Good morning! Today’s word count is 1,858 words, or an 8-minute read. Let’s get to it:
“Major indexes wobbled but remained on track to finish another tumultuous week with slim gains, as investors braced for a choppy session ahead of the simultaneous expiration of an array of stock futures and options contracts,” WSJ writes.
- S&P 500: $3,345.21
- Nasdaq: $10,862.57
- Bitcoin: $10,957.78
- U.S. 10-Year: 0.687%
Also, be sure to enter the new, weekly giveaway in Morning Cents every day.
Justin Oh’s Quick Read
A big topic we covered during Thursday’s Live Show on YouTube was whether Apple’s new streaming products changed my mind on Spotify ($SPOT) and Peloton ($PTON). Apple will be offering its Music, TV+, Arcade, 50GB Cloud for $15/month individually or $20/month for a family of 5. It’s also offering a bundle that includes all the above plus News, Fitness+, and 2TB Cloud for $30/month for a family of 5. While this is definitely a shot across the bow for streaming services generally, Apple is still stretched too thin, providing mediocre experiences across all mediums. Spotify is a better music experience and cheaper. Peloton, with its equipment, plus digital, is a better fitness experience than merely digital-only. Netflix has a better catalog than TV+, although I wouldn’t say I like $NFLX stock. And Arcade is so bad, I don’t even want that subscription. I will be keeping a close eye on Apple’s encroachments, but it hasn’t spooked me out of my positions in $SPOT or $PTON yet.
U.S. to Ban TikTok Downloads, Use of WeChat on Sunday
After months of speculation, the White House is finally making its move. The Trump Administration announced Friday it would ban downloads of TikTok and the U.S. use of WeChat after Sunday night because of national security and data privacy concerns.
Why It Matters
It was only a matter of time.
- In August, President Trump signed an executive order giving ByteDance a 45-day deadline to sell or restructure its U.S. TikTok operations or “face a ban over the perceived security risk.” Tencent’s social media, messing and payments app WeChat has received similar scrutiny.
- After Oracle won the bidding war for TikTok’s U.S. operations, it announced a “technology partnership” agreement instead of a deal structured as an outright sale. To quell the Trump administration’s security concerns, the proposal evolved into a new plan where Oracle and Walmart would join together and own a significant majority stake of the app.
- Though, the situation is “highly fluid,” and it’s unclear what the final terms would be, or if that would be enough to satisfy Trump or Chinese authorities.
- The New York Times reported TikTok planned to IPO in the U.S. and approached Instagram co-founder Kevin Systrom to lead the makeover as its new chief executive, as part of a restructured proposal with Oracle.
Relations between China and the U.S. are bottoming out.
- Investments between the two countries in the first half of 2020 hit a nine-year low, according to research from the Rhodium Group.
- The drop is mainly attributed to escalating political tensions between the two nations, which traded consulate closures earlier this year, and the global economic fallout from the Covid-19 pandemic.
- The “threat of China” heavily influenced the Trump administration’s decision to block Broadcom’s proposed buyout of Qualcomm in 2018, while China responded by withholding regulatory approval on Qualcomm’s $44 billion bid to buy NXP Semiconductors later that year.
The White House’s actions only threaten to stir the pot more.
- As of Sunday, the Commerce Department will block “any provision of service to distribute or maintain the WeChat or TikTok mobile applications, constituent code, or application updates through an online mobile application store in the U.S.,” as well as money transfers in the WeChat app.
- Commerce officials have said Chinese-owned apps are “active [participants] in China’s civil-military fusion and is subject to mandatory cooperation with the intelligence services of the CCP.”
- However, restricting WeChat could hurt American companies as well. Firms such as Disney and Walmart rely on the app to reach and collect payments from customers in China. Nine out of 10 companies surveyed by the American Chamber of Commerce in Shanghai expressed similar concerns should the ban extend to China.
Tencent’s broader business could be next.
- Bloomberg reported the Trump administration is examining the security protocols of U.S. video game companies wholly or partially owned by Tencent, the world’s biggest game publisher.
- The Committee on Foreign Investments in the U.S. has sent letters including Riot Games (wholly owned by Tencent) and Epic Games (Tencent owns 40 percent), inquiring how the firms handle American users’ data.
- Riot is the creator of League of Legends and Epic makes Fortnite, two of the world’s most popular games.
Numbers To Consider
- TikTok has around 100 million monthly active users in the U.S., while WeChat and its domestic sister app Weixin have roughly 1.21 billion monthly active users combined.
- Tencent has a market value of more than $645 billion and reportedly generates less than 2 percent of its revenue from the U.S.
Read More: (WALL STREET JOURNAL)
Covid-19 Vaccine Study Results Could Come Late October, Moderna CEO Says
Moderna’s late-stage vaccine trials could yield preliminary results on whether the shot works safely as early as October, but more likely in November, according to its CEO, Stephane Bancel.
Why It Matters
The race for a viable vaccine is seemingly near its finish.
- Moderna began a late-stage, federal-funded trial in March, enrolling more than 25,000 participants.
- Bancel’s remarks suggest Moderna and Pfizer, the other likely favorite in the vaccine race, have similar goals for obtaining and assessing critical data on their respective vaccine candidates’ efficacy.
- If Moderna’s interim results are positive, the drugmaker could seek emergency use authorization soon after that.
Determining results depends on rates of infection where the trial is conducted.
- The study compares whether fewer vaccinated people come down with symptomatic Covid-19 than unvaccinated people.
- Researchers assess this at intervals after a certain number of cases occur. The range is typically from 53 cases to 151 cases.
- However, the more Covid-19 cases decline, the harder it is to determine results quicker.
Even with advanced preparations, distribution is still going to take time.
- Moderna has already been manufacturing the shots, which could lead to the quick distribution of available doses.
- The U.S. government has also told states to be ready to help distribute Covid-19 vaccines later this year.
- But a limited amount of supplies means most vaccinations will have to wait until next year.
There’s still no guarantee the vaccine works.
- AstraZeneca, which is co-developing a Covid-19 vaccine candidate with the University of Oxford, paused its late-stage trials after a participant in the U.K. suffered an unexpected illness. Testing has since resumed.
- In the interest of transparency, Moderna published its 135-page safety protocol for the clinical trial.
- Earlier this month, Moderna, along with several other drug companies, released a joint pledge to “adhere to high scientific and ethical standards in the conduct of clinical studies and in the manufacturing processes.”
Numbers To Consider
- Moderna Stock opened at $68.28 Friday, with a market cap of $26.37 billion.
- In August, the Trump administration agreed to purchase 100 million doses of Moderna’s experimental Covid-19 vaccine candidate for $1.5 billion.
Read More: (WALL STREET JOURNAL)
Number Crunch: SoftBank Sells Brightstar, Carrying On Its Divestiture Spree
Japanese conglomerate SoftBank Group continued its massive divestiture plan by selling “U.S.-based wireless-services unit Brightstar Corp. to a private-equity firm founded by a former Brightstar executive.”
- Neither party disclosed the unit’s sale price, which SoftBank purchased for roughly $1.7 billion in 2014. Brightstar has been consistently losing money, and SoftBank posted impairment losses for the unit in 2017 and 2018 totaling $771 million. SoftBank will retain a 25 percent stake in Brightstar.
- SoftBank is best known for its $100 billion Vision Fund and an early investment in Alibaba that has exploded to nearly $150 billion in value.
- The Japanese conglomerate began a significant string of divestitures in March due to sharp-stock market drops and losses at the Vision Fund due to the global pandemic. In response, SoftBank CEO Masayoshi Son announced $42 billion in asset sales to fund share buybacks and debt redemptions.
- Before Brightstar, SoftBank had announced nearly $94 billion in asset sales this year, including its $40 billion sale of Arm Holdings to Nvidia and the offload of an $11.8 billion piece of its Japanese mobile phone unit.
- Brightstar was founded as a small cellphone trader in 1997. The sale is expected to close by the end of March 2021.
Read More: (WALL STREET JOURNAL)
Worth Your Time
Covid-19 Football: “Throughout the coronavirus pandemic, the Pac-12 conference has moved in close coordination with the Big Ten. Both leagues canceled their men’s basketball tournaments on the same day in March and postponed their football seasons within hours of each other on Aug. 11. Now that the Big Ten has announced it’s going to play football after all beginning in late October, the question is: Will the Pac-12 again follow suit?” (WALL STREET JOURNAL)
If You’re Not First You’re Last: Europe pioneered the first generations of digital-cellular communications and was a world leader in shifting the world away from analog networks in the 1990s. But now, the collection of nations is close to forfeiting that advantage. Europe’s deployment of 5G cellular communications networks is “alarmingly slow,” according to a lobbying group of the Continent’s companies. While there’s still time to catch up, especially since Europe is home to two of the world’s largest telecommunications companies, urgent action is needed now to “address that gap.” (WALL STREET JOURNAL)
Chip Complications: Nvidia’s acquisition of Arm was poised to push the U.S. chipmaker to new heights. However, it’s no done deal. The proposal needs regulatory approval in the U.K., U.S., European Union and China, and there’s “already an indication that China might not be happy about an American firm owning an important and strategic player in the semiconductor industry.” (CNN)
Lawmakers are set to unveil a new spending bill that would avoid a government shutdown but are no closer to another round of coronavirus relief.
Snowflake CEO Frank Slootman reaped the rewards of his third bet on big data — he led the IPOs of Data Domain Corp. and ServiceNow Inc. as well — after the newly public firm’s shares soared when trading opened Wednesday.
Max Levchin’s fintech startup Affirm has secured $500 million in a round of Series G funding led by GIC and Durable Capital Partners, bringing the new company’s total funding to $1.6 billion.
Facebook is being sued for allegedly spying on Instagram users through the unauthorized use of their mobile phone cameras.
More Facebook: The social media giant is moving to curb “internal debate around divisive political and social topics, after a spate of disputes and criticism that has fueled discord among staffers.”
“The U.S. will top 200,000 deaths from the novel coronavirus in coming days, a devastating milestone that comes eight months after the pathogen was first confirmed on American soil.”
“LVMH Moët Hennessy Louis Vuitton SE asked the top negotiator in France’s tax talks with the U.S. for help in backing out of its agreement to take over Tiffany & Co., and was turned down, according to senior French officials.”