As a bonus, Thanksgiving lets me have some journalistic fun every year by writing about business turkeys. As in, “Boy, was that deal a turkey!”
Before we begin, you should know that I’m sticking to business turkeys. I’ll leave political turkeys for others.
We’ve had a bumper crop of business turkeys this year. In fact, we’ve had so many fowl-ups that I don’t have room to tell you about all of them.
Negative Interest Rates: This is the dumbest thing ever. The idea, promoted by the Japanese and European central banks, that reducing countries’ borrowing costs to less than zero would be economic nirvana, was totally nuts.
Not only didn’t it work, but interest rates of less than zero (or close to zero for higher-quality borrowers) did huge damage to insurance companies and pension funds, which invest today to be able to pay benefits in the far future.
You can bet that we’ll soon be reading about the huge losses insurers and pension funds racked up by taking big risks to offset negative rates. And that negative rates will be in the running for Turkey of the Decade.
WeWork: The funniest turkey of the year involves We, the parent company of WeWork. We, which was losing money hand over fist, convinced sucker investors that an office-rental company was really a high-tech operation whose privately traded stock was worth $47 billion.
Oops. Soon after that, We’s numbers were disclosed in initial public offering documents and the company turned from a triumph into a turkey. Suddenly, We needed a financial bailout, its stock was revalued downward to $7 billion (which is still probably too high) and its IPO was delayed, possibly forever.
SoftBank, which bailed We out, now owns a controlling interest in this mess and big stakes in other messes, as well. Perhaps SoftBank should consider becoming a corporate sponsor of Turkey Trot races.
Before I forget, a disclosure: ProPublica, where I’m an editor at large, rents office space in Washington and Chicago from WeWork.
Reality bites: Irrational exuberance for start-ups isn’t confined to the Northeast Corridor or the West Coast. Courtesy of the Minneapolis Star Tribune, here’s a turkey tale about Bite Squad, a once-sizzling-hot Minneapolis food-delivery start-up that was sold for $336 million in January to a Louisiana company called Waitr. Oops. Waitr has just taken a $192 million loss on the acquisition. Perhaps Waitr got inadequate tips about Bite Squad’s value.
Saudi suckers: One of my favorite turkeys involves the March purchase of a 70 percent stake in Saudi Basic Industries (SABIC) by Saudi Aramco, which is in the process of trying to go public. Aramco, 100 percent owned by the government of Saudi Arabia, purchased 2.1 billion SABIC shares for 123.39 Saudi riyals each from a Saudi sovereign wealth fund in March.
When last I looked, the 900 million SABIC shares that trade on Tadawul, the Saudi stock market, were selling at 93.1 riyals. That puts Aramco’s SABIC investment of 63.6 billion riyals — about $17.2 billion — underwater. A sweet deal for the wealth fund, which sold at close to SABIC’s market high. A turkey transaction for Aramco.
Boeing: Boeing is the biggest business turkey of the year. I’ve made it my last item because I didn’t want to start this column by writing about something so awful and depressing. The other turkeys involve only money. This one involves lost lives.
Boeing was so hot to peddle its Max jets that it adopted shortcuts and played games that contributed to two plane crashes that killed a total of 346 people. A horrible story.
Many Boeing jets are still out of service, which has caused travel problems and may have helped lead to higher fares because there are fewer flights and fewer airline seats than normal available.
Dead fliers, higher fares, fewer flights. Happy holiday traveling, Boeing.
A final word: I can’t resist writing about the financial turkey being stuffed down our nation’s throat by the horrible 2017 tax bill, the no-tax-cut-can-be-too-big Republicans and the no-spending-plan-can-be-big-enough Democrats. Even though we’re near the height of the business cycle, we’ve got trillion-dollar annual federal budget deficits. Our grandkids are going to look at this some day and wonder why we felt entitled to gobble up their heritage.
Enough, already. A Happy Thanksgiving to you and yours. And let’s all try to remember to be polite and civil to each other, especially to people with whom we disagree.