The Pirate Ship

By Matthew Gutierrez, Shawn O'Malley, and Weronika Pycek · August 09, 2023

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Yesterday, we got the latest survey on small businesses from the National Federation of Independent Business. As you’ll see in our Chart of the Day, it has some interesting insights.

Less than 10% of small business owners surveyed cited interest rates or poor sales as their most important challenge going forward.

💭 Instead, finding and retaining high-quality workers remains the biggest obstacle for America’s small business owners in 2023, despite Fed rate hikes and recession worries.

— Shawn

Here’s the rundown:

Today, we'll discuss the three biggest stories in markets:

• Inside the growing trend of job hopping
• The world’s biggest stock exchanges duke it out
• Disney-owned ESPN enters the sports gambling space

All this, and more, in just 5 minutes to read.

POP QUIZ

Which countries’ stock markets have performed the best in 2023? (Scroll to the bottom for the answer!)

CHART OF THE DAY

IN THE NEWS

💼For Young Workers, Job Hopping Loses Its Stigma (NYT)

Gone are the days when you entered the workforce, worked for one or two companies for 40 years, then retired with a nice pension. For decades, repeatedly switching jobs had been a red flag. Stay with one, large, steady company. Stay loyal. Reap the rewards in retirement.

Not anymore. Gen Z and younger Millennials have embraced the upsides of “job hopping,” sometimes switching jobs once, twice, or even three times per year for higher pay and benefits, remote work, or a desire to try new industries.

• Said one frequent job hopper: “I’ve almost doubled what my starting salary was … and that’s really important to me. I really wanted the flexibility of remote work, and I’d be hard-pressed not to give that up. And I’ve gotten a lot of professional experience across industries super quickly.”

More common: 22.3% of workers aged 20 and older spent a year or less at their jobs in 2022, the highest percentage with a tenure that short since 2006. About 33% spent two years or less at their jobs.

On the move: A whopping 74% of 18- to 26-year-olds and 62% of 27- to 42-year-olds were searching for a new job or planned to search in the next six months, per a May survey.

Unsurprisingly, employers don’t love hiring employees, onboarding and training them, then seeing them leave a few months later. Job hopping requires companies to spend more time and money on hiring and training candidates over and over.

• One CEO said job hopping has become a “huge headache” for employers, noting that “human resources executives keep hoping it will improve, but it just seems to get worse by the month.”

Why it matters:

There aren’t many signs of the trend slowing down. The labor market has cooled since its 2022 peak, but we’re still near record-low unemployment.

• Jobless rates in half of U.S. states are at or near record lows, and the unemployment rate dipped to 3.5% in July, only 0.1% higher than the 54-year low reached in April.

Worth the risk? Job hopping might be risky. Still, young workers are doing the simple calculus: If the new job doesn’t work out, there’s probably another one open, especially as some employers struggle to fill open roles.

• As one job hopper put it: “There’s always a way back into corporate America if I want that.”

On the flip side: Traditional employers point out that job hopping is risky, and employers have questioned job hoppers’ decision-making ability and judgment. Hiring managers also point out that it’s risky to job-hop should the U.S. enter a recession in late 2023 or 2024.

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🥊The World’s Biggest Stock Exchanges Duke It Out (WSJ)

The world’s two biggest stock exchanges, both based in New York City, the New York Stock Exchange (NYSE) and Nasdaq, are ramping up efforts to compete for new stock listings.

What to know: Stock exchanges make money the more stocks are traded back and forth. Attracting the biggest-name companies looking to IPO confers exclusive bragging rights and prestige for exchanges while boosting trading volumes. It also rakes in listing fees.

• Each firm that lists shares on a major stock exchange must pay an annual listing fee, with fees reaching as much as half a million dollars a year per company.
• It’s a great business to be in, and to stay on top, you must lure the most prominent private companies to go public on your exchange.

Enter the NYSE and Nasdaq: Last year, when the Fed began hiking interest rates and sent the stock market falling, the initial public offering (IPO) market — the market for companies listing their shares on stock exchanges for the first time — dried up. That was bad for the stock-exchange business.

• Given the rebound in stocks this year, companies feel increasingly confident about IPOing again. And the NYSE and Nasdaq are looking to capitalize.

Big wins: Recently, Nasdaq won grocery-delivering firm Instacart’s stock listing, happening later this year. It also snagged Arm, the British computer-chip designer expected to be backed by Amazon at a valuation between $60-70 billion.

• But the NYSE has had its own successes, securing the marketing-automation company Klaviyo and everyone’s favorite ugly-shoe brand Birkenstock.

How do you woo big IPOs? According to the Wall Street Journal, with “expensive marketing and advertising packages, fancy coming-out parties, and opening-and-closing-bell ringing privileges.”

• Supposedly, to beat out the NYSE for Arm, Nasdaq offered the British company a promotional package worth $50 million.

Why it matters:

2022 marked the slowest year for traditional IPOs in over two decades, and 2023 got off to a slow start, hence why stock exchanges are eager to compete for new stock listings.

The NYSE is keen to also reverse another trend: The Nasdaq is on a four-year winning streak — measured by the amount of money companies raised from IPOs on its exchange. But the NYSE is having a better 2023, helping companies raise about $6.5 billion, compared to $3.7 billion for Nasdaq.

• After the Mediterranean restaurant chain, Cava, had a successful IPO in June on the NYSE and saw its share price double, bankers and investors are optimistic that if this next batch of IPOs also goes well, 2024 could be a big year.

Best of luck to both players in the ongoing stock-listing contest.

MORE HEADLINES

🛢️ U.S. oil production poised to break Trump-era records

🇨🇳  China’s economy slips into deflation (while everyone else struggles with inflation)

⚠️ WeWork warns of possible bankruptcy

💳  Americans’ credit card debt exceeds $1 trillion for first time

❌  White House announces ban on certain investments in China

🏀 ESPN Enters Sports Gambling Space (ESPN)

Sports betting has taken off in recent years, and now here comes ESPN to the booming space.

ESPN, the Disney-owned TV network, has signed a licensing deal with Penn Entertainment to create “ESPN BET,” a sportsbook for the U.S.

• And Penn’s stock surged more than 20% on the news of the 10-year agreement.
• In addition to $1.5 billion in cash, ESPN will receive about $500 million worth of warrants, which are like customized stock options enabling ESPN to purchase shares in Penn at a set price.

Another wrinkle: Penn also announced that it was selling Barstool Sports back to its founder, Dave Portnoy, at an undisclosed price in exchange for 50% of the proceeds from any future sale of the business.

• In 2020, Penn bought a 36% stake in Barstool and then purchased the remaining 64% of the company in February of this year for $388 million.
• But now, Portnoy has bought back the sports media company, saying, “For the first time in a decade, I own 100% of Barstool Sports.”

The Pirate Ship: Penn had hoped that Barstool’s clout could boost a new sports-betting business, branded as Barstool Sportsbook — now rebranded as ESPN BET.

• However, Portnoy commented that he and Penn “underestimated just how tough it is for myself and Barstool to operate in a regulated world.”
• “For the first time in forever, we don’t need to watch what we say, how we talk, what we do,” Portnoy said. “It’s back to the pirate ship.”

Why it matters:

In 2018, the Supreme Court overturned a law prohibiting most states from legalizing sports betting. More than half of U.S. states have since legalized it, and Americans have bet more than $200 billion on sports over the past five years alone.

• Sports teams and networks, ESPN included, have allowed betting ads and partnerships to permeate broadcasts.

Big pivot: The move is strategic for ESPN, a profitable household name in American sports but a company whose costs are surging. Cord-cutting has severely hampered its bread-and-butter revenue stream, forcing it to invest heavily in streaming.

• This summer, ESPN laid off more than 20 high-profile broadcasters, and Disney CEO Bob Iger has said he’s considering selling a minor stake in ESPN.

What else: The deal allows ESPN to make money in gambling without becoming a sportsbook itself.

• One analyst believes the deal “should make shareholders of Disney happy, particularly given a lot of questions surrounding whether ESPN continues to be a strong vehicle for the Disney brand as a whole or whether it should be spun off.”

TRIVIA ANSWER

 The countries with the best total return stock market performances (in U.S. dollars) for 2023 are Nigeria (48.3%), Greece (47.5%), Argentina (38.7%), Poland (36.4%), and Mexico (32.5%). Through July 31, the U.S. was 15th globally, measured by the S&P 500 at 20.6%.

SEE YOU NEXT TIME!

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