U.S. VC investments fell 30% Q3 to US$32.7 billion, the sixth straight quarter investing has dropped from the year earlier period, and the lowest level since the second quarter of 2018. Intel plans to IPO programmable chip unit within three years. Anthropic is talking to investors about raising an additional US$2 billion in new funding. Meal kit service Blue Apron said Friday that it plans to sell itself to Wonder for US$103 million. Blue Apron went public in 2017 at a valuation of US$1.9 billion. SmileDirectClub files for bankruptcy, capping years of losses. Rivian shares fell over 20% after the EV maker said it plans to raise US$1.5 billion. Microsoft was willing to lose US$15 billion annually to win Apple search deal. Amazon plans an AI Chatbot for search. Meta launched generative AI products for advertisers. JPMorgan’s Dimon predicts 3.5-day work week for next generation thanks to AI. MGM resorts refused to pay ransom in cyberattack on casinos, costing the company US$100 million. Meta proposes US$14 subscription fee for ad-free Instagram and Facebook. TikTok is testing a US$5-per-month, ad-free version of its app. According to a new report, Apple has held early talks with the College Football Playoff tournament about a streaming deal, joining the sea of rumors relating to Apple’s interest in sports rights. Microsoft will debut its AI chip next month. OpenAI also discussed building its own AI chip. Hyundai and Kia announced they will soon adopt Tesla’s electric vehicle charging system, beginning in the fourth quarter of 2024 in the US. In Canada, Sophic Client Legend Power announced significant operational and sales progress. Sophic Client Clear Blue provides a positive corporate Q3 2023 update. Sophic Client UGE International CEO Nick Blitterswyck, presented and did a fireside chat at the MicroCap Club Leadership Summit, and was on the Planet MicroCap Due Dilligence Series Podcast.
Canadian Technology Capital Markets & Company News
Sophic Client Legend Power Systems Inc. (LPS-TSXV, LPSIF-OTC) announces significant operational and sales progress.
During the past year, Legend Power continued to adapt its solutions to a changing world and customer needs. The Company continued to invest in developing awareness and acceptance in a new solution category, Active Power Management (APM) and is well recognized as the leading APM brand. The Company has created a strong base for growth as our powerful and unique solutions become industry standards. As a result of these operational activities, the Company is pleased to announce that it has received $8 million of order commitments that have either been realized in the fourth quarter or are in various stages of finalization. The Company also announces an additional US$8 million in commitments for larger systems (currently in development) for future delivery. Fourth quarter commitments range from retail to large, multiple building facilities; however, the Company made significant progress with the U.S. Federal Government, including an initial commitment for double-digit SmartGATE systems. Over the next decade, the U.S. Federal Government could account for over 10,000 systems. When combined with the verbal commitment for 300+ systems for a single vertical of a major US municipal government customer, the demand for Legend Power Systems SmartGATE continues to grow. At the end of the fiscal year ending September 30, 2023, Legend Power Systems has US$75 million of pending proposals and US$125 million of near-term opportunities. The Company estimates that the current 200 potential customers that are active in the sales funnel could be worth over US$2 billion to Legend. https://bit.ly/48wVlxb
Sophic Client Legend Power Systems Inc. (LPS-TSXV, LPSIF-OTC) clarifies October 3 press release.
Legend Power Systems Inc., at the request of CIRO, the Company would like to clarify the following referenced in the press release dated October 3, 2023 entitled “Legend Power Systems Announces Significant Operational and Sales Progress”: U.S. Federal Government operates an estimated 3b sq ft of Federal facilities1 and this could account for a projected total of over 10,000 systems over the coming 10 years if deployed widely across most Federally operated facilities, however, there is no guarantee from the Company at this time. Additional clarification is that the additional 200 prospects (non-customers) active in the pipeline represent a total of almost ten thousand buildings/facilities with a total addressable active power management market (TAM) size of over 10,000 Active Power Management systems for a TAM of $2b US. This is not intended to serve as a forecast or projection. https://bit.ly/46Xanuz
Sophic Client Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA) provides corporate Q3 2023 update.
Revenue is expected to be $2.243 million (+198% from Q2 2023, and 397% from Q3 2022), exceeding the previously announced guidance range of $1.5 million – $2.2 million with Gross Margin expected to be in line with previous periods; Revenue was distributed across all business units: Nano-Grid systems is expected to be approximately 33% of revenue; Illumient systems is expected to contribute approximately 42% of the revenue, Esite-Micro systems is expected to represent approximately 20% of the revenue. In the quarter the Company shipped 920 power control devices across 18 orders, a quarterly record for units shipped; The cash position at the end of the quarter was $1.03 million and increased by more than 30% from Q2 2023. Further to its September 20, 2023 news release, Clear Blue has completed its previously announced amendments to certain of its unsecured convertible debentures in the aggregate principal amount of $4,334,000 and additionally completed its shares for debt transaction with an arm’s length lender. The Company confirms that it has received approval from the TSX Venture Exchange (“TSXV”) and completed its shares for debt transaction, whereby an aggregate of $343,000 of the Company’s outstanding debt was settled by way of the issuance of 4.9 million common shares in the capital of the Company to BDC Capital Inc. at a deemed price of $0.07 per share. Clear Blue also announces that the TSXV has additionally approved the previously announced amendments to the Company’s 2021 10% convertible debentures. https://bit.ly/3ti0nNU
Watch Sophic Client UGE International (UGE-TSXV, UGEIF-OTC) CEO Nick Blitterswyck present and conduct a fireside chat at the MicroCap Club Leadership Summit.
Watch the 13-minute presentation and then stay tuned for the fireside chat for a deep dive into the business and to learn why investors should be looking to invest in the Company now. https://bit.ly/3to7MLD
Watch Sophic Capital client Sophic Client UGE International (UGE-TSXV, UGEIF-OTC) CEO Nick Blitterswyck on the Planet MicroCap Due Dilligence Series Podcast. https://tinyurl.com/y94a4reu
Sophic Client Kraken Robotics (PNG-TSXV, KRKNF-OTC) supports multiple countries at NATO exercise.
The Robotic Experimentation and Prototyping with Maritime Unmanned System (REPMUS) is focused on capability development and interoperability, and the 2023 Exercise involved 15 NATO partners, as well as Sweden and Ireland. Kraken’s field support team was onsite throughout the exercise, working closely with three NATO navy teams (the US, UK, and Netherlands) utilizing three generations of HII’s REMUS unmanned underwater vehicles (UUVs), all of which were retrofitted with Kraken’s Man-Portable Synthetic Aperture Sonar (MP-SAS). Kraken also took part in a historic multi-national collaborative underwater vehicle mission, where the US Navy MK 18 Mod 2 conducted a Search-Classify-Map (SCM) mission including embedded Automated Target Recognition (ATR) identifying contacts of interest, and using SeeByte’s Neptune automatically re-tasking the Royal Navy REMUS 100 and the Netherlands Navy REMUS 100 with Kraken SAS to perform Reacquire and Identification (RI) missions. https://bit.ly/46tuqRv
Sophic Client LuckBox (LUCK-TSXV, LUKEF-OTC) provides corporate update and announces restructuring of operations following termination of LOI.
Real Luck Group Ltd. announces an update on the Company’s September 7th Merger or Acquisition Letter of Intent (“LOI”) and its ongoing business operations. Following a thorough examination and assessment of the proposed Merger or Acquisition, the Company has determined that the potential transactions under consideration since the announcement on September 7th are not viable and are not currently in the best interest of the Company and its shareholders. Furthermore, despite the significant growth the Company has experienced since the start of 2023 and its well documented and defined requirement for additional funding to support this continued expansion, it has been unable to secure the required capital injection due to persistently challenging conditions in the capital markets. The Company will now look to restructure its operations. This means an immediate suspension of betting and player registrations on its B2C platform, Luckbox.com and a shift towards the more cost effective B2B activities of the Company. B2C has generated all the Company’s revenue to date, but achieving profitability will require significantly more capital than launching the B2B platform. All Luckbox players will continue to be able to withdraw their funds, which are segregated from the Company’s operational funds and will be supported as per the requirements of the Online Gambling Regulation Act 2001. The restructuring is expected to be completed this year and will result in a new optimized and better focused corporate structure with no debt and minimal cash burn. The Company also continues to explore other strategic and operational options, including but not limited to a potential merger, acquisition, or a capital raise for growing its B2B or restarting B2C operations. https://bit.ly/3rzhXMS
BlackBerry (BB-NYSE, BB-TSX) to split into two public companies in attempt to revive shareholder interest.
BlackBerry plans to split itself in two by spinning its connected-car software business into a separate public company in an attempt to revive investor interest in the one-time smartphone leader, the company said Wednesday. The Waterloo, Ont. company said in a statement that splitting into two separate public companies “will enable shareholder to more clearly evaluate the performance and future potential of BlackBerry’s principal businesses on a standalone basis, while allowing each business to pursue its own distinct strategy and capital allocation policy.” It plans to spin out the connected car, or internet of things (IOT) business in the first half of its next fiscal year, which begins next March 1. This is a pivotal year for BlackBerry: The company announced the sale of most of its legacy smartphone-related patents to Dublin’s Key Patent Innovations earlier this year. That ended a period of several years in which BlackBerry generated hundreds of millions of dollars in high-margin revenue extracting licensing fees from other companies for alleged use of its intellectual property. This fall, CEO John Chen comes to the end of a five-year employment contract and the company faces repayment of US$365 million in debentures. BlackBerry recently announced disappointing revenues for both divisions and cut its revenue forecast for the IOT division to US$225 million to US$240 million for the year, mainly due to delays in project implementation and reorganizations at some carmakers. BlackBerry has said it expects QNX revenue to hit an all-time high in its fourth quarter and for momentum in the QNX division to ramp up next year. The announcement follows a strategic review launched in May that saw the company hire investment banks Morgan Stanley and Perella Weinberg Partners to provide advice on possible alternatives to increase shareholder value. The review was announced after British hedge fund Fifthdelta Ltd. accumulated just under 10% of its shares. Fifthdelta has made other investments in the internet-of-things space, suggesting it is interested in BlackBerry’s connected car business. The hedge fund has publicly supported the strategic review process. https://tinyurl.com/mr2t4h8w
H2O Innovation (HEO-TSX) signs definitive agreement to be acquired by Ember alongside IQ, CDPQ and management.
H2O Innovation has entered into a definitive arrangement agreement with Ember SPV I Purchaser Inc, an entity controlled by funds managed by Ember Infrastructure Management, LP, a New York-based private equity firm, whereby the Purchaser will acquire all of the issued and outstanding common shares in the capital of H2O Innovation, other than the Shares to be rolled over by Investissement Québec (“IQ”), Caisse de dépôt et placement du Québec and the key executives of the Corporation. The shareholders of H2O Innovation will receive a price of $4.25 per Share, payable entirely in cash, which represents a premium of approximately 68% to the closing price of the Shares on the Toronto Stock Exchange on October 2, 2023, a premium of approximately 66% to the 20-day volume-weighted average Share price on the TSX for the period ending on October 2, 2023, and a 26% premium to the 52-week high price on the TSX of $3.37 per Share achieved on July 4, 2023; The Transaction values H2O Innovation at $395 million, on a fully diluted equity basis. https://tinyurl.com/yk25wspa
Cardata raises $100 million for product acceleration.
Toronto-based software startup Cardata has raised $100 million to accelerate its new product innovation to support what it called its rapidly growing customer base. Cardata provides tax-compliant mileage reimbursement software. Wavecrest Growth Partners led the round with participation from MassMutual Ventures. The round closed on Sept. 26. For the $100 million raise, Raymond James & Associates served as exclusive financial advisor to Cardata. Stikeman Elliott acted as legal advisors to Cardata, while Goodwin Procter and Cassels served as advisors to the new investors. https://tinyurl.com/y5c9pzbz
Clearco Announces Recapitalization, raises US$60 million series D round led by Inovia capital and founders Circle Capital and closes new asset-based facility with Pollen Street Capital to support growth of e-commerce businesses.
Toronto-based fintech Clearco announced the completion of multiple actions to recapitalize its business and solidify its position as the leading provider of growth capital to e-commerce businesses. The transactions include a US$60 million equity raise from existing investors and a new asset-backed financing facility, which provides up to $100 million in financing capacity, and is expected to support $850 million of Clearco originations over the next two years. These accomplishments herald a new era at Clearco and mark the culmination of over 12 months of transformational change spanning technology, product and management. The US$60 million Series D round was led by longtime Clearco investors Inovia Capital and Founders Circle Capital. Alongside the fundraise, Clearco announces the closing of a new committed asset-backed facility from Pollen Street Capital, a leading global alternative asset management firm. The Pollen Street facility will be used to fund revenue-based advances to e-commerce businesses that have been approved for funding through Clearco’s AI-backed underwriting model. The company has funded over 10,000 e-commerce businesses to date, advancing over $2.5 billion to help facilitate growth. Clearco customers can access between $10,000 and $2 million in Invoice Funding with predictable payment amounts over periods typically ranging from 4-6 months and no hidden fees. https://tinyurl.com/y5zmhaz9
Scale AI announces $21 million for nine Canadian AI healthcare projects.
At the ALL IN conference in Montreal, the federally funded innovation organization Scale AI announced a $21 million investment across nine separate Canadian AI projects focused on optimizing healthcare logistics and resources. These projects are supported by funding provided to Scale AI as part of the Pan-Canadian Artificial Intelligence Strategy. In its 2021 budget, the Government of Canada committed $125 million over five years towards efforts to drive the adoption of AI across Canada’s economy and society. Scale AI, as an investment and innovation hub, shares these goals and supports investments in companies that implement real-world applications of AI.https://tinyurl.com/456vrvf4
Ecosystem fears cleantech funding gap as ISED pauses SDTC funding after mismanagement investigation.
The Government of Canada has suspended Sustainable Development Technology Canada (SDTC) from funding new projects following the conclusion of a third-party investigation into allegations of mismanagement at the federal cleantech investment agency. Other investors and industry stakeholders echoed Boreal Ventures managing partner David Charbonneau’s assertion to BetaKit that an extended financing pause could have a “massive impact on the ecosystem.” SDTC confirmed it has halted approval of new projects and will not accept new applications until it implements the recommendations. As first reported by The Globe and Mail, Innovation, Science and Economic Development Canada (ISED) commissioned the probe this spring after ex-SDTC employees alleged some entrepreneurs with ties to SDTC’s management and board received preferential treatment when seeking funding from SDTC, among other claims. ISED brought on Raymond Chabot Grant Thornton (RCGT) to conduct a fact-finding exercise. These efforts are now complete, and the resulting RCGT report, obtained and reviewed by BetaKit, discovered evidence of conflict of interest and governance issues at SDTC involving the organization’s CEO and board members. In response, ISED has taken a slew of “immediate corrective actions,” delivering a detailed plan for addressing these issues that ISED expects SDTC to implement by December 31, 2023, pausing funding for new SDTC projects until these steps are taken, and exploring further options to strengthen the governance oversight of SDTC. In a push to help bring Canada’s green-transition efforts up to speed with the United States, which passed a historic US$369 billion climate and tax deal last year, the Government of Canada promised a multitude of new cleantech and green economy tax measures as part of Budget 2023. However, some experts argue that Canada is still at risk of missing out. Canadian investors BetaKit spoke to said even a temporary pause on new SDTC funding could have a significant impact on Canada’s early-stage cleantech startups, at a time when venture and debt financing have become even harder to secure, and cleantech capital and companies are already fleeing south. https://tinyurl.com/vu9rt5jx
Global Markets: IPOs, Venture Capital, M&A
U.S. startup investments drop to 2018 low.
U.S. venture capital investments fell 30% in the third quarter to US$32.7 billion, the sixth straight quarter investing has dropped from the year earlier period, and the lowest level since the second quarter of 2018, according to financial research firm PitchBook. Including non-U.S. deals, startup funding fell 31% from the year-ago period to US$73 billion, the lowest level since the second quarter of 2020, when the outbreak of the Covid-19 epidemic halted most venture capital activity. The new data shows how most investors have held back from dealmaking, notwithstanding excitement over AI deals and recent initial public officers for Instacart and Arm. Reflecting those headwinds, VC firms have also struggled to raise money. U.S. venture capitalists have raised US$42.7 billion across 344 funds this year so far. For all of last year, U.S. investors raised US$172.5 billion across 1,278 funds last year. If the fundraising pace continues, 2023 could be the lowest full-year fundraising total since 2017. https://tinyurl.com/du5t2fw8
SoftBank-backed Lululemon rival Vuori said to plan IPO next year.
Activewear brand Vuori Inc. is talking to investment banks about an initial public offering as soon as the middle of 2024, according to people with knowledge of the matter. The apparel company would seek in an IPO to top its $4 billion valuation in a 2021 funding round led by SoftBank Group Corp.’s Vision Fund 2, said the people, who asked not to be identified discussing private information. Vuori could pick its advisers within weeks, though it hasn’t made a final decision and its plans could change, the people said. A representative for SoftBank declined to comment. A spokesperson for Vuori didn’t immediately respond to requests for comment. Founded by Joe Kudla in the San Diego area, the company expanded to the East Coast, opening its first New York store in 2022. It has since established an international presence with locations in countries including the UK and China. Vuori raised $400 million from SoftBank Vision Fund 2 in 2021 round, the company said at the time. Norwest Venture Partners also invested in Vuori in 2019. Activewear continues to be a popular apparel category post-pandemic as fashion took a more casual turn. Lululemon Athletica Inc. stocks grew 20% this year on strong demand and expanding margin. https://tinyurl.com/mhnc7fj5
Intel plans to IPO programmable chip unit within three years; stock rises after hours.
Intel said it will treat its programmable chip unit as a standalone business, with an aim to spin it out through an IPO in the next two to three years. The chipmaker’s stock price rose 2.3% in extended trading after the announcement on Tuesday. Intel’s Programmable Solutions Group will have its own balance sheet as it heads toward independence. The company will continue to support the business and retain a majority stake, and could also seek private investment. The move follows Intel’s spinoff last year of Mobileye, its self-driving subsidiary, and continues a strategy under CEO Patrick Gelsinger to control costs and focus on the foundry business and core processors in an effort to catch Taiwan Semiconductor Manufacturing Co. in manufacturing by 2026. Intel acquired the FPGA business when it bought Altera for US$16.7 billion in 2015. The move also highlights the strong demand in the semiconductor industry for field programmable gate arrays, or FPGAs. Lattice Semiconductor, a maker of FPGAs, has seen its stock rise about 30% so far in 2023, and reported 18% growth in sales in the most recent quarter. AMD, Intel’s chief rival, bought FPGA maker Xilinx for US$35 billion in 2022. Intel’s FPGAs are sold under the Agilex brand. Intel doesn’t break out PSG sales yet, but said in July that the unit had three record quarters in a row, offsetting a slump in server chip sales. PSG has been part of Intel’s Data Center and AI group, which generated US$4 billion in sales in the second quarter. https://tinyurl.com/3ft4xcv2
Anthropic seeks US$2 billion in new funding.
OpenAI rival Anthropic, which announced a deal to raise up to US$4 billion from Amazon last week, is talking to investors about raising an additional US$2 billion in new funding, The Information reported Tuesday. Google, which bought a 10% stake in Anthropic in 2022, is expected to invest in the US$2 billion round, according to two people with direct knowledge. The startup, which sells ChatGPT competitor Claude, is seeking a valuation between US$20 billion and US$30 billion, according to a person with direct knowledge. Anthropic is one of several leading AI startups racing to secure large amounts of funding and cloud computing resources to develop its software. Anthropic has told some investors that it has been generating revenue at a US$100 million annualized rate, according to two people with direct knowledge. https://tinyurl.com/3behewrr
Visa launches US$100 million venture fund for generative AI startups.
Payments processor Visa on Monday launched a $100 million venture fund for generative artificial intelligence (AI) startups, joining a list of investors who have flocked to the sector this year. Several high-profile names such as Microsoft and Alphabet’s Google have backed the AI space, a buzzword in technology circles this year, after chatbot ChatGPT’s popularity. https://archive.ph/zWXk1
TiKTok-parent ByteDance generated nearly US$7 billion in cash.
ByteDance, the owner of TikTok, generated US$6.8 billion in cash in the first quarter, up from US$5.8 billion in the year ago period, The Information reported. The Chinese internet company’s finances underscore the strength of ByteDance’s cash engine, even has growth has slowed. ByteDance’s revenue rose 34% to US$24.5 billion in the first quarter, a slight slowdown from its 38% revenue growth in the 2022 calendar year. ByteDance revealed its financial statements to employees as it offered to buy back their shares. The price of that buyback, of US$160 per share for employees who have worked at ByteDance for less than two years, implies a valuation of US$223.5 billion. https://tinyurl.com/n29y3cn6
Instacart, facing slowing growth, sees stock drop sharply.
Instacart’s parent company suffered the second-worst stock drop since it went public after The Information reported that the banks that underwrote its IPO expect the grocery delivery company’s growth to slow in the second half of this year. Shares of the company, known as Maplebear, slid 9.2% to $26.96 on Monday, leaving the stock 10.1% below the $30 price it fetched in its initial public offering. The stock began trading Sept. 19. The Information reported that private forecasts from analysts at banks including Goldman Sachs show Instacart posting revenue growth between 7% and 8% in the second half. That’s down from growth of 31% in the first half, and 50% growth from the second half of 2022. The company’s adjusted Ebitda is forecast to fall by between 5% and 6% in the period compared to the first half of 2023, the people said. That would be a notable drop considering Instacart said in its IPO filing that its business is typically stronger in the second half of the year during the back-to-school period and holiday season. Still, the figure would be up about 26% from the second half of last year. https://tinyurl.com/3mrraa2b
Marc Lore’s Wonder to Buy Blue Apron for US$103 million.
Meal kit service Blue Apron said Friday that it plans to sell itself to serial entrepreneur Marc Lore’s food startup Wonder for US$103 million. Blue Apron, which went public in 2017 at a valuation of US$1.9 billion, had struggled in recent years amid mounting competition from competitors like Hello Fresh and Amazon. Wonder’s proposed takeover price of $13 per share is a 137% premium to Blue Apron’s Thursday closing price. Blue Apron shares surged to US$12.83 in premarket trading on Friday. For Wonder, which has raised a total of US$850 million from backers including Bain Capital Ventures and Accel and was valued at US$3.5 billion in 2022, the Blue Apron acquisition is the latest of several pivots. In late 2022, Wonder laid off staff and began moving away from its original focus of using food trucks to cook meals in customers’ driveways, as first reported by The Information. At the time, Wonder said it was on track for US$100 million in revenue in 2023. Since then, however, Wonder has abandoned the food truck idea altogether in favor of opening bricks-and-mortar restaurants. Earlier this month, Lore told an industry publication that Wonder was operating three such restaurants that are each on track for nearly $4 million in sales in 2023. A Wonder spokesperson did not immediately respond to a request for updated revenue projections. https://tinyurl.com/3uzs6dza
Nauticus Robotics makes strategic acquisition.
Nauticus Robotics is set to acquire 3D at Depth, a Colorado-based provider of subsea laser LiDAR (Light Detection and Range) inspection and data services. The strategic acquisition is said to enhance Nauticus’ full spectrum of autonomous underwater maritime capabilities, including integrated sensor solutions and data collection and analysis, as well as expand market reach and increase the value and utilization of the company’s fleet assets. Under the terms and subject to the conditions of the acquisition agreement, 3D at Depth security holders will receive approximately 9.9326 shares of Nauticus common stock for each share of common stock equivalent they own, for an aggregate equity value of approximately US$34 million, before purchase price adjustments. Nauticus will also assume approximately US$4.1 million of debt in the transaction. The transaction is expected to close during the fourth quarter of this year. Upon closing, 3D at Depth will operate as a division of Nauticus. The boards of both companies have unanimously approved the transaction, which is subject to customary closing conditions, including the approval of Nauticus’ and 3D’s respective stockholders. Furthermore, Nauticus will assume 11 patents for underwater optical measurements and inspection, with an additional 19 pending. https://tinyurl.com/jpbjupa2
SmileDirectClub files for bankruptcy, capping years of losses.
Dental aligner company SmileDirectClub Inc. filed for bankruptcy four years after raising US$1.35 billion in an initial public offering. The Chapter 11 filing in Texas on Friday allows the company to continue operating while it works out a play to repay creditors. The company’s founders will invest at least US$20 million into the company as part of its reorganization, according to a statement. Nashville, Tennessee-based SmileDirectClub listed US$499 million of assets and more than US$1 billion of liabilities in its bankruptcy petition. The company makes plastic aligners that can straighten teeth at a fraction of the price of conventional braces and markets its wares directly to consumers. Its 2019 initial public offering valued the company at US$8.9 billion, and made its founders billionaires. But in the years since, the company struggled with declining revenues, and never turned a profit. It ended up marred in a patent fight with a rival, and cut sales and marketing drastically during the pandemic shutdowns. https://archive.ph/DTjud
Casino stocks were flying, now they’re flirting with bear market.
The summer of revenge spending is over, and a number of investors have decided that once high-flying casino stocks just aren’t worth the gamble. Casinos were ripping through the first half of the year as relentless consumer spending sent demand for everything from concerts to blockbuster films soaring. On July 18, the S&P Composite 1500 Casinos & Gaming Index set a 52-week high and was up over 28% for the year compared with a 19% gain in the S&P 500 Index. Through September, however, the casinos index has crept closer to a bear market with an 18% plunge since peaking, while the broader S&P lost just 6%. MGM Resorts International has led declines, sinking 26% since the casino gauge peaked. Golden Entertainment Inc. isn’t far behind with a 24% loss in that time. Of the 10 stocks in the index, only slot machine maker Light & Wonder Inc. was in the green over that period, mustering a 0.5% advance. So what’s driving the selloff? Some strategists are pointing to fears of weakening consumer spending and an economic downturn as the Federal Reserve keeps interest rates higher for longer. As Americans cut their expenses and exhaust their excess savings, pricey vacations at ritzy casinos have become less of a priority. https://archive.ph/0stzL
Rivian shares fell over 20% after the EV maker said it plans to raise US$1.5 billion.
Shares of Rivian Automotive fell sharply on Thursday, after the company surprised investors with a plan to offer US$1.5 billion in convertible notes. It also provided a preliminary estimate of its third-quarter revenue that was in line with Wall Street estimates. Shares closed down over 22% on Thursday. In a regulatory filing late Wednesday, Rivian said it expects its third-quarter revenue to come in between US$1.29 billion and US$1.33 billion, roughly in line with Wall Street estimates of US$1.3 billion, according to LSEG, formerly known as Refinitiv. Rivian also estimated that it had cash and equivalents of US$9.1 billion as of Sep. 30, down from US$10.2 billion at the end of the second quarter. Rivian took steps earlier this year to slow spending and bolster its balance sheet, including a 6% staff reduction in February and a US$1.3 billion sale of convertible notes in March. The company also delayed the launch of its upcoming smaller R2 vehicle platform to 2026, from 2025. But news of the latest offering came as a surprise to investors. Rivian plans to offer US$1.5 billion worth of senior, unsecured “green” convertible notes due in 2030. Buyers will have the option to purchase up to an additional US$225 million worth of notes, the company said. https://tinyurl.com/5fufbnk7
Microsoft was willing to lose US$15 billion annually to win Apple search deal.
Google’s multibillion-dollar deal to make its search engine the default in Apple’s Safari browser has hobbled Microsoft’s ability to improve its Bing search engine or make any meaningful gains in market share, Microsoft CEO Satya Nadella told a federal trial court on Monday. Microsoft also bid on the Safari deal and was prepared to lose US$15 billion annually, Nadella said. Microsoft ultimately lost the Safari deal because it couldn’t bid as high as Google, which U.S. lawyers said pays Apple US$4 billion to US$7 billion annually for the privilege, he said. Nadella was called as a witness in the Department of Justice’s lawsuit against Google, which is aiming to persuade a judge that its deal with Apple has illegally stifled competition in the search market. Google and Apple have said that Google won the Safari agreement primarily because its search engine was superior to Bing. https://tinyurl.com/2m62b9t2
Amazon plans AI Chatbot for search.
Amazon is building an artificial intelligence-powered chatbot that customers will be able to use to search its e-commerce site, Insider reported on Monday. The chatbot is being tested internally and could launch as soon as January, according to the report. Insider reported that the chatbot will be integrated into Amazon.com’s search bar and will let customers ask questions, such as, “What coffee maker should I get?” The chatbot will then give users a list of options and answer follow-up questions about the products. The chatbot is the latest example of how Amazon is weaving generative AI into its e-commerce site. Amazon has started rolling out an AI feature that writes copy for product listings, The Information reported in August. And in May, The Information reported that Amazon was working on tools to generate photos and videos for merchants to use in advertising campaigns. https://tinyurl.com/4unkzd6s
Meta launches generative AI products for advertisers.
Meta Platforms said Wednesday it had started to introduce tools for advertisers on Facebook and Instagram that use generative artificial intelligence to create image backgrounds, change the size and ratio of images and make multiple options for advertising copy. Meta began testing these products in May, when it announced the AI Sandbox, which allowed a small group of advertisers to experiment with generative AI. The company’s leaders view these tools, which would help advertisers create campaigns in a self-service format, as a way to make money using generative AI, The Information reported in April. Advertisers traditionally create their own ads. The move is part of a broader push by Meta into generative AI. At its developer conference last week, the company unveiled a slew of generative AI products. It launched an assistant and 28 other chatbots played by celebrities and creators on Messenger, WhatsApp and Instagram. The company also released image-editing and image-generation tools, as well as a developer platform for building and training chatbots. https://tinyurl.com/mrhnaty8
JPMorgan’s Dimon predicts 3.5-day work week for next generation thanks to AI.
Jamie Dimon said artificial intelligence is already being used by thousands of employees at his bank, and is likely to make dramatic improvements in workers’ quality of life, even if it eliminates some jobs. Your children are going to live to 100 and not have cancer because of technology,” Dimon said in an interview on Bloomberg TV Monday. “And literally they’ll probably be working three-and-a-half days a week.” Dimon, who has called AI “critical to our company’s future success,” previously said the technology can be used to help the firm develop new products, drive customer engagement, improve productivity and enhance risk management. The New York-based firm advertised for more than 3,500 related roles between February and April, according to data from consultancy Evident, and Dimon dedicated an entire section to AI in his shareholder letter this year, calling JPMorgan’s efforts, which include more than 300 use cases already in production, “an absolute necessity.” https://archive.ph/Q7ZV4
MGM resorts refused to pay ransom in cyberattack on casinos.
MGM Resorts refused to pay a hackers’ ransom demand in a September cyberattack that threw its Las Vegas Strip resorts into chaos and crippled its properties and technology nationwide, according to a person familiar with the matter. Service disruptions from the attack and efforts to resolve the issue will cost the company more than US$100 million in the third quarter, MGM said in a regulatory filing Thursday. The cyberattack was detected on Sept. 10 and forced MGM to shut down IT systems in response. The shutdowns hobbled slot machines, interrupted online hotel bookings and required hotel workers to check-in guests using pen and paper for days, among other impacts. The company said Thursday that guest-facing operations have returned to normal. MGM’s decision not to pay hackers is in line with guidance from the Federal Bureau of Investigation, which doesn’t support paying ransom. Doing so doesn’t guarantee that a company will recover its data, but does reward hackers and encourage bad actors to target more victims, the FBI’s website says. Still, some companies decide to pay hackers to maintain or restore business operations, recover data or stop hackers from making stolen data public. Rival Caesars Entertainment also suffered a hack late this summer and paid roughly half of a US$30 million ransom that hackers demanded, The Wall Street Journal previously reported. Caesars has said its operations weren’t impacted. MGM said service disruptions would have a US$100 million negative impact on adjusted property earnings before interest, taxes, depreciation, amortization and rent for its Las Vegas and broader U.S. resorts. The cost of remedial technology consulting, legal and advisory services was less than US$10 million. https://tinyurl.com/34zw93te
Media, Streaming, Gaming & Sports Betting
Meta proposes US$14 subscription fee for ad-free Instagram and Facebook.
Meta Platforms is proposing offering US$14 subscriptions for ad-free versions of Facebook and Instagram to European users, as the company navigates the potential revenue hit from new European laws targeting its advertising business. If implemented, European users would be offered the option of paying about €10 (US$10.50) a month for ad-free versions of Facebook and Instagram on desktop, or €13 (US$14) a month on mobile devices, the Wall Street Journal reports. Meta detailed the plan to regulators in Ireland and Brussels in September, and has been seeking input from other privacy regulators in the region, according to the Journal. Meta has been making changes to its ad model in Europe in light of new regulation coming into effect next year and after a recent court decision that found Meta needed to seek consent from users before targeting them with ads based on their personal data. The company has been looking for ways to offset the revenue loss caused by these restrictions and started discussing the possibility of a subscription model back in 2021, The Information previously reported. https://tinyurl.com/43zu2e85
TikTok is testing a US$5-per-month, ad-free version of its app.
TikTok is testing a paid, ad-free version of its app, according to a person with direct knowledge of the matter. News of the test was first reported by the tech blog Android Authority, which posted screenshots that showed TikTok offering users two versions of its app: the current free one with personalized ads or an ad-free option for US$4.99 per month. TikTok’s test is in one market outside of the U.S. and is in a very limited and early stage, said the person with direct knowledge of the matter. TikTok, which at one point last year was projected to generate US$10 billion in annual ad sales, has been looking to diversify its revenue streams beyond advertising. It has invested heavily in TikTok Shop, the app’s nascent shopping service, including by hiring, building a delivery network and subsidizing merchants that offer big discounts and free shopping. Those investments mean TikTok Shop is expected to lose more than US$500 million in the U.S. this year, as The Information has previously reported. Whether enough users would sign up for an ad-free version of TikTok to make it a meaningful revenue stream for the platform is unclear. YouTube, for example, has offered an ad-free version of its video service for years. The platform will generate more than US$8 billion in revenue from subscriptions to YouTube’s ad free option and YouTube’s music service, which translates to about a fifth of YouTube’s overall revenue, according to MoffettNathanson research from July. YouTube hasn’t disclosed how much revenue it generates from the ad-free version of its video service. https://tinyurl.com/3juezzsx
X’s Daily Active Users have dropped since musk bought company.
X’s daily active users have dropped 3.7% to 245 million since Elon Musk bought the company last year, according to a comparison of new metrics released by the company and metrics Musk tweeted last fall. The decline in users could complicate Musk and X CEO Linda Yaccarino’s efforts to turn around the company, which is also struggling with a 60% decline in advertising revenue, according to Musk. It’s also a contrast to the more upbeat tone Musk and Yaccarino have struck when talking publicly about user growth on X. In July, Musk tweeted that the platform “may see all time high device user seconds usage this week,” a metric he earlier defined as “cumulative user-seconds per day of phone screentime, as reported by iOS & Android.” On Wednesday, CNBC’s Julia Boorstin asked Yaccarino how many daily active users X had in a tense interview onstage at the Code conference. Yaccarino first said that X had “200, 250, something like that” before shifting topics to talk about X’s appeal to users. When Boorstin asked a second time, Yaccarino said she would give a “more personal, specific number” and said that engagement on X’s communities—public groups on Twitter typically organized around a topic—was up since June. After the conference, X clarified that it had 245 million daily active users. https://tinyurl.com/mr2f59kj
Apple might be interested in College Football Playoff streaming rights deal.
According to a new report, Apple has held early talks with the College Football Playoff tournament about a streaming deal, joining the sea of rumors relating to Apple’s interest in sports rights. The 12-team CFP tournament’s current media deal expires at the end of next year, so the group is holding discussions with possible future rights holders. Front Office Sports reports both Apple and Amazon have held preliminary talks so far. Front Office Sports says that CFP is unlikely to divorce itself so much from the traditional broadcast networks, but it could make some of the games on its slate available to streaming platforms.There have been a flurry of rumors about Apple talking with various sports leagues in the past few months, as the company looks to expand its sports offerings beyond MLS Season Pass and MLB Friday Night Baseball. These include extended talks with the NFL for Sunday Ticket last year (Apple eventually bowed out and YouTube won the package), the NBA for upcoming basketball TV rights starting in 2025, and a potentially huge global streaming rights acquisition for Formula 1. We know Apple is particularly hunting a deal for college sports, having almost signed a media deal with the Pac-12 before the conference collapsed. The College Football Playoffs are a reasonable target for Apple then, given that history. https://tinyurl.com/2rtfat7u
Adtech, Privacy & Regulatory
SEC sues to force Musk to testify on Twitter stock purchases.
The Securities and Exchange Commission filed a lawsuit seeking to compel Elon Musk to answer questions relating to its investigation into whether Musk violated securities laws in his purchases of Twitter stock last year. In a complaint filed with the federal court in San Francisco, the SEC said Musk failed to appear for testimony in mid-September. The complaint said Musk had already testified, in 2022, and produced “hundreds” of documents. But in April of this year, after getting “substantial new information,” the SEC subpoenaed Musk for an additional round of questions. After agreeing to testify, Musk told the SEC shortly before the agreed date that he would not attend. Musk has had a long and contentious relationship with the SEC, which has pursued him in the past over various issues, including over his tweet about a potential buyout of Tesla. Its investigation into his Twitter purchases follows questions it raised with him about his description of himself as a passive investor in Twitter even as he accepted a seat on Twitter’s board, a decision he quickly reversed before announcing a takeover bid for the company that proved successful. https://tinyurl.com/5daps2j7
Amazon used ‘Nessie’ algorithm to raise prices.
Redacted portions of the Federal Trade Commission’s antitrust lawsuit against Amazon detail how the company used a pricing algorithm codenamed “Project Nessie” to raise prices on its e-commerce site, the Wall Street Journal reported Tuesday. Amazon used Nessie to make price increases on items and monitor whether competitors matched them, according to the Journal, which cited people familiar with the allegations in the FTC’s complaint. If competitors didn’t match Amazon’s price increases, Nessie would automatically reverse them, according to the report. Amazon made more than $1 billion in revenue by using Nessie, according to the Journal. Amazon stopped using Nessie years ago, a person familiar with the situation said. Nessie would also reportedly match competitors like Target when they lowered the price of items. That could result in “spirals” where one competitor would temporarily lower the price of an item during a sale, but Amazon and other competitors would stay locked at the lower price because they were all price matching each other, according to the Journal. https://tinyurl.com/yhauw76x
Elon Musk’s X may introduce shopping in direct messages.
X owner Elon Musk and CEO Linda Yaccarino are turning to shopping and sports to turn around the business of the social network previously known as Twitter, The Information reported Wednesday. They’re attempting to introduce new revenue streams while coaxing advertisers back to the site. X is exploring ways to use direct messages on the platform to offer one-click checkout to X users, as well as talking with ecommerce software firms about expanding live shopping on the app, according to people familiar with the matter. The former could open the door for creators to send product purchase links directly to followers, or for brands to advertise products to customers via direct messages. The company is also working to revive Amplify, the formerly lucrative program under which Twitter sold ads attached to video clips produced by established publishers. NFL videos on Amplify, viewed as more brand safe than X ads in general, are a rare promising spot in X’s otherwise beleaguered ad business. Yaccarino is trying to widen the range of sports videos that appear on X, including by meeting with NASCAR and NBA representatives, according to people familiar with the situation. https://tinyurl.com/7bz8zzt7
Microsoft to debut AI chip next month.
Microsoft plans to unveil its first chip designed for artificial intelligence at its annual developer conference next month, The Information reported Friday. The chip, code-named Athena, is designed for data center servers that train and run large language models, such as the software behind OpenAI’s ChatGPT. Azure data centers already use Nvidia’s graphics processing units, or GPUs, but Microsoft hopes its chip will lessen its reliance on Nvidia’s chips, which have been in short supply. The Information first reported on the chip’s existence in April. Microsoft and Nvidia declined to comment. Nvidia’s stock closed up more than 2% on Friday but later dropped 1% in after hours trading, following the publication of the story. Microsoft’s stock ticked up after the markets closed. https://tinyurl.com/9j2bcxbr
OpenAI discusses building its own AI chip.
Executives at OpenAI have discussed developing an artificial intelligence chip to reduce the company’s reliance on Nvidia’s hard-to-get graphics processing units, known as GPUs, according to a report from Reuters. As part of these discussions, OpenAI has evaluated a potential acquisition and considered working on a chip with semiconductor designers. If OpenAI were to develop its own AI chip, it would follow similar efforts from cloud computing providers such as Amazon and Google, which have developed their own AI chips to rival Nvidia’s GPUs. Microsoft, OpenAI’s cloud provider, is also developing an AI chip for training and powering large language models, The Information previously reported. OpenAI’s interest in developing its own chip could change Microsoft’s plans for how many AI chips to produce. https://tinyurl.com/favphn8m
Hyundai and Kia to adopt Tesla’s EV charging tech next year.
Hyundai Motor and Kia announced Thursday they will soon adopt Tesla’s electric vehicle charging system, beginning in the fourth quarter of 2024 in the United States. Hyundai and Kia join others like Ford and General Motors to integrate the Tesla charging ports, called North American Charging Standard, into their electric vehicles, allowing drivers to use any Tesla charging stations. The charging tech has gained steam in recent months toward becoming a unified charging standard among electric vehicle makers. The South Korean automakers said all new electric vehicles built in 2024 and beyond will incorporate Tesla’s NACS technology to gain access to more than 12,000 Tesla Superchargers across the U.S., Canada and Mexico. Additionally, owners of current Hyundai and Kia electric vehicle models will be able to access Tesla Superchargers using adapters beginning in the first quarter of 2025. GM CEO Mary Barra has said the automaker expects to see up to US$400 million in savings by adoption the NACS technology. https://tinyurl.com/bddkyp8s
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