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In this week's newsletter: Libra, Kiva, shareholder activism, direct listings, Sotheby's, Fed dovishness, negative-yielding debt, and more.
Illustration: Sarah Grillo/Axios
"Reinvent money. Transform the global economy." That's the promise at the top of the homepage of Libra, an almost parodically ambitious pecuniary exercise brought to you by the empire-builders at Facebook.
Be smart: The balance of probabilities is that Facebook Money is going to go the way of the Facebook Phone — or, for that matter, Facebook Credits, the company's previous attempt to get into payments. Facebook co-founder Chris Hughes has laid out many good reasons to worry about Libra succeeding, but the fact is that Facebook's cryptocurrency ambitions are unlikely to get all that far.
Libra's primary stated goal is to concentrate on serving the 1.7 billion of the world's adults who are entirely outside the financial system. The idea is that they should be able to send and receive money as easily as they do text messages.
Libra is, literally, run by committee. It's called the Libra Association, and Facebook has just one vote. When problems arise, Facebook will point out that it does not control the currency. This will not mollify regulators.
The bottom line: Libra can't be successful without regulatory approval, and that approval isn't going to arrive anytime soon.
Go deeper: FT Alphaville has a whole series, "Breaking the Zuck Buck," devoted to all the problems with Libra.
Illustration: Aïda Amer/Axios
One of Facebook's launch partners in Libra is Kiva, a nonprofit that has married the concept of third-world microloans to first-world crowdfunding. Ordinary Americans use Kiva to lend money to some of the poorest people in the world, receiving 0% interest in dollars. The dollars go to microfinance institutions in more than 80 countries, which convert them to local currency and then lend them out to individuals who have to repay the loans with interest.
So Kiva is introducing the Kiva Refugee Investment Fund, a lending vehicle aimed at impact investors seeking a positive return. The fund will be part of Kiva Capital Management, a new shop that will join what the Global Impact Investing Network estimates as the $502 billion market for investments aimed at positive social change.
The bottom line: A recent UBS survey of 443 asset managers controlling more than $20 trillion among them found that 78% of them actively take ESG (environmental, social and governance) factors into account when making investments. But it's hard to see what difference that has made. More focused impact investors tend to be keener on quantifying their impact — and efforts to do that on a comparable basis are still at a very early stage.
Illustration: Aïda Amer/Axios
You don't need to own a lot of shares in a company to make a difference on how it's run. For decades, "gadfly" shareholder activists have bought a handful of shares and then pushed for reforms at annual meetings and via proxy votes.
Those activists are getting more sophisticated, reports Axios' Courtenay Brown. Behind-the-scenes negotiations have led to fewer ESG proposals making it onto the ballots at companies’ annual shareholder meetings.
Illustration: Aïda Amer/Axios
Slack went public this week via the most elegant and efficient way possible — a direct listing. The opening auction of the stock cleared around noon on Thursday, at a price of $38.50. It then traded smoothly (under the ticker symbol WORK) for the rest of the week within a pretty narrow range between $36.50 and $42.
What to watch: Slack and Spotify — which also opted for a direct listing — didn’t raise any new equity capital when they went public. But they can do so at any time, now that there's a deep and liquid market for their stock. And future IPOs might also use an auction system to allocate stock, a bit like Google did in 2004.
The bottom line: No matter how plugged in to the markets they are, IPO bankers will only ever be able to talk to a small subset of investors before they take a company public. The Slack auction — just like the Zoom IPO before it — shows just how unexpectedly large the bid can be when a hot, fast-growing company hits the market. It's silly for companies not to take full advantage of that upside.
The opposite of an irrevocable offer is an irrevocable bid.
Drahi could yet get outbid: The New York Post reports that "at least two counteroffers" are in the works. But, just like a third-party guarantor, Drahi would win even if he lost. He receives a $100 million termination fee in the event that Sotheby's ends up selling to someone else.
Neel Kashkari treats a tree on his property as though it were the current 2.5% Fed Funds target rate. Photo: Linda Davidson/The Washington Post via Getty Images
This week's decision to keep interest rates on hold was not unanimous. For the first time in Jay Powell's tenure as Fed chair, there was a dissent: St. Louis Fed president James Bullard said the Fed should have cut rates by 25 basis points.
Minneapolis Fed president Neel Kashkari was even more dovish. (He was also present in the room, but doesn't get a vote until 2020.) Once the final decision was made, Kashkari went public with his position on Medium:
"I advocated for a 50-basis-point rate cut to 1.75 percent to 2.00 percent and a commitment not to raise rates again until core inflation reaches our 2 percent target on a sustained basis. I believe an aggressive policy action such as this is required to re-anchor inflation expectations at our target."— Neel Kashkari, president of the Minneapolis Fed
Kashkari's logic is pretty simple: Inflation is too low, and so the Fed needs to keep on loosening monetary policy until it gets up to the target level.
The bottom line: Cutting rates with the stock market at a record high might seem odd, but it's happened before. If the market continues to rally through the next Fed meeting, it might well happen again.
U.S. interest rates might be low, but they're a lot higher than interest rates in most of the developed world. The benchmark 10-year bond yield is negative in Germany, the Netherlands, Switzerland and Japan; it's also thisclose to going negative in France.
Be smart: You'll see a lot of chatter about how the investors in these bonds would get a better return were they to just stash cash under a mattress. Ignore that chatter. If you're an institutional investor managing trillions of dollars in assets, you can't convert that money into cash, and while a bank will probably pay you 0% for that money, you still end up taking significant counterparty risk. Bonds have negative yields for good reason.
Illustration: Rebecca Zisser/Axios
The G20 summit begins on Friday in Osaka, Japan, writes Courtenay.
Photo: Niklas Halle'n/AFP/Getty Images
Every year, London's Serpentine Gallery commissions a pavilion for its front lawn from an architect who has never built anything in the U.K. This year's architect is Junya Ishigami, from Japan. He used 67 tons of Cumbrian slate to build a "stone hill" emerging from the ground.