Haunted

MARKETS

• U.S. economy: Consumer spending rose 0.1% in August, which, if you are wondering, is not a lot.
• Crypto: Yes, bitcoin still exists. No, it’s not doing very well. The largest crypto fell more than 20% this week to its lowest level in three months.
• U.S. markets: Not good. China. We'll get to it.

IPO

The IPO Market Is Haunted

Bad: Bent-Neck Lady

Worse: Going public only to fall flat

After witnessing a ghoulish series of IPOs and recognizing not all investors are totally chill with huge losses...some companies would rather frolic in a discarded pile of bones than list shares.

The latest to get spooked: Endeavor Group, the Hollywood talent agency turned digital media firm. On the eve of its planned Friday IPO, Endeavor pulled the plug.

• Hard to blame Endeavor, especially when a black cat in the form of Peloton crossed its path one day earlier.
• The stationary bike company registered one of the worst day-one performances of the year Thursday, tumbling 11%. It made none of that back yesterday.

And if Peloton was Endeavor’s black cat, WeWork was both broken mirror and squashed spider. The company postponed its IPO until at least October, its CEO stepped down, and it put three businesses and a private jet up for sale—all in the last two weeks.

Put it all together: Of the five most valuable $1+ billion firms to IPO this year, three (Uber, Lyft, and Peloton) have suffered an average decline of 28%. And the average IPO return this year now stands at about 6%, down from over 30% at the end of June.

So what’s going on?

Investors appear to have lost their willingness to support sky-high valuations.

• Many of the startups considering IPOs spent years marinating in vats of venture capital poured in by firms like SoftBank.
• On Wall Street, where easy funding is less available, investors are beginning to sour on ultra-expensive companies with only loose ideas of a path to profitability.

Now...startups that have IPO’d are facing tougher circumstances than those in the Valley. As Reuters points out, most public investors expect profitability within 18 months of listing. Neither Uber nor Lyft has a stated timetable for profitability.

GEOPOLITICS

The White House Wants the U.S. and China to Stop Venmoing Each Other

The Trump administration is reportedly discussing options to limit Chinese access to U.S. capital markets (and vice versa), Bloomberg reported yesterday. It’s considering...

• Limiting government pension funds’ exposure to Chinese equities
• Delisting Chinese companies from U.S. stock exchanges

The report sank shares of U.S.-listed Chinese companies and weakened the Chinese renminbi.

Why it matters: As of February, 156 Chinese companies listed on the three largest U.S. exchanges were worth $1.2 trillion, according to the U.S.-China Economic and Security Review Commission. That includes the Chinese e-commerce giant Alibaba.

• China hawks like Sen. Marco Rubio have raised alarms as Chinese companies increase their footprints on major indexes.
• 11 of those companies are state-owned, and many others are suspected of falling under Beijing’s domineering influence.

This is awkward

Also yesterday, top Wall Street execs met with Chinese officials at the Ritz-Carlton in Beijing. What was on the agenda besides using the very nice bathrooms? China’s opening its $43 trillion financial system to foreign investors...and global banks are vying for an estimated $9 billion in annual profits by 2030.

BANKING

Charles Scharf Takes the Job No One Else Wanted

We’re still workshopping nicknames for Charles Scharf before he takes over as CEO of Wells Fargo (+3.77%) on Oct. 21, but here’s what you should know about Scharf Attack in the meantime.

His background is impressive. Scharf spent four years as the CEO of Visa before taking the top job at BNY Mellon in 2017. Once he’s at Wells Fargo, his daily duties will include refilling the office Brita and repairing the bank’s roughed-up reputation.

• Wells Fargo is still recovering from 2016’s fake account scandal.
• The bank remains under investigation by the DOJ and SEC.

He’s a Jamie Dimon protégé. Before joining Visa, Scharf was one of the JPMorgan CEO’s right hand men. He spent several years running JPM’s consumer ops before graduating from the Dimon School of Management and Gray Hair.

He’s also making a boatload. Scharf’s annual target compensation was set at $23 million, a 40% raise from his current paycheck. That’s what happens when just about all the top candidates for your job say “nah I’m good.”

ENTERTAINMENT

Spidey’s Back in the Marvel Cinematic Universe

This weekend, Spider-Man fans can walk with their thoraxes held high. Disney (-1.00%) and Sony (-1.08%) have reached an agreement to keep the character in the Marvel Cinematic Universe (MCU) and make a third movie in the Spider-Man: Homecoming series.

That looked doubtful last month, when a high-profile partnership between the two studios broke down.

• What happened: Like all good superheroes, all good superhero financial conflicts have an origin story. This one starts decades ago, when Sony acquired the rights to Spider-Man from Marvel.
• But after years of producing Spidey movies on its own, Sony went back to Marvel (which had since been acquired by Disney) in 2015 for some of that secret MCU sauce.

They made two Spider-Man movies together, including 2019’s Spider-Man: Far From Home, Sony’s highest-grossing movie ever. Then came the falling out in August.

Looking ahead...the next film in the series will hit theaters summer 2021. And it should be pretty good. The brain behind Marvel’s recent success, president Kevin Feige, will be consulting producer.

TRANSPORTATION

So That's How You Solve Traffic Problems

The National Association of City Transportation Officials shows us what's possible with public transit.

WHAT ELSE IS BREWING

• The CDC said that THC, the psychoactive component in marijuana, has been linked to over three-quarters of patients with vaping-related lung injuries.
• Billie Eilish announced her first-ever arena tour, called “Where Do We Go?” It starts in Miami next March.
• Waymo, Alphabet’s self-driving car unit, had its valuation cut by 40% by Morgan Stanley, from $175 billion to $105 billion.
• SpaceX will give more details about its Mars missions in a big event today.

BREAKROOM

Saturday Headlines
We made up one of the following headlines from this week’s news...can you tell which one it is? Hint: There is no hint.

1. “One cup of coffee every day actually helps you sleep, study finds”
2. “Labradoodle creator says it's his 'life's regret'”
3. “Airline introduces baby seat map to allow passengers to avoid infants”
4. “German court rules that hangovers are an 'illness'”

Breakroom Answers