In this week's newsletter: No one wants to go public except Saudi Aramco; stock-trading commissions go to zero; developed countries default on debt; and more. The whole thing is 1,674 words, which will take you about 6 minutes to read.
Illustration: Eniola Odetunde/Axios
Once upon a time, going public was a fun and joyous thing to do. In the late 1990s, young companies would raise money in an IPO, there would be an enormous first-day pop, everybody would start talking about you, and the combination of new money and free PR would turbocharge your business.
Driving the news: Venture capitalists are so unhappy with IPOs that they spent Tuesday at a high-level conference devoted to direct listings (a slightly different way of going public, that doesn't involve raising money).
Being public is so miserable that people like the Chang family, who founded retailer Forever 21, refused to raise equity capital.
The bottom line: In 2012, I wrote a feature for Wired about "why going public sucks," and suggested that maybe the answer might lie in companies staying private instead, orchestrating deals on their own terms to provide liquidity to investors and employees who need it.
Now that WeWork has pulled its IPO, the equity primary markets seem sure to end this year with a whimper.
What they're saying:
"I like to recite Prufrock internally while we check we're GAAP compliant, but feel free to use whatever method you prefer to numb the pain."— Frank Vernon, "Succession" character, in S2E6
"Uber started the decline and WeWork has massively increased the momentum. It’s like we’ve had this cocaine-fueled party at Studio 54. Uber was the lights starting to go on, and now they’ve gone on so bright it’s like you’re in an operating room. Endeavor couldn’t get out. Basically, these guys have totally shit in the IPO pond."— NYU's Scott Galloway to NY Magazine
The S&P 500 was flat in the third quarter. The stocks in the Renaissance IPO index, on the other hand, were not.
Illustration: Sarah Grillo/Axios
One company that's still desperate to go public is Aramco, Saudi Arabia's state-owned oil company. (Hence the long list of financiers willing to return to the country's "Davos in the Desert" conference later this month.)
Driving the news: Aramco promised this week that it would set a dividend of at least $75 billion through 2024 — or, at the very least, that non-government shareholders would receive at least $750 million in dividends for every 1% of the company that they own, from 2020 through 2024.
Why it matters: Because the Saudi royal family controls Aramco, it doesn't need the company to pay any dividends at all.
Between the lines: In many ways the Aramco situation is similar to that of Fannie Mae and Freddie Mac. The U.S. government controls the agencies and their profits. Private shareholders, who own 20% of the equity in the companies, have received nothing from them for over a decade.
Why you’ll hear about this again: Investing in autocracies is part of modern capitalism. In China, for instance, PayPal is buying Gopay, a local payments provider.
The bottom line: In countries with robust civil societies, shareholders have significant legally enforceable rights, and those rights underpin the value of their shares. In countries like China and Saudi Arabia, by contrast, foreign shareholders only win insofar as it behooves the local government to keep them happy.
Illustration: Aïda Amer/Axios
File under "what took you so long": All the major discount brokerage houses are now charging $0 for stock commissions, following the lead set by the Robinhood app in 2014.
Zero dollars is the most obvious and logical price for stock commissions, as Matt Levine explained in April in a Bloomberg Opinion piece.
The upside: All of the brokerages saw their share prices fall on Tuesday, in an indication that Wall Street believes they will be making less money as a result of this move. If the brokers are making less, that's good news for their customers.
The downside: If commissions are set at zero, that makes the companies' business models more opaque. It also encourages customers to make more trades, since there's no obvious cost to doing so. Of course, the more you trade, the less well you will likely perform.
The bottom line: Brokerages' interests have never been aligned with those of their customers. Zero commissions are surely good for consumers, but the hefty commissions of yesteryear did help to discourage day trading and similarly dangerous activities.
Countries defaulting on their debts have caused enormous problems for the international financial system since the Latin American debt crisis of the mid-1980s. But until this decade, the world's developed countries always found themselves as the creditors, not the debtors.
What's new: The world's most comprehensive database of sovereign defaults, run by the Bank of England and the Bank of Canada, has been updated for 2018, and once again advanced economies are driving the numbers.
The big picture: As countries struggle with growing debt burdens, sovereign debt problems will become increasingly common.
Tomorrow’s jobs report is expected to show a gain of 145,000 jobs in September. Unemployment is expected to hold at 3.7% — a near 50-year low, writes Axios' Courtenay Brown.
Why it matters: A terrible manufacturing report this week renewed recession fears. Those fears will be exacerbated on Friday if the jobs report misses expectations and comes in below about 100,000. On the other hand, a big miss would almost certainly lock in a 3rd interest rate cut later this month.
Photo: Sergei Malgavko\TASS via Getty Images
Byzantine Emperor Justinian I built the first fortress in Sudak, Crimea, in the 6th century. Various other fortifications were added over the following 1,000 years, as Sudak became a major international trade center.
Finally, this, by Toph Tucker, is the best thing I've ever read about information design in finance.