tv Nightly Business Report PBS October 19, 2011 6:30pm-7:00pm EDT
>> susie: trouble in europe weighs on wall street, making for another day of choppy trading. >> the markets at the moment, in my opinion, are simply hostage to the politicians, whether it's in the eurozone or whether it's in washington. >> susie: we'll look at how trading volatility is impacting the i.p.o. market. it's "nightly business report" for wednesday, october 19. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. my colleague tom hudson is on assignment tonight. europe and the u.s. economy-- those troublesome issues pressured stocks today. there were conflicting signals today on how close european leaders are on a deal to solve the debt crisis ahead of a crucial summit this weekend. investors are concerned that talks between france and germany have stalled. and in greece, one of the largest demonstrations as people protested a new batch of austerity measures.
the greek parliament takes a final vote on the plan tomorrow. also worrying investors? a pessimistic report on the u.s. economy from the federal reserve. its beige book survey of regional economies showed weaker conditions for growth. all that led to a negative close on wall street. the dow lost 72 points, the nasdaq dropped 53 and the s&p slipped 15. earlier in the day, averages were solidly in positive territory. as suzanne pratt reports, today's volatility is a pattern of trading that will be with us for a while. >> reporter: one day we're up. one day we're down. with the u.s. stock market experiencing such wild movements, it's no wonder investors are scratching their heads. take a quick look at the dow since the beginning of august. it's traded in nearly a 2,000 point range. experts like trader teddy weisberg point fingers directly across the pond, saying u.s. stocks pivot on every tidbit of eurozone news. >> the markets at the moment, in
my opinion, are simply hostage to the politicians, whether it's in the eurozone or whether it's in washington, and that's not a good place for the markets to be and that's not a good a place for investors to be. >> reporter: when european leaders are close to a debt deal, we rally. the deal falls through? we tumble. and, so much for corporate profits having the muscle to distract investors from europe. of the handful of companies reporting earnings so far, 68% have beat wall street expectations. that performance gets a big "so what" on wall street. still, equity strategist jeremy zirin says what concerns him is that volatility will scare everyone away from our capital markets. >> the real risk is that the heightened volatility in the markets ,which is really underlying the uncertainty in terms of the economic trends, as well as the political outcomes in both europe as well as the u.s., and starts to impact business behavior and consumer behavior. >> reporter: others worry that's already happening, as trading
lately is dominated by institutions rather than retail investors. weisberg says investors need to make friends with the volatility. >> when you get those downdrafts that are being created-- by mechanical reasons, high- frequency trading, whatever-- it might be that you take advantage of those downdrafts and perhaps put some money to work. >> reporter: it doesn't matter how good u.s. fundamentals are, experts say the bumpy ride in u.s. stocks is likely to continue for weeks, if not months. that's until there's a credible plan in place for europe's financial nightmare. suzanne pratt, "nightly business report," new york. >> susie: despite the volatility in the markets, it looks like i.p.o.s are beginning to come back. today, zeltiq aesthetics sold shares to the public-- this is only the second initial public offering to come out in the past two months. zeltiq priced seven million shares at $13 apiece. the stock ended the day at
$15.50 a share, up 19%. it trades on the nasdaq under the ticker "z-l-t-q." zeltiq makes just one product, the cool sculpting system. it's a non-surgical fat-melting device used by plastic surgeons and dermatologists. the i.p.o. investors are eagerly waiting for now is groupon. press reports say the daily deals website is expected to scale back its offering, selling 10% to the public. it's the first big-name tech company to go public since the i.p.o. market dried up this summer. there are now 341 companies in the pipeline looking to raise about $200 billion. joining us now to talk more about the groupon offering and the health of the i.p.o. market? david menlow. he's president of ipofinancial.com.
david, so nice to have you back on "nightly business report". >> great to be here, susie. >> susie: let's talk about groupon, a lot of excitement about this, the company coming to public. how do you think it's going to do? >> well, there's a tug of war that's going on between the underwriters and the investing community. this i. p. o. has been in the system for just a little bit too long and it's starting to develop some cobwebs, so investors are thinking maybe there's something wrong with the company, and there have been a lot of back and forth between the s. e. c. and the company to get this taken care of. investors are going to be the ones that will leap into this offering because they've heard it as one of the big coast, and it will get a good sponsorship. >> susie: you heard our report about all the market volatility. is this a good time for a company like groupon or any company to go public? >> it's an interesting question. it really depends on what side of the equation you are.
if you are an issuing company, if you want to bring your company public, and you came to me and asked me that question, i would say this is the worst time to be bringing an i. p. o. into the marketplace because valuations are so low. however, in this value proposition, anybody who is a buyer when companies are selling are going to be able to take advantage of those lower valuations and in the longer term this will be a windfall for investors. >> susie: you gave me some statistics, let's look at them now. so far in year 97 companies have offered their shares to the public. 64% of them you told me are now trading below their offering price. so what is this telling but the health of the i. p. o. market? >> well, this is actually a measure in contrast, susie. what we're looking at are companies that came public for the most part prior to the august unsettled parts of the marketplace. and there was a haircut, an evaluation repricing of risk.
so anything that came out before is not quite as attractive as it is now for the stocks that are coming out for the fourth quarter. so those are the stocks that got hit and there were a couple that were higher, but still showing positive gains. >> susie: so companies have to adjust to this changing market environment, and the investors appetite for risk and uncertainty. so like a company today that we just reported about, zeltiq, how do you think it's going to do? >> i think zeltiq will be a surprise to a lot of people on the up side. it wasn't that large a deal, but it's following the template from a stock that came out last week called ubiquity networks, they had a 20 to $22 price range and it came at $15. so it marks that the underwriter, serious about pricing these deals so that they work. they are looking more in the lap of the investor rather than the issuer, and zeltiq was yet another example of that with pricing below the
original range. >> susie: as you know, hundreds of companies will be coming public over the next couple months. do you have any advise for investors of how they should do their homework and size up whether these are good investments or not? >> for the most part i would say the valuations of these deals are going to be very low and that investors should be looking to try and get allocations, but if they are unable to do so, and the deals open up at premiums nay might want to look at just going into the open market and buying whatever they couldn't get from their allocations and their brekers. >> susie: is there any stock that is coming public in the next couple of months that you're intrigued about, that you think is worth looking into? >> well, i don't have any specific names for you, susie, but i will say that people cannot get trapped into this internet craziness that is probably going to reemerge. if the grup yon deal does come at a low number and investors decide they don't want to pay attention to the valuations of wall street, they will set
their own valuations and that could start yet another little mini internet bubble. >> susie: all right, buyer beware, thank you so much, david, for all your thoughts, we appreciate it. >> thank you. >> susie: we've been speaking with david menlow, president of i. p. o. financial. still ahead, we go "beyond the scoreboard" with the owner of the florida panthers. cliff viner tells us why he took the leap from minority investor to owner of one of the n.h.l.'s most successful expansion teams. in what could be the largest trade case ever filed against china, american solar panel makers accuse the chinese of using billions of dollars in government subsidies to gain control of the american market. the case could affect more than $2 billion in solar panel imports and, as darren gersh reports, could become a key political flashpoint. >> lets be clear. china has a plan for our market-
- to gut it and own it. >> reporter: with that blunt warning, u.s. solar manufacturers demanded relief under u.s. trade laws. >> the illegal subsidies that china is putting out into the solar industry is no different than giving an athlete a bucket full of steroids. >> reporter: the suit filed today also claims chinese companies are dumping solar panels and cells on the american market at below their cost of production. on top of that, chinese companies receive improper subsidies from the chinese government, and that could make this case a very interesting test, since the u.s. government is also pouring money into its own solar industry. >> the obama administration's lavish billions of dollars of subsidies on the u.s. solar industry, our central bank has been implicitly driving down the value of the dollar to promote u.s. exports. a lot of u.s. solar companies are losing money, which of course means they are selling their product at below cost, dumping it on the market, so the
chinese really aren't doing anything we haven't been doing. they're just doing it more efficiently. >> reporter: in a show of political strength, both of oregon's senators are backing the trade case, which they say is hurting solar manufacturing in their state. >> american based companies can compete with their chinese competitors. what they can't do is compete with the chinese government. and that's exactly what these various subsidies are forcing them to do. >> reporter: experts in trade law say it is no coincidence a decision in this case is likely to come next fall in the closing days of the presidential election. the obama administration is already under pressure for funding failed solar panel maker solyndra. even though solyndra makes a different kind of solar panel, rutgers trade expert thomas prusa says the controversy could influence the trade complaint filed today. >> it gives the impression that it was unfair chinese behavior that is destroying or made it difficult for solyndra to make a
profit, rather than solyndra having a faulty business plan and choosing a risky technology. >> reporter: this trade complaint could also bring some uncomfortable facts to light. some u.s. companies manufacture solar cells and panels in china, and this case should make it clear just how extensive those operations are. darren gersh, "nightly business report," washington. >> susie: complex bundles of mortgage investments-- they were at the heart of the financial crisis. now they've landed citigroup in hot water with the securities and exchange commission. the agency says the bank has agreed to pay $285 million to settle civil fraud charges over how a $1 billion mortgage bond deal was structured. the issue? whether citi misled investors. the agency says citi bet against that deal as the mortgages soured. former s.e.c. attorney brad bondi expects more prosecutions like this. >> i think the s.e.c., with
their structured finance group-- structured products group-- at the s.e.c. will bring a lot more actions in the future. they're actively investigating in this space-- other c.d.o. deals-- so i think we can expect to see more actions like this in the future. >> susie: bondi noted one upshot of prosecutions like this: complex bundled deals like these collateralized debt obligations are becoming far less common. the trading day was all about earnings.
let's take a look in tonight's "market focus." a flood of companies reported earnings. ebay shares saw selling in after hours as the company provided a cautious outlook for the full year. at 48 cents a share, the online auction giant's earnings were in considered a miss. ebay closed at $33.18, but fell as much as 5% in after hours. now, western digital's numbers beat expectations. after the close, the disk drive maker earned $1.10 per share-- 14 cents better than the street was looking for. during regular trading , shares fell more than 9% on continued worries that flooding in thailand could hurt the company. but after hours, shares rose slightly.
we got a solid report from american express today. the credit card company earned $1.03 a share, beating wall street's expectations as it set aside less for loan losses. amex shares finished the day at $46.13 and slipped slightly in after hours. fellow dow component travelers posted the largest gain among the blue chips after reporting an increase in third-quarter policy sales and said it was raising rates for clients. looking at its earnings, the insurance company earned 79 cents a share in the third quarter, eight cents less than analysts predicted. travelers policy sales for the quarter climbed to $5.6 billion, up 3% from a year ago. looking at the stock, shares were up 5%, their biggest jump in several months. industrial conglomerate united technologies saw a sharp increase in its quarterly profit. the world's largest maker of elevators and air conditioners earned $1.47 per share, three cents better than expected. revenue rose nearly 9% to $14.8
billion, with currency fluctuations adding 4% points of growth. shares of u-t-x were unchanged. intel shares moved higher on double its normal volume. the chipmaker was up more than 3% after intel's third-quarter in the financial sector, morgan stanley. it reported a strong quarter thanks to a huge accounting gain. wall street's second-largest investment bank earned $1.14 per share, handily beating expectations. nearly $10 billion in revenue was helped by its investment banking unit. shares of morgan stanley ended the day at $16 and change, the same place where it began. intuitive surgical moved higher after soundly beating estimates in its third-quarter financial report.
the surgical equipment maker rose 9% driven by continued adoption of robotic procedures and an upbeat outlook. apple pulled technology stocks lower. shares ended 5% lower. we told you last night that apple's quarterly income and revenue fell short of forecasts. apple blamed the shortfall on a later-than-usual release of its newest iphone. many of apple's retail stores across the country were closed for a while today to allow workers to pay tribute to the late steve jobs. stores were covered with white sheets to keep the event secret. jobs died two weeks ago after fighting pancreatic cancer. employees that didn't attend the memorial at apple's headquarters were able to watch a live webcast of the service. here's what we're watching for tomorrow:
weekly jobless claims and the september reports on leading indicators and existing home sales. more earnings tomorrow-- at&t, capital one, microsoft and southwest airlines are scheduled to report. also tomorrow? from beefing up trade policy to union workers at ford have ratified a new, four-year labor agreement. 63% of united auto workers union members voted to approve the contract. ford expects the deal will reduce labor costs over the next four years as it adds nearly 12,000 u.s. jobs. the contract also is expected to clear the way for ford's credit rating to be upgraded. both standard & poor's and moody's said recently that they might take action if the contract got approved. abbott labs is breaking up. the healthcare conglomerate plans to split into two companies. one will focus on brand-name prescription drugs, the other will concentrate on medical devices, diagnostic tests and baby formula.
abbott is not the only big pharma company spinning off units. pfizer, the world's biggest drugmaker, said earlier this year that it would sell or spin off its animal health and nutritional products units. it's make or break time for the n.b.a. owners and players are meeting for a second straight day,
trying to resolve pro basketball's labor dispute. the main sticking point is the division of revenues between owners and players. 100 games have been canceled so far. if a deal isn't reached soon, more games could be lost. the labor issues are similar to those experienced by the national hockey league seven years ago, when the entire season went unplayed. back then, cliff viner was a minority partner in the florida panthers. now, the co-founder of a.v.m. brokerage firm owns the team. in tonight's "beyond the scoreboard," rick horrow talks sports and money with viner. he began by asking if managing money is the same as managing professional athletes. >> it is very different. even though when you have a firm you're always managing people, personalities, goals. this is a little different in that it's a different type of culture, it's a different type of sensitivity. athletes at the professional level have to be treated in a very particular respectful
way. where actually the management of the team really has to very often keep its distance from the professionals. >> so you spent a lot of time accumulating knowledge and being a minority partner, probably one of the only times in recorded sports history i can find where a guy actually selling bonds for a pro sports franchise got a more excited so he stepped up even more. why did you then make the transition to become general partner? >> i had a lot of experience, i knew the business. and i really did love the people that were here. so it was a great decision to take over and become really the leader of all those people that i was work sog closely with. >> there's no team in the national hockey league that's more creative as far as nhl marketing. what is the hardest thing to overcome in south florida? is it the fact that everybody is from somewhere else? is it because of the dolphins and the heat? or is it because of all the other distractions? >> i'll say this. number one, people love our
brand. people really do like the panthers, we just haven't given enough to cheer about. but we really, really are a very family oriented, safe environment, terrific place to come to watch a sporting event. >> let's talk about the business of the nhl itself. 2004, 2005, lockouts shut down the season. nfl just coming off a lockout, the nba in one. how do you you feel about the stability and the business future of the national hockey real generally? >> when you see gary betman and the team of executives that he has, they are running the nhl in the most disciplined, professional, progressive way whether you look at either our ability to go into a new cba, what broadcasting price we've got friend the u.s. and nbc, what will happen in future years as we look at the canadian broadcast rights, under the stewardship of guard and i all
the executives there, it's an extremelyle priceive business. i think we will get better over time and we're going to contend for a stanley cup. >> thank you very much. >> thank you. >> susie: and finally tonight, why adding women entrepreneurs to your startup team could boost your chances of success. with tonight's "money file," here's eric schurenberg, editor and director of content at inc.com. >> everyone knows that the key to restarting job creation in the u.s. lies with young growth companies. its not controversial. such firms account for virtually all new net jobs. what is a political flashpoint is how to create more small companies and help them survive. but research suggests a simple way that shouldn't be controversial, except maybe to men. and that way is? recruit women entrepreneurs. at the moment, women get involved with startups at a little more than half the rate of men, and even less so in the case of the rapid-hiring tech firms the economy needs.
whether that's fair isn't the question. what matters is that it's a missed opportunity. a v.c.-sponsored white paper last year found that startups owned by women offered better returns on venture capital and failed less often than male- dominated firms. another study this summer found, to the researchers' surprise, that the best way to raise the i.q. of a business leadership team is to add women. why that might be so is a subject for another day, along with the policies that might encourage women to launch more companies in the future. my suggestion is aimed at the people creating tech startups today, who tend to be mostly male. guys, invite more smart women onto your startup team. outside of engineering, women aren't rare any more in tech. bringing them on might raise your collective i.q. and, more important, might just lift the odds that you'll succeed. i'm eric schurenberg. >> susie: that's "nightly business report" for wednesday, october 19. i'm susie gharib. good night everyone, and we hope to see all of you again tomorrow
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