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Of course it did.
Just about every single late-stage company in private markets at the moment has been contacted by a blank-check company looking for a deal.
Kicking off the day, office-sharing startup WeWork has reportedly engaged in talks to combine with a special-purpose acquisition company, per the Wall Street Journal, in a deal that could take the business public and value it around $10 billion. The SPAC in question is Bow Capital Management, run by the owner of the NBA’s Sacramento Kings, Vivek Ranadivé.
If a deal were to be struck, it would be a surprisingly fast return to the public markets for WeWork, whose disastrous attempt at going public in 2019 left its valuation slashed to a fraction of its original figure. WeWork’s new CEO, Sandeep Mathrani, has also said that he plans to turn a profit for the company sometime in 2021 before revisiting the idea of an IPO.
ROBINHOOD: The popular stock trading app has reportedly raised another $1 billion from existing investors on top of hundreds of millions more in credit as it faces a liquidity crunch sparked by the ongoing trading frenzy.
It’s just the latest chapter in the saga that started with irreverent Reddit investors crusading against short-selling hedge funds. The wild trading made it difficult for Robinhood to pay customers who were owned from trades and offer collateral to clearing facilities. On Thursday, the startup paused the buying of shares in companies such as GameStop, drawing widespread ire from its users and even eliciting lawsuits. “In order to protect the firm and protect our customers, we had to limit buying of these stocks,” Robinhood CEO Vlad Tenev told CNBC Thursday. The company will allow for limited trading of shares of GameStop starting Friday.
Even while the story is posed as one of large investors battling retail players, the narrative is not so cut and dry: The rally in shares of movie chain AMC may have also been a boon to tech-focused private equity firm Silver Lake and credit investor Mudrick Capital Management.
ARE MORE SOFTWARE SPINOUTS ON THE WAY AFTER QUALTRICS’ IPO?: German software maker SAP acquired survey and analytics company Qualtrics for $8 billion roughly two years ago, with the SAP CEO at the time seeking to assuage critics of the pricey deal by likening it to Facebook’s famous acquisition of photo-sharing company, Instagram.
While Qualtrics’ IPO Thursday certainly doesn’t fulfill SAP original intent, the investment has paid off, at least on paper. Shares of Qualtrics rose 51% in their debut, valuing the company at $27.3 billion. SAP plans to maintain a controlling interest in the company.
Term Sheet caught up with Qualtrics Zig Serafin and founder Ryan Smith on Thursday to ask about the thinking behind the spinoff, and Smith had an interesting prediction:
“I think this will be a trend where you will see other companies look at this and say, this is a very good new path for people to IPO,” the chairman said over Zoom. “How many companies have been acquired and then spun out like this in enterprise? Not many. There are a lot of companies within larger ones whose market and category are in hyper-growth… As we looked out almost two years into the SAP and Qualtrics relationship, the real question came to: ‘Are we going to invest heavily under the current economic structure or is there another way we can invest more?’”
SAP has struggled in recent months to appease shareholders seeking growth, with shares of the company staying level through the last year. The Qualtrics spinoff meanwhile has also attracted Silver Lake as an investor.
Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter
Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.
The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.
Coinbase shares fell almost 8% in premarket trading to $80.74.
Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.
JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.
Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.
The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.
The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.
JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.
The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.
Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter
Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.
“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings.
Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”
Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.
Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October.
In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance.
“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”
At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.”
Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.
Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year.
With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.
The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says
Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.
But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.
This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday.
The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June.
But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows.
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.
The great rent comeback
Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value.
Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA.
It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.
It’s no wonder—the rent really is too high.