their tracks, includes charges of conspiracy to commit computer fraud, conspiracy to commit economic espionage and conspiracy to commit wire fraud.

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L Brands nears sale of Victoria’s Secret to Sycamore

People are seen inside the newly opened Victoria’s Secret shop in Shanghai on February 24, 2017.

Johannes Eisele | AFP | Getty Images

L Brands is nearing a deal to sell its Victoria’s Secret brand to private equity firm Sycamore Partners in a deal that could be announced as soon this week, people familiar with the matter told CNBC.

It could not be immediately determined what leadership role L Brands CEO Les Wexner would have in such a deal. Wexner has been under mounting pressure due to his ties to the late sex criminal Jeffrey Epstein. He has also been criticized for the poor performance of the company’s Victoria’s Secret brand under his watch. L Brands also owns the stronger-performing Bath & Bodyworks personal care shop.

CNBC first reported in November that L Brands was exploring a spin-off of Victoria’s Secret or a “private investment in public equity.” At the time, the company was exploring deals that would keep Wexner in place. The Wall Street Journal in January said Sycamore was weighing a deal to buy Victoria’s Secret that could involve Wexner stepping down as CEO.

The people, who requested anonymity because the negotiations are still confidential, cautioned terms of the deal are still being negotiated and could still yet fall apart or be delayed. L Brands and Sycamore declined to comment.

Shares of L Brands are down nearly 10% over the past year.

For Sycamore, a deal to buy Victoria’s Secret would be a bet on a dominant player in the large intimate apparel industry. Bras are a $7.2 billion category, according to NPD. Victoria’s Secret, which also sells pajamas, perfumes, and other accessories, had roughly $7.4 billion in sales last year, according to Factset.

Sycamore would also be betting that it can reinvigorate the Victoria’s Secret brand after it has faced significant upheaval. The retailer has for years faced criticisms of out-of-date focus on sexy styles, while competitors like Third Love prioritized comfort. This November, it canceled its once-annual fashion show as viewership increasingly shunned the provocative show.

More recently, the company has faced accusations of professional impropriety. Its former chief marketing officer, Ed Razek, was accused of inappropriate conduct, according to allegations in a recent report by The New York Times. Razek, who stepped down last year, is said to have been close to Wexner. An L Brands spokesperson told The New York Times the company “‘is intensely focused’ on corporate governance, workplace and compliance practices and that it had “made significant strides.” Razek denied the allegations.

And Wexner is among the highest-profile executives with ties to Epstein who has yet to remove himself from a public-facing role. Britain’s Prince Andrew has said he will “step back from public duties for the foreseeable future” due to controversy over the British royal’s past friendship with Epstein. Entrepreneur Joi Ito earlier last year resigned from his role as director of MIT Media Lab and several corporate boards after admitting he took money from Epstein.

Wexner said in August he first met Epstein in the mid-1980s through friends who vouched for the financier. Epstein was a trustee of the Wexner Foundation, although Wexner has said Epstein had no executive responsibilities. In a letter to the foundation in August, Wexner said Epstein had misappropriated more than $46 million from Wexner and his family years ago. He only recently provided documents to federal prosecutors about the missing money. He has not explained why he did not pursue charges when he discovered the funds were missing.

L Brands has said it cut ties with Epstein nearly more than a decade ago and called his alleged crimes “abhorrent.”

Sycamore has a history of taking bets that its peers eschew. The private equity firm is one of the few to continue to invest in retail, even as the changing landscape has thrown a number of private equity-backed buyouts, like Toys R Us and Payless ShoeSource, into bankruptcy.

Many of these bets were accompanied by bold and creative strategies. Sycamore financed its $6.9 billion acquisition of beleaguered office retailer Staples in a way that allowed it the flexibility to wind down its retail business while retaining its stronger business-to-business segment.

The firm closed its third fund, with $4.75 billion of limited partner capital, in 2018. It raised the fund, its largest yet, with an eye towards investing in retail.

Sycamore has past ties to L Brands’ predecessor, Limited Brands. The firm took a 51% interest in Limited Brands’ sourcing business, Mast Global Fashions, in 2011. The company, now known as MGF Sourcing, has helped Sycamore put together a retail and apparel empire that also includes Talbots and Torrid.

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Here’s why analysts soured on Apple this week

Analysts are raising questions about the impact of coronavirus on Apple’s sales and the loyalty of Apple TV Plus users.

The week kicked off with TF International Securities analyst Ming-Chi Kuo reducing his iPhone shipment forecast by 10% for the current quarter over fears that coronavirus affect the company’s supply chain in China. Soon after, researcher Flixed said that many Apple TV Plus free-trial users aren’t keen to pay for the streaming-video service.

Apple’s troubles continued, when France announced that it had fined the company $27 million for a feature in iPhone batteries that slowed them down after prolonged use. Even Apple’s contracts with third-party repair companies came under fire for their “onerous” provisions.

It was a rough week for Apple. Here’s a summary of what happened:

How coronavirus affects Apple

The deadly respiratory illness coronavirus, which has infected thousands of people globally and killed hundreds, could impact Apple’s supply chain, analysts said this week. TF International Securities analyst Ming-Chi Kuo said Apple’s iPhone shipments could drop by 10% this quarter because of delays in Chinese production. Several other analysts who spoke to Fortune this week all agreed: The longer the coronavirus problem continues, forcing the Chinese government and companies to shutter production, the greater impact it will have on Apple’s financial results.

Apple TV Plus problems

Apple TV Plus is “failing to resonate with customers,” Bernstein analyst Toni Sacconaghi said in a research note this week. Fewer than 10 million Apple device owners have signed on for a free trial, according to Sacconaghi, and even fewer will become paying customers. The analyst said Apple TV Plus’ slow uptake could be due to its “limited content offerings.” Meanwhile, streaming-video industry watcher Flixed said this week that just 28% of Apple TV Plus users who had signed up for the seven-day free trial actually became subscribers. Among those who received a one-year free trial to Apple TV Plus by buying Apple devices, only 59% currently plan to sign up and pay $4.99 monthly after their trial expires. Despite the sobering news for Apple, there was a glimmer of hope: The people who Flixed surveyed gave Apple TV Plus an average satisfaction rating of 7 out of 10.

Get ready for CarKey

Apple is working on technology that would allow car owners to use their iPhones or Apple Watches as car keys, according to Apple-tracking site 9to5Mac. The feature, called CarKey, is hidden in the recently released iOS 13.4 Beta, the article said. Although Apple hasn’t confirmed its existence, 9to5Mac was able to determine that the feature will let users open the Wallet app on their iPhones or Apple Watch, and then start and turn off their cars. It’s unknown which vehicles the features could work with. Apple’s iOS 13.4 is expected to be released in the coming weeks.

France fines Apple

France has fined Apple 25 million euros (about $27 million) for throttling iPhones that have aging batteries. In a statement this week, investigators said that iOS software updates in 2017 intentionally slowed down performance on older iPhones, like the iPhone SE and iPhone 6, and that the company failed to notify users about the change. Apple acknowledged that it released the software with throttling, but denied France’s accusation that it did so to push owners of older iPhones to upgrade. Apple said the throttling safeguarded older batteries and allowed aging devices to last longer.

Apple’s repair program policies

Last year, Apple said that it would allow small business owners to provide repairs to consumers for their Apple devices. This week, tech news site Motherboard obtained a copy of the agreement between Apple and those repair providers that raises questions about the requirements involved. The agreement lets Apple inspect providers at any time, with no notice, and even inspect providers up to five years after the they end their agreement. In interviews with Motherboard, attorneys and repair advocates called the agreement “onerous” on the providers.

The successful Apple Watch

Apple shipped 31 million Apple Watches worldwide last year, Strategy Analytics said this week. Apple outpaced the entire Swiss watch industry, which accounted for 21 million shipments last year. Apple Watch shipments were up 36% year-over-year, compared to a 13% year-over-year drop on Swiss watches.

One more thing…

February is Heart Month, and to celebrate, Apple is offering the same $100 trade-in credit value on old Apple Watch Series 2 and Apple Watch Series 3 models that is available for Apple Watch Series 4. Apple had previously offered credits of $60 to $70 on Series 2 and Series 3 models. The credits can be used for buying an Apple Watch Series 5.

More must-read stories from Fortune:

—What you need to know about new IBM CEO Arvind Krishna
—Startup uses A.I. to identify molecules that could fight coronavirus
—Governments deploy surveillance tech to track coronavirus victims
—How marketers are increasingly using A.I. to persuade you to buy
—Predicting the biggest tech headlines of 2020

Catch up with Data Sheet, Fortune’s daily digest on the business of tech.

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Ninja Van CEO Chang Wen Lai on his most entrepreneurial business move

Chang Wen Lai has done well for himself.

At just 32 years old, the Singaporean entrepreneur has built a multimillion-dollar, multinational business as co-founder and CEO of express delivery service, Ninja Van.

But in order to kick-start his business five years ago, he had to get inventive — that includes getting a little imaginative with the truth.

“To convince our first client, I had to convince her that we were a proper logistics company,” Lai recalled in a recent interview with CNBC Make it.

That was easier said than done. At the time, in 2015, Lai and his team of five had just one, second-hand van between them to deliver all orders. What’s more, it broke down “every few days.”

Ninja Van’s co-founders deliver their early orders with a second-hand van.

Ninja Van

“Obviously if I went to a client and said I have one van, and half the time it’s out of commission, she would probably tell me to get lost,” said Lai.

But, he reasoned that his team could fulfill the client’s deliveries using the team’s five cars. So, he got creative; taking pictures of another fleet and airbrushing them to look like his own.

“I said: ‘No, we have multiple vans, don’t worry about it,'” Lai, a former bank trader, recalled.

“I think that was maybe not the most honest thing to do,” he continued. “But what we told ourselves was that we all have cars at home and there were enough of us that when I showed her a picture of six vans, we technically had six vehicles — one van and five cars — and we had six of us.”

Lai said he considered it helping the customer take a “leap of faith” to see what the founders were capable of.

Ninja Van’s fleet of delivery vans.

Ninja Van

“Yes, on the superficial level you might have said yeah we didn’t have six vans, we said we had six vans. But the reality was we had the capacity and the capability of six vans.”

“Sometimes you need a bit of a leap of faith. So why don’t I help her with the leap of faith first, but make sure she would never regret it.”

And yes, said Lai, she “absolutely” remains a customer today. Ninja Van now has a fleet of 20,000 drivers — and plenty of vans — who deliver around 1 million parcels a day across six countries in Southeast Asia.

“The reality of it was she never left us because we always deliver on our promises,” said Lai.

Don’t miss: How failure inspired 3 friends’ multimillion-dollar business

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Buttigieg holds thin lead in Iowa with 100% of precincts tallied

Pete Buttigieg holds a razor-thin lead over Bernie Sanders in the Iowa caucus with 100% of precincts reporting.

Buttigieg had 26.2% of state delegate equivalents to Sanders’ 26.1%, according to official results. Elizabeth Warren had 18%, Joe Biden had 15.8% and Amy Klobuchar had 12.3%. Other candidates were far behind.

The Associated Press, whose race calls are considered official, said Thursday it would not declare a winner in the Iowa caucus because of the tight margin and the irregularities in the caucus process. The final count was delayed for three days because of problems with a smartphone app that precincts used to report results and because of phone lines jammed by supporters of President Donald Trump and a large volume of calls due to the app’s failure.

Both Buttigieg and Sanders have declared victory in Iowa, based on different yardsticks. Buttigieg leads in state delegate equivalents, which the party will use to determine delegates to the Democratic National Convention.

Iowa awards 41 pledged delegates to the convention, a little more than 1% of the total. But it has held outsized influence because it’s the first opportunity for voters to have their say in the 2020 election cycle.

But Sanders is leading in the popular vote. In the first round of caucusing on Monday night, Sanders led by more than 6,000 votes. In the second round, that lead shrunk to about 2,600 votes.

Delegates can differ from popular votes because of rounding, coin flips, and a process that weights some precincts more than others based on how many Democrats have voted in previous elections.

Buttigieg said he’s happy with the result no matter how the final delegates are allocated.

“I’ll leave it to the party to get into that but you know what I’ll say is nothing can take away what happened on Monday,” he told CNN. “It’s an extraordinary moment for the movement that we have built and now we’re looking ahead to New Hampshire and beyond.”

New Hampshire holds a primary on Feb. 11.

Democratic National Committee Chairman Tom Perez has asked the state party to retabulate the results, citing the problems that caused the three-day delay.

More must-read stories from Fortune:

—2020 candidates’ positions, and records, on economic issues that affect women
—How a company with 120 Facebook likes ended up at the center of the Iowa caucus firestorm
Europe’s refugee crisis is getting worse—for these children
—Fortune Explains: The debt ceiling
America’s young voters could sway 2020 results. What will it take to get them to the polls?

Get up to speed on your morning commute with Fortune’s CEO Daily newsletter.

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