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TABB Group, an international research company, has disclosed in its extensive analytical report that the over-the-counter (OTC) market of bitcoin is significantly larger than the global bitcoin exchange market. OTC Versus Exchanges: Whales Against Retail Traders For many years, the majority of bitcoin analysts predicted billions of dollars to be traded on a regular basis … Continued

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• The music industry has maybe seen the greatest turnaround in its fortunes.
• The video game industry has also been evolving in the digital age, offering a variety of features for purchase.
• Big players in the music and video gaming industries who used to sell their product in a physical format have been reborn in the digital age.

Investing In a Time of Digital Dragons

We all know the digital disruption story now. Along comes cavalier new entrant wearing the cloak of new technology, slashing prices and delivery times and destroying ancient business models. But it’s not only the cavaliers who are enjoying the benefits of a new world in which everyone is connected at high speed, all the time. Big players in the music and video gaming industries who used to sell their product in a physical format – vinyl, cassette, shiny disc – have been reborn in the digital flames, and this is in turn affecting how investors are looking at this once volatile market.

Music- An Industry on The Rise

The music industry has maybe seen the greatest turnaround in its fortunes. From its 2000 high on the back of a boom in the new CD technology, industry sales declined relentlessly for a decade, halving by 2014. Digital distribution was the culprit. The spread of mp3 technology saw every song ever recorded become a small compressed file, easy to transfer from computer to computer.

Piracy hit the industry hard, and the apparent white knight of iTunes turned out to be a false friend. Its saviour has been streaming. Here was a service that for $10 a month, gave you access to the entire past and present of musical history, streamed to your digital device in real time via wifi or high-speed mobile connection. As the service improved, customer take-up at Spotify and its peers accelerated dramatically, drawing a reluctant Apple into the fray in 2015. Amazon and others have followed. In 2016 the industry grew for the first time since 2000, and in 2017, it was up by 8%. Spotify listed on the NYSE recently and is currently valued at over $30bn.

For music labels, the benefit has been greater than just a return to growth. Profitability is higher, as digital delivery removes physical costs of product, transportation and inventory write-offs. Retailer margin is replaced with the margin of the streaming provider, but there are now competing platforms rather than the monolithic iTunes, and only three big music labels to supply them, so the balance of negotiating power is more equitably split. But maybe even more important, the revenues become much more steady and predictable, and much less dependent on the latest greatest hit band. As such, the industry has gone from declining, volatile and barely profitable, to one that is
growing, much more predictable, and increasingly profitable.

Digital Connectivity Transforming Video Games

My sons love FIFA, the world’s leading football computer and video game. However, they no longer play with each other, but with strangers matched up globally via online connections. When they’re not trading players in Ultimate Team, they’re building online football careers from apprenticeship up. Ominously, small ongoing charges for ‘Coins’ have started appearing on my bills.

Their FIFA obsession tells the story of how digital disruption has affected video game companies as well. Historically, these companies were very dependent on a small number of big hits, sold mainly straight after launch, with attendant volatility amplified by the cycle of new gaming console releases. A disappointing new game or delay to a key title would periodically send the share price crashing.

Historically, a customer would simply buy the game, play it solo until he or she had exhausted its possibilities and thrill, then buy another one. Today that same customer will enter an almost infinite world, frequently updated and expanded by the game’s makers, and with every gaming experience different, as it now involves interactions with a large and diverse online community of players. As a result, gamers now play these games for much longer.

In addition, while playing the game they are now offered a variety of features for purchase. These features might include new funky costumes for their characters, shortcuts to better weapons or access to new areas. These have proved hugely popular and steady daily and monthly purchases can double the revenue from a console game release over time. This innovation has been widely adopted by makers of games for mobile devices, where the dominant business model today is a game that is free to download and play, but with many opportunities to upgrade, customize and progress through the game. While console games have not yet become free-to-play, the worlds are
converging.

For the gaming companies, the benefits of connectivity go even further. As with music, the majority of gamers are no longer buying the likes of Assassins Creed in a physical format, but simply downloading the game onto their console. Naturally, this is much more profitable than the sale of a physical CD game. In addition, it allows much easier sale of back catalogue games. With digital delivery a $3 game can be very profitable, even in Emerging Markets, which might have struggled to afford a more expensive product.

Put all these factors together and you get a video game industry that has been transformed. Revenues are not only growing but have become much less volatile as franchises endure and as the share of old games and in-game sales rises relative to the share of new games. Meanwhile, profitability has been rising rapidly, driven by digital delivery and the increasing share of back catalogue sales, much like in the music industry. Unsurprisingly, the companies themselves are becoming much more highly valued by the stock market.

Investors Should Take Heed

My job is to run investment portfolios focused on companies with sustainably high, or improving, financial productivity, trading at attractive valuations. Historically, I avoided investing in the music industry or the video game industry as they were volatile industries, with fading financial returns. Yet today, these businesses are seeing revenues that are not only growing fast, but becoming much more predictable, and often much more profitable. Company valuations have started to follow the sharp improvement in business quality and outlook. I have been thinking about these industries in a completely different way, and some of the portfolios than I manage are invested in a number of companies exposed to this trend. The digital revolution will continue to push profitability in both the music and the video game industry, so investors should watch this market with a renewed,
digital-focused, view.

Mark Little is a managing director and portfolio manager at Lazard Asset Management.

SEE ALSO: Tech stocks are diving, and traders have never been more scared of a massive meltdown

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Cryptocurrency payments startup Ripple is partnering with Madonna to raise funds for orphans in the African nation of Malawi.

• Brian Gallagher, a top Morgan Stanley electronic trading executive, has left the firm after 15 years.
• Gallagher, a senior sales person who formerly headed European trading at the bank, departed in recent weeks.
• A Morgan Stanley spokesman declined to comment on Gallagher's exit. 

A top electronic trading executive at Morgan Stanley has left the firm after 15 years, according to people familiar with the matter. 

Brian Gallagher, a managing director of sales in Morgan Stanley's equities electronic trading business who was with the firm since 2003, exited the bank in recent weeks. 

Gallagher formerly headed European electronic trading at the bank. 

A Morgan Stanley spokesman declined to comment on Gallagher's departure from the bank and Gallagher did not respond to a request for comment.

Gallagher was part of Morgan Stanley's star equities division which is the top stock trading business on Wall Street ahead of Goldman Sachs and JPMorgan.  These firms are locked in an arms race to improve their technology to grab market share in a global revenue pool for equities trading that generated $41.8 billion in 2017, according to data provider Coalition.

SEE ALSO: Morgan Stanley rises more than 3% after strong earnings beat

SEE ALSO: The power behind the throne at Morgan Stanley: Here's who insiders say is in line to replace CEO James Gorman

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NOW WATCH: An early investor in Airbnb and Uber explains why he started buying bitcoin in 2009

• Apple reported third-quarter earnings that beat Wall Street's expectations on Tuesday.
• The company said it earned $2.43 per share on revenues of $53.3 billion
• Shares climbed as much as 2.6% in after-hours trading
• Follow Apple's stock price in real-time here. 

Shares of Apple climbed as much as 2.6% in after-hours trading Tuesday following the tech giant's earnings report that topped Wall Street's expectations.

For the fiscal third quarter, Apple said it earned $2.34 per share on $53.3 billion in revenue. The Street had expected $2.18 per share and $53.31 billion, respectively. 

iPhone sales came in slightly short of the expected 41.6 million units, at 41.3 million during what is typically Apple's slowest quarter for phone sales. 

Revenue from services — one of it's fastest-growing units that includes Apple Music and the App Store — climbed 31% over the same quarter in 2017, hitting $9.55 billion. 

"We’re thrilled to report Apple’s best June quarter ever, and our fourth consecutive quarter of double-digit revenue growth," said Tim Cook, Apple’s chief executive, in a press release. "Our Q3 results were driven by continued strong sales of iPhone, Services and Wearables, and we are very excited about the products and services in our pipeline."

Apple is locked in a race with Microsoft, Amazon, and other mega-cap stocks to be the first $1 trillion company. Based on the number of outstanding shares at Tuesday's close, a stock price of $203.45 could take Apple past the milestone. It still has about $10 per share, or 2%, to go. 

Shares of the company are up 13.44% since the beginning of 2018. 

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Stocks staged a comeback Tuesday after a three-session losing streak amid optimism for cooling trade tensions between the US and China and after a series of strong earnings reports. The dollar rose, and Treasury yields fell. 

Here's the scoreboard:

Dow Jones industrial average: 25,418.10 +111.27 (+0.44%)

S&P 500: 2,816.67 14.07 (+0.50%) 

Nasdaq Composite: 7,671.79 +41.78 (+0.55%)

1. Facebook said it uncovered and deleted a group of accounts attempting to influence the November midterm elections through a coordinated disinformation campaign. The findings resemble those related to Russian efforts to influence the 2016 election, the social media giant said. 
2. Washington and Beijing may be able to avoid further trade escalations. Bloomberg reported representatives of Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He are working toward a restart in trade talks, according to two people familiar with the matter.
3. Amid rising tensions between Tehran and Washington, Iranian President Hassan Rouhani rebuffed President Donald Trump's suggestion to meet. After the two leaders swapped a series of threats last week, Trump told reporters Wednesday he would be willing to meet Rouhani anytime and without preconditions. But Iranian officials said that would not be "appropriate" at this point, according to the Wall Street Journal.
4. American workers saw the largest pay raises in nearly a decade in the year up to June. The employment-cost index rose 2.8% last month from a year earlier, the Labor Department said, the most since September 2008. 
5. Earnings season rolls on. Pfizer topped estimates and raised its forecast. Sony and Nintendo also beat. Apple reports after the bell — follow Business Insider's live updates here.

And a look at the upcoming economic calendar:

• The Federal Reserve announces its rate decision.
• Tesla, Volkswagen and BMW report earnings.

See also:

MORGAN STANLEY: The stock market is heading for its biggest sell-off of the year — here's how to protect yourself

America's housing market is raising a 'large red flag' for the economy

SEE ALSO: Tesla investors keep finding new ways to bet against the company ahead of the company's hotly anticipated earnings report

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NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

This article originally appeared on Bitcoin Magazine.

This article originally appeared on Bitcoin Magazine.

Financial services giant Northern Trust, which ranks 486th on the Fortune 500 list of the largest U.S. companies, has begun to wade into the cryptocurrency ecosystem. Northern Trust Offers Services to Crypto-Curious Hedge Funds Forbes reports that the 129-year-old Chicago-based firm, which caters to institutional investors, corporations, and high net worth individuals, has begun to

The post $10.7 Trillion Custodian Northern Trust Helping Hedge Funds Invest in Bitcoin appeared first on CCN

This article originally appeared on Bitcoin Magazine.

This article originally appeared on Bitcoin Magazine.

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The stock market is heading for its biggest sell-off of the year — here's how to protect yourself

A stock market sell-off worse than the February correction is coming, Morgan Stanley's equity strategists forecast.

Earlier in July, they advised clients to turn defensive on the market in preparation for a rotation to sectors like utilities. They also downgraded the tech sector , making two decisions that even they acknowledged many clients weren't excited about.

But the team led by Michael Wilson showed no sign of backing down on its views in its weekly note on Monday. In fact, the recent sell-off in tech, which led stocks lower Monday, only confirmed that the rotation to more-defensive sectors was gaining traction, Wilson said.

Credit Suisse second quarter profit doubles 

Shares of Credit Suisse Group AG were gaining around 2 percent in the morning trading after the Swiss banking giant reported Tuesday that its second-quarter profit more than doubled from last year, with improved revenues.

Looking ahead, the company said the outlook for global economic growth in second half remains positive. However, geopolitical developments and growing tensions surrounding global trade, as well as the impact of monetary policy changes by central banks, are likely to trigger periods of heightened uncertainty through the remainder of 2018.

The company said it is on track to achieve 10-11% Group RoTE 2019 target.

Tidjane Thiam, Chief Executive Officer of Credit Suisse, said, "For the remainder of 2018, we will continue to focus on growing our wealth management franchise and completing the last two quarters of our restructuring successfully. Looking to 2019 and beyond, we will continue to deliver improved profitability, higher returns and growing shareholder value."

A top JPMorgan strategist shares the one word investors need to know to get ahead in the 'extreme' market

"The only thing I know is that I know nothing," goes the famous saying, often known as the Socratic paradox.

The expression could well be applied to what's going on in financial markets right now. With the US economy going gangbusters and earnings following suit, investors have a lot to be positive about. At the same time, however, the spectre of US President Donald Trump's trade war looms large.

"For investors at the moment, the trickiest thing is working out whether to pay any attention to the current data or current earnings," Karen Ward told Business Insider in an interview last week.

Ward is the chief market strategist for the UK and Europe at JPMorgan Asset Management, which manages around $1.7 trillion of clients' money.

The founder of a restructuring firm accused McKinsey of racketeering — now the consulting giant is fighting back

The founder of a rival to McKinsey & Co. accused the firm and its senior executives of running a "criminal enterprise" and hiding conflicts of interests to win client business.

Now the consulting firm giant is fighting back.

Jay Alix, the founder of the restructuring firm AlixPartners, sued McKinsey in May, claiming that the consulting firm didn't disclose conflicts so it could win valuable assignments advising clients on bankruptcy matters. Alix no longer holds a majority stake in AlixPartners, and his lawsuit was filed in an individual capacity.

On Monday, McKinsey filed a motion to dismiss Alix's charges, arguing that "there is not a single fact alleged in the 150-page complaint and accompanying appendix that supports its incendiary headline accusation that McKinsey 'has unlawfully schemed to harm AlixPartners.'"

JPMorgan's US M&A chief shares how the role of investment bankers is changing

Halfway through the year, 2018 has been the hottest for mergers and acquisitions on record.

Global economic expansion, a friendlier corporate tax regime, cheap lending, boardroom confidence, and a sense of urgency thanks to the looming threat of industry-upending tech giants has led to $2.5 trillion in announced deals worldwide through the first two quarters, according to Thomson Reuters data. That's a 61% increase from 2017.

But despite the frothy environment, companies aren't getting a free pass to spend frivolously. The market continues to greet deals with scrutiny, and M&A that seems too expensive or doesn't make enough strategic sense has flopped when it crosses the finish line.

"The market is much more discerning in terms of evaluating M&A deals — not every deal gets a positive reaction," Anu Aiyengar, the head of M&A in North America for JPMorgan Chase, told Business Insider in a recent interview at the bank's midtown headquarters. "If investors like a deal, the acquirers' stock goes up; if investors don't like the deal terms or don't understand the rationale, the reaction is negative."

In markets news

• The stock market is undergoing a shift not seen since the financial crisis — and 3 ignored areas suddenly look like great bets

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NOW WATCH: An early investor in Uber, Airbnb, and bitcoin explains why it's actually a good sign that no one is spending their crypto

• The Federal Reserve is considering a key milestone in its public communication about the path of interest rates.
• Wall Street economists think a language change is coming that will signal monetary policy is no longer loose, meaning interest rates are no longer seen as particularly low.
• This week's meeting may be too soon; it's more likely such a shift will come in September, when the Fed is next expected to raise interest rates.

Federal Reserve officials meeting this week are grappling with an important milestone in their effort to raise interest rates gradually without derailing the economy: When to tell the world that interest rates are no longer all that low — or more accurately, that monetary policy is no longer "loose."

This is how the internal debate at the US central bank was characterized in minutes to the Fed’s June meeting. 

"Many (officials) noted that, if gradual increases in the target range for the federal funds rate continued, the federal funds rate could be at or above their estimates of its neutral level sometime next year. In that regard, participants discussed how the Committee's communications might evolve over coming meetings if the economy progressed about as anticipated; in particular, a number of them noted that it might soon be appropriate to modify the language in the post-meeting statement indicating that the stance of monetary policy remains accommodative."

Ward McCarthy, Jefferies chief financial economist, says he does not expect any tweaks to come at this week’s meeting, which is also not expected to yield another interest rate hike.

"How soon is soon? We think that August 1 is too soon," he writes in a research note. "However, we cannot preclude the possibility that the FOMC alters the language in the August 1 policy statement to set the stage for the modification of the phrase 'the stance of monetary policy remains accommodative.'"

But McCarthy adds: "The most efficient change on August 1 would be to change the statement to 'the stance of monetary policy remains accommodative for now.'"

The Fed has raised interest rates several times since December 2015 to a range of 1.75% to 2%. That may seem low historically, but comes in the context of an employment recovery that has taken so many years to make up the ground lost during the Great Recession.

Morgan Stanley economist Ellen Zentner and her colleagues are on the same page on the likely timing of the Federal Open Market Committee's language shift:

"We do expect that after raising rates at the September meeting, the FOMC may look to adjust its assessment that the stance of policy 'remains accommodative,' but that reference is likely to remain unchanged in the August statement for now," the bank's economists write in a research note. 

"The bulk of the changes we expect will be a mark-to-market in the section describing current economic conditions to reflect recent data."

SEE ALSO: One key staffing change makes the Fed even more likely to keep raising interest rates

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NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

• Soybean prices rose 3% on Tuesday.
• They are up more than 11% after falling nearly 20% since April amid President Donald Trump's tariffs.
• Trump recently rolled out a $12 billion aid package for farmers.
• Watch soybeans trade in real time here.

Soybean prices jumped Tuesday as the prospect of easing trade tensions between the US and China set the legume up for its longest streak of gains in nearly a year.

In a sixth straight session of gains and at the highest level in more than a month, soybean futures for November delivery rose by as much as 3% to $9.16 a bushel in midday trading. The legume has climbed more than 11% while gaining ground in 11 of the last 12 sessions. The rally follows a months-long decline that in July had dragged prices to near-decade lows.

Representatives of Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He are looking to restart trade talks after a months-long standoff, two people familiar with the matter told Bloomberg, in efforts to avoid further escalation in a trade war between the world's largest economies.

Soybean prices had shed nearly 20% since April when the Trump administration announced plans to penalize China for alleged intellectual-property theft and what the president sees as unfair trade practices.

The Trump administration enacted earlier this month a 25% tariff on roughly $34 billion worth of Chinese goods and threatened to slap additional duties on nearly all Chinese imports to the US, prompting Beijing to retaliate in kind.

Among the targeted $34 billion worth of US products are soybeans, which China has since been strategizing to reduce domestic reliance on by lowering trade barriers with other exporters of the legume.

Following backlash among American farmers — who make up a key part of Trump's political base — the administration last week rolled out $12 billion in emergency aid to farmers hurt by its trade policies. The controversial plan would include direct payments to farmers, trade promotion abroad, and government buyouts of surplus agricultural goods. 

Last week, Trump struck a deal with European Commission President Jean-Claude Juncker for the EU to purchase more American soybeans. But the EU consumes significantly less soybeans than China, which is the world's largest importer of the legume.

Soybean prices are down 12% year-over-year.

SEE ALSO: MORGAN STANLEY: The stock market is heading for its biggest sell-off of the year — here's how to protect yourself

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NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

• AMD's third-largest stakeholder, Mubadala Investment Co., sold off 22 million shares worth more than $400 million on Tuesday.
• AMD sank more than 3% following the filing by the Abu Dhabi based investment firm.
• Follow AMD's stock price in real-time here. 

AMD sank more than 3% Tuesday after its third-largest shareholder — Abu Dhabi-based Mubadala Investment Co. — sold 22 million shares at a market value of $427.7 million, according to data compiled by Bloomberg.

The investment firm held 56.9 million shares of AMD as of its most recent filing in August 2017, equating to more than 5% of the chipmaker's total equity. Only Vanguard and BlackRock have larger stakes.

It's not clear when Mubadala amassed the large stake in AMD, but the investment likely netted a hefty profit. Shares of the company have risen 37% since last August, when the 57 million share stake was disclosed, easily outpacing the S&P 500's 14% gain in the same period.

Mubadala did not immediately respond to a request for comment from Business Insider.

AMD on Wednesday reported second-quarter earnings that topped Wall Street expectations, sending its stock price higher by more than 6%. Cryptocurrency revenue, however, fell back to negligible amounts after the unexpected boon, the company's chief financial officer said on the earnings call.

Now read:

• CITI: A 'full-on global bear market' is coming — here's where to put your money until it arrives
• GOLDMAN SACHS: Big-money investors are dominating the market with the help of 10 stocks — here's the list and how they can continue crushing it
• BANK OF AMERICA: Global markets are echoing the 1998 financial crisis, and there's evidence for another crash

SEE ALSO: AMD: Our crypto boom is over

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NOW WATCH: An early bitcoin investor explains what most people get wrong about the cryptocurrency

• John Hussman, the outspoken investor and former professor who has been predicting a stock market crash, calls out a big mistake he says investors are making as valuations continue to climb.
• He sees this dynamic specifically playing out in the tech sector, which has been largely responsible for market gains in recent months, leaving them that much more vulnerable.

In the stock market, the concept of valuation can mean different things, depending on the investor.

To novices, it's frequently used as a simple barometer of when an investment gets overextended. Conventional wisdom there suggests once valuation gets stretched too far, it might be time to sell.

But to seasoned experts like John Hussman — a former economics professor who is now the president of the Hussman Investment Trust — assessing valuation is more nuanced.

He subscribes to what he calls the Iron Law of Valuation, which says the higher the price investors pay for future cash flow, the lower their long-term investment returns will be. In other words, if you arrive late to the party, don't expect to get the full experience.

It's a relatively basic concept that informs Hussman's view that irrational investor behavior will eventually lead the market to its doom. Piggybacking off the Iron Law, he points out that as prices have surged, people still seem ...

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Former U.S. President Bill Clinton will headline Ripple's Swell conference later this year, the cryptocurrency payments startup announced Tuesday.

Bitmain, the world’s largest bitcoin mining firm, is preparing to open a new data center in Texas, external job postings show. The China-based cryptocurrency company, which reportedly recorded $1.1 billion in profit during the first quarter, is currently looking for a project manager and data center site manager to staff a new plant in Rockdale,

The post Bitmain to Open New Data Center in Texas as North American Expansion Continues appeared first on CCN

• Three former Tesla energy salespeople claim they were subject to harassment, discrimination, and inadequate pay in a lawsuit against the company filed on July 25 in San Diego County Superior Court.
• The plaintiffs also claim some of their colleagues created fake sales accounts that inflated their bonuses and deceived investors and shareholders.
• A Tesla representative told Business Insider the plaintiffs' claims of mistreatment and fraud are untrue.

Three former Tesla energy salespeople claim they were subject to harassment, discrimination, and inadequate pay in a lawsuit against the company filed on July 25 in San Diego County Superior Court. The plaintiffs also claim some of their colleagues created fake sales accounts that inflated their bonuses and deceived investors and shareholders.

A Tesla representative told Business Insider the plaintiffs' claims of mistreatment and fraud are untrue.

"Tesla is absolutely against any form of discrimination, harassment, or unfair treatment of any kind by or against anyone, and we take any concerns raised by employees very seriously, as we did here. In this case, the facts simply don’t support the plaintiffs’ story," the representative said.

Two of the three plaintiffs, Andrew Staples and Robert Ray, began working for Tesla's energy sales division, previously named SolarCity, before it was acquired by the company for $2.6 billion in November 2016. The lawsuit does not specify when the third plaintiff, Anqunetta White, was hired. Each was let go around May 2017, according to the lawsuit.

The lawsuit alleges that some energy salespeople created fake sales accounts that allowed them to receive unwarranted bonuses and led to "an unreasonably high valuation of SolarCity."

A Tesla representative said the company investigated Staples' allegations about false sales and determined it was not true. 

"We have seen absolutely nothing that suggests there were 'fake potential sales accounts' as claimed in the lawsuit," the representative said.

The plaintiffs were allegedly subject to harassment and discrimination

The lawsuit alleges that Staples was subject to harassment and homophobic slurs from a supervisor based on his sexual orientation. According to the lawsuit, Staples informed multiple managers and Musk about the alleged mistreatment, but the managers didn't punish the supervisor. Instead, the lawsuit alleges, Staples was prevented from making sales in some cases and was let go "under a false pretext" in May 2017.

A Tesla representative said Staples did not alert the company to any instances of discrimination or harassment based on his sexual orientation while he worked there.

Ray was subject to age discrimination, the lawsuit alleges. According to the lawsuit, Ray was 59 when he was let go and, while he was allegedly told his position was being eliminated, the lawsuit claims. Ray said he believes he was replaced by an employee who was under 30. Ray, Staples, and the third plaintiff, Anqunetta White, were not paid for all the hours they worked, the lawsuit alleges, and in some cases were told to underreport their hours on their timesheets.

A Tesla representative said White and other applicable employees were found to have been paid properly, and that White declined a request to submit a list of unpaid hours to Tesla. The representative also said the plaintiffs were let go as part of the company's decision to end SolarCity's door-to-door sales channel.

"The plaintiffs’ roles were eliminated last year when, as part of Tesla’s integration with SolarCity, we decided to close our door-to-door sales channel for energy products – a decision that was announced publicly and covered extensively in the media – and the suggestion that they were eliminated for any other reason is false," the representative said.

Other Tesla employees have alleged being subject to racial and sexual harassment while working at the company, and other former salespeople have claimed they were not adequately paid. 

SEE ALSO: Tesla investors keep finding new ways to bet against the company ahead of the company's hotly anticipated earnings report

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NOW WATCH: An early investor in Airbnb and Uber explains why he started buying bitcoin in 2009

• MoviePass on Tuesday announced a slew of measures designed to shore up its finances, including higher monthly rates and black-outs on some of the hottest movies.
• The stock more than doubled after the announcement — but then quickly sank back into the red below to $0.54.
• MoviePass customers have reported widespread service issues since the company first said it received an emergency loan last week.

After a string of service interruptions and a near-constantly falling stock price, MoviePass' parent company finally found some good news for investors — but it only briefly helped the struggling stock. 

Helios & Matheson — the company that has become synonymous with MoviePass since its purchase of the subscription service last year — announced Tuesday that it would raise its monthly fee to $14.95 "within the next 30 days" while also limiting availability of high-demand movies.

"Over the past year, we challenged an entrenched industry while maintaining the financially transparent records of a publicly traded company," CEO Ted Farnsworth, said in a press release. "We believe that the measures we began rolling out last week will immediately reduce cash burn by 60% and will continue to generate lower funding needs in the future."

The announcement came one day after executives told staff of the new measures in an all-hands meeting on Tuesday.

Because MoviePass has to pay the full ticket price for all the movies its subscribers go see, eliminating major releases going forward means the cash-strapped company would pay millions less. (As of mid-July, MoviePass paid more than 1.15 million tickets for just "Avengers: Infinity War.")

Shares of HMNY skyrocketed as high as $2 from their opening price of $0.73 following the announcement — triggering at least two trading halts in the process — before sliding back below the $1 mark that it has struggled to maintain in the past week, bottoming out at $0.54.

After receiving a warning from Nasdaq that it could be delisted, HMNY last week announced a reverse stock split, giving shareholders 1 share for every 250 they previously owned. This week's slide, however, has taken the stock price back below $1. The company must maintain a trading price above $1 for 10 consecutive business days, the stock exchange's requirements say.

"These changes are meant to protect the longevity of our company and prevent abuse of the service," MoviePass CEO Mitch Lowe said in the press release. "While no one likes change, these are essential steps to continue providing the most attractive subscription service in the industry. Our community has shown an immense amount of enthusiasm over the past year, and we trust that they will continue to share our vision to reinvigorate the movie industry."

HMNY was trading at $0.54 as of 1 pm Tuesday. 

Jason Guerrasio contributed to this report.

SEE ALSO: The strange story of how MoviePass' owner was created by an Indian company accused of massive fraud

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• Emma Sayle is the CEO and founder of Killing Kittens, a "female empowerment brand" valued at £5 million which hosts high-end sex parties for its members around the world.
• The concept? To provide a safe space for women to explore their sexuality.
• The parties have anywhere between 60 and 200 guests and are held in apartments, mansions, or country homes in the likes of London, New York, Paris, Venice, and Sydney.
• She told Business Insider what goes on behind the scenes — and what people get wrong about it.
• The company recently crowdfunded nearly £600,000 to take the brand digital with a new platform and app.
• Sayle also just launched SafeDate, an app which encourages users to check in before a date, and have a notification sent to someone they trust if they don't check back in by an agreed upon time.

In capital cities around the world, luxurious sex parties are being held in mansions and clubs right under our noses — but they're nothing like you'd expect.

40-year-old Emma Sayle founded "female empowerment brand" Killing Kittens in 2005 after she realised there was nowhere for women to explore their sexuality in a safe environment without being judged.

Previously working in financial PR, the CEO told Business Insider: "It was all about the time that 'Sex and the City' was out, and there was all of this talk about the female sexual revolution, and women being able to talk about their sex lives."

However, she added that while it was being written and talked about, it wasn't happening in society.

"Women were still being judged for one night stands, but when men had a one night stand they were a legend," she said. "There was a real imbalance, and I wanted to do something about it."

Building the 'KK Army'

The name of the company, known to its members simply as "KK," has an interesting back story.

It comes from the expression: "Every time you masturbate, God kills a kitten," according to Sayle, who said she heard the phrase while partying in Ibiza.

"I liked the name, I liked the two K's. In my 'I haven't slept for three days' state, I said 'That's what I'm calling it.'"

The events started on a small scale — about 30 to 50 people once per month — but they started to grow organically and through word of mouth.

"It became a sort of movement," she said, adding that she now calls members the "KK Army."

"We have events all over the world now, and the digital world has exploded as well."

Becoming a Kitten

Along with the parties, Killing Kittens is an online community featuring chatrooms and a blog.

"It doesn't matter where you are in the world, you can communicate and chat to other people and not be judged," Sayle said.

To become a member, you must register on the site and go through the vetting process, which involves submitting photos, "verifying you're a real person," and explaining why you're on the site and what you're looking for, according to Sayle. It also involves a one-off £20 fee.

"Our members want [someone] of a certain age, or more girls, or girls only," she said.

While you can be a free member and just pay for the event tickets, should you be accepted, you can also opt to pay £10 a month to use the digital platform, where there's a blog and chat rooms where you can arrange meet-ups.

However, the brand is best known for its Killing Kittens parties, which Sayle calls "more full on masked parties in mansions, private houses, and clubs [where] if you wander into certain areas you will see people shagging."

'What goes on in there stays in there'

The locations range from penthouse apartments filled with 60 people to mansions and country houses with 150-200 guests, according to Sayle.

"We've been in New York, in Dublin, in a castle in Scotland, in villas in Sydney, in Venice, in Paris," Sayle said, adding that the parties all have a similar format.

"They're all masked, cocktail dress, with a Champagne/cocktail oyster reception."

There are also DJs and burlesque dancers with the bigger venues.

She described the demographic as "AB," adding that the company doesn't like single men coming on their own.

"It keeps the testosterone factor down," she said. "We have groups of girls come and dance around in their underwear and don't do anything else, because they know they're not going to get hit on, so they can just relax."

At each party, there are "playooms" and candlelit bedrooms with music.

"If you want to get naked, you go there," she said. "What goes on in there stays in there."

And there are a few other strict rules, like the fact that all members must wear masks — but the main one is that men can't approach women.

There are also "Kurious" events, which Sayle launched three years ago, where you can explore the KK world without being a member or being vetted — you can simply buy a ticket.

"A big part wasn't just coming to events and getting naked, [but] finding out about yourself and your sexuality," she said. The Kurious events involve talks, workshops, and weekend retreats that aim to inspire confidence.

'I watched Batman carry a guy wrapped up in a sheet'

Ultimately, we were most interested in the sex parties, though — and Sayle says the company has organised the "occasional fantasy experience" even outside of these, "with everyone's permission" of course.

In one, "we'd kidnap the partner and they'd follow clues and have to rescue the girl who they'd find tied up in some hotel," she said. 

"One guy wanted to be kidnapped in Kensington Gardens by Batman and rescued by Supergirl, who had been tied up in a hotel.

"I watched Batman carry a guy wrapped up in a sheet."

She added that police often turn up at the events, even though they're not doing anything illegal.

"Every event there's something funny that happens," she laughed — and she describes in her book "Behind the Mask," which she wrote in 2012.

Crowdfunding to go digital

Of the more than 100,000 members worldwide, more than 70% are in the UK, with the rest are across the US, Australia, and Europe, according to Sayle, who added the membership is also an even 50/50 male/female split.

And recently, they had the chance to become investors in the business.

The company started a Seedrs crowdfunding campaign to raise £500,000 for digital expansion earlier this month — and it surpassed its target before the end of July, reaching £598,100.

"To go into the tech world and digital world, we need to go big or go home," Sayle said.

"We need a site and an app to go with it, and that's not cheap.

"Getting individuals to put large amounts in didn't feel comfortable — it's always been about the community."

While the crowdfunding platform started out private for members only, it was opened up to the public earlier in July.

The company was already valued at £5 million pre-funding, and plans to use the funds to introduce a new digital platform including a Killing Kittens app (to be released in December), as well as to promote Sayle's other new app, SafeDate, which was released earlier this month.

Funding a 'safety app'

The idea for the app came about from a Killing Kittens chat room, where monitors — or "Community Kittens" — could see girls telling others in the group where and when they were going for a hookup, since they didn't want to tell their real friends, but wanted to make sure someone know their whereabouts.

"They liked the anonymous side of it," Sayle said.

With SafeDate, which is free to download and use, you can check in when you go on a date with information on where you're going, and select the person or people who will receive a message if you don't check back onto the platform when you say you will.

And it's not just for dating.

"I have friends who have teenage daughters, [and] it's something good for a parent to know their daugher has it on their phone," she said. "If they're on a cinema date, they can put in a time they have to check back in, and if they don't, their "safe people" will get a message with the details of where they've been."

She added it can also be great for people working in bars to let someone know once they leave work that they've checked in at home safely.

This isn't the first time Sayle has pushed for female empowerment outside of the sex space.

She started The Sisterhood, an organisation which empowers girls and women to believe in themselves and "have each others' backs," 12 years ago — and even got some attention from a then-single Kate Middleton.

"It came from a drunk bet with some guys about racing eachother across the English Channel in dragon boats and grew from there," she said. "It became a big community. It's got sport at its core and crazy challenges."

Members have rafted down the Amazon, climbed Kilimanjario, and they paricipate in a big charity ball every year. Next April, they'll be competing in a relay race from LA to Vegas.

Sayle said Middleton, a "lovely human being" who she has "lots of mutual friends" with, came to The Sisterhood right at its start to do the Channel crossing. "It was when she'd split with William, then she got back together with him and pulled out and the rest is in the history books," she said. 

She added that now, at the helm of Killing Kittens, she and Middleton are in "very different worlds."

Proving people wrong

There are certainly a lot of people who doubt her — and a number of misconceptions about what goes on within her company.

For starters, she said there's a perception that you have to get naked and have sex to come along to a Killing Kittens party.

"There is sex that happens at some of the events, but it's not the reason why people go," she said. "It's a by-product of being there."

She added that a lot of people also assume it's a big swingers party.

"It's not at all," she said, adding that only 19% of members are couples. "The rest are singles, and the couples don't consider themselves swingers.

"The perception is that it's some big seedy shagging setup, without getting the whole female side of it."

However, the numbers are starting to speak for themselves, and Sayle said friends are "starting to get" the business side of things.

According to Sayle, Killing Kittens' turnover has increased by 30-50% every year for the last five years, and last year turned over £1 million.

She told Business Insider she has also had interest from dating apps who want to build the SafeDate tech into their platforms.

"Friends spent a decade asking when I'd get a proper job, now I say: 'Now do you get it?'

"The list of people I've proved wrong gets longer and longer."

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• The first half of 2018 was a record for dealmaking, with $2.5 trillion worth of mergers and acquisitions.
• Yet the market remains skeptical, and not all deals have been greeted with approval from investors.
• Anu Aiyengar, the head of M&A in North America for JPMorgan Chase, told Business Insider that messaging around mergers and analyzing a company's investor base has grown increasingly important.
• Companies used to tightly guard their M&A strategy, but times have changed, she said. 
• In a recent interview, Aiyengar discussed how M&A strategy has changed, why the bank is spending more time coaching clients on messaging, and why it gives them an edge in the world of dealmaking. 

Halfway through the year, 2018 has been the hottest for mergers and acquisitions on record. 

Global economic expansion, a friendlier corporate tax regime, cheap lending, boardroom confidence, and a sense of urgency thanks to the looming threat of industry-upending tech giants has led to $2.5 trillion in announced deals worldwide through the first two quarters, according to Thomson Reuters data. That's a 61% increase from 2017. 

But despite the frothy environment, companies aren't getting a free pass to spend frivolously. The market continues to greet deals with scrutiny, and M&A that seems too expensive or doesn't make enough strategic sense has flopped when it crosses the finish line. 

Take General Mills, for instance, which received a cool welcome from analysts after announcing in February it had bought the high-growth pet food company Blue Buffalo for $8 billion — about 25 times EBITDA. The cereal maker's stock slid more than 7.5% in the ensuing three days of trading. 

More recently, asset management giant State Street saw its shares plunge as much as 9%, the most in nearly three years, after buying financial data firm Charles River Development for $2.6 billion. 

"The market is much more discerning in terms of evaluating M&A deals — not every deal gets a positive reaction," Anu Aiyengar, the head of M&A in North America for JPMorgan Chase, told Business Insider in a recent interview at the bank's midtown headquarters. "If investors like a deal, the acquirers' stock goes up; if investors don’t like the deal terms or don’t understand the rationale, the reaction is negative."

JPMorgan has been one of the most active M&A advisers in the first half, orchestrating 176 deals worth $554 billion, good enough for third place behind Morgan Stanley and Goldman Sachs, according to Thomson Reuters. 

In Aiyengar's territory of North America, the bank worked on nine of the top 20 announced M&A transactions in North America.

[Read More: JPMorgan is chasing a $3 billion opportunity in places like Atlanta, Dallas, and Seattle — and it's raised the stakes in Wall Street's race for national dominance]

And increasingly, under her watch, the firm finds itself spending considerable time advising its clients on messaging and cultivating their investors long before a deal is in the offing, so as to avoid a sloppy landing once a hard-won transaction is finally announced to the world. 

"The importance of corporate communications is at a totally different level today," Aiyengar said. It's also grown more complicated and high stakes with activist investors constantly prowling and even passive managers, like BlackRock, becoming more likely to throw their weight around and less likely to rubber-stamp boardroom strategy.

Analyzing the investor base and developing thoughtful, well-communicated acquisition strategy is an obvious tactic in Aiyengar's mind, yet she says it's not common practice among Wall Street investment banks, which may be because historically companies have kept the secret sauce of their M&A strategy tightly guarded.

But times have changed, and that approach no longer adds up, she said.  

Aiyengar recently discussed how M&A strategy has changed, why the bank is spending more time coaching clients on messaging, and why it gives them an edge in the world of dealmaking. 

The following has been edited for length and clarity. 

What role does messaging play in successful dealmaking?

Communicating M&A strategy and broader investor communications has become much more complex. Companies need to think proactively about messaging and preparing the investor base. If the company strategy is appropriately communicated and the investors understand it, then when a deal prints, investors say, “I get it, it’s consistent with what the company articulated as part of their strategy.” When the deal is consistent with strategy and well explained, there’s no reason the market shouldn’t react favorably, even if it's a dilutive deal.  But if a company surprises an investor, and announces a deal that is not part of their communicated strategy, then they significantly enhance the risk of a negative market reaction. The importance of corporate communications is at a totally different level today.

What role do JPMorgan's investment bankers play in this?

We spend a lot of time discussing corporate communications and preparing the investor base with clients. Some companies might spend a lot of time on a press release, but in our opinion, a press release is almost too late to start the dialogue. Is the investor base well prepared — when the deal crosses the ticker tape what’s the instinctive visceral reaction? As in: “You did what?” or “Oh, we understand.” It's sometimes as simple as that.

To an extent, if a stock is in an index, it’s more complicated to exit. In some ways, some of these reactions may be muted because there’s more passive holding. Investors have to look stock by stock at what their passive-active mix includes — it's a more nuanced analysis.

And how much work are you guys doing for clients on understanding that investor base and in doing that nuanced analysis?

Often when we're working with a company for a long period of time, we help them shape their communications in advance of an M&A deal. There is greater importance on what a company discloses in a public setting — earnings calls, analyst and industry conferences. If a company consistently delivers the same message, it will not be a surprise when they act in the future. For example, if a company states they are looking for growth, possible global expansion, as well as exploring ecommerce and end up paying up to do one or all of these things, it doesn’t come as a surprise to the market because they’ve articulated it previously. 

So why isn't this practice already widely adopted?

Historically companies believed in never discussing their M&A strategy in a public setting. Sometimes companies might be concerned of discussing possible M&A and not executing a deal. This concern was more relevant when the potential M&A transactions were obvious. In today’s world of disruptive cross-sector deals, companies are not really showing their hand by articulating the core principles of their M&A strategy. 

Companies can talk about their M&A strategy without having to be specific — you can have several qualifiers in the message to be clear that company is exploring these strategies (not committing to do a deal) and will be disciplined in its approach (will be focused on shareholder value creation).  

Is this specific advice different from what other banks are providing clients?

Yes, it is.  Some companies view investor communications as the investor relations or IR job.  In our view, that shareholder communications need to be at a different level with full engagement from the C-suite.  It is the public face of the company and its strategic direction, and the CEO and the executive management team have to be integral to the strategy and participate in the discussion.

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• President Donald Trump's administration is considering adjusting Treasury Department regulations to index capital-gains taxes to inflation.
• Such a change would result in a roughly $100 billion tax cut over the next 10 years, with 97% of the gain going to the top 10% of income earners.
• But there's a problem with the idea: It's probably illegal.

President Donald Trump is considering a massive new tax cut, but the administration's plan to implement the tweak to the tax system is on shaky legal ground.

The New York Times reported Monday that the Trump administration was considering a change that would index capital-gains taxes to inflation.

The administration wants to fulfill this longtime Republican goal by adjusting Treasury Department rules, bypassing Congress.

What's the plan?

Today, an investor who sells an asset is taxed on the difference between the amount paid for the asset and the amount earned in the sale.

• For instance, an investor who made a $100,000 real-estate investment in 1990 and sold today for $1 million must pay taxes on the $900,000 difference.
• But Under Trump's new plan, the $100,000 investment would be adjusted for inflation.
• Based on the consumer price index inflation rate between 1990 and today, the value of the initial investment would be adjusted to about $198,000.
• That means the investor would owe taxes on the $802,000 difference, a significant savings compared with current law.

According to independent analyses, Trump's plan would mainly benefit wealthy Americans, who make up a larger portion of asset sales. The Penn-Wharton Budget Model estimated that the change would cut taxes by $102 billion over 10 years, with 97.5% of the benefit from capital-gains inflation indexing going to the top 10% of income earners. In fact, according to its estimate, 63% of the benefit would go to just the top 0.1% of income earners.

Why the plan is probably not feasible

This idea has come up before, but it was scrapped because it appeared to be on shaky legal grounds.

To implement the tweak, the Treasury Department would adjust the meaning of the word "cost" from the Revenue Act of 1918. Capital-gains indexing advocates say the original meaning of "cost" has not been clearly defined.

But in 1992, the administration of President George H.W. Bush considered making the same change Trump has now proposed and found that the Treasury Department had no legal grounds to make the switch.

In a report from the Justice Department, Assistant Attorney General Timothy Flanigan determined that the meaning of the word "cost" was not ambiguous, since the term had been defined over time by a series of legal rulings and additional legislation from Congress.

"The Department of the Treasury does not have legal authority to index capital gains for inflation by means of regulation," the report concluded.

Brian Gardner, the director of Washington research at the investment bank Keefe, Bruyette & Woods, wrote in a note to clients that a lawsuit would be "almost certain" if the Trump administration went through with the plan.

"We think there is a good chance the administration would lose a lawsuit in court if it came to that," Gardner said.

In addition, making the switch would create regulatory and logistical nightmares, says Len Burman, a fellow at the Tax Policy Center.

Indexing advocates say a series of legal rulings in the decades since the Bush administration study could open the door for the change. But the Trump administration would almost certainly be hit with a legal challenge if the Treasury Department made the switch.

"Indexing capital gains alone by executive fiat while leaving the rest of capital taxation unchanged would make no sense," Burman wrote in a blog post. "It would cut capital gains taxes by up to $20 billion a year for the richest Americans and open the door to a raft of new, inefficient tax shelters."

Given the optics around the likely winners from the change and the thin Republican margin in the Senate, a legislative switch also doesn't seem likely anytime soon.

SEE ALSO: Trump is reportedly considering going around Congress for a massive tax cut that would mostly benefit wealthier Americans

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• As the pressure to lower drug prices increases, the Trump administration and the pharmaceutical industry are shifting the blame onto pharmacy benefit managers, the middlemen of the drug operation.
• Eliminating PBMs would be getting rid of rebates — a key payment that acts as a discount to the list price drugmakers set.
• Goldman Sachs published a research report last week, saying rebate retractions could be positive for pharmaceutical companies with diverse portfolios of new and innovative drugs. However, they could have adverse effects on companies who rely heavily on legacy drugs in over-crowded markets.

In the wild witch hunt of who's to blame when it comes to high costs in drug pricing, the latest victim has been pharmacy benefit managers.

Dubbed the middlemen of the drug industry, PBMs include companies like Express Scripts, CVS Caremark, and Optum RX who work with insurers that pay for drugs to negotiate lower prices with drug companies. As part of this process, drugmakers pay out more than $100 billion in rebates to PBMs, a financial arrangement that Health and Human Services Secretary Alex Azar has criticized.

Azar said that PBMs have an incentive to keep drug prices high because of rebates. 

“Right now, everybody in the system makes their money off a percentage of list prices,” Azar testified in June before a Senate committee. “We may need to move toward a system without rebates.”

Pfizer CEO Ian Read said a healthcare model without rebates will be beneficial to patients and the industry broadly. 

"With the removal of rebates, we will remove the sort of, what we call the rebate trap, whereby access is denied to innovative products because of a strong position over another products with its rebates," he said Tuesday on a company earnings call. 

"I believe we are going to go to a marketplace where we don't have rebates."

A research report released by Goldman Sachs last Tuesday took a look at how eliminating rebates might impact pharmaceutical companies. Rebates have been used historically to promote healthy market competition between drugmakers. But these systems are sometimes hijacked by larger pharmaceutical companies to protect their own drugs. Because of the way drug markets are shaped, some pharmaceutical companies tend to benefit from rebates while others lose out. 

Goldman Sachs categorized the drug portfolio of major pharmaceutical companies into three categories: innovative, stable and legacy. Innovative portfolios boast new drugs and therapies where there is little to no competition in the market. Stable portfolios contain drugs that treat general consumer and animal health and vaccines. These are drugs with steady sales over time but no remarkable growth or profitability. Then there are the legacy drugs, which have been used for a long time with proven safety and efficacy but face a lot of competition from generic brands. 

SEE ALSO: The CEO of one of the largest health insurers in the US explains why he thinks healthcare costs so much

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• A no deal Brexit is "not an option" for UK car manufacturers, the head of Britain's auto manufacturing group said on Tuesday.
• "No deal... is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well," Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT) said.
• The warning was made more stark as new figures show that nine out of ten cars built in the UK in the last month were due for export rather then domestic sales, as demand in the domestic market collapsed by 47%, Reuters reported.
• "A no-deal scenario is feared by volume UK auto manufacturers which could affect the smooth running of plants and squeeze the already tight cost margins of British car companies selling to Europe," David Leggett, a director and car industry analyst at Just Auto, told Business Insider.

A no deal Brexit is "not an option" for the UK car industry, considering the disruption and cost carmakers would suffer, the head of the country’s auto manufacturing group said on Tuesday.

Carmakers are "increasingly concerned" about the lack of clarity around the manner of Britain’s departure from the European Union, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT) said, Reuters reported.

The warning was made more explicit as fears over disruption to cross-border trade were highlighted by new figures showing that nine out of ten cars built in the UK last month were for the foreign export market.

Prime Minister Theresa May, who has eight months until the split with the EU is due to take place, is yet to produce a proposal that can sustain economic links and satisfy both her party and negotiators in Brussels.

This has left open the possibility that Britain could have economic ties with the EU severed, leaving the UK dependent on World Trade Organisation rules meaning British car exports to the EU would face 10% tariffs.

"No deal... is just not an option. It would be seriously damaging to the industry not just in the UK but in Europe as well," Hawes told Reuters and other reporters as he presented SMMT’s mid-year update on British car production.

The car industry employs over 850, 000 people, both directly and indirectly in Britain and Hawes said car manufacturers were getting as "ready as possible" for any disruption from a no-deal Brexit.

In the first six months of 2018 British car production fell by 3.3% due to a sharp decline in domestic demand outweighing a boost in exports. In June production fell by 5.5% compared with June in 2017, despite a 6% rise in export output. Behind the shift is a domestic market collapse of 47%.

"This reflects a number of developments, including model cycles and pressures on consumer spending in Britain," David Leggett, a director and car industry analyst at Just Auto, told Business Insider.

On the cost to car manufacturers he added that a no-deal scenario is feared by volume UK auto manufacturers which could affect the smooth running of plants and squeeze the already tight cost margins of British car companies selling to Europe.

"The auto industry in Britain is highly locked in to pan-European supply chains. Besides the impact of new trade tariffs of as much as 10%... the industry in Britain could face expensive hold-ups at borders for additional checks that would disrupt production schedules set-up for just-in-time delivery processes," Leggett said.

Despite the concerns over Brexit, Hawes reassured reporters, that "looking at the long-term picture, the sector is performing as expected in the context of market conditions at home and abroad."

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• Jay Alix, the founder of restructuring firm AlixPartners, sued McKinsey & Co earlier this year.
• Alix claimed that McKinsey was hiding conflicts of interest to win client business. 
• McKinsey on Monday filed a motion to dismiss the claims.

The founder of a rival to McKinsey & Co accused the firm and its senior executives of running a "criminal enterprise" and hiding conflicts of interests to win client business.  

Now the consulting firm giant is fighting back. 

Jay Alix, the founder of restructuring firm AlixPartners, sued McKinsey in May, claiming that the consulting firm didn't disclose conflicts in order to win valuable assignments advising clients on bankruptcy matters. Alix no longer holds a majority stake in AlixPartners and his lawsuit was filed in his individual capacity. 

Financial advisers and lawyers who are seeking to work for a bankrupt company must disclose their ties to other parties in the case, such as investors and creditors, to avoid potential conflicts of interest and ensure they're working in the best interests of their clients.   

Alix sued McKinsey under the Racketeer Influenced and Corrupt Organizations (RICO) Act, a law that has historically been used to target mobsters, accusing the firm of bankruptcy fraud, mail fraud, and wire fraud.

He claimed that McKinsey's restructuring business, called RTS, has received tens of millions in fees that it wouldn't have ordinarily earned if it had disclosed conflicts with clients. According to the suit, McKinsey's lack of disclosure has harmed AlixPartners. 

The suit came after the Wall Street Journal reported in April that McKinsey had drawn criticism for disclosing far fewer potential conflicts of interest than other advisers. 

On Monday, McKinsey filed a motion to dismiss the charges made by Alix, arguing that "there is not a single fact alleged in the 150 page complaint and accompanying appendix that supports its incendiary headline accusation that McKinsey 'has unlawfully schemed to harm AlixPartners.'" 

Alix's complaint is "an unfounded and reckless use of RICO by a competitor of McKinsey," the motion says. Alix has failed to demonstrate that McKinsey directly injured AlixPartners through lost revenue opportunities, it adds, alleging that there is no evidence that AlixPartners even applied for the 13 bankruptcy assignments that McKinsey had won.

Alix's lawyer, Sean O'Shea of Boies Schiller Flexner, was not immediately available for comment. 

McKinsey, which is known best for its traditional consulting business, only entered the bankruptcy advice business in 2011. It's is a small player in an industry dominated by restructuring advisers like Alvarez & Marshal, FTI Consulting, and AlixPartners.

But the firm's entrance into the space has chipped away at market share from incumbents, according to data from Debtwire, which ranked McKinsey fifth for fees generated by bankruptcy advisory work in 2017. McKinsey has worked on several large bankruptcies including American Airlines and energy company SunEdison. 

This is not the first time that Alix has challenged McKinsey. Alix in 2016 formed a company called Mar-Bow Value Partners, named after iconic McKinsey partner Marvin Bower. Mar-Bow acquired a stake in coal producer Alpha Natural Resource, a McKinsey bankruptcy client, to gain legal standing to press McKinsey to disclose more about its connections to clients. 

A McKinsey spokesperson said in a statement:

"... Courts have previously upheld the appropriateness of McKinsey’s disclosures.  This lawsuit is just one more part of Mr. Alix’s anticompetitive campaign to push out of the market a competitor whose deep expertise and unmatched scale deliver superior bankruptcy outcomes.”

SEE ALSO: The Wall Street bankers who feast during recessions say there's a 'smell in the air' and it's starting to feel like 2007

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