Schumpeter

LIKE many unhappily married couples, Yahoo! and Alibaba have not found it easy to divorce. The American online firm owns roughly 40% of the Chinese e-commerce giant, but both sides have had misgivings about the relationship for years. All of Yahoo!’s many recent chief executives have tried to find a clever way to sell off the stake. Jack Ma, Alibaba’s flamboyant boss, for his part, has been dreaming of winning outright control of the firm he founded from Yahoo! and Softbank, a Japanese firm that controls about 30% of Alibaba. But there always seemed to be something—tax issues, valuation—that got in the way of a deal.

Continue reading "The long goodbye" »

INVESTORS have gotten used to a swift run-up, or “pop”, in the share price of tech firms that stage an initial public offering (IPO). But doubts swirling around Facebook’s business model meant that the giant social network’s stock failed to take off as some had expected on its first day as a public company on May 18th. Instead the IPO’s underwriters were forced to step in to prevent the shares slipping below their offer price of $38 as trading progressed on America's NASDAQ stockmarket. At the market’s close they were swapping hands at $38.23, giving the company a market capitalisation of $105 billion.

Continue reading "Not top of the pops" »

IT IS unlikely to keep Facebook's IPO rocket from taking off. But General Motors’s decision to scuttle its ad campaign on Facebook highlights the big question about the service, which now boasts more than 900 million users who log in at least once every month: Will the firm find a way to make enough money off its huge audience? 

Continue reading "Outdated logic" »

THE CHAIRMAN of Berkshire Hathaway discusses his motivations for giving wealth away, history's great philanthropists and why his tax return is not a factor

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“ZUCKERBERG’S rocket, ready for lift-off” was the title of our article about Facebook’s upcoming initial public offering (IPO) that ran in last week's issue of The Economist. As the first day of trading in its shares, expected to be May 18th, approaches, the rocket’s payload is getting bigger. On May 16th the social network revealed it was boosting the number of shares available by 25%, to 421m, on the back of increased demand. On May 17th it set the price of its shares at $38 each, valuing the company at $104 billion. The IPO is expected to raise more than $18 billion, making it one of the biggest in American corporate history.

Continue reading "The final countdown" »

A LARGE, mistaken, trading position take by J.P. Morgan, one of America’s leading banks, already costing it more than $2 billion has become a weapon in major battles in Washington and the financial markets.

In Washington a crowd of politicians has used the incident to argue for more government involvement in banking, even if the ideas floated are muddled or counter-productive. In the financial markets the response has been more focused and carnivorous as other financial firms are trying to get ahead of any move Morgan might make to extricate itself from its trade.

Continue reading "Damage control" »