QUOTE OF THE DAY
Troll”
“Sriracha”
“Pregame”
“Hive mind”
A couple of our favorites from Merriam-Webster’s release of 250 new words.
Market Snapshot
- U.S. indexes finished up ahead of the Fed’s meeting.
- Global indexes finished up (FTSE, NIKKEI, DAX, HSI).
- Shares of Mattel and Hasbro fell as Toys “R” Us could file for bankruptcy.
- The dollar rose to a nearly 7-week high against the yen.
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Cut Me Some Slack
SoftBank’s $93 billion Vision Fund just invested $250 million in team messaging company, Slack. That puts Slack’s total funding at $841 million and a valuation of $5.1 billion.
But Slack’s not just a channel-based platform for discussing company KPIs and planning lunches without Toby. It’s a network that has connected over 9 million weekly active users, generated $200 million in revenue, and worked its way into small Valley startups and large corporations alike.
So here’s what we’re wondering:
- What is it raising more private money for?
- Why doesn’t it just go public?
Even though Slack is bringing in more revenue than most Valley startups make before tapping the public markets, the young company’s performance is still unpredictable. So while 2018 could be its year, best to be accountable to only a few shareholders right now.
Then, consider increased competition. Microsoft has watched Slack revolutionize collaboration in the workplace and quickly introduced its own “Slack killer” called Teams.
And that’s partly why Slack is doubling down. Big corporations like Microsoft seem to have endless funds to undercut companies in whatever markets they want. Slack isn’t strapped for cash (in fact, it hasn’t even touched the $360 million from previous rounds), but this additional $250 million is a credibility booster for prospective clients.
So how did #slack find its way here?
CEO Stewart Butterfield didn’t just roll the dice and scream Yahtzee…although he tried to. Butterfield was a big gamer trying to uncover the next Minecraft. In fact, his first game, dubbed “Game Neverending,” somehow ended up becoming Flickr which sold to Yahoo for $25 million.
And get this: in 2011 he took another swing at the joysticks, inventing Glitch—a game in which people cooperate to build a shared world. Well, it never built the world, but it nailed the cooperation part. Glitch kept its engineers and eventually spun into Slack.
Now, Butterfield & Co. are looking to stave off the competition (like any true gamer would) and make Masayoshi Son and his overly ambitious tech fund proud.
The Great Bitcoin Wall of China
China continued its tirade against Bitcoin over the weekend. Now, government regulators will shut down Bitcoin exchanges AND possibly other forms of peer-to-peer and over-the-counter Bitcoin transactions.
These potential new measures might even go as far as restricting website access to overseas trading on exchanges like Coinbase (and China’s no noob when it comes to restricting website access).
But the Bitcoin crackdown could continue to disrupt China’s influence on the market. While China’s control over Bitcoin trading volume may have fallen from 90% to 15%, it still accounts for ~70% of mining.
So while less trading and more government regulations will continue to hurt the price of this summer’s superstar, imagine what happens when the world’s largest community of miners is impeded from verifying transactions.
It hasn’t happened yet, but we don’t feel far from it.
It IS Rocket Science
Dream big, kids. Defense contractor Northrop Grumman is taking on outer space with the acquisition of Orbital ATK for $7.8 billion (and $1.4 billion of its debt).
There’s a very clear strategy here. Orbital’s specialties in rocket propulsion and space operations will be a resume-padder in Northrop’s bid for one particular (and lucrative) government contract—the $85 billion ICBM defense system program (a convoluted way of describing “our last line of defense against North Korea”).
And Northrop is hoping to keep the streak alive following a big W in 2015 over rivals Boeing and Lockheed for the newest B-21 bombers.
With this deal and United Technologies’ recent $23 billion takeover of Rockwell Collins, aerospace and defense are in full consolidation mode. How come? Likely a combo of increased federal defense spending under a Republican Congress and White House…and the saber-rattling of Kim Jong Un.
The pie is growing, and Northrop is reaching for an even bigger slice.
Good Day, Bad Day
Good Day—Nvidia
Nvidia (+4.13%) shares hit an all-time high after Merrill Lynch raised its price target (only days after Evercore did the same). It certainly helps when analysts look at the $30 billion AI chip market and see Nvidia as the clear leader.
Nvidia, which is hyper-focused on AI and machine learning, is rolling out a new graphics card (the Volta) and ramping up spending on data centers. Maybe that’s why its stock has skyrocketed 187% over the past 12 months.
Bad Day—JBS
Last week, JBS’ former CEO was taken into custody by Brazilian authorities on alleged insider trading charges. Now that there’s a new man in charge, it should be smooth sailing for the world’s largest meat processor, right?
Not when the new CEO is the disgraced former CEO’s father, Jose Batista. The 84-year-old founder of JBS is running the company once again while his son Wesley settles his differences with the authorities. Investors don’t seem to care for the new (old) Batista either, with shares dropping 4%.
What Else Is Happening…
- Cisco CEO John Chambers will step down after a 20-year tenure.
- A survey found that Brexit may cause 10,000 finance jobs to leave the U.K.
- GE is developing AI that can save $200 billion worth of power.
- Roku is hoping to raise more than $200 million with its IPO.
Economic Calendar
- Monday Earnings: No Events
- Tuesday Earnings: Adobe, Bed Bath & Beyond, FedEx
- Wednesday Earnings: General Mills
- Thursday Earnings: YogaWorks
- Friday Earnings: No Events
Economic Events: Housing Market Index (-)
Economic Events: Import and Export Prices
Economic Events: MBA Mortgage Applications, Existing Home Sales, FOMC Forecasts, Petroleum Status
Economic Events: Jobless Claims, House Price Index, Consumer Comfort, Fed Balance Sheet
Economic Events: PMI, Baker-Hughes Rig Count
By the Numbers (SoftBank’s Vision Fund)
SoftBank, the Japanese telecom giant, has been grabbing headlines with high-profile investments (and a few more in the pipeline). It sure seems like CEO Masayoshi Son is determined to have a hand in all emerging technologies, from cloud services to autonomous vehicles. But what’s driving the ship? SoftBank’s $93 billion behemoth: the Vision Fund. Let’s take a look at the ridiculousness.
$45 billion—The contribution of Saudi Arabia’s Public Investment Account to the Vision Fund.
$4.4 billion—The Vision Fund’s investment in WeWork this August, helping the shared workspace company expand into Asia.
300 years—The time span of SoftBank’s business plan, according to Son in the 1990s.
17-22%—The ownership stake SoftBank is seeking with a potential investment in Uber.
$187.55—Current stock price of Nvidia, which hit an all-time high yesterday. Naturally, the Vision Fund took a $5 billion stake in the leading GPU maker.
The Breakroom
Question of the Day
There are 6 boxes numbered 1, 2, … 6. Each box is to be filled up either with a red or a green ball in such a way that at least 1 box contains a green ball and the boxes containing green balls are consecutively numbered. What is the total number of ways in which this can be done?
(Give up?)
Guess the Business Term
C_ _ D _ T D_ FA _ _ T S _ _ P
(Give Up?)
Stat of the Day
1 in 1,000,000–Those are the odds of someone tricking the iPhone X’s facial recognition software. The numbers have spoken, and your face is safe.
