The Economist - USA (2019-11-09)

8 The EconomistNovember 9th 2019
The world this week Business

Masayoshi Son, the chief exec-

utive of SoftBank, acknowl-

edged that he made a mistake

by betting on WeWork, as his

group revealed a $4.6bn write-

down of its investment in the

office-rental startup. Overall,

SoftBank reported a quarterly

net loss of ¥700bn ($6.4bn)—

“red ink of the deepest red”,

said an unusually contrite Mr

Son. The Japanese conglomer-

ate had to rescue WeWork after

it abandoned an ipoamid

questions about its valuation

and a shortage of cash. Mr Son

is now taking steps to beef up

oversight of SoftBank’s many

interests, such as demanding

at least one seat on the board of

any firm it sinks money into.

Part of SoftBank’s loss was also

connected to its investment in

Uber. The ride-hailing com-

pany reported another quarter-

ly loss, of $1.2bn, and said it did

not expect to turn an annual

profit until 2021. Its share price

tumbled to another record low,

in part because of expectations

that Uber’s shares will flood

the market now that investors

who were locked in to holding

them after the company’s ipo

in May are free to sell.

The Federal Communications

Commission formally ap-

proved the long-delayed merg-

er of Sprint, which is owned by

SoftBank, and T-Mobile, Deut-

sche Telekom’s American

subsidiary. A lawsuit brought

by a coalition of states attempt-

ing to block the deal on anti-

trust grounds is due to be heard

in court next month.

hp, one of the world’s biggest

makers of personal computers

and printers, confirmed that it

had received a “proposal” from

Xerox, a smaller company

focused on office photocopi-

ers,tocombinetheirbusiness-

es.A dealwouldreportedlybe

valuedataround$30bn.

AmericaandChinaweremak-

ingprogressintradenegotia-

tions, witheachconsideringa

reductionintariffs.Thecon-

clusionof“phaseone”ofa

tradetruceisuncertainbe-

causeofcivilunrestinChile,

whichhascancelledtheapec

meetingwherethedealwasto

besigned.Meanwhile,the

WorldTradeOrganisationgave

Chinaofficialapprovalforthe

firsttimetoimposetariffson

America,ina disputeoversteel

pre-datingtheircurrentspat.

Not lovin’ it

Steve Easterbrook was sacked

by McDonald’sas its chief

executive for having a romance

with an employee. Although

the relationship was consensu-

al, McDonald’s said it “violated

company policy and demon-

strated poor judgment”. Mr

Easterbrook has been credited

with revitalising the fast-food

chain by spicing up its menu.

Its share price has doubled

since March 2015, when he

became ceo.

International Airlines Group,

the parent company of several

carriers, including British

Airways and Iberia, agreed to

buy Air Europa, a smaller

Spanish rival to Iberia. The deal

will increase iag’s share of the

Europe-to-Latin America

market from roughly a fifth to a

quarter. Michael O’Leary, the

boss of Ryanair, Europe’s big-

gest low-cost airline, was not

happy. He claims the takeover

will hurt competition and

wants regulators to force iagto

sell off some assets.

Concerns about data privacy

were raised following the

announcement that Googleis

to buy Fitbit, a wearable device

that tracks a user’s exercise and

healthy habits. Google and

Fitbit stressed that the $2.1bn

deal would not compromise

their commitment to transpa-

rency on data use and that

information would not be sold

on to third parties. As well as

recording a person’s heart rate,

running pace, calorie burn and

so on, Fitbit also retains perso-

nal information and location

details.

Saudi Aramcoat last con-

firmed that it is to launch an

ipo, the details of which will be

provided in a prospectus

scheduled to be published on

November 9th. The state-

owned Saudi oil firm will sell

shares on the Tadawul stock

exchange in Riyadh. In an

effort to widen its appeal do-

mestically, small investors will

receive bonus shares if they

keep the stock until at least 180

days after the flotation.

Malaysia’s prime minister,

Mahathir Mohamad, said he

was prepared to take Goldman

Sachsto court if it did not

increase its offer of compensa-

tion for its role in the sprawl-

ing 1mdb-fund scandal. Mr

Mahathir said recently that he

had rejected an offer of $2bn

from the bank.

Boom and bust

One of the pioneers of Ameri-

ca’s shale-gas revolution,

Chesapeake Energy, warned

in a filing that it was in danger

of failing as a “going concern”

if cheap gas prices persist. The

company has amassed almost

$10bn in debt, five times its

market value, amid a glut in

American oil and gas output,

which has driven prices down.

The British government

banned frackingin England,

after an official report found

that it was not possible to

predict when and where earth

tremors caused by the process

for extracting shale gas might

occur. Environmentalists were

delighted. Others accused the

government of pulling a pre-

election stunt.