Good morning. Andrew here. Keep an eye this morning on Republicans’ major policy legislation, which the House appears likely to pass in the next couple of hours, and the latest jobs numbers at 8:30 a.m. Eastern. But the story that’s roiling corporate America today is an effort by several financial firms to sell the equivalent of shares in private companies like OpenAI and SpaceX to the public — via a clever workaround of investor-protection rules. I dive into the issue and the questions it raises below. Have a happy July Fourth. We’re off tomorrow and Saturday and will be back on Monday. (Was this newsletter forwarded to you? Sign up here.)
The trouble with tokensFor years, Wall Street fund managers have talked about opening private markets to ordinary investors. Some tech companies are rolling out what they say are ways to help investors get into hot, privately held start-ups like OpenAI. In truth, what’s happening in many cases appears to be an end run around rules to protect investors. It’s about so-called tokenization. This week, Robinhood began offering “tokens” in OpenAI and SpaceX that are supposed to reflect the valuations of the privately traded companies. In other words, it is pitching them as offering stocklike exposure to start-ups that average people can’t buy into otherwise. But the tokens are available only to investors in the E.U., to avoid breaking American laws that preclude such sales. And OpenAI made clear it wasn’t a fan of the move: We did not partner with Robinhood, were not involved in this and do not endorse it. Any transfer of OpenAI equity requires our approval — we did not approve any transfer. Please be careful. Vlad Tenev, Robinhood’s C.E.O., clarified that the tokens aren’t technically “equity” but that they “effectively give retail investors exposure to these private assets.” (Robinhood isn’t alone: The start-up Republic is offering tokens meant to track the equity performance of SpaceX. Those will be sold to U.S. investors via a loophole in a 2012 securities law.) These appear to be ways around longstanding regulations, such as the S.E.C.’s accredited-investor rule for U.S. investors, which requires individuals to meet specific wealth thresholds to be able to buy into privately traded offerings. There’s an ongoing debate about whether people should meet other qualifications, such as passing a knowledge-based exam, in order to participate in these private markets. We absolutely need to have that discussion. But it’s separate from the issue at hand. The accredited-investor rule exists because OpenAI, SpaceX and other privately held companies often don’t have the same rigorous disclosure obligations as publicly traded counterparts. Their overall risk profile is usually higher. Tokenization offers potential benefits to average investors, including enabling broader access to high-growth assets that are otherwise out of reach. The mechanism is undeniably clever. But proponents like Larry Fink of BlackRock, the giant money manager, concede that tokenization strips away “friction” — like regulations — in the name of “allowing more people access to potentially higher returns.” Let’s not ignore the potential risks. Unregulated private-company tokens could lead to a fragmented and less transparent ecosystem for investments, making it harder for regulators to protect the public. The S.E.C. faces a critical challenge here, ensuring that the intent of the law prevails over technical loopholes. Paul Atkins, the S.E.C. chair and a proponent of loosening restrictions on cryptocurrency, said on CNBC yesterday that “tokenization is an innovation.” It may be. But investing isn’t just about rules — it’s about trust.
The music mogul Sean Combs wins acquittal on the most serious charges. A federal jury found him not guilty of racketeering conspiracy and sex trafficking, sparing him from potential life imprisonment, but it convicted him of transportation to engage in prostitution. Combs remains in a Brooklyn jail and still faces dozens of other lawsuits accusing him of sexual assault and misconduct. Britain’s prime minister offers support to his finance chief as investors worry. Keir Starmer told the BBC that Rachel Reeves, the country’s chancellor of the Exchequer, would be in that post “for a very long time.” He was seeking to quell speculation that she might be out soon after he declined to guarantee her job security in Parliament yesterday, which led to drops in the pound and British government bonds. Microsoft will lay off another 9,000 employees. The tech giant said it would cut about 4 percent of its global work force across teams and locations, adding to the 6,000 layoffs it announced in May. The move is the latest instance of cost-cutting by Big Tech companies as they spend heavily on artificial intelligence. It may also be tied to growing efficiency at these businesses because of A.I. Big dealsGlobal stocks are up today on signs of breakthroughs in President Trump’s trade wars before Trump’s own tariff deadline next week. The latest: Three makers of chip design software, including Siemens, said that the Trump administration had lifted restrictions on sales to China. Dropping chip-related export limits was a key point in recent U.S.-China tariff negotiations. Also, Washington has demanded that China resume shipments of rare-earth minerals vital to many U.S. manufacturers, including car companies. Stocks in Asia are rallying, too. That’s on the news yesterday that the U.S. had clinched a preliminary trade deal with Vietnam that would impose a 20 percent tax on the country’s U.S.-bound exports. Hanoi also agreed to a 40 percent tariff on so-called transshipped goods, which are produced elsewhere but shipped from Vietnam, a move seen at punishing countries like China. Vietnam is a key cog in the global supply chain for retail, tech and sportswear companies. The pact appears to spare it from a far worse fate: It had faced a 46 percent export tax as soon as next week. Investors cheered the news, with shares in Nike and Levi Strauss climbing yesterday. But some trade experts worried about the fallout for American companies with strong ties to Vietnamese trade. For instance, the deal is likely to raise the cost of athletic shoes, Matt Priest, the C.E.O. of the Footwear Distributors and Retailers of America, a trade group, told The Times. “It’s bad economics,” he said. Does this set a (steep) new base line for trade deals? Executives and investors had assumed that the Trump administration would settle on an average tariff rate of about 10 percent, the level in the recent trade deal with Britain. Whether 20 percent will be the new standard is a question that will hang over talks with trade representatives from Japan, the European Union, India and other governments descending on Washington to negotiate before next week’s deadline. Graphic of the day
President Trump’s true net worth has long been murky, and his family’s business forays have raised concerns from government watchdogs. The Times took a close look at many of his holdings, including from the Trumps’ push into crypto, to shed more light on the president’s assets (and significant liabilities). Tech companies fail to escape state A.I. rulesBuried in Republicans’ domestic policy legislation was a measure about artificial intelligence: a proposal would have barred state-level A.I. regulation for the next decade. The proposal was ultimately removed from the Senate bill that passed this week, keeping the state rules in play. But the debate about it underscored a major split in the tech world about the appropriate guardrails for the technology, Danielle Kaye writes. Among those who had supported banning state regulations:
Proponents of tougher A.I. regulation are cheering the survival of state rules, saying they would lead to more stringent consumer protections and online safety, given the slow progress toward federal regulation:
But tech allies aren’t ending their push. “We’re hopeful it will get brought up as a stand-alone provision,” Zach Lilly, deputy director of state and federal affairs at the advocacy group NetChoice, told DealBook in a statement.
Talking A.I. with Workday’s C.E.O.Every week, we’re asking a C.E.O. how he or she uses generative artificial intelligence. Carl Eschenbach, who leads the H.R. software company Workday, recently began a training program to get employees comfortable with A.I. tools. His responses have been edited and condensed. How do you use A.I. in your work or personal life? Anything around summarization, whether it’s an analyst note or a press article, I just find it significantly helpful. We use Slack internally, but there’s so many channels. I use Slack A.I. to give me an overview on what I may have missed throughout the day. What direction have you given your team on how to use A.I.? We’ve introduced an A.I. curriculum that all 20,000 employees are required to take. We teach them about the tools we’ve rolled out — whether it’s Zoom A.I., Gemini or our Copilot for developers. At the end, we ask them to build their own development cases around how they’re going to use A.I. and how they’ll measure their own success going forward. We look at sentiment going into the training and why they’re afraid of A.I. After they’re done with the training, you can see a change. When all you do is talk about savings or a return on investment from using these tools, it will tell your employees, “Wow, my job may go away.” We need to flip that narrative to talk about how we’re not just going to save money but drive growth. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
Deals
Tech and artificial intelligence
Best of the rest
Thanks for reading! We’ll see you next week. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com. |
