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Rivals crying foul over Nets owner Joe Tsai’s latest business venture

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Brooklyn Nets owner Joe Tsai is looking to widen his investments in the NBA — and his unusual play has some competitors crying foul.

The billionaire co-founder of China-based e-commerce giant Alibaba is poised to take a stake of less than 5 percent in the firm behind HomeCourt Partners, a fund that has won special permission from the NBA to raise $2 billion to buy small stakes in numerous basketball franchises, many of which are now losing money.

Tsai — who as the right hand of Alibaba chairman Jack Ma boasts a personal fortune of $11.7 billion, according to Forbes — is making his move as the COVID-19 pandemic has devastated the NBA, with yearlong lockdowns wiping out ticket sales and forcing wealthy team owners to cough up cash to keep operations afloat.

But as Tsai’s deal moves forward, critics point out that the NBA bylaws explicitly prohibit team owners from taking stakes in competing franchises, even indirectly, unless they get the league’s OK or own less than 1 percent through a publicly traded stock.

“No owner … shall hold any direct or indirect financial interest in any other member [team],” without league approval, according to the bylaws.“

This is a huge conflict,” a rival private equity fund manager told The Post of Tsai’s planned ties to HomeCourt Partners. “It sounds like there is one rule for Joe Tsai and one for everyone else.”

Tsai aims to close the deal through his Hong Kong-based hedge fund Blue Pool, which owns a stake in Owl Rock Capital, a direct lender that’s in the process of merging with Dyal Capital, the private equity firm behind HomeCourt.

Normally, NBA team ownership stakes are sold directly to individuals. But the NBA has given Dyal, a unit of asset manager Neuberger Berman, special permission to raise money as more minority owners search for exits amid endless capital calls.

The planned $12 billion tie-up, which aims to close this summer, promises a big payout for Tsai, who will be able to sell preferred shares in Owl Rock as part of the deal, a source close to the merger said. It will result in a new investment company called Blue Owl that will trade on the New York Stock Exchange and manage $45 billion in assets, according to public documents.

NBA Commissioner Adam Silver has not yet studied the issue, the league said. “It’s premature to comment given that the Owl Rock/Dyal transaction hasn’t happened and the league has yet to review it,” an NBA spokesman said.

Tsai declined to comment, but a rep for Dyal denied the transaction will result in any violation of NBA rules, noting that Tsai will own a stake in the asset manager and not in the HomeCourt Partners fund itself.“

Dyal’s Homecourt Partners fund will invest in passive minority stakes in NBA teams on behalf of its fund investors. Believing that a Blue Owl public shareholder owns a stake in a team through its Blue Owl shares is ridiculous,” the Dyal spokesman said.

But critics say Tsai’s investment in HomeCourt’s parent company not only violates the letter of the law, it also creates the potential for the Brooklyn Nets owner to gain a sneak peak at rival team financials, which could be used to his advantage in player trade talks.

Tsai bought the Brooklyn Nets for a record $2.35 billion from Russian billionaire Mikhail Prokhorov through his J Tsai Sports group in 2019. Oliver Weisberg is CEO of both J Tsai Sports and Blue Pool Capital.

“Either Tsai is going to have to get a waiver from the league or figure out a way to exit these stakes,” a former NBA team CEO familiar with the ownership rules said.

After launching HomeCourt last year, Dyal is expected to close on its first $750 million funding round in the coming weeks with plans to buy stakes in six unidentified NBA teams, according to Sportico.

Mark Rosentraub, a professor of sports management at the University of Michigan, told The Post he believes the transaction is a clear-cut violation of NBA rules if it gives Tsai even an indirect financial interest in other NBA teams. If Silver has another private equity firm that can quickly replace Dyal, he could choose it and bench HomeCourt, he said.

“If he has an option, I think he should play the option,” Rosentraub said.

Otherwise, Rosentraub believes Silver should find a way to give Tsai a waiver, including by getting him to place any proceeds he stands to collect from HomeCourt in a blind trust. Sources say Tsai stands to profit from a management fee Blue Owl will collect from the fund. A performance fee also will kick in after seven years when the fund’s investors are allowed to sell their positions.

“Let’s solve the problem but not jeopardize the solution,” Rosentraub said, adding that the bigger issue is helping money-losing teams get liquidity to pay their bills. Of course, such an exception would likely never be allowed if it weren’t for the pandemic, he added.

“You never would allow this conflict if there was not a crisis of this scale,” Rosentraub said.



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Tesla more than doubles Q1 sales, delivers 185,000 vehicles

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Tesla says it delivered nearly 185,000 electric vehicles in the first quarter despite a shortage of computer chips that has hit the global auto industry.

The number was more than double the deliveries for the same period last year. And it beat Wall Street estimates of 168,000 for January through March. The company says in a statement that the Model Y small SUV in China has been well received.

Tesla lists no production figures for its older models, the S sedan and X SUV, during the quarter, but it delivered just over 2,000 of them. It says new equipment has been installed at the Fremont, California, factory and production of new versions is in the early stages.

The strong sales are a sign that demand for the company’s relatively expensive vehicles remains strong despite the pandemic. Analysts polled by data provider FactSet estimate that the average selling price of a Tesla is $49,100.

Shares of Tesla are down more than 9 percent so far this year as some of the shine wore off electric vehicle and tech stocks, which had experienced a big runup last year. The stock closed Thursday down just under 1 percent at $661.75. Markets are closed for the Good Friday holiday.

Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla's first-quarter sales.
Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla’s first-quarter sales.
Xinhua News Agency via Getty Images

Tesla sold just under 500,000 vehicles last year, barely missing a target set by CEO Elon Musk. The company hasn’t given much guidance for this year’s sales figures.

Wedbush analyst Dan Ives called the first-quarter numbers a “jaw dropper,” and a huge home run in the eyes of bullish investors. “We believe China and Europe were particularly robust this quarter as the trajectory now puts Musk & Co. to exceed 850k for the year which is well ahead of whisper expectations,” he wrote Friday.

The Model 3 small car and the Model Y accounted for nearly all of the Palo Alto, California, company’s first-quarter sales. Tesla said it sold 182,780 of both models combined.

Ives wrote that analysts expected more than 12,000 sales of Models S and X, with the miss driven by the chip shortage.

The strong sales came even though the company shut down much of its Fremont production for several weeks in late February and early March. It did not say why, but it’s likely that the company ran short of computer chips.

President Joe Biden’s announcement this week of $174 billion in spending on electric vehicle incentives and charging stations, and rising global demand for electric vehicles should shift sentiment toward Tesla stock, Ives wrote.

“It’s been a brutal sell-off for Tesla and EVs, but we believe that will now be in the rearview mirror,” he wrote.



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55 firms paid no federal income tax last year, report finds

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Dozens of America’s biggest companies paid no federal income taxes last year thanks to a range of tax breaks — including some brand-new ones, a new report says.

The 55 corporations avoided a total of $8.5 billion in taxes on more than $40 billion in pre-tax profits in their most recent fiscal year, according to the Friday report from the Institute on Taxation and Economic Policy.

In fact, 52 of those firms — including household names such as Nike, FedEx and Dish Network — ended up pocketing federal tax rebates worth a collective $3.5 billion, the left-leaning think tank’s analysis found.

And 26 of them haven’t paid a penny in federal income tax in the three years since the Tax Cuts and Jobs Act reform bill was signed into law in 2017, the report says. That group includes shipping giant FedEx and power company Duke Energy, which reported nearly $15 billion in pre-tax income for those three years, according to the findings.

Nike sneakers
Nike is among dozens of major corporations reported to be paying little to no federal income taxes.
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“Duke Energy fully complies with federal and state tax laws as part of our efforts to make investments that will benefit our customers and communities,” company spokesperson Catherine Butler said, adding that Duke paid more than $2 billion in annual state and local taxes in 2020.

Major companies have used loopholes in federal tax law to help their bottom line for decades, the think tank’s researchers note. But they got a fresh boon from the CARES Act, the $2.2 trillion stimulus bill that aimed to help businesses weather the COVID-19 pandemic.

Big firms were able to take advantage of a provision in the bill to use losses they racked up in 2018 or 2019 to offset profits from previous years, which slashed some of their 2020 tax bills to less than zero, according to the report. That measure accounted for at least $500 million of the 55 giants’ tax breaks, the report says.

FedEx stood by the CARES Act tax breaks, saying the law helped it and other companies “navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”

FedEx truck
FedEx is said to be among major firms pocketing federal tax rebates while avoiding federal income taxes.
Alamy Stock Photo

But many companies also used more established methods for giving themselves tax discounts.

Those include write-offs for paying executives in stock, which were used by more than a dozen companies, while at least half a dozen took federal research and experimentation credits, the report says.

The list included some companies hit hard by the pandemic, including crafts retailer Michaels, as well as companies that thrived despite the lockdowns, like Salesforce.com, the cloud computing company that announced record 2020 earnings in February.

Salesforce logo
Salesforce is reported to be among thriving firms able to take advantage of numerous write-offs.
Getty Images

By reining in tax breaks like those, “or by re-introducing some form of a ‘minimum tax’ requiring profitable companies to pay at least some tax in any profitable year, Congress and President Biden could take a major step toward a fairer and more sustainable tax system,” authors Matthew Gardner and Steve Wamhoff wrote in the report.

Salesforce, Michaels, Nike and Dish Network did not immediately respond to requests for comment.



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China admonishes H&M over ‘problematic’ map on website

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Swedish retailer H&M continues to clash with Beijing, this time over how it has portrayed the region geographically.

Chinese officials admonished H&M Friday over a “problematic” map on the company’s website in the latest sign of escalating tensions after the Swedish retailer criticized China’s controversial cotton-picking region.

Shanghai government regulators summoned H&M managers to a meeting after internet users complained about the map, officials said on social media.

Chinese officials did not provide any detail about the alleged offense, which they said H&M managers quickly corrected.

But H&M got in trouble with China in 2018 for listing Taiwan as a country on the Taiwanese version of its website. China claims the democratic island country is part of its territory.

H&M was told to “bolster its awareness of the national territory, and really ensure the standardized use of the Chinese map,” the Cyberspace Administration of China’s Shanghai arm said in a post on the WeChat social network, according to The Wall Street Journal.

H&M did not immediately respond to a request for comment Friday.

The map flap is just the latest headache H&M has faced in China, the fast-fashion retailer’s top clothing supplier and its fourth-largest market by sales.

The company was hit with boycott threats last week and had its products pulled from Chinese e-commerce platforms over a statement it made last year saying it does not source cotton from the Xinjiang region, where Beijing has been accused of forced labor practices against Uyghur Muslims.

H&M tried to tamp down the backlash Wednesday with a new statement saying it’s “dedicated to regaining the trust and confidence” of its customers, colleagues and business partners in China, where its store locations were reportedly scrubbed from digital maps last week.

The company said it wants to be “a responsible buyer, in China and elsewhere,” but did not mention Xinjiang specifically.

With Post wires

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