The IPO market is heating up but investors are shunning unprofitable companies

WeWork chooses the Nasdaq for its IPO.

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Breaking news from the Wall Street Journal: WeWork's parent company has chosen the Nasdaq for its IPO, which will take place during the week of September 23. Even more interesting: The Journal reports that the office rental company plans "sweeping" changes to its governance.

The report doesn't give many details on the overhaul planned by We, but the changes may have been spurred by concerns over the amount of control that CEO Adam Neumann and his wife, Rebekah Neumann, wield over the company.

Money matters: We and its advisers are targeting a valuation that could slip below $20 billion, according to the Journal. That's much lower than the $47 billion valuation implied by a funding round earlier this year. A preliminary price range will be set next week.

Vital signs: We lost $1.9 billion last year, according to its prospectus. It has continued to burn money this year, losing $904 million in the first half. The bull case for potential investors? Revenue roughly doubled to $1.5 billion in the first six months of the year.

Mario Draghi's best efforts might not be enough

ECB President Mario Draghi is credited with saving the euro by pledging to do "whatever it takes" to preserve the currency during the region's sovereign debt crisis.

Now, with his tenure drawing to a close and economic storm clouds gathering in Europe, Draghi is going all out once again in an effort to boost persistently low inflation. On Thursday, he pushed interest rates deeper into negative territory and announced the return of the central bank's bond-buying program.

But the ECB chief also issued an explicit warning to national governments in Europe: Changes to monetary policy alone won't be enough, he said. Counties would have to ramp up spending in order to prevent a sharper slowdown in economic growth.

"Mario Draghi reminds me of an ageing boxer, still up for the fight but unable to pack the same punch as he used to," wrote Kit Juckes of Societe Generale. "It's not at all clear that the impact on the economy will be significant and it's crystal clear that the baton needs to be handed to fiscal policy."

The big question: Will governments rise to the challenge? Germany holds the key. Europe's largest economy could spend to upgrade infrastructure and tackle the climate crisis. Yet experts caution that its lawmakers, determined to maintain a balanced budget, are unlikely to approve a flashy spending package.

The reasons are historical. German attitudes toward government spending were shaped by the 1970s and 1980s, when unemployment, inflation and government debt all rose. There's also a fear of hyperinflation and its destabilizing effects that dates back to the early 1920s.

"While fiscal policy is more effective than monetary policy, waiting for a big fiscal boost would be like waiting for Godot," wrote analysts at Berenberg. "However, [the ECB] doing nothing in the face of a significant economic slowdown would have also entailed risks."

Change at the ECB: Draghi has one final meeting as head of the ECB before his successor, the former International Monetary Fund boss Christine Lagarde, takes the reins in November. Remember: Lagarde is a lawyer by training, not an economist, and her political skills could be useful in convincing governments that they must act.

Should we be paying more attention to the US deficit?

The US budget deficit widened to $1.067 trillion for the first 11 months of the fiscal year, an increase of 19% over this time last year, according to the Treasury. The current shortfall exceeds the full-year deficit for fiscal 2018, which was $898 billion.

While a surplus in September could help bring down the final numbers for 2019, increased federal spending and tax cuts pushed through by President Donald Trump have helped push the deficit to levels not seen since the aftermath of the global financial crisis.

There's very little talk about spending levels in Washington. And markets don't seem too concerned, either. Yet the US government is being forced to ramp up borrowing. Treasury Secretary Steven Mnuchin has even floated the idea of introducing new 50-year bonds.

Trump, of course, has his own plan to reduce financing costs. He's heaping pressure on the US Federal Reserve to slash interest rates. "They get paid to borrow money, while we are paying interest!" Trump tweeted after the ECB pushed its rates even deeper into negative territory on Thursday.

One potential consequence of current spending levels? Budget watchdogs warn that the winner of the 2020 presidential election won't have much budget headroom to work with, constraining their ability to launch new programs and fulfill campaign promises.

Up next

The big event is US retail sales for August, which arrive at 8:30 a.m. ET.

Also today

  • US export and import prices for August will also post at 8:30 a.m. ET.
  • The University of Michigan's initial survey on consumer sentiment for September hits at 10 a.m. ET.

Coming next week: It's the Federal Reserve's turn to make a call on interest rates.

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