The Week's Top Stories: Employment Figures and Mega IPOs

July 5, 2019

From Wall Street to Silicon Valley, these are the top stories that moved markets and had investors, business leaders, and entrepreneurs talking this week on Cheddar.

Jobs Report Blowout

Economists breathed a sigh of relief at the June employment report, which showed a gain of 224,000 non-farm payrolls for the month ー far surpassing expectations of about 160,000. The unemployment rate ticked up slightly to 3.7 percent. Wage growth continued to creep higher, however slowly, showing a 3.1 percent gain year-over-year. Markets fell sharply after the report as investors calculated that the strong showing makes it less likely the Federal Reserve will move to cut interest rates at this month's meeting. Still, the June print provided evidence that May's dismal report ー which was revised downward from 75,000 jobs to 72,000 ー was an aberration, rather than an indicator of a gathering economic slowdown. See more.

Nike and the Culture Wars

The holiday fireworks started early for Nike ($NKE) when the Wall Street Journal reported that the shoemaker pulled a special Independence Day-themed sneaker that featured an image of the "Betsy Ross" flag, with its 13 stars arranged in a circle to represent the original 13 colonies. Nike reportedly nixed the shoe after Colin Kaepernick, former NFL star-turned-activist who is sponsored by Nike, advised the company that the flag was offensive for its ties to an era of slavery. The Betsy Ross flag has also been co-opted in recent years by far-right and white supremacist groups. Nike's reversal, on the eve of the nation's birthday, enraged some people who said it was another example of P.C. culture run amok. Among the critics was Arizona's Republican governor, Doug Ducey, who said he was pulling financial incentives for Nike to build a manufacturing plant in a Phoenix suburb, a deal that was set to be announced just as the controversy erupted. Those incentives reportedly included $1 million in waived fees and another $1 million for the 500 jobs the plant would create. Nike has not said whether it still plans to build the facility in Arizona. See more.

Tesla Delivery Surprise

Tesla ($TSLA) reported quarterly deliveries that blew past expectations in an important reprieve for the embattled electric carmaker. Tesla said it delivered 95,200 vehicles in the second quarter, nearly doubling its year-over-year deliveries and besting its previous record by 1,500. Deliveries are a critical indicator for Tesla investors because that's the point at which customers pay the full sticker price of the vehicle they've ordered. The production beat was a sliver of good news in an otherwise bad first half of the year for the company. Shares are still down more than 30 percent from their January high of $347. Musk spent months as the target of an SEC investigation over his tweeting, all while several high-profile executive departures added to a sense of the corporate governance being in disrepair. Adding to signs of internal strife, tariffs upended the company's China strategy. Plus, a federal tax credit that had a been a boon to Tesla was just halved again, to $1,875, after starting at $7,500. That credit will be eliminated entirely next year, which is part of the reason Tesla cut prices. See more.

Biggest IPO Ever

The biggest public listing in history is back on. Saudi Arabia's energy minister said the kingdom has restarted plans to list shares of Aramco, the state-run oil giant, within the next two years. Aramco is thought to be the most profitable company in the world, with $111 billion in net income last year. The float could value Aramco at an astounding $2 trillion. Plans for an IPO sputtered last year amid worries it wouldn't hit that valuation, and Saudi Arabia has since dealt with serious reputational damage after the killing of dissident journalist Jamal Khashoggi. Crown Prince Mohammed bin Salman has been working to move the kingdom away from its reliance on oil. Privatizing a large portion of the country's huge oil wealth could help the Saudis diversify their investments, such as the ones they've made in Silicon Valley unicorns like Uber ($UBER) through a partnership with SoftBank's Vision Fund.

Biggest IPO of the Year

Anheuser-Busch InBev ($BUD), the global brewery giant, is prepping a public offering on the Hong Kong market that could raise $9.8 billion. That would top Uber's May listing, which raised $8.1 billion, despite its rocky start. Based on the price range of shares being offered ー HK$40 to HK$47 ($5.12 to $6.02), according to Bloomberg ー AB InBev's Asia Pacific business would be valued at as much as $64 billion. Brussels-based AB InBev has seen sales stagnate in some markets, while it has grown in Asia due in part to its strategy of buying up smaller craft breweries that make beers that appeal to China's increasingly affluent middle class. The offering is expected to be priced next week with shares set to start trading July 19.