News Archive


Iran woos local investors as U.S. sanctions loom, currency falls

DUBAI (Reuters) – Iran plans to offer price and tax incentives to private investors to take over idle state projects and help boost the economy, state media reported on Saturday, as the country faces likely U.S. sanctions and the exit of many foreign companies.

In May the United States pulled out of a multinational deal to lift sanctions against Iran in return for curbs on its nuclear program, and Washington has told countries they must halt all imports of Iranian oil from Nov. 4 or face U.S. financial measures.

The new Iranian plan, along with action against alleged financial crime, appears to be aimed at easing concern over the U.S. decision.

The probable return of sanctions has triggered a rapid fall of Iran’s currency, protests by bazaar traders usually loyal to the Islamist rulers, and a public outcry over alleged profiteering.

The plan will offer attractive prices and flexible terms as well as tax holidays for investors who agree to take over some of the 76,000 government projects which are unfinished or idle, Vice-President Eshaq Jahangiri said on state television.

“Over the past few months, the country’s liquidity has gone into housing, foreign exchange and gold coins, raising prices and provoking public concerns,” Jahangiri was quoted as saying by the website of the state broadcaster.

“A main issue in the meeting … was to find solutions to push liquidity towards employment and activating manufacturing,” Jahangiri added after the meeting attended by President Hassan Rouhani, and the heads of parliament and the judiciary.

PULLING OUT

The sanctions start to come into effect in August but some European companies investing in Iran and with big U.S. operations have already announced they will pull out of business deals with Tehran.

The Iranian rial plunged to a record low against the U.S. dollar on the unofficial market on Saturday. The dollar was offered for as much as 97,500 rials, compared to about 85,500 a week ago, according to foreign exchange website Bonbast.com.

The currency has lost more than half of its value this year because of a weak economy, financial difficulties at local banks and heavy demand for dollars among Iranians who fear the effects of sanctions.

Judiciary spokesman Gholamhossein Mohseni Ejei said on Saturday that 18 people had been arrested over alleged profiteering from foreign exchange dealings and the illegal importing of luxury cars, state television reported.

In late December, demonstrations which began over economic hardship spread to more than 80 Iranian cities and towns. At least 25 people died in the unrest, the biggest expression of public discontent in almost a decade.

Demonstrators initially vented their anger over high prices and alleged corruption, but the protests took on a rare political dimension, with a growing number of people calling on Supreme Leader Ayatollah Ali Khamenei to step down.

Reporting by Dubai newsroom; Editing by Andrew Bolton

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Economy, dollar, trade key to U.S. stocks’ global edge

NEW YORK (Reuters) – The ability of the U.S. stock market to keep an edge this year over equities elsewhere in the world hinges on the United States maintaining its economic and earnings growth advantage, the strength of the dollar and how global trade tensions resolve, investors said.

Spurred by fiscal policy benefits including a corporate tax cut, the U.S. economy’s standout momentum relative to other regions has underpinned Wall Street’s advantage this year, investors said.

“The outperformance of U.S. stocks reflects not just earnings, but expectations about U.S. economic growth versus other regions,” said Kristina Hooper, chief global market strategist at Invesco.

“Conventional investor wisdom is that the U.S. is going to continue to outperform other economies this year and hence investors should move more of their exposure to the U.S.,” Hooper said.

A clearer read of the U.S. economy comes next week with data such as the government’s monthly employment report on Friday and quarterly results from more than 140 SP 500 companies, including Apple (AAPL.O).

According to an International Monetary Fund report this month, the United States is projected to post economic growth of 2.9 percent this year, up from 2.3 percent in 2017, while European advanced economies, and Japan and China, have slower growth than a year ago. The U.S. economy grew 4.1 percent in the second quarter, data on Friday showed, its fastest pace in nearly four years.

While returns for the U.S. benchmark SP 500 index trail last year’s – they are up 6 percent so far in 2018 against a 10.5 percent gain at a similar point in 2017 – U.S. equities are easily beating indexes covering Europe, Japan and emerging markets after lagging or just keeping pace for all of last year.

NEAR ALL-TIME PEAK

After rebounding from a 10-percent correction earlier this year, the SP 500 is close to an all-time high and on track for its best year relative to stocks in the rest of the world since 2014.

“Returns themselves have been lower than many investors have come to expect. But on a relative basis, the U.S. continues to be the market leader,” said Michael Arone, chief investment strategist at State Street Global Advisors.

U.S. stocks separated from equities elsewhere in particular during the second quarter, with investors citing a divergence in growth expectations.

Citi Research’s gauge on U.S. economic data surprises .CESIUSD was solidly positive in April and May, when its barometer for euro zone surprises .CESIEUR was sharply negative.

“There was a change in expectation from synchronized global growth to U.S. growth being better than the rest of the world really due to the fiscal tailwinds,” said Sunitha Thomas, regional portfolio manager for Northern Trust Wealth Management.

The dollar .DXY surged against other major currencies starting in the second quarter, and investors said the greenback’s path will be an important factor determining relative equity performance.

The dollar’s gains aided U.S. equity fund returns against international funds, which required a costly translation into the greenback, investors said.

The dollar’s strength weighed on emerging markets, where debt costs have increased and weaker currencies sparked an investor retreat. Emerging market stocks overall .MSCIEF have particularly lagged this year, declining 6 percent.

“All of these fundamental factors in emerging markets were triggered by the stronger U.S. dollar that were not good for economic momentum in those countries,” Thomas said.

ROSY EARNINGS

SP 500 profits are expected to surge 22.7 percent this year against an 8.5 percent rise for companies in Europe’s Stoxx , according to Thomson Reuters I/B/E/S, but the benefits from a cut in corporate tax rate to 21 percent from 35 percent will wane next year.

Expectations for economic growth in Europe and Asia appear more realistic, after being too high before, said Jeffrey Kleintop, chief global investment strategist at Charles Schwab.

“It really takes some very strong U.S. economic momentum, maybe even better than what’s expected today, to see a repeat of what we saw in the first half,” Kleintop said, adding it wouldn’t surprise him if there wasn’t a major performance difference for the rest of the year.

Any resolution of tensions between the United States and its trade partners resulting in more free trade stands to benefit stocks globally. But trade disputes have weighed more on non-U.S. markets, investors said, so those could be poised for a greater rebound.

“If trade simmers down, that’s disproportionately positive for international” markets, said Alec Young, managing director of global markets research at FTSE Russell.

Reporting by Lewis Krauskopf; Editing by Alden Bentley and Bernadette Baum

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City Council aims to make New York first U.S. city to cap Uber, others

NEW YORK (Reuters) – New York City is moving toward becoming the first major U.S. municipality to cap ride-sharing services, sparking a tsunami of protest on Friday from Uber [UBER.UL] and others, which warned that those living in far-flung neighborhoods will suffer most.

The City Council is considering five bills aimed primarily at reducing traffic congestion and increasing driver paychecks in the wake of explosive growth of for-hire vehicles and a rash of suicides among financially challenged yellow taxi drivers.

“We are pausing the issuance of new licenses in an industry that has been operating without checks,” Council Speaker Corey Johnson told reporters on Friday.

The council’s move to vote on the measures as soon as Aug. 8 is the city’s second try to restrain an industry that has grown exponentially since Mayor Bill de Blasio’s failed 2015 attempt to rein it in.

Resurrection of the effort in New York – Uber’s largest U.S. market – outraged ride-hailing businesses, including Uber, Lyft and Via.

In an email barrage to nearly 5 million New Yorkers on Friday, Uber said riders would be hurt most by the squeeze, facing higher prices, longer wait times and less service in the city’s outer reaches by drivers more heavily dependent on higher demand in Manhattan, only adding to, rather than reducing, congestion.

“@NYCCouncil I’m a New Yorker, and I rely on @Uber to get around the city, especially when public transit isn’t available. Don’t leave me stranded and #DontStrandNYC,” tweeted thousands of New Yorkers, some using a link provided in the Uber email.

Since Uber and other app-based services debuted in New York City about five years ago, the industry has grown to more than 100,000 cars, according to the Taxi and Limousine Commission. At the same time, less demand for New York’s iconic yellow cabs has decimated that one-time route to middle-class income.

Six struggling professional drivers – including three yellow cab drivers – have killed themselves in recent months.

The New York Taxi Workers Alliance cheered the City Council’s pledge to move ahead with the bills.

The impending New York City limits come amid a worldwide effort to crack down on ride-hailing companies, including a move by Honolulu’s city council to cap fares charged when demand spikes.

London, in a test of Uber’s new senior management, in June, issued a probationary license to operate as long as Uber can show it has improved on safety and other concerns.

Reporting by Barbara Goldberg; Editing by Dan Grebler

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CBS probes misconduct allegations against CEO Moonves amid legal battle

(Reuters) – U.S. broadcasting and media company CBS Corp (CBS.N) said it was investigating claims of personal misconduct by its chief executive Leslie Moonves made in a New Yorker magazine article that was published on Friday.

The allegations against Moonves surfaced as he is locked in a legal battle over control of CBS with the company’s largest shareholder, National Amusements Inc, owned by Shari Redstone and her father Sumner who also control media company Viacom (VIAB.O).

The New Yorker report featured claims against Moonves from six women spanning different time periods over two decades, from 1985 to 2006. The allegations included sexual assault and unwanted advances.

Reuters could not independently verify the accusations against Moonves.

“I recognize that there were times decades ago when I may have made some women uncomfortable by making advances”, Moonves said in an emailed statement to Reuters.

“Those were mistakes, and I regret them immensely,” Moonves said. “But I always understood and respected – and abided by the principle – that ‘no’ means ‘no,’ and I have never misused my position to harm or hinder anyone’s career. This is a time when we all are appropriately focused on how we help improve our society, and we at CBS are committed to being part of the solution.”

One of the women in the story was identified as actress Illeana Douglas. Douglas’ publicist Danny Deraney confirmed her comments in the story.

“Real change will occur when victims of sexual assaults are not stigmatized as whistle blowers, or people with some kind of agenda for coming forward,” Douglas said in a statement.

“Speaking for myself, real change will occur when I can walk through the front doors of CBS and resume the creative and working relationship that was so tragically cut short in 1997,” she added.

According to the New Yorker, 30 current and former CBS employees described harassment, gender discrimination, or retaliation for refusing sexual advances at the company.

CBS said in a statement that it takes each report of misconduct very seriously but it does not believe “the picture of our Company created in The New Yorker represents a larger organization that does its best to treat its tens of thousands of employees with dignity and respect.”

Earlier on Friday, before the New Yorker article was published, CBS said in a statement that its board would promptly review the findings and take appropriate action.

COMBINATION WITH VIACOM

Moonves, 68, joined CBS in 1995 as president of CBS Entertainment and has been CEO since 2006. He is widely credited with turning CBS into one of the top-performing U.S. media companies.

Moonves clashed with Shari Redstone earlier this year over her bid to merge CBS with Viacom Inc, also owned by National Amusements. Moonves resisted that deal because he believed CBS’s prospects were better without taking on Viacom’s turnaround challenges.

A CBS board committee in May turned down the potential merger with Viacom and sued to strip National Amusements of its control of CBS.

Redstone is challenging a plan by CBS to issue a special dividend aimed at cutting National Amusements’ voting power in the company to 17 percent from 80 percent. The trial in a Delaware court is expected to start in October.

Before the story was published, a spokeswoman for National Amusements Inc said, “(Shari) Redstone hopes that the investigation of these allegations is thorough, open and transparent.” The spokeswoman declined to comment further. Viacom also declined to comment.

Combining CBS, which owns cable networks including Showtime as well as the CBS TV Network and CBS TV Studios, with Viacom, whose businesses include Paramount Pictures, Comedy Central, Nickelodeon and MTV, would have more negotiating leverage with cable and satellite companies, analysts said.

Viacom shares ended up 4.5 percent at $29.35 on Friday, while CBS shares closed about 6 percent lower at $54.01, as investors speculated that the chances of a merger between the two companies had increased.

#METOO SOCIAL MEDIA MOVEMENT

Multiple accusations of sexual misconduct against politicians, business leaders and entertainers in the United States have been made in the past year, leading to resignations, often inspired by the #MeToo social movement.

Veteran TV journalist Charlie Rose, 76, was fired by CBS in November after being accused by more than 10 women of sexual misconduct. Rose apologized for inappropriate behavior but questioned the accuracy of some of the accounts. Reuters could not independently verify the accusations.

Moonves has been married since 2004 to Julie Chen, a CBS news anchor and TV host. Chen tweeted on Friday that she stands by Moonves and that he is a “good man and a loving father, devoted husband and inspiring corporate leader.”

The author of the New Yorker article, Ronan Farrow, previously has written reports that contributed to the resignation of Hollywood movie producer Harvey Weinstein from his film and TV studio.

More than 70 women, mostly actresses and other women employed in the movie business, have accused Weinstein of sexual misconduct, including rape, in a series of incidents dating back decades. Weinstein has denied the accusations.

Reporting by Liana B. Baker in New York; Additional reporting by Vibhuti Sharma and Sonam Rai in Bengaluru and Lisa Richwine in Los Angeles; Editing by Clive McKeef

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Advisory firm ISS recommends against Rite Aid sale to Albertsons

(Reuters) – Institutional Shareholder Services Inc (ISS), a shareholder advisory firm whose recommendations are followed by major mutual funds, said on Friday that Rite Aid Corp (RAD.N) investors should vote down its $24 billion merger with Albertsons Cos.

The ISS report is a blow to grocery chain Albertsons and its majority owner, private equity firm Cerberus Capital Management LP, which are hoping that acquiring Rite Aid, a drug retailer, will help win new business amid pressure from retail giants Amazon.com Inc (AMZN.O) and Walmart Inc (WMT.N).

“It does not appear that Rite Aid shareholders would receive a fair ownership interest in the combined company, a concern heightened by potential conflicts of interest during the negotiation process and apparently reflected in the company’s underperformance since announcement,” the ISS report said.

Rite Aid spokeswoman Ashley Flower said in a statement that the company strongly disagrees with ISS’s recommendation. The deal “will significantly improve Rite Aid’s growth prospects, financial strength and ability to deliver compelling long-term value for shareholders,” she said.

Representatives for Cerberus and Albertsons did not immediately respond to requests for comment. ISS peer Glass Lewis has also recommended that Rite Aid shareholders vote against the deal.

Rite Aid shareholders would get 30 percent of the combined company under the terms of the agreements with Albertsons. They are scheduled to vote on the deal on Aug. 9.

The company formed by combining Albertsons and Rite Aid will operate about 4,350 pharmacy counters and 320 clinics across 38 states and Washington, D.C., serving more than 40 million customers per week, the companies said at the time of the deal.

Most Albertsons Companies pharmacies would be rebranded as Rite Aid, and the company would continue to operate Rite Aid stand-alone pharmacies.

In early June, Highfields Capital Management, which is Rite Aid’s fourth-largest shareholder, owning 4.4 percent of Rite Aid’s outstanding shares, came out in opposition to the deal while a number of individual shareholders have also rallied against the deal’s proposed form.

Reporting by Harry Brumpton in New York; Editing by Leslie Adler

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Higher U.S. soy imports won’t harm EU farmers: German minister

BERLIN (Reuters) – An agreement by the European Union to increase soy imports from the United States will not harm EU farmers, German Agriculture Minister Julia Kloeckner said in an interview published on Saturday.

European Commission President Jean-Claude Juncker agreed to increase soy imports in a deal reached with U.S. President Donald Trump, under which Washington will suspend the imposition of new tariffs on the EU.

Kloeckner told the Passauer Neue Presse newspaper she saw “no disadvantages for European farmers of any kind” as a result of the decision because Germany and the EU were dependent on soy imports to meet demand for animal feed.

Europe had previously relied on soy imports from South America, but would now shift its demand to U.S. suppliers, she told the paper.

Wednesday’s surprise deal suspends the imposition of a proposed U.S. 25 percent levy on auto imports, with Washington and Brussels to hold talks over tariffs on imports of European steel and aluminum. The agreement sent shares higher as fears of a transatlantic trade war ebbed.

Reporting by Andrea Shalal; Editing by Andrew Bolton

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California farmers and Mexican cheese sales, U.S. trade war takes a toll

TULARE, Calif. (Reuters) – Stephen Mancebo, a fourth-generation California dairy farmer with 2,300 cows, has battled ups and downs in his temperamental industry for a quarter-century only to find himself a casualty of a U.S trade war with one of his biggest customers – Mexico.

Mancebo, 47, represents one of approximately 1,300 dairy farm families eking out a living in California on the narrow margins of an enterprise that increasingly relies on exports.

For Mancebo and other U.S. dairy farmers and processors who turn milk into cheese, butter and other products, the trade war is threatening to snuff out a nascent rebound from three years of slumping prices that have driven nearly 140 California dairies out of business.

In retaliation for tariffs that President Donald Trump imposed on imports of steel and aluminum, Mexico in late May announced duties on cheeses, other farm products and metals from the United States.

Milk and cheese prices on the Chicago Mercantile Exchange, a key part of the formula that determines what dairy producers are paid, faltered immediately on expectations Mexico’s tariffs would translate into U.S. surpluses.

The extent of export disruption has yet to be quantified. But sudden downturns in demand are challenging for dairy farmers, whose means of production need to be fed and milked on a daily basis.

“Our product is perishable. I can’t sit on my milk for a month or two months,” Mancebo told Reuters outside his dairy in Tulare, in California’s Central Valley. “These cows can’t be shut off.”

After several years of showing little if any profit, Mancebo said he had been looking forward to a turnaround in prices that might have netted his operation $50,000 to $80,000 a month later this year, allowing him to break even for 2018.

“Most months I don’t make anything, so to take that, it’s a considerable loss at this time,” said Mancebo, whose support for Trump has been undiminished despite the effect of the trade policies.

CALIFORNIA MOST VULNERABLE

The United States is Mexico’s leading foreign supplier of dairy goods, including nearly $400 million in cheese last year. Dairy operators in California, the nation’s top milk-producing state, are especially vulnerable to Mexico’s 25 percent cheese tariffs.

California dairies, like Mancebo’s, export 30 percent of all they produce, compared with 17 percent for U.S. dairies on average, and Mexico is their No. 1 buyer.

California accounted for 35 percent of U.S. cheese exports to Mexico alone last year, estimated at 33,600 metric tons (74 million-plus pounds), said economist Annie AcMoody of the trade group Western United Dairymen.

But beyond immediate price swings, U.S. dairy exporters worry about losing hard-earned market share to the European Union, which has just reached a free-trade accord with Mexico.

In a letter sent to the White House last month, 65 dairy producers, processors and cooperatives from around the country urged Trump to reach an accommodation with Mexico.

The $12 billion aid package Trump announced this week to offset damage to farmers from the trade war could potentially replace some short-term income losses, but it will do nothing to rebuild any market share seized by foreign competitors, said Bill Schiek, economist for the Dairy Institute of California.

Concerns also are growing that China could retaliate against U.S. tariffs with a fresh set of duties on U.S. dairy.

Schiek said anecdotal evidence shows orders are being canceled in anticipation of export demands softening as Mexico’s duties add to the cost of made-in-America cheese, and buyers there turn elsewhere for supplies.

AcMoody said that even minor fluctuations can undercut American dairy producers because international pricing is so competitive.

Slideshow (3 Images)

Mancebo said that even as Trump’s policies are hurting him, he backs the measures: “Our trade deficit needed to be addressed.”And it was going to be a struggle whenever it happened,” he said. “So it’s kind of like holding our breath. Problem is, we’re holding our breath underwater.”

Writing and additional reporting by Steve Gorman in Los Angeles; editing by Bill Tarrant and Leslie Adler

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Tech stocks weigh on Wall Street

NEW YORK (Reuters) – Wall Street’s major indexes fell on Friday as weak earnings reports from major technology companies led to a big drop for the sector.

Intel Corp (INTC.O) shares sank 8.6 percent after the chipmaker’s data center business missed estimates amid stiff rivalry from Advanced Micro Devices Inc (AMD.O). AMD shares rose 3.2 percent.

Twitter Inc (TWTR.N) shares plunged 20.5 percent after the social media network reported a decline in monthly active users, versus the increase analysts had expected, and warned of further drops as it deletes phony accounts.

The SP 500 technology index .SPLRCT fell 2.0 percent, the most among the major SP sectors. Shares of Apple Inc (AAPL.O), which is set to report quarterly results on Tuesday, fell 1.7 percent. Shares of Microsoft Corp (MSFT.O) and Alphabet Inc (GOOGL.O), which had soared after both companies recently reported strong quarterly results, dropped 1.8 percent and 2.5 percent, respectively. Alphabet shares touched an all-time high earlier in the session but reversed course.

The pressure on tech stocks started on Thursday after Facebook Inc (FB.O) gave a dismal forecast that caught investors off guard about growth prospects in a sector that has led the market’s march toward record highs.

“There’s a bit of concern perhaps growing that the bloom’s off the rose for these tech stocks, that they are not invincible,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

The Dow Jones Industrial Average .DJI fell 76.01 points, or 0.3 percent, to 25,451.06, the SP 500 .SPX lost 18.62 points, or 0.66 percent, to 2,818.82 and the Nasdaq Composite .IXIC dropped 114.77 points, or 1.46 percent, to 7,737.42.

The Nasdaq exceeded Thursday’s losses to register once again its biggest daily percentage drop in a month.

For the week, the Nasdaq shed 1.06 percent, but the SP rose 0.61 percent. The Dow, cushioned by promising developments in trade relations between the United States and the European Union earlier this week, added 1.57 percent.

Intel and Twitter’s disappointing results overshadowed data from the Commerce Department showing the U.S. economy grew at a 4.1 percent annualized rate in the second quarter, its fastest pace in nearly four years, on higher consumer spending and farmers rushing soybean shipments to China to beat tariffs.

Economists and investors cautioned against putting too much weight on the growth, which matched expectations, as the trade-related boost is expected to unwind later this year.

“It’s old news,” Ghriskey said. “Trade is bound to have an impact on the coming quarters if the tariff issue isn’t resolved.”

AbbVie Inc (ABBV.N) shares fell 3.6 percent after sales of its Humira drug in the second quarter barely beat Wall Street views, raising concerns about the drug’s viability as a cash-cow.

Amazon.com Inc (AMZN.O) shares jumped as much as 4 percent to a record high of $1,880.05 after the e-commerce giant forecast strong sales and posted a profit that was double analysts’ estimates. Amazon shares closed up 0.5 percent.

Declining issues outnumbered advancing ones on the NYSE by a 2.03-to-1 ratio; on Nasdaq, a 3.39-to-1 ratio favored decliners.

The SP 500 posted 25 new 52-week highs and three new lows; the Nasdaq Composite recorded 63 new highs and 99 new lows.

Volume on U.S. exchanges was 6.81 billion shares, compared with the 6.04 billion average over the last 20 trading days.

Reporting by April Joyner in New York; Additional reporting by Amy Caren Daniel in Bengaluru; Editing by Leslie Adler and Dan Grebler

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Facebook is sued after stock plunge ‘shocked’ market

NEW YORK (Reuters) – Facebook Inc (FB.O) and its chief executive Mark Zuckerberg were sued on Friday in what could be the first of many lawsuits over a disappointing earnings announcement by the social media company that wiped out about $120 billion of shareholder wealth.

The complaint filed by shareholder James Kacouris in Manhattan federal court accused Facebook, Zuckerberg and Chief Financial Officer David Wehner of making misleading statements about or failing to disclose slowing revenue growth, falling operating margins, and declines in active users.

Kacouris said the marketplace was “shocked” when “the truth” began to emerge on Wednesday from the Menlo Park, California-based company. He said the 19 percent plunge in Facebook shares the next day stemmed from federal securities law violations by the defendants.

The lawsuit seeks class-action status and unspecified damages. A Facebook spokeswoman declined to comment.

Shareholders often sue companies in the United States after unexpected stock price declines, especially if the loss of wealth is large.

Facebook has faced dozens of lawsuits over its handling of user data in a scandal also concerning the U.K. firm Cambridge Analytica. Many have been consolidated in the federal court in San Francisco.

Thursday’s plunge also hit Zuckerberg’s bottom line.

Zuckerberg had been tied with Warren Buffett as the world’s fourth-richest person, but the Berkshire Hathaway Inc (BRKa.N) chairman’s current $83 billion fortune tops Zuckerberg’s $66 billion, Forbes magazine said.

Buffett now ranks third among the world’s billionaires, while Zuckerberg is sixth.

Facebook shares fell another 0.8 percent on Friday, closing at $174.89 on the Nasdaq.

The case is Kacouris v Facebook Inc et al, U.S. District Court, Southern District of New York, No. 18-06765.

Reporting by Jonathan Stempel in New York; Editing by Susan Thomas

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