Business heads back to Saudi Arabia

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Saudi boycott? What Saudi boycott?

Six months ago, the murder and dismemberment of the journalist Jamal Khashoggi by agents of Saudi Arabia cast a heavy cloud over the kingdom. But now the international business community is revving up its work with the Saudis again, Michael de la Merced, Stanley Reed and Dai Wakabayashi of the NYT report.

Business leaders had withdrawn from a government-led conference in Riyadh last fall, but that didn’t mean that their Saudi projects stopped:

• Google continued to work on a data center there, meant to support cloud-computing services in the Middle East.
• Blackstone still plans to invest from a $40 billion infrastructure fund that is counting on $20 billion in capital from the Saudis.
• Saudi Aramco, the state-owned oil giant, sold $12 billion worth of bonds to international investors last week — on the same day that the U.S. barred 16 Saudis suspected of participating in Mr. Khashoggi’s death from entering the country.

Executives say they’re trying to support the Saudi people. “It’s the right thing to do for the people of Saudi Arabia,” Adam Aron, the C.E.O. of AMC Theaters, told the NYT this month when discussing plans to open movie theaters in the country. “They have been deprived of going to the movies for decades.”

But there’s also plenty of money to be made. Saudi Arabia has 33 million residents, most of them under 30, and it’s eager to attract foreign investment to help it revamp its economy.

Whether Saudi Arabia can sustain this momentum remains to be seen. “For people to invest in Saudi Arabia, they need a belief that this country is moving in the right direction,” Roger Diwan, a vice president at IHS Markit, told the NYT. “The last 12 months have not been stellar.”

Pinterest and Zoom beat I.P.O. expectations

Both Pinterest, the digital pin board company, and Zoom, which does videoconferencing, priced their initial public offerings above their initial price ranges yesterday.

Pinterest priced its shares at $19 each, above its price range and giving it a fully diluted valuation of $12.7 billion. That means its public debut won’t be a “down round,” at below the value used for its last private fund-raising. (For Pinterest, that was $12 billion.) Bankers appeared to set the company’s initial pricing conservatively, allowing it to vault over low expectations.

Zoom did better, pricing its shares at $36 apiece. That was $1 above an already raised price range, and made the company worth about $9 billion, nine times the valuation at its last private fund-raising round. Investors seems to appreciate that, unlike many other tech unicorns, it’s already profitable.

The strong demand may give some investors confidence in backing further unicorn I.P.O.s. Big investors may not be swayed by apparent trends, a corporate adviser told the FT, but retail investors probably will be.

The real test is still to come when the shares of the two companies start trading on the public markets today. Since Lyft went public two weeks ago, its shares have fallen about 17 percent. The Economist argues that the big question on investors’ minds is whether these companies (Zoom excepted) can ever make money.

It’s Mueller time

Perhaps this year’s most anticipated event in Washington starts at 9:30 a.m. Eastern, when Attorney General William Barr says he’ll unveil a redacted version of Robert Mueller’s report. Here are some things to expect:

The White House already knows some of the findings, because the Justice Department shared details with President Trump’s team, the NYT reports. That has enabled the White House to prepare a speedy rebuttal, but raises questions about whether the Justice Department acted appropriately.

The report will be “lightly” redacted, the WaPo reports. It’s expected to lay out a blow-by-blow account of potential obstruction of justice by the president, including analyses of tweets, private threats and more. (The special counsel himself declined to offer a conclusion on whether Mr. Trump broke the law.)

It will be delivered to Congress on CDs. Yes, in 2019. The information will then be posted on the special counsel’s website sometime after noon.

Expect publishers to rush out physical copies of Mr. Mueller’s tome. Pity the typesetters who have to deal with the redactions. And Amazon is expected to start on an audiobook version as soon as there’s something to read aloud.

Is inflation dead?

Did central banks kill inflation off with high interest rates? Did weak economies cause it to shrivel away? Or is it just hiding? Peter Coy of Bloomberg Businessweek went hunting for answers.

• While hyperinflation is destructive, a little inflation “greases the wheels of commerce,” Mr. Coy writes. It gives the appearance of rising wages and helps central banks encourage borrowing by cutting rates.
• “The Fed has repeatedly missed the target it set in January 2012 of 2 percent annual change in the price index for personal consumption expenditures. Once you strip out volatile food and energy prices, inflation by that measure has reached 2 percent just one month (July 2018) in the past seven years.”
• “Researchers are finding that low inflation is in large part a consequence of globalization or automation or deunionization — or a combination of all three — which undermine workers’ power to bargain for higher wages.”
• “In other words, the capitalists killed inflation.”
• There is no single obvious way to revive inflation, though aggressive fiscal policy might help. But even in countries where that’s possible, Mr. Coy writes, there’s no apparent political will for that, so the situation could persist for at least a decade.

The U.S. whacks another Chinese telecom giant

The chairman of the F.C.C., Ajit Pai, said yesterday that he would oppose China Mobile’s application to provide cell service in the U.S., Cecilia Kang of the NYT reports.

China Mobile has been waiting on a decision since 2011. It wanted to connect calls between the U.S. and other nations, not to manage domestic calls.

But “serious national security and law enforcement risks” were raised by China Mobile’s application, Mr. Pai said in a statement. Senior officials worry that “calls could be intercepted for surveillance and make the domestic network vulnerable to hacking and other risks,” Ms. Kang writes.

An internal review and a Commerce Department recommendation pointed the same way, Mr. Pai said, “because of the potential for espionage, hacking and other security risks,” according to Ms. Kang. The F.C.C. is an independent, bipartisan agency, but “Mr. Pai, a Republican, carries tremendous sway because his party holds three of the five commission seats.”

A rejection would escalate the ongoing U.S.-China feud, in which Washington has tried to limit Beijing’s increasing telecom dominance. The Trump administration had largely focused on Huawei, but clearly has added to its target list.

For Apple and Qualcomm, 5G really matters

When the iPhone maker and the modem chip giant settled a tangle of global patent lawsuits on Tuesday, they were focused on the two characters that obsess the entire tech world: 5G.

Qualcomm has taken an early lead in making the chips that will let cellphones use forthcoming superfast 5G data networks, the WSJ writes; it shifted its focus to that business more than two years ago.

So Apple was in a bind. Fighting Qualcomm, CNBC notes, limited its 5G options to a short and unpalatable list:

• Go with Intel, its 4G supplier. But there were rumors of delays at Intel. So that could be risky.
• Pick Huawei. But that would mean ignoring Washington’s concerns about national security.
• Build its own. But Apple’s chip design team is relatively new, so that could take a while.

Apple was seeking as much as $27 billion in damages across its lawsuits against Qualcomm, but ultimately ended up making an undisclosed one-time payment to the chip maker. That underscores 5G’s importance to Apple and its rivals.

More: Huawei has promised a $600 5G smartphone.

JPMorgan sees two women as potential C.E.O.s

JPMorgan Chase reshuffled its executive ranks yesterday, giving two women big new roles — ones that identify them as possible successors to Jamie Dimon.

• Marianne Lake, formerly the C.F.O., will lead the bank’s enormous consumer-lending division.
• And her successor as C.F.O. will be Jennifer Piepszak, who led the credit-card unit.

Both women gain in prominence. Ms. Lake, already considered a potential future C.E.O., can gain further cred by running one of JPMorgan’s most visible divisions.

And both are seen as having the “right combination of youth and experience to potentially succeed Mr. Dimon,” David Benoit of the WSJ writes. (They’re both 49.)

But don’t expect Mr. Dimon to go anywhere soon. He said in February that he plans to step down in about five years.

Revolving door

The Treasury Department plans to hire Monica Crowley, a Fox News commentator, as its top communications official. She dropped out of contention for previous government posts amid plagiarism allegations.

The speed read

Deals

• If T-Mobile can’t buy Sprint, one of the biggest losers would be SoftBank, which was counting on the deal to take Sprint’s debt off its books. (WSJ)
• Saudi Aramco is said to be in talks to buy a stake in the petrochemicals unit of Reliance Industries, the Indian conglomerate. (FT)
• Uber is reportedly near a deal for an investment in its autonomous vehicle division, which would value the unit at $7.25 billion. (WSJ)
• Blackstone is reportedly planning to sell the Cosmopolitan hotel and casino in Las Vegas, and seeking $4 billion. (WSJ)
• Hedge funds enjoyed their best first quarter in 13 years. (CNBC)

Politics and policy

• Herman Cain said he wouldn’t withdraw from consideration for a seat on the Fed’s board, despite a shortage of Senate support. (WSJ)
• The Treasury Department issued new rules for tax breaks tied to opportunity zones. (NYT)
• Ivanka Trump confirmed that her father had asked whether she’d like to run the World Bank, and said she turned down a nomination. (AP)
• President Trump’s F.T.C. appointees don’t appear to agree with his “Made in America” vision. (NYT)

Trade

• The U.S. and China reportedly plan two more rounds of face-to-face trade talks, hoping for a deal by early June. (WSJ)
• Beijing’s recovering economy could give it a stronger negotiating hand. (Bloomberg)
• The Trump administration has cut off access to dollars for Venezuela’s central bank, further squeezing the Maduro government. (NYT)
• The E.U. warned that it could impose tariffs on $20 billion worth of U.S. good as punishment for American state support of Boeing. (FT)

Tech

• Gov. Tony Evers of Wisconsin wants to revise his state’s deal with Foxconn. (NYT)
• Gadget reviewers keep breaking Samsung’s $2,000 foldable-screen smartphone. (BBC)
• India has halted downloads of the video app TikTok, saying it could harm children. (NYT)
• The E.U. approved draft legislation that would require platforms to take down terrorist content within an hour of a request from the authorities. The European Parliament also passed rules that will require big tech companies to offer clearer terms of service, improve dispute-resolution programs and increase transparency. (BBC, VentureBeat)
• Facebook said it may have “unintentionally uploaded” the email contacts of 1.5 million new users since May 2016. (Reuters)
• Amazon is shutting its Chinese online stores in the face of stiff domestic competition. (Reuters)

Best of the rest

• French billionaires’ donations to rebuild Notre-Dame are fueling the resentments that animated the Yellow Vest movement. (NYT)
• The Writers Guild of America has filed a lawsuit against the four major talent agencies, escalating a civil war in Hollywood. (NYT)
• Deutsche Bank estimates that it handled at least 175 million euros, or about $197 million, from Russian criminals between 2011 and 2014. (FT)
• How much slower would the U.S. grow without immigration? In many places, a lot. (Upshot)
• The N.R.A. is reportedly mired in “secrecy, self-dealing, and greed.” (New Yorker)
• Alcohol-free beer is booming. (Bloomberg)

Thanks for reading! We’ll see you next week.

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