What the U.S. Government Is Doing With Its Stakes in Companies

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Alex Ossola (0:33)

The US government is now an activist investor. How is the business community reacting?

Plus, Secretary of State Marco Rubio is in Rome trying to smooth things over with the Pope and Italy's leadership.

Robbie Gramer (0:45)

A lot of Italian officials, lawmakers, even those in the Vatican see Rubio as Trump's Mr. Fix-It, and French prosecutors seeking criminal charges for Elon Musk summon him to Paris.

Alex Ossola (0:57)

It's Thursday, May 7th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

We begin this evening's show with a key insight into how people are spending their money, thanks to the latest earnings from the world's biggest burger chain. McDonald's has been doubling down on value meals and other low-cost menu items. That's helping it bring people in. Its first quarter revenue and profit beat Wall Street's forecast. In the US, same store sales rose 3.9 percent. Some other chains like Shake Shack, Wingstop, and Papa John's have reported disappointing sales in recent weeks. Rising gas prices and other costs have made consumers cut back, and restaurants are going all out to attract them, and McDonald's plans to keep pushing deals.

Stocks slipped today, pulling back from recent records for the NASDAQ and S&P. The Dow led the losses and closed down 0.6 percent. Whirlpool stock tumbled after the company slashed its earnings guidance. Shake Shack shares slid 28 percent after the burger chain swung to a loss in its latest quarter. But national security satellite company Hawkeye 360 soared after its IPO. It closed up 31 percent, a sign of investor demand for defense-related companies.

There's free market capitalism, there's state capitalism, and now there's Trump capitalism. The president has been involved in American business in unorthodox ways. The Trump administration has announced direct investment stakes in at least 10 companies.

SPEAKER_5 (2:31)

That includes Intel, The US government will take a 10 percent stake in Intel.

Alex Ossola (2:36)

US. Steel.

Robbie Gramer (2:37)

The US will have a golden share in US. Steel.

Alex Ossola (2:40)

And mining companies.

Robbie Gramer (2:41)

The White House taking a 10 percent stake in Tritium Atoll.

Alex Ossola (2:45)

While other arrangements, like the recent one with Spirit Airlines, have fallen apart.

SPEAKER_6 (2:49)

That reportedly would have given the government up to a 90 percent stake in the company.

Alex Ossola (2:54)

For more on those deals and what they mean for the Trump administration, I'm joined now by WSJ reporter Maggie Severns. Maggie, how different is President Trump's approach to these kinds of deals than in the past throughout US history?

Maggie Severns (3:07)

There are examples from history like the New Deal era where the government was very involved in building infrastructure and more involved in private business. And then in the 70s, 80s, we had this swing towards more laissez-faire capitalism and the idea that the government should really be hands-off, right? So this is a real departure from several decades that preceded us when it comes to the government starting to say, we want to be more hands-on even when it comes to the specific companies. So we don't have term sheets for these deals. We don't know the details of them. In some cases, the government has said that it would have some kind of powered influence, company decisions, and other cases we don't know.

Alex Ossola (3:43)

Last week, the president said the US investment in Intel alone had generated $30 billion in gains over the past 90 days. What has the government said it would do with potential profits?

Maggie Severns (3:53)

The profit only exists for the most part if you sell the stock, right? He said that the government's made so much money off of Intel stock because the stock is up, but that's only if we sold our share in Intel. And the government hasn't really articulated what plans might be. There's not an exit strategy. They haven't said, you know, here's one we would sell or why we would sell. They also haven't said what they would do with dividends. If you get dividends, are you reinvesting them in the company? Are you taking that money and moving it to Treasury? Is it going somewhere else? We don't know.