Microsoft reclaims title of most valuable public company after Apple falls

Microsoft reclaims title of most valuable public company after Apple falls

Enlarge (credit: Getty Images)

Microsoft regained its crown as the most valuable publicly listed company in the world on Friday from Apple, whose shares slumped following a weak quarterly earnings update from the maker of iPhones and Mac computers.

Microsoft’s 2.2 percent gain on Friday lifted its market valuation to $2.49 trillion. Apple slid 1.9 percent, taking its market cap to $2.46 trillion.

Microsoft reported this week that its revenues soared in the third quarter, aided by a pandemic-fuelled surge in cloud computing resulting from a shift to remote working. The company’s quarterly revenue grew 22 percent, its largest gain since 2014.

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#apple, #finance, #microsoft, #stock-market, #tech

Apple sheds value during iPhone event

The TechCrunch crew is hard at work writing up the latest from Apple’s iPhone, iPad and Apple Watch event. They have good notes on the megacorp’s hardware updates. But what are the markets saying about the same array of products?

For those of us more concerned with effective S&P dividend yields than screen nit levels, events like Apple’s confab are more interesting for what they might mean for the value of the hosting company than how many GPUs a particular smartphone model has. And, for once, Apple’s stock may have done something a little interesting during the event!

Observe the following chart:

This is a one-day chart, mind, so we’re looking at intraday changes. We’re zoomed in. And Apple kinda took a bit of a dive during its event that kicked off at 1 p.m. in the above chart.

Normally nothing of import happens to Apple’s shares during its presentations. Which feels weird, frankly, as Apple events detail the product mix that will generate hundreds of billions in revenue. You’d think that they would have more impact than their usual zero.

But today, we had real share price movement when the event wrapped around 2 p.m. ET. Perhaps investors were hoping for more pricey devices? Or were hoping Apple had more up its sleeve? How you rate that holiday Apple product lineup is a matter of personal preference, but investors appear to have weighed in slightly to the negative.

Worth around $2.5 trillion, each 1% that Apple’s stock moves is worth $10 billion. Apple’s loss of 1.5% today — more or less; trading continues as I write this — is worth more than Mailchimp. It’s a lot of money.

You can read the rest of our coverage from the Apple event here. Enjoy!

Read more about Apple's Fall 2021 Event on TechCrunch

#apple, #gadgets, #ipad, #iphone, #mobile, #stock-market, #tablet-computers

Spotify to spend $1B buying its own stock

Music streaming service Spotify today said it will spend up to $1 billion between now and April 21, 2026 to repurchase its own shares. The dollar amount represents just under 2.5% of Spotify’s market cap, with the company valued at $41.06 billion this morning as its shares rose 5.1% following the repurchase news.

The company previously executed a similar buyback program in 2018.

A public company using some of its cash to repurchase its shares is nothing new. Many public companies, including Apple, Alphabet, and Microsoft, have active share repurchase programs, and it is common to see mature or nearly-mature companies devoting a fraction of their balance sheet or a regular percentage of their free cash flow to buying back their own equity.

The goal of such efforts is to return cash to shareholders. Buybacks, along with dividends, are among the key ways that companies can use their wealth to reward shareholders. Also, by buying their own stock, companies can boost the value of their individual shares. By limiting the shares in circulation, the company’s share count declines and the value of each share consequently rises, in theory, as it represents a larger fraction of ownership in the corporation.

Spotify shares have traded as high as $387.44 apiece in the past 12 months, but are now worth just $215.84, inclusive of today’s gains. From that perspective, seeing Spotify decide to deploy some cash to repurchase its own equity makes sense — the company is buying low.

But if you ask a recently public company what it intends to do with its excess cash, buybacks are not usually the answer. For example, TechCrunch asked Root Insurance CEO Alex Timm if his company intended to use cash reserves to purchase its own equity after its recent Q2 2021 earnings report. Root’s share price has declined in recent months, perhaps making it an attractive time to reward shareholders through buybacks. Timm demurred on the idea, saying instead that his company is building for the long-term. That translates to: That cash is earmarked for growth, not shareholder return.

But isn’t Spotify still a growth company? It certainly isn’t valued on the weight of its profits. In the first half of 2021, for example, Spotify posted net profit of a mere €3 million on revenues of €4.5 billion.

If Spotify is still a growth-focused company, shouldn’t it preserve its capital to invest in exclusive podcasts and the like — efforts that may grant it pricing power in the future and allow for stronger revenue growth and gross margins over time?

To answer that, we’ll have to check the company’s balance sheet. From its Q2 2021 earnings, here are the key numbers:

  • Spotify closed out the second quarter with “€3.1 billion in cash and cash equivalents, restricted cash, and short term investments.”
  • And in the second quarter, Spotify generated free cash flow of €34 million. That figure was up €7 million from a year earlier despite “higher working capital needs arising from select licensor payments (delayed from Q1), podcast-related payments, and higher ad-receivables”.

More simply, despite paying up for efforts that are generally understood to be key to Spotify’s long-term ability to improve its gross margins — and therefore its net profitability — the company is still throwing off cash. And with a huge bank account earning little, thanks to globally low prices for cash and equivalent holdings, Spotify is using a chunk of its funds to buy back stock.

By spending $1 billion over the next few years, Spotify won’t materially harm its cash position. Indeed, it will remain incredibly cash-rich. However, the move may help defend its valuation and keep itchy investors happy. Moreover, as the company is buying its stock at a firm discount to where the market valued it recently, it could get something akin to a deal, given Spotify’s long-term faith in the value of its own business.

Perhaps the better question as this juncture is not whether Spotify is a weird company for deciding to break off a piece of its wealth for shareholders, but instead why we aren’t seeing other breakeven-ish tech companies with neutral cash flows and fat accounts doing the same.

#alphabet, #apple, #buyback, #dividend, #earnings, #enterprise-software, #equity, #microsoft, #music-streaming-services, #share-buybacks, #shareholders, #spotify, #stock, #stock-market, #tc

Robinhood is now a stonk

Update: Trading of Robinhood shares has been halted due to volatility. The company’s stock paused at $65.60 on Robinhood itself. Yahoo Finance has a higher $77.03 price on the company’s equity, up a stunning 64.59% today. Things are fluid, but Robinhood may have been halted and then rose again when it resumed trading. Stonks indeed.

Shares of Robinhood, an investing-focused consumer fintech company, soared this morning in pre-market trading. The stonk phenomenon, which helped propel minor companies like GameStop and AMC earlier this year, appears to be impacting Robinhood’s own stock; that much GameStop and AMC trading took place on Robinhood’s platform during stonk-fever is irony not lost on this publication.

Here’s what things look like this morning, per Yahoo Finance:

Recall that Robinhood went public at $38 per share, the low end of its range, and sank in its early trading sessions to below its IPO price. Now, it’s worth $54 per share.

Cool.

Normally we’d crack a joke and close this small news item here, but with Robinhood’s IPO featuring a unique twist on the traditional public offering, we have to do a bit more work. When it went public, Robinhood reserved a chunk of its equity for purchase by its own users. The impact of this was that more retail investors likely owned Robinhood equity at the start of its trading life than would be normal with a traditional IPO.

One hypothesis regarding Robinhood’s somewhat slack early trading performance was that early retail demand for its shares was sated by its effort to allow its users to buy stock in its shares, leading to a less-skewed supply/demand curve when it debuted.

Things have changed. What’s going on? Last week, an analyst put a $65 per share price target on the stock. And there are a handful of other ratings to chew on. But the wild swing in the price of Robinhood today appears from our vantage point to be another stonk moment. The stock is being traded like a short-squeeze, even if some market participants are skeptical of the idea due to what they view as a limited short interest in the company.

Checking the Robinhood IR page, there’s no news. Robinhood did not recently report earnings. And the company’s recent 606 filings that deal with PFOF incomes seemed to match up with expectations in revenue terms regarding what the company detailed in its Q2 2021 flash numbers. Perhaps there was more crypto in there than expected, but nothing truly wild.

It appears that Robinhood is simply going up because it is. This happens in 2021; we just have to get used to it.

But what matters most for our purposes is that Robinhood’s decision to sell some IPO stock to its users did not manage to create so much float for the now-public unicorn to diminish weird trading. You can go public in an unusual manner and still catch a stonk wave. Now we know.

#fundings-exits, #gamestop, #initial-public-offering, #pfof, #robinhood, #startups, #stock-market, #yahoo

Robinhood’s stock drops 8% in its first day’s trading

Robinhood priced its public offering at $38 per share last night, the low end of its IPO range. The company was worth around $32 billion at that price.

But once the U.S. consumer investing and trading app began to allow investors to trade its shares, they went down sharply, off more than 10% in the first hours of its life as a floating stock. Robinhood recovered some in later trading, but closed the day worth $34.82 per share, off 8.37%, per Yahoo Finance.

The company sold 55,000,000 shares in its IPO, generating gross proceeds of $2.1 billion, though that figure may rise if its underwriting banks purchase their available options. Regardless, the company is now well-capitalized to chart its future according to its own wishes.

So, why did the stock go down? Given the hungry furor we’ve seen around many big-brand, consumer-facing tech companies in the last year, you might be surprised that Robinhood didn’t close the day up 80%, or something similar. After all, DoorDash and Airbnb had huge debuts.

Thinking out loud, a few things could be at play:

  • Robinhood made a big chunk of its IPO available to its own users. Or, in practice, Robinhood curtailed early retail demand by offering its investors and traders shares at the same price and level of access that big investors were given. It’s a neat idea. But by doing so, Robinhood may have lowered unserved retail interest in its shares, perhaps reshaping its early supply/demand curve.
  • Or maybe the company’s warnings that its trading volumes could decline in Q2 2021 scared off some bulls.

Regardless, in the stonk and meme-stock era, Robinhood’s somewhat downward debut is a bit of a puzzler. More as the company’s stock finds its footing and we dig more deeply into investor sentiment regarding its future performance.

We have more coming on the company’s debut, including notes from an interview with the company’s CFO about its IPO coming tomorrow morning on Extra Crunch

#fundings-exits, #initial-public-offering, #robinhood, #startups, #stock, #stock-market, #united-states

Nigerian investment platform Chaka secures $1.5M pre-seed after bagging country’s first SEC license

When Robinhood raised its $3 million seed round in 2013, it was a couple of months old with huge ambitions of democratizing securities access to the underserved and unserved. Robinhood has since taken the world by storm and grown to serve more than 30 million users with its zero-commission trading

In the past, we’ve seen such growth trickle down to other regions across the world, inspiring similar businesses. Robinhood is no exception. Several platforms have sprung forth to bring stock trading opportunities in their respective markets. In Nigeria, at least four platforms offer both local and foreign stocks to individuals. Chaka is one such platform. Today, it is announcing the close of its $1.5 million pre-seed round to power digital investments for individuals and businesses.

The pre-seed round was led by Breyer Capital, while 4DX Ventures, Golden Palm Investments, Future Africa, Seedstars, and Musha Ventures participated. It’s the second joint deal for 4DX Ventures and Breyer Capital in the space of two weeks, the first in Egyptian social e-commerce platform Taager.

It is a well-known fact that even before Robinhood, the average American actively participated in stock trading. According to a survey by Gallup, about 60% of Americans owned some form of stock in 2000; that number was down to 55% in 2020. This was partly due to the global financial crisis that occurred in 2008.

The crash also affected the Nigerian capital market and because Nigerians lost a lot of money during that period, stock trading is mostly frowned upon by most of the public. Yet for the average Nigerian interested, participating in trading local stocks is hard; and practically impossible for foreign ones.

Tosin Osibodu, while in the U.S., recognised this problem and came back to Nigeria to start Chaka officially launching the company in 2019. According to Osibodu, Chaka wanted to create opportunities for Nigerians to invest in foreign assets and at the same time allow foreigners to invest in Nigerian assets.

“If there’s more demand in the market, over time, we expect there’ll be more supply. If you fast forward over a long period of time, we expect that our local capital markets will continue to grow,” he said to TechCrunch in an interview. “We will provide borderless digital access to multiple solutions, and so it’s not just about Nigerians investing in the market, it’s about making the markets accessible for people locally and globally.”

For the most part, Chaka has executed on one front. The platform Nigerians access to more than 10,000 stocks and ETFs trading on local and foreign capital markets. The CEO maintains that the platform has levelled entry barriers for borderless investments in Nigeria by providing customers with compliant access to the capital market.

“The thing about markets is that they have demand and supply with barriers to entry. We’re committed to lowering those barriers in local markets and by lowering barriers to investing for retail, more people will come to the market. In fact, more people came into the Nigerian stock market through us last year than any other broker. It’s like a demand-supply flywheel,” the CEO added.

Chaka’s local assets are registered with the Nigerian Stock Exchange (NSE) Central Securities Clearing System (CSCS) and regulated by the Securities Exchange Commission of Nigeria (SEC). Dollar assets, on the other hand, are regulated by the US FINRA and the US SEC.

In April this year, digital investment platforms were caught in crosshairs with Nigeria’s SEC. The regulator declared their activities illegal and warned capital market operators working with them to renege on providing brokerage services for foreign securities. Unlike Robinhood which offers online brokerages, Nigerian investment platforms do not. Chaka, for instance, partners with Citi Investment Capital in Nigeria and DriveWealth LLC in the U.S. to issue stocks and securities.

According to Nigeria’s SEC, the bottom line was to bring the activities of these platforms under its purview as part of its efforts to safeguard the investing public. Although Osibodu claims Chaka had always engaged the SEC since the company was formed in 2019, it did not seem that way last December when the regulator singled out the two-year-old company for “selling and advertising stocks.”

The event set the precedence for the regulator’s all-out attack on other digital investment platforms, giving Chaka enough time to engage and conclude talks in about half a year. And last month, Chaka acquired the first fintech license issued by the SEC, making it the only investment platform operating as a digital sub-broker.

“When we launched, we kept SEC in the loop. But now, over the last six months, we’ve engaged with them, showed them our business models, the benefits, the markets. Now we’re proud to have SEC’s first fintech license. We believe that the most important thing is that the market has clarity and understands the regulations required to be registered. And we’re thrilled to have broken new ground and cleared up what it takes to be able to offer services in the market,” he said.

With the new license, the company can swiftly focus on what lies ahead. Osibodu says the license expands the scope of what Chaka can achieve. He asserts that Chaka can power multiple brokers and provide access to different digital investment offerings in addition to being a digital sub-broker.

Chaka

Image Credits: Chaka

Asides from Chaka’s traditional stock trading app for retail investors, it also offers Chaka SDK which allows asset managers and financial institutions to offer digital investments and Chaka for Business for direct business onboarding and trading tools for institutional investors.

Jim Breyer of Breyer Capital, commenting on the investment said, “We are proud to combine efforts with a company that is levelling the investment playing field for Nigerians [and Africans at large]. We’re confident in the value Chaka provides through its digital tools, and we look forward to playing our part in supporting Chaka’s team on their mission to drive borderless investments in Africa.” 

Osibodu says the company will use its pre-seed investment to expand footprints to Ghana and other West African markets. Improving its technology and services and securing partnerships with major financial institutions, including apex ones, is also a priority.

“As we advance, I think something that we’re just very focused on is how do we continually reduce access barriers, and we are proud of the initiatives that we’ve brought and are to come. Watch this space for more partnerships, even with apex institutions in our markets as well.”

#africa, #breyer-capital, #chaka, #finance, #funding, #jim-breyer, #nigeria, #stock-market, #stock-trading, #tc, #tosin-osibodu

Equity Monday: China hates crypto, and the Vision Fund’s vision lives on

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast where we unpack the numbers behind the headlines.

This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here and myself here.

Our live show is this week! And we’re very excited about it! Details here, and you can register here. It’s free, of course, so swing by and hang with us.

Back on theme, we had a lot to get through this morning, so inside the show you can find the following and more:

  • The Chinese cryptocurrency clampdown is a big damn deal: With lots of the nation’s mining capacity heading offline, there’s a scramble to relocate rigs and generally figure out what a crypto market sans China might look like.
  • In the wake of the news, the value of cryptocurrencies fell. As did shares of Coinbase this morning in pre-market trading.
  • Facebook’s Clubhouse rival is out. The American social giant follows Spotify into the live-audio market. You have to give it to modern software companies, who thought that they could be both leading tech shops and Kinko’s clones at the same time?
  • Revolut is unprofitable as hell but increasingly less so. That could be good news for fintech as a whole.
  • Amber Group raised $100 million; Forto raised $240 million.

See you this Thursday at the live show!

Equity drops every Monday at 7:00 a.m. PST, Wednesday, and Friday at 6:00 AM PST, so subscribe to us on Apple PodcastsOvercastSpotify and all the casts!

#audio, #china, #clubhouse, #coinbase, #crypto, #cryptocurrencies, #equity-monday, #equity-podcast, #facebook, #fintech, #forto, #fundings-exits, #neobank, #revolut, #spotify, #startups, #stock-market, #vision-fund

Apple releases torrent of updates, and Wall Street yawns

Today’s WWDC keynote from Apple covered a huge range of updates. From a new macOS to a refreshed watchOS to a new iOS, better privacy controls, FaceTime updates, and even iCloud+, there was something for everyone in the laundry list of new code.

Apple’s keynote was essentially what happens when the big tech companies get huge; they have so many projects that they can’t just detail a few items. They have to run down their entire parade of platforms, dropping packets of news concerning each.

But despite the obvious indication that Apple has been hard at work on the critical software side of its business, especially its services-side (more here), Wall Street gave a firm, emphatic shrug.

This is standard but always slightly confusing.

Investors care about future cash flows, at least in theory. Those future cash flows come from anticipated revenues, which are born from product updates, driving growth in sales of services, software, and hardware. Which, apart from the hardware portion of the equation, is precisely what Apple detailed today.

And lo, Wall Street looked upon the drivers of its future earnings estimates, and did sayeth “lol, who really cares.”

Shares of Apple were down a fraction for most of the day, picking up as time passed not thanks to the company’s news dump, but because the Nasdaq largely rose as trading raced to a close.

Here’s the Apple chart, via YCharts:

And here’s the Nasdaq:

Presuming that you are not a ChartMaster™, those might not mean much to you. Don’t worry. The charts say very little all-around so you are missing little. Apple was down a bit, and the Nasdaq up a bit. Then the Nasdaq went up more, and Apple’s stock generally followed. Which is good to be clear, but somewhat immaterial.

So after yet another major Apple event that will help determine the health and popularity of every Apple platform — key drivers of lucrative hardware sales! — the markets are betting that all their prior work estimating the True and Correct value of Apple was dead-on and that there is no need for any sort of up-or-down change.

That, or Apple is so big now that investors are simply betting it will grow in keeping with GDP. Which would be a funny diss. Regardless, more from the Apple event here in case you are behind.

 

#apple, #apps, #gadgets, #lol, #mobile, #stock-market, #wall-street, #wwdc-2021

Edtech stocks are getting hammered but VCs keep writing checks

After years in the backwaters of venture capital, edtech had a booming 2020. Not only did its products become must-haves after schools around the globe went remote, but investors also poured capital into leading projects. There was even some exit activity, with well-known edtech players like Coursera going public earlier this year.

But despite a rush of private capital — which has continued into this year, as we’ll demonstrate — edtech stocks have taken a hammering in recent weeks. So while venture capitalists and other startup investors are pumping more capital into the space in hopes of future outsize returns, the stock market is signaling that things might be heading in the other direction.

Who’s right? One investor that The Exchange spoke to noted that market turbulence is just that, and that he’s tuning into activity but not yet changing his investment strategy. At the same time, the recent volatility is worth tracking in case it’s a preview of edtech’s slowdown.


The Exchange explores startups, markets and money. 

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.


Let’s look at the changing value of edtech stocks in recent months, parse some preliminary data via PitchBook that provides a good feel for the directional momentum of edtech venture capital, and try to see if there’s irrational exuberance among private investors.

You could argue that it’s public investors who are suffering from irrational pessimism and that private-market investors have the right to it. But since public markets price private markets, we tend to listen to them. Let’s go!

Falling shares

We’re sure that you want to get into the private-market data, so we’ll be brief in describing the public-market carnage. What follows is a digest of edtech stocks and their declines from recent highs:

  • Compared to its 52-week high, Chegg stock has lost over a third of its value.
  • After reaching $62.53 per share in April, Coursera has shed about half of its value and is trading close to its $33 IPO price.
  • 2U closed at $33.92 per share yesterday, its shares also losing half of their value compared to their 52-week high.
  • Staying on that theme, Stride (K12) closed at $26.77 per share yesterday, which is about half of its 52-week high.

    #chegg, #ec-edtech, #edtech, #education, #fundings-exits, #startups, #stock-market, #the-exchange, #venture-capital

The current narrative explaining why tech stocks are getting hammered

This morning the tech-heavy Nasdaq Composite index is off 2.34% after falling yesterday. Shares of Tesla are off more than 6% today, now mired in a bear-market correction after reaching new all-time highs earlier this year. Apple stock is worth $122.02 per share, down from over its recent highs of more than $145.

After a long period of time when it felt like tech stocks only went up, the recent correction is starting to feel material.

There are other ways to measure the selloff. Bessemer’s cloud index is off 4.5% today, after falling over 5% yesterday. And the now-infamous $ARKK, or ARK Innovation ETF that many investors have used as a proxy for growthy-tech stocks, is off 6.6% today after falling 5.9% yesterday.

Hell, even bitcoin has taken a pounding in the last few days, after its recent, relentless rise.

What’s driving the rapid turn-around in the value of tech companies, tech-focused indices, and tech-adjacents, like cryptocurrencies? Not merely one thing, of course, in an environment as complex as the world’s capital markets. But there is a rising narrative that you should consider.

Namely that the money-is-cheap-and-bond-yield-is-garbage-so-everyone-is-putting-money-into-stocks trade is losing steam. As some yields rise, bonds are become more attractive bets. And as COVID-19 vaccines roll out, some investors are pushing their stock-market bets into categories other than tech.

The result is that the landscape of value is shifting; the winds that were at the back of every tech company are receding, at least for now. If the changed weather persists until the very investment climate that tech stocks exist in reaches a new equilibrium, we could see the appetite for tech IPOs lessen, late-stage private valuations for startup shares dip, and more.

Here’s CNBC from earlier today on what’s changing:

Stocks dropped again on Tuesday as tech shares continued to tumble in the face of higher interest rates and a rotation into stocks more linked to the economic comeback.

Here’s the Wall Street Journal on the same theme, from yesterday:

The lift in yields largely reflects investor expectations of a strong economic recovery. However, the collateral damage could include higher borrowing costs for businesses, more options for investors who had seen few alternatives to stocks and less favorable valuation models for some hot technology shares, investors and analysts said.

And here’s Barrons from this morning, noting that what we’re seeing at home is not merely a US-issue:

While members of the NYSE FANG+ index including Tesla, Facebook and Apple have dropped sharply as the yield on the 10-year Treasury has climbed, the sector also is on the retreat overseas.

The market could snap back. Or not. It’s worth watching stocks for the next few days.

#exits, #fundings-exits, #ipo-environment, #lol, #startups, #stock-market

SEC issues statement on past week’s turbulent market activity prompted by Reddit-fueled GameStop run

The U.S. Securities and Exchange Commission (SEC) has issued an official statement on the tumult of the past week in the public stock market. It’s a relatively brief statement, and doesn’t mention any of the key players by name (aka GameStop, Reddit, Robinhood and others), but it does say acknowledge that “extreme stock price volatility has the potential to expose investors to rapid and severe losses” which could “undermine market confidence,” and basically says the Commission is watching closely to ensure that it doesn’t.

The SEC statement does specify that it believes the “core market infrastructure” remains intact despite the heavy trading volumes of the past week, which were prompted primarily by activity organized by retail investors acting in concert through organization on r/WallStreetBets, a subreddit dedicated to day trading. These retail investors resolved to collectively purchase and hold GME stocks (and subsequently, shares in other companies like movie theater chain AMC) in a bid to sweat out hedge funds with significant short positions in the same.

The ensuing high volume of trading activity from individual retail investors led to various actions from platforms that provide free trading to these individuals, including Robinhood, Webull, Public and M1. Robinhood initially cited “protecting” its users as the reason for limits imposed, but later revealed that a lack of funding to cover trade clearances likely caused the temporary measures, since it tapped $500 million to $600 million in credit facility and raised $1 billion in funding overnight.

The SEC’s statement includes a callout that seems specifically directed at entities like Robinhood, and it’s fair to interpret it as a warning:

In addition, we will act to protect retail investors when the facts demonstrate abusive or manipulative trading activity that is prohibited by the federal securities laws. Market participants should be careful to avoid such activity. Likewise, issuers must ensure compliance with the federal securities laws for any contemplated offers or sales of their own securities.

Robinhood has already had run-ins with the financial regulator for unrelated business practices. Meanwhile, lawmakers from both the House and the Senate, as well as NY AG Letitia James have all expressed their intent to review the event and all surrounding activities, which likely involves the role trading platforms like Robinhood played in the week’s events.

#amc, #economy, #finance, #gamestop, #investor, #letitia-james, #money, #robinhood, #senate, #startups, #stock-market, #tc, #u-s-securities-and-exchange-commission

Webull, M1 and Public remove restrictions on ‘meme stocks’ after citing trade settlement firm as the cause

Three of the popular retail stock market trading apps that have hosted much of the activity related to the Wall Street Bets subreddit-spurred run on stocks including GameStop (GME) and AMC, among others, have removed all restrictions on their exchange by their users. M1, Webull and Public had restricted transactions for the affected stocks earlier in the day, along with Robinhood.

M1, Webull and Public all attributed the restrictions placed on these volatile stocks not to any effort to curb their purchase or sale, but instead cited the costs associated with settling the trades on the part of their clearing firm, Apex. All three platforms employ Apex to clear trades made by users via their platform. In an interview with Webull CEO Anthony Denier, Yahoo Finance confirmed that the restriction was not something the company had any hand in deciding.

Public confirmed via Twitter that users can now buy and sell GME and AMC and KOSS on the platform, thanks to the resolution of the Apex blocker. Meanwhile Webull noted that all three stocks are now also available for exchange via their app, as did M1 shortly after. Other platforms like SoFi so far haven’t restricted the stocks, CEO Anthony Noto confirmed on Twitter.

Robinhood earlier issued a blog post noting that it is restricting a number of stocks tied to the r/WallStreetBets action to counter short-seller hedge funds, arguing that it’s doing so in the best interest of users. This has not seemed to have been much appreciated by most users, based on the reaction on social media to that action thus far. Robinhood at no time references any technical barriers imposed by any clearing house.

#anthony-noto, #apex, #california, #ceo, #finance, #gamestop, #reddit, #robinhood, #social, #social-media, #sofi, #stock-market, #tc, #yahoo

Apple reports double-digit sales booms for every product category in Q1 2021

Apple's global headquarters in Cupertino, California.

Enlarge / Apple’s global headquarters in Cupertino, California. (credit: Sam Hall/Bloomberg via Getty Images)

The last 24 hours have been flooded with stock market news, from the normal to the nutty. But based on Apple’s performance in recent quarters, the earnings the Cupertino company reported today for its first quarter of 2021 were very much on the normal side. And by that, we mean big numbers yet again.

According to the report, Apple crossed the threshold for $100 billion in revenue in a single quarter for the first time, and the company posted double-digit sales increases for every single one of its defined product categories. Overall, sales were up 21 percent year-over-year, despite many consumers’ struggles in the pandemic-stricken economy.

iPhone revenue was $65.6 billion, surpassing analysts’ expected $59.8 billion, and beating the same quarter last year by 17 percent. This coincides with the introduction of the iPhone 12 lineup (iPhone 12, iPhone 12 mini, iPhone 12 Pro, and iPhone 12 Pro Max), which was the most substantial redesign and upgrade to iPhones since the iPhone X three years earlier.

Read 8 remaining paragraphs | Comments

#apple, #q1-2021, #stock, #stock-market, #tech, #tim-cook

American stocks drop in wake of President’s COVID-19 diagnosis

American stocks are selling in the wake of President Trump, and members of his family and a key staff member, testing positive for COVID-19.

The news, which came overnight, is weighing heavily on all major American indices, but heaviest on tech shares. As of the time of writing, here’s where the mess stands:

  • Dow Jones Industrial Average: Futures off 1.5%
  • S& 500: Futures off 1.63%
  • Nasdaq Composite: Futures off 2.32%

Smaller, and more specific baskets of equities like the Bessemer cloud index do not release similar pre-market numbers, so we cannot see the precise impact that the news, and the potential political destabilization that it may bring, are having on the shares of the tech industry that have flown the highest.

But we can see around the edges: Datadog is off 2.9%. Salesforce is off 1.8%. Zoom is off 1.7%. Crowdstrike is off 3.2%, and so forth. In short, it doesn’t appear that SaaS and cloud stocks are faring better than tech stocks more broadly.

Recent direct listings Palantir and Aasana are off 3.8% and 3.4%, respectively, in pre-market trading. Other recent IPOs are down as well, including JFrog (off 5.8% before the bell), and Snowflake (off 4.6% in pre-market trading).

It’s not hard to guess why the stock market is suffering in the wake of the President’s diagnosis. This close to an already volatile election, complicating factors are deleterious to investor confidence. That’s bad for stocks. And it would be a good moment to have a fully healthy President to help get another round of stimulus done. That package could be undercut by today’s chaos. And on and on.

TechCrunch will keep an eye on the markets as the day continues, but don’t expect your personal accounts to look better at the day’s end than the beginning.

#covid-19, #earnings, #saas, #stock-market, #tc

Stocks are selling off again, and SaaS shares are taking the biggest lumps

It was just days ago that cries of “stocks only go up,” and “no it makes sense that Tesla is going up because it split” and other bits of unironic stupidity were the only thing you could read online about the equities markets. Today, and yesterday, that all went to hell.

Stocks, it turns out, can go down, and they can do so very quickly. And, yes, even Tesla can endure a strong slump, giving up tens of billions of dollars in market capitalization at the same time.

What’s going on? It’s impossible to point to a single thing as the reason, but it’s worth noting that the United States is still suffering from the business impacts of COVID-19, with high unemployment and other related issues plaguing the broader economic climate.

Update: While this piece was in edit, news broke in the FT and the WSJ that SoftBank — yes, that SoftBank — was at least partially responsible for the run-up in tech stocks due to some huge wagers. Obviously we’re still figuring this out, but I wanted to note it here given the above paragraph.

The U.S. had also seen its stock market set successive all-time highs in recent days. Perhaps the better question is why were things so good for so long before this particular two-day (so far) correction to the value of domestic — particularly domestically listed, technology-related — stocks?

And notably it’s the sub-cohort of tech companies that was expected to perform the best in the future that are taking the most lumps. Yes, SaaS and cloud shares, after enjoying a historic run that saw their revenue multiples stretch to what felt like a breaking point, are snapping back, giving back weeks’ worth of gains generated during earnings season (though concerns cropped up more recently).

Yesterday, the damage was severe:

  • Dow Jones Industrial Average: -808 points, or -2.8%
  • S&P 500: -126 points, or -3.5%
  • Nasdaq: -598 points, or 5%
  • SaaS and cloud stocks (via the Bessemer index): -8.2%

That’s a goddamn mess. And today is looking pretty awful as well, though the following results include material bounce-back from session lows:

  • Dow Jones Industrial Average: -381.3 points, or -1.35%
  • S&P 500: -69.5 points, or -2%
  • Nasdaq:  -403.2 points, or 3.5%
  • SaaS and cloud stocks (via the Bessemer index): -6%

Tech stocks are taking the worst hits. And inside of tech stocks, SaaS and cloud stocks are enduring even bigger declines. As we’ve noted that some tech shares have taken lumps when their growth has underwhelmed investors, perhaps we’re seeing the entire SaaS sector see their growth expectations slip?

Bulls may say that the above declines are merely a few weeks’ gains and that the accelerated digital transformation is still a key tailwind for SaaS. Bears may say that this is the start of a real correction in the value of tech shares that had become simply too expensive for their fundamentals. What we can say with confidence is that software shares are in a technical correction, and other equities cohorts that we care about are not far behind.

Monday is an off day for stocks. Let’s see what happens Tuesday and if the bleeding stops or simply keeps on letting.

#earnings, #saas, #stock-market, #tc

Apple’s value soars to a record $2 trillion

A smiling man in glasses and a tee-shirt.

Enlarge / Apple CEO Tim Cook looks on as the iPhone X goes on sale at an Apple Store on November 3, 2017 in Palo Alto, California. (credit: Justin Sullivan/Getty Images)

Apple’s market capitalization hit $2 trillion on Wednesday, making Apple the first company outside Saudi Arabia to reach that milestone. Saudi Arabia’s state-owned oil company, Saudi Aramco, was briefly valued at $2 trillion last December, but Apple surpassed its value last month.

The new milestone comes just two years after Apple first reached a market capitalization of $1 trillion. It’s particularly remarkable because Apple market capitalization was below $1 trillion as recently as March, when fears of a coronavirus-induced recession were battering stocks across the board.

But while the coronavirus has created economic hardship for many companies and workers, it’s been a boon to Apple and other big technology firms. Unable to spend cash on experiences like dining out or going on vacation, consumers who still have jobs have splurged on digital gadgets instead.

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#apple, #iphone, #stock-market, #tech

Is your net worth too closely tied to your company’s success?

Now that I’ve offered an overview to help you think through where concentrated stock sits in your overall plan, let’s take a closer look at why selling can be challenging for some.

In the following section, I reveal the facts of the concentrated stock “get rich” myths that reside in the minds of many first-time concentrated stock owners, and I show why it is prudent to consider greater diversification.

Keep reading to learn more about the benefits of diversification, discover how much company stock is likely too much to hold, and the options you have when it comes to diversifying strategically.

Dangers of concentration

There are several hard facts to keep in mind in contemplating maintaining a concentrated position:

  1. It’s stating the obvious, but not all stocks are AAPL or AMZN. Hendrik Bessembinder published research that found the best performing 4% of listed companies explained the returns for the entire U.S. stock market since 1926. The remaining 96% of stocks collectively matched the performance of U.S. Treasury bills. Since 1926, 58% of stocks have failed to beat one-month Treasury bills over their lifetimes. Forty percent of all Russell 3000 (an index of the 3000 largest publicly traded companies in the U.S.) have lost at least 70% of their value from their peak since 1980.
  2. Despite all this, broad-based equities have returned 9%+ a year, beating most other asset classes, ultimately due to the top 4% of stocks. Although there is no guarantee anyone can single out any of the top 4% going forward, diversification will guarantee you will own the top 4%.
  3. Even if the concentrated stock you own will be another AAPL/AMZN, both stocks have experienced declines of 90%+ at some point throughout their lifetimes. Most investors would not be able to have conviction and stay invested, especially if that concentrated stock was driving the majority of their portfolio returns and net worth. Sometimes catastrophic declines are a function of the industry or existential threats that have little to do with the company itself. Other times, it has everything to do with the company and nothing to do with external factors.

The odds of any new IPO being among the top 4% is just slightly better than hitting your lucky number on the roulette wheel. But is your investment portfolio success and the odds of achieving your long-term financial goals something you want to spin the wheel on?

Benefits of diversification

Excess volatility can harm returns. Note the example below that shows the comparison between a low-volatility diversified portfolio versus a high-volatility concentrated portfolio. Despite the same simple average return, the low-volatility portfolio below materially outperforms the high-volatility portfolio.

Image Credits: Peyton Carr

Beyond the math, unexpected spikes in volatility can cause significant price declines. Volatility increases the chances that an investor reacts emotionally and makes a poor investment decision. I’ll cover the behavioral finance aspect of this later. Lowering your portfolio volatility can be as simple as increasing your portfolio diversification.

The Russell 3000, an index representing the 3,000 largest U.S.-based publicly traded companies, has lower volatility when compared against 95%+ of all single stocks. So, how much return do you give up for having lower volatility?

According to Northern Trust Research, the 5.96% annualized average return of the Russell 3000 is 0.73% more than the 5.23% return of the median stock. Additionally, owning the Russell 3000, rather than a single stock, eliminates the likelihood of catastrophic loss scenarios — more than 20% of shares averaged a loss of more than 10% per year over a 20-year time frame.

If this establishes that the avoidance of overly concentrated portfolios is important, how much stock is too much? And at what price should you sell?

How much of your company’s stock is too much?

We consider any stock position or exposure greater than 10% of a portfolio to be a concentrated position. There is no hard number, but the appropriate level of concentration is dependent on several factors, such as your liquidity needs, overall portfolio value, the appetite for risk and the longer-term financial plan. However, above 10% and the returns and volatility of that single position can begin to dominate the portfolio, exposing you to high degrees of portfolio volatility.

The company “stock” in your portfolio often is only a fraction of your overall financial exposure to your company. Think about your other sources of possible exposure such as restricted stock, RSUs, options, employee stock purchase programs, 401k, other equity compensation plans, as well as your current and future salary stream tied to the company’s success. In most cases, the prudent path to achieving your financial goals involves a well-diversified portfolio.

What’s stopping you?

Facts aside, maintaining a concentrated position in your company stock is far more tempting than taking a more measured approach. Token examples like Zuckerberg and Bezos tend to outshine the dull rationale of reality, and it’s hard to argue against the possibility of becoming fabulously wealthy by betting on yourself. In other words, your emotions can get the best of you.

But your goals — not your emotions — should be driving your investment strategy and decisions regarding your stock. Your investment portfolio and the company stock(s) within it should be used as tools to achieve those goals.

So first, we’ll take a deep dive into the behavioral psychology that influences our decision-making.

Despite all the evidence, sometimes that little voice remains.

I want to hold the stock.

Why is it so hard to shake? This is a natural human tendency. I get it. We have a strong impetus to rationalize our biases and not believe we are vulnerable to being influenced by them.

Becoming attached to your company is common, since after all, that stock has made you, or has the potential of making you wealthy. More often than not, selling and diversifying is the tough, but more rational decision.

Numerous studies have furnished insights into the correlation between investing and psychology. Many unrecognized psychological barriers and behavioral biases can influence you to hold concentrated stock even when the data shows that you should not.

Understanding these biases can be helpful when deciding what to do with your stock. These behavioral biases are hard to spot and even harder to overcome. However, awareness is the first step. Here are a few more common behavioral biases, see if any apply to you:

Familiarity bias: Familiarity is likely why so many founders are willing to hold concentrated positions in their own company’s stock. It is easy to confuse the familiarity with your own company with the safety in the stock. In the stock market, familiarity and safety are not always related. A great (safe) company sometimes can have a dangerously overvalued stock price, and terrible companies sometimes have terrifically undervalued stock prices. It’s not just about the quality of the company but the relationship between the quality of a company and its stock price that dictates whether a stock is likely to perform well in the future.

Another way this manifests is when a founder has less experience with stock market investing and has only owned their company stock. They may think the market has more risk than their company when in actuality, it is usually safer than holding just their individual position.

Overconfidence: Every investor is exhibiting overconfidence when they hold an overly concentrated position in an individual stock. Founders are likely to believe in their company; after all, it already achieved enough success to IPO. This confidence can be misplaced in the stock. Founders often are reluctant to sell their stock if it has been going up since they believe it will continue to go up. If the stock has sold off, the opposite is true, and they are convinced it will recover. Often, it is challenging for founders to be objective when they are so close to the company. They commonly believe that they have unique information and know the “true” value of the stock.

Anchoring: Some investors will anchor their beliefs to something they experienced in the past. If the price of the concentrated stock is down, investors may anchor their belief that the stock is worth its recent previous higher value and be unwilling to sell. This previous value of the stock is not an indicator of its real value. The real value is the current price where buyers and sellers exchange the stock while incorporating all presently available information.

Endowment effect: Many investors tend to place a higher value on an asset they currently own than if they did not own it at all. It makes it harder to sell. An excellent way to check for the endowment effect is to ask yourself: “If I did not own these shares, would I purchase them today at this price?” If you are not willing to purchase the shares at this price today, it likely means you are only holding onto the shares because of the endowment effect.

A fun spin on this is to look into the IKEA effect study, which demonstrates that people assign more value to something that they made than it is potentially worth.

When framed this way, investors can make more intentional decisions on whether to continue holding concentrated stock or selling. At times, these biases are hard to spot, which is why having a second person, a co-pilot, or an advisor, is helpful.

Take control

Congratulations to those of you with a concentrated stock position in your company; it is hard-earned and likely represents a material wealth. Understand, there is no “right” answer when it comes to managing concentrated stock. Each situation is unique, so it is essential to speak with a professional about options specific to your situation.

It starts with having a financial plan, complete with specific investment goals that you want to achieve. Once you have a clear picture of what you want to accomplish, you can look at the facts in a new light and gain a deeper appreciation for the dangers of holding a concentrated position in company stock versus the benefits of diversification, considering all of the implications and opportunities involved in rational decision-making and investment behavior.

What are my choices if I want to diversify?

Most individuals understand they can simply and directly sell their equity, but there are a variety of other strategies. Some of these opportunities may be far better at minimizing taxes or better at achieving the desired risk or return profile. Some might wonder what the best timing is to sell. I will cover these topics in the final article of the series.

#column, #economy, #entrepreneurship, #exit, #finance, #funding, #fundings-exits, #investment, #ipo, #startups, #stock-market, #tc

NYSE seeks SEC approval for more direct listings

The New York Stock Exchange filed an amendment today with the Securities and Exchange Commission to allow for more direct listings.

Direct listings offer a more streamlined method for companies to go public and raise capital than traditional IPOs — which entail a lengthy roadshow process and involvement of underwriters to determine valuations and share-prices.

Traditionally, direct listings have been available to companies only for follow on raises, after they’d completed the conventional initial public offering process.

The NYSE allowed tech companies Slack and Spotify to list directly in 2018 and 2019 and Silicon Valley insiders, such as VC Bill Gurley, have encouraged companies to pursue the method.

AirBNB — which this month revived talks of going public in 2020 — has said it would consider a direct listing rather than a traditional IPO.

The NYSE filed a proposal with the SEC in December to allow for more direct listings, but that was declined without public comment.

The amendment offered today provides more details on how the direct listing process would work, according to the NYSE’s Vice Chairman, John Tuttle.

“What we did, versus the early versions of the filing, is to [offer] a very granular, mechanical breakdown of how we would execute this type of transaction,” he told TechCrunch on a call.

Most of that surrounds how new shares are numbered, valued and priced in a direct listing. Traditional IPOs rely on underwriters —  that also charge hefty fees — to determine opening share-price, and that can swing widely once the stock actually goes to market.

The NYSE touts direct listings as a less costly way to go public and one that could lead to a less volatile price discovery process.

On when the NYSE’s proposed direct listing proposal could be approved or (denied), “The timeline is up to the SEC. Their first deadline for any action is this Saturday,” said Tuttle.

Updates to the listing process are just some of the changes that could come to New York Stock Exchange. The 228 year old, Wall Street based organization continued trading virtually through the COVID-19 outbreak, using digital platforms.

The pandemic could lead to the NYSE becoming less of a work from office entity and more a remote, work from home company in the future, Tuttle told TechCrunch in April.

#airbnb, #corporate-finance, #direct-listings, #economy, #finance, #initial-public-offering, #john-tuttle, #new-york, #new-york-stock-exchange, #slack, #spotify, #stock, #stock-market, #tc, #vice-chairman

All bets are off as Hertz pulls plan to issue $500 million in new stock

Hertz, which filed for bankruptcy last month, halted its $500 million stock offering Wednesday after the U.S. Securities and Exchange Commission told the rental company it would review its controversial plan to sell shares that could soon be wiped out completely.

Hertz disclosed Monday that it would issue a $500 million stock offering following approval from the U.S. Bankruptcy Court for the District of Delaware . Last week, the court gave Hertz permission to sell up to 246.8 million unissued shares (about $1 billion) to Jefferies LLC.

The financially strained company was aiming to tap into a new pool of speculative short-term retail investors in an effort to raise capital. But that plan got the SEC’s attention. Staff at the regulatory agency reached out to Hertz on Monday afternoon and told the company it intended to review its Prospectus Supplement, according to an SEC filing Wednesday. Trading was halted briefly Wednesday prior to Hertz’s announcement.

More from Hertz:

After discussions with the Staff, sales under the ATM Program were promptly suspended pending further understanding of the nature and timing of the Staff’s review. The company is not currently offering any shares under the ATM Program. The company’s advisors have been in regular contact with the Commission since the Staff’s initial contact on June 15, 2020. 

As COVID-19 spread throughout the globe, business trips and other travel stopped, leaving Hertz with an unused asset — lots and lots of cars. It wasn’t just that revenue stopped coming in; used car prices plummeted, further devaluing its fleet.

Hertz filed for Chapter 11 bankruptcy May 22. But as its business dried up, prospectors jumped in. Retail investors, including those using the Robinhood trading app, invested in Hertz and drove up the stock price. Hertz stock dropped more than 83% between February 21 and March 18. It rose briefly and then continued to slide until May 26, when shares closed at $0.56 (that’s down 97.24% from the closing high in February).

Robinhood traders looked at Hertz and didn’t see the poor fundamentals; they saw opportunity. By March 18, more than 3,500 Robinhood users held Hertz stock, according to Robintrack. A month later, that number popped to more than 18,000, and then nearly doubled to surpass 43,000 users by May 21. It peaked June 14, when more than 170,000 Robinhood users held Hertz stock. The stock price rose 887.5% since that May 26 low, until it reached $5.53 on June 8. Shares of Hertz have since fallen 63.8% and closed Wednesday at $2.

#advisors, #atm, #automotive, #corporate-finance, #delaware, #finance, #hertz, #money, #robinhood, #stock, #stock-market, #u-s-securities-and-exchange-commission

How to protect your equity if you’ve been furloughed or laid off

If you’ve been lucky enough to keep your job or business, you almost certainly know someone who wasn’t so fortunate.

Thousands have lost their jobs as companies significantly reduce workforces to adjust to uncertainties and economic challenges created by COVID-19. Many of these people in tech are now faced with a number of questions, from how they’ll pay next month’s rent to whether they’re eligible for unemployment. One area that is particularly confusing is what to do if your compensation package was tied to equity.

Here are some ways I suggest approaching the issue.

Safeguard your equity

Layoffs have become part and parcel of the current economic crisis with unemployment figures skyrocketing to record highs as a result of COVID-19. From multinational conglomerates to mom-and-pop stores, everyone is feeling the impact, and the startup sector is no different.

Despite difficult circumstances, the silver lining for employees is that we have seen many management teams go the extra mile to help their teams, especially when it comes to equity. Compared to traditional layoff situations, companies in the COVID-19 era are offering generous extensions and accelerated vesting on their options, which is undeniably good news for employees with equity.

Typically, equity plans come with a 90-day exercise window after employment termination. That means that if you leave the company, you will have to exercise your options within 90 days or they go back to the company. However, lots of management teams have decided to extend these deadlines many years out given the circumstances.

While layoffs are not easy, it’s been great to see management teams doing the right thing when it comes to equity for their employees who have been laid off. Offering extensions is a benefit that employers should be offering their employees who have helped build the company.

If your company is not offering this, consider negotiating and asking for an extension. This is the right thing to do for employees who are now out of work and a paycheck for the foreseeable future. Both options do not require the company to pay cash at the moment, so there are few reasons a company should deny this request in this environment.

Consider exercising your options

Even if you are granted an extension to exercise your options, employees that hold incentive stock options (ISOs) should look into exercising their options now to maximize their equity’s value.
Many companies are offering extensions for option exercises. While this is great in that it gives employees more time to figure out their exercise situation, waiting past the 90-day window may have much bigger tax consequences that employees need to consider.

ISOs are much more tax advantageous compared to non-qualified stock options (NSOs). They are not taxed under standard income tax and if you sell the stock two years after grant date and one year after exercise date, you sell them as part of a qualifying disposition. In short, this allows you to effectively convert everything north of your strike price to preferential long-term capital gain rates.

As part of offering these tax advantages, the tax code has limitations on ISOs. Most relevant to us at this point is that the fact that you cannot have ISOs past 90 days after you are no longer an employee. This means that even if your company allows an extension on your stock options past the typical 90-day expiration window, your ISOs will convert to NSOs and lose their tax benefit.

This creates a potential planning opportunity that employees who have been laid off need to consider. If you feel good about the upside of the company, then you should consider exercising your ISOs today to capture the potential tax benefits rather than letting them convert to NSOs. Employees who wait risk putting themselves in the same difficult situation once the extension ends at typically less favorable conditions due to an increased 409A valuation.

Negotiate for equity during a pay cut or furlough

In light of the economic slowdown many companies have begun to cut costs. Reduced pay or furloughing employees has become the new norm as businesses of all sizes struggle to navigate these changing times.

It can obviously be concerning if you find yourself in this situation. But for startup employees, the COVID-19 crisis could provide an opportunity to negotiate your compensation package to make up for this decrease, and even set yourself up to prosper in the future.

Startups typically offer equity as a means of deferred compensation and as a way to incentivize employees to own a piece of the company they are building. The compensation is deferred as most startups are cash-strapped and cannot afford to pay you what a larger company may be able to.

If your company is now asking you to take a pay cut, or even take no pay during this time, you should consider asking for additional equity to make up for the lost compensation. While not all companies may be amenable to offering more equity, there is no cash outlay from the company’s standpoint, so it’s an efficient way for your company to compensate you for your sacrifice while preserving their cash.

In addition, offering more equity shows a commitment from management to their employees during this difficult time. It may be the win-win scenario for your company and yourself in the long-run so it’s worth having the conversation with management to discuss if this is available for you.

If your company does offer you more equity, make sure you ask whether the 409A (or fair market value) of the company is being updated. With revised forecasts given the COVID-19 situation, it may be possible for your company to issue your stock at a lower strike price if the company revalues its 409A.

Don’t be afraid to ask for help

I can sympathize with startup employees right now because I faced a similar situation when I left a startup that I had joined as employee number four and was forced to wave goodbye to the equity I had banked on.

If you want to take action on equity but don’t know where to start, now might be a good time to brush up on how your stock options work. As the economy begins to reopen, there’s a good chance we’ll see a rush for candidates in tech as companies compete to bring in some of the extremely talented folks who lost their jobs this week.

Those who have a good understanding of equity may be positioned for a big payday down the line.

#column, #coronavirus, #corporate-finance, #covid-19, #equity, #finance, #options, #startups, #stock, #stock-market, #vesting

New earnings report shows Microsoft’s shift to cloud and subscriptions is working

Promotional image of desktop computer.

Enlarge / Xbox Series X, due in late 2020. It’s tall. And it has a modified controller compared to the Xbox One pad. (credit: Xbox)

The gauntlet of tech earnings reports has mostly come to a close, and there’s a wide range of performance. Almost every part of the tech industry has been rattled by COVID-19, but Microsoft managed to report accelerated growth and strong performance for all of its businesses. It’s a sign that the software company’s efforts to reinvent itself may be working—and that cloud and subscription services will define the company (and with it, customers’ experiences with its products) for years to come.

Microsoft’s Q3 2020 earnings report showed significant growth for all three of the company’s business segments, which hasn’t even always happened in a “normal” quarter. Productivity, which includes services like Office and LinkedIn, grew 16 percent year over year to $11.7 billion in revenue—that’s a small step down compared to $11.8 in the immediate preceding quarter. Cloud, which includes Azure and GitHub, grew 27 percent year over year to $12.3 billion. And personal computing—an umbrella that covers Windows, Xbox, and Surface—grew a more modest 3 percent year over year to $11 billion.

All told, Microsoft’s revenue for the quarter was $35 billion, down $2 billion from the previous quarter but up 15 percent from last year’s Q3. Even Xbox, which saw an 11 percent drop last quarter, grew by three points. Microsoft this week announced that Xbox Game Pass, a Netflix-like subscription for accessing about 100 games on the Xbox One and Windows 10 platforms, reached 10 million subscribers—more evidence that subscription services and the like are now integral to the company’s strategy across all its businesses.

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#azure, #cloud-services, #earnings, #microsoft, #microsoft-azure, #stock-market, #tech

In an unusual investor call, Apple reports flat quarterly earnings amid COVID-19

A serious man in a business suit.

Enlarge / Apple CEO Tim Cook. (credit: Drew Angerer/Getty Images)

Despite disruptions to both supply and demand caused by the global COVID-19 pandemic, Apple posted $58.3 billion in revenue in its second quarter, eking out 1 percent growth over last year’s second quarter.

This beat some recent expectations by investors, but it falls well behind the $63-67 billion guidance for the quarter the company initial gave before the coronavirus’ effects were fully felt. Apple’s retail stores have been closed around much of the world, and for a period of time earlier this year, its ability to assemble iPhones and other products was hampered as the virus first spread in China.

CEO Tim Cook spoke optimistically about the company’s long-term prospects on a call with investors today, but in a break with common practice, Apple did not provide guidance for the next quarter, citing the inability to predict the pandemic’s future impact. “We have great confidence in the long-term of our business,” Cook said. “In the short-term, it’s hard to see out the windshield to know what the next 60 days look like, and so we’re not giving guidance because of that lack of visibility and uncertainty.”

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#apple, #coronavirus, #covid-19, #earnings, #stock-market, #tech, #tim-cook

NYSE trading and IPOs won’t halt through COVID-19 says vice chairman

Trading and IPOs on the New York Stock Exchange will continue through any economic tremors the COVID-19 crisis may cause.

That’s according to the NYSE’s vice chairman, John Tuttle, who spoke to TechCrunch on business continuity and how the coronavirus pandemic could impact future operations of the world’s largest stock market.

Like much of the commercial universe, COVID-19 has induced some never-before events for the securities exchange, while testing the 228-year-old organization’s tech and contingency planning.

During the second week of March — when a U.S. coronavirus outbreak appeared inevitable — markets began to react to the economic damage COVID-19 could cause.

For the remainder or March, trading on the NYSE was halted an unprecedented four times after market drops triggered internal circuit breakers put in place to stem panic sell-offs.

After the DOW lost 30% of its value, there was fear of a sustained stock free-fall and calls from many corners — including big tech and Congress — to shutdown U.S. stock markets.

Simply turning off the trading switch for a company with over 2,000 company listings wasn’t an option then, and is an unlikely one moving forward, for a number of reasons, according to Tuttle.

“It’s incredibly important to keep the markets open during this period. While people may not like the prices…they know that they can access the marketplace,” he told TechCrunch on a call.

Equities trading goes beyond 401(k) valuations, he noted, to serve a broader function to companies, investors and the economy — namely that of providing liquidity and access to capital.

“The ability as an institutional investor or an individual investor to exchange your shares for cash or cash for shares is incredibly important to maintaining confidence in the financial marketplace,” he said.

For companies, a market shutdown would “limit their opportunities to access the capital they need to keep their businesses functioning,” according to Tuttle.

He noted that since the U.S. COVID-19 outbreak, two NYSE listed companies — Slack and Carnival Cruise Lines —  have tapped debt and equities markets for funding.

Rather than shut down completely, the New York Stock Exchange has closed its 11 Wall Street location and trading floor to all but a skeleton crew. NYSE staff continue to operate on a remote basis, with traders accessing the exchange’s systems and virtual board electronically.

Image Credits: Spencer Platt/Getty Images

The organization has an internal engineering team and has developed its own trading and communications platform called Pillar.

“Our philosophy is we want to design, build and own the technology that powers our marketplace,” said Tuttle.

The NYSE will continue to manage any market volatility caused by the COVID-19 pandemic through the circuit-breaker system — implemented by the SEC for large U.S. trading platforms after the Black Monday stock crash of 1987.

There are three circuit-breaker thresholds that switch on — and automatically pause trading — for significant declines in the S&P 500’s previous day value: a Level 1 (for a 7% drop), Level 2 (at 13%) and Level 3 (at a 20% decline), per info provided to TechCrunch by the NYSE.

“They are in place as protection to our markets. I think that’s an important part of the U.S. marketplace… we’ve built a system where we can be open rain or shine. Good or bad and allow people and firms access to capital,” said Tuttle.

On raising funds through public listings, the NYSE’s remote work scenario hasn’t restricted that option.

“When it comes to the IPO pipeline…we are open for companies to access the marketplace and we can execute IPOs in a purely electronic manner. We can even do it in a completely remote manner,” said Tuttle.

He noted that the listing market had pretty much ground to a halt since the COVID-19 outbreak in the U.S.

“But we have seen companies that are less impacted by the macro environment continue to move forward with their IPO plans,” Tuttle said.

“Some of the healthcare and biotech companies that are in the pipeline are still planning to come to market in the relatively near term.”

The NYSE is evaluating on a day to day basis the physical re-opening of the trading floor and returning the bulk of its staff to 11 Wall Street.

“We’re going to continue to monitor events and when we feel like we can bring people back and we’re comfortable with their safety and well-being, we’ll open,” said Tuttle.

Whenever that occurs — from an operating perspective — the NYSE is likely to join a list of companies that pivot to a more remote work stance post-COVID-19.

“Historically, we are a New York, Wall Street, work from the office type company. In a very short period of time we shifted to a 100% remote company,” said Tuttle.

“That’s something of a transformation in the New York Stock Exchange that for the first time in 228 years we’ve operated the markets and the company remotely.”

#congress, #coronavirus, #covid-19, #economy, #euronext, #healthcare, #initial-public-offering, #new-york, #new-york-stock-exchange, #nyse, #slack, #stock-market, #tc, #techcrunch, #u-s-securities-and-exchange-commission, #united-states

Markets dragged down by abysmal retail sales and factory output

U.S. major stock indexes fell in Wednesday trading as new data from the Commerce Department and Federal Reserve indicated a collapse in manufacturing output and retail sales.

However, the declines did not completely erase yesterday’s gains in another sign that U.S. investors and corporations may be better positioned to withstand the economic shocks caused by the COVID-19 epidemic than most of the employees of the same businesses.

The numbers coming from the Commerce Department were especially grim. The value of U.S. retail sales have fallen 8.7% over the last month. That’s the biggest decline on record, dating back to 1992. Factory production had its worst month since the end of World War II. Output from factories fell a stunning 6.3% in March.

Market declines could have been worse, given the extent of the bad news coming from the industrial and retail sector. Perhaps investors were buoyed by the knowledge that stimulus checks could begin rolling out soon (if the addition of the president’s signature doesn’t slow down their release).

  • Dow Jones Industrial Average slid 1.86% to 23,504.35, a decline of 445.41 points
  • S&P 500 tumbled 2.20% to 2,783.36, a loss of  62.70 points
  • Nasdaq fell 1.44% to 8,393.18, shedding 122.56 points

While the major indices fell, a collection of SaaS and cloud stocks actually posted gains on the day.

As TechCrunch reported this morning, the Dow and its peers are up a little under 30% from lows, though they remain under recent, record highs. So the markets are somewhat parked between their prior optimism, and more recent pessimism. No one is sure what’s going to happen next, perhaps.

But while the stock market might be a mixed-message, Amazon, a famous tech company, reached an all-time share price high today. Closing the day worth $2,307.68 per share, Seattle’s e-commerce and computing giant closed the day up just over 1%. In a down market, Amazon was the day’s obvious standout.

#amazon, #capitalism, #computing, #department-of-commerce, #dow-jones-industrial-average, #e-commerce, #earnings, #economy, #president, #seattle, #stock-market, #tc, #united-states

The odd reality of today’s stock market

As the COVID-19 death toll in the United States continues to climb, American stocks are, in a grim divergence, recovering lost ground.

It isn’t clear precisely why locally-listed equities have risen in recent weeks, let alone today, but let’s go over the day’s results so that we’re all on the same page.

In regular trading today, the Dow Jones Industrial average rose 558.99 points, or 2.39%, while the broader S&P 500 rose 84.83 points, or 3.06%. But it was the tech-heavy Nasdaq that posted the largest rally of the major American indices by gaining 323.32 points or 3.95%. Niching into the tech sector itself, SaaS and cloud companies measured by the Bessemer cloud index rose 49.16 points, or 4.18% on the day.

Returning to the why, here are some hypotheses: CNBC wrote that the markets rallied “on improving virus outlook,” Bloomberg observed that shares rose “after signs virus outbreak is easing,” and CNN Business posited that today’s gains came “amid optimism over better-than-expected trade data from China.” On the same theme, MarketWatch wrote that the markets were up “as states weigh reopening economy,” while Barrons pointed to earnings being “better than expected.”

Reading just the headlines, you might think that things were economically fine in the United States. They aren’t; unemployment is still rising sharply around the country with millions of jobs lost each week, the nation’s food supply is slipping, farmers are dumping food while bread lines surge, and we’re still losing nearly two thousand humans each day in the US to COVID-19.

But that’s the public market. In the private markets, it’s a different tune: every person I talk to concerning the domestic private market is expecting a recession of at least a quarter or two, and most anticipate a “U” shaped recovery instead of a “V” shaped return to form. Hell, you can look at China’s re-opening and see our future; v-shaped our next months will not be.

Which is why we’re bringing you today’s stock market tallies. Things have sharply rebounded, so much so in fact that if you calculate from recent bottoms you could confuse yourself:

  • Dow Jones Industrial Average % ∆ from 52 week lows: +31.5%
  • S&P 500 % ∆ from 52 week lows: +29.6%
  • Nasdaq % ∆ from 52 week lows: +28.4%

Feeling better? I’m not.

The gap between public optimism and private pessimism is the reverse of what we’ve seen before, but it makes about as much sense. There may be a way for both the private market and public market to be right, but I doubt it. Every venture capitalist is talking about B2B companies seeing falling sales and rising churn. And since the stock market last reached record lows, the world has only gotten worse. To see gains, then, in shares as business quality crumbles is odd..

And, finally, if they aren’t then what an economy, right?

#capitalism, #china, #cnbc, #companies, #dow-jones-industrial-average, #earnings, #economy, #food, #food-supply, #nasdaq, #stock-market, #tc, #united-states

Tech shares close down on the day despite roaring start

American equities closed down today, with the major domestic indices all losing ground after a wild trading cycle. After starting the day up sharply higher after strong Monday gains, those gains were erased as the day closed. It was a day of confusing movement; the tech-heavy Nasdaq Composite, to pick an example, had a range on the day of more than 3%, despite closing off just a tenth of that figure.

Divining the correct reason for movement in the stock market is a fool’s errand most days. Today, however, it isn’t hard to point to at least part of the reason for the reversed gains: a possibly record-setting one-day domestic death toll from COVID-19. Per collected data, deaths for the day as of the time of writing came to 1,690, with several high-infection states yet to report.

Here are the day’s results:

  • Dow Jones Industrial Average (DJIA): -26.13, -0.12%
  • S&P 500: -4.27, -0.116%
  • Nasdaq Composite: -25.98, -0.33%

Shares of SaaS and cloud companies dropped more sharply, with the Bessemer cloud index falling 1.88% on the day. Oil also fell, with WTI crude dropping more than 7% as of the time of writing.

Are you a bit sandblasted by all the volatility? Let’s update you on how the major indices have performed since their recent highs:

  • DJIA change from 52 week highs: -23.4%
  • S&P 500 change from 52 week highs: -21.63%
  • Nasdaq Composite change from 52 week highs: -19.83%

And for good measure, the Bessemer cloud index is off 24.09% from recent highs. So everything is in bear market territory at the moment — even after Monday’s huge gains — except for the Nasdaq Composite, which remains merely in deep correction. Not great news for anyone with a 401k balance, but the numbers were worse on Friday.

Today the market tried to go up again and failed. Let’s see what tomorrow’s COVID-19 data shows us. It just may drive the markets yet again.

#bessemer, #coronavirus, #covid-19, #earnings, #saas, #stock-market, #tc

Asian stock markets fall as COVID-19 is declared a pandemic

American stock markets plunged on Wednesday, after the World Health Organization officially declared the spread of COVID-19 a pandemic. In Asia, meanwhile, almost all the major stock indexes were also trading lower the morning after the WHO’s announcement, with the Asia Dow Index down 4% by midday.

Morning trading in East Asian markets was ongoing by the time President Donald Trump made an address in which he announced a 30-day travel ban from the European Union to the United States.

In Japan, the benchmark index, the Nikkei 225, had fallen 3.6% as of mid-afternoon. The Nikkei Jasdaq, seen as an index for smaller companies and startups, was down 3.4%. Both recovered slightly in the afternoon after a morning drop.

The Hong Kong Stock Exchange fell 3.6% by early afternoon, while the Shanghai Stock Exchange composite index was down 1.6%.

The FTSE Straits Times Index, the benchmark index for Singapore, fell 3.7% by early afternoon, while Taiwan’s TSEC was down 4%.

The Mumbai Sensex was down 6.8% as of late morning trading in India.

#asia, #coronavirus, #covid-19, #stock-market, #tc

Turbulent trading leads to market gains as stocks recover, SaaS lags

Sometimes, it takes only the promise of a massive government bailout to put that rose-colored filter on the effluent sandwich of today’s economic realities.

After yesterday’s terrifying sell-off, American equities recovered today, with the major domestic indices rising to close the day. While the day’s gains do not erase yesterday’s losses, they are a welcome return to form for equity markets long-accustomed to rising.

The final results in less turbulent times would be more shocking, but today the Dow Jones Industrial Average rose 1,167.1 points, or 4.89%, the S&P 500 rose 135.7 points, or 4.94%, while the Nasdaq Composite picked up 393.6 points, or 4.95%.

SaaS and cloud stocks, however, lagged their broader sector, only managing a 3.1% gain, according to the Bessemer-Nasdaq cloud index. This means that after SaaS and cloud stocks lost more yesterday (in percentage terms), they also recovered less than their peers. After a long period of leading, modern software companies are being repriced in the public markets, possibly leaving the company category with less of a premium over other tech companies.

The rally was broad, with bitcoin ending a period of decline, and oil sharply ascending.

Still, the public markets are down from their heights. The Dow is off 15%, and touched a new 52-week low today before recovering. The S&P is also off a smidgen over 15%, while the Nasdaq is down a hair more at 15.2%, compared to its recently set 52-week highs.

A few more days like today are needed, then, to fully repair the damage. And there’s still the overhang of bad news, including: a quarantine zone set up in New Rochelle, N.Y.; the terrible shape of oil and gas companies’ debt loads; and the lack of any clarity around an actual bailout from the government.

Hopefully tomorrow morning stocks are quiet, and then the TechCrunch Public Markets Crew (Shiebs and Alex) can stop writing these posts. Until then, however, expect more.

As a final note, Apple and Microsoft are still trillion-dollar companies. So even in the throes of this correction, tech is hardly in the dumps. And the Nasdaq is up 12.6% over the last year.

#dow-jones-industrial-average, #finance, #nasdaq, #stock-market, #tc