Senate’s Budget Vote Gives Markets Some Hope: DealBook Briefing
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Good Friday morning from Andrew Ross Sorkin in New York and Michael J. de la Merced and Amie Tsang in London. We’re thinking about the implications of Lyft’s $1 billion investment from Alphabet and how that changes its battle with Uber — and all the companies like Apple that have invested in one or the other. More on all those frenemies in a moment.
A reminder: DealBook’s sixth annual conference, Playing for the Long Term, is on Nov. 9. Want to join us? Apply to participate here.
One Small Step Closer to a Tax Change
Stock market futures are up this morning after the Senate passed a 2018 budget blueprint that could pave the way for Republicans’ tax proposal.
• Senator Lindsey Graham, Republican of South Carolina, warned that failure to pass any tax proposal “will be the end of us as a party.” (NYT)
• Senator Bob Corker, Republican of Tennessee, still isn’t sold on how the latest proposal will affect the deficit. “The only way for this to work — I met with Secretary Mnuchin last night on this very topic — they’ve got to close $4 trillion in loopholes; they’ve got to make the taxes permanent in nature.” (Bloomberg)
• What happens next: First, the Senate and House each work out a budget proposal. Then each body releases its tax plan. Then they reconcile the two. Then each votes on the resulting proposal. Then President Trump signs it. Count the steps in which something could go wrong.
• A former Treasury Department official in the Obama administration says that the odds of a comprehensive tax overhaul happening this year are “zero percent,” though the chances of tax cuts are “considerably higher.” (Bloomberg)
Elsewhere in Washington
• Senator Mike Crapo, the chairman of the Banking Committee, wants a quick return to “normal, traditional monetary policy.” His committee will vet Mr. Trump’s choice for the next Fed chair. (Bloomberg)
• Mr. Trump has personally interviewed candidates for the United States attorney positions in Manhattan and Brooklyn, which have jurisdiction over his company. (Politico)
Lyft’s Race to I.P.O. Could Keep It Going for a Long Time
The $1 billion investment from Alphabet’s CapitalG gives Lyft a powerful ally in its fight against Uber. But it’s beating Uber to an I.P.O. — Lyft could go public as soon as 2018, according to Mike Isaac and Katie Benner of the NYT — that could keep the smaller company around for the long term.
Being public first would let Lyft define measures of success for the ride-hailing industry, rather than allowing Uber to set bars that its rival can’t reach. Public companies can raise money more easily than private ones from share sales, making them slightly harder to kill.
What Alphabet’s money also does for Lyft: Eric Newcomer of Bloomberg points out that the new cash could help Lyft expand internationally and reignite the battle over subsidies to drivers that helped drive steep losses at both companies.
The frenemies rundown: Alphabet previously invested $258 million in Uber — while its Waymo unit has sued Uber. Apple is aligned with Didi Chuxing, which has invested in Lyft and has a Chinese joint venture with Uber. SoftBank is tightly partnered with Didi, but is also trying to finalize a $10 billion investment in Uber. Got all that?
How Are Tech Giants Flexing Their Lobbying Muscles?
• Facebook and Alphabet used lobbyists like Marc Elias to get exemptions from a rule requiring political ads on third-party websites to reveal who paid for them. Critics of the tech giants say that the regulation could have helped deter Russian-funded ads, according to Ken Vogel and Cecilia Kang of the NYT. Three Senators are now pushing legislation to force disclosure.
• Alphabet, Microsoft, Facebook and Uber are also joining a coalition to push Congress into giving permanent residency to the young immigrants known as Dreamers, according to Salvador Rodriguez and Jeffrey Dastin of Reuters.
Facebook’s point person on Capitol Hill: The company is sending its general counsel, the former Washington lawyer Colin Stretch, to testify for it at the congressional hearings into Russian electoral interference on Nov. 1. (CNBC)
Inside WeWork: Tequila Tastings and High Valuations
From the WSJ’s deep dive into the co-working office space start-up:
• SoftBank’s Masayoshi Son invested $4.4 billion into the company even after executives in his Vision Fund essentially said it was overvalued.
• WeWork is valued at $135,000 a desk, while an older publicly traded rival, IWG, is valued at around $5,600.
• Co-founder Adam Neumann is known to treat business partners like Jared Kushner to tequila shots.
Speaking of SoftBank…
• Venture capitalists say that the Japanese tech giant and its Vision Fund are contributing to a prolonged slump in the tech market. (Reuters)
Can Oscar Munoz Stay as United’s C.E.O.?
“We have dug ourselves in a hole from a competitive perspective,” which Mr. Munoz said on the company’s earnings call yesterday, is not what investors like to hear.
Analysts are now speculating about a management shake-up, David Koenig of AP notes. Helane Becker of Cowen said that she was hearing not “rumblings” but “full-fledged screams” from investors for a change in the C-suite.
Blackstone Will Invest in Infrastructure Even If Trump Doesn’t
The money management giant is forging ahead even if Mr. Trump’s $2 trillion infrastructure proposal stalls, Dan Primack of Axios noted. So what will it do with the potentially $40 billion ($20 billion of which is coming from Saudi Arabia) that it hopes to raise?
The answers, according to Melissa Mittelman of Bloomberg, include buying both public companies and assets from public companies, as well as building new projects.
Blackstone’s investors are likely to be happy to go along with whatever the firm wants. Its third quarter earnings were up 23 percent from the same period a year ago, at $384.6 million.
• President Trump has picked Joseph J. Simons, a veteran antitrust lawyer who has represented Microsoft, to lead the Federal Trade Commission. (NYT)
• BP is searching for a new chairman after announcing that Carl-Henric Svanberg would step down. (FT)
Goldman Bankers Brush Up on Their German
Their boss is dropping heavy hints about European moves on Twitter.
The Speed Read
• Whoops: First Data mistakenly posted a draft news release announcing that it would buy the credit card processing firm BluePay Holdings, even though the deal hasn’t been finalized. (WSJ)
Policy and Legal
• Paul Volcker wants to discuss the ineffectiveness of government in the memoir he’s writing. (WSJ)
• The Fed’s independence is a myth and the central bank is “caught in the cross hairs of partisan polarization,” according to research by Sarah Binder and Mark Spindel. (NYT)
Banks and Banking
• Red Kite Management, the world’s largest metals hedge fund, is suing Barclays, alleging market abuse in copper that cost it at least $850 million between 2010 and 2013. (Bloomberg)
Private Capital (P.E. and V.C.)
• Private equity firms like Bain Capital and Blackstone are placing first bids on Unilever’s spread-making business. (FT)
I.P.O.s and Offerings
• Stitch Fix, an online personal styling service backed by Benchmark, has filed for an I.P.O. It said it had $977 million in sales last year. (Bloomberg)
• Bill Ackman suggested that Automatic Data Processing, the human resource software company, should buy its rival Ceridian, which he said had a better product. (Reuters)
• Lee Ainslie’s Maverick Capital is the latest big-name hedge fund to cut fees after posting continued losses, offering 0 percent performance fees to some investors. (WSJ)
• Being ruthless apparently isn’t the secret to success: Hedge fund managers who exhibit psychopathic traits tend to perform worse than their peers over time. (Bloomberg)
Business and Economy
• The kind of panic that set off Black Monday could happen again, says Robert J. Shiller, who knows a thing or two about social psychology and the markets. (NYT)