Good morning! Today’s word count is 1,638 words, or a 7-minute read. Let’s get to it:
“Investors took a pause following a sharp rally that sent the blue-chips index to its highest since February. Meanwhile, data showed new applications for unemployment benefits fell last week, a possible sign of a slowly improving labor market,” WSJ writes.
- S&P 500: $3,521.22
- Nasdaq: $11,680.27
- Bitcoin: $10,898.77
- U.S. 10-Year: 0.619%
Justin Oh’s Quick Read: More On $TSLA
Given how much attention Tesla stock is getting, I spent the last two days collecting my thoughts and making a more in-depth video on why it’s run-up so much and why I sold at this valuation. If you’re still interested or conflicted about $TSLA, check it out here. It’s a quick 8-minute watch.
Aspiring Tiktok Buyers Pursue Four Options In Effort To Revive Talks
It’s time to get creative. TikTok’s prospective U.S. buyers are weighing four options on how to structure the acquisition of the short-form video app while complying with China’s new tech regulations. Beijing updated its export control rules last week, limiting the sale of proprietary technology, like ByteDance’s deep learning algorithm used to recommend videos to users, and stalling a deal potentially worth $30 billion.
Why It Matters
ByteDance has a few weeks to find a buyer.
- Citing national security concerns, President Trump signed an executive order in August compelling TikTok to divest its U.S. assets by mid-September.
- While Microsoft and Oracle both had been bidding for a deal, China’s new restrictions seem to be an attempt to regain some form of agency in the process.
The Four Options
ByteDance could sell TikTok without the algorithm.
- This would circumvent China’s export control rules.
- But it’s a gamble for Microsoft, Oracle or whatever company takes over, which would quickly have to find a substitute.
- A new algorithm could be constructed using existing user data, but it would be time-consuming and probably cost the platform some users.
The parties could negotiate a transition period.
- The Committee on Foreign Investment in the United States (CFIUS) is overseeing the deal and could grant a transition timeframe of up to a year.
- It’s unclear whether China’s rules would allow this.
They could ask nicely.
- The negotiating parties could seek approval from China to pass on the algorithm to the buyer as part of the deal.
- It comes with massive geopolitical risk, though, given the souring relations between the U.S. and China over “trade, cybersecurity and the spread of the coronavirus.”
TikTok’s new U.S. owners could license the algorithm from ByteDance.
- This might worry CFIUS.
- The goal of a U.S. TikTok sale is to distance the app from China, and maintaining a relationship with ByteDance would make that difficult.
It’s hard to see the endgame.
- Last week, TikTok engineers were told to make contingency plans should TikTok need to shut down its U.S. operations.
- Founder and CEO Zhang Yiming has also reportedly had second thoughts about unloading such a significant piece of TikTok.
Read More: (REUTERS)
Cable, Satellite Operators Place New Bets on 5G Airwaves
The Federal Communications Commission collected $4.6 billion in winning bids as a mix of cable and satellite operators, such as Verizon, Dish, Comcast and others, vied for “70 megahertz of ‘priority access’ licenses in a band considered useful for ultrafast fifth-generation, or 5G, transmissions.”
Why It Matters
Companies are racing to secure 5G access if they don’t have it already.
- When T-Mobile bought Sprint this year, it gave it a “treasure trove” of wireless licenses.
- To supply customers with more internet data, Verizon is stuck playing catch-up.
- Dish has spent the past decade amassing a war chest of spectrum licenses for a brand-new wireless network. However, the system hasn’t been built yet.
It looks as if cable operators are eager to offer more service over the air.
- “Charter and Comcast have added hundreds of thousands of smartphone customers over the past year, but their mobile service runs on Verizon’s network outside the home, limiting the cable companies’ profitability.”
- There’s also a cost-cutting opportunity. Charter has tested fixed home broadband service to lower the cost of running wires to “far-flung households.”
A bet on 5G doesn’t mean forgoing the current model.
- Cable companies are still heavily invested in landline infrastructure, and there’s no guarantee that strategies will shift.
- In the past, companies have made similar bets on wireless services before withdrawing or selling their holdings.
- Cox Communications, a digital cable provider, offloaded the airwave rights to 28 million people in a $315 million sale to Verizon in 2011.
The auction is a table-setter.
- Other companies, such as Chevron and Deere & Co., are still testing the waters on building their own wireless services, while several electric utility companies made smaller bids for other licenses.
- There’s another auction coming in December for the more expensive C-Band Spectrum, another “swath of frequencies useful for 5G service,” and these results could be a benchmark to the pricing on the forthcoming auction.
Numbers to Consider
- Verizon had the most expensive winning bid, spending $1.89 billion for licenses in the 3.55 gigahertz band.
- Wetterhorn Wireless bid around $913 million, while units of Charter Communications, Comcast and Cox Communications followed with winning bids of $464 million, $459 million and $213 million, respectively.
- T-Mobile bid less than $6 million, while AT&T spent nothing.
Read More: (WALL STREET JOURNAL)
Number Crunch: Samsung’s Drugmaking Future Includes A ‘Super Plant’ Bigger Than the Louvre
“Samsung’s drug-manufacturing arm is betting that the already-booming market for biologic drug ingredients will only get hotter, thanks to industry shifts sparked by the coronavirus pandemic,” WSJ writes.
- The company is constructing a $2 billion drug-making plant. When it’s completed in 2022, it will be the largest of its kind in the world, will have roughly 230,000 square meters of floor space and is bigger than its three existing plants combined.
- The new plant will add 256,000 liters of manufacturing capacity onto Samsung’s current 364,000. Lonza Group, which has 15 facilities, currently holds the top spot at 465,500 liters.
- Samsung Biologics has seen manufacturing orders nearly triple to $1.5 billion in the most recent quarter compared to last year. The company’s recent deal with GlaxoSmithKline accounts for $370 million over the next two years. It also covers about 60 percent of last year’s sales.
- “Samsung Biologics executives say they are in conversations with other biopharmaceutical firms to manufacture Covid-19 antibodies but declined to name the firms.”
Read More: (WALL STREET JOURNAL)
Worth Your Time
Turning Tides: As TikTok struggles, Snapchat thrives. App store intelligence firm Sensor Tower reported Snapchat’s mobile app across iOS and Android received 28.5 million new installs in August; it’s largest single month since May 2019. It’s unclear exactly why — “maybe it was just the Disney eyes filter that went viral” — but the indication is the looming uncertainty following TikTok may have created a significant opportunity for competitors like Snapchat as the dust settles. (TECH CRUNCH)
Deep As A Well: “The amount of U.S. government debt has grown to nearly outpace the size of the nation’s economy in the 2020 fiscal year and is set to exceed it next year, as the virus downturn saps tax revenues, spurs government spending and necessitates record amounts of federal borrowing, the Congressional Budget Office said on Wednesday. Federal debt, as a share of the economy, is now on track to smash America’s World War II-era record by 2023.” (NEW YORK TIMES)
Back To School: “Schools and colleges are purchasing [keyboard covers, webcams and plexiglass] and other protective products in great quantities as they try to prevent the spread of the coronavirus and calm concerns of teachers, students and parents…Increased demand from the tens of thousands of U.S. schools and colleges is providing a boost to manufacturers whose sales to other sectors hit particularly hard by the coronavirus, such as the restaurant, travel and entertainment industries, have fallen. Some manufacturers, particularly those that don’t normally count schools among their customers, are straining to meet so much new demand.” (WALL STREET JOURNAL)
Right Direction: “New applications for unemployment benefits fell last week, a possible sign of a slowly improving labor market and the impact of a new measurement method…The latest data is in line with a general trend of improvement since spring, but also reflects a new methodology to adjust for seasonal factors. Under the new method, updated seasonally adjusted data should be more in line with the unadjusted data. Unadjusted claims have most weeks been lower than the more widely reported adjusted figure since early March.” (WALL STREET JOURNAL)
ByteDance has acquired payment agency UIpay and obtained a payments license, confirming its entry into China’s digital payments market.
“The SoftBank Vision Fund has led a $100 million investment in Biofourmis, a digital therapeutics business that’s currently using its technology to remotely monitor Covid-19 patients for signs of deterioration.”
Airbnb plans to go public with a traditional IPO after reportedly turning down an opportunity to merge with Bill Ackman’s $4 billion black-check company, Pershing Square Tontine Holdings.
Robinhood is currently under SEC investigation for allegedly selling clients’ stock trade orders to high-speed trading firms, which could carry a $10 million fine.
“The English Premier League has canceled its broadcasting agreements with its partner in China, ending a $700 million deal just one year into a three-year licensing pact amid a payment dispute.”
Months after banning a group of Chinese apps, including TikTok, the Indian government has added 118 more to the list, including Tencent’s popular mobile game PUBG.
Facebook plans to ban new political ads a week before Election Day to limit uncontested messages, misleading posts and voter suppression.
“A U.S appeals court ruled against Oracle and its claim that the Pentagon broke its own rules by awarding a $10 billion cloud computing contract to a single company.”
E-cigarette pioneer Juul is cutting around one-third of its 3,000 workers and shrinking its footprint to its core markets of the U.S., U.K. and Canada.