The market is always changing every year. Want to buy Robinhood stock on Robinhood? That time may be soon approaching despite the obstacles they have faced in recent years during their rapid growth. Robinhood has filed IPO documents showing steep growth in crypto trading and a heavy reliance on order-flow payments. The stock-trading app maker lost $1.4 billion in 2023 and the first quarter of 2024, and revenue grew 309% year-over-year to $520 million. The large loss was due to a $1.5 billion fair-value adjustment to convertible notes and warrants that were used to raise emergency funding during the GameStop saga. Payment for order flow, the controversial practice of selling trade orders to market makers, and similar practices accounted for 81% of Robinhood's revenue in Q1. Options trading alone brought in nearly $198 million. Blockchain backed cryptocurrencies represented 14% of the assets held by clients, or $11.6 billion as of March 31. Revenue from the segment rocketed from 4% to 17% between Q4 2020 and Q1 2021.
More than a third of that cryptocurrency revenue came from dogecoin trading which is a little suspect. Monthly active users stood at 17.8 million in Q1, more than double the number for the same period last year. Those customers will have a shot at buying into the offering: Robinhood is reserving 20% to 35% of its IPO shares for retail customers. We'll have to see how they perform with questionable cryptocurrency transactions, lawsuits, settlements, fines, and stiff competition from other trading exchanges like WeBull and Coinbase.
You've heard of inflation, but have you heard of "shrinkflation"? The price stays the same, but the portions get smaller. Recent victims include Cheerios and Cocoa Puffs and other consumer packaged goods (CPG).
Over the past few years, private equity investors have struggled to find bargains as buyout multiples continue to rise. And a few industries in particular have seen prices skyrocket during the COVID-19 pandemic, with others taking a hit. Our latest analyst note breaks down how pricing multiples vary by sector. Among the takeaways: To win auctions in the IT, B2C and healthcare sectors, investors have offered buyout multiples north of 20 times. But that trend may be short-lived if interest rates eventually jump across Europe and the US due to inflationary pressures. In the past decade, buyout multiples in the healthcare sector have jumped around 50%, with healthcare tech companies surging in value during the pandemic due to the rise of telemedicine. IT continues to remain the most expensive industry to invest in when measured by buyout multiples, with the median EV/EBITDA multiple peaking last year at around 20x.
When it comes to growing their artificial intelligence capabilities, leading tech companies have largely preferred to invest internally rather than snap up startups. Our recent analyst note explores M&A trends for VC-backed AI and machine learning companies. Key highlights include: Acquisition deal counts and deal values barely grew in 2020, and just $1 billion worth of acquisitions were recorded in the first quarter of 2021. Natural language processing and consumer AI applications have proved to be regular targets for acquisition. The R&D budgets of the leading five tech companies are so massive that their combined AI and ML investments could reasonably exceed the $29.3 billion that VCs invested in North America in 2022. But Microsoft's $16 billion deal to acquire conversational AI company Nuance in April shows that big tech is willing to spend big for the right opportunity.
Nestled at the base of Colorado's Rocky Mountains, Boulder is not synonymous with tech investment. Yet the city was home to one of 2020's biggest deals when EQT, Ardian and Digital Colony bought communication infrastructure company Zayo Group for $14.3 billion. The Zayo Group buyout is just one of many deals happening in America's lesser-known tech-driven cities. The Denver area has seen a large influx of tech-driven PE buyouts, and it's not alone. Miami, better known for its beaches and nightlife, has also seen a strong uptick in tech buyout deals. With tech becoming a ubiquitous feature of the economy, PE deal-makers are looking beyond familiar tech hubs such as Silicon Valley and New York.
The Big Picture below includes three key themes that defined the first half America's booming recovery. It's time to cue the "revenge spending." The US economy is roaring back to life and is expected to grow 6.5% this year, its highest rate since the '80s. Thank the US' massive stockpile of Covid vaccines for the glow-up — oh, and $5.3T worth of government stimulus. This year, Americans are spending more on restaurants, flights, and non-stretchy clothes (pajamas are about to enter a recession). US plane traveler volume is back to three-quarters of 2019 levels, up from 25% a year ago. But the reopening economy has also been driving inflation and shortages. And while the US recovers, poorer nations are falling further behind. The rise of alt-coins... This year, crypto mainstreamification is going far beyond Bitcoin: we call it "coin crowding." In January, BTC made up 70% of total crypto value — now, it makes up 45%. Alt-coins like Ethereum and Doge have picked up crypto market share, dimming BTC's spotlight. Smaller coins like DigiByte, VeChain and SafeMoon have also gained traction – and then there's influencer coins. As BTC's environmental impact comes under scrutiny, "green" alternatives like Chia are getting attention, too. Coin crowding is a new phenomenon with high volatility risk, and the long-term outcomes are still unclear.
Big Tech's antitrust problems have gotten much worse. This year, regulators are bringing real heat. Since the Apple-Epic trial in May, the temp has gone from steam room to sauna and now Joe Biden is looking to potentially loosen monopolies, including big tech companies like Google, Amazon, Facebook, and Microsoft.
Just last week, a House committee advanced major legislation to curb Big Tech's dominance. The headliner: a bill that would prohibit tech companies from playing favorites with their own products (think: Apple apps on App Store, Basics on Amazon). Meanwhile, newly confirmed FTC leader Lina Khan is a Big Tech critic who could expand the scope of antitrust enforcement. Blocked acquisition and even tech breakups seem more plausible. NUMBERS The Numbers: six big numbers that defined the first half 1.9M: Global Covid deaths from January to June, already higher than 2020's toll. 57%: Percentage of US adults who have been fully vaccinated. ~$2.5K: The average monthly unemployment payout with boosted benefits, extended until September. -20%: Fall in the stock price of the 50 biggest SPACs this year. 5,000%: Surge in the price of Dogecoin this year so far. FUTURE Looking ahead: three major questions for the rest of the year Inflation's effect on stocks... Will it have one? If the first half of the year were a hashtag, it would be #flated. For most of the year, investors worried that the Fed would raise interest rates sooner than expected to tamp down rising prices as the economy revved up (see: our chart above). This month, the Fed suggested it would do just that (ETA: 2023). Higher interest rates can make stocks less attractive compared to less risky assets like bonds and savings accounts. Despite the inflation situation, stocks are at records highs. But if inflation starts to look like a trend rather than a one-time reopening blip, that could change.
Big tax hikes for corporations... Will they actually happen? This month, G7 countries came to a historic agreement: multinational companies should pay a minimum tax rate of at least 15% in each country in which they operate. That could hurt Big Tech companies like Google and Amazon, who've been plopping their international HQs in countries with low corporate tax rates. Meanwhile, President Biden wants to raise the corporate tax rate in the US to 28% from 21% to fund trillions worth of proposals. Neither of these tax hikes have passed yet, and they'll likely get pushback — but they've become more likely. Economic competition with China... Can the US stay #1? With its tech power and growing international influence, China’s becoming a bigger economic threat to the US economy. This month, the Senate approved a $250 billion bill to subsidize Made In USA R&D for key industries of the future like technology and chips. The bipartisan goal: keep the US competitive against China. Then, G7 countries announced “Build Back Better World”: a Biden-inspired partnership to rival China's "Belt and Road" initiative by financing infrastructure projects in developing countries.
Some of our biggest stories from H2 2021 (Q1 + Q2). Jobs: The Hiring Dilemma: Corporate America is raising wages to bring reluctant workers back. Ransomware: Cyber attacks have been increasingly targeting critical infrastructure (including your gas), with ransoms often paid in Bitcoin. Juneteenth: As Juneteenth became a national holiday, we looked at the future of reparations and what form they could take. China: China's been cracking down hard on its tech giants (RIP, Ant Financial IPO). It seems there is such thing as too successful for the CCP’s liking. Movies: The future of entertainment: the new normal for studios, theaters, and streamers.
Alexa, please play "In My Life" by The Beatles because world's richest man Jeff Bezos is feeling post-Prime Day nostalgia. Yesterday, Amazon's founder officially stepped down as CEO after 27 years at the helm. The 'Zon has come a long way since 1995, when Bezos sold the site's first book from his Seattle garage. Bezos had left a cushy hedge fund job to take a risk on his ecomm idea, saying "Even if I fail, I would not have any regrets." Spoiler: he didn't fail. Enter Jassy: Andy Jassy = Amazon's new CEO. The Amazon lifer was the CEO of AWS, Amazon's massive cloud computing service ($45B in annual sales). Exit Bezos: Kind of. Bezos is now exec chairman, focusing on new Amazon products and special projects. Cue investors: Amazon stock barely budged when the transition was announced in February, signaling investors have confidence in the shift. Special delivery... CEO onboarding packet, coming in bulky. Jassy is inheriting an ecomm and cloud leader with side-hustles in hardware, grocery, advertising, healthcare, streaming, and Hollywood (see: MGM acquisition). What’s going well: Money. Amazon's sales surged 44% last quarter, and profit more than tripled as the ecommerce boom keeps booming. The 'Zon is expected to rake in 40%+ of US ecomm sales by the end of the year. Not going well: Regulatory scrutiny.
The FTC's new leader Lina Khan is a Big Tech critic who wrote a major paper on Amazon's dominance while at Yale Law. Last week, Amazon made moves to stop her from participating in 'Zon-related antitrust investigations. Oh, and a House committee just advanced major legislation to curb Big Tech's dominance. THE TAKEAWAY Bezos' focus was blistering growth... Jassy's focus might be corporate responsibility. Amazon's 14 corporate principles include: "deliver results," "bias for action," and "customer obsession." A few days before Jassy took over, Amazon renamed them Leadership Principles and added two: “Strive to be Earth’s Best Employer,” and “Success and Scale Bring Broad Responsibility.”
They are reactions to criticism Amazon has received over the years — but they are also Bezo's parting words to Jassy, to tee up Amazon's next chapter to crush it with currency capital. EVENTS Coming up this week... Space Battle of the Billionaires... Most people do summer vacays in Florida or Yosemite — billionaires go to space. Virgin Galactic founder Richard Branson plans to board a test spaceflight on Sunday. Awkward, since that is nine days before Jeff Bezos is scheduled to embark on his Blue Origin space trip (announced before Branson's). Aside from fueling billionaires' egos, these trips are billboards for NASA-sponsored space tourism. The fact that CEOs are getting aboard helps build confidence in the emerging industry.
Marvel returns with a vengeance. Marvel is releasing Black Widow in theaters and Disney+ on Friday, after delaying it for more than a year. It’s the first Marvel flick to debut in theaters since the pandemic began. Now: 80% of movie theaters are open, and Covid restrictions have relaxed. The US box office is seeing a strong recovery, but hasn't caught up to its pre-Covid success yet. Black Widow's ticket sales could give us a glimpse into summer demand. ZOOM OUT Stories we're watching... Labor shortage update... Still short. US employers added an expectation-beating 850K jobs in June, the biggest gain in 10 months. Unemployment ticked up to 5.9%, in part because more Americans started job-searching. As the US economy roars back to life, demand for workers is revving up, too. Wages jumped last month as employers from restaurants to gig apps tried to attract workers. Case in point: Uber and Lyft are spending millions on driver incentives, and you've probably seen ads recruiting food delivery drivers.
Heat waves in the middle of June have hit hard. A record-breaking heat wave has been plaguing the Pacific Northwest. The temp in Portland soared to 116 degrees last week, hotter than Miami, Dallas, and LA have ever been, possibly due to climate change. Even the U.S. northeast has been experiencing droughts or record heat. All that sweat means more cash for A/C companies like Carrier, Lennox, and Trane, whose stocks are near record highs. But for the agriculture industry, the too-hot-handle temps could mean smaller crops and fewer workers. For consumers, it could mean even pricier food.
Inside the Space Race: Branson, Bezos, and the future of the space industry Comet me, bro... The Space Battle of the Billionaires has moved from the Twitter sphere to the thermosphere. Yesterday, Virgin Galactic founder Richard Branson boarded Virgin's VSS Unity, traveling faster than three times the speed of sound to reach the edge of space. Branson just became the first billionaire founder of a space company to go to space on his own spacecraft (meta). Next up is Jeff Bezos, who announced his own trip before Branson decided to out-space him. The former Amazon CEO plans to take off on a Blue Origin spaceplane on July 20, along with his brother and a mystery bidder who's dropping $28M to join them — or $2.5M per minute of ride time. Spaghetti Apollo-gnese... Apart from fueling billionaires' egos, these trips are major endorsements for NASA-sponsored space tourism (think: restaurant bookings on the ISS). NASA is leaning on private companies to help commercialize space. In May last year, Elon's SpaceX became the first private company to send humans to space. In May, Virgin completed its first human spaceflight, a critical step before it flies space tourists — ETA: early 2022. While $250K tickets to space make headlines, tourism is still a tiny sliver of the space industry. Satellites: One of the largest space industry subsectors, providing everything from WiFi, to telecom, to GPS and weather sensing. SpaceX's Starlink project has already launched 1K+ high-speed internet satellites into low earth orbit — and is accepting $99 preorders. Defense: The real-life Space Force. For fiscal year 2022, the Pentagon requested $21B to invest in outer space security. Defense giants Lockheed Martin and Boeing both have space divisions. NASA missions: Boeing is developing a spacecraft for NASA flights, and Elon's SpaceX won a $2.9B contract to develop a NASA lunar lander, beating out Bezos' Blue Origin (RIP Prime Moon delivery). THE TAKEAWAY This isn't sci-fi... The space industry is taking off in a real way. Space startups raised $7B in 2020, double what they raised in 2018. Today "space customers" mainly consist of governments and companies paying to launch satellites, cargo, and astronauts into space. In the not-so-distant future, they could be commercial space tourists. In the more distant future, they could be space colonizers on the Moon and even Mars if you believe in Elon Musk's Martian vision.
It has been a big week for stablecoins as well. A Stablecoin is a type of cryptocurrency whose value is tied to an asset like the dollar or gold. USD Coin, one of Earth's largest dollar-pegged stablecoins, made headlines last week. Visa said it'll allow cardholders to pay with USD Coin at 70 million merchants worldwide. Merchants will get paid in fiat (aka: regular) currency. Meanwhile, Circle — the firm that operates USD Coin — is going public via SPAC at a $4.5B valuation. While crypto mainstream-ification is advancing, regulator scrutiny of the crypto market is also heating up.
On Friday, President Biden signed an exec order to curb the dominance of companies in industries including shipping, agriculture, healthcare, and tech. The goal was to promote competitive markets and limit corporate dominance in everything from railroads to prescription drugs. It is part of a broader effort to confront consolidation and perceived anti-competitive pricing in big industries — and it has big companies on edge.
Waiting for the drink trolley isn't easy. Delta is rolling up with earnings for the quarter ended in June. Compared to 2020's tomato juice numbers, 2021 might look like champagne: TSA traveler volumes are back to 85% of pre-pandemic levels, and Delta's expected to report a sales increase from last year (no shocker there). Domestic recreational travel is rebounding — Fourth of July flyers even surpassed 2019 levels. But international and business travel, which brings in 75% of airline profits, remains grounded. Bill Gates said that half of biz travel may never return to normal by 2023 or 2024.
Goldman Sachs' DJ-ing CEO David Solomon (aka: the banker who drops bangers) is dropping earnings instead. It is Big Banks earnings week, with Chase, Citi, Goldman, and others unveiling their numbers. In April, Chase and Goldman revealed record quarterly profits thanks to the IPO blitz. Corporate and investment banking made up nearly half of Chase's revenue that quarter, and most of Goldman's. Despite a record first half for M&A activity, analysts expect that trading and loan revenue has slowed from last year.
Stay tuned for even more updates to the stock market, cryptocurrency sector, and global economy in 2022 H2 and into 2023. We are publishing more new content and financial developments beyond just social media and marketing companies.
