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Payment Protection Program Recipients, Palantir and TikTok’s Dilemma

Big companies are getting PPP loans, Palantir finally plans to go public and TikTok pulls out of Hong Kong while the U.S. considers banning the app.
Small businesses
"Business DIstrict, Wyoming, Illinois" (CC BY-NC-ND 2.0) by myoldpostcards
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July 7, 2020 – Big companies are getting PPP loans, Palantir finally plans to go public and TikTok pulls out of Hong Kong while the U.S. considers banning the app.

Today’s word count: 1,113 words (7 minutes)

Small Business Loans Helped the Well-Heeled and Connected, Too

Congress designed the Paycheck Protection Program as a tool to help suffering small businesses in the wake of the coronavirus pandemic. Only that’s not what happened. According to The Wall Street Journal, the program issued more than half-a-trillion dollars to “well-heeled and politically connected firms across the economy” after the Trump administration disclosed a list of borrowers.

Loans ranged as high as between $5 million and $10 million and would be paid back by taxpayers if the companies met specific criteria. Firms also gamed the system by taking multiple loans through subsidiaries. Some of the notable companies to appear on the list included Kanye West’s Yeezy LLC, P.F. Chang’s, Five Guys Enterprise LLC hamburgers, Shake Shack Inc., Ruth’s Chris Steak House and more.

“This was supposed to be a small-business program,” said Rebel Cole, a finance professor at Florida Atlantic University who studies small businesses. “They should have never made loans of that size.”

Why It Matters

It’s an ethical issue. Should bigger businesses be taking taxpayer-funded loans if they don’t need it? P.F. Chang’s says it used the money to protect 12,000 jobs. The disclosure of the companies involved opens up a real concern about whether the PPP program is helping small businesses as intended or if it’s a poorly hidden, highly exploited crutch for some of the better-off ones.

Numbers to Consider

  • $521 Billion – The funds distributed to “well-heeled and politically connected firms.”
  • 660,000 – The companies named by the Trump Administration accounting for the most substantial loans – worth $150,000 or more.
  • $41 Million – The total amount one national hospital chain received despite loans being capped at $10 million.

Read More: (WALL STREET JOURNAL)

Palantir, One of Silicon Valley’s Oldest Startups, Files to Go Public

Finally. Palantir Technologies Inc. announced it has confidentially filed to go public, ending a drought that had made the data analytics firm one of “Silicon Valley’s oldest private startups.” The company has been valued privately at as much as $20 billion, and Palantir’s chief executive, Alex Karp, told staff the company was “cash-flow positive” earlier this year. Palantir, co-founded by Peter Thiel in 2004, deals mostly in big data aggregation. Its analytics notably helped the U.S. government capture Osama bin Laden

Why It Matters

The path to a public offering has been tumultuous for the data analytics firm. Palantir has repeatedly missed on turning a profit and frustrated employees looking to shares on the open market. Despite revenue of around three-quarters of a billion dollars last year, Palantir has yet to turn an annual profit.

As corporate customers pare back spending because of the coronavirus pandemic, the company’s listing plan could be affected. Palantir is “heavily weighing” a direct listing, a cheaper option to save on investment banking fees. Other tech companies, including Spotify and Slack, opted to follow the same track in the past.

Numbers to Consider

  • $750 Million – Palantir’s annual revenue last year, which still didn’t earn a profit.

Read More: (WALL STREET JOURNAL)

TikTok Pulls Out of Hong Kong As Pompeo Says U.S. May Ban the Video Sharing App

TikTok is leaving Hong Kong behind following the passage of a “draconian new security law that undermines the Chinese territory’s independent judiciary and internet freedoms,” according to The Information. It provides “sweeping new powers, including the ability to remove internet posts and fine or jail companies that’s don’t comply with requests for data.”

At the same time, U.S. Secretary of State Mike Pompeo said the U.S. is considering banning Chinese apps, including Tik Tok.

Why It Matters

TikTok faces a significant dilemma. To freely operate in overseas markets like the U.S., it needs to distance itself from China. But ByteDance, TikTok’s parent company, is Beijing-based, and abandoning Hong Kong risks damaging its relationship with the Chinese government.

Pompeo cited data privacy concerns regarding TikTok, questioning the app’s relationship with China. He added that people should only download the app “if you want your private information in the hands of the Chinese Communist Party,” according to CNN.

Numbers to Consider

  • 2 Billion – TikTok downloads through the Apple and Google app stores after Q1 this year, according to Sensor Tower.
  • 150,000 – TikTok’s reported userbase in Hong Kong.

Read More: (THE INFORMATION)

A Quick Look

Unemployment Expected to Reach Highest Level Since Great Depression

  1. The world’s advanced economies expect Unemployment levels to end the year higher than during the Great Depression. The best hope for things to return to pre-pandemic levels is 2022 at the earliest, according to the Organization for Economic Cooperation and Development.
  2. If a second wave of lockdowns hits the U.S., “the OECD forecasts jobless rates of 12.9% in 2020 and 11.5% in 2021, compared with 11.3% this year and 8.5% next year if there is no sustained resurgence.”

Read More: (WALL STREET JOURNAL)

Worth Your Time

Fight for Your Right: Facebook made a bold statement Monday when it announced WhatsApp would suspend data reviews of Honk Kong users following China’s imposition of a new, restrictive national security law on the city. Now, Google and Twitter have joined the movement, protesting Beijing’s attempts to curb free speech and creating a collision course between big tech and China’s government restrictions. (WALL STREET JOURNAL)

The Great Test: It’s sink or swim time for Quibi. Monday marked the end of the company’s 90-day free trial program, and the scores of users who took advantage of the free offer will have to decide if the short-form video app is worth it. “Bad press, middling reviews and an unideal economic environment have all contributed to an unyielding bad aura around the company since launch.” (THE INFORMATIONDive Deeper: (VULTURE)

Here Comes The Judge: Big tech finally has its “day in court.” The chief executives of Apple, Google, Facebook and Amazon will appear before the House antitrust subcommittee on July 27. It will be the first time Jeff Bezos has testified in Congress and the second for Tim Cook. While the hearing wraps up a yearlong investigation into the big four tech companies, lawmakers don’t expect to impose penalties. Instead, this could be a precursor to tech reform. (THE INFORMATION)

Tidbits

Microsoft is looking to expand its game-making capabilities by acquiring the games division of Warner Bros., the publisher behind Batman, Harry Potter and other video games.

After TikTok lost its footing in India, Instagram is expanding its rival app, Reels, into the region.

A Couple Cents Content

Read part three of Justin Oh’s interview with trucking industry expert Jeffrey Whitcomb. (POST)

If you missed it last night, check out Monday’s live show where Justin Oh discusses artificial markets, BYD, HCA and more. (YOUTUBE)

Watch Justin Oh discuss the “five things that will solve the Covid economy.” (YOUTUBE)

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Thanks for reading!

— Justin Birnbaum

Image:Business DIstrict, Wyoming, Illinois” (CC BY-NC-ND 2.0) by myoldpostcards

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