SoftBank may have a plan to invest more safely
After the near-collapse of the office space company WeWork that it’s heavily invested in, SoftBank may be set to clamp down on the freedom afforded to the founders of companies it backs through its Vision Fund.
It’s not just WeWork causing headaches. Other investments made by SoftBank’s nearly $100 billion Vision Fund are also causing problems. “After a sizable bet on online car-lessor Fair, that company is struggling to stay afloat,” the WSJ reports. And the dog-walking app Wag “is for sale, people with knowledge of the companies say.”
Masayoshi Son, the SoftBank C.E.O., defended the Vision Fund’s approach at the Future Investment Initiative conference in Riyadh, Saudi Arabia, last month, the FT reports. He said it would continue offering capital to start-ups so they could “grow much bigger and quicker.” He added: “We identify the entrepreneurs who have the greatest vision to solve the unsolvable.”
But SoftBank may impose new standards to keep founders in check, according to another report by the FT:
• “The Tokyo-based group is expected to outline tougher governance standards and restrictions on dual-class share structures on Wednesday.”
• “The new governance standards will apply to future investments made by SoftBank.”
• “Its Saudi Arabia-backed Vision Fund is in discussions about how it can adopt some or all of these measures.”
“The guidelines that SoftBank are now introducing echo the steps WeWork was forced to take to address investor anxiety in the run-up to its IPO, as well as after it received a $9.5bn rescue package from its Japanese backer to avert bankruptcy,” the FT notes.
The U.S. may roll back some tariffs on China
It’s rare in negotiations to get anything without giving a little in return — and that’s something the Trump administration may be realizing. According to the FT, the White House is considering scrapping existing tariffs on Chinese goods in an effort to seal President Trump’s “Phase 1” trade deal with China.
“The White House is considering rolling back levies on $112 billion of Chinese imports — including clothing, appliances and flat-screen monitors — that were introduced at a 15 percent rate on September 1,” the FT reports, citing five unidentified people briefed on the discussions. A senior administration official also told the WSJ that a deal would include tariff rollbacks; Politico previously reported that China had asked for the removal of such tariffs.
The U.S. is also seeking concessions from China, the WSJ notes, “including purchases of American farm goods, rules to deter currency manipulation and some provisions to protect intellectual property and open up Chinese industries to U.S. firms.”
China’s concessions were expected to be in return for the U.S. holding off on enacting a new wave of tariffs on Dec. 15.
But a tariff rollback could change American demands. “Washington would probably expect something in return,” the FT writes, potentially including beefed-up versions of the existing desires, or perhaps “a signing ceremony for the agreement on American soil.”
Trump served notice on the Paris climate pact
The Trump administration formally notified the U.N. yesterday that it would withdraw the U.S. from the Paris Agreement on climate change, Lisa Friedman of the NYT reports.
It starts a yearlong countdown to America’s exit, which would officially pull the U.S. out a day after the 2020 presidential election. (It would make the U.S. the only nation on the planet outside of the agreement.) American participation would ultimately be determined by the outcome of the 2020 election, but re-entry wouldn’t necessarily be straightforward.
The administration cited “unfair economic burden imposed on American workers, businesses and taxpayers” as the reason for the withdrawal. And it argued that the U.S. had “reduced all types of emissions, even as we grow our economy and ensure our citizens’ access to affordable energy.”
But the economic argument may be short-termist. “Economic damages of unchecked climate change will be astronomical,” MIT Technology Review notes. “In the U.S. alone, climate change could add up to at least hundreds of billions of dollars per year in lost labor productivity, declining crop yields, early deaths, property damage, water shortages, air pollution, flooding, fires and more.”
Other nations are braced for the exit, as the global economic shifts required to overcome climate change will be difficult without the world’s largest superpower on board. And some diplomats fear that Mr. Trump “will begin actively working against global efforts to move away from planet-warming fossil fuels,” Ms. Friedman notes.
How much is Aramco worth?
Saudi Arabia’s giant state-owned oil producer announced plans on Sunday to go public in what could be the largest initial stock offering ever. But questions have risen about the company’s value, writes the NYT’s Stanley Reed.
What we know:
• Crown Prince Mohammed bin Salman, the kingdom’s main policymaker, set a $2 trillion goal for the company’s valuation more than three years ago.
• The prince wants to use proceeds from the sale to help overhaul the Saudi economy so that it is less dependent on oil.
• The company will be listed only on Riyadh’s Tadawul stock exchange.
What we don’t know:
• How much of the company will be sold, or for what price.
• When the I.P.O. will happen.
Expert valuations vary wildly, from around $1.2 trillion to $2.3 trillion. Bernstein analysts estimate that “a fair value range” is $1.2 trillion to $1.5 trillion. Some people are more conservative: Anish Kapadia, the head of London-based independent oil and mining advisory Palissy Advisors, says $1 trillion is more realistic.
The uncertainty stems from questions hanging over the I.P.O. — including recent drone attacks, concerns about the future of fossil fuels, and the optics of investing in a repressive state like Saudi Arabia.
The prince may accept a valuation of about $1.8 trillion, according to a person familiar with the offering who spoke to the NYT. But investors may ultimately require a much lower price tag, forcing Riyadh to choose either price or credibility.
Big Tech tries to back affordable housing
Apple’s $2.5 billion housing plan is a response to the increasing pressure that Silicon Valley’s tech giants are under to play a more active role in the region’s housing crisis, write Jack Nicas, Kevin Granville and Conor Dougherty in the NYT.
The crisis is fueled by the tech boom. As Silicon Valley companies have prospered, they have flooded the region with hundreds of thousands of highly paid employees. But the supply of housing has not kept pace and prices have soared.
The solution, as Apple and other companies see it, is to dig into bank accounts — and tap existing real estate — to help address the problem. Google and Facebook have recently pledged $1 billion each toward the goal.
Is the economy gloomy or bright?
The American public is energetically engaged in a spendathon. American businesses, by contrast, are not. What happens when they eventually meet could send the economy in one of two directions, Patricia Cohen of the NYT writes.
Outlooks of businesses and households usually align, but in recent months the two seem to occupy opposite ends of a teeter-totter. Consumers continue to spend while business owners cut back.
The economic expansion has extended its record run despite this divergence. The question is how long it can continue.
“They will catch up with each other,” one expert said. And when they do, if consumers are in the lead and businesses respond in kind, the economy will keep growing. But if business anxiety spreads to households, the risk of a recession looms.
McDonald’s top human-resources officer, David Fairhurst, is leaving the company, a day after the company fired it C.E.O., Steve Easterbrook.
Jimmy Fallon’s producer, Jim Bell, will leave NBC amid a rating slide on the network’s “Tonight Show.”
WeWork is reportedly cutting up to 25 percent of the staff at Meetup, a start-up it bought for $200 million two years ago.
Two managers of a Buffalo Wild Wings restaurant in Illinois have been fired after reportedly asking black diners to move.
The speed read
• Xerox has agreed to sell its stake in a joint venture with Fujifilm to its partner for about $2.3 billion. (WSJ)
• KKR has raised its biggest-ever European fund, €5.8 billion, or about $6.5 billion. (FT)
• The medical device maker Stryker said it would buy its smaller rival Wright Medical for about $4 billion. (Reuters)
• Lion Air reportedly aims to raise as much as $1 billion from an I.P.O. in early 2020. (Reuters)
• “Female entrepreneurs have less equity in their own companies than do male entrepreneurs.” (Axios)
Trump impeachment inquiry
• House investigators released the first transcripts of their private interviews, revealing crucial details, including that the former U.S. ambassador to Ukraine felt “threatened” by President Trump. (NYT)
• Lev Parnas, an associate of Rudy Giuliani’s who was involved in the campaign to pressure Ukraine, has broken ranks and spoken with impeachment investigators. (NYT)
• The Republican National Committee paid to generate thousands of calls to the congressional offices of House Democrats, an effort meant to tie up phone lines as part of a broader plan to defend the president. (NYT)
Politics and policy
• President Trump’s accounting firm must turn over eight years of his personal and corporate tax returns to Manhattan prosecutors, a federal appeals panel said. (WSJ)
• The Justice Department wants identifying details about the senior Trump administration official who wrote the anonymous critical New York Times Op-Ed about the president last year. (NYT)
• Responding to revelations of corruption and exploitation of E.U. farm subsidies revealed by the NYT, officials there said that outright fraud was rare and that auditors swiftly rooted it out. (NYT)
• Representative Alexandria Ocasio-Cortez apologized to a former elected leader from Brooklyn who sued her for blocking him on Twitter. (NYT)
• Lindsay Hoyle, an opposition lawmaker in Britain’s Parliament, will replace John Bercow as speaker of the House of Commons. (NYT)
• Three British pro-E.U. political parties reportedly plan to unveil a Remain election pact this week. (FT)
• Prime Minister Boris Johnson has traded harsh criticism with the leader of the opposition Labour Party, Jeremy Corbyn, over Brexit issues. (Bloomberg)
• Mr. Johnson has raised as much as $500,000 for his election campaign from hedge fund executives, investors and bankers. (Bloomberg)
• Uber posted a $1.2 billion loss and a higher revenue growth rate for the last quarter — an improvement over its record losses last quarter. (NYT)
• The U.S. government should double down on A.I. funding and support, according to a government-commissioned panel led by Google’s former C.E.O., Eric Schmidt. (Reuters)
• Microsoft announced new tools that it hopes will help it outcompete its cloud computing rival Amazon. (WSJ)
• India’s government has been accused by academics and lawyers of spying on its citizens via WhatsApp. (FT)
Best of the rest
• A former Fed staff member says average inflation targeting will not work in times of stress or changing economic circumstances. (WSJ)
• A complex economic model used to determine how to price health care fairly is being used to shame drug manufacturers to lower their prices. (WSJ)
• Changes designed to shake up British auditing after accounting scandals are prompting an increasing number of large listed companies to approach firms outside the Big Four. (FT)
• An advisory panel urged the S.E.C. to end the industry’s “issuer pay” business model in which entities that sell bonds also pay for ratings. (WSJ)
• Malaysia is trying to locate at least $4.3 billion in assets that haven’t been accounted for amid the 1MDB scandal. (Reuters)
• Ranking the best business schools in the U.S. (Bloomberg)
Thanks for reading! We’ll see you tomorrow.
The post SoftBank May Tighten the Reins on Start-Up Founders appeared first on New York Times.