TheChek News Flow

A recent string of fires on cargo vessels will push up premiums for the struggling industry

Cargo vessels have been hit by an expensive string of fires. The beleaguered shipping industry will now have to contend with higher insurance premiums.

The sinking of a Grimaldi Lines-operated container carrier after it caught fire off the coast of France two weeks ago was the fourth big ship fire in the past four months. And 2018 was also a tragic year: In March, five crew members of the megaship Maersk Honam, owned by freight giant A.P. Moller-Maersk , AMKBY 1.25% died in a fire while the vessel sailed in the Arabian Sea.

Part of the problem dates back to the era, more than 10 years ago, when container-shipping companies engaged in an arms race by purchasing ever-larger vessels. This hasn’t just depressed industry profits as capacity has outpaced demand for cargo, it has also made it harder to suppress fires—which turn out to be more destructive aboard bigger vessels.

As a result, marine insurance costs rose in 2018 for the first time in six years, according to research firm Drewry, as companies providing so-called “hull and machinery” cover for shippers started reacting to widespread losses. Drewry expects this trend of higher premiums—plus tightening of terms and deductibles—to continue over the next five years.

This is bad news for shipowners, because insurance makes up roughly 10% of vessel-operating costs.

After 2015 in particular, fierce competition among insurance companies pushed premiums down by 22%. The long U.S. economic expansion and low interest rates led investors to pour money into all sorts of niche assets, of which marine insurance is yet another example.

Premiums eventually got too low to account for the probability of fires, yard losses and natural disasters such as hurricanes Florence and Michael. Reinsurers have already been badly hit. This week, Lloyd’s of London reported a second consecutive year of losses, resulting in insurers like Oslo-based Skuld quitting this market.

One hope was that better data on the contents of containers would allow insurers to measure risks more accurately, but it hasn’t really worked out. They don’t have access to much of the necessary information, says Sean Dalton, head of marine underwriting for North America for Munich Reinsurance America.

A global economic slowdown has already dampened sentiment toward the container-shipping industry, weighing on stocks such as Maersk, Cosco and Evergreen. The prospect of higher insurance costs gives investors another reason not to hold out for a swift recovery.

PARIS (Reuters) - A man has been arrested after the tomb of American-born surrealist artist Man Ray was desecrated in Montparnasse Cemetery in Paris, a city official said on Thursday.

Born into a family of Russian Jewish immigrants in 1890, Man Ray spent much of his career in the French capital and was close to dada and surrealist artists such as Salvador Dali and Marcel Duchamp in the 1920s and 1930s.

The man’s motives were unclear, a spokeswoman for Paris City Hall said, adding that early investigations indicated he was homeless and drunk when police arrested him on Tuesday as he was damaging another nearby tomb.

A headstone added to the tomb after Man Ray’s wife died was also knocked down.

Man Ray is best known for Ingres’s Violin, a nude print in which he transformed the naked back of his muse, singer Kiki de Montparnasse, into a violin.

Man Ray, who was named Emmanuel Radnitzky at birth, fled to the United States from France during World War Two. He returned to Paris in the early 1950s where he lived until his death in 1976.

France has seen a spate of vandalism at Jewish cemeteries and memorials amid concern about rising anti-Semitism in France, home to the largest Jewish community in Europe, although there was no indication that this incident was linked to anti-Semitism.

Montparnasse Cemetery contains the graves of other well known people, including philosopher and playwright Jean-Paul Sartre, and writers Simone de Beauvoir and Charles Baudelaire.

Despite attempts by a much-larger rival to starve it of capital, the ride-hailing company found unlikely investors and managed to grow

Lyft Inc., the ride-hailing underdog whose long-term survival was once in doubt, is revving up for its moment.

For much of the past decade—one in which ride hailing grew from nothing into an indelible part of transportation—Lyft played the part of an also-ran to Uber Technologies Inc. in an industry where many thought the winner would take all.

It was subject to a series of aggressive tactics by Uber, which tried to corner the capital markets and make it difficult for competitors to land cash to fuel their growth. Inside Uber, then-Chief Executive Travis Kalanick and top executives including business chief Emil Michael said their objective was to far outraise any competitor.

“There are going to be competitors. And we will kill them,” Mr. Kalanick, Uber’s co-founder, said in a 2011 podcast interview.

But Lyft didn’t die. Instead, it will beat Uber to the public markets Friday with a valuation well over $20 billion, as investors hungry for its shares far outnumber the amount available in the IPO.

Uber’s squeeze was at times so effective that even some Lyft investors worried there was a good chance the company wouldn’t survive. But Lyft was able to grow by seeking out unusual fundraising sources and capitalizing on key missteps by Uber that tarnished its brand.

By the time they go public, Lyft and Uber will have each raised more venture capital than any U.S. startup that has gone public, according to Dow Jones VentureSource. While many early investors in the companies initially believed a dominant player would win and be able to make healthy profit margins, billions have been plunged into a war over market share with giant losses at both companies. Uber plans to kick off its own pitch to public investors for its IPO within a month of Lyft, in an offering that could value the company as high as $120 billion.

For this article, The Wall Street Journal spoke with more than a dozen people familiar with the companies’ capital-raising fight, including people familiar with Uber and Lyft’s strategies, investors involved with or witness to their fundraising efforts, and people familiar with both companies’ fundraising histories.

The early history of ride hailing as it largely exists today began with Lyft. Its founders, Logan Green and John Zimmer, ran an online ride-sharing board called Zimride that matched people for long-distance car trips.

In 2012, they began matching ordinary drivers with people who wanted rides. Drivers affixed bushy pink mustaches to their bumpers and greeted passengers with a fist bump. Uber, at that point dealing with licensed professional drivers of luxury cars, quickly started its own version called UberX.

Both saw huge potential in the business and thought it would have a single dominant player, boosted by network effects where more drivers meant more passengers. To get there, capital was critical in subsidizing rides to get passengers hooked. Lyft said in a fundraising-pitch slideshow that the industry was ripe for a “natural monopoly” in which a company could “set prices to maximize profits.”

By early 2014, Uber and Lyft had similar levels of funding from venture-capital firms—Lyft from Mayfield Fund and Andreessen Horowitz, Uber from Benchmark and Menlo Ventures.

Then Uber stepped on the gas. In one funding round after another, it scoured the globe for capital and raised it by the billions. Meanwhile, Mr. Kalanick had started a push to steer money away from the company’s competitors, especially Lyft.

Before looking at Uber’s financials, potential investors had to sign away their right to invest in Lyft or any other ride-hailing company for as long as a year. Investors said they had never seen another company ask for such an agreement.

When Lyft sought to raise more money in 2014, a pattern emerged. The company’s founders would pitch investors, and within hours or days, Uber’s team would call those potential Lyft investors, leading Lyft’s executives to suspect they were being followed. Indeed, Mr. Kalanick wanted investors considering Lyft to have a full picture of the ride-hailing industry and at least understand Uber’s financials.

The response from many of Lyft’s prospective investors was: We can’t proceed because we heard from Uber, and we were told we’ll be shut out of Uber if we continue to talk to you.

By the end of 2014, Uber was valued at about $41 billion and had raised roughly $2.7 billion, more than eight times as much as Lyft, according to PitchBook.

In early 2015, General Atlantic was talking with Lyft executives about a possible investment and was parsing the company’s financials. Near the end of deliberations, General Atlantic executives spoke to Uber’s team and ultimately eschewed taking part in Lyft’s next round. Uber helped garner a $200 million investment from General Atlantic by offering it common stock sold by one of its founders at a $30 billion valuation—$10 billion lower than the level at which Uber had recently raised money.

Lyft also struggled to work with Wall Street investment banks as many were wary of helping the company for fear of losing out on potential work with Uber. A key exception: Credit Suisse Group AG , which is now one of the top underwriters on Lyft’s IPO.

Frustrated, Messrs. Green and Zimmer turned to unlikely corners and cleaned up their image. The pink mustaches—which often became brown from dust—were abandoned.

The two founders connected with Hiroshi Mikitani, the CEO of Japanese e-commerce company Rakuten Inc., who saw room for a second player and led a $680 million round in March 2015.

Less than a year later, while Uber was raising from Wall Street investors like Tiger Global Management and mutual funds that typically invest before IPOs, Lyft found another critical source of capital in Detroit.

General Motors Co. executives, particularly President Dan Ammann, had been hunting for ways to show shareholders they had a plan to be a big player in the future business of robot taxis. In November 2015, Mr. Zimmer gave a keynote speech on the end of car ownership at the Los Angeles Auto Show and Connected Car Expo.

After watching Mr. Zimmer’s speech, Mr. Amman and his team sat down with him and Mr. Green at a Los Angeles hotel and started hashing out a plan to lead Lyft’s next investment round. Soon after, GM said it would put $500 million into Lyft as part of a $1 billion round that valued Lyft at $5.5 billion. It was the first time a major car maker joined forces with a ride-hailing company, an industry seen as a primary threat to auto makers.

In 2017, Lyft was aided immensely by Uber’s corporate woes, as a series of scandals ultimately led to Mr. Kalanick’s resignation as CEO. Uber’s image was tarnished, and Lyft’s brand benefited. Since then, Uber has replaced a large portion of its senior management team, who have emphasized a softer image and focused more on IPO preparations than raising more private capital.

“Nobody could have predicted what happened at Uber,” said Ben Ling, founder of Bling Capital and an early investor in Lyft. “There was definitely a time when people thought that Uber could crush Lyft.”

Lyft’s U.S. market share—15% in late 2016, according to Second Measure, which tracks credit-card transactions—surged at first and has since grown to around 30%. At that level, both companies tend to have similar wait times and service, investors in both companies say, giving Lyft a more secure seat. Uber has roughly 70% of the market.

When Lyft signed up underwriters in late 2018 for its IPO, it had more banks to choose from. Ahead of what was expected to be one of the biggest IPOs in recent years, Lyft was finally in a position to call its own shots. JPMorgan Chase & Co sought to have a role on the IPO of Uber and Lyft, but Lyft executives balked at that. They forced the bank to sign an 18-month agreement that prohibits JPMorgan from working with Uber during that time.

Last week, Lyft held its key meeting for possible investors in a ballroom at the St. Regis hotel in Manhattan attended by more than 400 people. Credit Suisse’s global head of equity capital markets syndicate, Anthony Kontoleon, introduced Messrs. Zimmer and Green. Before starting his pitch, Mr. Zimmer thanked Mr. Kontoleon for his loyalty.

Now, as one of the three lead underwriters on the IPO, Mr. Kontoleon and his team will help choose which funds can get in on one of the year’s hottest deals.

Charges from Department of Housing and Urban Development accuse social-media firm of letting advertisers discriminate by race, national origin, religion and more

WASHINGTON—The Department of Housing and Urban Development on Thursday said it was charging Facebook Inc. with violating fair housing laws by enabling real-estate companies to improperly limit who can view advertisements on its platform.

The charges under the Fair Housing Act, announced in a statement Thursday morning, accuse the social-media giant of unlawfully discriminating based on race, color, national origin, religion, and more, “by restricting who can view housing-related ads.”

“Facebook is discriminating against people based upon who they are and where they live,” HUD Secretary Ben Carson said in a statement announcing the charges of violating the Fair Housing Act. “Using a computer to limit a person’s housing choices can be just as discriminatory as slamming a door in someone’s face.”

The department said Facebook let advertisers exclude people from viewing housing and housing-related ads based on demographics including status as parents, citizenship status, interest in Hispanic culture, gender, and more categories.

The charges are civil in nature, not criminal. HUD said the charges would be heard either by a federal administrative law judge or a federal district judge. If a judge in either venue rules against Facebook, the judge can assess damages and fines, HUD said.

A spokesman for Facebook said the company was surprised by HUD’s action because the company had been working with the department to address their concerns, and said it had taken steps to prevent advertising discrimination. The spokesman said the company last year eliminated thousands of targeting options subject to misuse, among other measures.

“While we were eager to find a solution, HUD insisted on access to sensitive information—like user data—without adequate safeguards,” the spokesman said in a statement. “We’re disappointed by today’s developments, but we’ll continue working with civil rights experts on these issues.”

Under the proposal, foreign providers would be allowed to own data centers as part of a pilot in a free-trade zone

BEIJING—China is offering foreign technology firms better access to the country’s fast-growing cloud-computing market, according to people briefed on the matter, as Beijing fashions a compromise in a tech sector the U.S. wants opened as part of a trade deal.

Premier Li Keqiang disclosed the proposal to allow trial operations for foreign cloud service providers at a Monday meeting with about three-dozen corporate chieftains, including those from IBM Corp. , Pfizer Inc., Rio Tinto PLC, BMW AG and Daimler AG . The plan is part of a package of offers on technology-related issues Chinese negotiators are expected to discuss with their U.S. counterparts during high-level meetings scheduled for Friday, the people said.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, who arrived in Beijing on Thursday, are to hold the new round of talks with Chinese Vice Premier Liu He to try to close a deal to end the yearlong trade dispute between the world’s two largest economies. Next week, a Beijing delegation headed by Mr. Liu will continue the talks in Washington.

The two sides are aiming for a package deal that includes substantial increases in U.S. exports to China, and Chinese pledges to address some long-running structural issues, such as allowing greater market access to American companies and boosting protection of intellectual property. Important issues still to resolve include how to enforce a deal and the pace at which the U.S. and China will roll back the tariffs on hundreds of billions of dollars in goods imposed in the past year.

Chinese Commerce Ministry spokesman Gao Feng told reporters Thursday that while some progress has been made, “much work remains to be accomplished.”

In the seesawing negotiations, the U.S. team led by Mr. Lighthizer has been pressuring Beijing to relax its restrictions on U.S. providers of cloud-computing and other high-tech services and on the flow of data across its borders—areas of concern to American businesses. Until recently, China has refused to budge on issues related to cloud computing, citing national-security reasons, and has a stringent cybersecurity law in place.

Increasingly, as negotiations enter their final stages, Beijing is starting to give ground on issues Washington sees as crucial.

Earlier this month, for instance, China’s national legislature passed a foreign-investment law. The proposed law had been delayed for three years until President Trump’s trade offensive spurred Beijing to act. The law bans officials from divulging corporate secrets, threatening criminal prosecution for doing so. Previously, Chinese officials denied that the government forces U.S. firms to transfer technology to their Chinese partners.

On cloud computing, China requires U.S. providers such as Amazon.com Inc. and Microsoft Corp. to form joint operations with Chinese companies and license their technology to the Chinese partners. U.S. officials have said Beijing withholds licenses that would allow U.S. firms to operate independently in China. As a result, U.S. companies can’t market their cloud-computing services in China or sign up customers directly. Chinese firms, such as Alibaba Group Holding Ltd. , by comparison, are allowed to operate in the U.S. without restriction.

Cloud-computing firms deliver computer services, including storage, software and analytics, over the internet, a service considered one of the most promising, high growth parts of the tech industry.

In response to a question about cloud computing from IBM Chief Executive Ginni Rometty during Monday’s meeting, Premier Li said Beijing is considering a “liberalization pilot” in a free-trade zone to open cloud computing to foreign companies, according to the people briefed on the matter. A key hurdle foreign providers of cloud services need to overcome, Mr. Li said, is to offer adequate “privacy protection” to their Chinese customers.

Under the cloud proposal, foreign providers would be allowed to own data centers in the free trade zone. The most likely one is in the southern city of Guiyang that’s a center for big data, people with knowledge of China’s plans said.

Key questions remain: Would China allow free flow of data from the operations in the zone to the rest of the country? What kind of data services can foreign firms setting up data operations in the zone provide? What kind of customers can they offer such services to?

“It shows that, at the minimum, they get the idea that they’ll have to show some movement in this area and they can’t stonewall the U.S. completely on this,” said Paul Triolo, an analyst specializing in global technology policy at Eurasia Group, a New York-based consulting firm. “But the devil is in the details.”

The pilot proposal, which would still allow the government to keep control of the sector, is also likely to be met with skepticism in Washington that China is moving too slowly to make any meaningful changes to what it sees as Beijing’s unfair trade practices. But Beijing officials argue China has traditionally experimented with reforms in pilot zones before ultimately implementing them nationwide.

The cloud proposal “fits China’s habit of making discretionary, piecemeal adjustments rather than outright liberalization,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies, a Washington think tank.

Premier Li told the business leaders the cloud proposal is part of China’s effort to narrow the list of sectors that are off-limits for foreign investment. A revision of the so-called negative list will be done by June, he told the top foreign executives.

Separately, in a speech Thursday at a conference of global business executives and political leaders on China’s southern island of Hainan, Mr. Li pledged to invite foreign capital into more areas of the Chinese economy, including education services, medical institutions, transportation, infrastructure and energy.

He also promised a new patent law being revised will impose “unaffordable costs” for infringing on intellectual property.

Trade negotiations between Washington and Beijing have been through ups and downs in recent months. Having shown progress early this year, the talks hit a snag in February. Soon after Mr. Trump abruptly broke off nuclear-disarmament talks with North Korean leader Kim Jong Un, Chinese leaders were unnerved about meeting the same fate at a summit to sign a trade deal. Then, earlier this month, the two sides decided to resume high-level in-person meetings as both capitals try to wrap up the talks possibly by the end of April.