Last week, the Dow Jones fell 4%, the S&P 500 fell 4.6%, and the Nasdaq fell 5.1%, as a hawkish Federal Reserve sent US Treasury yields soaring. Instacart plans to focus its IPO on selling employee shares. Chinese EV maker Leapmotor aims to raise US$1 billion in a Hong Kong IPO. Tencent considers more stake sales to fund share buybacks, future growth. FTX is in talks to raise up to US$1 billion at valuation of about US$32 billion, in-line with its prior round. Meta, and Google to cut costs and staff. Home-flipper Opendoor hit with losses in echo of Zillow collapse. Accenture stock fell after profit and revenue beat expectations but outlook was downbeat. Take-Two stock fell as company says leaked ‘Grand Theft Auto’ footage the result of ‘network intrusion’. Amazon said it had ‘biggest three hours of signups’ for Prime during first exclusive NFL stream. 25% of Netflix subscribers planning to leave service. In 2021, investors poured more than US$12 billion into a new breed of start-ups focused on buying Amazon marketplace sellers. This year, the funding has mostly dried up. Nasdaq moves into crypto with custodying services. Affirm stock heads higher as company notches BNPL deal with Amazon in Canada. Coinsquare to acquire CoinSmart as consolidation of Canadian crypto traders continues. Sophic Client, Swarmio Media (SWRM-CSE, SWMIF-OTC) and Globe Telecom Partner with PUBG MOBILE to Promote the Globe Gamer Grounds Platform in the Philippines. PUBG MOBILE is one of the most popular mobile games in the Philippines, with over one million monthly active users. Sophic Client Reklaim (MYID-TSXV, MYIDF-OTC): This report demonstrates how shifts in regulation and company compliance relates to Reklaim, which allows consumers to confirm their identity and unveil data that businesses have collected and sold without the consumer’s explicit consent for years.
Canadian Technology Capital Markets & Company News
NowVertical Group Inc. (NOW-TSXV) announces pricing of marketed public offering.
The Offering will be completed on a commercially reasonable “best efforts” agency basis and consist of convertible debenture units (the “Debenture Units”) of the Company for gross proceeds of C$5,000,000. Each Debenture Unit will consist of one 10% senior unsecured convertible debenture (each a “Convertible Debenture”) of the Company having a face value of C$1,000 (the “Principal Amount”) and 715 subordinate voting share purchase warrants of the Company (each a “Warrant”), representing 75% warrant coverage. The Convertible Debentures will mature 36 months from the Closing Date (as hereinafter defined) (the “Maturity Date”). The Principal Amount per Convertible Debenture, together with then accrued and unpaid interest thereon, shall be convertible, for no additional consideration, into subordinate voting shares of the Company (the “Subordinate Voting Shares”) at the option of the holder (with the exception of the Company Conversion as set out below) in whole or in part at any time and from time to time prior to the earlier of: (i) the close of business on the Maturity Date, and (ii) the business day immediately preceding the date specified by the Company for redemption of the Convertible Debentures upon a Change of Control at a conversion price per share equal to C$1.05 subject to adjustment in certain events (the “Conversion Price”). https://bit.ly/3xP7igP
Sophic Client, Swarmio Media (SWRM-CSE, SWMIF-OTC) and Globe Telecom Partner with PUBG MOBILE to Promote the Globe Gamer Grounds Platform in the Philippines.
PUBG MOBILE is one of the most popular mobile games in the Philippines, with over one million monthly active users. PUBG MOBILE players in the Philippines can now complete daily challenges for prizes and ‘Ember Points’ that can be exchanged inside the Globe Gamer Grounds platform for Steam gift cards, in-game currencies, and more. In April 2022 Globe Telecom rolled out Swarmio’s proprietary Ember gaming and esports platform to its 85 million customers under the brand name Globe Gamer Grounds. Revenues generated from subscriptions and transactions inside the platform are shared between Swarmio, Globe Telecom, and TM WHOLESALE. Swarmio’s Ember platform enables game publishers and developers to reach, engage and monetize the 2 billion gamers in Asia, Africa, the Middle East and Latin America, where credit card penetration is relatively low and access to bank accounts is limited. By partnering with telecom operators, Swarmio enables gamers to purchase in-game items using telco payment channels such as digital wallets and Direct Carrier Billing (DCB). https://bit.ly/3xPDUHa
Coinsquare to acquire CoinSmart as consolidation of Canadian crypto traders continues.
Coinsquare has entered into an agreement to purchase CoinSmart, creating what it claims will be one of Canada’s largest crypto asset trading platforms. The transaction involves Coinsquare paying Coinsmart $3 million in cash, and issuing 5.2 million Coinsquare shares to CoinSmart. CoinSmart, which trades on the Neo Exchange, saw its shares rise slightly after the deal was announced, to 26 cents per share. Coinsquare claimed that it is in the final stages of IIROC approval. The acquisition announcement comes at a time of consolidation within Canada’s crypto market. The Kevin O’Leary-backed crypto company WonderFi has made a number of acquisitions, a couple of which have provided it with entrance into regulation amid mounting regulatory pressure. Coinsquare’s purchase of CoinSmart is similar in that the latter was the second crypto trading platform to receive exempt status in 2021. The deal with CoinSmart may enable Coinsquare to get its first foothold in the regulated market. CoinSmart is still seeking registration as an investment dealer and membership with the Investment Industry Regulatory Organization of Canada (IIROC), which is something Coinsquare has also been working towards following its 2020 settlement with the Ontario Securities Commission (OSC) in relation to market manipulation. Coinsquare claimed that it is in the final stages of approval to become Canada’s first crypto asset trading platform regulated as an IIROC dealer and marketplace member. Once the acquisition is completed, CoinSmart will hold approximately 12 percent of the issued and outstanding Coinsquare shares. Coinsquare’s largest shareholder, Mogo, which trades on both the NASDAQ and the TSX, disclosed in its most recent financials that it valued Coinsquare’s shares at approximately $5.02 as of June 30, 2022. https://bit.ly/3fgGTSJ
D2C travel lifestyle brand Monos closes $40.2 million Series B round.
Monos, a direct-to-consumer travel lifestyle brand based in Vancouver, has announced the closing of a $40.2 million (US$30 million) Series B round. Existing Monos investor Venn Growth Partners led the financing, with participation from Strand Equity—both of which invested in Monos’ $10 million Series A funding round that wrapped up earlier this year. Clearco co-founder and Dragons’ Den star Michele Romanow is also one of the investors who contributed to the round. https://bit.ly/3R0VCOJ
PolicyMe reveals $18 million in Series A financing to tackle Canadian insurance market.
Toronto-based insurtech startup PolicyMe wants to make it easier for Canadians to access not just affordable life insurance, but other types of insurance, online. To date, PolicyMe claims to have sold over $5 billion in life insurance coverage. After focusing primarily on life insurance and selling direct-to-consumer to date, PolicyMe has announced $18 million in Series A financing from existing investors and insurance industry players to roll out other types of insurance products and develop its business-to-business-to-consumer (B2B2C) distribution pillar. The startup’s Series A round consists of $13 million in equity funding raised across four tranches that closed between November 2021 and April 2022, and $5 million in debt financing PolicyMe secured in July from an undisclosed “Tier 1 Canadian bank.” This financing brings PolicyMe’s total funding to about $21.8 million. The Series A round’s equity component was provided in part by a trio of new PolicyMe investors, insurance industry players Missouri-based RGAX, Bermuda-based SiriusPoint, and Minnesota’s Securian Financial—the parent of PolicyMe partner Canadian Premier Life Insurance. The round also included follow-on support from Miami’s HCS Capital and Toronto-based Westdale Properties, which co-led the startup’s $3.3 million 2020 seed round. https://bit.ly/3RXKun7
Andgo Systems raises $5.6 million to make employee absence management easier.
Saskatoon-based SaaS startup Andgo Systems (formerly NC SmartCall) has raised a $5.6 million Series A round. Boston venture capital firm Waterline Ventures and Toronto’s First Ascent jointly led the financing. Founded in 2014, Andgo provides a scheduling platform for organizations to automate such processes as onboarding employee absences, filling vacant shifts, as well as annual vacation planning. https://bit.ly/3f9OQsK
IMAX acquires video quality solutions startup Ssimwave in $28.3 million deal.
Waterloo-based Ssimwave, which offers video quality solutions for media and entertainment companies, has been acquired by IMAX in a $28.3 million (US$21 million) deal of cash and stock. The transaction comprises $18.5 million in cash and $2.5 million in stock. It also includes an additional earnout consideration of $4 million. Four of the world’s top-ten streaming media companies currently partner with Ssimwave to optimize video, according to the startup. https://bit.ly/3xJ4xgY
Cognitive 3D secures $2.5 million to help companies better understand immersive experiences.
Cognitive 3D, a startup that uses immersive, 3D technology to research consumer behaviour, has raised a $2.5 million seed round. The startup plans to use the funds to double its staff from nine to 18 employees over the next 18 months. Konvoy Ventures led Cognitive 3D’s latest round of funding with participation from Space Capital’s Space Venture Capital Investing Fund, and Boost VC. https://bit.ly/3faz0OK
Affirm stock heads higher as company notches BNPL deal with Amazon in Canada.
Shares of Affirm Holdings Inc. were up more than 3% in premarket trading Thursday after the company announced that it would launch a buy-now-pay-later option on Amazon.com Inc.’s site in Canada. The company already has a relationship with Amazon in the U.S. Affirm noted in a Thursday press release that eligible Canadian Amazon shoppers will be able to split purchases into monthly installments on purchases of US$50 or more. Shares of Affirm have lost 79% so far this year as the S&P 500 has declined 20%. https://on.mktw.net/3R8tXLG
Global Markets: IPOs, Venture Capital, M&A
Instacart plans to focus IPO on selling employee shares.
Instacart Inc. doesn’t plan to raise much capital in its initial public offering and instead plans to have most of the listing come from the sale of employees’ shares, said people familiar with its thinking. In meetings with prospective investors in recent weeks, Instacart executives said they didn’t plan to issue many new shares in their IPO, the people said. The sale of mostly employee shares would allow Instacart’s staff, including some of its earliest hires, to at last cash out of some of the shares they have been accumulating. The move could help Instacart, which was founded in 2012, retain talent by allowing employees more ways to benefit from their shares. Listed shares could also make Instacart more attractive to new employees than startups that have decided to wait for a better market to list. Highly valued startups like food-delivery firm Gopuff and online marketplace StockX LLC have delayed listing plans. Payments provider Stripe Inc., founded in 2010 and last valued by investors at US$95 billion, has also yet to go public. Listed companies similar to Instacart have seen their shares hit harder than most. Delivery companies DoorDash Inc. and Delivery Hero Inc. have each tumbled more than 50% since the beginning of the year. Over the same period, the tech-heavy Nasdaq Composite Index fell less than 30%. https://on.wsj.com/3LEQlLE
Chamath Palihapitiya shuts down two tech SPACs.
The venture capitalist and so-called SPAC King Chamath Palihapitiya is shutting down two technology-focused special purpose acquisition companies, after they failed to find companies to take public. It’s another notable capitulation by a high-profile SPAC enthusiast, after hedge fund investor Bill Ackman threw in the towel on his US$4 billion blank-check company in July. The Palihapitiya-backed SPACs, with stock tickers IPOD and IPOF, had raised a total of US$1.6 billion and previously said in August filings they would consider seeking an extension to an October deadline for finding a deal. Palihapitiya had said at the peak of the blank-check boom that he could eventually have a series of 26 SPACs—one for each letter of the alphabet. “Over the past two years, we evaluated more than 100 targets and while we came close to doing a deal several times, we ultimately walked away each time,” Palihapitiya said in a Tuesday filing, citing too-high private company valuations and public-market volatility. Companies bought by SPACs have largely languished on the public markets. That includes space-travel company Virgin Galactic and lender SoFi, both of which have seen their shares plunge since Palihapitiya took them public. Meanwhile, even SPACs that found targets are seeing deals fall apart—SeatGeek, Forbes and eToro called off SPAC mergers in recent months, though the SPACs that planned to take those companies public have not shut down. https://bit.ly/3LDsdsY
Chinese EV maker Leapmotor aims to raise US$1 billion in Hong Kong IPO.
Chinese electric vehicle maker Zhejiang Leapmotor Technology, whose backers include Sequoia Capital China, plans to raise as much as US$1.03 billion in a Hong Kong initial public offering, according to the company’s regulatory filing with Hong Kong’s stock exchange. The listing will test investors’ appetite at a time when the IPO market has cooled globally this year. Leapmotor had previously planned to raise US$1.5 billion, but it recently scaled back the size of the deal because of lukeward investor interest, according to Reuters. The company’s shares will start trading on Sept. 29. The shares of other Hong Kong-listed Chinese electric car makers have underperformed the overall market this year. Xpeng’s stock has declined 68% so far this year, while Li Auto has fallen 22%. https://bit.ly/3BKkUev
Tencent considers more stake sales to fund share buybacks, future growth.
Tencent is looking into shedding more of its huge investment portfolio as the Chinese social-media and videogame company tries to fund a series of share buybacks and refocus its growth strategy, people familiar with the matter said. The technology giant, which owns stakes in some of China’s largest internet companies, has recently completed a regular review of its sprawling portfolio and identified its priorities for possible stake sales based on the returns these investments have generated, the people said. Potential disposals could include online real-estate brokerage KE Holdings Inc., food-delivery company Meituan and ride-hailing giant Didi Global they added. Tencent is in no rush to execute the divestments, the people said, and it is unclear when they will happen. https://on.wsj.com/3flGONK
FTX in talks to raise up to US$1 billion at valuation of about US$32 billion, in-line with prior round.
Sam Bankman-Fried’s crypto conglomerate FTX is in talks with investors to raise up to US$1 billion in new funding that would keep the company’s valuation at roughly $32 billion, according to people with knowledge of the discussions. Negotiations are ongoing and the terms could change, said the sources, who asked not to be named because the talks are confidential. Coindesk previously reported on a coming investment at flat valuation, following FTX’s last capital raise in January. Existing investors include Singapore’s Temasek, SoftBank’s Vision Fund 2 and Tiger Global. While its rivals and peers have been pummeled in this year’s “crypto winter,” FTX has tried to bill itself as the market consolidator, swooping in to buy distressed assets at a discount. The company, which is based in the Bahamas, is privately held so it hasn’t suffered the stock meltdown of Coinbase, which has lost three-quarters of its value in 2022. Some of the fresh capital, on top of the US$400 million round from January, would go to fuel more deal-making, the sources said. In July, FTX signed a deal that gives it the option to buy lender BlockFi, and the company was in discussions to acquire South Korean Bithumb. FTX also offered to buy bankrupt crypto brokerage Voyager Digital in August but was turned down for what was called a “low ball bid.” FTX’s revenue soared more than 1,000% in 2021 to US$1.02 billion from US$89 million the prior year, CNBC reported last month, based on a leaked investor deck. FTX saw net income of US$388 million last year, up from just US$17 million a year earlier. Momentum continued in the first quarter, as the company reeled in US$270 million in revenue, the financials showed. https://cnb.cx/3BEzRid
Schneider Electric to buy Aveva in £9.5 billion industrial software deal.
Schneider Electric SE agreed to buy out minority shareholders in Aveva Group Plc in a deal that values the UK industrial software company at £9.5 billion (US$10.8 billion), the latest foreign takeover of British tech company. Schneider will pay £31 per share, the company said in a statement on Wednesday, confirming an earlier Bloomberg News report. Under the terms of the deal, the company, which already owns 59.14% of Cambridge, England-based Aveva, will pay about £3.87 billion for the remaining equity. https://bloom.bg/3C16SpY
FTC investigating Amazon deal to buy Roomba maker iRobot.
The Federal Trade Commission asked for additional information about Amazon’s US$1.7 billion purchase of iRobot, the company behind the Roomba vacuum, the companies disclosed on Tuesday. The request is a sign that the FTC is investigating the deal in detail. The inquiry could delay the deal’s completion, as federal antitrust investigations can often take up to a year to finish. Once complete, the FTC could sue to block the deal, or seek concessions. It could also decide to allow the merger to proceed. This investigation is only one small part of a broader effort by the FTC, led by longtime Amazon critic Lina Khan, to scrutinize the e-commerce giant’s business activities and market dominance across industries. Earlier this month, digital health care company One Medical disclosed that it had received a similar notice from the FTC requesting information about Amazon’s $3.9 billion acquisition of the firm, which was announced earlier this year. https://bit.ly/3r1uip8
Facebook parent Meta, Google to cut costs and staff, report says.
The Wall Street Journal reported on Wednesday that Meta is looking to slash its costs by at least 10% within the next few months. Meta executives haven’t used the term layoffs but are trying to cut staff by reorganizing departments and giving workers a certain amount of time to apply for other roles within the company, according to the report. Google also required some employees to apply to new roles. Meta’s and Google’s efforts to cut costs show how the companies, which make money through selling ads, are bracing for an economic downturn. It’s unclear how many employees have been impacted by these moves. Both companies have previously signaled that they were exploring ways to cut expenses. Meta and Google reportedly set time limits for how long employees have to find another job internally. Meta employees have about 30 days and Google employees typically have about 60 days to apply for other roles in the company if their jobs were eliminated, the Journal reported. That time could be longer, though, depending on other factors. Google reportedly told about half of the more than 100 employees at the company’s startup incubator Area 120 they had 90 days to find other jobs at the company but gave them more time if their project was canceled. https://cnet.co/3BHOG3r
Home-flipper Opendoor hit with losses in echo of Zillow collapse.
The US housing market’s sharp downturn has been bad for builders, flippers and almost anyone who had plans to sell a home when rising mortgage rates shut down the pandemic buying frenzy. The slump has been especially harsh for Opendoor Technologies Inc., pioneer of a data-driven spin on home-flipping known as iBuying. The company, which sells thousands of homes in a typical month, lost money on 42% of its transactions in August, according to research from YipitData. Opendoor’s performance — as measured by the prices at which it bought and sold properties — was even worse in key markets such as Los Angeles, where the company lost money on 55% of sales, and Phoenix, where the share was 76%. The losses, which don’t include fees charged to customers or expenses incurred in renovating and marketing homes, have been looming since the housing market turned suddenly in recent months. Opendoor warned investors that it expected to lose as much as US$175 million in adjusted earnings before interest, taxes, depreciation and amortization in the third quarter. The iBuying model relies on acquiring homes, making light repairs and reselling the properties — often within a few months of the initial purchase. When home prices were skyrocketing earlier in the year, Opendoor banked easy profits. Then dwindling affordability and mortgage rates soaring toward 6% this spring finally pushed would-be buyers to the sidelines. By June, median home prices had begun to decline in some areas, especially the Sun Belt markets that had been frothiest in the pandemic boom days. The shift caught Opendoor by surprise, leaving it to offload thousands of properties it had agreed to purchase when prices were rising. Instead of canceling contracts, Opendoor decided to make good on the offers, explaining the decision as an investment in the company’s brand, according to a letter to investors in August. https://bloom.bg/3R8RL2b
Accenture stock falls after profit and revenue beat expectations but outlook was downbeat.
Shares of Accenture PLC dropped 0.9% toward an 18-month low in premarket trading Thursday, after the consulting company reported fiscal fourth-quarter profit and revenue that topped expectations but provided a downbeat outlook. https://on.mktw.net/3fgvfaf
Take-Two stock falls as company says leaked ‘Grand Theft Auto’ footage the result of ‘network intrusion’.
After leaked footage said to be from a forthcoming “Grand Theft Auto” game appeared online over last weekend, Take-Two Interactive Software Inc. said in a filing with the Securities and Exchange Commission Monday morning that the actions were a result of an intrusion into its network. Rockstar Games, the “Grand Theft Auto” publisher that’s part of Take-Two, “experienced a network intrusion in which an unauthorized third party illegally accessed and downloaded confidential information from its systems, including early development footage for the next Grand Theft Auto,” per the filing. Take-Two added that the company has “taken steps to isolate and contain this incident” and that it didn’t expect the issue to impact current Rockstar Games services. Rockstar also doesn’t anticipate that the incident will have “any long-term effect on its development timelines.” Take-Two shares were off more than 2% in Monday’s trading. The stock has lost 20% over the past 12 months as the S&P 500 has declined 13%. https://on.mktw.net/3SmMWDy
Wearables growth faces challenges through 2022, according to IDC tracker.
The wearables market faced another challenging period in the second quarter of 2022 (2Q22) as global shipments declined 6.9% year over year to 107.4 million units according to new data from the International Data Corporation (IDC) Worldwide Quarterly Wearable Device Tracker. Demand has slowed due to rising inflation, fears surrounding recession, increased spending on other non-tech categories, and the hyper growth that the wearables market has experienced in the last two years. While the list of top 5 companies has not changed (Apple, Samsung, Xiaomi, Huawei, and Imagine Marketing), four of the top 5 experienced year-over-year declines during the second quarter. Smaller brands continue to target lower price points, putting downward pressure on average selling prices (ASPs) for the incumbents. Rising prices and cooling demand have also led to a reduction in the overall outlook for wearables as IDC now forecasts shipments for the full year of 2022 to remain flat at 535.5 million units. However, growth will return in 2023 as demand for watches and hearables is expected to return due to new buyers in emerging markets and replacements in mature markets. https://bit.ly/3dH8Ouq
iPhone 14 Pro models to account for 65% of shipments in 2H22.
Analyst Ming-Chi Kuo is back with another report regarding the new iPhone 14 Pro models. According to Kuo, Apple is increasing the shipment expectation of the Pro version in the second half of this year, as the company has been focusing on these models at first. In a blog post, Kuo writes that “after the production line switch, iPhone 14 Pro models will account for 60-65% of the total iPhone 14 shipments in 2H22,” (vs. 55-60% previously estimated). Ming-Chi Kuo thinks the iPhone product mix is “improving,” so Apple may offer a “positive outlook for 4Q22 at the next earnings call in late October.” While some believe these slow regular iPhone 14 sales could be a problem for Apple, the fact is that the company is focusing on the pricier models – which are the versions hardcore customers are willing to buy – and later Apple is expected to reduce iPhone 14 Pro production to focus on the regular models, which are the ones that will stick for longer. https://bit.ly/3f0j8hu
Media, Streaming, Gaming & Sports Betting
BeReal reportedly considers paid features in lieu of advertisements.
The viral photo-sharing app BeReal has accomplished something incredible, quickly racking up 15 million users in a super saturated social market. It’s so popular that Instagram, TikTok and Snapchat have all released new features that capitalize on what makes BeReal shine: its front-and-back camera set-up and its anti-addictive, once-per-day posting gimmick. But BeReal is only two years old, operating off of its US$30 million Series A round, led by Andreessen Horowitz and Accel. Unlike the social apps with billions of users that are trying to copy it, BeReal has not yet figured out how to monetize yet. According to a report from the Financial Times, the app is looking toward paid features or subscriptions for income, as opposed to inundating users with ads. https://tcrn.ch/3R2Oku0
Amazon says it had ‘biggest three hours of signups’ for Prime during first exclusive NFL stream.
Amazon is already seeing some fruits from its massive investment in live NFL streaming. The company reported the “biggest three hours for U.S. Prime signups ever” during last week’s Thursday Night Football game, according to an internal memo sent by Amazon exec Jay Marine, obtained by GeekWire. The Chargers vs. Chiefs game was the first of Amazon’s reported US$11 billion, 11-year exclusive streaming rights deal with the NFL. Amazon aired Thursday Night Football games for the past several years but this was the first exclusive stream, meaning the only place to watch the game was via Amazon. That requires fans, for the most part, to have a US$139/year (or US$14.99/month) Prime subscription. There are more than 200 million Amazon Prime members worldwide. https://bit.ly/3R5jHUP
Apple to sponsor the Super Bowl halftime show.
Talks between the National Football League and Apple over a package of Sunday football games have dragged as the league and the tech giant have wrangled over pricing, but another deal has been added to the mix: sponsorship of the Super Bowl halftime show. The N.F.L. has been seeking as much as US$2.5 billion for rights to N.F.L. Sunday Ticket, about US$1 billion more than what it collects from its current provider, DirecTV. As the sides squabble over a rights fee that high, Apple has agreed to be the main sponsor of the Super Bowl halftime show, the league and the company said late Thursday night. They did not disclose terms of the deal. Apple Music will replace Pepsi as sponsor in a deal that the N.F.L. has been shopping around for about US$50 million. The N.F.L. needed a replacement for Pepsi and recognized that Apple had tapped its marketing budget to win rights to live sports. The company offered Major League Baseball US$55 million in rights fees for two weekly Friday baseball games, and an additional US$30 million in advertising, according to two people familiar with the agreement. https://nyti.ms/3C1VB98
Spotify audiobooks launch with 300k titles, but no discounts.
Spotify audiobooks are now on sale, following the company’s announcement that it was further diversifying its business model by acquiring the audiobook platform Findaway. It follows a previous diversification into podcasting. If this sounds like old news, that’s because Spotify previously dipped its toe into the waters by offering just a handful of public domain titles, but has now 300,000 paid titles available … Spotify has almost never turned a profit from its streaming music service, and that’s no surprise. After the Beats business was acquired by Apple, Jimmy Iovine said that it was almost impossible to make money from it. That’s because the majority of the monthly subscription cost is passed on to music labels, who then split the take between themselves, composers, and artists. After operating and marketing costs, there is virtually nothing left for the streaming company. Podcasts are far more profitable, as the company can offer most of its content without any acquisition or licensing costs, and can also take a share of revenue from subscription podcasts. Don’t expect better pricing from Spotify than Amazon, Audible, or Apple Books, either. https://bit.ly/3LDfAhE
25% of Netflix subscribers planning to leave service.
Netflix already lost 1.2 million subscribers in the first two quarters of 2022. While the company hopes to add one million new users with its new ad-supported tier, a survey shows that 1 in 4 Netflix users are planning to cancel their subscriptions this year. Here’s what this could mean to other streaming services, such as Apple TV+. Reviews surveyed 1,000 Americans to gauge their streaming habits in 2022. According to the report, the average American is subscribed to four streaming platforms. Netflix is still the most popular streaming service with nearly 4 out of 5 (77%) Americans currently subscribed to the platform. In addition, 70% say they use Netflix the most, followed by: HBO Max: 9.91%; Disney+: 6.18%; Peacock: 4.25%; Hulu: 3.86%; Apple TV+: 2.70%; Paramount+: 2.70%. That said, of all the Netflix subscribers, 25% are planning to cancel their subscriptions. Of those who plan to leave the streaming service, two-thirds say increasing costs is one of the reasons. https://bit.ly/3SuQXpg
YouTube will share ad revenue with Shorts creators.
YouTube just made a major change to its Partner Program that will allow its short-form video creators to make a lot more money from its platform. The company announced that it will share ad revenue with creators on its TikTok rival, YouTube Shorts. The changes, which go into effect “early next year,” could help YouTube draw creators away from TikTok, where stars have complained about low creator fund payouts. “This is the first time real revenue sharing is being offered for short-form video on any platform at scale,” YouTube Chief Product Officer Neal Mahon said during an event announcing the news. With the new revenue sharing program, creators with at least 1,000 subscribers who get 10 million views on Shorts in a 90-day period can apply to join the Partner Program. Revenue from the ads will be pooled and split among creators, Mohan said. Creators will get a 45 percent cut of the ads, regardless of whether they use music. Up until now, YouTube had a dedicated US$100 million creator fund for Shorts. https://engt.co/3UuCuLU
Twitch to ban Stake.com streams and other unlicensed gambling content.
As the conversation concerning Twitch and the platform’s allowance of gambling streams continues to swirl, the platform has struck its first blow. In a tweet on Tuesday evening, Twitch stated that it will ban “streaming of gambling sites that include slots, roulette, or dice games” in a policy update effective October 18th. An update on gambling on Twitch. Critically, Twitch is not banning all gambling, nor even all streaming of the gambling forms mentioned above. There will be a carveout permitting sports betting, fantasy sports, and poker, while the streaming of slots, roulette, and dice is only prohibited if the websites streamed aren’t “licensed in the U.S. or other jurisdictions that provide sufficient consumer protection.” https://bit.ly/3dxODiL
Adtech, Privacy & Regulatory
Jury orders Meta to pay US$174 million over patent violation in walkie-talkie app Case.
A jury in an Austin, Texas court ruled in favor of walkie-talkie app company Voxer after it accused Meta of infringing on its patents, a court document viewed by Insider shows. Voxer first filed its lawsuit against Meta in the US in 2020, back when the tech giant was still called Facebook. The companies’ legal fight over intellectual property went international, as the two companies also took the case to court in London in 2021. The jury ordered Meta to pay Voxer US$174.5 million in damages, and struck down attempts by Meta to have Voxer’s patents invalidated. Voxer said in its initial 2020 complaint that its founder, an army veteran named Tom Katis, began developing communications tech in 2006 after witnessing shortcomings in walkie-talkie technology while serving in Afghanistan. https://bit.ly/3fbUk6a
Meta sued for skirting Apple privacy rules to snoop on users.
Meta Platforms Inc. was sued for allegedly building a secret work-around to safeguards that Apple Inc. launched last year to protect iPhone users from having their internet activity tracked. In a proposed class-action complaint filed Wednesday in San Francisco federal court, two Facebook users accused the company of skirting Apple’s 2021 privacy rules and violating state and federal laws limiting the unauthorized collection of personal data. A similar complaint was filed in the same court last week. https://bloom.bg/3UzHAGW
India proposes to regulate internet communication services.
India has proposed to regulate internet-based communication services, requiring platforms to obtain a license for operating in the world’s second largest wireless market. The Department of Telecommunications’ new proposal, called Draft Indian Telecommunication Bill, 2022, seeks to consolidate and update three old rules — Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933, and The Telegraph Wires (Unlawful Protection) Act, 1950. The 40-page draft proposes to grant the government the ability to intercept messages beaming through internet-powered communication services in the event of “any public emergency or in the interest of the public safety.” It also provides the government immunity against any lawsuit. The draft also asks that individuals using these licensed communications apps should not “furnish any false particulars, suppress any material information or impersonate another person”. The draft notably comes just over a month after India concluded its US$19 billion 5G spectrum. The country is expected to get 5G networks later this year. https://tcrn.ch/3xJ24my
Companies that buy Amazon marketplace sellers suffer as dealmaking dries up.
In 2021, investors poured more than US$12 billion into a new breed of start-ups focused on buying Amazon marketplace sellers. This year, the funding has mostly dried up, with dealmaking all but grinding to a halt as ecommerce growth stalls and investors grow wary. It has meant that the acquisition start-ups, known as aggregators, which were previously clambering over each other to pay over the odds for sellers, have been left to rue their overexuberance. Many have made lay-offs or been forced to narrow their focus. “Last year was crazy,” said Shrestha Chowdhury, chief technology officer at Berlin-based aggregator Razor Group, which at the peak was buying a dozen companies a month. “I wouldn’t do that again.” Amazon aggregators, or roll-ups, are groups that buy sellers who typically do the bulk of their business through Amazon’s third-party marketplace. The thesis is that by combining many brands under one roof, efficiencies can be found through, among other things, marketing spend and inventory management. But so far in 2022, funding has dropped to just over US$2 billion, the lion’s share of which came before the stock market slump in March that was prompted by rising inflation, the war in Ukraine and a broad sell-off in tech stocks. This confluence of factors hit the ecommerce sector particularly hard. Massachusetts-based Thrasio, the largest aggregator, having raised at least US$3.5 billion and made more than 200 acquisitions, laid off some 20 per cent of its staff in May shortly after announcing the hiring of Amazon veteran Greg Greeley as its chief executive. Much of 2021’s frantic dealmaking was funded by debt, with aggregators often paying interest rates as high as 18 per cent when starting out, Hollywood said. As growth slows and with no clear path to profitability, several operators may soon breach their debt covenants, he said. Aggregators’ fortunes have not been helped by conditions on Amazon itself. Seller fees have increased by more than 30 per cent over the past two years, according to Marketplace Pulse, with Amazon citing logistical pressures. Other additional costs have included a 5 per cent fuel surcharge imposed in April that is levied on every delivery made via Amazon’s own logistics network. https://on.ft.com/3LUYlbP
Fintech, Blockchain & Cryptocurrency
Nasdaq moves into crypto with custodying services.
Nasdaq, the second largest stock exchange in the U.S., is establishing a new digital assets division. The new unit, called Nasdaq Digital Assets, will initially custody bitcoin and ether for institutional investors, according to Bloomberg. The move puts Nasdaq in direct competition with other crypto startups that offer custodial services, such as Fireblocks and Anchorage. These raised money at sky-high valuations before the digital assets downturn. Crypto exchange Coinbase also offers custodial services. Nasdaq follows other established financial institutions into serving as a custodian for clients’ crypto assets. Bank of New York Mellon struck a deal in March to custody all USD Coin stablecoins issued by Circle. Nasdaq is not planning to launch a crypto exchange explicitly at the moment, said Tal Cohen, a senior Nasdaq executive for North America, in the interview with Bloomberg on Tuesday. https://bit.ly/3DR8mEF
Coinbase tested group to speculate on crypto.
Last year, Coinbase—which operates a large cryptocurrency exchange that handles bitcoin and other digital coins—hired at least four senior Wall Street traders and launched a group to generate profit, in part, by using the company’s cash to trade and “stake,” or lock up, cryptocurrencies, according to people close to the matter. The activity was described as “proprietary” trading by the people at the company. Earlier this year, the team completed a US$100 million transaction that the group viewed as a test trade of the new effort, according to the people. The transaction came after Coinbase executives testified to members of Congress last year that the company didn’t buy and sell digital currencies for its own account. The monthslong effort to launch the Coinbase Risk Solutions group underscores how Coinbase, which has seen its shares tumble about 70% over the past year, has entertained more aggressive strategies as it tries to develop new businesses. There are no regulations preventing firms like Coinbase from trading digital currencies alongside their clients. https://on.wsj.com/3BIIvMK
Michael Saylor’s MicroStrategy adds US$6 million to Bitcoin trove.
MicroStrategy, helmed by famed bitcoin-bull Michael Saylor, purchased about US$6 million in bitcoin between August 2 and September 19, a Tuesday SEC filing showed. That’s good for about 301 bitcoin, bought at about an average price of US$19,851 per token using excess company cash. Leading up to September 22, MicroStrategy held about 130,000 bitcoin, bought at an average price of US$30,639. The world’s biggest cryptocurrency has fallen more than 10% in the last four weeks, and is down more than 60% in 2022. Shares of MicroStrategy, similarly, are down roughly 64% year to date. https://bit.ly/3xKAwgS
iPhone 14 satellite features powered by Qualcomm modem.
iPhone 14, iPhone 14 Plus, Pro, and iPhone 14 Pro Max include a new Emergency SOS feature via satellite connectivity, so that users can get help even when out of cellular and Wi-Fi range. This feature launches in the United States and Canada first, starting in November. A Reuters report this weekend indicated that the satellite features are enabled by a Qualcomm X65 modem inside the phones. An Apple statement to Reuters also said that custom Apple-designed radio frequency components and software also make the satellite feature possible. The Qualcomm X65 modem enables 5G cellular connectivity for phone calls and data, but also and ‘band n53’ which enables the iPhone to communicate with satellites in the sky. Specifically, Apple has partnered with satellite infrastructure managed by Globalstar. https://bit.ly/3DIfG5E
PG&E says Tesla battery was source of power storage site fire.
In the early hours on Monday, a Tesla Megapack battery caught fire at a key California power storage facility, the state’s largest utility said in a statement to TechCrunch. According to PG&E, the utility “became aware of a fire in one Tesla Megapack at its Elkhorn Battery Storage facility” at around 1:30 a.m. in Moss Landing, which is located about 25 miles south of Santa Cruz, in Monterey County. The site is home to a facility that houses 256 Megapacks and is capable of storing up to 730 megawatt-hours of energy…when not aflame. Such facilities underpin the crucial transition to renewables by storing clean energy for use when the sun isn’t shining. Though not pinned on Tesla, lithium batteries at storage sites in Moss Landing have repeatedly caught fire in recent years. And last year, a Tesla Megapack caught fire in Geelong, Australia, during initial tests at the Victorian Big Battery storage site. https://tcrn.ch/3C2Gaxx
Salesforce launches marketplace for carbon emission offsets.
CRM giant will aggregate offset sellers and rating agencies Marketplace launching in October for US, 2023 internationally. Salesforce Inc. is launching a marketplace for carbon credits that will aggregate offset providers and rating agencies, aiming to reduce confusion about which offerings are legitimate. Carbon credits, marketed as a way for companies to atone for their emissions by investing in climate-friendly actions like tree planting, are difficult to measure and verify. If companies have access to transparent pricing and multiple third-party ratings for each project, it will encourage them to make more effective investments in offsets, said Patrick Flynn, Salesforce’s global head of sustainability. “Because of the controversy, many organizations are cautious about taking action.” https://bloom.bg/3DJtyfI
Sophic Capital Client Insights
Sophic Client Reklaim (MYID-TSXV, MYIDF-OTC): Bridging the gap between consumers and their data.
In our 3 previous reports, we outlined how governments and corporations are focusing on consumer privacy data protection as well as increased consumer concern about the security and use of their data. This report will demonstrate how this shift in regulation and company compliance relates to Sophic Capital client Reklaim. Reklaim allows consumers to confirm their identity and unveil data that businesses have collected and sold without the consumer’s explicit consent for years. Consumers can take back control of this data by setting up a Reklaim account where, should they choose to, they can be compensated for their data. Through Reklaim, consumers can also subscribe to a SaaS-based privacy tier that reduces the amount of data leaking from their devices while alerting them to any third-party data or password breach for an annual or monthly fee. https://bit.ly/3SudyTe
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