Weekly Investment News and Analysis
Please see what we’ve been reading in technology and ESG related investing this week. Please feel free to send us what you’ve found interesting.
Latest Invesment News
Invesment News in the Past Weeks
The market had another down day Friday, as the NASDAQ closed the week down about 1%, after a bit of a reprieve the previous week. Meanwhile, bearish headlines continue to pile up. Fidelity cut Stripe and Reddit valuations amid the tech stock downturn. Forbes and Seatgeek scrapped their SPAC plans. Tiger Global Management, has lost more than 50% of its value in 2022 including a 14.3% drop in May, according a report by CNBC. Microsoft cut earnings and revenue guidance, citing a stronger U.S. dollar. Venture capital investment is declining faster in China than anywhere else, according to data from Preqin. The pace of investing fell 44% in the first four months of the year to US$24.7 billion compared to a year earlier. Elon Musk has a “super bad feeling” about the economy and needs to cut about 10% of Tesla jobs. At the same time, tech blog, The Verge, had a candid take on Elon Musk’s recent news, in a take, which many non Tesla bulls are well familiar — Elon Musk says Tesla’s fake robot might be ready by September 30th. GM is slashing prices for the Chevy Bolt amid high demand for electric vehicles. Sophic Client, Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA) closed a second tranche of a unit offering, for a total of $1.64 million raised. Sophic Client, Swarmio Media Holdings Inc. (SWRM-CSE, SWMIF-OTC) announced the closing of an oversubscribed private placement of common shares for proceeds of $1.16 million. Clear Blue was also recognized as #13 on the “Future 50 Fastest-Growing Sustainable Companies in Canada”.
The Dow Jones Industrial Average jumped 6.2% in last week’s stock market trading. The S&P 500 index leapt 6.6%. The Nasdaq composite popped 6.8%. The small-cap Russell 2000 ran up 6.55% – a refreshing change after weeks of declines. Sand Hill Road’s doomsayer-in-chief—Sequoia Capital—is back with a warning to its startup founders: Don’t expect a recovery from the current market downturn to happen quickly. 15,000 startup employees were laid off in May. This week’s cuts bring this year’s total to over 28,000, per Layoffs.fyi, compared to about 10,000 total in 2021 and a staggering 80,000 in 2020. 25 companies that listed during the SPAC boom of 2020 and 2021 have already issued warnings that they could go bust within a year, according to a data analytics firm. These blank-check vehicles raised $96 billion in the first quarter of 2021 alone, according to the Harvard Business Review. A growing number of Chinese tech start-ups, , are willing to list shares publicly in China at valuations lower than during private funding rounds in so-called blood listings, according to Reuters. Snap’s warning sent shock across digital advertising as investors fled social media stocks. Cathie Wood’s ARK Invest bought almost US$44 million in shares of Nvidia on Thursday, after the tech company reported its first-quarter earnings. A Twitter shareholder sued Elon Musk for market manipulation. Apple could be in talks to buy EA gaming, Disney and Amazon also potential suitors. iPhone production plans said to be 20 million down on consensus expectations. Samsung will reportedly produce 30 million fewer smartphones this year.
Although the broader market has free fallen for weeks now, Canadian microcap stocks have been declining since March 2021. And while we won’t call a bottom, microcaps look VERY cheap for long-term investors. Take advantage of this time to do your research and find the winners that will come out of this downturn and provide outsized returns. Please feel free to reach out to SophicCapital if you would like to dig into our companies.
Some stats from Morning Brew put recent stock market volatility into perspective. The Dow posted its eighth straight weekly loss, which is its longest weekly losing streak since 1923. The S&P has lost ground for seven straight weeks, its longest losing streak since 2001. The Nasdaq has dropped more from its peak last November than when the world shut down in spring 2020. We repeat: The literal world shut down and the Nasdaq is doing worse now. Tiger Global, the hedge fund known for making big bets on technology companies, slashed its shareholdings and dumped stakes in companies such as Netflix and Rivian as it suffered heavy losses during this year’s stock market rout. ‘Big Short’ investor Michael Burry revealed a bet against Apple stock — and built stakes in Alphabet and Meta last quarter. Coinbase shares jumped Tuesday after the largest cryptocurrency exchange in the US said it’s pulling back the pace of hiring to strengthen its businesses during a slump in the US$1.4 trillion crypto market. Southeast Asian ride hailing and food delivery company Grab said its business is recovering as the region reopens from Covid-19 lockdowns. Cisco Systems forecasts revenue drop, blames China lockdowns. China’s Tencent reports no revenue growth for first time. Apple execs recently presented augmented reality headset to company board, suggesting product is close to launch. Facebook parent company Meta Platforms has plans to monetize WhatsApp. Your online behavior and location are shared with advertisers 747 times a day. Square to offer Afterpay’s BNPL at brick-and-mortar stores. Taiwan Semiconductor Manufacturing Co., the world’s largest contract chip maker, is considering building a semiconductor factory in Singapore to help address a global supply shortage, according to people familiar with the matter. As investor conferences gradually resume in person, Sophic clients Renoworks Software (RW-TSXV), Smart Employee Benefits (SEB-TSXV), Swarmio Media (SWRM-CSE), and Edge Total Intelligence (CTRL-TSXV) attended the Planet MicroCap Showcase 2022 conference in Las Vegas recently. Sophic Client Clear Blue Technologies’ (CBLU-TSXV) CEO, was on BNN Bloomberg this week to talk about Smart Off-Grid energy Voyager Digital (VOYG-TSX) announced a common share private placement of approximately US$60 million anchored by leading crypto companies.
Other than a likely short covering rally on Friday, the pain in growth stocks continued through last week. As Shopify’s (SHOP-NYSE, SHOP-TSX) stock price continued to slide, the company’s senior executives are putting on a public display and promising to personally buy chunks of the firm’s shares on the open market. This all came a few days after a filing showed Uber CEO Khosrowshahi bought US$5 million of the company’s own beaten down stock. Uber CEO also told staff, the company will cut down on costs, treat hiring as a ‘privilege’. PopReach (POPR-TSXV) closed a US$33 million in credit facilities with Bank of Montreal. Instacart, the biggest online grocery in the U.S., has confidentially filed to go public this year, the company said, confirming an earlier report by Bloomberg. Goldman Sachs is exiting work on most SPACs because of liability concerns as regulators tighten guidelines, report says. Twitter CEO Parag Agrawal said Friday in a series of tweets that he still expected Elon Musk’s purchase of Twitter to close, “we need to be prepared for all scenarios,” explaining why he made management changes and is acting to control costs. Salesforce has sold out of the last of its shares in data-analytics software maker Snowflake, according to a regulatory filing on Friday. Salesforce, which makes investments through its Salesforce Ventures unit, still owns a stake in five public companies, including Robinhood and Monday.com, the filing shows. Tiger Global has been hit by losses of about US$17 billion during this year’s technology stock sell-off, marking one of the biggest dollar declines for a hedge fund in history. Ark Invest’s 75% decline in its flagship ETF hasn’t stopped investors from pouring US$1.3 billion in the fund in 2022. SoftBank is cutting its startup investments 50-75%. Samsung is in talks to hike chipmaking prices by up to 20%.
Shopify’s shares plunged on Thursday after the e-commerce company announced plans to make a big fulfillment acquisition even as its revenue growth slows dramatically. Neo Financial has become Canada’s latest unicorn tech company after securing a $185 million Series C round. Neo is one of the quickest Canadian tech companies to reach unicorn status. Stellantis will spend US$2.8 billion to increase production of electric vehicles at two of its Canadian plants, the company said on Monday. About a third of the fresh funds will come from the Canadian government and the Ontario government. Elon Musk’s decision to accept some foreign investors as part of his US$44 billion buyout of Twitter runs the risk of inviting the kind of regulatory scrutiny over U.S. national security that social media peer TikTok faced, legal experts say. Warren Buffett bought US$600 million worth of Apple last quarter, may be buying more now. Peloton is seeking a minority investment to help stabilize its business as an e-commerce slowdown and eased Covid restrictions hurt its sales, as the bike maker is looking to sell 15% to 20% of itself to a private equity firm or industry peer. The U.S. SEC is investigating Didi Global’s 2021 initial public offering where it raised $4.4 billion just before it was revealed to be under a cybersecurity investigation by Chinese authorities. The SEC has also added more than 80 Chinese companies, including e-commerce giants JD.com and Pinduoduo, to a list of Chinese stocks that face delisting risks for failing to meet disclosure requirements. Microstrategy said it faces a margin call if Bitcoin falls to US$21,000. Chips for chipmaking machines are affected by chip shortage, says TSMC and Intel. President Joe Biden’s administration said it will provide US$3.1 billion in funding to support the domestic production of advanced batteries that will spur electric vehicle adoption.
Last week, capped off yet another tough month in the markets. Selling accelerated into the end of the week. According to Morning Brew, the US stock market just had its worst month since March 2020 as the S&P dropped 8.8%, the Dow 4.9%, and the Nasdaq, 13.3%—which marks that index’s worst month since 2008. While blog posts and trading memes are likely to continue — in truly market-neutral manner, businesses march on, regardless of market volatility. Sophic Client, Clear Blue Technologies (CBLU-TSXV, CBUTF-OTC, 0YA-FRA) announced the closing of the initial tranche of a unit offering, for around a million dollars. The Company expects to complete one or more additional tranches of the Offering in the coming days. VitalHub (VHI-TSXV) recently closed a $17.5 million bought deal public offering. Venture capital activity in Canada hit an all-time record high in the first quarter, with US$3.5 billion in investment across 213 deals, up from US$3 billion (across 276 deals) in the year-earlier quarter, according to KPMG. Amazon reported a quarterly loss leading to the stock having its worst day since 2006. Facebook briefly dropped 6% after Bloomberg incorrectly published disappointing forward guidance for revenue. Robinhood’s net revenue dropped 43% in the first quarter as the brokerage app saw trading activity cool dramatically versus the previous year. Elon Musk raised about US$8.4 billion through the sale of 9.6 million Tesla shares this week. Fidelity Investments said on Tuesday it will offer investments in bitcoin through its 401(k) accounts later this year, marking the first such move by a major retirement-plan provider. U.S.-listed shares of China-based technology companies soared in premarket trading Friday, after The Wall Street Journal reported that Chinese regulators were preparing to pause its campaign against technology companies, as they look to stem the deterioration in China’s economy.
Toronto’s tech sector once again swept venture funding records away in the first quarter of 2022, according to a new report from briefed.in. Despite a seemingly favourable start to the year, there are signs Toronto’s roaring tech sector may cool off in the coming quarters. The city’s previous venture funding record, which totalled $1.7 billion, was set in Q2 2021. Shopify is in talks to buy tech startup Deliverr in a deal, which could value San Francisco-based Deliverr at more than US$2 billion. At the same time, Amazon announced a new program will allow Prime members to buy products on platforms that aren’t Amazon.com, but using their Amazon account details. Importantly, those products will then be delivered like Amazon products, with a commitment to two-day delivery. The move will put Amazon at odds with the likes of Shopify, which provides software to merchants to run online stories, and delivery companies like FedEx and UPS. Shares of Didi Global dropped 17% in premarket trading on Monday, after the China ride-share group over the weekend announced a 12% drop in fourth-quarter revenue from a year earlier and plans to vote on a delisting from the New York Stock Exchange. Walt Disney stock heads for 17-month low as Florida, streaming troubles weigh. Netflix stock slid 27% premarket and dragged down Disney, Roku, and Warner Bros, after the Company’s first subscriber decline in years. Snap reported a jump in users for the first three months of the year but warned global problems such the war in Ukraine weighed on demand for its digital advertising, and it forecast a weaker second quarter than expected. Shares fell 10% in after-hours trading. Musk to explore potential tender offer for Twitter, has US$46.5 billion in committed financing for deal. Crypto stocks perform worse than cryptocurrencies, according to data from CoinMarketCap FactSet.
Viral Nation, announced an initial funding round of $250 million led by Eldridge, with participation from Maverix Private Equity, to fuel the company’s technology and market growth strategies. Founded as an influencer marketing agency in 2014, Viral Nation has evolved to meet the needs of an impressive roster of Global 500 clients. Bigg Digital Assets Inc. is reporting that its subsidiary, Netcoins, experienced a security breach that allegedly allowed a customer to fraudulently withdraw an estimated $1.58 million. The startup reported the software vulnerability was fixed within an hour. Canada has lost $154 million in cryptocurrency through three breaches and one fraud between 2011 and 2021, according to a report from Crystablockchain.com. As the Twitter – Elon Musk drama unfolds, including Elon Musk now being sued by former Twitter shareholders; Twitter Inc. announced on Friday that the company has adopted a shareholder rights plan, or “poison pill,” that will reduce the chances that a person or group will take control of the company. The announcement comes after Elon Musk’s offer of US$54.20 per share was made public on Thursday. Bucking the gloom of other tech equities, shares of Indonesian ride-hailing and e-commerce company GoTo rose as much as 23% after it raised US$1.1 billion in its domestic stock market debut. Oracle-backed server processor startup Ampere Computing said Monday that it plans to go public, filing initial confidential paperwork with the SEC. Epic Games said on Monday it had raised US$2 billion from Sony Group Corp and the family owned holding company behind the Lego Group, valuing the “Fortnite” creator at US$31.5 billion. Charlie Munger’s Daily Journal halved its Alibaba stake to 300,000 shares last quarter. The newspaper publisher nearly quadrupled its Alibaba holdings during the second half of 2021. Amazon is hitting its sellers with a 5% fee due to inflation and increased fuel costs, and there’s a good chance products will get more expensive as a result.
Sophic Client GameSquare Esports (GSQ-CSE, GMSQF-OTC, Sophic Client) announces US$3.0 million Private Placement led by Goff Capital and the Jones Family and a new strategic investor to further strengthen the Company’s shareholder base. In a recent report, we examine, Sophic Client, Edge Total Intelligence (CTRL-TSXV) offerings as edgeTI’s software provides enterprises a single point of control software enabling the rapid coordination and execution of informed decisions. This is a US$23 billion industry, and edgeTI is establishing itself to grow in this industry. Shopify told employees on Thursday that it will raise all employees’ base salaries, The Information has learned. The salary increases will come into effect starting in July, according to a person familiar with the matter. The move follows The Information’s report that Shopify was suffering from staff defections, even as Shopify’s stock plunge this year has reduced the value of recent stock grants. Canada Pension Plan Investment Board (CPP Investments) today announced that it has invested US$425 million in VerSe Innovation Private Limited, one of India’s leading content technology platform companies. PokerStars and FanDuel join forces to strike major partnership deal with Maple Leaf Sports & Entertainment. Gartner forecasts global tech spending to hit US$4.4 trillion this year, up 4%. Buffett’s Berkshire reveals stake in HP; shares surge almost 10%. Twitter shares surge after disclosure Elon Musk has taken stake. Amazon, Alphabet and others are quietly rolling out drone delivery across America. Cash App discloses security breach impacting over 8 million users. Apple Pay surpasses Venmo and PayPal as teens’ favorite payment app, shows Piper Sandler survey. Meta Platforms’ financial arm, Meta Financial Technologies, has been exploring the creation of a virtual currency for the metaverse, the Financial Times reported.
Vancouver blockchain tech startup, LayerZero Labs is the latest Canadian company to join the country’s growing group of unicorns, as it raised $135 million that values LayerZero at $1 billion. LayerZero’s financing was tri-led by notable venture capital firms Sequoia Capital, Andreessen Horowitz, and FTX Ventures, which is the fund launched by crypto exchange FTX. As Canadian VC seems more active in tumultuous public markets, Mogo (MOGO-TSX, MOGO-NASDAQ) announced the formation of Mogo Ventures to manage its $124 million investment portfolio. SoftBank founder Masayoshi Son has told the company’s top executives to slow down investments, as the Japanese investment giant tries to raise cash amid a global stock market turmoil, the Financial Times reported. OnlyFans, the subscription-based social platform, has spoken with several blank check companies known as SPACs about a merger to take it public, Axios reported. The SEC is taking aim at SPACs with proposed rules to make disclosures more like those in a traditional IPO. Apple is planning to cut production of some of its most popular products due to macroeconomic factors such as the war in Ukraine and rising inflation, which are impacting demand, Nikkei Asia reported. Huawei’s 2021 revenue was down 29% as U.S. sanctions hurt smartphone sales. A bug that exposed Facebook users to a swell of posts containing misinformation persisted for six months on the platform before it was fixed, The Verge reports. The DOJ backs a bill targeting business practices of Amazon, Apple and Google. The Justice Department threw its support behind bipartisan legislation forbidding large internet companies from favoring their own products and services over those from competitors, according to the Wall Street Journal. Singapore’s giant Sea said on Monday it is shutting down its e-commerce business, Shopee, in India, months after the firm began recruiting sellers in the country.
The New York Times published an interesting piece about Toronto’s booming tech sector last week. Toronto is now the third-largest tech hub in North America. It is home to more tech workers than Chicago, Los Angeles, Seattle and Washington, D.C., trailing only New York and Silicon Valley, according to CBRE, a real estate company that tracks tech hiring. Interestingly, last week, we counted ~$150 million of activity in the Canadian VC ecosystem, against a backdrop of high public market volatility. SoftBank seeking US$60 billion valuation for Arm, which would imply a far higher multiple of Arm’s revenue and profits than is common in the chip sector. GoTo Group, an Indonesian startup giant, raised about US$1.1 billion in one of the world’s largest initial public offerings announced since the Russian invasion of Ukraine. Private-equity firm Thoma Bravo LP has struck a deal to buy Anaplan Inc. for $10.7 billion, the latest in a recent string of big leveraged buyouts. Instacart Inc., a pandemic darling that’s now facing decelerating growth, is slashing its valuation by almost 40% to about US$24 billion, a move it says will help the company attract talent and adapt to market conditions. Uber stock gains after company strikes partnership with NYC taxis. Nikola stock price soars after it begins production on electric truck. Adobe slumps 11% as the software maker says halting sales in Russia will reduce yearly revenue. Shares of Okta dropped more than 7% Tuesday following reports of a data breach. Famed short-seller Jim Chanos revealed he’s betting against crypto exchange Coinbase. “Coinbase is what we would call a bubble stock,” he told CNBC’s Scott Waper on Friday. Late Thursday night in Brussels European lawmakers reached a tentative agreement after nearly two years of negotiations on rules restricting certain business practices of Google, Apple, Meta Platforms, Amazon, Microsoft and other tech companies. Nvidia is exploring using Intel’s manufacturing services.
With US$150 million in fresh funding, Montréal’s Talent.com is ready to take on Indeed worldwide. Calgary based, Oil and gas tech startup, Validere closes $55 million funding with BlackRock backing. Sophic Client, Edge Total Intelligence’s (CTRL-TSXV) CEO Jim Barrett, recently presented at the Investor Summit Q1 2022. Indonesian startup GoTo will raise up to US$1.1 billion in its IPO. SoftBank-backed Indian hotel startup Oyo is mulling a smaller IPO. GM is buying out Softbank’s stake in autonomous vehicle unit Cruise. SoftBank’s Arm will lay off up to 15% as it prepares for an IPO after Nvidia deal collapse. ConsenSys, the New York company operating a suite of blockchain products including popular crypto wallet MetaMask, raised US$450 million in a Series D funding round, that valued the company at more than US$7 billion, which included the new investment. Shenzhen iPhone production was forced to shutdown at two Foxconn facilities due to a new COVID-19 outbreak – but has now partially restarted. China is forcing Alibaba and Tencent to cut over 50,000 jobs. Tencent could be fined for anti-money laundering violations. Mark Zuckerberg said NFTs are coming to Instagram soon. US Lawmakers introduce bill that would let Nvidia, Qualcomm share in U.S. chip subsidies. Intel is building a new €17 billion semiconductor manufacturing hub in Germany.