The tech I.P.O. rush starts … now!

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Why tech unicorns are speeding up their I.P.O.s 

Some of America’s biggest privately held start-ups have resisted going public for years. That’s about to change, and perhaps faster than we had thought it would.

The news: Lyft, most recently valued at $15 billion, announced that it had confidentially filed a draft registration statement with the S.E.C. for an I.P.O. The ride-hailing company had indicated that it planned to go public in the middle of next year, but it is moving up the timing. Lyft’s competitor Uber, which could be worth as much as $120 billion, is also moving its I.P.O. up from fall 2019.

Why are they going public? “For years, many unicorns were in no rush to go public because they could grow easily with money from private investors and away from the scrutiny of Wall Street,” the NYT’s Erin Griffith and Mike Isaac write. “Those attitudes have shifted as investors and tech employees have increased pressure on the companies to go public so that they can cash in their shares.”

Why the urgency now? Uber is said to be nervous about a looming recession. Lyft apparently pulled things forward because of the recent stock market sell-off (and because it wants to beat Uber to the punch). “Few executives want to take their companies public when investors’ appetite for shares may be ebbing,” Ms. Griffith and Mr. Isaac write.

Plus: Airbnb and Slack are also expected to go public next year, too, although the timing is unclear.

Why did the U.S. have a top Chinese tech executive arrested?

On Saturday, Canadian police, acting at the request of the United States, detained Meng Wanzhou, the C.F.O. of the Chinese technology giant Huawei. The arrest came as President Trump was negotiating a trade truce with President Xi Jinping of China.

More on why the arrest happened and what it means for the fragile trade truce between the U.S. and China from Mark Landler, Edward Wong and Katie Benner of the NYT:

• “The Justice Department is investigating Ms. Meng’s company, Huawei, on charges of violating sanctions on Iran, and her arrest was meant as a warning shot by the Trump administration in its campaign to limit the global spread of Chinese technology.”
• “While the Justice Department did brief the White House about the impending arrest, Mr. Trump was not told about it. And the subject did not come up at the dinner with Mr. Xi.”
• “Former American officials said the awkward timing of it was most likely a coincidence that grew out of the unpredictable travel schedule of Ms. Meng.”
• But “the timing of the arrest, some experts said, could feed the suspicion of Chinese officials that nationalist factions in the Trump administration were trying to sabotage the trade deal.”

The U.S. trade deficit hit a decade high in October

President Trump got some good news yesterday: The U.S. exported more oil and fuel than it imported last week. That was the first time that had happened in 75 years. But that may have been outweighed by the monthly U.S. trade deficit hitting $55.5 billion in October, the highest monthly level in 10 years.

Mr. Trump had pinned his hopes on oil and gas. Domestic production has been increasing, and the federal government lifted a ban in 2015 on crude oil exports, allowing American oil to flow outside its borders. That was supposed to help narrow the trade deficit.

But the gap has continued to grow. “The basic explanation is that the United States’ appetite for foreign investment, including the financing of the federal debt, is driving the country’s consumption of imports,” write Binyamin Appelbaum and Jim Tankersley of the NYT. “The dollars that the United States borrows from foreign countries are the dollars that the United States spends on foreign products.”

Edward Lampert’s hedge fund makes a bid to save Sears

The chairman of the failing retailer, which also owns Kmart, has offered to buy its remaining assets for $4.6 billion in a bid to prevent it from collapse.

Here’s how it would work. Mr. Lampert’s hedge fund, ESL Investments, says it has put together the money from a mixture of cash, new loans and debt swaps. It would take over the entire company, including stores and brands like Kenmore. It would seek to keep the 500 or so stores that are still open and to preserve around 50,000 jobs. The deal would need to fend off bids that liquidators have prepared.

So far, reactions have been negative. Burt Flickinger, managing director of Strategic Resource Group, a retail advisory firm, told Bloomberg that Mr. Lambert was “trying to perpetuate himself almost as an undertaker to drain more blood out of the body and make more money as he’s doing it.” Farla Efros, the president of HRC Retail Advisory, said that the deal was “really about ego and saving face.”

Oil prices sink as a pivotal meeting fails to deliver

OPEC ended a meeting yesterday without striking a deal to reduce oil output, writes Stanley Reed of the NYT.

Officials discussed a range of cuts, with a reduction of a million barrels per day — or around 1 percent of global oil supply, a modest amount in the eyes of traders — thought to be enough to stabilize prices. The indecision reflects the different pressures facing the oil industry:

• On one hand, the world is widely viewed as having an oil glut substantial enough to justify a cut in production, a move that would prop up prices.
• But President Trump is pressing OPEC, and Saudi Arabia in particular, to maintain production levels to keep prices down for American consumers.

Oil prices tumbled amid the failure to strike a deal. Brent crude, the international benchmark, dropped about 3.5 percent, to $59.40.

There was little sign that things would improve when officials reconvene today. Saudi Arabia’s energy minister, Khalid al-Falih, told reporters he was “not confident” that an agreement that would keep supply and demand in balance was within reach.

More natural resources news: The Trump administration plans to open nine million acres to drilling and mining by removing protections for the sage grouse, an imperiled ground-nesting bird.

What caused yesterday’s roller coaster market ride

A steep slide followed by a strong recovery whipsawed investors on Thursday, write Alexandra Stevenson and Matt Phillips of the NYT. Here’s what happened.

A high-profile arrest raised trade worries. The arrest of Meng Wanzhou, the C.F.O. of Huawei, led investors to fear that the U.S.-China trade war could escalate rather than calm. The S&P 500 fell as much as 2.9 percent on the news, but regained much of the lost ground by day’s end.

Positive news about the Fed calmed investor jitters. The Wall Street Journal published an article saying that the central bank was considering emphasizing a wait-and-see approach to rate increases, offering traders some reassurance about future monetary policy.

But one sector didn’t bounce back. Energy shares were the worst-performing part of the S&P 500 yesterday, after prices for American crude oil fell when OPEC’s meeting failed to yield a deal to reduce oil output.

The relentless volatility is getting harder to explain. “Markets have grown so jittery that moves seem detached from the fundamental or technical analysis that traders use to underpin investment decisions,” write Vildana Hajric and Sarah Ponczek of Bloomberg.

Trump may be right about interest rates after all

What if President Trump is correct and the Fed’s interest rate increases are holding back the U.S. economy?

It might depend on the starting point. Barry B. Bannister, head of institutional equity strategy at Stifel, tells Peter Eavis of DealBookthat the Fed’s main policy rate, the federal funds rate, was in effect significantly lower in the years after the 2008 financial crisis than the actual rate.

Call it the shadow rate. “The economists Jing Cynthia Wu and Fan Dora Xia used the yields on government bonds to calculate a shadow fed funds rate. Their intent was to estimate what that rate would have been if it could have fallen below zero,” Mr. Eavis writes. “In the years after the crisis, this shadow rate fell as low as minus 3 percent in May 2014.”

Why that matters now. “The Fed has taken the fed funds rate from zero in 2015 to 2.25 percent today. But using the shadow rate, the Fed has effectively taken that rate from minus 3 percent in mid-2014 up to 2.25 percent today, a much greater increase, and one that might now be pressuring the economy.”

A note of caution: From a growing G.D.P. to healthy loan issuance, there are still plenty of reasons to question whether monetary policy is really too stringent.

Revolving door

• Hannah Karp, a former reporter at The Wall Street Journal, has been appointed as the new editorial director at Billboard magazine.
• James Quincey, Coca-Cola’s chief executive, will now also serve as its chairman.
• Tesla’s general counsel, Todd Maron, is leaving the company. He will be succeeded by Dane Butswinkas, a Washington trial lawyer.
• Unilever’s chief marketing officer, Keith Weed, will retire in May.

The speed read

Deals

• Anta, China’s largest sportswear brand by revenue, is reportedly close to a $6.3 billion deal to acquire Finland’s Amer Sports, which owns brands like Salomon and Louisville Slugger. (FT)
• Moderna staged one of the biggest I.P.O.s for a biotechnology company, raising $604.3 million for a valuation of roughly $7.5 billion. (WSJ)
• IBM will sell some of its software assets to India’s HCL Technologies for $1.8 billion. (Reuters)
• Berkshire Hathaway is said be considering taking a 10 percent stake in Kotak Mahindra Bank of India, which could be worth between $4 billion and $6 billion. (CNBC)
• Walmart acquired the online retailer Art.com for an undisclosed sum. (Reuters)
• A federal appeals court judge voiced skepticism about the Justice Department’s effort to block AT&T’s acquisition of Time Warner. (WSJ)

Politics and policy

• President Trump is expected to name Heather Nauert, the State Department’s spokeswoman, as his next ambassador to the United Nations. (NYT)
• The president is also considering bringing back William Barr as attorney general. (NYT)
• Democratic lawmakers have criticized drugmakers as using tax savings to buy back stock rather than to cut prices. (WSJ)
• A new Trump administration proposal could significantly dent the Environmental Protection Agency’s control over water pollution. (NYT)

Trade

• China said it would immediately start enacting trade agreements with the U.S. on agriculture, automobiles and energy. (Bloomberg)
• Because of trade concerns tied to Brexit, global companies are stockpiling so many goods that they are running out of warehouse space. (WSJ)
• President Trump says he wants to see a return to the high tariff days of President William McKinley. So far, history seems to be repeating itself. (NYT)

Tech

• Bitcoin has fallen below $3,400, its lowest level since September 2017. (Bloomberg)
• Amazon reportedly plans to put cashierless stores in airports. (Reuters)
• Elon Musk’s Boring Company plans to open a new test tunnel in Los Angeles that will include car elevators. (Bloomberg)
• When artificial intelligence chooses workers, it could lead to unusual hires, and lower wages. (NYT)
• Leasing the first autonomous cars could cost over $100,000 per year. (Axios)
• Microsoft has urged governments worldwide to regulate facial recognition technology. (WSJ)

Best of the rest

• Carlos Ghosn, the Nissan and Renault executive, will reportedly be indicted on Monday in Japan. (Reuters)
• Deutsche Bank processed an additional €31 billion, or about $35 billion, in questionable funds for Danske Bank than previously thought. (FT)
• Fiat Chrysler plans to open a factory in Detroit to make a new Jeep, creating at least 1,800 jobs. (NYT)
• Boeing is canceling a satellite order financed by a company owned by the Chinese government, citing default for nonpayment. (WSJ)
• Growth in health care spending slowed last year. (NYT)

Thanks for reading! We’ll see you next week.

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