DealBook Briefing: How the Impeachment Fight Could Affect the Markets
The political drama in Washington won't necessarily cause jitters on Wall Street. But it could lead to decisions that do.
September 26, 2019
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Doug Mills/The New York Times
What impeachment means for stocks and the economy
As Washington prepares for a fight over allegations that President Trump pressured the leader of Ukraine to investigate political opponents, Neil Irwin of the Upshot asks: How will the political tumult affect finance?
Political headlines tend to have only fleeting effects on the markets, Mr. Irwin notes. For example, stocks declined on Tuesday, after Speaker Nancy Pelosi announced the start of an impeachment inquiry, but they rose slightly yesterday.
Stocks are driven more by economic fundamentals, like oil prices during Watergate and the dot-com boom during the impeachment of President Bill Clinton in 1998.
The question is whether there will be a feedback loop between impeachment and economic policy. For example:
• The political fight could distract Mr. Trump from his trade wars and make escalation there less likely.
• Or Mr. Trump could choose to act more provocatively on trade, perhaps as a way of redirecting public attention.
Today’s DealBook Briefing was written by Andrew Ross Sorkin, Michael J. de la Merced, Lindsey Underwood and Stephen Grocer.
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Haruka Sakaguchi for The New York Times
SoftBank may raise its stake in WeWork again
As the co-working company moves on under new leadership, its biggest backer, SoftBank, is reportedly in talks to put more money into the business, the FT reports, citing unnamed sources.
SoftBank is weighing investing at least $2.5 billion in WeWork next year, up from a planned $1.5 billion, according to the FT. (The $1.5 billion investment is part of an agreement that WeWork reached with SoftBank earlier this year.) But it would do so at a lower per-share price than initially expected, which would give the conglomerate a bigger stake.
The potential investment would help WeWork secure more bank financing. The company is in talks to borrow at least $3 billion from lenders led by JPMorgan Chase and Goldman Sachs.
SoftBank’s only option may be increasing its exposure to WeWork, even as the FT reports that the conglomerate may decide against the investment. SoftBank faces having to take a write-down on the real estate company, which could present a problem as it tries to raise money for another giant tech investment fund. Investing in WeWork again could help set a favorable valuation.
More: WeWork’s new leaders, Sebastian Gunningham and Artie Minson, will be the latest test of whether having co-C.E.O.s works. And they will have to consider the roles currently held by associates of Adam Neumann, who stepped down as C.E.O. this week.
Julio Cortez/Associated Press
Juul grabs a lifeline from Big Tobacco
The struggling company replaced its top executive yesterday, a move that the NYT says raises doubts about “the very future of the e-cigarette industry.”
Kevin Burns was replaced by K.C. Crosthwaite, an executive at Altria, the tobacco giant that bought a 35 percent stake in Juul for $12.8 billion last December.
The announcement came as the company faces “a federal criminal inquiry, new bans on some of its products, and an onslaught of state and federal regulatory investigations into its marketing practices,” the NYT notes. The vaping industry itself is grappling with a rise in teenage vaping and in vaping-related lung illnesses, which have been linked to at least 11 deaths.
Juul said that it wouldn’t fight a Trump administration proposal to ban most flavored e-cigarettes, and that it would end its “Make the Switch” ad campaign, which has come under scrutiny by the F.D.A.
Meanwhile, Altria and Philip Morris International called off talks of a $200 billion merger that would have reunited the tobacco companies. Philip Morris International reportedly walked away over concerns that the U.S. government’s crackdown on vaping could weigh on Altria, given its stake in Juul, the FT reports, citing an unnamed source.
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Trump scored a win on trade
The U.S. and Japan reached a limited deal yesterday that will help American farm goods reach the Japanese market. That’s one of the few trade victories that the Trump administration has reached this year, Ana Swanson of the NYT reports.
Japan will reduce barriers to $7 billion worth of American products like beef, pork, wheat and wine. The U.S. will cut tariffs on Japanese turbines, bikes, green tea and other goods.
The countries stepped around the big issue that hung over the trade talks: President Trump’s threats to impose tariffs on Japanese cars, and Tokyo’s demand that he drop them. In a joint statement, the U.S. and Japan said they would “refrain from taking measures against the spirit of these agreements.”
Why the Trump administration was happy to get a win:
• A trade battle with Europe appears to be heating up, with the E.U. reportedly considering $4 billion in levies on American goods as retaliation for any tariffs that Mr. Trump imposes on European imports.
• American farmers have already been suffering, and more are filing for bankruptcy protection.
• And Congress appears unlikely to pass the revised NAFTA agreement, with Democrats focused on the impeachment inquiry.
Erik S. Lesser/EPA, via Shutterstock
Uber’s complaints process draws complaints
The team that handles complaints from riders and drivers, including allegations of sexual assault and harassment, is reportedly “coached by Uber to act in the company’s interest first, ahead of passenger safety,” Greg Bensinger of the WaPo reports.
Investigators believed they could be reprimanded or even fired if they contacted the police or advised victims to do so, writes Mr. Bensinger, who spoke with more than 20 current and former members of the team.
Uber executives made exceptions to its three-strikes system for bad behavior in certain cases, according to investigators. One New York-area driver who faced accusations of making sexual advances on riders in three occasions was allowed to continue working — until a fourth complaint, when a rider said that he had raped her.
“Even in the most severe cases, when Uber kicks drivers off the platform, it doesn’t convey the information to police, other ride-share companies or background check firms, investigators said, steps that could prevent the driver from working for other companies.”
Uber denied that investigators were meant to limit the company’s liability. Its C.E.O., Dara Khosrowshahi, has said the company is “putting safety at the heart of everything we do.”
Dave Limp, Amazon's head of devices, introduced the new accessories yesterday. Ted S. Warren/Associated Press
Alexa is about to be everywhere
Amazon unveiled more than a dozen new products tied to its Alexa voice assistant, Karen Weise of the NYT reports. Its goal is to put the technology anywhere users go.
The products include new earbuds, called Echo Buds, that will sell for $129; prescription eyeglasses, called Echo Frames, that will go for $180; and Echo Loop, a smart ring with miniature microphones and speakers, that will retail for $130.
“They are on a track to continue to penetrate the home, and then take it out of the home,” Carolina Milanesi, a research analyst, told Ms. Weise.
To counter longstanding privacy concerns, Jeff Bezos said that Amazon would support new regulations — although he didn’t elaborate on what they would look like.
More: Spending on smart home devices could reach $103 billion this year, according to the research firm Strategy Analytics.
Revolving door
Devin Wenigstepped down as the C.E.O. of eBay yesterday amid a disagreement with his board over the company’s strategy. Scott Schenkel, eBay’s C.F.O., was appointed interim chief.
Patrick Conwayresigned as C.E.O. of Blue Cross and Blue Shield of North Carolina, months after he crashed his car on a highway and was charged with driving while impaired.
Maelle Gavet has stepped down as C.O.O. of Compass, the online real-estate brokerage. She’s the latest in a string of C-suite departures from the company.
Moda Operandi, an online fashion retailer, has hired Arpan Nanavati from Walmart Labs as its C.T.O.
The speed read
Deals
• Peloton, the home fitness company, priced its I.P.O. at $29, the top of its expected price range. It’s now valued at about $8.2 billion. One big winner from the stock sale: Tiger Global Management, which owns a 20 percent stake. (FT, Bloomberg)
• The activist investor Elliott Management called on Marathon Petroleum to split itself into three businesses. (CNBC)
• The owner of Bubba Gump Shrimp Co. agreed to buy two Del Frisco’s restaurant chains from the investment firm L Catterton, reportedly for at least $300 million. (WSJ)
• The parent company of Arby’s agreed to buy Jimmy John’s, the popular sandwich chain. (Business Insider)
• Fresh off his deal to buy the publisher of New York Magazine, the C.E.O. of Vox, Jim Bankoff, hinted that he may buy more media companies. (CNBC)
Politics and policy
• A senior F.A.A. official told lawmakers yesterday that he disputed an internal watchdog’s conclusion that the airline regulator had misled Congress over its approval process for the 737 Max. (WaPo)
• The Senate again rejected President Trump’s declaration of an emergency at the southern U.S. border, but fell short of a veto-proof majority. (NYT)
• Sabine Lautenschläger quit as Germany’s representative on the board of the European Central Bank, over her disagreement with the central bank’s easy-money policies. (FT)
• Al Franken is pursuing a comeback after resigning his Senate seat two years ago over sexual harassment accusations. His next job: SiriusXM host. (Bloomberg)
Brexit
• Prime Minister Boris Johnson of Britain defiantly brushed aside criticism that he violated the law by suspending Parliament and defended his Brexit strategy. (FT)
Tech
• At least 70 countries have used online disinformation campaigns, according to a new research report. (NYT)
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