Porsche's supercharged market debut
Shares in Porsche rose in their trading debut this morning, after the sports car maker priced its initial public offering at the top end of its expected range last night. The long-awaited offering was an increasingly rare bright spot for I.P.O.s, but it may not be enough to revive the moribund market on its own.
Porsche's stock opened at 84 euros, up nearly 2 percent over its I.P.O. price. (Fun fact: The company's stock ticker, P911, and overall share count of 911 million are nods to its iconic 911 model.) Underwriters had expected strong demand for some time: The deal's order book was oversubscribed within hours of being opened last week, DealBook has learned. Investors clamored for a piece of the I.P.O., with some going so far as to send pictures with their 911s to prove their Porsche fandom.
Among the points that Porsche emphasized during its I.P.O. roadshow were its healthy operating profit margins of 20 percent and the success of its battery-powered Taycan sedan, the first of what is expected to be many electric vehicle models in the modern era.
About 40 percent of the shares sold in Porsche's offering went to four big investors, including sovereign wealth funds and the American money manager T. Rowe Price. An additional slug of shares was sold to the Porsche and Piech families that control Volkswagen (and will, thanks to a dual-class stock structure, hold sway over Porsche as well).
The offering breathes new life into the I.P.O. market. Porsche's debut raised 9.4 billion euros, about $9.1 billion, for Porsche's parent company, Volkswagen — double the entirety of proceeds raised by I.P.O.s in Europe so far this year, according to Refinitiv. Globally, the I.P.O. business has struggled with market volatility that reduced investor appetite for anything risky: The number of initial offerings is down 40 percent, while the dollar volume is down 66 percent.
But the strength of Porsche's debut can go only so far. I.P.O. bankers say that their business overall will most likely remain muted, so long as stocks remain weighed down by investor fears over inflation and recession. Porsche was a special case — it has a brand name with loyal fans (Porsche car clubs had sought to buy into the I.P.O.) and strong business performance — whose success can't easily be duplicated.
One proof point: European stock markets were down this morning.
HERE'S WHAT'S HAPPENING
The Swedish Coast Guard discovers a fourth leak in the Nord Stream gas pipelines. The reported rupture , in the country's waters, raised further questions about the extent of what European officials have called sabotage. N.A.T.O. also said this morning that "acts of sabotage" were to blame for the leaks .
Bank trade groups sue the Consumer Financial Protection Bureau. The organizations accused the financial regulator of overstepping its bounds by requiring banks to submit tests of how their policies may discriminate against certain groups, including racial minorities, without proper consultations or legislation. In an email, the bureau stressed that it was "one of the most transparent regulatory agencies" but did not comment on the suit.
California makes it easier for farmworkers to unionize. Gov. Gavin Newsom signed a bill that allows workers to vote in union elections by mail , instead of in person, often on a grower's property. Supporters of the measure say it will help reduce the possibility of retaliation.
The Private Life of MacKenzie Scott
The novelist is one of the most consequential philanthropists in the world.
- Avoiding the Spotlight: MacKenzie Scott's divorce from the Amazon founder Jeff Bezos made her a public fascination , but she continues to keep a low profile .
- Her Donations: Since promising to give away her entire fortune, Ms. Scott has handed out over $12 billion to 1,257 organizations .
- No Fanfare: Through a streamlined operation with no known address — or even website — Ms. Scott has quickly disbursed her money with no strings attached .
- Transforming Giving: Ms. Scott has become part of an emerging group of wealthy women who are changing the philanthropy game.
Beijing warns investors against betting on the renminbi. The People's Bank of China posted a notice on its website urging traders not to wager on the Chinese currency's rises and falls, according to CNBC. The central bank has also directed state-run banks to buy the currency (and sell the dollar) to prop up the slumping renminbi.
Saudi Arabia's huge sovereign wealth fund opens its books. The $608 billion Public Investment Fund reported a 25 percent return for its shareholder last year, as part of its plans to issue its first-ever bonds. The unusual move is meant to help the fund raise money for ambitious infrastructure projects down the line.
Ian's devastation shows the challenge of pricing climate risk
More than two million people in Florida were without power this morning , and severe flooding and high winds from Hurricane Ian have damaged homes and businesses, and affected operations at some airports. Ian, now downgraded to a tropical storm, is expected to inflict as much as $40 billion in property damage claims and much higher total economic losses, RBC Capital Markets analysts calculated in an early assessment. Even though ferocious storms like Ian seem to make landfall with increasing regularity, insurers and environmentalists say that pricing the risk associated with these events will only get trickier.
New models are needed. Historical actuarial patterns that once helped insurers price premiums are becoming less relevant as severe weather spawned by climate change happens more frequently, said Don Bain, an engineer and senior adviser at the nonprofit group Climate Central. "The ability to price risk depends on modeling, and that modeling is stressed," he told DealBook. "Climate is in motion now, and we're on a path to a new normal that's also in motion." And insurance data paints only part of the shifting picture.
Coastal communities could take a $108 billion hit by 2100 , according to a Climate Central analysis. As sea levels rise and shift the tide lines that delineate boundaries between public and private property in some states, researchers predict "significant implications for both property owners and local property tax revenues." They estimate that by 2050 up to 4.4 million acres may be below the relevant tidal boundary levels, with Florida, Louisiana, North Carolina and Texas most at risk.
Climate change litigation is an added calculation. Steve Tagert , a leader in Allianz's environmental practice group, told DealBook that more companies are getting sued for environmentally damaging activities each year and that plaintiffs' approaches are becoming more sophisticated. He expects these suits could become a bigger factor in future underwriting math. "We'll have to continue to monitor long-term, so we don't end up surprised," Tagert said.
"The Florida homeowners' insurance market is in crisis," said Kyle Ulrich , the head of the Florida Association of Insurance Agents, a trade group. He told DealBook that while climate change may be a factor in mounting premiums, wrinkles in state law that incentivize litigation are putting pressure on insurers' finances. On Friday, state regulators sought to declare FedNat Insurance insolvent . It was the sixth Florida property insurer to fail this year.
Was the Bank of England's rescue plan enough?
The Bank of England's surprise announcement yesterday that it would buy British government bonds " on whatever scale is necessary ," spurred by a run on the debt, appears to have contained a markets and a political crisis for now.
The bank's rescue plan lifted the global bond markets, a rally that spilled into U.S. stocks. But economists and investors fear that there may be more turmoil ahead. European stocks and bonds are in the red this morning, as are U.S. stock futures.
What went wrong? In essence, a strategy used by pension funds to guard against inflation, backed in part by government bonds known as gilts, went sour as British bond prices have plummeted. The funds were required to post more collateral, pushing them to sell gilts into an increasingly illiquid market, creating a vicious circle of declining prices.
Financial leaders and, increasingly, the British government became worried about the gilt market in recent days; the topic came up at a meeting between Kwasi Kwarteng, the chancellor of the Exchequer, and top bankers yesterday, DealBook has learned. Ultimately, the bank stepped in and ended the cycle of forced selling.
Not everyone is convinced that the trouble is over. Analysts warned that Prime Minister Liz Truss's high-growth, low-tax fiscal plans are at cross purposes with the bank's efforts to contain inflation. If Truss and Kwarteng pursue their proposals — and there's no indication they won't — the central bank will be forced to continue raising interest rates, increasing the British government's borrowing costs will keep climbing, as well as putting pressure on the finances of new home buyers and on variable-rate mortgage holders.
2022 has been a uniquely bad year for investors. According to a recent Deutsche Bank research note, the global market for government bonds, a typically stable investment, has sunk into its first bear market in 70 years. This isn't just bad news for the classic 60-40 stocks-to-bonds investor. Such a scarcity of bond buyers can quickly increase borrowing costs for issuers, and lead to wider market ramifications. In Britain, the pound tumbled to a record low on Monday against the dollar, and there are new doubts over the economy's path under the Truss government.
"All the areas are going to have impact. It could be the final straw for some Florida growers."
— Raymond Royce , the executive director at Highlands County Citrus Growers Association in Sebring, Fla., shares his fears that Ian could devastate the state's orange crop.
MacKenzie Scott files for divorce
Less than two years after the billionaire philanthropist MacKenzie Scott announced her marriage to Dan Jewett, she filed a petition for divorce on Monday in the King County Superior Court in Washington State.
Shortly after marrying last year, Scott and Jewett were considered a philanthropic power couple , report The Times's Nicholas Kulish, Rebecca R. Ruiz and Karen Weise . After her 2019 divorce from Jeff Bezos — at the time, the world's richest man — Scott began making multimillion-dollar donations in a unique fashion, usually as grants with no strings attached. In just three years, she has given away more than $12 billion to nonprofit groups. Jewett, a former science teacher, publicly promised to join her in giving away their vast fortune to good causes.
Jewett has all but vanished from the couple's philanthropic endeavors lately. Recent gift announcements have not listed his name in news releases. And Jewett's name was recently removed from a June 2021 Medium post in which Scott wrote: "Me, Dan, a constellation of researchers and administrators and advisers — we are all attempting to give away a fortune that was enabled by systems in need of change." His name was also deleted from Scott's author bio on Amazon.
THE SPEED READ
Efforts to fund $3.9 billion worth of debt to support Apollo's leveraged buyout of telecom assets are reportedly struggling. (Bloomberg)
The food e-commerce start-up GrubMarket has raised new funding from investors like General Mills at a valuation of more than $2 billion. (Bloomberg)
Lionsgate is said to favor spinning off its studio business , instead of its Starz cable and streaming platform. (CNBC)
Vladimir Putin will sign agreements tomorrow to formally absorb four Ukrainian territories, the Kremlin said, after referendums that were widely denounced as a sham. (NYT)
Victims of Bernie Madoff will get another $372 million in payouts from the Justice Department. (Bloomberg)
The gun maker Smith & Wesson faces civil lawsuits from the families of victims of the Fourth of July mass shooting in Highland Park, Ill. (WSJ)
Best of the rest
How McKinsey helped the vaping company Juul get teenagers hooked on nicotine. (NYT)
The rapper Coolio, famous for the hit "Gangsta's Paradise," died at 59 . (NYT)
Why the 2022 ad slump is so puzzling . (Vox)
"After Pandemic Barriers, Can Hong Kong Recover as a Global Metropolis?" (NYT)
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