Philippa Kaur

IF DINNER PARTIES were permitted in locked-down France, it is not hard to guess what would set le tout Paris aflutter. For months bankers, politicians and other pre-covid canapé-scoffers have taken sides in a corporate battle royale pitting two century-old firms against each other. Veolia, a water- and waste-management utility, has been struggling to gobble up Suez, a rival which is resisting fiercely. The proposed deal is mired in legal disputes, boardroom recriminations and ministerial intrigue. All grist to the mill for those who see French business as the product of its politicians’ dirigiste tendency to shape the private sector in the mould of the public one. But look at the wider French business landscape and the stereotype is out of date. Away from the clutches of politicians, many French firms have become world-beaters. Is this thanks to the attention of elected officials—or in spite of it?
The ugly spat between Veolia and Suez shows politics still matters in Parisian business circles. Given the two firms offer the same outsourced environmental services to customers dotted across the globe, a tie-up has long been mooted. Veolia having already seized nearly a third of its target’s shares, each side has lined up members of l’establishment to make its case. Their brief is not so much to convince shareholders of the merits of a deal, as might be the case in Britain or America. Rather, politicians whose assent is considered critical are an important audience. Suez and Veolia are each said to have a former speechwriter to President Emmanuel Macron lobbying for them (not the same one). Given that a slew of legal challenges and regulatory clearances is required, the outcome will not be known for months. Few think it will hinge on the transaction’s commercial merits.

Such intrigue used to delight the French business elite. Now it feels old hat. Look at the top of the CAC 40 index of France’s leading companies today, and a new generation of firms has emerged. Two decades ago the corporate league table was dominated by firms in sectors in which relations with government matter, such as telecoms, utilities or banking. The bosses of France Télécom or BNP Paribas, a bank, were inevitably former ministerial advisers. More often than not they had graduated from the École Nationale d’Administration (ENA), a finishing school for public officials.
Fast forward to today and the CAC 40 is led by companies with less use for political connections. The index’s brightest stars today are luxury giants such as LVMH (of Louis Vuitton fame), Kering (Gucci) and Hermès; L’Oréal, a beauty-products firm; Sanofi, a drugmaker; and a host of industrial giants. Selling handbags or skincare products to Chinese yuppies is a global contest in which French firms excel, thanks to competent management. Lesser-known but equally astute companies such as Schneider Electric, a specialist in energy-management kit, have outperformed American rivals such as 3M and General Electric, and European ones like Siemens and ABB. Investors in Air Liquide, a chemicals firm, have enjoyed juicier returns than those of Germany’s BASF or America’s DuPont. Publicis, an advertising group, is worth nearly three times as much as in 2000, while rivals like WPP in Britain and Omnicom in America have lost market value. EssilorLuxottica, a French-Italian firm, is the world’s biggest purveyor of spectacles.
Even more telling, some big firms began to prosper only once unshackled from the government yoke. Total, an oil-and-gas major, used to be worth a fraction of BP or Royal Dutch Shell. As it has gained distance from the corridors of power since privatisation in 1992, it has caught up with its European rivals’ valuations. Safran, an aerospace firm, has seen its market value go up 14-fold in two decades as the state has sold down its stake. Airbus has outpaced its American jetmaking nemesis, Boeing, as political meddling (by the many European governments that founded it) has ebbed.
And today political allies carry less heft than they once did. According to Morgan Stanley, a bank, over 70% of big French firms’ revenues nowadays come from overseas, where French politicians hold little sway. Most regulation critical to French firms used to be done at national level, where regulators were drawn from the same ENA lecture halls as corporate bosses. Now a lot is carried out by European or global watchdogs.

That is not to say that big firms and politicians steer clear of each other. France’s foreign minister recently waded into LVMH’s takeover of Tiffany, an American jeweller, in ways that were eyebrow-raisingly useful for the French luxury champion. But direct patronage is becoming a burden. The French authorities remain a shareholder in Renault and in 2019 clumsily handled a proposed merger with Fiat Chrysler Automobiles, an Italian-American rival (whose big shareholder, Exor, owns a stake in The Economist’s parent company). Peugeot, a nimble competitor with no direct state shareholding, is now in the midst of the merger Renault fluffed.
French whines
Corporate France has plenty of shortcomings. It has no tech giants to match Google or Amazon. Many large companies with few state ties, such as Accor, a hotel chain, and Carrefour, a retailer, are decidedly ordinary. The CAC 40 was lagging behind its European and American equivalents even before covid-19 hit the French economy particularly hard. Its smaller firms pale in comparison to Germany’s Mittelstand. And French politicians, though no longer the dirigiste master-planners of yore, still pine for national (or European) champions to take on Chinese rivals. They frown on hostile takeovers—the mere prospect of which serves to sharpen managers’ minds—which is one reason the Veolia-Suez deal may fail.
That is a shame. Just ask Danone’s shareholders. In 2005 an unsolicited approach by PepsiCo for Danone was foiled by the French authorities on the grounds yogurt-making was a strategic industry. The American firm went on its way and has since delivered fizzy profits for its shareholders. Those at Danone, meanwhile, have had to stomach far blander returns.■
This article appeared in the Business section of the print edition under the headline “Dirigiste? Moi?” More

IN 2016 TRAVIS KALANICK, then Uber’s chief executive, described self-driving cars as mission-critical. If somebody managed to beat Uber to making them work, he said, then the rival’s ability to offer taxi trips without paying for human drivers would mean that “Uber is no longer a thing.”
Times change. On December 7th Uber announced the sale of its self-driving arm to a firm called Aurora. No price was given. But Uber said it would put another $400m into the unit; that Dara Khosrowshahi, its current boss, would join Aurora’s board; and that the deal would leave it with a 26% stake in Aurora.

One reason for the spin-off is Uber’s belated effort to return to profit. It lost $8.5bn in 2019, as it fought for market share with rivals such as Lyft. Besides offloading the self-driving unit, the firm has sacked workers and sold its Jump electric-bicycle division to Lime, a scooter firm. On December 8th Uber said it would flog its Elevate flying-car project to a startup called Joby Aviation.
Another explanation is that the reality of self-driving has lagged far behind the excitement, as it had done in the idea’s earlier heydays in the 1960s and the 1990s. The machine-learning software on which the cars rely often struggles to cope with “edge cases”, which are absent from software’s training data but pop up regularly on real roads.
Uber’s self-driving progress has, according to industry rumours, been slow. In 2018 one of its cars ran over and killed a pedestrian in Arizona. It is not alone; Tesla’s “Autopilot” feature has been linked to at least four deaths since it was launched in 2015. But Uber’s Kalanick-era reputation for rule-breaking has made the PR burden heavier.
The bearish interpretation of the sale is that, having given up on self-driving, Uber will remain a fancy taxi-and-delivery firm. But if Aurora can buck expectations and make self-driving work, Uber could license the technology back. And high-tech distractions like self-driving cars—or flying ones—may be the last thing the firm needs. It is under pressure not just from rivals and investors but also from regulatory probes into its other big cost-saving innovation—the assertion that its drivers are not employees, but independent contractors. Joe Biden, America’s president-elect, has called that a “misclassification”. Tighter European rules will come into force by 2022. Those edge cases look urgent.
This article appeared in the Business section of the print edition under the headline “Spinning off” More

AMAZON, VODAFONE and Cairn Energy operate in different industries: e-commerce, telecoms and oil-and-gas exploration, respectively. But they share a common predicament. All are waging legal battles over their Indian operations—and doing so outside India.
The trio are part of a larger wave. Last year nearly 500 cases filed in the Singapore International Arbitration Centre came from India. No other country came close (see chart). The number of Indian parties involved in arbitration through the Paris-based International Chamber of Commerce tripled last year, to 147. More quietly, London remains a crucial centre for India-related commercial spats, as to a lesser extent does The Hague. Two newish arbitration centres in the United Arab Emirates, in Dubai and Abu Dhabi, want in on the game.

Narendra Modi, the prime minister, is believed to dislike this trend. His administration sees it, with reason, as an infringement of India’s sovereignty—but also as impugning its laws and judicial process. The resistance to outside meddling in the country’s legal affairs is echoed by its bar association, which blocks foreign lawyers and law firms from practising locally.

Crucial components of the legal system are nevertheless being outsourced. Companies feel that it is the best way to get a fair shot in India. And for all its grumbling, India’s government understands that attracting investment requires the availability of a judicial recourse that is considered efficient and fair—which Indian courts can at times seem not to be.
The emigrant cases can be divided into two categories. The first kind involve the Indian government. Vyapak Desai of Nishith Desai Associates, an Indian law firm with expertise in the area, has compiled a list of more than a dozen big cases pending. Some were brought by Indian firms. In 2017 Reliance Industries, a conglomerate famous for ably navigating India’s courts and bureaucracy, chose Singapore as the venue to fight a $1.6bn claim by the Indian government, which accused it of improperly extracting gas from fields owned by state-controlled firms. Reliance won and was awarded $8m in compensation.
Foreign arbitration is all the more attractive for firms lacking Reliance’s local nous. Cairn, which is British, filed its case in The Hague, arguing that it should be paid back $1.4bn in taxes involuntarily extracted on the basis of a retroactive law passed in 2012, which was applied to an asset sale six years earlier. Cairn says this violated a bilateral investment treaty between Britain and India; a decision is expected any day now. Vodafone’s case stems from the same law and relies on a similar treaty which India signed with the Netherlands. The firm, which had purchased mobile-telephony assets in 2007, won a bitterly fought case before India’s Supreme Court in 2012 exempting it from a capital-gains tax on the transaction, only to have the levy reimposed by India’s parliament. In September it won a unanimous decision fro
m a three-person arbitration panel in The Hague.

The prime minister’s office is said to be torn over offshore arbitration. On the one hand, it believes that foreigners have no right to contest Indian taxes; partly in response to such cases it has withdrawn from 73 bilateral investment treaties, including the British and Dutch ones, and imposed more onerous terms for challenging tax assessments in new ones it has signed.
On the other hand, it fears that rejecting arbitration would reinforce the sense that India is a toxic place for foreign firms to invest. Appealing against a decision—let alone ignoring it—brings costs, not least by putting off investors at a time when Mr Modi is keen to lure them away from China.

The second category of disputes settled abroad involves only private parties. These often move offshore simply because business moves fast whereas Indian courts do not. It takes more than three years on average to resolve a case before the High Court in Mumbai and nearly three years in Delhi, according to a study by Daksh, a research group. Seven years is not uncommon, Daksh says. Lawyers in Mumbai’s High Court report that is not hard to find cases still pending from the 1960s.
Most of the offshore private cases are resolved quickly and quietly. Some, though, make headlines. The one involving Amazon is an example. In October the e-commerce giant won a favourable decision in Singapore to suspend the acquisition of a tottering retailer, Future Group, by Reliance. Amazon had earlier negotiated with Future a right of first refusal on any sale. Given Future’s troubles, Amazon might reasonably have felt it had no time to wait for a sluggish Indian court to intervene. In appealing against the Singaporean arbitrator’s decision to the Delhi High Court, Future accused Amazon of acting “like the East India Company of the 21st century”. The comments chimed with Mr Modi’s instructions to all Indians to “be vocal for local”. They rhyme less well with his appeals to foreign investors.■
This article appeared in the Business section of the print edition under the headline “The case of the disappearing cases” More

“COUNT ON US, hold us accountable and together we will reinvent the way businesses run.” Thus ends a recent letter of support from 337 senior managers at SAP, a maker of business software, to Christian Klein, their chief executive. In April Mr Klein, then a stripling 39 years old, took over as sole boss of Europe’s biggest technology firm, after running it for a few months in tandem with Jennifer Morgan, an American who used to helm SAP’s business across the Atlantic. He needs all the love he can get, for SAP faces a challenge.
Mr Klein became CEO at the peak of covid-19’s first wave. It had hurt SAP more than other tech firms: many of its biggest clients, such as carmakers and energy companies, were temporarily hit by the pandemic. And it struck as more rivals were vying for swathes of the business-software market that the German giant used to rule.

Then, in October, Mr Klein was humbled when he presented changes to SAP’s business model that would depress margins in the short run and delay earlier revenue and profit targets by two years. Combined with lacklustre results for the third quarter, the news shaved 22% off the firm’s share price, wiping out €35bn ($41bn) in market value, the sharpest drop in 21 years and almost unheard of for a firm of SAP’s size (see top chart). The purchase of almost €250m in SAP shares the following day by Hasso Plattner, chairman of the supervisory board, who co-founded the company 48 years ago, did not reassure investors.

To regain their confidence Mr Klein must improve SAP’s offering in the cloud, and persuade more of its clients to move there. And he needs to do this while fending off competition from firms such as Oracle, Salesforce and Workday in America, SAP’s biggest market.
The pandemic has softened demand for “enterprise resource planning” (ERP) software, which firms use to manage their everyday operations—and which has long been SAP’s forte. It has also prompted SAP’s existing clients, typically large or medium-sized manufacturers, to rethink their ERP processes. “I never had so many calls from CEOs who wanted to talk about supply chains,” says Mr Klein. Retailers and manufacturers asked SAP for tools to get more visibility of their suppliers. Critically, many of them demanded that ERP, which has traditionally resided on firms’ own servers, be moved to the cloud instead.
SAP is very late to the cloud, where companies have been progressively moving for the past 20 years, says Liz Herbert of Forrester Research, a consulting firm. Oracle, which also embarked on the transition belatedly, has done so swiftly. So has Microsoft, the world’s biggest software-maker, with ambitions to expand its enterprise offerings. By contrast, SAP remains more of a hybrid. It has moved a chunk of its business to the cloud but many big customers still use its software on their premises.
Why the dithering? Shifting complex, customised end-to-end ERP processes to the cloud is much harder than uploading human resources, sales or customer-relationship management, Mr Klein explains. And ERP remains SAP’s bread and butter: it controls 21% of the market, according to Gartner, a research firm, compared with 11% for Oracle, its closest competitor (see bottom chart). A whopping 92% of Fortune 500 companies—from carmakers, like BMW, to defence firms, such as Lockheed Martin—use SAP software. It therefore cannot get the transition wrong. SAP listened to its customers and took a methodical approach, says an executive at a rival software firm, whereas the market wants it to move fast and break things.

Even so, says Mr Klein, “covid was clearly an inflection point.” Bosses of big firms who may have waited another five years before switching to the cloud now want to speed up. They are also demanding a closer integration of SAP affiliates acquired by Mr Klein’s predecessor, Bill McDermott. These include Concur, a travel-expenses firm; Ariba, a procurement platform; and SuccessFactors, which makes HR software. This will require additional investments by SAP. So will Mr Klein’s plan to increase spending on research and development.
SAP must now persuade its 35,000-odd ERP clients of the benefits of the cloud. It must convince investors of the same thing. Licences for on-site software bring a big chunk of revenue upfront, whereas customers initially pay much less for rolling cloud subscriptions. But recurring revenues are increasingly coveted by all manner of technology firms, from Amazon and Apple to Netflix, because they are more predictable and build a closer relationship with customers. The shift to the subscription model will eventually mean a big revenue lift for SAP, predicts Mark Moerdler at Bernstein, a broker.

As for the transition to the cloud, it need not be onerous technically. That is a bit of red herring, thinks Paul Sanderson of Gartner. The bigger challenge is changing the culture of SAP, which has become too removed from its clients.
Rivals will try to exploit the transition period to win over some of those customers. Larry Ellison, the colourful co-founder and now chief technology officer of Oracle, declared last year that “SAP’s customer base is up for grabs.” His subsequent claim that a huge client of SAP was about to defect to Oracle proved unfounded. Another such boast might not be. ■
This article appeared in the Business section of the print edition under the headline “Hitting the reset button” More

DISNEY’S THEME parks may be closed and its cruise ships docked, but the entertainment giant’s Disney+ streaming service has been one of the great success stories of the year of lockdown. Launched 13 months ago with a target of reaching 60m-90m subscribers by 2024, it had hit that mark by this summer, as self-isolating audiences happily shelled out $6.99 a month for access to the deep back-catalogue of Hollywood’s biggest studio.
Wall Street lapped it up. Despite a net loss of $710m in the three months to September, mainly owing to those closed theme parks and docked cruise ships, the growth of Disney+ propelled the company’s share price back to where it had been before the pandemic. If the stockmarket had any lingering doubts, it was over the emptiness of Disney’s pipeline of new shows. Aside from “The Mandalorian”, a “Star Wars” spin-off, and “Hamilton”, a Broadway musical, the service has had few original hits, relying heavily on the Disney archives. The company allocated only about $2bn for fresh Disney+ content this year. Netflix, the world’s biggest streamer, with 195m subscribers, earmarked $17bn.

In a presentation to investors on December 10th Disney dispelled those doubts once and for all. It announced a content binge designed to put it on a par with Netflix—and to shift the company’s focus sharply towards streaming. This was just what the presentation’s audience of market analysts wanted to see. Disney’s share price leapt by almost 14% the next day, reaching an all-time high and adding $38bn to the company’s stockmarket value (see chart).

Disney said that in the next few years it would release around ten more “Star Wars” series, ten based on the Marvel comic books, 15 other new original series and 15 feature films, all going straight to Disney+. By 2024 its content spending on Disney+ will be $8bn-9bn; across all its streaming channels (which include Hulu, an entertainment service, and ESPN+, which shows sport) it will be $14bn-16bn.
As well as matching Netflix dollar-for-dollar, Disney is broadening its range of content in a way that will make the two streamers more direct rivals. Netflix has had recent hits with documentaries and reality shows such as “Selling Sunset” and “Floor is Lava”. Disney announced that a new service, Star—to be included with Disney+ in some countries and offered separately elsewhere—will carry a wider range of programming, including a new programme about the indefatigable Kardashian clan.
To help pay for all this the company plans to raise the subscription price of Disney+ by a dollar a month. But that dollar will be multiplied by what it now expects to be 230m-260m subscribers by 2024—more than treble its previous target. That should allow Disney+ to break even the same year, in line with earlier plans. Across all its streaming channels, Disney expects to have more than 300m paying subscribers by 2024. This could be enough to make streaming the company’s single largest business by revenues, notes Benjamin Swinburne of Morgan Stanley, a bank. It would also probably be enough for Disney to draw level with Netflix in subscribers. The “content tsunami” announced this week is “frightening to any sub-scale company thinking about competing in the scripted entertainment space,” wrote Michael Nathanson of MoffattNathanson, a media-research firm.
The spending spree will also worry cinema-owners. WarnerMedia, a subsidiary of AT&T, a telecoms group, shocked them last week with its announcement that in 2021 all its feature films will be released on its HBO Max streaming service on the day that they come out in theatres, which historically have had an exclusive run of a couple of months or so. The first movie to get this treatment, on Christmas Day, will be “Wonder Woman 1984” (shot partly outside The Economist’s London offices, though its journalists were, inexplicably, spurned as extras).

Disney, which makes far more money at the box office than any other studio, with seven of last year’s top ten hits in America, is not willing to go that far; “Black Widow”, its latest Marvel-superhero blockbuster, due out in May, is still to be shown first on the silver screen. But the notion is no longer a complete non-starter. Disney has announced that in March it will offer one of its lower-budget films, “Raya and the Last Dragon”, simultaneously in theatres and on Disney+, for a one-off fee of $30. Other productions are sure to follow. “Made for TV” is no longer a slur in Hollywood. More

LETITIA JAMES, New York’s attorney-general, couldn’t be blunter in describing the antitrust case lodged on December 9th against the world’s biggest social network. “By using its vast troves of data and money Facebook has squashed or hindered what the company perceived as potential threats. They’ve reduced choices for consumers, they stifled innovation and they degraded privacy protections for millions of Americans,” she declared, summarising the accusations. Forty-five states joined her bipartisan coalition against the giant. Separately, the Federal Trade Commission (FTC) sued Facebook for monopolistic practices in social-networking and demanded remedies including the firm’s break-up.
A few years ago co-ordinated action by 46 states and the FTC that could split Facebook apart was unthinkable, says Lina Khan, an antitrust scholar at Columbia Law School. But the case is about more than narrow competition law. The controversies around Facebook’s privacy practices, the spread of fake news and conspiracy theories on the platform, and its exploitation by authoritarian regimes mean regulators and politicians are set on forcing change.

Will they succeed? The cases look strong. Experts judge Facebook to be the lowest-hanging antitrust fruit, alongside Google (which America’s Justice Department sued over alleged monopoly abuses in October). Amazon and Apple are in the crosshairs, but those cases will take longer, if they come at all, says an antitrust expert.
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The Facebook lawsuits centre on its acquisitions. The firm maintained its monopoly in personal social-networking by systematically buying up potential competitors, both contend—notably Instagram in 2012 and WhatsApp in 2014. A smoking gun could be Onavo, an Israeli firm Facebook bought in 2013—to protect user data, the firm said. The suits claim it in fact used Onavo to track rival apps’ popularity and select acquisition targets. Another alleged anti-competitive practice was blocking rival app developers from its platform. As consumer harm is hard to prove against big tech’s mostly free products, the suits try a novel argument: that damage is done to users’ privacy and advertisers’ choice.

Facebook will argue that its market is social media, which is broader and more competitive than social-networking. TikTok, a Chinese-owned short-video app, is now more popular than Instagram among American teenagers. The internal Facebook emails on which the lawsuits hinge hardly paint a picture of a lazy monopolist; Mr Zuckerberg and his lieutenants see competitive threats everywhere. Facebook can also argue that breaking it up is well-nigh impossible. Last year it started integrating Instagram, WhatsApp and Messenger more deeply. And the FTC’s complaint fails to mention it cleared the Instagram and WhatsApp deals. The government “now wants a do-over”, sending a chilling warning to American business that “no sale will ever be final”, Facebook said.
Markets shrugged off the news. Facebook’s shares dipped by 2%, in line with the rest of big tech. Investors either see forced divestitures as unlikely, says Brent Thill of Jefferies, an investment bank—or spy even more money to be made from spin-offs. ■
This article appeared in the Business section of the print edition under the headline “Battle commences” More

IN MARCH THE corporate world found itself staring into the abyss, recalls Susie Scher. From her perch overseeing global capital markets at Goldman Sachs, a bank, she witnessed firms scrambling for money to keep going as the wheels of commerce ground to a halt amid the pandemic. Many investors panicked. Surely, the thinking went, public markets would freeze in the frigid fog of covid-19 uncertainty—and then stay frozen.
Instead, within weeks they began to thaw, then simmer, kindled by trillions of dollars in monetary and fiscal stimulus from governments desperate to avert an economic nuclear winter. In the past few months they have turned boiling hot.

According to Refinitiv, a data provider, this year the world’s non-financial firms have raised an eye-popping $3.6trn in capital from public investors (see chart 1). Issuance of both investment-grade and riskier junk bonds set records, of $2.4trn and $426bn, respectively. So did the $538bn in secondary stock sales by listed stalwarts, which leapt by 70% from last year, reversing a recent trend to buy back shares rather than issue new ones.
Initial public offerings (IPOs), too, are flirting with all-time highs, as startups hope to cash in on rich valuations lest stockmarkets lose their frothiness, and venture capitalists (VCs) patience with loss-making business models. VCs still plough three times as much into American startup stars than public investors do. But proceeds from listings are now growing faster than private funding rounds (see chart 2). The boom is global (see chart 3). On December 2nd JD Health, a Chinese online pharmacy, raked in $3.5bn in Hong Kong. A week later DoorDash, an American food-delivery darling, and Airbnb, a home-rental platform, both more or less matched it in New York.

In a world of near-zero interest rates, it appears, investors will bankroll just about anyone with a shot at outliving covid-19. Some of that money will go up in smoke, with or without the corona crisis. What does not get torched will bolster corporate haves, sharpening the contrast between them and the have-nots.
The original spark that lit capital markets on fire was the $6.25bn in debt and equity that Carnival Cruise Lines secured in April, remembers Carlos Hernandez of JPMorgan Chase, a bank. Investors reasoned that cruises will one day sail again—by which time some of Carnival’s flimsier rivals will have sunk. Other dominant firms have benefited from this logic. Boeing, part of a planemaking duopoly, has sold $25bn in bonds this year, even as its bestselling 737 MAX jetliner has remained on the ground and the near-term future of travel up in the air. Many Chinese companies have taken to issuing perpetual bonds, which are never redeemed but pay interest for ever, to repair their balance-sheets.

By the summer, notes Ms Scher, “rescue capital-raising” had given way to something less defensive. Investors’ ultraloose purse-strings allowed opportunistic firms to lock in historically low coupons. S&P Global, a ratings agency, calculates that the average investment-grade bond paid interest of 2.6% in this year’s covid recession, down from 2.8% in 2019. Thanks to a boom in online shopping and cloud computing, Amazon, which is a leader in both areas, can now borrow at 1.5% for ten years, more cheaply than any American firm since at least 1980—and than some governments. Indebted giants like AT&T, a telecoms-and-entertainment group, are lengthening debt maturities. In November Saudi Aramco, an oil colossus, sold $2.3bn-worth of 50-year bonds, in spite of looming climate policies that may cripple its business of selling crude long before 2070.

Even cheap debt, of course, must be rolled over and, perpetuities aside, eventually paid back. With stockmarket valuations propped up by loose monetary policy, and only a slim prospect of tightening, many firms opted to shore up their balance-sheets with new share issues. Danaher, a high-rolling industrial conglomerate, raised over $1.5bn by selling new stock just after its share price returned to its pre-pandemic highs in May; it has risen by 39% since. On December 8th Tesla, an electric-car maker whose market value has grown eight-fold this year, to $616bn, said it plans to issue $5bn-worth of shares.
With shareholder payouts trimmed or suspended until the covid fog lifts, the cash held by the world’s 3,000 most valuable listed non-financial firms has exploded to $7.6trn, from $5.7trn last year (see chart 4). Even if you exclude America’s abnormally cash-rich technology giants—Apple, Microsoft, Amazon, Alphabet and Facebook—corporate balance-sheets are brimming with liquidity.
It is still too early to tell what firms will do with all that cash. The merger market is showing signs of life, though mostly as deals put on ice during the pandemic are being revived. Many companies will content themselves with maintaining liquidity, at least until a covid-19 vaccine becomes more widely available.
Startups, for their part, will use IPO proceeds to blitzscale their way to profitability. The pandemic has made business models that might not have matured for years, such as digital health, suddenly viable. Many will fail. But for now giddy investors are pouring money into any firm whose IPO prospectus features the words “digital”, “cloud” or “health”. Headier still, “special purpose acquisition companies”, which go public with nothing but a promise to merge with a sexy startup later on, and which have raised $70bn in 2020, mostly on Wall Street, are shattering previous records.
Markets seem no more discerning in mainland China, where proceeds from listings hit $63bn, the most since 2010. Hong Kong added another $46bn. Shanghai’s STAR Market, a year-old technology board, this week welcomed its 200th member, bringing its IPO haul to $44bn. In September demand for shares to be traded on the Hong Kong Stock Exchange by Nongfu Spring, a water-bottler, outstripped supply by 1,148 times. Even the authorities’ last-minute suspension of Ant Group’s record-breaking $40bn IPO in Hong Kong and Shanghai, after the fintech titan’s co-founder annoyed regulators, may not frighten other listers. And so long as geopolitical tensions between America and China persist, more Chinese firms with an American stock ticker may avail themselves of a Hong Kong one, observes Julien Begasse de Dhaem of Morgan Stanley, a bank.
For now, capital is likely to keep flowing. Mr Hernandez says his bank’s pipeline of IPOs looks “the most robust in years”. The ten-year Treasury yield is below 1% and the spreads between American government and corporate bonds have narrowed to pre-pandemic levels. As a result, even riskier firms’ paper yields less than 5%, according to JPMorgan Chase. Investors expecting meaningful returns are therefore eyeing stocks. For the pandemic’s corporate winners, the choice between cheap debt and cheap equity is a win-win. More

CORPORATE CHIEFTAINS can barely keep tabs on what their own staff are up to, let alone suppliers and subsidiaries in far-flung places. A referendum in Switzerland on November 29th proposed to change that, making Swiss multinationals liable in domestic courts for lapses in human rights or environmental stewardship along their global supply chains. The proposal failed by the narrowest of margins—a watered-down version will come into force instead.
The changes were championed by the usual foes of big business—NGOs, pressure groups and the like—with their long-standing gripes over cacao that Nestlé uses in KitKats or cobalt traded by Glencore. This political push to make companies more accountable chimes with boardroom proclamations about purpose-driven business, shareholders be damned. Corporate bosses nonetheless fiercely opposed the measures. Vague threats were made about footloose multinationals moving to laxer jurisdictions.

That won’t be necessary. Though the Responsible Business Initiative gained 50.7% of votes, it failed to carry enough cantons under the arcane Swiss system. (Another proposal, to ban the central bank from investing in defence companies, was roundly defeated.) The Swiss government, which opposed the measures, will still bring in some less stringent norms. Reporting standards will be tightened, with fines for erring. But campaigners will not be allowed to bring wayward companies to civil courts, as they had hoped.
No Swiss business is—at least publicly—in favour of child labour, human-rights abuses or environmental vandalism. But low taxes, pleasant living conditions and a historical penchant for business-friendly policies like bank secrecy have helped the Alpine confederation attract more than its fair share of global firms, some with tricky supply chains. All proclaim their attachment to corporate social responsibility, as proven by glossy brochures. But none felt being dragged through Swiss courts for misbehaviour elsewhere would do anything but enrich lawyers. Some argued that the risk of litigation may dissuade them from being open about inevitable shortcomings they are working to fix.
The referendum was seen as a prequel to wider European efforts to hold businesses accountable beyond their immediate operations. Germany has mulled a law on supply-chain standards; next year the EU will push for firms to be held responsible for human-rights abuses and environmental harm. If the Swiss experience is anything to go by, bosses will resist, stakeholder-friendly rhetoric notwithstanding.■
This article appeared in the Business section of the print edition under the headline “Swiss miss” More