Business

By Saqib Iqbal Ahmed

NEW YORK (Reuters) -Traders in the U.S. equity options market appear to be betting that stocks, which turned volatile last week following the Federal Reserve’s warning on continued policy tightening, will remain choppy over at least the next couple of months.

The volatility index, or VIX, was 0.33 points higher at 25.89, after rising to a more than 6-week high of 27.67, earlier in the session.

Fed Chair Jerome Powell warned on Friday that the U.S. central bank would raise rates as high as needed to restrict growth and keep them there “for some time” as it fights to control inflation.

The options-based gauge had dipped to a 4-month low earlier in August but rising worries about the stock market being vulnerable to the Fed’s aggressive campaign of interest rate hikes has helped lift the index in recent sessions.

On Monday, VIX options volume stood at 478,000 contracts, or 1.3 times what is usual, according to options analytics firm Trade Alert data. One trade in particular stood out due to its large size. It appeared to involve the sale of 151,500 VIX October 19th puts at the 20 strike.

“This sale expects the VIX to remain over 20 through the October expiry,” Joe Tigay, portfolio manager at Equity Armor Investments, said.

The VIX’s long-term median stands at 17.7 and a VIX above 20 points to a slightly elevated expectation for market gyrations.

While the VIX has picked up from a week ago, the current level points more to an expectation for choppy markets than outright panic, Michael Purves, chief executive of Tallbacken Capital, said.

As we get into September, a seasonally weak time for U.S. stocks, investors looking to pick up more options protection could potentially drive the VIX higher, Purves said.

Meanwhile, the EURO STOXX 50 Volatility VSTOXX, the VIX’s European equivalent, rose 1.8 points to finish at a near 6-week high of 28.46.

(Reporting by Saqib Iqbal Ahmed; additional reporting by Samuel Indyk in London; editing by John O’Donnell and Nick Macfie)

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By Tom Hals

WILMINGTON, Del (Reuters) -Elon Musk has subpoenaed a Twitter Inc whistleblower, seeking documents and communications on the company’s spam and alleged security vulnerabilities as the billionaire battles to end his agreement to buy Twitter for $44 billion, according to a court filing on Monday.

Musk sought information from whistleblower Peiter Zatko mostly about the way Twitter measures spam accounts. Musk has said he is walking away from the his deal for the company because Twitter misled him and regulators about the true number of spam or bot accounts on the microblogging platform.

But Musk also sought documents and communications about alleged attempts to hide security weaknesses and “Twitter’s engagement in any unlawful activity.”

A spokesman for Twitter did not immediately respond to a request for comment.

A famed hacker widely known as “Mudge,” Zatko ended a stint as the head of Twitter’s security earlier this year, and said in his whistleblower complaint that became public last week that the company falsely claimed it had a solid security plan.

A Twitter attorney said at a court hearing last week that Musk’s focus on spam as a way to end his agreement to buy the company was “legally irrelevant” because Twitter always said its spam counts were only estimates, not binding representations.

The two sides have sued each other and are heading to a five-day trial on Oct. 17. Musk wants out of the deal and Twitter is asking Chancellor Kathaleen McCormick of the Delaware Court of Chancery to order him to buy the company for the agreed $54.20 per share.

Twitter’s stock was down slightly at $40.36 on Monday morning in New York.

(Reporting by Tom Hals in Wilmington, Del.Editing by Mark Porter and Matthew Lewis)

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BOGOTA (Reuters) – Representatives of Colombia’s oil, mining and tourism industries told opposition lawmakers on Monday a $5.7 billion tax reform proposed by the government of leftist President Gustavo Petro could put their sectors at risk.

Petro, who took office early this month, has said he is willing to negotiate on the reform, which seeks to raise 25 trillion pesos in 2023 to fund anti-poverty programs.

The bill would levy a 10% tax on income earned when coal and oil are exported for prices exceeding a certain threshold, though a proposal to include gold exports has been withdrawn.

The threshold for oil would be $48 per barrel, while coal exports would see the duty levied when prices exceed $87 per tonne.

“The tax reform as it’s proposed puts at risk the viability of many exploration and production projects in Colombia, and with them our energy self-sufficiency,” said Francisco Lloreda, the head of Colombian Petroleum Association, at an event hosted by lawmakers form the right-wing Democratic Center party.

“Not allowing what companies transfer to the government to be deducted from royalties, plus the export tax that is being proposed, would mean this industry will end up paying 24% of the reform,” Lloreda said, estimating oil companies’ taxes could increase by 65% to 80%.

The reform has profound impact on mining, said Juan Camilo Narino, head of the Colombian Mining Association (ACM).

“It compromises job creation, it compromises investment,” Narino said, adding minerals are necessary for the transition to renewable energy.

Proposed duties higher than the normal value added tax of 19% on travel packages could damage tourism, which has not yet recovered to pre-pandemic levels, said Paula Cortes, the president of the Colombian Travel Agency and Tourism Association.

“Taking away tax benefits for tourism means we will not see a swift reactivation,” Cortes said.

The head of the Colombian Agricultural Society, Jorge Bedoya, hailed the reform for not levying higher taxes on basic food, but warned potential labor reforms floated by the administration could have negative consequences.

(Reporting by Carlos Vargas; Writing by Julia Symmes Cobb; Editing by Alistair Bell)

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By Laura Sanicola

(Reuters) – Oil prices settled up more than 4% on Monday, extending last week’s gain, as potential OPEC+ output cuts and conflict in Libya helped to offset a strong U.S. dollar and a dire outlook for U.S. growth.

Saudi Arabia, top producer in the Organization of the Petroleum Exporting Countries (OPEC), last week raised the possibility of production cuts, which sources said could coincide with a boost in supply from Iran should it clinch a nuclear deal with the West.

OPEC+, comprising OPEC, Russia and allied producers, meets to set policy on Sept. 5.

Brent crude settled up $4.10, or 4.1%, at $105.09 a barrel, having risen by 4.4% last week. U.S. West Texas Intermediate (WTI) crude gained $3.95, or 4.2%, to$ 97.01, after rallying 2.5% last week.

“Oil prices are inching higher on hopes of a production cut from OPEC and its allies to restore market balance in response to the revival of Iran’s nuclear deal,” said Sugandha Sachdeva, vice president of commodity research at Religare Broking.

Nations that are members of the International Energy Agency could release more oil from strategic petroleum reserves (SPR) if they find it necessary when the current scheme expires, the head of the agency said on Monday.

The price of crude oil has surged this year, with Brent coming close to a record high of $147 in March as Russia’s invasion of Ukraine exacerbated supply concerns. Rising fears over high interest rates, inflation and recession risks have since weighed on the market.

Oil’s gain was limited by a strong U.S. dollar, which hit a 20-year high on Monday after the Federal Reserve chairman signalled that interest rates would be kept higher for longer to curb inflation. [USD/]

“While a strong dollar restrains broad commodity prices, the undersupply issue in the oil markets will probably continue to support the upside bias,” said CMC Markets analyst Tina Teng.

Unrest in Libya’s capital at the weekend, resulting in 32 deaths, sparked concern that the country could slide into a full-blown conflict and disrupt in oil supply from the OPEC nation.

U.S. crude oil stockpiles likely fell 600,000 barrels with distillates and gasoline inventories also seen down, a preliminary Reuters poll showed on Monday.

The poll was conducted ahead of reports from the American Petroleum Institute, an industry group, due at 4:30 p.m. EDT (2030 GMT) on Tuesday, and the Energy Information Administration, the statistical arm of the U.S. Department of Energy, due at 10:30 a.m. (1430 GMT) on Wednesday.

Crude inventory in the U.S. emergency reserves fell by 3.1 million barrels in the week to Aug. 26 to the lowest since December 1984, according to data from the Department of Energy.

(Additional reporting by Alex Lawler; Additional reporting by Mohi Narayan in New Delhi and Sonali Paul in Melbourne; Editing by David Goodman, Kirsten Donovan and David Gregorio)

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By Doyinsola Oladipo

(Reuters) -The National Labor Relations Board (NLRB) said on Monday it was unlawful for Tesla Inc to prohibit employees from wearing shirts bearing union insignia, ruling in a 2017 dispute between the electric car maker and the United Automobile Workers (UAW) union.

NLRB Chair Lauren McFerran said the decision reaffirms “any attempt to restrict the wearing of union clothing or insignia is presumptively unlawful and – consistent with Supreme Court precedent – an employer has a heightened burden to justify attempts to limit this important right.”

In a 3-2 decision, the NLRB said that when companies interfere with employees’ rights to display union insignia the employer “has the burden to establish special circumstances” and the majority “found that Tesla failed to establish special circumstances in this case.”

Tesla and the UAW did not immediately respond to requests for comment.

(Reporting by Doyinsola Oladipo in New YorkWriting by David ShepardsonEditing by Mark Porter and Matthew Lewis)

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SAN FRANCISCO (AP) — From fire departments to governments, from school districts to corporations, from local utilities to grassroots organizers around the world, Twitter at its best is a tool to get a message out quickly, efficiently, directly.

It’s also a constant risk-and-reward calculation.

A recent bombshell whistleblower report from Twitter’s former head of security alleges that the social media company has been negligently lax on cybersecurity and privacy protections for its users for years. While worrisome for anyone on Twitter, the revelations could be especially concerning for those who use it to reach constituencies, get news out about emergencies and for political dissidents and activists in the crosshairs of hackers or their own governments.

“We tend to look at these companies as large, well-resourced entities who know what they’re doing — but you realize that a lot of their actions are ad hoc and reactive, driven by crises,” said Prateek Waghre, policy director at the Internet Freedom Foundation, a digital rights nonprofit in India. “Essentially, they’re often held together by cello tape or chewing gum.”

Peiter “Mudge” Zatko, who served as Twitter’s security chief until he was fired early this year, filed the complaints last month with federal U.S. authorities, alleging that the company misled regulators about its poor cybersecurity defenses and its negligence in attempting to root out fake accounts that spread disinformation. Among Zatko’s most serious accusations is that Twitter violated the terms of a 2011 FTC settlement by falsely claiming that it had put stronger measures in place to protect the security and privacy of its users.

Waghre said the allegations in the complaint about India — that Twitter knowingly allowed the Indian government to place its agents on the company payroll where they had “direct unsupervised access to the company’s systems and user data” — were particularly worrisome. He also pointed to an incident earlier this month where a former Twitter employee was found guilty of passing along sensitive user data to royal family members in Saudi Arabia in exchange for bribes.

The consequences of privacy and security lapses can range from inconvenience and embarrassment — such as when an Indiana State Police account was hacked and tweeted “poo-poo head” earlier this year — to much worse. In October 2021, a Saudi humanitarian aid worker was sentenced to 20 years in prison because of an anonymous, satirical Twitter account that the kingdom says he ran. It’s possible that the case is linked with the men accused of spying on behalf of the kingdom while working at Twitter.

As an advocate for dissidents and others detained in Saudi Arabia, Bethany Al-Haidari has been concerned for years about Twitter’s user privacy safeguards. The new whistleblower allegations make her all the more worried.

“Given what we know about how social media is used around the world, that is incredibly problematic,” said Al-Haidari, who works for The Freedom Initiative, a U.S.-based human rights group. The possibility of hackers or governments exploiting the alleged cybersecurity lapses at Twitter to get users’ identities, private messages or other personal information “is quite disturbing to me,” she said.

Chinese-Australian artist and activist Badiucao, who regularly publishes art that criticizes the Chinese Communist Party, expressed concern about the whistleblower’s allegations, noting that many users provide their phone numbers and emails to Twitter.

“Once that personal information is leaked, it could be used to trace your identity,” he said. Badiucao said he regularly receives death threats and propaganda from what appears to be bot or spam accounts.

But the artist plans to keep using Twitter, saying it’s probably the best option Chinese-speaking activists and artists have for a “shelter for free speech.”

Twitter says the whistleblower claims present a “false narrative” about the company and its privacy and data security practices, and that the claims lack context. “Security and privacy have long been company-wide priorities at Twitter and will continue to be,” the company said in a statement.

Despite the heightened concerns sparked by Zatko’s claims, none of the groups The Associated Press spoke to this week plan to stop using Twitter. Security experts say while the whistleblower’s claims are alarming, there’s no reason for individual users to delete their accounts.

High-profile Twitter users and world governments may be at greater risk than average users, experts say. In 2020, for instance, Twitter suffered an embarrassing hack by a teenager who accessed the accounts of then-President Barack Obama, Joe Biden, Mike Bloomberg and a number of tech billionaires including Tesla CEO Elon Musk and Amazon founder Jeff Bezos. Musk is currently embroiled in a battle with Twitter as he tries to back out of a $44 billion deal to buy the company.

Yet another security incident raised alarms for Jennifer Grygiel, a Syracuse University communications professor who follows Twitter closely. In 2017, a Twitter customer support worker deactivated then-President Donald Trump’s account for a few minutes during their last day on the job. While the account was restored quickly, Grygiel said, the incident showed how vulnerable Twitter was when it comes to governments, heads of state and military branches that use the platform.

“Am I surprised and shocked by the whistleblower’s allegations? I’m not,” said Trav Robertson, chair of the South Carolina Democratic Party, which uses Twitter to communicate with about 18,700 followers. But he argues that it’s especially important for people not to assume that “the constant attacks on our emails, our databases, our Twitter accounts, our Facebooks” are the new normal. “When we become desensitized to it, we fail to be proactive,” he said.

At the City of Denver’s fire department, public information officer JD Chism acknowledges concern over security issues. But the department has to weight that risk against the way Twitter has become integral to communicating emergencies to the public. The department’s Twitter feed hosts real-time updates on fires and consequent road closures and injuries, alongside retweets from other agencies warning of dangers such as flash floods.

For now, the department will keep using Twitter as it always has, Chism said, “It’s good for taking care of people, and that’s what we are here for.”

—

Associated Press Writers Krutika Pathi in New Delhi; Jesse Bedayn in Denver; Jennifer Peltz in New York; James Pollard in South Carolina; Zen Soo in Hong Kong; Margaret Stafford in Kansas City; Russ Bynum in Savannah, Georgia; Jay Reeves in Birmingham, Alabama; Amy Taxin in Orange County, California; Rebecca Santana in New Orleans; Jonathan Mattise in Nashville, Tennessee; and Michael Goldberg in Jackson, Mississippi, contributed to this story.

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By Kanishka Singh

WASHINGTON (Reuters) -Democratic U.S. Senator Elizabeth Warren said on Sunday that she was very worried that the Federal Reserve was going to tip the nation’s economy into recession and that interest rate hikes would put people out of work.

“Do you know what’s worse than high prices and a strong economy? It’s high prices and millions of people out of work. I am very worried that the Fed is going to tip this economy into recession,” Warren told CNN on Sunday.

The U.S. central bank’s chief, Jerome Powell, warned on Friday that Americans were headed for a painful period of slow economic growth and possibly rising joblessness as the Federal Reserve raises interest rates to fight high inflation.

Powell said in a speech on Friday the Fed will raise rates as high as needed, and would keep them there “for some time” to bring down inflation that is running at more than three times the Fed’s 2% goal.

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” Powell had said in his speech.

“What he calls ‘some pain’ means putting people out of work, shutting down small business because the cost of money goes up because the interest rates go up,” said Warren, whose views on the economy are often influential among progressive Democrats.

Warren said inflation was high partly due to supply chain problems, the COVID-19 pandemic and the war between Russia and Ukraine.

“There is nothing in raising the interest rates, nothing in Jerome Powell’s tool bag, that deals directly with those and he has admitted as much in congressional hearings,” Warren said.

(Reporting by Kanishka Singh in Washington; Editing by Lisa Shumaker and Alistair Bell)

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ROME (AP) — Italian authorities scrambled on Sunday to relieve overcrowding in shelters after scores of boats carrying a total of about 1,000 migrants reached Italy’s southern shores and two of its tiny islands over the weekend.

Nearly 50 boats arrived between Friday night and Saturday on Lampedusa island off Sicily, according to state radio and other Italian media. Other boats carrying migrants reached Pantelleria, another tiny island favored by vacationers.

Hundreds of migrants stepped ashore from the virtual flotilla of smugglers’ vessels on those islands. Several of the vessels launched by migrant smugglers held as few as eight passengers. But others had around 100 passengers aboard, many of them from Tunisia, according to the reports.

Other boats reached the shores of the Italian mainland on Saturday, either unaided or assisted by Italian coast guard vessels.

The Italian news agency ANSA said that 92 migrants, most of them from Afghanistan, reached Puglia — the “heel” of the boot-shaped peninsula — in a sailboat on Saturday. Still other migrants sailed to Calabria in the “toe” of the peninsula, while other boats reached Sicily and Sardinia, Italy’s two biggest islands, in the last two days.

On Sardinia, Carabinieri paramilitary police spotted 29 migrants walking along a road, ANSA said.

The humanitarian organization Doctors Without Borders tweeted that one of its rescue ships, Geo Barents, saved 25 migrants, including five minors, from a small boat in distress in international waters near Libya on Saturday night. Geo Barents already had other migrants abroad plucked to safety in other rescue operations, the group said.

With the disembarkation of hundreds of migrants from boats in the last days, the residence temporarily housing rescued migrants on Lampedusa quickly became overcrowded. Corriere della Sera said the residence housed 1,500 asylum-seekers, nearly four times its capacity.

Interior ministry authorities arranged for a commercial passenger ferry to sail from Sicily to Lampedusa, where it was expected to arrive on Sunday night, embark 250 migrants and take them to Sicilian migrant residences to lessen crowding on the tiny island’s facility.

While hundreds of thousands of migrants have set sail from Libyan shores aboard smugglers’ boats in the last decades, many also set out from Tunisia.

Italian media noted the Tunisian coast guard had thwarted at least a score of attempts by vessels filled with migrants to head toward Italy and rescued many others from boats in distress on Friday and Saturday.

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Follow AP’s coverage of migration issues at https://apnews.com/hub/migration

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PORTLAND, Maine (AP) — Diesel and heating oil supplies in the Northeast are more than 50% below the recent average, raising concerns that an extreme weather event could cause supply disruptions, federal officials said.

Fuel supplies are lower than normal across the country for a variety of reasons, including the war in Ukraine. But it’s the worst in the Northeast.

Diesel fuel and heating oil, which comprise the distillate category, are 63% below the five-year average in New England and 58% below the same average from Maryland to New York, according to a survey by the Department of Energy. Gasoline inventories are not as bad, but are still at their lowest levels in nearly a decade along the entire East Coast, the agency said.

The Northeast is heavily dependent on heating oil to keep homes warm in the winter, while other regions rely more on natural gas and electricity. Also, the National Oceanic and Atmospheric Administration has projected an active hurricane season, and a powerful weather event could cause disruptions, since most fuel consumed from the Middle Atlantic states to Maine comes from Gulf Coast refineries, energy officials say.

Energy Secretary Jennifer Granholm is convening a meeting of New England governors and their energy directors after Labor Day to discuss the situation. In the meantime, she has urged governors in a letter to take whatever steps they can to shore up fuel supplies in coming weeks to prevent any problems.

The Energy Department also sent letters to seven major oil companies, asking them to hold onto their stocks to help offset low stocks.

The federal agency has been monitoring the problem and is attempting to be proactive with outreach. But there’s little incentive for buyers to stock up on high-priced fuel for storage because it is anticipated that prices will drop, said Michael Ferrante, of the Massachusetts Energy Marketers Association.

The fuel inventory concerns come against a backdrop of Russian’s invasion of Ukraine further shaking up an energy supply chain that was seeking to catch up with growing demand. The war is causing worries about the adequacy of energy supplies around the world.

In New England, the immediate concern in the late summer is diesel fuel, but the winter heating season looms not far behind.

Heating oil disruptions would hit the region hard because the percentage of homes that rely on it range from 24% in Massachusetts to more than 60% in Maine, the most heavily dependent states.

Maine Gov. Janet Mills, a Democrat, has urged the Energy Department to expedite its meeting with governors to talk about maintaining a stable heating oil supply.

Maine is “distinctly vulnerable to the increased prices and volatility the global fossil fuel market is now experiencing due to the Russian invasion of Ukraine,” said Anthony Ronzio, a spokesperson for the Mills administration.

Despite the concern, wholesale suppliers and retailers are working well together, and Ferrante said he anticipates inventories will increase in September and October, easing the immediate concerns.

He said he is optimistic that there will be an ample supply of heating oil.

“Suppliers and retail delivery companies are concerned about prices and inventory, but there’s not any alarm bell being rung at this time,” he said. “I don’t see a crisis at this point.”

The Energy Department created a heating oil reserve that holds 1 million barrels in terminals in the Northeast. Those could be tapped in an emergency.

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Follow David Sharp on Twitter @David_Sharp_AP

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By Tatiana Bautzer and Aluisio Alves

SAO PAULO (Reuters) – A new law allowing soccer clubs in Brazil to seek outside investment is attracting hundreds of millions of dollars to a country renowned as football’s biggest source of talent, a change that could see Brazilian teams rival Europe’s top tier.

The surge of fresh, mostly foreign, cash coincides with an agreement last May by Brazil’s largest clubs to create a league modeled on Britain’s Premier League that will centralize talks to sell transmission rights and marketing contracts.

Together, the recent developments have spawned a funding bonanza for the Brazilian teams, which have long been fan-owned operations closed to outside investors.

That may allow Brazil – the world’s largest exporter of footballers – to keep its best players in the country longer and charge higher fees for talent that does move overseas.

The biggest deal in the works is for a 51% stake in Brazilian league champion Atletico Mineiro, according to two people with knowledge of the matter, who said the club had met with dozens of investors. The deal could fetch 1 billion reais ($200 million), one of the people said.

The people requested anonymity to disclose private discussions. The club did not respond to a request for comment.

Guilherme Avila, sports investment banking partner at XP, a Brazilian broker, predicted that at least 10 fan-owned Brazilian soccer clubs will become investor-owned companies over the next two years.

In December, the sale of second-division club Cruzeiro to retired Real Madrid and Brazil striker Ronaldo became the first deal to take advantage of the law, approved roughly a year ago.

Deal for Rio de Janeiro’s cash-strapped Botafogo followed earlier this year. Its crosstown rival Vasco da Gama was sold this month.

Next in line is second-division Esporte Clube Bahia’s possible sale to City Football Group, an Abu Dhabi company with investments in Manchester City and 10 other football clubs.

Bahia’s ongoing negotiations with City Football Group were first announced by the Brazilian club’s president, Guilherme Bellintani, earlier this year. Bellintani told Brazilian media the deal’s value is 650 million reais ($126.4 million).

City Football Group declined to comment on the Bahia deal. Bahia did not respond to a request for comment on the matter.

TV RIGHTS WINDFALL

As for lucrative TV rights, talks are expected to start next year about 2025 and beyond.

Brazilian network TV Globo bought exclusivity from the clubs through 2024 for the national soccer championship and many regional tournaments. But going forward, the league will divide the rights – as the leagues in England, Italy, Spain and Germany do – into packages for which different groups may bid, including Globo but also other local and international media companies that show interest.

Last year, clubs in Brazil’s first division received 3.5 billion reais ($687 million) in transmission rights, mainly from Globo, with a part from Amazon Prime.

By contrast, England’s Premier League, which has the world’s top soccer transmission rights revenues, got $3.9 billion in the 2021 from broadcasters including Sky Sports, BT Sport and Amazon.com Inc’s Prime Video.

In a glimmer of things to come, the rights for the regional championship in Sao Paulo, long held exclusively by Globo, was last year split for the first time between local broadcaster Record and also YouTube, with a slice of pay-per-view games going to HBO Max/TNT Sports as well as Globo. The new model raised revenues by 30%.

ATLETICO LOOKS OVERSEAS

Atletico Mineiro is being advised by investment bank BTG Pactual. The club reached out to City Football as a potential suitor, but the group was not interested in the deal, one of the sources said.

Rafael Menin, scion of the family that controls Brazilian homebuilder MRV and one of four businessmen who have lent the team some 500 million reais in recent years, told Reuters the club prefers an international investor “with experience or ownership of a large European soccer club”. He declined to comment on the potential price.

Rio de Janeiro’s 120-year-old Fluminense has also hired BTG to help it look for investors, but three people with knowledge of the matter that spoke with Reuters expect the club to fetch less than Atletico given its weaker finances. Fluminense did not respond to a request for comment.

Three bankers said the largest clubs, including Corinthians and Palmeiras, may be candidates for initial public offerings. Some clubs with healthy balance sheets may be against selling their control to one investor and would prefer a more diverse shareholder base, according to the bankers.

“Depending on the financials, listing may make more sense than a private deal”, said BTG head of M&A Bruno Amaral.

Corinthians and Palmeiras did not immediately respond to requests for comment on their potential for an IPO.

Soccer club listings elsewhere have had a mixed history, with the world’s largest listed club Manchester United having chronically underperformed the S&P index. United made headlines last week when billionaire Elon Musk said in jest that he was buying the famed team, sparking takeover speculation.

NEW SOCCER LEAGUE

Libra, as the new Brazilian league is known, has 13 clubs including Flamengo, Corinthians, Palmeiras, Sao Paulo and Santos. A second group, comprised of 25 teams, is in public talks to join Libra.

“A professional league may completely change Brazilian soccer” said Alessandro Farkuh, sports and media banker at BTG, which is advising the new league. A professional negotiation of rights may drastically increase revenues for clubs, he said.

Brazilian clubs get just 1% of their revenues from international transmission rights, whereas the Premier League gets 48% and Spain’s La Liga gets 44%.

XP analysts, in a June report about the soccer business, forecast that Brazilian clubs could reap 200 million reais ($39 million) from international rights in the first year, still amounting to less than 5% of their total revenues.

The new scenario may lead Brazilian soccer to $5 billion annual revenue, said KPMG sports and media leader, Francisco Clemente, up from $1.3 billion last year. The firm is advising Vasco da Gama and Corinthians, Brazil’s second-largest club by number of fans.

“If Brazilian soccer gets the same GDP share as Spanish and British soccer, annual revenues could quadruple”, he said.

This could also reverse the recent trend of Brazilian players being sold to European clubs before they reach peak potential, analysts say. The average transfer value in Brazil fell to 12.9 million euros last year from 19.2 million euros in 2018, according to XP.

The average Brazilian transaction is just a third of the 35.7 million euros average Spanish transfer deal.

With larger revenues, Brazilian clubs may afford to take time for the development of exceptional players, instead of using transfers as recurring revenue, XP’s Avila said. This could result in larger average transfer values in the future.

“With higher revenues, Brazilian clubs will be able to keep the top talent playing longer in the country”, Avila said.

(The story corrects 32nd paragraph to clarify KPMG is advising Vasco da Gama, not Atletico)

(Reporting by Tatiana Bautzer and Aluisio Alves; Editing by Christian Plumb and Frank Jack Daniel)

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