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Kodak’s Sticky Situation, Twitter, Microsoft, TikTok and Record-Breaking BioTech IPOs

Kodak faces losing its business-saving loan, Twitter enters the TikTok race and 2020 continues as a record-setting year for biotech IPOs.
Berlin, Germany - April 28, 2018: Kodak sign on building exterior. (By Cineberg)
Berlin, Germany - April 28, 2018: Kodak sign on building exterior. (By Cineberg)
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Good morning! Today’s word count is 1,319 words, or an 8-minute read. Let’s get to it:

“Prospects for new stimulus bill, tensions with China and the pace of new coronavirus infections are weighing on the stock market,” The Wall Street Journal writes.

  • S&P 500: $3,356,04
  • Nasdaq: $11,033.70
  • Bitcoin: $11,685.89
  • U.S. 10-Year: 0.571%

U.S. Agency Sidelines Planned $765 Million Loan to Kodak Amid Probes

Eastman Kodak’s resurgence will have to remain on hold for now. After the U.S. International Development Finance Corp. announced plans to loan Kodak $765 million to produce drug ingredients in its factory, the federal agency pulled back after the deal came under congressional and regulatory scrutiny.

Why It Matters

It’s only been two weeks.

  • At the end of July, the Trump administration announced its intent to dish out the massive loan to the onetime photo leader.
  • “The planned loan, the first of its kind under the Defense Production Act, sought to help Kodak produce ingredients for generic drugs.”
  • When the loan was first announced, President Trump called it “one of the most important deals in the history of U.S. pharmaceutical industries.”
  • Kodak’s stock soared from the news.

The Securities and Exchange Commission is already on the case.

  • Last week, the SEC announced a prove into how Kodak controlled the disclosure of the loan.
  • Kodak reportedly shared information of the agreement with media outlets, but then asked the few companies that did publish to take it down.
  • The SEC is also examining stock options granted to executives on July 27, which became instantly profitable, at least on paper, after news of the loan emerged.

The Democrats already had their concerns.

  • Several Democrat-led congressional committees pointed to Kodak’s “lack of pharmaceutical experience.”
  • Kodak has historically been a photography company.

In a tweet Friday, the DFC said: “We will not proceed any further unless these allegations are cleared.”

Numbers to Consider

  • $15.79 – Kodak’s open price Monday.
  • $779.86 Million – Kodak’s market capitalization.

Read More: (WALL STREET JOURNAL)

New Bidders Reportedly Emerge for TikTok In the US as Powerful Critics Assail the Process

While it seemed like Microsoft was the only hope for salvaging TikTok in the U.S., new bidders have expressed interest in acquiring the short-form video app. The Wall Street Journal reported Twitter and TikTok held preliminary talks about a potential merger as time inches closer to President Trump’s ban. Microsoft has been negotiating a purchase of TikTok’s operations in the U.S., Australia, Canada and New Zealand, but Twitter’s deal would focus on the North American business.

Why It Matters

TikTok could be a mulligan for Twitter.

  • Twitter had a chance to own the short-form video market after buying Vine for a reported $30 million in 2012.
  • However, the app later became a casualty of Twitter’s then-financial struggles and was shut down in 2016.

It would be game-changing for Twitter.

  • Adding TikTok’s U.S. operations would add a “huge additional pillar” to its business.
  • Twitter would add a massive new user base and vastly alter the demographics of its current audience.

Twitter isn’t big enough to do it alone.

  • With a valuation between $15 billion and $50 billion and a market cap of $29 billion, Twitter doesn’t have the firepower to make the acquisition internally.
  • Some ByteDance investors have valued all of TikTok at more than $30 billion, meaning TikTok would have to look to additional investors for help.
  • Therein lies Microsoft’s advantage – with a $1.6 trillion market cap, the company has plenty of resources to absorb TikTok.
  • Twitter does have high-powered investors – private equity firm Silver Lake invested $1 billion in the platform in March.

Other companies, besides Microsoft, are in the fold.

  • Venture-capital giant Sequoia Capital is already invested in ByteDance and has expressed interest in a deal.
  • Japanese investment giant SoftBank Group also “would like to throw its hat in the ring as a possible TikTok suitor.” But as a foreign company, it remains a long shot.

Outside of a deal, TikTok plans to keep fighting.

  • The app has a limited window to challenge President Trump’s executive order, which TikTok called “highly unprecedented.”
  • A federal lawsuit could come as soon as Tuesday.

President Trump’s executive order creates a limited window.

  • If ByteDance can’t find a buyer by Sept. 15, the order will block TikTok in the U.S.

Numbers to Consider

  • $1.23 Billion – Twitter’s loss in the most recent quarter.
  • $7.8 Billion – Twitter’s cash and short-term investments as of June.
  • $100 Billion – ByteDance’s estimated valuation.

Read More: (TECH CRUNCH)

A Quick Look

During Covid-19 Pandemic, Biotech IPOs Already Surpass Record

  1. “So far this year, U.S.-listed biotech companies have raised roughly $9.4 billion in initial public offerings, already beating the $6.5 billion raised in all of 2018, the biggest year on record, according to Dealogic data going back to 1995,” The Wall Street Journal writes.
  2. “This year’s biotech issues have jumped an average of 34 percent on their first day of trading, the biggest average first-day pop for the sector since the tech boom in 2000.”
  3. “The Nasdaq Biotechnology Index is up 13 percent so far this year, compared with the S&P 500’s 3.7 percent rise.” Biotech is reaping the rewards with more than $32 billion in follow-on offerings so far in 2020, the most ever in a year, according to Dealogic.
  4. Moderna, one company touting a promising Covid-19 vaccine candidate, has seen its market valuation rise nearly $23 billion since the start of the year.
  5. German biotech company, CureVac BV, is expected to bolster the trend when it goes public on the Nasdaq later this month. Its target valuation is expected to be more than $1 billion.

Read More: (WALL STREET JOURNAL)

Worth Your Time

Ballroom Blitz: “Last week, as leaders in Silicon Valley, China and Washington raced to seal the fate of one of the world’s fastest-growing social media companies, a shouting match broke out in the Oval Office between two of President Trump’s top advisers. In front of Trump, trade adviser Peter Navarro and other aides late last week, Treasury Secretary Steven Mnuchin began arguing that the Chinese-owned video-sharing service TikTok should be sold to a U.S. company…The ensuing argument — which was described by one of the people as a “knockdown, drag-out” brawl — was preceded by months of backroom dealings among investors, lobbyists and executives.” (THE WASHINGTON POST)

One More Chance: U.S. chipmaker Qualcomm is asking the Trump administration to sell chips to Huawei, the Chinese telecom company the U.S. has accused of helping China spy. Qualcomm argues that the ban has created an opening for its competitors to supply a market estimated to be worth $8 billion annually while failing to prevent Huawei from acquiring the tech. (WALL STREET JOURNAL)

Everybody Wants To Rule The World: The plight of ailing department stores may be the next great opportunity for Amazon. The Jeff Bezos-run empire has been in talks with Simon Property Group, the largest mall owner in the U.S., about the possibility of “turning some of the property owner’s anchor department stores into Amazon distribution hubs.” The talks reflect the intersection of two trends accelerated by the pandemic – the decline of malls and the growth of e-commerce. (WALL STREET JOURNAL)

Tidbits

After a six-month battle, Facebook finally agreed to “accept Apple’s demands” and launched its new Gaming app in the App Store.

While autonomous-vehicle road testing has “skidded to a halt” in the U.S. amid the Covid-19 pandemic, China’s startups have pushed ahead by doubling the number of self-driving car projects.

“The Environmental Protection Agency is preparing to adopt new rules that would rescind regulations for methane-gas emissions, including ending requirements that oil-and-gas producers have systems and procedures to detect methane leaks in their systems.”

U.S. stocks have been the better bet for a decade, but are high valuations a reason to shift exposure overseas?

A Couple Cents Content

I wrote about Nintendo’s recent success and the ups and downs of its defined role in the video game industry. (POST)

Catch up on everything you missed during last week’s Live Show. (YOUTUBE)

How does a potential TikTok acquisition impact Microsoft’s stock? Justin Oh breaks it down. (YOUTUBE)

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