Trump’s techie friends
Last week, Donald Trump became the first former U.S. president to be convicted of a felony. Thursday night, he was feted at a fund-raiser in San Francisco hosted by David Sacks, the tech investor, that pulled in more than $12 million.
But even as Trump is making new friends in Silicon Valley — few tech moguls backed him publicly in 2016 — the LinkedIn co-founder and Democratic donor Reid Hoffman has issued a blunt warning about Trump 2.0.
This was Trump’s first fund-raiser since being found guilty. Among the attendees: Chamath Palihapitiya, Sacks’ co-host of the “All In” podcast and former Democratic donor; Jacob Helberg, an adviser at Palantir; and crypto entrepreneurs, including the Winklevoss twins.
Also there: Senator J.D. Vance, Republican of Ohio and former venture capitalist seen as a potential Trump running mate, who connected Trump with Sacks, writes the Times’s Theodore Schleifer.
Sacks gave his case for backing Trump. Top of the list: the economy. The U.S. is performing far better than its peers, but he blames President Biden for sticky inflation, weak growth and rising debt (though Trump too added trillions to the national debt).
But Biden has huge support in Silicon Valley. The president has raised millions from tech industry leaders this election cycle. Last month, he attended a fund-raising event hosted by Vinod Khosla, the venture capital investor, and Marissa Mayer, the former Yahoo C.E.O., and Silicon Valley includes some of his biggest business allies.
Hoffman broke down why no C.E.O. should vote for Trump. Business leaders are mistaken to think that Trump would be “normal and controlled” back in the White House, he writes in The Economist. They shouldn’t empower a criminal, he adds.
For American business, the rule of law is essential. It is the soil in which commerce can take root and grow. Without this stable, predictable, rules-based environment, New York, and America, would not have become the hubs of innovation, investment, profit and progress that they are.
Unfortunately, many American business leaders have recently developed a kind of myopia, miscalculating what politics, and which political leaders, will truly support their long-term success. Perhaps this stems from their having lived their entire lives in a stable legal regime that they now take for granted. But a robust, reliable legal system is not a given. It is a necessity we can ill afford to live without. We trade it away at our peril.
That’s unlikely to slow Trump. The Republican will attend a pair of fund-raisers in Southern California on Friday and Saturday, including one hosted by Palmer Luckey, the Oculus co-founder who now runs Anduril Industries, a defense tech company.
HERE’S WHAT’S HAPPENING
Shares in GameStop surge, ahead of Keith Gill’s expected YouTube return. The retailer’s stock jumped more than 30 percent in premarket trading on Friday, after a note appeared on his YouTube channel on Thursday saying he had scheduled his first livestream in years. The leap in share price extended a volatile run triggered by Gill, the meme-stock ringleader who goes by “Roaring Kitty.”
SpaceX achieves a milestone in its latest test flight. The Starship rocket’s booster landed in the Gulf of Mexico (and its second-stage spacecraft continued in orbit) Thursday, an accomplishment that went a long way toward validating Elon Musk’s long-held vision to build entirely reusable rockets.
A woman sues Netflix over the hit show “Baby Reindeer.” Lawyers for Fiona Harvey filed a lawsuit in Los Angeles arguing that she was the inspiration behind the “true story” Netflix series that depicts a woman who stalks and torments an aspiring British comedian. The breakout show has spurred a wave of online sleuths seeking to unmask the woman. Harvey is suing for defamation and seeks $170 million in damages.
The markets await today’s jobs report
The S&P 500 is a tick below its record high on Friday as investors are increasingly optimistic that the Fed will join the global rate-cutting party initiated this week by central bankers in Europe and Canada.
That upbeat sentiment will be tested Friday and next week. At 8:30 a.m. Eastern, the Bureau of Labor Statistics is set to publish the jobs report for May with economists predicting a slight cool-down in the labor market. That will be followed by the release of the Consumer Price Index next Wednesday.
A hotter-than-expected number on one or both of the key economic data points could complicate the Fed’s outlook on rate cuts, and once again spook investors.
What to watch in the jobs numbers:
Economists polled by FactSet have forecast that employers added roughly 180,000 jobs in May, a big drop from the 245,500 average monthly rise since the start of the year.
Predictions that job creation has slowed come as G.D.P. growth is forecast to slow as well. But economists don’t necessarily see this as a problem. “We think the labor market is normalizing, not necessarily weakening,” Michael Gapen, an economist at Bank of America, wrote in a research note this week.
Hourly average earnings are expected to have risen by 0.3 percent last month, up from a 0.2 percent increase in April. This data point will be especially scrutinized as wage gains are barely outpacing inflation, economists say, putting the pinch on lower-income consumers.
The markets have been trading as if the inflation fight has turned a corner. Investors have bought up 10-year Treasury notes in the past week, partly on optimism that the Fed will soon lower its prime lending rate. Some big names, including JPMorgan Chase and Citigroup, plus Mohamed El-Erian, the economist and adviser at Allianz, have argued for a July Fed rate cut.
Not so fast, futures traders say. They’re penciling in zero cuts before September.
A British tech tycoon is vindicated
As Mike Lynch, a once-celebrated British software mogul who had been compared to Bill Gates, headed into his criminal fraud trial this spring, his chances of winning didn’t look good.
But Lynch was vindicated Thursday, when a San Francisco jury cleared him of charges that he had led one of the biggest frauds in the tech industry. The victory may herald efforts by Lynch to rehabilitate his once-lofty reputation.
Lynch has battled fraud charges for more than a decade. In 2011, he sold Autonomy, the data analysis company he founded, to Hewlett-Packard for $11 billion. But shortly after the deal closed, HP said it had found “serious accounting improprieties” that led to an $8.8 billion write-down a year later — and accused Lynch of masterminding a fraud involving overinflated revenues and financial chicanery.
In 2018, U.S. prosecutors charged him with fraud.
Lynch has always denied the accusations. He argued that he was being made a scapegoat by HP executives including Meg Whitman, then the U.S. company’s C.E.O., to hide their mismanagement of Autonomy.
The odds weren’t in Lynch’s favor. Autonomy’s C.F.O., Sushovan Hussain, was convicted of fraud charges in 2018. In 2022, the London judge overseeing HP’s civil lawsuit against Lynch found him liable of defrauding the U.S. company. And last year, Lynch failed to stop his extradition to the U.S.
The judge overseeing the California fraud trial rejected Lynch’s efforts to include evidence from after HP closed the Autonomy deal, depriving his lawyers of what they believed were key arguments.
Still, jurors appeared swayed by Lynch’s arguments that he wasn’t involved in Autonomy’s day-to-day financial operations.
What’s next: Lynch is still waiting to hear what, if anything, he will owe in the English civil lawsuit. A spokeswoman said he planned to appeal in any case.
He may also seek to re-establish himself as a respected wise man of British tech. (Before being accused of fraud, he advised the then-Prime Minister David Cameron and sat on the BBC’s board.)
Acquaintances have told DealBook that he’s eager to weigh in on tech-related public policy matters, including artificial intelligence. And he almost certainly wants to erase the stigma attached to his reputation: Consider that the cybersecurity company Darktrace, which he backed, has declared Autonomy-related matters as a risk to its business.
Lightspeed’s buyout team is open for business
As start-ups face diminished market appetite for initial public offerings, venture capitalists are looking for ways to capitalize. Lightspeed Venture Partners, the Silicon Valley firm that has invested in Snap and Affirm, is betting on an emerging approach: starting a buyout team.
Isaac Kim, who leads the new business after joining from the hedge fund Elliott Management this spring, and Bejul Somaia, a senior partner at the firm, spoke first with DealBook’s Michael de la Merced about what they’re planning and how it will work.
It’s harder for start-ups to go public. While 61 I.P.O.s have taken place this year, up nearly 39 percent year-on-year according to Renaissance Capital, investors are still picky about which companies they’ll back.
That means many start-ups that slowed their growth to preserve cash in recent years are less attractive to prospective public shareholders. “Companies are staying private longer,” Somaia said. “Many aren’t going to have a path to public liquidity.”
Lightspeed had been weighing a buyouts business for several years. (Other firms, like Bessemer Venture Partners, have announced similar initiatives.) Its leaders pulled the trigger once they met Kim, who worked on takeovers including those of Citrix and Athenahealth at Elliott.
Lightspeed’s approach: Somaia and Kim said the new team will initially concentrate on enterprise software companies, a traditional focus for the firm, particularly those with annual recurring revenue of $50 million to $200 million.
But it won’t rely on conventional buyout approaches like using lots of debt or selling off assets. Instead, Kim said, the team will focus on instilling spending discipline and adopting new technology, and may roll up companies with complementary businesses.
Lightspeed isn’t raising a separate buyouts fund. Instead, it will draw from its most recent growth and opportunity funds, which together have nearly $4.6 billion in capital, Somaia and Kim said.
The move is a recognition that venture capital has to evolve, given that the institutions that back those firms are more selective about where they invest. The industry is increasingly splitting between big shops that offer an array of services and smaller, hyper-focused ones.
Lightspeed, which oversees $25 billion in assets, is solidly on the larger end. But Somaia and Kim said the new team wasn’t a signal that rapid expansion was in the cards: They’re aiming to strike up to three deals a year. “We’re not looking to gather assets,” Somaia said.
THE SPEED READ
Deals
Saudi Arabia is set to raise roughly $11.2 billion from an Aramco stock offering, toward the lower end of its target range. (WSJ)
In sports news: Jeff Lurie is said to be looking to sell a minority stake in the Philadelphia Eagles and Michael Bloomberg is reportedly joining the prospective ownership group for the N.B.A.’s Minnesota Timberwolves. (Bloomberg, The Athletic)
Policy
The F.D.A. rescinded its 2022 ban on the e-cigarette maker, Juul Labs, opening the door to a possible return to the U.S. market. (WSJ)
Credit Suisse bondholders filed a lawsuit in New York arguing that Switzerland unlawfully wiped out the bank’s $17 billion in debt to facilitate its tie-up with UBS. (FT)
Best of the rest
Despite slowing sales and some high-profile artists’ cancellations, the live music industry is doing just fine. (NYT)
The LVMH chief executive Bernard Arnault appointed his son Frédéric as head of one of the family holding groups that controls the luxury conglomerate. (FT)
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