August 11, 2024: Whew!

After a brutal Monday, due to fears of the yen-carry-trade unwinding and an Nvidia AI chip delay, the market ended the week well above Monday’s lows. Dow Jones fell 0.6% last week, S&P 500 ended the week almost flat, and Nasdaq composite lost 0.2%. WeRide, a Chinese autonomous driving company, is getting ready for its U.S. IPO. The company is selling almost 6.5 million American depositary shares, priced between US$15.50 and US$18.50 each. Shares of AI chipmaker Black Sesame tumbled as much as 35% on their Hong Kong debut, dealing a blow to Hong Kong’s efforts to lure more technology listings. Nvidia shares dropped 6% Monday after reports that the company’s upcoming AI chips are facing production delays by at least three months due to design flaws. Groq, an Nvidia challenger, raised US$640 million in Series D funding at a valuation of US$2.8 billion. Warren Buffett’s Berkshire Hathaway slashed its stake in Apple in half as part of a selling spree in Q2. A federal U.S. judge ruled Monday that Google has illegally held a monopoly in two market areas: search and text advertising. Later in the week, Palantir’s shares surged on a rosy profit outlook signaling AI demand. Uber posted sharply higher profits, and Airbnb warned of a U.S. growth slowdown. In Canada, Shopify’s revenue grew 21% y/y, beating the company’s own outlook of high-teens growth, sending its shares up more than 20% on Wednesday morning. Sophic Client UGE International announced that the closing of its previously announced go private transaction, is now expected to occur on or about August 14, 2024, as opposed to on or about August 8, 2024. Sophic Client Intermap closed the final tranche of its Private Placement, for a total of ~$3.3 million raised. Sophic Client Clear Blue Technologies’ stakeholders provided a financing package of $2.2 – $2.9 million.

Sophic Client UGE International (UGE-TSXV, UGEIF-OTC) provides update on closing of Plan of Arrangement.

UGE International announces that the closing of its previously announced plan of arrangement (the “Arrangement”) with 1000896425 Ontario Ltd. (the “Purchaser”), an affiliate of NOVA Infrastructure Fund II, LP, pursuant to an arrangement agreement (the “Arrangement Agreement”), dated May 28, 2024, is now expected to occur on or about August 14, 2024, as opposed to on or about August 8, 2024, as was previously stated in the Company’s news release dated July 31, 2024. The Company acknowledges that the Purchaser has satisfied its obligations under the Arrangement Agreement, including depositing the aggregate cash consideration payable under the Arrangement with TSX Trust Company, acting as the depositary. A brief delay to the closing is required in order for certain shareholders who are participating as rolling shareholders to complete share transfers relating to their continued participation in UGE following the completion of the Arrangement. https://bit.ly/3AlHflx

Sophic Client Intermap (IMP-TSX, ITMSF-OTC) closes final tranche of Private Placement.

Intermap Technologies announced that it closed the third and final tranche of its previously announced offering (the “Offering”) of Class “A” common shares of the Company. The third tranche included the issuance of 2,491,568 Common Shares at a price of CAD$0.45 per Common Share for aggregate gross proceeds of approximately CAD$1,121,206. Patrick A. Blott, Chairman and CEO of Intermap acquired approximately 6% of the Common Shares issued under the third tranche of the Offering. The Offering, including the third tranche and the previously announced first and second tranches, included the issuance of an aggregate of 7,346,568 Common Shares at a price of CAD$0.45 per Common Share for aggregate gross proceeds of approximately CAD$3,305,956. Upon issuance, all of the Common Shares issued under the Offering will rank pari passu in all respects with the Company’s existing issued Common Shares. https://bit.ly/3yyp3o6

Sophic Client Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA) stakeholders provide financing package of $2.2 – $2.9 million.

Clear Blue Technologies International Inc. is pleased to announce that it has received significant financial support from its stakeholders to provide financial support to the Company as it continues to invest in its AI leadership in Smart Power for Internet of Things, Smart City and Telecom markets around the world. The financing consists of the following transactions: 1) SOFII (Southern Ontario Fund for Investment in Innovation), a previous supporter of Clear Blue has provided a 7-year loan of $500,000 with interest payable at 14% compounded annually to Clear Blue. Southern Ontario Fund for Investment in Innovation (SOFII). Launched by the Government of Canada in July 2012, SOFII supports high-growth, innovative Small and Medium-sized Enterprises (SMEs) in rural and urban communities. 2) A private placement of convertible debentures, including participation by management, contributed additional cash contribution, with the total sum of the convertible debenture totaling up to $2.2M, of which an initial tranche of $1.46M has been completed. 3) Business Development Bank of Canada (BDC), Clear Blue’s main financing partner, deferred a total of $240,000 of payments due in 2024 to a balloon payment at the end of the loan term, in 2026. Taken combined, the above financings provide cash, deferred payments and additional liquidity totaling $2.9M. https://bit.ly/4dxQPQv

Shopify (SHOP-NYSE, SHOP-TSX) stock surges on revenue beat.

Shopify’s revenue grew 21% year-over-year to US$2.05 billion in the second quarter. That beat the company’s own outlook of high-teens growth, sending its shares up more than 20% on Wednesday morning. Shopify, which sells commerce software and merchant services including payments, reported a net income of US$171 million during the quarter compared to a net loss of US$1.6 billion during the same period a year earlier. In the second quarter last year, Shopify took an impairment charge on the sale of its logistics business to Flexport and laid off more than 20% of its corporate workforce. Shopify chief financial officer Jeff Hoffmeister told analysts that Shopify expects to end the year with “minimal headcount growth” compared to the approximately 8,300 employees it had at the end of 2023. The company’s gross merchandise volume grew 22% to US$67.2 billion, which executives attributed to factors including winning over larger enterprise clients, growth in its offline point-of-sale business and European expansion. For the third quarter, Shopify projected revenue growth in the low to mid-twenties and said it expects gross margins to improve. Asked whether Shopify has seen any recent evidence of a consumer pullback that other companies have flagged in the second quarter, Hoffmeister said “we didn’t see any significant deterioration or improvement.” https://tinyurl.com/ysb579y3

China’s WeRide readies U.S. IPO.

WeRide, a Chinese autonomous driving company, is getting ready for its U.S. public debut. The company is selling almost 6.5 million American depositary shares, priced between US$15.50 and US$18.50 each, it said in a U.S. Securities and Exchange Commission filing on Friday. The offering and a concurrent private placement could bring WeRide’s market value close to US$5 billion. Two years ago, the company’s valuation was about US$4.4 billion following an $400 million investment from U.S. private equity firm Carlyle Group. The IPO suggests a thawing of Chinese regulators’ views toward U.S. listings. In 2022, ride-hailing giant Didi abruptly withdrew its U.S. listing after it ran afoul of Chinese regulators. Investors in WeRide, including Alliance Ventures and the venture arm of the Renault Nissan Mitsubishi Alliance, have also agreed to purchase US$320.5 million in ordinary shares of the Guangzhou-based company concurrent with the public offering, the filing said. Robert Bosch GmbH, a German engineering company, showed an interest in purchasing up to US$100 million worth of American depositary shares at the IPO price, according to the filing. https://tinyurl.com/4j9ra43s

Xiaomi-backed AI chipmaker Black Sesame falls in Hong Kong debut as AI frenzy wanes.

Shares of artificial intelligence chipmaker Black Sesame International Holding Ltd. tumbled as much as 35% on their debut, dealing a blow to Hong Kong’s efforts to lure more technology listings. The Xiaomi Corp.-backed company’s shares fell to as low as HK$18.28 Thursday in the Hong Kong Stock Exchange and closed the day 27% lower. They had been priced at HK$28, the bottom of the marketed range in an initial public offering that raised HK$1.04 billion (US$133 million). Its listing comes as global markets are recuperating from a rout — including downturns in AI stocks — earlier this week. The stock’s reception is a setback for Hong Kong as it strives to revive its equity market, which has seen moribund volumes of IPOs and liquidity concerns stemming from the region’s economic sluggishness. Hong Kong Financial Secretary Paul Chan was among the attendees of Black Sesame’s listing ceremony in Hong Kong Thursday. Nearly 95% of the shares offered were snapped up by just five investors prior to the first day of trading, according to a Wednesday filing from the company, which specializes in chips used in autonomous driving systems. A subsidiary of Guangzhou Automobile Group Co. and an investment unit of Ningbo Joyson Electronic Corp. participated as cornerstone investors. The deal’s international portion was subscribed 1.05 times, according to the filing. That reflects weak demand from institutional investors. IPOs in Hong Kong have raised US$2.44 billion so far this year, down 7.6% from the same period in 2023 and far below 2021 levels, according to data compiled by Bloomberg. https://archive.ph/Z1iIO

Indian e-scooter maker Ola Electric’s US$734 million IPO fully subscribed.

Ola Electric’s US$734 million initial public offering (IPO) was fully subscribed on the second day of bids for shares in the Indian electric scooter maker. The SoftBank-backed company’s IPO, the first by an electric vehicle maker in India and also the country’s biggest this year, received bids for about 490.6 million shares, exceeding the 465.2 million on offer, exchange data showed on Monday. https://archive.ph/KjHxf

Nvidia challenger Groq raises at near-US$3 billion valuation.

Groq, an Nvidia challenger that develops chips specialized for running large language models, raised US$640 million in Series D funding at a valuation of US$2.8 billion, the company announced on Monday. Funds managed by BlackRock through its Private Equity Partners team led the fundraising, with participation from investors including Neuberger Berman, Type One Ventures and Cisco Investments. The company says that it has over 360,000 developers using its cloud service to build applications that run on open-source models from Meta Platforms, OpenAI, Google and Mistral. Groq is one of a number of chip developers hoping to take a piece of Nvidia’s lucrative pie. Cerebras, another chipmaker, announced that it had filed confidentially with securities regulators for an initial public offering last month. https://tinyurl.com/39yhvfz9

Nvidia shares tumble after report of production delay.

Nvidia shares dropped 6% Monday after The Information reported that the company’s upcoming artificial intelligence chips are facing production delays by at least three months due to design flaws. Nvidia’s share price has fallen nearly 26% from the height of June 18, when it briefly overtook Microsoft to become the world’s most valuable company. Still, the stock, a proxy of investor sentiment on the AI boom, has more than doubled since the beginning of this year. The chip production delay could affect Nvidia customers including Meta Platforms, Google and Microsoft, which have collectively ordered tens of billions of dollars worth of the chips. Nvidia unveiled the Blackwell series of chips in March and had planned to start shipping large numbers of them to customers later this year. The design flaws mean Nvidia has to conduct new production test runs and simulations with chipmaker Taiwan Semiconductor Manufacturing Company and shipments won’t be ready until the first quarter of next year. https://tinyurl.com/m4fc6aac

Warren Buffett’s Berkshire Hathaway halves stake in Apple.

Warren Buffett’s Berkshire Hathaway has slashed its stake in iPhone maker Apple in half as part of a selling spree in which the billionaire investor dumped US$76 billion of stocks. The company cut its position in Apple by more than US$50 billion to US$84.2 billion in the second quarter, generating huge investment profits, according to filings published last Saturday. The data suggested that Berkshire had sold roughly 390 million Apple shares, or about half of its stake, according to calculations by the Financial Times. The sales of Apple and other stocks produced an after-tax realised gain of US$47.2 billion, a sizeable return on an investment that was first initiated by one of Buffett’s deputies in 2016. Late last year Buffett began to pare back Berkshire’s stake in Apple, and in early 2024 he quickened the pace of stock sales. In May, he signalled to shareholders that he believed Apple would remain one of the conglomerate’s big holdings, listing it among core long-term investments including Coca-Cola and American Express. “Unless something dramatically happens that really changes capital allocation strategy, we will have Apple as our largest investment,” Buffett said at the company’s annual meeting in May. “But I don’t mind at all, under current conditions, building the cash position . . . when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive.” https://tinyurl.com/yva8kj66

Google loses antitrust case over search.

A federal U.S. judge ruled Monday that Google has illegally held a monopoly in two market areas: search and text advertising. The landmark case from the government, filed in 2020, alleged that Google has kept its share of the general search market by creating strong barriers to entry and a feedback loop that sustained its dominance. The court found that Google violated Section 2 of the Sherman Act, which outlaws monopolies. The ruling marks the first anti-monopoly decision against a tech company in decades. “Google is a monopolist, and it has acted as one to maintain its monopoly,” Judge Amit Mehta of the U.S. District Court for the District of Columbia wrote in the decision. The Department of Justice and a bipartisan group of attorneys general from 38 states and territories, led by Colorado and Nebraska, filed similar but separate antitrust suits against Google in 2020. The suits were combined for pretrial purposes, such as discovery of evidence. Kent Walker, Google’s president of global affairs, said in a statement that the company plans to appeal the ruling. He highlighted the court’s emphasis on the quality of Google’s products. “This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available,” Walker wrote. “As this process continues, we will remain focused on making products that people find helpful and easy to use.” Alphabet shares fell more than 4% on Monday, dragged down by a broad decline in stocks worldwide. https://tinyurl.com/yc2p3way

Palantir shares surge on rosy profit outlook signaling ai demand.

Palantir Technologies Inc.’s stock jumped in extended trading after the company raised its annual outlook, citing continuing demand for its artificial intelligence software. Palantir also topped analyst estimates for sales and profit for the quarter, helping send its stock up more than 15% after the results were released. Palantir increased its 2024 revenue guidance to a range of US$2.74 to US$2.75 billion. Analysts had expected US$2.7 billion, according to data compiled by Bloomberg. The company also raised its outlook for adjusted operating income to a range of US$966 million to US$974 million for the year. Analysts had expected US$882.9 million. “With these results we maintain our eligibility for the S&P,” Palantir Chief Financial Officer David Glazer said in an interview Monday, referring to the company’s possible inclusion in the S&P 500 Index, an event many investors are waiting for. “It’s the S&P’s call.” https://archive.ph/2N3Z3

Uber Posts sharply higher profits.

Uber reported sharply higher operating income of nearly US$800 million in the second quarter, as revenue rose 16% to US$10.7 billion, the ride-hailing and food delivery firm said Tuesday. The results show Uber’s cash generation expanding to US$1.7 billion, up 51% on a year earlier, demonstrating how the company’s steady growth is now turning it into a significant money maker. Driving the quarter’s growth was Uber’s ride-hailing business, where gross bookings rose 23%, ahead of delivery, which expanded 16%. While the two segments generate nearly as much money in gross bookings, Uber’s ride hailing business turns far more of that into revenue and profits. https://tinyurl.com/yzkdkh3w

Instacart shares surge on higher revenue.

Instacart reported 15% year-over-year growth in second quarter revenue, although its operating income fell by about half on sharply higher expenses, particularly in research & development and sales & marketing. Instacart’s transaction revenue rose 17%, a much stronger rate of growth than in overall orders, which the company credited to “fulfilment efficiencies.” Meanwhile growth in Instacart’s ad business slowed to 9.6% in the first half of 2024, compared to 24% in the first half of 2023. Instacart shares rose 8% after the earnings were released. The results were higher than analysts expected. https://tinyurl.com/mryzx9uv

Airbnb warns of U.S. growth slowdown.

Airbnb shares fell 17% in after hours trading after it warned that revenue growth in the current quarter would slow from the second due in part to “some signs of slowing demand from U.S. guests” during the summer travel season. The short-term rental company expects revenue in the third quarter, usually its strongest, to rise 8% to 10% from the year-earlier period. In the three months ended June 30, revenue rose 11% from the same period last year to US$2.75 billion, beating the San Francisco company’s forecast. Nights and experiences booked, a measure of underlying demand, rose 9% to 125.1 million in the second quarter, in line with its forecast. The company expects a slower pace of growth in the third quarter, however. The company is the latest consumer tech company, following Meta Platforms, Snap and Pinterest, to warn of a revenue slowdown for the current quarter, adding to signs of cooler economic activity in the U.S. The company is still generating cash though growth has slowed. Free cash flow rose 16% from a year ago to US$1.1 billion, down from a 21% pace in the first quarter. https://tinyurl.com/mr36fafs

Reddit reports 54% revenue growth in Q2.

Reddit reported a 54% increase in revenue to US$281 million, as its efforts to expand its ad business paid off, along with a surge in data licensing from its deals with AI companies. Reddit projected slightly slower growth in the third quarter of around 45%, sending the company’s stock down 4.8% in after-hours trading. The chat-forum business, which went public in the spring, reported free cash flow of US$27.2 million compared with cash burn of US$54.9 million a year earlier. https://tinyurl.com/y3pnenjn

Robinhood reports record quarterly revenue as crypto trading jumps.

Robinhood reported record quarterly revenue of US$682 million, up 40% from a year ago, driven by a surge in trading in crypto and equities. Crypto revenue jumped 161% from a year ago to US$81 million, while equities revenue rose 60% to US$40 million. Net income increased to US$188 million, up from US$25 million a year ago. The company’s retirement business, which Robinhood launched in late 2022 in an effort to retain investors as they age, also grew, with assets under custody soaring to US$8.7 billion versus US$800 million a year ago. https://tinyurl.com/2dx26dmb

Retail brokers hit by outages during US stock sell-off.

Brokerages such as Charles Schwab, Vanguard and Fidelity experienced outages on their trading platforms on Monday, leaving some retail investors unable to trade during one of the sharpest market routs in years. The S&P 500 and Nasdaq indices tumbled after the markets opened, led by sharp fall from big tech stocks such as Nvidia, which briefly dropped 15 per cent before clawing back some ground. Brokerage customers began reporting outages around 9:30am ET, according to DownDetector.com, which collects third-party reports of online service disruptions. Brokerage platforms have struggled with outages in frenzied markets in the past. In March 2020 Robinhood failed due to “unprecedented” trading activity on the platform, preventing investors from trading on two of the most volatile days in markets since the financial crisis. Vanguard has also reported outages on busy trading days in the past. There have been consequences for the tech failures. In 2021, Robinhood was fined by the Financial Industry Regulatory Authority, which ordered it to pay around US$70 million for failures the agency said hurt investors, including its operational outages. https://tinyurl.com/bddce4zy

Delta added to ‘misleading narrative’ following tech outage, CrowdStrike says.

CrowdStrike “strongly rejects” the claim that the cybersecurity company is to blame for Delta’s flight cancellations as a result of the July CrowdStrike-Microsoft outage, the cybersecurity company said in a letter last Sunday. Last week, Delta CEO Ed Bastian told CNBC that Delta had “no choice” but to seek damages from CrowdStrike and Microsoft after the cancellations cost it more than US$500 million. An update released by CrowdStrike to users of its Falcon software on Windows triggered PC system crashes worldwide in late July, triggering days of disruption to airlines and other industries. In the letter, CrowdStrike said these public remarks have added to a “misleading narrative” that the company is responsible for the airline’s response to the outage. Delta hired attorney David Boies, chairman of law firm Boies Schiller Flexner, to seek damages from CrowdStrike and Microsoft. Crowdstrike’s shares were up almost 2% on Monday but have fallen 43% over the past month. https://tinyurl.com/3fnf59bm

Humane’s daily returns are outpacing sales.

Shortly after Humane released its US$699 AI Pin in April, the returns started flowing in. Between May and August, more AI Pins were returned than purchased. By June, only around 8,000 units hadn’t been returned, a source with direct knowledge of sales and return data told me. As of today, the number of units still in customer hands had fallen closer to 7,000. At launch, the AI Pin was met with overwhelmingly negative reviews. Our own David Pierce said it “just doesn’t work,” and Marques Brownlee called it “the worst product” he’s ever reviewed. Humane’s AI Pin and accessories have brought in just over US$9 million in lifetime sales, according to the internal data seen by The Verge. But around 1,000 purchases were canceled before shipping, and more than US$1 million worth of product has been returned. These figures, which have not been reported before, paint a better picture of the difficult position Humane finds itself in with limited options on a path forward. The low sales figures also pale in comparison to the over US$200 million that Humane has raised from notable Silicon Valley executives like OpenAI CEO Sam Altman and Salesforce CEO Marc Benioff. To date, around 10,000 Pins and accessories have shipped in total. Humane hoped to ship about 100,000 Pins within the first year. Once a Humane Pin is returned, the company has no way to refurbish it, sources with knowledge of the return process confirmed. The Pin becomes e-waste, and Humane doesn’t have the opportunity to reclaim the revenue by selling it again. The core issue is that there is a T-Mobile limitation that makes it impossible (for now) for Humane to reassign a Pin to a new user once it’s been assigned to someone. One source said they don’t believe Humane has disposed of the old Pins because “they’re still hopeful they can solve this problem eventually.” https://tinyurl.com/mt8mxthu

Disney turns a profit in streaming, driven by ESPN+.

Disney said it turned a profit in its combined streaming businesses for the first time, driven by its ESPN+ subscription service, according to the company’s latest earnings report. ESPN+ saw a profit of US$66 million, which helped Disney’s streaming services eke out a profit of US$47 million during the company’s fiscal third quarter of 2024. Streaming subscriber growth has also slowed down. Disney+ and Hulu subscribers essentially remained flat from quarter to quarter and the company said it only expects modest growth for Disney+ subscribers next quarter. The entertainment-focused streaming services reported a small combined operating loss. Meanwhile, Disney revealed in a securities filing it was on the hook to pay as much as US$5 billion for the buyout of NBCUniversal’s stake in Hulu. Disney already paid US$8.6 billion to buy NBCU’s 33% stake late last year but the two sides are in discussions about the final value of the stake. Disney said that if NBCUniversal’s appraisal of Hulu’s valuation is accepted by a third party, it would have to pay US$5 billion extra, although Disney’s appraisal would involve no extra payment. The final payment may be somewhere in between zero and US$5 billion. https://tinyurl.com/26ueh5pb

Amazon deals let shoppers buy products on TikTok, Pinterest.

Amazon.com Inc. has inked partnerships with TikTok and Pinterest Inc. that lets users buy products from the e-commerce company without leaving the social media apps. Users can link their profiles from TikTok and Pinterest to their Amazon accounts and then buy products directly from ads. The initiative is designed to make it more convenient for customers to shop on social media, an Amazon spokesperson said Thursday in a statement. So-called social shopping is becoming more popular in the US, with ByteDance Ltd.’s TikTok launching an e-commerce operation last year. Amazon’s agreements with TikTok and Pinterest follow similar deals with Meta Platforms Inc. and Snap Inc. “Customers who choose to link their accounts in the US will see real-time pricing, Prime eligibility, delivery estimates and product details on select Amazon product ads in TikTok as part of the experience,” the Amazon spokesperson said. TikTok, in a blog post, said the partnership offered users of the popular video app “a seamless and fun shopping experience.” The Pinterest-Amazon partnership works similarly and is an extension of an existing relationship, in which Pinterest has relied on Amazon to help fill excess ad inventory. https://tinyurl.com/mpdw6es3