August 21, 2022: Tough End To The Week

Friday reversed a good start to the week, the Dow Jones closed the week down 0.2%, the S&P 500 fell 1.2%, and the Nasdaq composite was down 2.6%. In the USA, 522 startups have laid of 70,698 employees in 2022, according to Layoffs.fyi. Fidelity,and BlackRock cut fintech giant Ant’s valuation lower. WeWork’s co-founder lined up a US$350 million A16Z investment for a new billion-dollar real estate venture. Chinese internet giant Tencent reported its first-ever quarterly revenue decline since the company went public in 2004, as China’s economic slowdown took a toll. Shares of Hong Kong-listed food delivery service Meituan fell as much as 10% after Reuters reported that shareholder Tencent Holdings was planning to sell all or a bulk of its US$24 billion stake. Unity Software on Monday rejected gaming software company AppLovin Corp’s US$17.54 billion takeover offer and said it would go ahead with its deal to purchase mobile app monetization software company ironSource. Amazon is testing a feature in its app that would show users a TikTok-style photo and video feed of products for shoppers to share with other users. After dealing with booming demand and global shortages since the start of the pandemic, the semiconductor industry is facing a sudden downturn. The suddenness of the turn has ricocheted through the sector since late July, when Intel stunned Wall Street with the news that revenue in its latest quarter had fallen US$2.6 billion, or 15 per cent, short of expectations. In Canada, After the boom of 2021, Canadian venture capital investment is normalizing back to pre-pandemic levels, per the latest data from the Canadian Venture Capital and Private Equity Association (CVCA). Sophic Client LuckBox (LUCK-TSXV, LUKEF-OTC), management provided positive forward looking comments at the Company’s AGM held last week, guiding to profitability in H1 2023 supported by the Company’s existing cash balance.

Sophic Client LuckBox (LUCK-TSXV, LUKEF-OTC): Real Luck Group Ltd. announces results of Annual General Meeting.

As part of an update provided at the AGM, CEO Thomas Rosander, and CFO William Moore indicated the Company’s transformation is now complete, with meaningful player acquisition now having commenced. Additionally, Online Casino provides the Company a path to profitability in H1 2023, with an adequate current cash position to support the required investment in marketing. Management also highlighted the Company’s focus on innovative (e)sportsbook products, and a potential new Business to Business (B2B) offering, to drive revenue growth, and relevant milestones over the next six quarters. https://bit.ly/3QAYXEM

Brüush Oral Care closes Nasdaq IPO with US$15.5 million.

Toronto-based electric toothbrush company Brüush Oral Care announced the closing of its initial public offering (IPO) at Nasdaq earlier this month, generating approximately US$15.5 million in gross proceeds. The company filed to go public with a US$17.25 million IPO in the beginning of July. Upon closing of the IPO, Brüush missed its initial IPO target by US$1.75 million. With an initial exercise price of US$4.16 per share at its IPO, Brüush’s stock price has fallen to US$2.11 at the time of publication. https://bit.ly/3QSQ4WX

Attractions management software startup Connect&Go closes Series A round with $6.2 million top-up.

Montréal startup Connect&Go announced that it has closed its Series A financing with an additional $6.2 million investment round. This recent financing comprises $5 million from Financière Outremont as well as two existing investors, Carey and Gestal. The new round also includes $1.2 million in debt from new investor Finalta Capital. Connect&Go’s Series A capital was raised across three separate closes that span two and a half years. In 2020, the company raised a total of $7 million, which includes a $4 million extension. The Series A also includes $4 million that Connect&Go said it secured last year. With this latest financing, Connect&Go said its Series A sits at $17.2 million. Connect&Go told BetaKit that it also closed a $5 million round in 2018, bringing its total funding to about $22 million to date.  https://bit.ly/3ChbpFA

Direct-C closes $3.9 million Series A from Henkel and GreenSky to scale oil leak detection tech.

In 2018, Edmonton-based Direct-C began engaging with German manufacturing giant Henkel Adhesive Technologies to assess whether the startup’s oil leak detection technology could be combined with Henkel’s repair wrap product. Fast forward four and a half years later, and the startup has secured a long-term commercial supply agreement with Henkel to procure and resell its tech—and Henkel’s venture arm has co-led Direct-C’s $3.9 million Series A round, alongside Toronto-based GreenSky Capital. https://bit.ly/3QBQzV

Venture investment returning to pre-pandemic levels, shows Q2 2022 CVCA report.

After the boom of 2021, Canadian venture capital investment is normalizing back to pre-pandemic levels, per the latest data from the Canadian Venture Capital and Private Equity Association (CVCA). The amount of venture capital invested in Q2 2022 was $1.65 billion, a figure that closely mirrors the second quarter of 2020 and the second quarter of 2019. The economic downturn is leading to investment themes that bear resemblance to early 2020, when investors were cautiously deploying capital and concentrating on their existing portfolio companies. In total, $6.2 billion was invested during the first half of this year. https://bit.ly/3A46FQJ

Tech startup layoffs approach 71,000 in 2022.

A total of 522 startups have laid of 70,698 employees in 2022, according to Layoffs.fyi, which tracks public reports. Among the more recent moves, Sema4 Holdings Corp. cut 250 positions on Monday, ContraFect Corp. dropped 16 positions, also on Monday. Peloton Interactive Inc. said Aug. 12 it would eliminate 780 jobs. Layoffs in the sector have been increasing all year, but the pace has gained in May, June and July, according to data from the website. Since the start of COVID-19, 1,096 startups have laid of 166,661 employees, according to Layoffs.fyi.  https://bit.ly/3Qy370m

Fidelity, BlackRock cut fintech giant Ant’s valuation lower.

Boston-based Fidelity Investments cut its estimate for Ant to US$70 billion at the end of May, according to Bloomberg calculations based on filings. That’s down from US$78 billion in June last year, and US$235 billion just before Ant’s IPO was torpedoed by regulators in November 2020. https://bloom.bg/3AmXRH3

WeWork co-founder lines up US$350 million A16Z investment for a new billion-dollar real estate venture.

Adam Neumann, the co-founder and former CEO of the shared office startup WeWork, is working on a new rental real estate business that has received funding from Andreessen Horowitz. According to a report from The New York Times, the venture capital firm invested around US$350 million in Neumann’s up-and-coming real estate business, called Flow, which aims to provide a consistent housing experience across a chain of branded apartment complexes. As noted by the Times, this investment marks the “largest individual check Andreessen Horowitz has ever written in a round of funding to a company.” It puts Flow’s valuation at over $1 billion — despite critics “who have described his leadership of WeWork as a cautionary tale of corporate hubris” — and it hasn’t even launched yet. https://bit.ly/3whdduu

Abu Dhabi AI firm sets up US$10 billion fund for tech deals.

Abu Dhabi-based artificial intelligence firm G42, backed by a key member of the oil-rich emirate’s ruling family, is setting up a US$10 billion fund with a focus on technology investments in emerging markets. The entity will be formed in partnership with the Abu Dhabi Growth Fund, which was set up by state-controlled ADQ last year. Peng Xiao will be chairman of the new fund’s investment committee, which will also include Abu Dhabi Growth Fund’s Al Suwaidi. https://bloom.bg/3RbyL3J

Crypto firm BitGo says it drew all-cash offer, could opt for IPO.

Crypto custody firm BitGo attracted an all-cash offer that exceeded the value of the now-terminated deal with Mike Novogratz’s Galaxy Digital Holdings, BitGo’s Chief Executive Officer Mike Belshe said in an interview. That came in the last couple of months but BitGo isn’t actively entertaining acquisition offers at the moment and could list on the stock market if the timing is right, he said. BitGo is backed by investors including Goldman Sachs, Craft Ventures, Jump Capital and Galaxy Digital. https://bloom.bg/3QwPzlH 

Galaxy Digital calls off its US$1.2 billion acquisition of BitGo.

Galaxy Digital said Monday it has terminated the US$1.2 billion proposed acquisition of crypto custodian BitGo, a high-profile deal they announced in May last year, after the San Francisco-based startup failed to provide its audited financial statements for the year 2021. The proposed acquisition — which was proposed to include Galaxy Digital issuing 33.8 million new shares, and a US$265 million cash component — was supposed to be the crypto sector’s first US$1 billion deal. https://tcrn.ch/3JUXUwO

Value of stocks Tiger Global Management held was more than halved during the second quarter.

The value of hedge fund Tiger Global Management’s equity holdings was more than halved during the second quarter, to US$11.93 billion as of June 30 from US$26.64 billion as of March 31. Among some of the changes Tiger made to its portfolio during the quarter, it cut it’s stake in China-based electric vehicle maker XPeng Inc. to 4.36 million shares from 13.72 million shares and reduced its Coinbase Global Inc. holding to 151,536 shares from 836,597 shares, while selling off its 387,700-share bet on Salesforce Inc. , the 1,451 shares of Alibaba Group Holding Ltd. it held, the 1.04 million share investment in Zoom Video Communications Inc. and the 2.89 million Robinhood Markets Inc. it held. Meanwhile, Tiger boosted its stake in Amazon.com Inc. to 2.61 million shares from 147,743 shares, added a new Alphabet Inc. investment of 110,472 shares and initiated a 226,000-share bet on Zillow Group Inc.  https://bit.ly/3JWMZD2

Tencent’s revenue falls as China’s economic slowdown takes toll.

Chinese internet giant Tencent reported its first-ever quarterly revenue decline since the company went public in 2004. The results highlight the challenges facing China’s biggest tech giants amid the country’s dramatic economic slowdown. Tencent, the world’s largest videogame publisher that also operates China’s most popular messaging app WeChat, said its revenue in the second quarter fell 3% from a year earlier to about US$20 billion, which was in line with analysts’ expectations, while its net profit dropped 56%. Advertising revenue declined 18%, while revenue from video games—Tencent’s biggest source of revenue—fell 1% both in China and overseas. In the second quarter, China’s severe pandemic restrictions, especially Shanghai’s lockdown in April and May, dealt a serious blow to the country’s already weakening economy. And it is unclear when the macroeconomic environment will get better. China’s economic data on retail sales and industrial output for July, released earlier this week, showed an unexpected slowdown as the world’s second-largest economy grapples with a deepening crisis in the property market. https://bit.ly/3K6p18i

Meituan shares skid on report Tencent to sell most or all of its holdings.

Shares of Hong Kong-listed food delivery service Meituan fell as much as 10% after Reuters reported that shareholder Tencent Holdings was planning to sell all or a bulk of its US$24 billion stake. The report, citing four unnamed sources, said Tencent was selling to placate domestic regulators. China has been tightening regulation on the company’s technology sector in response to concerns over antitrust and privacy. Tencent shares slipped 1%. https://bit.ly/3JW7VKp

Unity Software rejects AppLovin’s takeover offer, to stick with ironsource.

Unity Software on Monday rejected gaming software company AppLovin Corp’s US$17.54 billion takeover offer and said it would go ahead with its deal to purchase mobile app monetization software company ironSource. AppLovin last week offered to buy Unity in a US$17.54 billion all-stock deal, on condition Unity terminated its plans to acquire AppLovin’s smaller competitor ironSource. Unity said last month it would buy ironSource in a US$4.4 billion all-stock transaction, which the company said on Monday it remains committed to. https://reut.rs/3Pr57Gi

PENN Entertainment buying the remaining stake of Barstool Sports. PENN Entertainment Inc. said in a filing late Wednesday it is buying the remaining shares it doesn’t yet own of media company Barstool Sports Inc., founded by David Portnoy. The Pennsylvania-based casino and racetrack operator has exercised call rights to bring its ownership of Barstool to 100%, PENN said in the filing. The acquisition of the remaining Barstool shares is expected to be completed by February, subject to certain conditions, after which Barstool will be a wholly owned subsidiary of PENN, the filing said. Shares of PENN National fell 0.8% in the extended session after ending the regular trading day down 3.2%. https://bit.ly/3c2ChhI 

Manchester United stock rallies as owners are reportedly open to selling a stake after Elon Musk’s joke tweet about buying the soccer club.

Shares of Manchester United jumped 6% Wednesday after Bloomberg reported that the soccer club’s owners could be open to selling a minority stake. The Tesla chief quickly clarified that he was only joking about the purchase, tweeting out four hours later: “this is a long running joke on Twitter. I’m not buying any sports teams.” Later, in a third tweet, Musk said that if he were to buy a sports team, that Manchester United would be his pick. https://bit.ly/3QBVoy7

Snapchat+ hits 1million paying subscribers as company announces Priority Story Replies, new app icons, more.

Snapchat announced an impressive one million subscribers to its Snapchat+ service after six weeks when it was officially unveiled. While Twitter Blue hasn’t reached 500 thousand subscribers and already wants to charge more for the service, Snapchat+ will add four new features for its customers. Snapchat+ is available for US$3.99/month and Snapchatters can enable the subscription anytime by visiting their Profile. The company said more features will be available in tech coming month. https://bit.ly/3c1DB4u 

Walmart reaches video-streaming deal to offer Paramount+ to members.

Walmart has been exploring a subscription video-streaming deal to draw more people to Walmart+ as it seeks to challenge Amazon.com Inc., which has grown its own Prime membership program to about 200 million global members. The companies agreed to a 12-month exclusivity agreement and a two-year deal that would give Walmart+ members access to Paramount’s ad-supported streaming service, according to people familiar with the deal. https://on.wsj.com/3w8nIQB

TikTok replaced TV for British young adults; 95% of US teens watch YouTube.

An official survey in the UK shows that TikTok has replaced TV as the most popular entertainment source for young adults, while a separate Pew study reveals that 95% of US teens watch YouTube, many of them “almost constantly.” A separate Pew Research Center poll found that 95% of US teens watch YouTube, while 67% use TikTok. Other popular apps for those aged 13 to 17 are Instagram (62%) and Snapchat (59%). Facebook and Twitter, meantime, are increasingly out of favor with teenagers, the former used by 32% this year, compared to 71% in 2015. Twitter suffered a less dramatic but still significant fall, from 33% down to 23%. https://bit.ly/3dG06w4

Meta plans to restrict new political advertisements in week before midterm elections.

Facebook-parent Meta Platforms Inc. plans to restrict new political advertisements in the week leading up to the U.S. midterm elections. The company won’t accept the publishing of new ads about social issues, elections, or politics from Nov. 1 to Nov. 8, and it will block “most edits” on advertisements. Meta will allow candidates or other parties to run ads as long as they obtained at least one impression prior to the restriction window. Facebook made a similar announcement in the lead-up to the 2020 election. Shares of Meta have fallen 11% over the past three months as the S&P 500 has added 5%. https://bit.ly/3K4pmID 

Signal says 1,900 users’ phone numbers exposed by Twilio breach.

End-to-end encrypted messaging app Signal says attackers accessed the phone numbers and SMS verification codes for almost 2,000 users as part of the breach at communications giant Twilio last week. Signal said in a blog post Monday that it would notify about 1,900 users whose phone numbers or SMS verification codes were stolen when attackers gained access to Twilio’s customer support console. While this didn’t give the attacker access to message history, which Signal doesn’t store, or contact lists and profile information, which is protected by the user’s security PIN, Signal said “in the case that an attacker was able to re-register an account, they could send and receive Signal messages from that phone number.” https://tcrn.ch/3PtZt60

Amazon tests TikTok-like feed in app.

Amazon is testing a feature in its app that would show users a TikTok-style photo and video feed of products for shoppers to share with other users. The test is currently visible to a small number of Amazon employees, according to a person familiar with it. Amazon joins other major technology companies such as Meta Platforms and Google parent Alphabet Inc. that have attempted to bump up engagement through short videos and an endless stream of content. The portal being tested under the internal name “Inspire,” appears as a diamond widget on the home page of Amazon’s app, according to Israeli-based artificial intelligence firm Watchful Technologies Ltd., which has tracked the feature’s use. The widget brings shoppers to a feed that shows a stream of images and videos of products, with shoppers able to like, share and ultimately purchase items. While most of the feed now appears as still pictures, Watchful researchers said the portal also features video content. The retailer posts live videos from creators on its website, who promote items available for purchase. It has attempted to court elite social-media users to its influencer program, which allows creators to build personalized pages on Amazon and earn money when followers make purchases through customized links. The company hasn’t yet seen the success of its rivals, though it has tried to lure top creators in part by inviting them to Amazon-hosted retreats featuring resort-style amenities and pampering. https://on.wsj.com/3T0THfj

Wait, when did everyone start using Apple Pay?

Nothing broke on the day in 2014 when Apple presented a new service called Apple Pay. If the quality of destruction was measured by the speed at which it happened, the flashy innovation from an industry titan would have been considered a disappointment. The idea that it would make the wallet obsolete sounded ridiculous when the pace of Apple Pay adoption underperformed expectations. Wall Street analysts and iPhone users alike were skeptical for the next few years. The experience of using a credit card didn’t seem like a problem that required a solution from Apple. The percentage of iPhones with Apple Pay activated was 10% in 2016 and 20% in 2017, according to research from Loup Ventures, as most people seemed perfectly happy with their plastic cards and leather wallets. Adoption nearly doubled again in 2018. It hit 50% by 2020. Now it’s around 75% and inching closer to ubiquity. Of course, not every account that gets activated remains in active use. https://on.wsj.com/3Ka36gK

FDIC issues cease and desist letter to FTX US, four other firms.

The Federal Deposit Insurance Corporation issued cease and desist letters to cryptocurrency exchange FTX US and four other firms Friday regarding “false and misleading statements” about FDIC insurance related to digital assets. The letter to FTX US, the U.S. affiliate of global crypto exchange FTX, referenced a July tweet from company President Brett Harrison that said employer direct deposits to FTX US are “stored in individually FDIC-insured bank accounts in the users’ names” and that “stocks are held in FDIC-insured and SIPC-insured brokerage accounts.” The FDIC said that the statements falsely implied that FTX US is insured by the agency. It added that the FDIC does not insure brokerage accounts and its insurance does not cover stocks or crypto. FTX US was founded by CEO Sam Bankman-Fried and was last privately valued at US$32 billion. Harrison said on Twitter Friday that he deleted the post referenced by the FDIC and apologized for the misleading statements. “We really didn’t mean to mislead anyone, and we didn’t suggest that FTX US itself, or that crypto/non-fiat assets, benefit from FDIC insurance,” Harrison tweeted. The FDIC also sent cease and desist letters to Cryptonews.com, Cryptosec.info, SmartAsset.com and FDICCrypto.com. https://bit.ly/3Aw8TKe

US chipmakers hit by sudden downturn after pandemic boom.

After dealing with booming demand and global shortages since the start of the pandemic, the semiconductor industry is facing a sudden downturn. But even for an industry accustomed to frequent cyclical slumps, this one has defied easy analysis and left researchers struggling to predict how the setback will play out. The sudden glut in memory chips, PC processors and some other semiconductors has come at a time when manufacturers in many automotive and industrial markets still lack a reliable supply of chips. It has also forced some of the biggest US chipmakers to slash billions of dollars from planned capital spending, at the very moment that Washington has passed a long-awaited law to subsidise a huge increase in domestic chip manufacturing capacity. The immediate cause has been a rapid build-up in inventory in the chip supply chain since early this year. Compared with February, when there were enough chips on hand to support about 1.2 months of production, global inventory levels jumped to 1.4 months in June and then 1.7 months in July, according to VLSI Research. Tumbling PC sales and weaker smartphone demand have been the main causes, as consumers retrench. But with fears rising of an economic slowdown, manufacturers of a wide range of equipment, which had been building inventory to make themselves more resilient to supply pressures, have reversed course. Meanwhile, it is unclear how much weakening chip sales reflect supply chain problems, rather than any fall-off in demand. The suddenness of the turn has ricocheted through the sector since late July, when Intel stunned Wall Street with the news that revenue in its latest quarter had fallen US$2.6 billion, or 15 per cent, short of expectations. Chief executive Pat Gelsinger blamed it on the kind of inventory adjustment that only hits once in a decade, although Intel also admitted to errors of its own. Gartner, which had been expecting the growth in global chip sales this year to halve from 2021’s 26 per cent, took its forecast down further to 7 per cent and is now predicting a 2.5 per cent contraction in 2023 to US$623 billion. https://on.ft.com/3dMiEex

Qualcomm is plotting a return to server market with new chip.

Qualcomm is taking another run at the market for server processors, according to people familiar with its plans, betting it can tap a US$28 billion industry and decrease its reliance on smartphones. The company is seeking customers for a product stemming from last year’s purchase of chip startup Nuvia, according to the people, who asked not to be identified because the discussions are private. Amazon.com Inc.’s AWS business, one of the biggest server chip buyers, has agreed to take a look at Qualcomm’s offerings, they said. https://bloom.bg/3QWHer4

Biden admin says about 20 models will still qualify for EV tax credits.

The Inflation Reduction Act, which President Joe Biden signed into law Tuesday, says that if automakers want their electric vehicles to be eligible for tax credits, they’ll need to have final assembly in North America. The law, which takes effect immediately, ends credits for about 70% of the 72 models that were previously eligible, according to the Alliance for Automotive Innovation. About 20 model year 2022 and early model year 2023 vehicles will still make the cut for EV tax credits of up to US$7,500 through the end of the year under the new legislation. https://tcrn.ch/3psW2C4

European power prices hit a record for a 5th day straight as a perfect storm rocks the continent’s energy system.

European power prices have surged to a record high for the fifth day running as the Russian squeeze on natural gas flows and fears about other energy supplies rock the continent. German baseload year-ahead power, the benchmark European price, rose 5.5% to hit a record 505 euros (US$512) per megawatt hour Tuesday, Bloomberg data showed. Dutch TTF natural gas futures, the European benchmark, were up almost 8% Tuesday to 237.50 euros a megawatt hour, their highest level since early March. https://bit.ly/3pHiTdz