How China Hopes To Launch More Tech Stock STARs—Data Sheet

China’s new equity exchange for tech companies got off to rollicking start this week.

The Shanghai Stock Exchange’s Science and Technology Innovation board, dubbed the STAR Market by Chinese authorities, launched Monday with 25 newly-listed companies.

Opening day was pandemonium. Trading on the new bourse was so frantic that shares surged an average of 140%. Anji Microelectronics Technology (Shanghai) soared 400%. Even the most lackluster performer, software product manufacturer Harbin Xinguang Optic-Electronics Technology, jumped 84%.

STAR’s stars fell only a little on Tuesday and Wednesday.

More than 140 companies have applied to list on the STAR market. To date, regulators have approved listing applications for 28 firms, of which 25 have completed initial public offerings.

Beijing hopes STAR, which has strong backing from Chinese president Xi Jinping, will emulate—and eventually compete with—the Nasdaq in fostering innovative startups. It has long been a source of irritation to China’s leaders that the nation’s hottest tech companies—including Alibaba Group, Tencent, Baidu, and smartphone maker Xiaomi—have opted to float shares in the United States or Hong Kong and largely ignored exchanges in Shanghai and Shenzhen.

One reason for STAR’s giddy opening: regulators exempted it from a rule that limits first-day gains on exchanges in Shenzhen and Shanghai to no more than 44%, although after the first five days of trading, daily price changes will be limited to no more than 20% up or down. STAR’s intraday circuit-breakers are wider, as well. Even so, several companies triggered them within minutes of Monday’s opening.

Other STAR market rules are meant to make it easier for tech companies to raise capital for growth and investment. Unlike exchanges in Shenzhen and Shanghai, STAR doesn’t bar unprofitable companies, nor does it require companies to receive government approval to be listed. Moreover, the new market imposes no limit on the ratio of a share price to a company’s earnings at the time of listing. For some STAR companies, price-to-earnings ratios exceed 150.

STAR’s stellar start has transformed several founders into overnight billionaires and racked up huge gains for a handful of investors.

But it’s unclear how long their luck will hold. STAR is Beijing’s third attempt to imitate Nasdaq, following unsuccessful experiments with Shenzhen’s ChiNext board and Beijing’s “new third board,” an over-the-counter market. And STAR’s early gains have been stoked by speculation. China is the world’s second-largest equity market after the United States. But its exchanges are driven by retail investors who buy and sell on rumors, prompting many Western investors to dismiss bourses in Shenzhen and Shanghai as giant casinos.

Meanwhile, the rest of China’s tech sector is in a funk. For now, it will have to be carried by the STARs.

Clay Chandler

On Twitter: @ claychandler

Email: clay.chandler@fortune.com

NEWSWORTHY

You don't tug on superman's cape. In a big, bold move, the Justice Department said on Tuesday it had opened a broad antitrust investigation of leading tech companies. Without naming names, the department explained: “Without the discipline of meaningful market-based competition, digital platforms may act in ways that are not responsive to consumer demands." Investors didn't wait long to assess who might be affected. Shares of Amazon and Facebook lost about 1% in premarket trading on Wednesday, while Apple and Google were about unchanged. The news came just before Facebook officially agreed to pay a $5 billion fine to the Federal Trade Commission. Announced on Wednesday morning, the deal resolves the agency's probe sparked by the Cambridge Analytica scandal.

You don't spit into the wind. Speaking of platforms playing games, an investigation by The Wall Street Journal found Apple's own apps at the top of many app store search results for generic apps on the iPhone. Apple disputed the findings. Separately, Apple asked the Trump administration to exempt computer components of its new Mac Pro from the 25% tariffs on imports from China. The company has already sought exemptions for the iPhone and other products.

You don't pull the mask off that old Lone Ranger. The crypto wars will never end. Two decades after the Clinton administration proposed putting a “Clipper” chip in every computer to allow law enforcers to crack all codes, Trump AG Bill Barr wants backdoors in every software program. “We must ensure that we retain society’s ability to gain lawful access to data and communications when needed to respond to criminal activity,” Barr said Tuesday in a speech at Fordham University.

And you don't mess around with (Andy). That New York Times piece we linked to on Monday where reporter Andy Newman played DoorDash food delivery guy for a few days has already had some impact. The company said it would let workers keep tips from customers, instead of deducting the amount of tips from the amount it pays for each delivery.

A pool shootin' son of a gun. I'm picking up a growing current of stories like this one in The Verge explaining how people are getting annoyed by paying for too many streaming video services and are turning back to piracy to catch their favorite shows for free. Hard to tell how real this phenomenon is right now, but it's one to keep an eye on.

Down home they call me slim. On Wall Street, Snap impressed and AT&T carried on. Snap said revenue increased 48% to $388 million in the second quarter and its daily active users grew 7% to 203 million. Its shares, previously up a mind-blowing 169% in 2019, jumped another 11% in premarket trading on Wednesday. AT&T, still benefitting from the Time Warner buy, said revenue increased 15% to $45 billion, while its DirecTV Now online TV service continued to shrink, losing 168,000 subscribers. Shares of AT&T, up 18% this year, lost 1%. Meanwhile, Bloomberg reports an imminent deal to allow T-Mobile and Sprint to merge by divesting some assets to Dish Network for $5 billion.

(Headline reference explainer, if you need one.)

FOOD FOR THOUGHT

The United States government has started to use cyber-counterattacks to hack back at other countries for intrusions against U.S. computers. Now some in Congress would like to extend the strategy to allow private businesses to fight back, as well. That's started a robust debate over hacking back, as my Fortune colleague Robert Hackett reports:

Mark Mao, head of privacy practice at Troutman Sanders, an Atlanta law firm, is a cautious proponent. “Personally, I don’t think it’s a bad idea,” he says. “To me, it’s like a cyber Second Amendment.” (He adds that it would have to be “limited” and that “a lot of the details would have to be worked out.”) Mao draws a comparison to nuclear stalemates. “Deterrence works because nobody wants to be nuked,” he says. “Most hackers get away with [it] because there’s no retribution in any way.”

But most cyber­security industry insiders agree that if the hack back bill became law, the results would be a fiasco. Sandra Joyce, head of intelligence at cybersecurity firm FireEye and a U.S. Air Force reservist, disapproves. “The last thing we need is to add well-intentioned rookies into the mix,” she says, noting the dangers of misidentifying attackers and the threat of tit-for-tat escalation. It’d be “releasing a vigilantism fraught with risk.”

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BEFORE YOU GO

We all want to stay relevant at work, but there are ways to go too far. Former Siemens software contractor David Tinley of Pittsburgh was hired to write and maintain spreadsheets to manage equipment orders. The complex files included custom scripts to pull information from various sources. They also included a booby trap known as a logic bomb, placed by Tinley to ensure that the spreadsheets would crash every so often and he'd be called back to save the day. But he was caught after going on vacation and giving some Siemens' employees the passwords to the spreadsheets. Now he's facing up to 10 years in prison and a fine of up to $250,000. Yikes.

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.