Andrew Krowne and I recently co-wrote an article in Tech Crunch, Why SAFE Notes Are Not Safe for Entrepreneurs. We’ve received numerous constructive comments, both privately and on social media, from attorneys, VCs, and CEOs who are well aware of the problem (including several who are experiencing it in real time). This is a fundamental issue that does, indeed, boil down to understanding the post-money valuation of a company. But it is also a topic that many find esoteric and difficult to grasp. To restate two core points of the article: While there are proper uses of notes (to bridge the company to achieve a major milestone, or driven by insiders’ willingness to extend runway), there also are troubling and frequent improper uses (to postpone pricing equity until valuation is higher or to ignore the implicit message associated with being unable to find a lead investor to price the Continue reading "Unintended Consequences: When SAFE and Convertible Notes Go Awry"
Record-low yields on U.S. Treasurys have for decades signaled weakness in the U.S. economy and foreshadowed recession. Not this time. Some economists are pointing to the so-called yield curve—the difference between long-term and short-term rates—as a harbinger of a new slowdown. Yields on 30-year and 10-year Treasurys plumbed record depths earlier this month, setting fresh milestones in three-decade downward trends. Yields have since retreated a bit from their lows. But combined with weak business investment, falling corporate profits and slipping auto sales, the slump in bond yields has led some investment banks to put the risk of recession as high as 60%, accounting for past yield-curve compressions that were followed by recessions. [wsj-responsive-dynamic-inset id=2] But unlike in the past, the pressures likeliest to trigger an economic contraction this time lie outside the U.S. Turmoil and weakness overseas have drawn investors to the security of U.S. government bonds, driving their prices up and their yields down. “The low level Continue reading "Why the Bond-Yield Curve Isn’t Likely Signaling Recession Ahead"
The coco bond market has endured its Paradise Lost moment. The main index has fallen nearly 8 per cent this year after returning 7 per cent in 2015 – practically utopian, in the current rates environment. Some names – Deutsche, UniCredit, Banco Popular – have experienced the distress of trading below 75 cents on the euro. Let’s briefly set aside these qualms of heart-sick malady. Let’s turn instead to the mostly untold tale of a $2.5bn Credit Suisse 6.25 dollar-denominated AT1 bond. CS 6.25, as we’ll call it. Continue reading: The Tale of the Swiss Coco
Continue reading "Who Wins and Loses in the IMF Governance Overhaul, and What’s Next"
1. The Party’s OverEconomists, including at the International Monetary Fund and the World Bank, have had to slash their forecasts for emerging markets over the last several years.
2. The Pain Isn’t All the SameSome countries have faced bigger downgrades than others, for example, Russia, Brazil and China.
3. Bad AssumptionsOld estimates assumed growth rates based on much stronger commodity prices. And economists assumed much higher productivity. But oil, metals and other commodity prices have plummeted. Crude oil prices have lost roughly 65% of their value over the last 18 months:
4. SlackersAnd governments didn’t
Continue reading "Why Emerging Markets Are Melting Down, and Why It Matters, in 10 Charts"
Continue reading "WSJ Survey: Yuan No Challenge to Dollar Amid China’s Tiptoe Toward Freer Markets"