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Why going public first matters in ride-hailing
Uber and Lyft compete aggressively in the American ride-hailing market. And now that competition could extend into a battle for investors as the companies push for stock market debuts in 2019.
Uber’s probable lead underwriters, Morgan Stanley and Goldman Sachs, told the company that it could be valued at up to $120 billion in an I.P.O. They also suggested bringing the offering forward to the first half of next year — potentially putting it in direct competition with Lyft. That company has picked JPMorgan Chase as its lead underwriter, and has long planned to go public in the spring.
The first to go public would get dibs on investors eager for a piece of the ride-hailing business. That could be especially important for Lyft, given that its I.P.O. would most likely be swamped by its much bigger rival’s, whose offering would be the biggest to hit the market since Alibaba’s in 2014.
Success may be outside either company’s control, though, given the state of stock markets and investor skepticism over whether the valuations being offered make sense — especially since neither company is profitable.
The markets bounced back
Many of last week’s stock market losses were erased yesterday. U.S. stocks climbed more than 2 percent, with Wall Street’s three major indexes having their biggest one-day percentage gains since March. The gains — which made the world’s 10 richest people at least $1 billion each — were led by the tech sector, which rose 3 percent.
Positive earnings reports, including from Goldman Sachs and Netflix, were factors, as were strong economic data, which showed a fourth straight month of industrial production gains and job openings at a record high.
Netflix resumes its march to video dominance
The video streaming service got back on track with investors yesterday, reporting earnings and subscriber growth that exceeded expectations. In after-hours trading, its shares soared 13 percent.
The ratio for the companies in the S.&P. 500 is currently 17.8 times the earnings they are expected to make this year, according to data from S. & P. Netflix’s multiple, at 145 times, is far higher. It’s so much larger because investors expect Netflix’s earnings to grow more quickly than those of other companies.
That level of investor risk-taking could augur well for the stock market, Mr. Eavis writes — but may evaporate if another big tech company, like Facebook, delivers disappointing earnings.
Canada legalizes cannabis. The nation today becomes the second country in the world — and the first major economy — to legalize marijuana. Many companies plan to take advantage of the change, but not all will be successful.
Prime Minister Theresa May of Britain heads to Brussels for Brexit talks. She will try to break a stalemate over what to do with the border between Ireland and Northern Ireland when Britain leaves the E.U. European leaders will consider her suggestions at a dinner — to which she isn’t invited. (Also: Why the pound remains stable despite Brexit turmoil.)
The Fed gives clues about its fiscal policy plans. The U.S. central bank will publish the minutes of its September meeting. They’re likely to reinforce the expectation that it will raise interest rates again in December. (President Trump continues to rail against the Fed’s chairman, Jay Powell, for raising rates.)
Saudi furor could disrupt Trump’s Iran sanctions
Pressure continues to build on Saudi Arabia in the wake of the disappearance and suspected killing of a prominent Saudi journalist. Yesterday, Senator Lindsey Graham of South Carolina, a longtime ally of the Saudis, said the U.S. should “sanction the hell” out of Saudi Arabia. He also argued that Prince Mohammed bin Salman, who has been accused of directing the disappearance of Jamal Khashoggi, has “got to go.”
But Prince Mohammed has close ties with President Trump, who strongly defended the Saudis yesterday. As David Sanger of the NYT notes, the Saudi government is meant to play a big role in the White House’s effort to cut off Iranian oil exports:
To make the strategy work, the administration is counting on its relationship with the Saudis to keep global oil flowing without spiking prices, and to work together on a new policy to contain Iran in the Persian Gulf.
Richard Haas of the Council on Foreign Relations summed up the fine line Mr. Trump must walk: “It’s a neat trick if you can both sanction a country and partner with them at the same time.”
Elon Musk’s S.E.C. settlement was approved
A federal judge cleared a settlement yesterday between Elon Musk, Tesla and the S.E.C. over the chief executive’s tweets about taking the automaker private. Mr. Musk must now step down as chairman and have his public communications vetted by the company, and Tesla must appoint two new independent directors. Tesla and Mr. Musk must each pay $20 million fines, too.
Judge Alison Nathan of the U.S. District Court for the Southern District of New York said that the settlements were “fair, reasonable and will serve the interests of the public and investors.” She did not mention Mr. Musk’s more recent Twitter antics, such as a tweet where he appeared to call the agency the “Shortseller Enrichment Commission.”
Google will start charging phone makers for Android apps in Europe
Google has always made its Android operating system available for free. It’s a way to get its apps on as many devices as possible, and to collect data about users and sell advertising. But in Europe, it will now charge handset manufacturers to install apps like Gmail and Google Maps.
It’s a response to a European antitrust ruling in July that hit Google with a roughly $5 billion fine for unfairly bundling free Android services to maintain its market dominance. (Google is appealing the decision, but it faced a deadline by which it had to change operations or risk further punishment.)
Adam Satariano of the NYT explains how the move will affect consumers:
The ultimate effect of the change announced on Tuesday remains to be seen, but European customers will probably see a wider variety of Android devices to choose from. Some will come with Google’s services; others may more prominently feature applications made by competitors.
More app news: Preinstalled apps are changing the way we use the web.
China’s $5.8 trillion debt time bomb
Beijing has tried to rein in ballooning debt in its financial system, but it may have a new problem: A new report by Standard & Poor’s finds that Chinese local governments may have racked up nearly $6 trillion in debt that exists off their balance sheets. More from Eric Lam of Bloomberg:
“The potential amount of debt is an iceberg with titanic credit risks,” S.&P. credit analysts led by Gloria Lu wrote in a report Tuesday. Much of the buildup relates to local government financing vehicles, which don’t necessarily have the full financial backing of local governments themselves.
That may be a big worry: China’s economy has slowed and defaults have risen this year. Beijing could struggle to contain this latest debt bubble.
Ken Howery, a co-founder of PayPal and Founders Fund, has been named U.S. ambassador to Sweden.
Alex Stamos, Facebook’s former security chief, has created the Stanford Internet Observatory, an initiative intended to help tech companies balance issues like security and democratic expression.
Bank of America’s C.E.O., Brian Moynihan, said that he had cut nearly 100,000 jobs since taking over in 2010.
The speed read
• Rupert Murdoch’s six children will reportedly receive $2 billion each from the sale of 21st Century Fox to Walt Disney. (FT)
• Walmart said that its $16 billion takeover of Flipkart would weigh down profit. (WSJ)
• Senator Elizabeth Warren criticized the investment firms that pushed Toys “R” Us to liquidate. (WSJ)
• How the Abraaj Group became the biggest-ever failed private equity firm. (WSJ)
Politics and policy
• A federal rule intended to protect student-loan borrowers defrauded by their schools finally went into effect. (NYT)
• President Trump says he’s not to blame if Republicans lose control of the House. (CNBC)
• The House minority leader, Nancy Pelosi, said Democrats would focus on drug prices if they win back the House. (CNBC)
• The Senate majority leader, Mitch McConnell, lamented the growing federal budget deficit, but said the Republican tax overhaul wasn’t to blame. (WaPo)
• How the U.S. could squeeze China even more on trade. (Bloomberg)
• And how the trade war is causing unhealthy desperation in Beijing. (Politico)
• Data from Facebook’s video-calling device could be used to target you with ads. Advertisers accuse the company of covering up an error in an important engagement metric for over a year. And the social network’s recent data breach affected three million European users, which means the E.U.’s new data rules will be tested. (But here’s why it’s so hard to punish companies for such breaches.)
• The Supreme Court agreed to hear a case that could determine whether social media companies can censor users. (CNBC)
• Silicon Valley is embracing a loophole that allows worthy investments to offset taxes. (Recode)
• A Stanford investigation says that unique comments made to the F.C.C. about net neutrality were overwhelmingly in support of the policy. And the New York attorney general’s inquiry into those comments is deepening.
• Can your face alone get you onto a plane? (NYT)
Best of the rest
• Audi admitted responsibility for its role in an emissions-cheating scheme and agreed to pay a $930 million fine. (NYT)
• The U.S. has regained its position as the world’s most competitive economy. (WSJ)
• What’s next in the Danske Bank money-laundering scandal. (FT)
• Goldman Sachs can sweat one asset much harder: its staff. (Breakingviews)
• Julian Assange received new house rules from the Ecuadorean Embassy in London, where he currently resides, including how to care for his cat. (Verge)
• Colleges don’t know what to do when alumni donate Bitcoin. (Bloomberg)
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