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Kodak, The SEC, Instagram Reels, TikTok and Disney’s Earnings

Kodak’s big week draws the SEC’s attention, Instagram debuts its TikTok clone in the U.S. and Disney reports a rare quarterly loss.
Ukraine, Lviv - January 26, 2017: Kodak film roll and Kodak film box on wood table and vintage background. (By Rizhka Nazar)
Ukraine, Lviv - January 26, 2017: Kodak film roll and Kodak film box on wood table and vintage background. (By Rizhka Nazar)
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Good morning! Today’s word count is 1,315 words, or an 8-minute read. Let’s get to it:

“U.S. stocks rose after White House negotiators said they aim to reach a deal on a new coronavirus-relief package by the end of the week,” The Wall Street Journal writes.

  • S&P 500: $3,317.37
  • Nasdaq: $10,967.90
  • Bitcoin: $11,210.45
  • U.S. 10-Year: .548%

Kodak Loan Disclosure and Stock Surge Under SEC Investigation

Eastman Kodak experienced monster growth last week, with shares rising as high as $60 before falling to around $15 due to dilution, thanks to news of a massive government loan to make drugs at its U.S. factories. But in the wake of the loan disclosure and stock surge, the Securities and Exchange Commission has opted to investigate the circumstances.

Why It Matters

There was money to be made.

  • The price spike “produced a potential windfall for company executives who owned stock-option grants, some of which were granted on July 27, the day before the loan was officially announced.” Though the company has said some of the stock options were issued to protect against dilution.
  • “On Monday, Sen. Elizabeth Warren (D., Mass.) asked the SEC to probe whether any illicit trading occurred before the loan announcement. In a letter to SEC Chairman Jay Clayton, Ms. Warren wrote she was concerned about stock purchases by Kodak directors last month, ‘at a time when Kodak and the Trump administration were negotiating the deal in secret.’”

SEC rules require public companies to ensure the accurate and timely disclosure of information.

  • Kodak has stated the loan details aren’t finalized, and its possible one isn’t made.
  • The Wall Street Journal reported last week Kodak had begun to share information about a potential agreement with the Trump administration with media outlets. Some of it was published, but then deleted following a request from the company.

It’s too early to say.

  • The SEC investigation is in the preliminary stages and may not produce any allegations of wrongdoing.

Numbers to Consider

  • $765 Million – The size of the government loan Kodak announced it was receiving.
  • $15.51 – Kodak’s open price Wednesday.

Read More: (WALL STREET JOURNAL)

Instagram’s Short-Video Feature Reels Debuts in U.S. as Threats to TikTok Mount

Facebook officially launched its TikTok clone, Instagram Reels, in the U.S. Wednesday, bolstering its effort to take over the short-form video market as TikTok’s future remains uncertain. Following successful test runs in India, Brazil and France, the home-market debut of Reels could be an opportunity to leverage Instagram’s massive user base and poses a significant threat to TikTok’s market share.

Why It Matters

This isn’t Facebook’s first clone.

  • Four years ago, Instagram rolled out its Stories feature, mimicking Snapchat’s disappearing message style. It’s since become one of the app’s most popular features.
  • Facebook also launched Lasso in 2018, a direct competitor and copycat to TikTok. It failed to catch on and ended up being a casualty of the preparation for Reels.

Reels offers a twist on TikTok’s approach.

  • Like TikTok, Reel is geared toward pushing users the most engaging content on the platform.
  • However, Reels limits videos to 15 seconds instead of a minute and offers proprietary special effects.
  • Instagram has a deep and diverse toolbox to throw resources at creators to lure them onto the new platform.

It’s do-or-die time for TikTok right now.

  • Questions about TikTok’s data practices have continually been raised over its Chinese roots.
  • The app had already been banned in India, its largest market, and President Trump announced his intentions to do the same last week. However, Trump did soften his stance to allow for a U.S.-based sale.
  • Microsoft is in talks to try and buy TikTok’s U.S. operations, but with a Sept. 15 deadline, it’s unclear whether a deal to save the app will be completed.

The short-form video market is growing competitive.

  • Users are now downloading other video apps such as byte, Zynn, Triller and Clash.
  • “But if Reels is a U.S. hit, it could make Instagram one of the world’s most popular short-video apps,” The Wall Street Journal writes. 

Numbers to Consider

  • 1 Billion – The approximate size of Instagram’s user base worldwide.
  • 100 million – TikTok’s approximate American user base.

Read More: (WALL STREET JOURNAL)

A Quick Look

Disney Earnings Report Reveals Rare Loss

  1. Disney posted a quarterly loss of $4.72 billion as the “majority of its business segments reeled from government efforts to corral the coronavirus by shutting down public spaces around the world.” Disney’s last quarterly loss, of roughly $567 million, came in early 2001.
  2. It’s a steep drop from its profit of $1.43 billion in the year-earlier period. Total revenue dropped 42 percent to $11.8 billion.
  3. The pandemic did provide a bump in subscribers on the Disney+ platform. The streaming service has acquired more than 60 million users in nearly nine months, a milestone that took Netflix eight years to achieve. 
  4. Disney’s theme parks were hit the hardest in the most recent quarter. The company estimated the pandemic resulted in a $1.96 billion loss for the business segment, compared to $1.72 billion in operating income a year earlier.
  5. To adapt to the pandemic conditions, Disney is planning to release its big-budget remake of “Mulan,” originally slated to open in theaters this spring, will now debut as a $30 premium-priced download on Disney+.

Read More: (WALL STREET JOURNAL)

Worth Your Time

Face in a Crowd: The Covid-19 vaccine market is getting more competitive each day, and now Novavax has taken a significant step forward. The company’s vaccine candidate generated immune responses and was generally well-tolerated in its 130-subject, first-stage study. Novavax is one of several companies to agree to a massive funding deal with the U.S. government, and the company said the results of this experiment support further testing. (WALL STREET JOURNAL)

Give Me The Good News: At a time where the overall media industry continues to struggle, The New York Times recorded its best quarter for digital subscriptions ever, and the first time digital revenue exceeded print revenue. The growth comes at a much-needed time. The pandemic has ushered in an advertising downturn, creating challenges for all shapes and sizes of media companies. (THE INFORMATION)

The Investigation: Federal prosecutors are probing whether bankrupt drugmaker Purdue Pharma LP marketing and distribution of opioids violated criminal statutes, “including anti-kickback laws, misbranding under the Food, Drug and Cosmetic Act and conspiracy,” The Wall Street Journal writes. The Justice Department is seeking as much as $18.1 billion from Purdue, which could “disrupt the company’s monthslong effort to reach a settlement with states and local communities that accuse it of helping fuel the opioid crisis.” (WALL STREET JOURNAL)

Almost Home: “A red-hot mortgage market could propel the country’s top mortgage lender to one of the biggest public offerings this year. Rocket Companies Inc., parent company of Quicken Loans, is set to raise $3.3 billion at the high end of its price range. That would be second only to the $4 billion that hedge-fund billionaire William Ackman raised with his blank-check company last month, the largest IPO of the year.” (WALL STREET JOURNAL)

Tidbits

Former Google engineer and serial entrepreneur Anthony Levandowski, who was at the center of a $4 billion lawsuit between Uber and Waymo, was sentenced to 18 months in prison and will report once the Covid-19 pandemic has passed.

Shopify competitor Big Commerce is going public Wednesday, with a target valuation as high as $1.31 billion.

Tencent, a minority stakeholder in game streaming sites Huya and Douyu, is seeking to facilitate a merger between the two companies.

Teladoc and Livongo Health, two leaders in the virtual healthcare space, have agreed to a merger valued at $18.5 billion.

CVS, which also owns insurance giant Aetna, raised its 2020 earnings forecast as fewer insurance claims boosted its second-quarter profits.

After years of keeping security researchers at bay, U.S. election-equipment makers are opening their devices up to hackers for testing.

A Couple Cents Content

We’re giving away $1,500 and a bunch of prizes for our Stock Pitch Contest! Take a look: (POST)

Justin Oh takes a look at how much Microsoft stock could benefit from buying TikTok.

Is using ETFs as a savings account a good thing? Justin Oh breaks it down. (TIKTOK)

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