14 Leaders The EconomistAugust 22nd 2020
2 One alternative to an ipois a direct listing. Instead of a bank-
er, a stock exchange sets the initial price, automatically balanc-
ing supply and demand just before the shares start trading. Last
year Slack, a software firm, listed this way, and Palantir could fol-
low. Another method involves blank-cheque companies known
as “special-purpose acquisition companies”, or spacs: listed
shell companies that acquire private firms, instantly bypassing
the ipoprocess. Virgin Galactic, a space firm, took this route in- Both approaches have drawbacks. In a direct listing, the law
says you cannot raise fresh capital, and without underwriters
the share price can be volatile. Blank-cheque firms, meanwhile,
have a patchy history, with sponsors often awarding themselves
piles of shares, although one newcomer, a $5bn-7bn vehicle
backed by Bill Ackman, an investor, says it will keep costs low.
These experiments put pressure on banks and regulators to
improve the ipo process. The twist is that they are made possible
by frothy markets (see Buttonwood). Some firms that have float-
ed look overvalued—take Nikola, an electric-lorry firm, which
has no material revenues but is valued at $16bn after a blank-
cheque listing. Entrepreneurs and vcs love getting an easy ride,
but they should be under no illusion: over time, the stockmarket
hammers weak firms. Shares of Uber and Lyft, ride-hailing firms
that floated in 2019, languish 35% and 61% below their listing
price. WeWork, an office-rental firm, abandoned its listing last
year after being exposed as a dud. By the end of the great flotation
boom of 2020, the hope is that America will have established
ways to make it easier for firms to go public. But make no mis-
take, some of the pioneer companies will be flops. 7A
t this time of year the eastern Mediterranean evokes
thoughts of holiday beaches. It has become a destination for
superyachts avoiding covid-hit Spain. Unfortunately, this sum-
mer the region is also luring warships, as tensions rise between
Greece and Turkey over disputed waters. A collision between
Greek and Turkish frigates on August 12th was the worst confron-
tation between the two nato allies since a face-off on an unin-
habited island in 1996 that nearly led to war. In a show of solidar-
ity with Greece, a fellow eumember, France has moved a couple
of Rafale fighter jets to Crete and deployed two warships to exer-
cise with the Greek navy. Unless cool heads prevail, there is a risk
that matters will escalate further—even as far as blows.
Three main ingredients make this a recipe for trouble. One is
interest in the region’s gas resources, which for a decade have
been attracting the attention not just of Greece and Turkey but
also Cyprus, Israel, Egypt and others. Several
countries aspire to be a regional energy hub,
helping supply the European market and pro-
viding a strategic alternative to Russian gas.
Boosters hoped pipelines running across the
eastern Med area could be a catalyst for regional
co-operation, which in some cases they have
(see International section).
But elsewhere that hope has been overpow-
ered by the second ingredient in the Mediterranean mix: the re-
gion’s rivalries. Instead of diluting them, the energy opportunity
has intensified them. Cyprus remains divided between a Greek-
Cypriot south and a Turkish Republic of Northern Cyprus recog-
nised only by Turkey. Turkish gas exploration in Cyprus’s exclu-
sive economic zone last year brought condemnation from the eu
and some (largely symbolic) sanctions. Now Turkish ships are
again conducting seismic surveys in Cypriot waters.
Relations between Greece and Turkey are always in danger of
flaring up over contested territory. The latest clash has been in
the making ever since the signing last November of an agree-
ment between Turkey and Libya’s un-backed Government of Na-
tional Accord (gna). The deal claims an expansive maritime
boundary that looks outrageous to Greeks, and also to interna-
tional law. German efforts to bring Greeks and Turks together fortalks came close to working until Greece and Egypt earlier this
month rushed to finalise an agreement on maritime zones that
countered the one between Turkey and Libya. The Turkish re-
sponse was to send a seismic-research vessel into the area, with a
naval escort—which was involved in that collision with an elder-
ly Greek frigate.
Aggravating all this are wider frictions involving Turkey, from
Libya to Syria, the third ingredient stewing in the pot. In Libya,
Turkey and France are at loggerheads; in June Turkish warships
prevented a French frigate from inspecting a ship suspected of
carrying arms to the gna. The French do not mind pushing back.
The Turks, for their part, condemn French interference and
think Greece and its friends are ganging up against them. Tur-
key’s response, under its authoritarian president, Recep Tayyip
Erdogan, is to throw its weight around. He may feel emboldened
because some countries, such as Britain, are
keen to avoid antagonising a natoally while
others, notably Germany, fear that if pushed too
hard Turkey could cause chaos by letting more
migrants into Europe.
How to defuse the situation? In the past
America might have stepped in to hold the ring
(as it did after the clash in 1996). But the mess in
the eastern Mediterranean shows how that old
order is unravelling—and at what cost. On August 20th France’s
president, Emmanuel Macron, was due to welcome Germany’s
chancellor, Angela Merkel, to his presidential retreat at Fort de
Brégançon on the French Med. A combination of Mr Macron’s
muscle and Mrs Merkel’s mediation could yet prove effective in
convincing Turkey that, though its rule-breaking cannot be ac-
cepted, its concerns will be listened to. The priority is to create
some breathing space for Greece and Turkey to talk. A morato-
rium on exploration in disputed waters might be a good start.
The irony is that, given today’s low prices, major oil compa-
nies are delaying further drilling near Cyprus. The transition to
cleaner energy is continuing apace. Energy companies are be-
coming ever more selective in their investments. The longer that
the eastern Mediterranean’s leaders bicker, the greater the
chance that gas riches beneath the seabed will remain there. 7A sea of trouble
Turkey and Greece must be encouraged to exchange views, not blowsTensions in the eastern Mediterranean