A key moment in capitalism; Stockmarket listings in America

 

“Going public? Here is a how-to-guide for the modern startup boss.

"A FLOTATION IS like your own funeral. You usually do it only once," deadpans the chief financial officer of a software company that recently staged a blockbuster initial public offering (IPO). Some compare a listing to a wedding, requiring much frantic preparation and ending with a big celebration and bell-ringing. Others liken it to an 18th birthday, marking the moment a young company is launched into the harsh realities of adult life.

Whichever metaphor you choose, going public combines mixed emotions, much complexity and myriad idiosyncracies. Despite that, and undeterred by recent wobbles in equity markets, startups have been listing in droves. So far this year tech firms have raised $60bn, according to Dealogic, a data provider, more than at the height of the dotcom bubble in 2000. Include all types of business and the figure is close to $250bn (see chart on next page). One headhunting agency is said to have more than 50 searches under way for finance chiefs at startups hoping to go public soon.

The latest blockbuster flotations include those of Amplitude, a data-analytics firm which went public on September 28th and reached a market capitalisation of $5.6bn after its debut, and Warby Parker, a maker of spectacles popular among hipsters, which started trading a day later, attaining a market value of $6.1bn. Investors can't get enough of the fresh blood. Despite a sharp drop in the first half of the year, recently listed companies are back in favour, and have handily outperformed the stockmarket as a whole since the start of 2020.

Besides being more numerous than earlier cohorts, the new generation of floaters enjoy greater choice in how to go about it. Holders of stakes in Amplitude and Warby Parker have opted to sell their shares directly to public investors without raising fresh capital, as is in an IPO. Last year a record number of companies listed via reverse mergers with special-purpose acquisition companies (SPACs). Even the classic IPO is getting a reboot.

To make sense of it all, The Economist talked to bosses and chief financial officers of companies that have recently listed or are about to, as well as venture capitalists, bankers and brokers, most of whom spoke on the condition of anonymity. The result is a rough-and-ready guide to everything that is new in what one chief executive dubs the "key moment in capitalism".

A conventional listing goes something like this. Banks distribute newly created shares, on average 10% of a firm's total, to public investors, and pocket 7% of the money raised as fees. Though this should incentivise them to price the shares highly, the bankers also work for the buyers, who tend to be their long-term institutional clients rather than one-off customers like the listing startup. Pleasing those regulars often means setting a lower price.

That in turn all but ensures a share-price "pop" on the first day of trading, generating a quick profit for the public investors at the expense of the private ones. In the past decade the pop averaged 21%, according to an analysis by Jay Ritter of the University of Florida. And the first-day surge can be much bigger. Snowflake, a cloud-based data platform which went public last year, popped by 112%, adding nearly $40bn to its market value. As a result, its private investors may have left nearly $4bn on the table.

The good news for startup bosses, their early backers and staff, who are often paid in stock, is that banks' power is waning. Faced with options such as SPACs and direct listings, the bankers have become more flexible with the terms they are willing to accept, at least for bigger, high-quality deals aiming to raise $500m or more. The 7% is now negotiable. Strict 180-day lock-ups, which bar pre-IPO investors from selling their shares too soon, are giving way to more staggered ones. Employees of Coursera, a big online-education platform that listed in March, were allowed to sell 25% of their holdings 41 days after the IPO. Management could do the same, but only if the share price stayed at least 33% above the IPO price for 10-15 trading days.

That makes the IPO look a bit more like a direct listing, which by definition has no lock-ups. Direct listings, meanwhile, are looking more like IPOs. Last December the Securities and Exchange Commission (SEC) allowed companies listing directly on the New York Stock Exchange (NYSE) to raise capital--something that had been prohibited. In May the markets regulator waved through a similar rule change for the tech-heavy Nasdaq exchange.

For the time being, startups eyeing direct listings simply raise money ahead of the flotations, as Databricks, a data-management firm eyeing a listing, has done in two rounds this year that brought in $2.6bn. But the ability to raise new capital may in time make direct listings appealing to companies with less cash than the tech darlings that have already taken the direct route, like Spotify (in music-streaming) or Slack (office-messaging).

Then there are the SPACs. These have been around for decades, as has their reputation for dodginess (born of laxer requirements than the conventional avenues to public markets). After a frenzy in late 2020 and earlier this year, this reputation may have caught up with them. Having raised around $100bn between January and March, the SPAC fever has broken. According to one reckoning, new SPACs that had merged with their target by mid-February have lost a quarter of their combined market capitalisation since then, wiping out $75bn in shareholder value.

Still, there may be room for SPACs in the pool of flotation options, especially now that regulators and investors alike are waking up to the iffiness. The SEC is taking a closer look at the practice, fearing that SPACs mostly benefit the vehicles' founders (who customarily get 20% of a SPAC's shares as a fee, or "promote"), their bankers and lawyers. This month an SEC advisory panel recommended that SPACs disclose more information about things like promoters' financial incentives and conflicts of interest, merger due diligence and risks. In August the SEC objected to one novel SPAC format proposed by Bill Ackman, a hedge-fund billionaire, because it looked too much like an investment fund.

Closer scrutiny should help clean up the industry. And even before any new rules are enacted, many SPACs are already offering more generous terms as they hunt for promising startups to merge with, which they must do within two years. Some SPAC sponsors are accepting lower "promotes" than the customary 20%. In one SPAC last year Mr Ackman forwent the promote altogether and settled for warrants that allow him to buy shares in the merged entity.

The sponsors of SPACs are also sticking around rather than flipping shares quickly, which gives them a reason to nurture longer-term success. In the record $40bn SPAC deal involving Grab, South-East Asia's biggest super-app, due to be completed this year, founders of the shell company, Altimeter Growth, vowed to hold on to their shares for at least three years, rather than the customary 12 months.

Other parts of the listing process look a bit more familiar. A CEO must find a trusted finance chief, and IPO-hardened ones remain a scarce commodity. Startups also continue to rely on investment bankers to take on legal liability, underwrite the share issue (as "stabilisation agents" that vow to support the share price should it tank) and act as a marketing department for the listing. Bosses are still advised to talk to the more taciturn members of the sales team pitching a bank's offer (they do more work than the garrulous types) and forge close relations with brokers that will track their firms' public fate (as the saying goes, "You date the banker but marry the analyst"). And firms in Silicon Valley still have only three real choices for the two "lead" banks: Goldman Sachs, JPMorgan Chase and Morgan Stanley. If a tech startup picks some other bank as the lead, investors will wonder what is wrong with its offering.

But here, too, change is afoot. Improved access to information and investors lets bosses play off the big three banks, and the ten or so others in the prospectus that provide additional distribution of shares and analyst coverage, against each other. Banks are responding by throwing in ever more extra sweeteners, such as offering to manage a founder's future wealth, or loans in exchange for collateral in the form of privately held stakes. Some startups that make business technology, like SimilarWeb, which provides tools to analyse website traffic, require banks which want to vie for the contract to purchase their wares.

Once the syndicate is in place, it is time to sell a story. This has grown in importance as the technology offered by startups has become more complex and their business models more unusual. Few firms these days leave the prospectus entirely to the bankers. The middlemen can deal with the financial disclosures and other legal boilerplate. But the opening letter to shareholders is virtually always written by the founder CEO. "It helps clarify the essence of what you do as a company," says Daniel Dines, the boss of UiPath, which sells automation software and raised $1.3bn in an IPO in April that valued it at $29bn.

Nowadays many firms file their prospectus, or S-1 in SEC-speak, confidentially, which lets them modify the document in response to queries by the regulator without the embarrassment of a public refiling. The "roadshows" that make up the other part of the sales pitch are also more of a back-and-forth process. Some firms begin meeting investors before they file their S-1. After the filing they do another round of meetings to hone the presentation and the accompanying pitch deck. Only then comes the roadshow proper, which gets cracking after the S-1 is made public.

As a result of the pandemic this arduous process involves fewer actual roads. Investor presentations have mostly gone virtual, sparing bosses visits to a dozen cities in ten days, including a handful overseas. And the tedium of endless Zoom calls is now punctuated by instant gratification. After each presentation investors put in their bids, which pop up instantly in an app provided by the banks. These enable all manner of fancy analytics, including drawing demand curves for an offering.

Nevertheless, actual share allocation and pricing still requires "man-to-man combat", in the words of a (female) banker. If a bank senses no pushback, the client startup will find many hedge funds on the investor list. Most startups do try to push back, however, demanding that all their future shareholders are long-term and blue chip. CrowdStrike, a cyber-security firm which went public in 2019, had confronted its bankers with a spreadsheet of some 400 investors that management had already vetted. Some firms are offering shares to their users. In its IPO Uber set aside 3% of its stock for drivers. Its ride-hailing rival, Lyft, did something similar. In July Robinhood, a day-trading app, reserved up to a third of shares in its IPO for its users.

Once the price is set and the allocations decided, the last task for the exhausted boss is to ring the bell on the opening day of trading. Besides being the culmination of a protracted process this remains a marvellous marketing opportunity. So when the bell chimes on the NYSE or the Nasdaq, bosses should smile, wave and watch traders spring into action, making their wildest capitalist dreams come true.” [1]

1. "A key moment in capitalism; Stockmarket listings in America." The Economist, 2 Oct. 2021, p. 55(US).

 

Jūros dumbliai dideliu mastu; Akvakultūra

    „Plaukiojantys atviroje jūroje esantys ūkiai turėtų padidinti naudingų augalų derlių ir netgi padėti palengvinti klimato kaitą.

    Daugelyje vietų, kur anksčiau klestėjo jūros dumbliai, dažnai augantys didžiuliuose „miškuose“, jie nyksta. Priežastis yra visuotinis atšilimas, kuris, kaitindamas viršutinį vandenyno sluoksnį, sumažina jo tankį dėl šiluminio išsiplėtimo-taip jis tampa plūdesnis. Šis papildomas plūdrumas reiškia, kad mažiau tikėtina, kad jis susimaišys su vėsesniais, tankesniais ir maistingesniais vandenimis žemiau. Tai kenkia jūros aplinkai apskritai. Tai yra blogai ir komerciniam jūros dumblių auginimui, verslui, kurio pajamos (priklausomai nuo to, ko klausiate) yra nuo 6 iki 40 mlrd. dolerių per metus.

    Dumbliai, ypač rudadumbliai, yra populiarūs Azijos virtuvėje. Jie taip pat naudojami, kaip trąšos ir perdirbami į karageniną, natūralų rišiklį ir emulsiklį, naudojamą maisto produktuose, kosmetikoje ir vaistuose. Dauguma jų auginami jūros dugne arba ant jo pritvirtintų virvių. Tačiau kai kurie auginami mažose plaukiojančiose platformose.

    Siekdami atremti paviršiaus šildymo poveikį, kuris ypač ryškus tropikuose, tyrėjai bando patobulinti plaukiojančios platformos metodą, padėdami pakelti vėsesnius vandenis, kad paskatintų dumblių augimą tokiose platformose. Tai taip pat padidintų jūros dumblių ūkių plotą, nes jie galėtų būti toli nuo pakrantės. Eksperimentinis plaukiojantis ūkis, įrengtas rugpjūtį, prie Filipinų krantų, vadovaujamas Amerikos labdaros organizacijos „Climate Foundation“ vadovaujamos grupės, yra vienas didžiausių kol kas bandymų tai padaryti.


    Dirbtinis pakilimo stimuliavimas nėra nauja idėja. Jis daugelį metų buvo reklamuojamas kaip būdas regeneruoti rudadumblių miškus. Ir dėl geros priežasties. Esant pakankamai maistinių medžiagų, milžiniškų rudadumblių lapai, užaugantys vidutiniškai apie 30 metrų, gali pailgėti daugiau nei 50 cm per dieną. Tačiau tik dabar rimtai bandoma skatinti vandens pakilimą.

    Fondo bandomosios platformos plotas yra 100 kvadratinių metrų. Joje saulės energija varomos turbinos siurbia vandenį iš kelių šimtų metrų gylio per lanksčius cilindrinius vamzdžius. Fondas taip pat planuoja eksperimentuoti su vėjo ir bangų varomomis turbinomis.

    Jei tai veikia, o tai rodo ankstyvieji rezultatai ir gali būti padidinta, tokia technologija ne tik galėtų padidinti jūros dumblių gamybą, bet ir padėti ekosistemoms, priklausančioms nuo jūros dumblių miškų. Ir, bent jau teoriškai, jei dalis derliaus būtų paaukota, nuskandinant jį giliai vandenyne, tai galėtų veikti kaip nauja anglies surinkimo ir saugojimo forma, galinti padėti sulėtinti atšilimą, sukėlusį šią problemą .

    Pasak fondui vadovaujančio Briano von Herzeno, 2020 m. organizacija, naudodama panašią technologiją, atliko mažesnio masto eksperimentus. 

Jie parodė, kad jūros dumbliai ant platformų, drėkinamų vandeniu, auga keturis kartus greičiau nei lygiavertėse, nelaistomose platformose. Be to, jis ir toliau auga šilčiausiais metų mėnesiais, kai ne taip drėkinami jūros dumbliai iš tikrųjų susitraukia.

 

    Von Herzenas ir jo kolegos tikisi pasinaudoti patirtimi, surinkta iš naujausio įrenginio, kuriant platformą, kuri apimtų visą hektarą vandenyno paviršiaus-100 kartų didesnį už ką tik paleistą. Tuo tikslu jie bendradarbiauja su Australijos viešojo ir privataus sektoriaus partnerystės Marine Bioproducts Cooperative Research Center. Partnerių vertinimu, tokiu mastu jūros dumblių ūkis galėtų atsipirkti per penkerius metus.

 

    Be to, jūros dumblių ūkiai duoda daugiau naudos, nei tiesioginė jų pasėlių vertė. Jūros dumbliai yra daugelio jūrų būtybių, įskaitant žuvis, buveinė. Kai kuriuos iš jų galima naudoti maistui. Iš tiesų, norint, kad dirbtinis vandens pakėlimas sukeltų norimą efektą, gali būti net nebūtina auginti jūros dumblius. 

 

Projektas „Ocean artUp“, kuriam vadovavo Helmholtz vandenyno tyrimų centras, Kylis, Vokietija, eksperimentuoja su vandens pakėlimu, kad paskatintų mažų planktoninių būtybių, kurias ėda sardinės, augimą.

    Tai galėtų padėti atkurti šių žuvų išteklius, kurie sparčiai mažėja tiek Atlanto vandenyne, tiek Viduržemio jūroje. „Ocean artUp“, prasidėjusi 2017 m. ir planuojanti veikti iki šių metų pabaigos, sutelkė dėmesį į tai, kaip tiksliai imituoti ir išmatuoti, kaip dirbtinis pakilimas veikia tarp vandenynų sluoksnių perduodamų maistinių medžiagų kiekius. 

 

Vienas dalykas, kurį atrado projekto tyrėjai, yra tas, kad jei siurbiate per stipriai, dalis pakilusio vandens tiesiog nukrenta atgal į gelmę, tinkamai nemaišant. Tokiu būdu maišant vandenyną gali prireikti ir plaukiojančių vandens maišytuvų, kad maistinės medžiagos išliktų paviršiuje.

    Tuo tarpu San Franciske „Otherlab“, nepriklausoma tyrimų laboratorija, dirba su povandeniniu robotu, skirtu tvirtai įsukti didelius raiščius į jūros dugną, kad užtikrintų plaukiojančių jūros dumblių ūkiai lieka vietoje ir gali geriau išgyventi audringus orus. „Otherlab“ yra konsorciumo, kurį moka JAV vyriausybinė agentūra „ARPA-e“, tirianti idėją naudoti jūros dumblius, kaip biokuro šaltinį, dalis.

    Tie, kurie nerimauja dėl visko, kas kvepia geoinžinerija-kitaip tariant, technologija, skirta pakeisti pasaulio klimatą taip, kad priešintųsi visuotiniam atšilimui, į dirbtinį pakilimą žiūri skeptiškai. Jie teigia, kad tai gali pakenkti kitoms vandenynų ekosistemų dalims ir netgi sukelti nepageidaujamą šalutinį poveikį, kuris galiausiai paspartins klimato kaitą, o ne ją sulėtins. Rėmėjai, atvirkščiai, mato šias ankstyvas pastangas bent jau kaip tiesiog atstatyti klimato kaitos nuslopintą pakilimą.

    Sluoksniuotas, nemaišomas

    Praėjusiais metais žurnale „Nature Climate Change“ paskelbtas tyrimas, kurį atliko Amerikos ir Kinijos mokslininkų komanda, parodė, kad bendras pasaulio vandenynų sluoksniavimasis nuo 1960 m. padidėjo 5%, o tropikuose - iki 20% daugiau. Taip yra nepaisant bet kokio kompensacinio ekstremalių orų, kuriuos atneša visuotinis atšilimas, poveikio, dėl kurio vandenynai labiau maišosi. Bet koks toks plakimas yra nuslopintas papildomo šiltesnių paviršiaus sluoksnių plūdrumo.

    Kaip pabrėžia daktaras von Herzenas, nepritariantis geoinžinerijai, bet kokie tokie planai susidurtų ne tik su ekonominėmis kliūtimis. Londono protokolas, tarptautinė teisinė sistema, reglamentuojanti jūrų taršą, nustato griežtas tyčinės vandenynų geoinžinerijos ribas. Tačiau protokolas toleruoja pagrįstą komercinį naudojimą ir tam tikrą anglies dioksido surinkimą.

    Vis dėlto, jei būtų atsižvelgiama į plataus masto jūros dumblių auginimą geoinžinerijos srityje, tai būtų tam tikra ironija. Tai padaryti reikštų vandenyno dugne užaugintų dumblių išmetimą, kad juose esanti anglis nesugrįžtų į atmosferą. Tai greičiausiai veiktų per trumpą laiką. Tačiau tai buvo kaip tik toks organinių medžiagų nusėdimo procesas, kuris per milijonus metų sukūrė šiuolaikinius naftos telkinius. Ir būtent jų nafta, įnirtingai pumpuojama daugiau, nei šimtmetį, sukūrė daug šiltnamio efektą sukeliančių dujų, kurių pasaulis dabar bando atsikratyti “. [1]

1. "Seaweed at scale; Aquaculture." The Economist, 2 Oct. 2021, p. 65(US).

Seaweed at scale; Aquaculture

 

“Floating offshore farms should increase production of a useful crop, and might even help alleviate climate change

IN MANY PLACES where seaweed used to thrive, often growing in vast "forests", it is disappearing. The cause is global warming, which, by heating the ocean's upper layer, reduces its density through thermal expansion--thus making it more buoyant. That extra buoyancy means it is less likely to mix with cooler, denser and more nutrient-rich waters below. This is bad for the marine environment in general. More specifically, it is bad for commercial seaweed farming, a business with revenues of (depending on whom you ask) between $6bn and $40bn a year.

The algae involved, particularly kelp, are popular in Asian cuisine. They are also used as fertiliser, and are processed into carrageenan, a natural binder and emulsifier employed in foods, cosmetics and drugs. Most are grown either on the seabed or on ropes attached to it (see picture above). But some are cultivated on small floating platforms.

To counter the effects of surface heating, which are particularly pronounced in the tropics, researchers are trying to improve the floating-platform approach by assisting the upwelling of cooler waters to stimulate algal growth on such platforms. This would also increase the area available for seaweed farms, by allowing them to be located well away from coastlines. An experimental floating farm installed in August, off the coast of the Philippines, by a group led by the Climate Foundation, an American charity, is one of the largest attempts so far to do this.

Pictures of a floating world

Artificial stimulation of upwelling is not a new idea. It has been touted for years as a way to regenerate kelp forests, in particular. And for good reason. With enough nutrients, fronds of giant kelp, which grow to an average length of about 30 metres, can elongate by more than 50cm a day. Only now, however, is upwelling-stimulation being attempted seriously.

The foundation's test platform has an area of 100 square metres. It employs solar-powered turbines to suck water up from a depth of several hundred metres through flexible, cylindrical pipes. The foundation plans to experiment with wind-powered and wave-powered turbines, too.

If this works, which early results suggest it does, and can be scaled up, not only could such technology boost seaweed production, it might also help ecosystems that depend on seaweed forests. And--at least in theory--if part of the harvest were sacrificed by sinking it into the deep ocean, that might act as a novel form of carbon capture and storage which could help slow the warming that caused the problem in the first place.

According to Brian von Herzen, who runs the foundation, the organisation carried out smaller-scale experiments, using similar technology, in 2020. These showed that seaweed grows four times faster on platforms irrigated with upwelled water than on equivalent, unirrigated platforms. Moreover, it continues to grow during the warmest months of the year, when seaweed not so irrigated actually shrinks.

Dr von Herzen and his colleagues hope to use experience gathered from their latest rig to develop a platform that would cover an entire hectare of the ocean's surface--100 times the area of the one just launched. To that end, they are collaborating with the Marine Bioproducts Cooperative Research Centre, a public-private partnership in Australia. At this scale, the partners estimate, a seaweed farm could pay for itself within five years.

Moreover, seaweed farms bring benefits beyond the immediate value of their crop. Seaweed is a habitat for many marine creatures, including fish. Some of these can be harvested for food. Indeed, for artificial upwelling to bring about that desirable state of affairs it may not even be necessary to farm seaweed. Ocean artUp, a project led by the Helmholtz Centre for Ocean Research in Kiel, Germany, is experimenting with the use of upwelling to encourage the growth of the small, planktonic creatures eaten by sardines.

That could help restore stocks of these fish, which are shrinking rapidly in both the Atlantic Ocean and the Mediterranean Sea. Ocean artUp, which began in 2017 and is scheduled to run until the end of this year, has concentrated on simulating and measuring exactly how artificial upwelling affects the quantities of nutrients transferred between ocean layers. One thing the project's researchers have discovered is that if you pump too hard, some of the upwelled water simply drops back into the depths, without mixing properly. Stirring the ocean in this way may thus require the design of floating water-mixers, too, to keep the nutrients at the surface.

Meanwhile, in San Francisco, Otherlab, an independent research laboratory, is working on an underwater robot intended to screw large tethers firmly into the seabed, to ensure that floating seaweed farms stay put, and can better survive stormy weather. Otherlab is part of a consortium paid for by ARPA-e, an American-government agency that is exploring the idea of using seaweed as a source of biofuel.

Those squeamish about anything that smacks of geoengineering--in other words, technology intended to change the world's climate in ways that oppose global warming--view artificial upwelling with scepticism. They argue that it could damage other parts of ocean ecosystems, and might even create unwanted side-effects that end up accelerating climate change rather than slowing it. Proponents, conversely, see these early efforts, at least, as simply restoring upwelling that has been suppressed by climate change.

Stratified, not stirred

A study published last year in Nature Climate Change, by a team of researchers from America and China, suggested that the overall stratification of the world's oceans has increased by 5% since 1960, with up to 20% more stratification in the tropics. This is despite any countervailing effect of the more extreme weather that global warming brings, which leads to greater churning of the oceans. Any such churning is overwhelmed by the extra buoyancy of the warmer surface layers.

Cooling the ocean surface by encouraging upwelling might also have a direct effect on the local air temperature. Warmer surface waters keep the atmosphere above warmer, too. Cooler waters do the reverse. But the technology would have to be deployed on a vast scale--over millions of hectares of the ocean's surface--before it had a noticeable effect on the atmosphere.

As Dr von Herzen, who does not advocate geoengineering, points out, any such plans would face more than just economic barriers. The London Protocol, an international legal framework that regulates marine pollution, sets stringent limits on deliberate geoengineering of the oceans. The protocol does, however, tolerate justifiable commercial exploitation, along with some carbon capture.

If large-scale seaweed farming were, nevertheless, to be considered for geoengineering, there would be a certain irony in that fact. To do this would mean dumping the algae thus grown on the ocean floor, to stop the carbon in them returning to the atmosphere. That would probably work in the short term. But it was just such a process of sedimentation of organic matter which, over millions of years, produced modern-day petroleum fields. And it is their oil, furiously pumped up for over a century, that has generated much of the excess of greenhouse gases of which the world is now trying to rid itself.” [1]

1. "Seaweed at scale; Aquaculture." The Economist, 2 Oct. 2021, p. 65(US).