fortune--2020-09-14--Why Goldman Sachs and Deutsche Bank think the September stocks sell-off has run its course

It would cost $ 1 trillion to move global supply chains out of China—but the long-term gains could be worth @

The recent pullback in U.S. stocks could be close to an end if history is a guide, according to strategists at Goldman Sachs Group Inc. and Deutsche Bank AG.
Its magnitude has matched a “typical” selloff in the S&P 500 since the financial crisis, albeit at a faster pace, wrote a team led by Goldman’s David Kostin in a note Friday. And options positioning—at the core of the weakness—has normalized, noted their counterparts at Deutsche including Srineel Jalagani the same day.
“Despite the sharp sell-off in the past week, we remain optimistic about the path of the U.S. equity market in coming months,” wrote the Goldman strategists. “Since the financial crisis, the typical S&P 500 pullback of 5% or more has lasted for 20 trading days and extended by 7% from peak to trough, matching the magnitude of the most recent pullback if not the speed.”
A reassessment of historically high equity valuations and volatility in options markets has sent the S&P 500 down about 7% from its record close on Sept. 2, though it remains almost 50% above its March low. The Nasdaq 100 is off 11%, after investors questioned whether a rally in the tech-heavy gauge might be too frothy.
Meanwhile, the Deutsche team focused on the impact of the options market, using a metric that looks at the number of bearish contracts relative to bullish ones. It had fallen to the bottom of its 10-year range—indicating an extreme level of positive sentiment—but after the correction has already recovered to “about average” levels, the team said.
“Historically, corrections in the put-call ratio have tended to have sharp but short-lived market impacts,” the strategists wrote.
Still, both teams pointed to the U.S. elections as the key source of uncertainty for markets ahead.
“Investors still have to contend with the upcoming macro event of the U.S. presidential elections,” the Deutsche strategists warned. “With a likely unprecedented volume of mail-in ballots, prospects for volatility enduring post-election day are high.”


fortune--2020-09-14--Will Oracle’s reported TikTok deal satisfy Trump?

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning. David Meyer here in Berlin, filling in for Alan.
The TikTok conundrum may be about to be solved—or not.
Here’s what can be said for certain at the time of writing. According to multiple outlets, Oracle is the “winning bidder” for a deal with TikTok owner ByteDance, regarding the future of the increasingly popular short-video network. Microsoft says ByteDance has rejected its offer to buy TikTok’s U.S. operations, while Walmart, which was to have been Microsoft’s partner in this venture, says it “continues to have an interest in a TikTok investment and continues discussions with ByteDance leadership and other interested parties.”
What we don’t know is what sort of deal Oracle is getting here—which rather dictates what happens next.
China’s recently-revised export-control list does not allow ByteDance to sell off TikTok’s desirable content-suggestion algorithms without permission, which is presumably why the Wall Street Journal reports that Oracle is to become TikTok’s “trusted tech partner” in the U.S., rather than the purchaser of its U.S. operations. After all, without that secret sauce, an outright buy becomes a lot less desirable.
But without TikTok’s U.S. operations being sold off, will the White House be satisfied?
President Trump is adamant that TikTok will be shuttered in the U.S. unless an American company buys it by tomorrow (according to Trump last week) or by Sunday (according to Trump’s executive order, signed last month). Oracle may have solid connections to Trump, with co-founder Larry Ellison and CEO Safra Catz both supporters of the President, but a “tech partnership” could be a far cry from the desired sale, depending on the terms.
Former Facebook security chief Alex Stamos argued on Twitter that “a deal where Oracle takes over hosting [TikTok’s U.S. services] without source code and significant operational changes would not address any of the legitimate concerns about TikTok, and the White House accepting such a deal would demonstrate that this exercise was pure grift.”
Hopefully that’s not the case, because it would turn what is already a deeply weird situation—up-and-coming tech firms should not be pawns on the geopolitical chessboard—into a terrible precedent. But if such fears are unfounded, will Beijing stand for the deal?
Let’s stay tuned for the details of that agreement. More news below.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Nvidia and ARM
Nvidia is to pay a whopping $40 billion for ARM, the British chip-design giant (your phone almost certainly uses its designs) currently owned by SoftBank. Nvidia is pitching this as a marriage of its A.I. tech and ARM's global ecosystem. News of the sale boosted SoftBank's shares by as much as 10%. Fortune
Amazon expansion
Amazon is hiring 100,000 more workers in the U.S. and Canada, some full-time and some part-time. The jobs will pay at least $15 an hour. Amazon also intends to open 100 more sites this month, including fulfillment centers, sorting centers and delivery stations. Wall Street Journal
Japan PM
The next prime minister of Japan is going to be Yoshihide Suga, who has won the leadership of the conservative Liberal Democratic Party. Suga has spent the last eight years or so essentially acting as chief of staff and spokesman for Shinzo Abe, who is stepping down due to ill health. He is not known to have strong policies of his own, and is likely to continue his predecessor's "Abenomics" economic formula. New York Times
Brexit drama
The British Parliament will today debate and vote on the government's internal market bill, which—unless it is amended—will break international law by allowing the government to bypass the Brexit Withdrawal Agreement that was ratified earlier this year. Every still-alive former British prime minister has concerns about the plan, as does Prime Minister Boris Johnson's own former attorney-general, Geoffrey Cox, who said "no British minister should solemnly undertake to observe treaty obligations with his fingers crossed behind his back." Reuters
AROUND THE WATER COOLER
Sandvine criticism
The Belarusian government reportedly used technology from U.S. blacklisting firm Sandvine to block much of the Internet during protests last month. Now Senator Dick Durbin is calling for an investigation to see whether PE-owned Sandvine potentially violated U.S. sanctions on Belarus. Bloomberg
China vaccine
China's disease-prevention chief reckons the novel coronavirus is so under-control there that there's no need for a sweeping vaccination program. However, Gao Fu said another major outbreak could justify such a program. "This is an issue of balancing risk and return," he said. China's only new coronavirus cases on Saturday—numbering just 10—were all imported. South China Morning Post
Israeli lockdown
Israel will from Friday impose a new three-week national lockdown, in which people will need to stay within 500 meters of their homes except when traveling to work, and shops (except for supermarkets and pharmacies) will be closed to the public. As the restrictions will overlap with important Jewish festivals, the ultra-Orthodox housing minister Yaakov Litzman has resigned in protest and threatened to pull his party from the ruling coalition. BBC
Nord Stream 2
Germany is considering killing the controversial Nord Stream 2 Russia-to-Germany gas pipeline, as retribution for Moscow's refusal to help the investigation into the Novichok poisoning of opposition leader Alexei Navalny. But how could Germany do this without risking enormous damages claims or breaking EU law? Politico has an interesting rundown of six potential options, and the fallout they might cause. Politico
This edition of CEO Daily was edited by David Meyer.


fortune--2020-09-14--A flurry of M&A deals lifts global stocks. Yes, even tech stocks

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning, Bull Sheeters. Upbeat vaccine news and a flurry of major tech deals have shaken equities out of a two-week rut.
Let’s see where investors are putting their money.
Markets update
Asia
The major Asia indexes are in the green in afternoon trading, with Japan’s Nikkei up 0.6% .
are in the green in afternoon trading, with Japan’s up . Microsoft is out, and Oracle is in. That’s the major development, first reported by the Wall Street Journal, this morning in the TikTok U.S. sweepstakes .
. SoftBank shares were up nearly 9% in Tokyo today on a string of huge headlines. It sold its semiconductor unit, Arm Ltd., to Nvidia for $40 billion in a record-breaking deal. It’s also getting serious about taking the firm private.
Europe
The European bourses were also higher at the open with Paris’s CAC leading the way, up 1%, before declining in late-morning trade.
were also higher at the open with Paris’s CAC leading the way, up 1%, before declining in late-morning trade. AstraZeneca shares opened with a pop, before falling. That’s after the British drugmaker announced over the weekend it got the green-light to resume its COVID-19 vaccine trials in the U.K. The news also gave a boost to global equities in early trading on Monday.
shares opened with a pop, before falling. That’s after the British drugmaker announced over the weekend it got the green-light to resume its in the U.K. The news also gave a boost to global equities in early trading on Monday. The ECB has a currency problem. The euro is up again this morning, and its steady rise is undoing some of the intended effects of the stimulus measures unveiled by the central bank this spring.
U.S.
U.S. futures —yes, tech futures too—point to a strong open. That’s after the Nasdaq fell 4% last week, its worst decline since March.
—yes, tech futures too—point to a strong open. That’s after the fell 4% last week, its worst decline since March. Nothing to see here, keep on trading . That’s more or less the consensus of Goldman Sachs and Deutsche Bank analysts who wrote in separate notes that the worst of the stocks skid is behind us.
. That’s more or less the consensus of Goldman Sachs and Deutsche Bank analysts who wrote in separate notes that the worst of the stocks skid is behind us. The odds are ever slimmer that the Senate will pass a new fiscal stimulus bill, and so all eyes are on the Federal Reserve, which meets tomorrow and Wednesday, the last such meeting before Election Day.
Elsewhere
Gold is flat, trading above $1,950/ounce .
is flat, trading above . The dollar is down.
is down. Crude is down too with Brent trading below $40/barrel.
***
The S&P 10
The S&P 500 has had a rough September—two straight down weeks, including a dud last week, its worst since June.
So it’s little wonder the pros continue to look backwards to get some a glimpse of what lies ahead. And you don’t have to go too far back to see some warning signs. Take August. To recap: the S&P 500 surged an improbable 7.2%, the best August performance since 1986.
That August rally set a far more dubious record along the way. According to BofA Securities, more than 50% of the S&P 500’s August return came from a mere ten stocks. (No points awarded for guessing which ten).
To illustrate the lopsided concentration, BofA put all 500 stocks in the benchmark index into a single mash-up pie chart, ranking each holding by its August return. The result is this thing of beauty:
Seriously, I would love to see an artist’s rendering of this. In a single image, it says so much about the 2020 bull market rally.
Nvidia, which cracks the top ten here, is up 6% in pre-market trading this morning, riding high on its deal to buy chipmaker Arm Ltd. That news is lifting tech stocks in general. (Oracle, which you cannot even make out in this chart, is up even higher in the pre-market).
And what of the other ~490 stocks? You can barely make out a bit of health care (Johnson & Johnson) and commerce (Mastercard), but the other big sectors are nowhere to be seen. No finance, no energy, no industrials or consumer discretionary stocks.
We’ve known for some time that Big Tech is carrying the water in this bull run. We’ve also learned that Big Tech has the power to take markets down with it once investors start rethinking valuations. The Nasdaq 100 has fallen 11%—yep, that qualifies as a markets correction—since its all-time highs, leading to a rough September.
The interesting news this morning is that Goldman and Deutsche Bank both describe the pullback as “typical,” and that stocks look attractive once again.
The question remains: are all stocks looking attractive, or just a handful?
***
Postscript
It’s a big day around here. Italian kids went back to school this morning, the first time since early March. (You may recall Italy was the first European country to shut schools and businesses to combat the virus outbreak.)
Despite a resurgence in COVID cases (but nothing like neighboring countries France and Spain), the return to classroom-instruction was never really in doubt here.
From my view at least, there hasn’t been much of a public debate about it, which reflects the way Italy has handled the pandemic from the start. Public health officials continue to advise the politicians, who then lay out the plan for the rest of us to follow. And we’re mostly following that plan.
To wit, the kids this morning masked up and entered the school building, one at a time. We parents hung back on the sidewalk and happily waved them off before grabbing an obligatory coffee at the nearby café.
For the first time in memory, Italian school kids will be seated one child per desk (it used to be a student had a compagno di banco, or deskmate, at a single oversized desk) and the day’s activities will be conducted according to social-distancing regulations, which we’re all familiar with.
The biggest disruption for the kids is the new school. For us, it’s a snap. It’s a short walk to a historic building in the center of neighborhood.
Our ‘hood, Garbatella, took off in the 1920s when Mussolini commissioned several dozen architects to design a series of residential quarters for working families on a hill just beyond the ancient walls of the city. On the cornerstone of every dwelling, you see the construction date, chiseled in the E.F.—epoca fascista—calendar. E.F. VII would be 1929, for example.
In the middle of Garbatella, a massive school was built, replete with imposing hawk statues overlooking the entrance. (You can see the school—at the 40-second mark, in this pre-war propaganda reel.) Our kids went there when they were young. They’ve now graduated to a different school that predates the Mussolini years.
All these images and memories came flooding back this morning on the walk through the neighborhood, up the hill to school.
Let’s hope it lasts. Speriamo bene, as the Italians say.
Have a nice day, everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
As always, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
The YOLO trade. In case you were wondering, that's shorthand for "you only live once." And it's become a kind of mantra for the army of retail traders who've fallen in love with options trading, a phenomenon the pros last saw in the late 1990s just before the dot-com bubble collapsed. Options traders are inflating a bubble in tech stocks, seldom a sound investment strategy, Fortune's Jeff John Roberts reports. But then, you only live once.
TikTok tick tock. It's hardly a done deal, but the potential Oracle-TikTok tie-up could still have ramifications beyond Silicon Valley. President Trump's hard line on the viral video platform wasn't a particularly popular one among voters, a recent Fortune-SurveyMonkey poll found.
Some of these stories require a subscription to access. There is a discount offer for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.
Market candy
Quote of the day
Fifty years ago, Milton Friedman in the New York Times magazine proclaimed that the social responsibility of business is to increase its profits... Half a century later, it is clear that this narrow, stockholder-centered view of corporations has cost society severely.
That's Colin Mayer, Leo E. Strine Jr., and Jaap Winter writing in a Fortune opinion piece on yesterday's anniversary of Friedman's seminal essay entitled, “The Social Responsibility of Business Is to Increase Its Profits.” A half-century later, Friedman's manifesto is still being hotly debated. The problem is Friedman's extremely limited take on corporate responsibility looks way out of touch with the times, economists and business leaders on the Right and Left now argue.


fortune--2020-09-14--Nvidia is buying SoftBank’s Arm chip division in biggest semiconductor deal ever

Nvidia Corp. said it agreed to buy SoftBank Group Corp.’s chip division Arm Ltd. for $40 billion, taking control of some of the most widely used electronics technology in the semiconductor industry’s largest-ever deal.
Nvidia will pay $21.5 billion in stock and $12 billion in cash for the U.K.-based chip designer, including a $2 billion payment at signing. SoftBank may receive an additional $5 billion in cash or stock if Arm’s performance meets certain targets, the companies said Sunday in a statement. An additional $1.5 billion will be paid to Arm employees in Nvidia stock.
SoftBank shares surged as much as 10% on news of the deal and renewed talks for the company going private.
Arm’s importance far outweighs its revenue, which comes from licensing chip fundamentals and selling processor designs. Its technology is at the heart of the more than 1 billion smartphones sold annually. Chips that use its code and its layouts are in everything from factory equipment to home electronics.
“It’s a company with reach that’s just unlike any company in the history of technology,” Nvidia Chief Executive Officer Jensen Huang said in an interview. “We’re uniting Nvidia’s leading AI computing with Arm’s vast ecosystem.”
The acquisition is fueled by the drive to bring artificial intelligence to everything that has an on-switch, the CEO said. Having succeeded in selling Nvidia’s graphics chips to owners of data centers to speed up image recognition and language processing, Huang is looking to make sure his technology helps spread that to everything from self-driving vehicles to smart meters.
The initial payment from Nvidia marks a small premium over the $31.4 billion that SoftBank paid to acquire Arm in 2016, previously the semiconductor industry’s biggest deal. The Japanese company is expected to own less than 10% of Nvidia following the transaction, according to the statement.
Regulatory approvals may well prove challenging. The companies said sign-offs are needed from China, U.K., European Union and U.S. authorities and may take as long as 18 months. China’s approval may be particularly difficult given rising tensions with the U.S.
“Now Arm will become a U.S. firm, and the conflict over semiconductors between the U.S. and China is becoming fierce as China still controls Arm China,” said Koji Hirai, head of M&A advisory firm Kachitas Corp. in Tokyo.
In comments after the deal announcement, Huang said his team “fully expect to spend time with the regulatory bodies in China,” but have every confidence in getting approval for the takeover.
Another major concern is whether the acquisition will upset Arm’s relationships with customers like Apple Inc. and Intel Corp. The chip designer has been able to work with a broad range of partners in part because it didn’t compete with them.
“We would imagine the bulk of Arm’s current licensees will be (no pun intended) up in arms,” Sanford C. Bernstein analysts including Stacy Rasgon wrote in reaction to the news.
Huang said he will preserve Arm’s neutrality and wants to expand its client list. He argued Nvidia is spending a lot of money for the acquisition and has no incentive to do anything that would cause clients to walk away.
Nvidia said the U.K. company will “continue to operate its open-licensing model while maintaining the global customer neutrality that has been foundational to its success.” Nvidia will add its technology to the offerings licensed by Arm, the Santa Clara, California-based company said.
Under Huang, Nvidia has risen rapidly up the ranks of technology companies in market value and influence. Already the dominant force in graphics chips that make video games more realistic, Nvidia has carved out a slice of the market for data center chips and is moving into self-driving vehicles.
Cambridge, U.K.-based Arm has created a successful niche for itself by being independent. Fierce rivals such as Apple, Intel, Samsung Electronics Co., Qualcomm Inc., Broadcom Inc. and Huawei Technologies Co. are all licensees. They either use Arm’s designs as the basis of their own chips or license its instruction set, the fundamental code used by processors to communicate with software, for proprietary efforts.
The acquisition by Nvidia, also a licensee, is a challenge to that neutrality. SoftBank’s purchase four years ago went ahead largely uncontested because the Japanese company wasn’t a competitor to any of Arm’s customers.
One client that will be directly challenged is Intel. Huang said a priority will be investing in Arm’s efforts to design chips for data-center computing. While he’s carved out a $3 billion niche in the business of supplying Alphabet Inc.’s Google and Facebook Inc. with graphics processors that help with their artificial intelligence workloads, Huang said he wants to speed up the adoption of Arm-based central processors, or CPUs. That’s a lucrative market dominated by Intel, which has about 90% share.
Nvidia announced it will keep Arm’s headquarters in the U.K. and will invest in a new facility there to push forward AI research, educate customers and provide a place for experimentation in robotics and automation. Huang said that commitment demonstrates how the acquisition will add to the U.K.’s technology footprint rather than detracting from it.
SoftBank’s sale of Arm unwinds another strategic investment in favor of boosting liquidity and enabling founder Masayoshi Son to focus on the more tactical investing he has said he wants to pursue.
Nvidia’s Huang runs a company that’s captured the attention of investors like few others in the past decade. Like Son, he’s a charismatic leader espousing a long-term vision of where technology is headed. The Taiwan-born entrepreneur is more engineering-focused than his Japanese counterpart, though, and often publicly delves into the minutiae of semiconductor and computer science.
His latest successful recasting of Nvidia’s technology involves the processing of AI work done in data centers. The company’s chips are among the best at breaking up the manipulation of data into small pieces and then executing that in parallel at high speed.
Huang will also get a large footprint in the mobile industry and smartphones. A previous attempt by Nvidia to break Qualcomm’s dominance of that business failed. The biggest rival to Qualcomm in smartphone processors is Apple’s internal effort. Those two companies are among Arm’s biggest customers.
Even without a presence in mobile, Nvidia’s value has soared in the past decade. The stock, which ended 2010 at $15.42 a share, closed Friday at $486.58. That’s given it a market value of just over $300 billion, almost $100 billion more than Intel, the world’s largest chipmaker with seven times the revenue of Nvidia.


fortune--2020-09-14--‘Going to Vegas:’ Newbie options traders face a reckoning as the tech stock rally fades

Benn Eifert is an expert in options trading, a complicated field that involves calculating delta, gamma and other exotic variables that help predict price movements. In 2020, he’s watched a flood of amateurs rush into his niche of finance—a phenomenon he last saw more than two decades ago.
“The ’90s were the last time retail investors were active and aggressive like this. Lots of older folks in Silicon Valley recall that time. Talk to your patent lawyer, and he was probably trading options in the ’90s,” says Eifert.
Like the current wave, the 1990s spike in amateurs trading options was spurred by a huge run-up in the price of tech stocks. And like that last wave, this one will end in tears, according to Eifert and other veteran options traders, who say most newbies don’t understand how derivates markets really work.
New players, ancient market
To understand the current mania among retail investors—and why they’re poised to take a bath—it’s helpful to look at the options market through a broader lens. Options are not a recent invention, of course. They’ve been around since biblical times, and their purpose is easy to grasp: They are a contract that locks in the right to buy or sell a given asset at a fixed price in the future, which is very useful if your business relies on a volatile commodity like grain or fuel.
That’s why the airline industry has long used options contracts, in the form of puts and calls (the right to sell and buy at a given price), to hedge against swings in commodity prices. Likewise, gold producers use such contracts to create a predictable revenue stream even as the price of the yellow metal bounces up and down.
Since options contracts can be valuable in their own right—think of a call option that gives you the right to buy a share of Apple at $100 when the market price is $115—they’ve given rise to an industry of speculators as well.
The trader Eifert, who founded a firm called QVR that specializes in derivatives, says speculative options trading took off in the 1970s after two academics created the Black-Scholes model, which offers a formula to help price them.
Despite their complexity, amateur investors have been quick to glom onto options during bull markets, viewing them as a way to bet that a given stock will go higher. That’s what happened prior to the dot.com bust of the late 1990s, when investors rushed to snap up shares of new tech companies—and also rushed to acquire options to buy and sell those shares.
The Robinhood effect
A similar rush has taken place this year as trading in calls of firms like Tesla and Apple has surged. The recent wave has seen individual investors account for as much of 75% of options trades on a given day, while sales of call contracts exceeded puts by 22 million in a recent week, according to figures cited by Bloomberg.
This influx of small traders has helped spur a 68% increase in call-options volume activity this year. According to a research note from Bank of America, this activity has “likely … influenced the 2020 bubble” as retail traders buy options helped drive up the price of Tesla and stocks like Netflix and Burger King.
The recent options mania among individual investors has also led to new and unusual patterns in the overall options market.
“On the retail front, it’s been very different than the past few years,” says Karen Chang who heads an options trading desk at Bank of America. “Much of the retail volume is coming out of platforms like Robinhood where users can trade for free, especially in stocks like Zoom and Peloton.”
The Robinhood influx, says Chang, has also led to a surge in short-dated options contracts as amateur investors seek to make bets on weekly stock movements. By contrast, institutional traders typically buy options that can be exercised over several months or more.
The army of amateurs also accounts for the imbalance in put and call options, says Chang, who says the ratio is typically more balanced. Another consequence has been individual stocks becoming more volatile as their price increases—an unusual phenomenon since higher stock prices normally imply that investors believe a company is becoming more mature and with more predictable revenue streams.
Chang isn’t the only one to encounter unusual patterns in the options market. Roni Israelov, the President of investment firm Ndvr and the author of several academic papers on derivatives, says 2020 has brought a big uptick in options contracts for individual stocks.
Ordinarily, the bulk of option contracts for equities consists of wagers on the broader markets—bets on which way the Dow Jones will move, for instance. But the recent run-up in tech stocks has led to a stampede of small investors buying contracts for single stocks.
In many cases, Israelov adds, these investors may be in over their heads.
“Unsophisticated traders focus on where the stock price is headed, and then buy or sell a put or call,” he says. “The harder, but more pertinent task is to forecast where the option price is headed.”
“The loudest and frothiest element”
A big reason for the surge in retail options trading is that it’s never been easier for the average person to buy puts and calls, or to attempt complex derivative strategies such as “strangles” or “straddles.”
Whether such traders know what they’re doing is another matter. Eifert, whose firm is known in trading circles as a “vol fund” (short for volatility) says the ease with which Robinhood traders can enter the options world is “totally shocking” to him. He believes that such trading is fine among amateurs—so long as they are doing it for fun rather than a way to build wealth.
“It’s fine as long as your spending is commensurate with your entertainment budget. Is there any difference between losing $5,000 a year on Robinhood or going to Vegas?” he asks.
Eifert also points to a sub-culture of traders who have gained infamy for engaging in seemingly reckless options trading, and then sharing their gains—or in many cases huge losses—on social media platforms.
“The loudest and frothiest element is on Reddit and Discord,” he says. “Those people are totally crazy. It’s like a self-destructive video game community.”
The “frothiest element” Eifert describes have also been posting their experiences to Twitter, including one amateur who described buying Peloton options after losing money on a Tesla call:
Eifert adds these kamikaze-like traders are not representative of most amateur options investors. Nonetheless, even the most diligent amateur risks taking a beating if they trade for any length of time.
“Table stakes”
The reason is that buying options is fundamentally different from investing in stocks, where retail investors can hold their own by researching a company and understanding a market of the sector.
In the case of options, making money from puts and calls relies less on understanding a company than it does on parsing factors like delta—the way an options price moves against an underlying stock price—or gamma, which measures the rate of change in delta.
Such calculations require strong math skills, but that’s just the beginning. Eifert says a high proficiency in math is merely “table stakes” when it comes to trading options, which he calls a “piece of craftsmanship from front to back.”
He’s not the only who views options trading this way. Israelov of Ndvr notes that most professional traders have not only math skills and market experience, but bespoke software tools to gauge volatility.
Options trading, of course, isn’t the only sector of finance where retail investors are competing against highly skilled pros. Even plain vanilla stock buying attracts legions of math whizzes deploying algorithms they believe will beat the market.
The difference is that options trading has a starker win-lose dynamic, one where amateurs are chum for the veterans. In a recent widely-shared essay about those dabbling in Robinhood options, veteran trader Ranjan Roy referred to them as “the gravy” for the rest of the industry. Israelov makes the same point, though more diplomatically.
“Options are a zero sum market. For every dollar made, there’s a loss,” he says. “If you want to come out ahead, you need an edge from experience or a sophisticated set of tools. That’s who retail investors are competing against.”


fortune--2020-09-15--TikTok users react to proposed Oracle deal: What’s Oracle?

To win in November , Trump would need to pull off an even bigger upset in 2020 than he did @ @

As business software giant Oracle tries to become “a trusted technology provider” for social media phenomenon TikTok, users of the app shared a similar reaction: Oracle who?
Oracle, the enterprise software company, confirmed on Monday that it was part of a high-profile bid for TikTok, which was facing a looming deadline imposed by the U.S. government to sell. The U.S. and China still have to confirm the deal, which stops short of an actual sale, before the it can be completed.
The agreement has some industry analysts scratching their heads. Why would a legacy enterprise software company chase TikTok, a social media app made popular by teens who create viral dance challenges? The answer has some analysts speculating that Oracle wants to serve as TikTok’s cloud data center provider. Meanwhile, half a dozen TikTokers interviewed said they knew little to nothing about Oracle, known for its very unhip database software.
“I heard about Oracle [for the first time] literally yesterday,” said Chelsea Dagrella, a 21-year-old TikToker from Syracuse, NY.
Kara Billington, a 16-year-old TikTok user from Richardson, Tex., said she wasn’t sure what Oracle does, but the name sounded familiar. “It’s a big company,” she said. “I really don’t know too much about it though.”
TikTok’s proposed deal comes just days before the Sept. 20 deadline imposed by President Donald Trump. Citing national security concerns, Trump said TikTok’s owner ByteDance, based in China, needed to sell the app or shutter its U.S. operations. Since then, the app received bids from big companies including Microsoft and Walmart as well as Oracle. However, the final proposal involving Oracle falls short of a sale, and it’s unclear whether it will be enough to appease the White’s House or pass muster with China’s government.
In a statement, Oracle provided few details about the proposed TikTok partnership. It merely said that “Oracle has a 40-year track record providing secure, highly performant technology solutions.”
For TikTok, the proposed deal potentially means the company can continue operating in the U.S. TikTok is also expected to establish a U.S.-based headquarters, where it would employ 20,000 people. For Oracle, the deal adds a big-name company to its roster of “partners”.
But for TikTokers, the deal means next to nothing. Users say they just want to be able to continue creating and watching video clips featuring users lip synching, dancing, and doing short comedy skits.
“If it continues being the same, then it’s fine,” said Diana Terrazas, a 19-year-old TikTok user in Dallas who spends hours every day watching new videos.
Many TikTokers echoed the sentiment. For them, their concern boiled down to the user experience. They want the app’s algorithms to continue to recommend videos based on their interests, to help boost the videos they make, and to steer clear from filling their feeds with ads (or pitches for business software).
Kathryn Baxter, a 16-year-old from Richardson, said TikTok is a service she uses to connect with her peers, knowing that she will be able to relate to others’ videos and not be judged by her responses. She said if Oracle or any new owner changed TikTok, it would be “big” and could potentially change the organic feeling of community that the app has created.
Billington, who attends school with Baxter, said she would continue using TikTok regardless of its owner “as long they don’t change it and turn it into Instagram,” a TikTok rival. And Dagrella said as long as TikTok “is there, I’m there.”
But some of TikTok’s influencers say they know how fickle social media can be. Even though they make money off the service through sponsorships and donations from fans, they make sure not to get too attached. Instead, they use it to amplify other projects that help them make money. They just hope Oracle, whatever it is, and whatever its deal involves, doesn’t get in the way.
For example, Drew Ryn, a 23-year-old singer from Nashville who was once on Fox show The X Factor, said she uses TikTok to help boost her profile as a musician. She has amassed 1.7 million followers on TikTok since joining last year. Unlike some of the others interviewed, she had heard of Oracle before and had a vague idea about what it does.
“I have heard of Oracle, but I’m not an expert,” Ryn said. “I think it will be better for privacy, but what that means for content creation or algorithms or our clout, I don’t know.”
Meanwhile, Cody Orlove said TikTok helped him build a career and that he doesn’t care about Oracle getting involved. The 19-year-old from Los Angeles posts comedy videos, skits, and re-enacts scenes from Netflix shows. At age 14, he realized he could make money on the app and dropped out of high school to dedicate himself to the app and other side ventures. Orlove has 6.5 million followers and said he’s made $2 million in the past three years.
Though he still regularly uses TikTok, he also now sells merchandise and tours with fellow influencers.
“Influencers only have three to four years,” of fame on social media, he said. “So I’ve been trying to make my biggest revenue stream not be social media. It’s very unpredictable.”
Olivia Ghaussy got a taste of how quickly anyone can build a following on social media. The 35-year-old nurse practitioner who lives in Los Angeles, joined in June and already has more than 20,000 followers (one of her videos went viral).
As a result, she knows she’ll always have a way to reach people who want to follow her, even if TikTok becomes unrecognizable because of any Oracle partnership.
“There’s always another app waiting in the wings,” she said.


fortune--2020-09-15--Deal fever has Wall Street feeling bullish once more

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The spate of M&A news over the weekend and on Monday has analysts feeling bullish about where CEOs see things going from here, as markets (and notably the embattled tech sector) post a rebound.
“You have a lot of companies and CEOs showing quite a bit of conviction in the ability to go out and spend billions of dollars to basically enhance the size of their companies and get into new product lines. That’s a vote of confidence in what the future state is,” says Wells Fargo Investment Institute’s senior global market strategist Sameer Samana.
In big deal news first reported over the weekend, Oracle just confirmed a deal with Gen Z-favorite TikTok’s owner ByteDance to serve as the app’s “trusted technology provider” (not a traditional sale). The proposed partnership deal would be “a positive to Oracle’s Cloud business and would give it another large marquee customer after landing Zoom Video in April 2020,” and could hypothetically generate at least $630 million in revenues, analysts at Bank of America wrote Monday (Oracle’s stock was up over 4% at Monday’s close). The deal was long fought over by the likes of Microsoft and Walmart.
Elsewhere, Nvidia scored a big A.I. deal with its acquisition of Arm from SoftBank Group for $40 billion in the biggest semiconductor deal ever. Meanwhile, on the healthcare front, Gilead Sciences snapped up cancer treatment maker Immunomedics for roughly $21 billion.
Overall, analysts believe the bevy of new deals hitting the newswires is a show of confidence on the part of Corporate America that is “incredibly encouraging” for investors, says Samana. “It probably helps with sentiment and animal spirits by quite a degree to have these CEOs be willing to pay premiums for companies that aren’t necessarily cheap,” he says.
Indeed, Commonwealth Financial Network’s Peter Essele believes “this isn’t the end of it either”—he thinks we’ll continue seeing deals announced as many big tech names are “flush with cash.”
And while coronavirus vaccine talk is certainly nothing new (and is likely already priced in to markets), investors were also encouraged by bits of good news on vaccine front Monday. After having coronavirus vaccine trials halted in its tracks recently, drug maker AstraZeneca resumed testing for its Phase 3 trials for the U.K. over the weekend. Pfizer, on the other hand, said Sunday a vaccine might even be distributed as early as the end of this year if all goes well, although there’s been pushback on how realistic that timeline is.
Investors will “absolutely get bumps every time you see a little bit of news coming through. That’s not what’s going to be driving the long-term trend, but as far as day-trading and weekly trading, that just helps the positive momentum that’s already being drummed up by the improvements in the economy,” notes Essele.


fortune--2020-09-14--Tech sell off was a ‘head fake’ as stocks rebound, say analysts

Tech investors have been whipsawed the past few weeks. But things appeared to be looking up on Monday.
The tech-heavy Nasdaq hit a new high on Sept. 2, then quickly posted a record speed correction, dropping roughly 4% over the past week on worries of overly exuberant options trading and overheated valuations. But in late afternoon trading Monday, the index rallied roughly 2% as investors move on from the past week’s rout.
Big names like Tesla and Apple, which dragged the sector down last week, posted strong rallies, up 3% and 12% respectively as of Monday’s close.
According to Lisa Shalett, Morgan Stanley Wealth Management’s chief investment officer, “last week’s 7% technology sell-off was technical in nature and not sufficient to break market leadership trends that have favored long duration secular growth names,” she wrote in a note Monday.
Meanwhile, analysts at Goldman Sachs and Deutsche Bank wrote in notes Friday that the early September sell-off is likely short-lived, predicting stocks will likely continue their trek higher in coming months.
From a technical standpoint, Wells Fargo Investment Institute’s Sameer Samana points out the S&P 500 and Nasdaq “both were able to hold above the levels we saw in June. From a higher highs, higher lows standpoint, … the fact you were able to hold at higher levels than June or July is encouraging,” he tells Fortune. “Right away, it tells a lot of investors, ‘Nothing is wrong with the trend, we just got a blowoff and kind of a pullback’.” In fact, Samana points out the sector is still trading at levels hit in mid-August.
And to some bullish investors, the rally Monday may be the all-clear that markets were merely frenzied, not in trouble.
“As far as the rebound in tech, you need to look back to last week, which was basically more of a head fake more than anything,” Peter Essele, the head of portfolio management at Commonwealth Financial Network, tells Fortune. “It was a resetting of expectations, a resetting of valuations, it was not fundamentally-driven, and I think after that slight downturn, that slight selloff, investors are starting to realize just how much of a solid footing the economy and markets are really on.” He believes much of the rally on Monday is from investors moving back in and snapping up tech names that have “seen pretty significant appreciation” over the past six to 12 months and are “basically on sale” from levels a few weeks ago.
And for Samana, the “absorption” of 10-year and 30-year Treasury issuances last week that quelled fears of higher interest rates “followed by a good bit of M&A over the weekend, which shows confidence on the part of CEOs, and some easing in financial conditions like the volatility indices [and] the dollar” are all bigger macro reasons why markets are climbing higher Monday. “All are helping sentiment on the day and leading to a rebound from the volatility over the past week or two,” he notes.
And as Fortune reported last week, there are still bullish signs indicating where tech stocks may go from here.


fortune--2020-09-14--To win in November, Trump would need to pull off an even bigger upset in 2020 than he did in 2016

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The 2016 Donald Trump win shocked pollsters and the political world alike.
But if Trump doesn’t begin to close the polling gap with Democratic nominee Joe Biden, then the president would need an even bigger polling upset on election day to pull out a 2020 victory.
Four years ago Democratic nominee Hillary Clinton went into election night polling ahead of Trump in Pennsylvania (+1.9 percentage points), Michigan (+3.4 points), and Wisconsin (+6.5 points). Trump won all three and took White House—although he did lose Nevada, where he had a 0.8 percentage point polling average lead, according to RealClearPolitics.
But this go around, Trump might need to come from behind in even more states: Biden currently leads Trump in polling averages in seven states the president won in 2016, including Arizona (+5.6 points) Florida (+1.2 points), Pennsylvania (+4.3 points), Michigan (+4.2 points), North Carolina (+0.8 points), Ohio (+2.4 points), and Wisconsin (+6.3 points).
In most electoral scenarios, Trump would need to win at least five of those states to get to 270 electoral votes. Trump would win, for example, if he pulls off upsets in Arizona, Florida, North Carolina, Ohio, and Pennsylvania—and wins everywhere he’s currently leading.
While Biden leads polling in Ohio, election models do still give Trump the advantage in the Buckeye State. FiveThirtyEight gives the president a 55% chance of winning Ohio in November, while the Economist gives Trump a 71% chance of taking Ohio. Those same models have Biden the favorite in all the other states he’s currently leading polls.
And keep in mind these polls could change between now and the election. Look no further than the 2016 polls, which saw considerable tightening in the final weeks of the race. And we still have all three presidential debates and the vice presidential debate to go.
The bad news for Trump is that Biden’s national polling lead (+7.5 points) is much stronger than Clinton’s (+3.2 points) during the 2016 campaign. Clinton ended up with a 2.1 percentage point popular vote win.
If Biden actually beats Trump in the popular vote by 6 percentage points his chances of winning the election are 99%, according to FiveThirtyEight editor-in-chief Nate Silver. But a 1 to 2 percentage point Biden popular vote win equates to just a 22% chance of a Biden electoral college win.
As of Monday, FiveThirtyEight forecast the odds of Biden winning at 75%, while The Economist forecast the Democratic nominee having a 84% chance of winning the electoral college.


fortune--2020-09-14--Why Nvidia’s purchase of Arm worries the U.K. tech sector

When Masayoshi Son, the billionaire founder and chief executive of Japan’s Softbank, announced he was buying U.K. computer chip design firm Arm for $32 billion in 2016, the British government was quick to praise the deal as evidence that the country remained an attractive place for foreign investment even though its population had just voted a month earlier to leave the European Union.
But now, four years later, Softbank is selling Arm to U.S. chip giant Nvidia for $40 billion and the U.K. government may not take such a sanguine view of the new ownership arrangements.
When Softbank purchased Arm, the British government forced the Japanese company to commit to a legally-binding set of conditions: these included keeping Arm based in Cambridge, where the company was already in the process of constructing a new signature headquarters building, and critically, doubling Arm’s U.K. headcount to 3,500 employees within five years.
The company, which now employs close to 3,000 people in the U.K., remains shy of that goal. And this time, Jensen Huang, Nvidia’s chief executive, has scrupulously avoided making a firm numerical commitment to further hiring.
“We want more great engineers not fewer,” he said on Monday, without mentioning how many more engineers his company may hire.
Instead, Huang offered vaguer assurances that Nvidia will invest in an artificial intelligence research center in Cambridge, including building one of the world’s most powerful supercomputers there.
“We are open-minded to talk to the U.K. government on a partnership that enables us to invest in the U.K. and expand the R&D presence of Arm,” he said.
Some analysts were skeptical of Jensen’s assurances. “This remains to be seen,” Gartner analyst Alan Priestley said. “Nvidia already has a major investment in its U.S.-based locations for A.I. research.”
One of Arm’s original co-founders, the venture capitalist Hermann Hauser, said he was dismayed at Arm’s sale. “I think it’s an absolute disaster for Cambridge, the U.K., and Europe,” Hauser told the BBC’s Radio 4 on Monday morning.
Hauser said he worried Nvidia, which is based in Santa Clara, Calif., will ultimately shift Arm’s headquarters to the U.S. More importantly, he said Nvidia would destroy’s Arms business model, which has depended on its independence —the company licenses its designs to many chipmakers and as well as companies that incorporate their own chip designs into products, such as Apple and Samsung. All these companies compete with one another. Now Arm is being acquired by one of those competitors, which may use its position to hike licensing and royalty fees on its rivals or to deny them access to the latest technology. Huang said Nvidia valued Arm’s independence and business model.
Hauser also said he worried about Nvidia’s acquisition by a U.S. company amid growing conflict between Washington and Beijing over access to next generation technology. He said Nvidia’s purchase would make it easier for the U.S. government to use its export control regime to prevent Arm from licensing its semiconductor designs to Chinese companies.
“If hundreds of U.K. companies that incorporate Arm’s [chip designs] in their products want to sell it or export it to anywhere in the world, including China, which is a major market, this decision on whether they’re allowed to export it will be made in the White House and not in Downing Street,” he said. “I think this is terrible.”
Simon Segars, Arm’s CEO, said U.S. export restrictions were based on where a technology was designed and licensed, not the nationality of its ownership. He said “the majority” of Arm’s technology was “designed in the U.K. or outside the U.S. and mostly don’t fell under U.S. export controls.” Huang also said Nvidia’s purchase would not change the legal jurisdiction of Arm’s technology.
Hauser has written an open letter to U.K. Prime Minister Boris Johnson asking him to block the deal unless Nvidia provides firm guarantees on the number of jobs in Cambridge, no preferential access to Arm’s technology for Nvidia and an exemption to U.S. export controls for British companies.
Hauser’s call has been joined by Prospect, a union that represents science and technology workers. The opposition Labour Party has also called for government scrutiny of Nvidia’s purchase. On Friday, as rumors of the impending deal swirled, Labour shadow business secretary Ed Miliband said that the government was wrongly “ignoring the potential consequences of this takeover, including the possible implications for where the company is headquartered and the thousands of jobs in Britain that depend on it.”
Oliver Dowden, the U.K.’s culture secretary, is considering whether to ask the government’s Competition and Markets Authority to undertake a full review of the deal, The Guardian reported. Such reviews can take many months to complete and open up the possibility of the regulator blocking the deal, which it can do if believes the purchase would in any way undermine national security, financial stability or plurality in media ownership. When Softbank bought Arm in 2016 it avoided this kind of review, in part due its legally binding commitment on jobs.
Huang said that Nvidia had only just begun any discussions of the deal with the U.K. government and that there remained “plenty of time” before the deal would close to reach an agreement on potential commitments in terms of investment or jobs.
Beyond job losses, the sale of Arm to a U.S. tech giant is another blow to British prestige. The country has been proud of its technology sector, which has been a bright spot in an economy that has been battered by long-term secular decline in industries ranging from mining and steel to oil and gas to retail.
But, despite playing host to a number of promising startups, the country’s tech sector has been unable to grow businesses with the scale and global impact of those birthed in the U.S.
Arm, prior to Softbank’s acquisition, was one of the few independent British companies that was an undisputed world leader in a technological field. From Lovefilm, a DVD subscription and video streaming service that was bought by Amazon and incorporated into its Prime Video product, to artificial intelligence pioneer DeepMind, which was acquired by Google, many of the U.K.’s most promising young companies have wound up in the hands of deep-pocketed Silicon Valley tech giants.
Other mega tech deals involving British firms have ended badly. In 2011, Hewlett Packard bought Autonomy, an enterprise software company based in Cambridge that was a one-time darling of the British technology sector, for more than $11 billion, only to turn around and write off $8.8 billion of that purchase one year later after discovering what it claimed was widespread accounting fraud. The case has resulted in on-going civil and criminal litigation on both sides of the Atlantic.


fortune--2020-09-14--Twitter users sound off about Oracle’s TikTok deal

Database giant Oracle confirmed on Monday that it’s slated to become the “trusted technology partner” of TikTok, the Chinese-owned viral video site with more than 100 million U.S. users. The news came hours after Microsoft revealed that TikTok owner ByteDance had rejected its acquisition, putting an end—for now at least—to a geopolitical drama that has roiled the tech world for months.
The TikTok controversy first flared this summer when the Trump Administration declared it would “ban” the app on national security grounds unless an American company took control of ByteDance’s U.S. operations. In recent weeks, other rumored suitors included Google, Twitter and WalMart.
By Monday, reactions to the Oracle-TikTok deal—which is subject to final review from a powerful interagency committee called CFIUS—began pouring in. For the most part, they are not positive.
Tech watchers have seized on the fact that, under the proposed terms, Oracle will just be a “partner” rather than take ownership of the app’s U.S. operations.
Oracle didn't beat Microsoft to buy TikTok. Because "trusted tech partner" isn't the same as buying anything.
No one is buying TikTok. — Dan Primack (@danprimack) September 14, 2020
What’s more, it appears Oracle will not get access to the algorithms that power TikTok’s AI, which is considered the company’s secret sauce—and which could leave U.S. users vulnerable to Chinese surveillance, as Facebook’s former security chief, Alex Stamos, pointed out.
A deal where Oracle takes over hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok, and the White House accepting such a deal would demonstrate that this exercise was pure grift. https://t.co/3kpwqnEYol — Alex Stamos (@alexstamos) September 13, 2020
Even Sen. Josh Hawley (R-MO), a close ally of Trump and a China hawk, expressed concerns about whether the “partnership” arrangement would safeguard Americans’ data from Beijing.
If true, the #TikTok platform must be rebuilt from top to bottom and all backdoors to #Beijing closed https://t.co/D72vSPJXWc — Josh Hawley (@HawleyMO) September 13, 2020
Others on Twitter, meanwhile, focused on Oracle’s close ties to the Trump Administration—Oracle founder Larry Ellison has hosted fundraisers for the President—to suggest that political influence determined the outcome of the deal more than business or security concerns.
Also, the "Larry Ellison raising money for Trump" thing is important, but most are ignoring the fact that Oracle CEO Safra Catz has been chummy with the president since before his inauguration. She even served on his transition team. — Steve Kovach (@stevekovach) September 14, 2020
Oracle is basically becoming one of those Saudi royal family members who you need to sign up as your “local partner” if you want to open a Toyota dealership there https://t.co/rJrGAZcgSL — Tom Gara (@tomgara) September 14, 2020
Some reactions to TikTok’s winning bid focused on the business implications of the deal. Oracle’s interest in TikTok has earlier raised eyebrows because the company has no experience in consumer products—raising the question of why it wanted the app in the first place.
According to the Wall Street Journal, which first reported Oracle’s winning bid, the TikTok deal is about the company’s cloud computing operations: “Oracle’s interest in TikTok is primarily driven by kick-starting its fledgling cloud-computing business, which remains far behind market leaders Amazon.com Inc. and Microsoft,” sources told the Journal.
If Oracle’s interest in TikTok is primarily about cloud computing, the deal could come at the expense of Google, which is Oracle’s longtime nemesis and which currently provides cloud services to TikTok. Veteran tech reporter Kara Swisher noted the next steps are uncertain:
FYI TikTok signed a three year cloud services deal with Google in May of 2019 for $800m. Whither that? Who knows? — Kara Swisher (@karaswisher) September 13, 2020
Finally, some observers—including Box CEO Aaron Levie—used the news to joke about what the likes of Oracle owning an app that is primarily defined by teen culture.
Sure, it seems unusual to have Oracle run TikTok. But who will have the last laugh when the TikTok influencers start recommending HR and Finance systems in all their videos. — Aaron Levie (@levie) September 14, 2020
One important figure who has yet to weigh in on the deal is President Trump, whose outbursts gave rise to the drama over TikTok in the first place. In the last 12 hours, the President had tweeted repeatedly about his poll numbers and various alleged hoaxes and conspiracies, but issued no statements about the tie-up between Oracle and TikTok.
More must-read finance coverage from Fortune:


fortune--2020-09-14--Momofuku’s David Chang on the big changes the restaurant industry needs to make to survive

When David Chang talks, the food world listens.
Since opening up his revolutionary Momofuku Noodle Bar in New York City 2004, Chang has not only built a restaurant empire but also become a spokesperson for the industry as a whole with Netflix show Ugly Delicious, a podcast, and now his just-released memoir, Eat a Peach. In his new book, written with Gabe Ulla, Chang scrutinizes his own success, bipolar disorder, and depression with the same honesty and bluntness that has made him such a critical figure in food culture.
These days, his message is a dire one: Restaurants are an essential part of the “oil” that keeps society and the economy running smoothly—and they are struggling to survive amid the COVID-19 pandemic. Even Momofuku has had to close two of its locations. The chef is focused on advocating for the industry with elected officials, pushing for government assistance, and trying to create solidarity within the sector. The big question he’s trying to answer: “How do we fix this industry so it isn’t so fragile?,” he asks. “How do we make sure we don’t repeat these mistakes?”
The following are edited excerpts of Fortune’s conversation with Chang.
Fortune: Let’s start by taking the temperature of the industry right now. In April, you said that it had been the hardest couple of weeks of your life. Have things gotten better or worse?
Chang: I don’t know if things have gotten better. We’ve just adapted to it. We understand the obstacles ahead of us a little bit better. The only thing that can really change the situation is a vaccine or some kind of effective therapeutic and proper government assistance that it seems every other English-speaking nation has been doing for their small business and restaurant industry. But our American government cannot seem to get its act together.
What’s been your strategy?
The first thing was trying to take a pragmatic approach: What is going to be most useful for us in a distressful situation and preparing for a scenario if and when we were to reopen. We spent I don’t know how many thousands of hours, our entire team, on it. You have to overhaul everything you’ve done. For the most part, we were just waiting—waiting for answers and doing what we could.
The restaurant industry has been a metaphorical car that’s always needed a new engine and shocks and breaks and a muffler. We could never fix it because it was always on the move. Now it’s stopped, and let’s take the time to do this right.
You just touched on how COVID has brought to light some of the industry’s vulnerabilities. What are they? Can they be fixed?
It’s becoming increasingly clear that I don’t think small businesses should have to pay for healthcare. That should be something that is universally provided. And it’s proved that we need some kind of universal basic income.
It was hard to make it work before the pandemic. Even if you were a proven operator, it was hard to get a loan because everyone in the financial industry knew the shaky financial ground that restaurants were built upon. It’s exposing the cost structure, and we need to evaluate how much you can charge for food. I think the real cost is probably a 30%, 40% increase across the board. I don’t know how anyone will pay for that.
The discrepancy is if you have the capital and the cash flow to have scale and you have access to public markets, you have no incentive to raise the prices. Because of that dynamic, you’re going to see just dramatic change in the industry.
This is problematic for the country at large because restaurants are like banks. We just don’t hold onto the money and collect interest. We bring it in, and we immediately send it out to a variety of things, from florists to bakers to purveyors to farmers to employees. We’re like the oil in this culture. We just constantly lubricate it by giving it away.
What does Momofuku look like as a company in 2035?
We never knew a pandemic like this was going to happen, but we always try to prepare for what might be terrible. We look at the trends, and it’s a reason we started a delivery service before it was cool. We’ve done everything knowing that we had to diversify for bad times. We started an equipment company. We were in media. We have a lab where we have focused on making mostly fermented products ranging from hot sauces to salts to soy sauce and versions of miso. We’ve dabbled in products before with Kraft Heinz and our Ssam Sauce.
Two years ago, we put out a lofty goal of changing our revenue in five years so 50% would not come from the four walls of a restaurant but from consumer product goods. With the pandemic, now we’ve tried to accelerate that into six months. We’re just shifting all of our resources to that and still trying to create a future of growth for the restaurants.
As a chef, how do you feel about being part restaurant company, part consumer packaged goods company?
I think a lot of chefs are saying, ‘Well, I didn’t sign up for this.’ I don’t have that luxury. I’ve got to do what’s best.
We took a big reorg. We’re going to try not to close any more restaurants. But the goal is maybe this is several steps backwards to shore up that foundation so we can create a better company moving forward, hire everyone back, do more things. The reality is we’ve got to do whatever we can to survive. If we don’t change, we don’t have any hope for a future.
Your book is in part dedicated to the underdogs. I’m curious what it is about the restaurant industry that attracts this type of scrappy person. Is that the mentality that you need in this moment to survive?
Now cooking is seen as cool, but not too long ago, if you told people you want to be a cook, people were like, ‘What the hell are you doing?’ When I went to cooking school, people said, ‘Congratulations, now you’re going to get asked did you get out of prison? Did you get out of the military? Or rehab?’ Now you see Ivy League kids cooking. It’s just the craziest thing.
The mindset with at least the older guard—and I’m in the middle at the age of 43—was that you were in this profession because you couldn’t do anything else. Many of the people that seemed to have been drawn to it, at least in my world, for whatever reason couldn’t fit into the status quo. I tend to think that scrappiness comes from never fitting in.
Restaurants provide this weird structure that I needed. I have been yelled at basically my entire life, from my father, my family, to high school. And then obviously in kitchens. I just couldn’t fit in anywhere else. And I get to kitchens and wow, I’m like, there’s something familiar about this environment. At least for me, what I loved about cooking was that it’s an addiction. I’m an addict to that kitchen high that so many of us get.
In your book you write about your evolution as a leader. You’ve been told in a board meeting that you are the worst businessperson they’ve ever met, and your executive coach said that it was incredible so many people have stayed by your side for so long when they can’t stand you.
The worst thing a chef can be told by a businessperson or investor is that you’re an artist. Part of that is true. We are. But part of that is also this weird bias that if you are a chef, you don’t know how to do anything else. I think it’s a self-perpetuating thing.
I’ve made a lot of mistakes both on making business decisions and being a business leader. And that’s hard. I’ve been working on a lot of my own issues. I can’t rationalize as much as I want to why I was a yeller or continue to have a bad temper.
It’s one of the reasons why I’ve given up a lot of control at Momofuku. I don’t make decisions. A lot of that is understanding what triggers me. If you have an addiction problem, you shouldn’t put someone in a situation where they might be tempted. I’m working on it, and it’s not been easy.
You write very openly about your depression and your anger, and how they’re tied in some ways to your success. How do you think about your creativity when it’s these issues that fueled your career? What fuels the next chapter?
Well, whatever was working for me before, I can now look and ask, did it even work? Was I open to new things? Did any of that ultimately lead to more happiness, to a net positive for myself and the people around me in the world at large?
Maybe getting to the top of the mountain isn’t the goal. Maybe it’s going halfway and come back down. This whole idea of success for me is something that is constantly shifting and changing, and I think about what that means for me going forward. This is the truth, I really don’t know.


fortune--2020-09-14--The federal $300 unemployment benefit is set to expire. Will there be a replacement?

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President Donald Trump signed a memorandum last month to provide a $300 enhanced weekly unemployment benefit to be paid on top of state benefits.
But the $44 billion allocated by Trump for the enhanced unemployment benefit, which comes from the Federal Emergency Management Agency’s (FEMA) budget, is expected to run out this month. In fact, On Wednesday, Texas became the first state to announce it had depleted the funding and will discontinue payments.
Trump opted to sign a memorandum once it became clear Congress wouldn’t reach a deal to replace the $600 enhanced benefit—which expired the week ending July 25. However, it may be harder—or legally impossible—for him to do so again.
As the $300 benefit nears expiration, Fortune compiled all the proposals for extending an enhanced unemployment benefit.
House Democrats want $600 per week
The $3 trillion Heroes Act passed by House Democrats in May would’ve extended the $600 weekly benefit into January 2021. However, that bill did not move forward in the Republican controlled Senate.
Democratic leaders stand by that proposal to bring back the weekly $600 enhanced unemployment benefit—which stretched from late March to late July.
But Democrats insistence that the unemployment benefit go back up to $600 isn’t what is holding up another stimulus package. Instead, it’s the fact the two parties are still $900 billion apart on the next broad stimulus bill: the Democrats are at $2.2 trillion, and the White House is at $1.3 trillion.
It’s unclear by what amount Democrats would be willing to reduce the enhanced unemployment benefit, or their offer for a broad stimulus bill, in order to get a bipartisan bill passed.
Senate Republicans want $300 per week
On Thursday, the Republican-proposed stimulus package failed to get enough votes to advance in the chamber. The stimulus package received 52 votes in favor, all from Republicans. The bill needed 60 votes in favor to move forward.
That stimulus bill would have extended $300 weekly enhanced unemployment benefits through the end of the year. And that proposal had support from the White House.
Senate Democrats said the $500 billion stimulus package was too small to properly boost the economy and control the virus.
Another extension from the White House?
Trump issued the $300 weekly enhanced unemployment benefit by pulling $44 billion in funding from FEMA that was set aside from the CARES Act. The president has suggested he may pull more unused stimulus funds to pay for another extension.
“We have $300 billion in an account that we didn’t use…I would be willing to release it—subject to Congress—and use that as stimulus money and it would go right to the American people,” Trump said earlier this month.
However, it’s unlikely Trump could legally use that money by simply issuing an executive order or memorandum. These funds, unlike the FEMA disaster aid, weren’t designated for direct aid to Americans.
Will the a deal get done?
For much of the summer another broad stimulus bill and an extension of enhanced unemployment benefits, looked like a sure thing. But with the economy improving faster than expected and politicians unwilling to comprise, the odds of another bill are declining.
The consensus on Capitol Hill is nothing will get signed before the end of September—when U.S. lawmakers are required to approve more federal funding to stave off a government shutdown.


fortune--2020-09-14--Nvidia’s purchase of Arm creates an A.I. computing juggernaut

Jensen Huang, the chief executive officer of chipmaker Nvidia, has presented his decision to purchase semiconductor design firm Arm from Japan’s SoftBank as all about artificial intelligence.
“A.I. is the most powerful technology force of our time,” Huang said in a press conference on Monday and that by purchasing Arm for $40 billion, “together we will create the world’s premier computing company for the age of A.I.”
While chief executive’s often portray big M&A deals in this sort of hyperbolic language, in this case, there’s more to Huang’s claims than the usual marketing spin.
Earlier this year, Nvidia surpassed Intel to become the world’s most valuable semiconductor manufacturer. The company makes a specialized kind of computer chip known as graphic processing units, GPUs. These chips were initially designed to handle the high data volumes that need to be crunched for animation—making them the standard chip for use in computer gaming and computer-aided design.
But that same high-volume processing ability has also made them the go-to chip for artificial intelligence applications. The company’s GPUs represent more than 97% of the A.I.-specific computing infrastructure offered by big cloud service providers such as Amazon’s AWS and Microsoft’s Azure, according to a report last year from research firm Liftr Cloud Insights. Nvidia’s data center revenues overtook gaming-related sales for the first time ever in the most recent quarter, bringing in $1.75 billion.
What Nvidia’s purchase of Arm does is allow the Santa Clara, California-based GPU giant to extend its dominance in A.I. from data centers and dedicated servers down to mobile phones and small microprocessors, which are increasingly being used in connected vehicles and other networked devices—from street lamps to washing machines—that are part of the so-called Internet-of-Things (IoT).
Arm, which is headquartered in Cambridge, England, has long-dominated the market for the computer chips that power the world’s smart phones, with its designs accounting for more than 90% of the market. It is also a leader in the design of small, low-powered chips that enable smart sensors to be incorporated into everything from cars to toasters.
It was the company’s preeminence in these two areas that Masayoshi Son, the CEO of SoftBank, cited when he purchased Arm for $31 billion in 2016, saying at the time that he saw Arm as the centerpiece of a portfolio companies he was building around the promise of the IoT revolution.
Since then, Arm has enhanced the ability for mobile phones using its chip designs to run machine learning applications on the phone itself and it has also, this past year, pushed A.I. capabilities into even its smallest and most power-constrained microprocessors designs.
It also launched a business designed to help companies manage an ecosystem of millions of connected sensors and devices, in part through dedicated software that Arm would maintain. This “IoT Services” division is not being sold to Nvidia as part of the deal, and will remain owned by Softbank.
“Energy-efficient architecture”
Huang cited Arm’s experience in finding ways to make hardware that can run sophisticated A.I. programs while consuming far less energy as a key asset Nvidia was hoping to exploit across its portfolio of A.I.-dedicated chips in the future. He also said Arm would allow Nvidia to reach a whole new set of customers beyond its traditional datacenter and gaming markets.
“We would never have been able to reach the broadness and vastness of the ecosystem that Arm has created with this incredibly energy-efficient architecture they’ve created,” he said. “Energy efficiency is the single most important thing in computing going forward.”
Many analysts say Huang’s emphasis on Arm’s strength in energy-efficiency is smart. One criticism of Nvidia’s existing GPUs is how much electricity they consume. “Energy efficiency is a new superpower in semiconductor,” J.P. Gownder, vice president and principal analyst at technology analytics firm Forrester Research, said. He said there were two reasons for this: cost and climate. “Power costs and climate change come into play, particularly in large-scale deployments like data centers,” he said.
While the deal gives Nvidia sweeping power in A.I. computing for the moment, it may also provoke a challenge that could knock the company off that prized perch.
Unlike Nvidia, Arm is not a chipmaker. It simply designs chips and then licenses those designs to semiconductor manufacturers for a fee, along with a royalty payment whenever those chips are shipped to end customers. It’s a great asset-light, high-profit business model. And one of the reasons it has worked so well for Arm in the past is that the company was independent, allowing it to sell to both Apple and Samsung, as well as the likes of Intel and AMD, which also design their own chips too.
While Gownder suggested that Nvidia could potentially adopt Arm’s licensing model for designs of its GPUs too, it seems just as likely that many existing Arm customers—such as Samsung, Intel and Qualcomm—which compete with Nvidia for data center business may fear being dependent on an entity controlled by a rival for access to the latest technology.
Huang and Simon Segars, Arm’s CEO, have sought to preempt such concerns by saying that Arm’s business model will not change and that the U.K. company will continue to sell to anyone and everyone. “We see the virtue of fairness and openness and independence,” Huang said. “Continuing this business model is the best way to expand the reach of Arm and the value of Arm.” Segars said that he had spoken to Arm’s customers when rumors about Nvidia’s likely purchase of the company first surfaced earlier in the summer and sough to reassure them. “It is clear to me that Arm can maintain its business model, and the way it was operated,” he said.
“Huge opposition”
But many analysts are skeptical. “This will rightly face huge opposition, most notably from ARM licensees,” said Geoff Blaber, analyst at CCS Insight. “A huge diversity of businesses from Apple to Qualcomm are dependent on ARM and will be motivated to unite in opposition.”
Reuters quoted an unnamed South Korean chip industry source as saying the deal would raise concerns among Nvidia competitors such as Samsung and Qualcomm that Arm might hike licensing fees. “Arm customers may try to find alternatives to Arm for the longer term,” the source told the news service.
Already some chipmakers, resentful of having to pay licensing and royalty fees to Arm, have been moving to an open-sourced architecture called RISC-V, which was developed by researchers at the University of California at Berkeley and made freely available in 2014. Since then it has been adopted by dozens of semiconductor companies, including many in China, and Nvidia’s purchase of Arm could accelerate that trend, says Alan Priestley, an analyst with technology research firm Gartner. (Nvidia itself uses RISC-V in parts of its chipsets.)
Nvidia’s purchase of Arm also does nothing to patch its Achilles-heel when it comes A.I. computing. While GPUs currently dominate the market for A.I. applications, many think that a new generation of chips, designed with A.I. in mind from the start, may soon unseat them.
Already several end-users, most notably Google and Tesla, have created their own A.I.-specific chips that are designed to run neural networks—a kind of A.I. software loosely based on how the brain processes information—more efficiently than Nvidia’s GPUs. Established chipmakers from Qualcomm to Xlinx, as well as fast-growing startups like Graphcore and Cerebras, have created alternative A.I. chips featuring radically different layouts than those found in either Nvidia’s or Arm’s existing semiconductors. Intel, seeking to make up ground it’s lost to Nvidia in recent years, has purchased a number of these startups, including, most recently, Israeli startup Habana Labs for $2 billion.
Among the new designs seeking to replace the GPU are so-called “neuromorphic” chips that—like the neural networks they are designed to run—claim inspiration from the way connections are wired in the human brain.
“There are a wide range of different architectures being pursued for A.I. workloads, many of which may be more efficient than a GPU,” Priestley said. He cautioned that “A.I. is at a very early stage in it development,” and that newer hardware and software combinations could wind up displacing established market leaders.
Nvidia’s purchase of Arm keeps the company in the poll position for A.I. applications—but maybe not for long.


fortune--2020-09-14--‘A 2nd or 3rd tier player’: How the size of Oracle’s China business helped it win TikTok

On Sunday, Microsoft announced that TikTok parent Bytedance had rejected its bid to acquire TikTok’s U.S. operations, a new twist in a months-long bidding process that sought to save the short video app from being banned in the U.S.
According to the Wall Street Journal, TikTok is instead seeking to take on IT enterprise solutions company Oracle as a “trusted tech partner” for its U.S. business—a move TikTok hopes will avoid an outright sale of its hugely popular app.
“ByteDance let us know today they would not be selling TikTok’s U.S. operations to Microsoft,” Microsoft’s statement said. Microsoft had been the front runner for a TikTok takeover. Speculation of an imminent deal spiked last month when TikTok CEO Kevin Mayer quit unexpectedly after just four months on the job.
Microsoft says it remains confident its proposal would have been “good for TikTok’s users, while protecting national security interests.” Evidently, TikTok sees a better option in Oracle; experts say it may be because of Oracle’s limited footprint in China.
Tick, tock
President Donald Trump first floated the idea of banning TikTok in early July. Although Trump presented the action as retaliation for China “releasing” COVID-19 on the world, TikTok has faced suspicion from Washington for over a year. The White House characterizes the short-video app as a threat to national security (TikTok denies the allegations), and in 2019 the Federal Trade Commission fined TikTok for violating data privacy laws.
Following Trump’s threat in July, TikTok fell under review from the Committee on Foreign Investment in the U.S. (CFIUS)—an inter-agency review panel chaired by Treasury Secretary Steven Mnuchin that has been deployed before to roll back Chinese investment in the U.S.
The CFIUS investigation prompted TikTok to consider offloading its U.S. assets and Microsoft emerged as a possible buyer. Then in early August, Trump signed an executive order demanding TikTok sell its U.S. operations to a U.S. company or else be banned.
Bytedance, the app’s parent company, has sued the Trump Administration for threatening to ban it. Meanwhile, Beijing inserted itself into the narrative at the last minute, asserting last month that it has final say over any sale of “Chinese tech” to a foreign company—a potential roadblock to any deal.
“There have been a lot of extraordinary actions [in this] legal drama,” says Dan Wang, a technology analyst at Gavekal Research.
Why Oracle?
Ostensibly, the two governments—Washington and Beijing—want different things. Washington wants assurance that TikTok’s data collection practices aren’t a threat to national security. Beijing doesn’t want prize domestic software—namely the A.I.-driven algorithms that make TikTok so addictive—falling into the hands of a foreign firm.
By choosing Oracle as a “trusted tech partner” rather than a buyer, TikTok might have found an arrangement that satisfies the demands of both. According to Reuters, taking on Oracle as a “trusted tech partner” means that Oracle would have control over TikTok’s user data while Bytedance retains ownership of the app’s algorithms.
The reported deal is certainly a victory for Oracle, and it puts a spotlight on the friendly relationship between Oracle’s leadership and Trump. Founder and chairman Larry Ellison has raised money for Trump. Oracle CEO Safra Catz served on Trump’s transition team in 2016.
For Bytedance, Oracle’s relatively small presence in the Chinese market may made the company more attractive than Microsoft and Walmart, which had joined Microsoft’s bid.
Oracle does not report its revenues from China, but in the company’s most recent earnings report, it said roughly 17% of its revenue comes from the ‘Asia Pacific’ region. And Oracle appears to be downsizing in the Chinese market.
In May 2019, Oracle reportedly laid off 900 employees—about 60% of its total China research and development team—and considered shutting down all of its research and development operations, which would have affected an additional 1,600 employees. Employees complained the layoffs were political, as tensions between China and the U.S. were on the rise. Oracle has maintained the cuts were just part of the business “restructuring.”
Shaun Rein, founder of China Market Research in Shanghai, says that Oracle is a “second or third tier tech player” in China’s tech scene, which may have proven beneficial in the company’s negotiations with Bytedance.
“One of the problems with Microsoft and Walmart is they might ultimately become a competitor of Bytedance in China,” Rein said. Bytedance, he says, is looking to expand in areas like cloud computing and e-commerce and may one day hope to challenge Microsoft and Walmart in these areas in China, the U.S., or elsewhere.
Microsoft is deeply embedded in China, operating cloud computing centers and a Chinese version of LinkedIn, which has some 50 million users and remains one of the only Western social media platforms that isn’t banned outright in the Chinese market. Because LinkedIn generally hosts less sensitive content than social media groups like Facebook, the company has had less difficulty conforming to China’s censorship demands.
Walmart, on the other hand, is also planning to double its stores in China in the next five to seven years as it aggressively expands its e-commerce capabilities.
Bytedance is also looking to grow its e-commerce business. The company recently obtained a rare permit to sell goods online in China, which analysts believe will help Bytedance grab a foothold in China’s e-commerce market.
For its part, Oracle doesn’t have any consumer-facing businesses, its bread-and-butter is business-to-business software, meaning that it may be less likely to introduce services that eventually compete with Bytedance, says Rein.
The future?
If the Oracle deal goes through, experts say it won’t just dictate TikTok’s overseas growth plans, it also could establish a model for how other Chinese tech firms expand internationally in a world that’s wary of Beijing’s influence.
“This [Oracle deal] might actually be a good framework for how Chinese tech companies can still own their assets but still safeguard American security issues,” says Rein. “It’s a framework that I could easily see the U.K., Australia, and all different types of countries adopt specifically towards TikTok.”


fortune--2020-09-14--TikTok finally sends a proposal to the U.S. government—with a twist

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Microsoft had long been considered the frontrunner in the race for TikTok’s U.S. operations.
But it’s Oracle that has won the bidding, per a Wall Street Journal report from over the weekend, with Microsoft acknowledging that TikTok’s parent company ByteDance had turned down a potential proposal. It’s a winning moment for ByteDance investors Sequoia Capital and General Atlantic, who have sat on Oracle’s side as Walmart has sat in Microsoft’s corner.
What’s particularly interesting about the deal: It doesn’t appear to be structured like an outright sale, as the U.S. government has pushed for. On Monday, U.S. Treasury Secretary Steve Mnuchin confirmed on CNBC that the administration received a TikTok-Oracle proposal over the weekend with Oracle acting “as the trusted technology partner” that would make “representations for national security issues” presumably on behalf of TikTok.
He added that it came with a commitment to make TikTok a “U.S.-headquartered company” with a commitment to create 20,000 new jobs.
Will this twist satisfy U.S. officials? The Journal reports that the participants believe the proposal “satisfies the concerns around data security” behind the U.S. government’s ultimatum to sell TikTok. But there may not be a significant sale of assets, and it is still unclear if TikTok’s core algorithm, which recommends content to users and is considered the company’s crowning jewel, will be part of the deal. (The Chinese government in particular has made this part of negotiations trickier by issuing export restrictions on this kind of A.I.)
We are light on details and, in TikTok’s case, time. Mnuchin says the administration is expected to review the proposal at the CFIUS committee this week before offering a recommendation to the president.
A FRAUD-PREVENTION STARTUP FACES A FRAUD INVESTIGATION: NS8, a Las Vegas-based startup that flags suspicious orders for fraud, has laid off hundreds of employees as the Securities and Exchange Commission investigates the startup for alleged fraud, per reports. That comes after the startup announced $123 million of Series A funding led by Lightspeed Venture Partners and AXA Partners in June. In a LinkedIn message to Forbes, NS8’s former CEO Adam Rogas, who left last week, said the investigation began in November.
And this brings me back to Nikola’s decision to go public via SPAC: Despite the financing method’s raging popularity in 2020, SPACs are still trying to shed their historical association with fraud. And while proponents emphasize the limited risk of investing in a SPAC before it finds an acquisition target (with funds going typically into, say, U.S. treasuries), it remains to be seen what comes after.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
VENTURE DEALS
- Neogene Therapeutics, an Amsterdam-based developer of cell therapy for solid tumors, raised $110 million in Series A funding. EcoR1 Capital, Jeito Capital, and Syncona co-led the round.
- Replicant, a San Francisco-based autonomous customer contact center founded out of Atomic, raised $27 million in Series A funding. Norwest led the round and was joined by investors including State Farm Ventures, Bloomberg Beta, and Costanoa.
- Resolution Therapeutics, a macrophage cell therapy company, raised £26.8 million ($35 million). Syncona led the round.
- Attralus, a South San Francisco-based biopharmaceutical company focused on patients with systemic amyloidosis, raised $25 million Series A funding. venBio Partners led the round.
- EODev, a Saint-Malo, France-based hydrogen tech company, raised €20 million ($23.7 million) in funding. Investors included Accor Group, Thélem Assurances, and the Monnoyeur Group.
- Medefer, a London-based business-to-business virtual healthcare provider, raised £10 million ($12.8 million) in funding. Nickleby Capital led the round.
- The Pro’s Closet, a Boulder, Colo.-based pre-owned cycling brand, has raised $12 million in funding. Foundry Group and Edison Partners led the round and were joined by investors including Ridgeline Ventures.
- Decent, an Austin-based insurance startup with health plans for small businesses and self-employed professionals, raised $10 million in Series A funding. QED Investors led the round and were joined by Vulcan Capital, Santander InnoVentures, Asset Management Ventures, Future Positive, Work Life Ventures, the Airbnb syndicate AirAngels, and Unpopular Ventures.
- Roam Research, an Oakland, Calif.-based maker of a note-taking tool, raised $9 million in funding valuing it at over $200 million, per The Information. Investors Stripe co-founders Patrick and John Collison, True Ventures, and Lux Capital. Read more.
- Toucan, a Santa Monica-based maker of a Chrome browser extension for learning new languages, raised $3 million in seed funding. GSV Ventures led the round and was joined by investors including Amplifyher Ventures, Wonder Ventures, Golden Ventures, Halogen Ventures, and Vitalize Ventures. Read more.
- Superlist, a Berlin-based productivity startup for teams, raised €2.5 million ($2.9 million) in seed funding from Cherry Ventures.
- AaDya Security, a Detroit-based cybersecurity startup, raised $2.7 million in seed funding. Investors include Firebrand Ventures, 645 Ventures, and Next Coast Ventures.
- Chartable, a New York-based analytics startup for podcast publishers, raised $2.3 million in seed funding. Initialized Capital led the round and was joined by investors including Naval Ravikant, Greycroft Partners, The Fund, and Weekend Fund. Read more.
PRIVATE EQUITY
- Sixth Street Growth invested $50 million in MDLIVE, a Miramar, Fla.-based telehealth company.
- Sterling Partners invested in Datacubed Health, a New York-based healthcare technology platform that digitizes and takes clinical trials virtual. Financial terms weren't disclosed.
- EC Waste, a portfolio company of Post Capital Partners, acquired Republic Services of Puerto Rico, a waste management subsidiary of Republic Services, Inc. Financial terms weren't disclosed.
- AUA Private Equity acquired Westminster Pet Products, a Cumberland, RI-based developer and marketer of pet treats, chews and supplies as well as shoe care products. Financial terms weren't disclosed.
- Imaweb/ IDF Group, backed by Providence Strategic Growth, acquired TMS-Soft, a French provider of digital car registration workflow software. Financial terms weren't disclosed.
- H.I.G. Europe acquired a controlling stake in DGS S.p.A., an Italian information technology company. Financial terms weren't disclosed.
- BV Investment Partners made a “significant investment” in sister companies GlideFast Consulting and Pharicode, two partners of enterprise software company ServiceNow (NYSE: NOW). Financial terms weren't disclosed.
OTHERS
- Gilead Sciences (Nasdaq: GILD) agreed to acquire Immunomedics (Nasdaq: IMMU), a Morris Plain, N.J.-based cancer-focused biotech, for about $21 billion.
- Altice founder Patrick Drahi is offering €2.5 billion ($3 billion) to take Altice Europe NV, a French phone company, private. The deal would value Altice at €4.9 billion ($5.8 billion). Read more.
- Adtalem (NYSE: ATGE) agreed to acquire Walden University, a Minneapolis-based online healthcare education provider, from Laureate Education for about $1.5 billion in cash. Financial terms weren't disclosed.
- Orix Corp. (JP:8591) agreed to acquire a 20% stake in Greenko Energy Holdings, an Indian renewable energy developer, for $980 million, per Bloomberg.Read more.
- Lightspeed POS, a Canadian point of sale software provider, raised $355 million in an offering of 11.7 million shares priced at $30.50 apiece. The raise was on the NYSE. Lightspeed is also listed on the Toronto Stock Exchange. Read more.
- Investors including Caledonia plan to acquire a 35% stake in Scientific Games, a Las Vegas-based gaming and slot-machines group, from Ron Perelman’s MacAndrews & Forbes. The deal values Scientific at over $2.6 billion.
- Nvidia plans to acquire Arm Holdings, the U.K.-based chip design giant, for a total of up to $40 billion from SoftBank. SoftBank acquired the business for $32 billion in 2016.
BREAKUPS AND BANKRUPTCIES
- J. Crew, the clothing retailer, emerged from bankruptcy with Anchorage Capital Group as its majority owner.
- Cosmoledo, the owner of French bakery chain Maison Kayser’s U.S. locations, filed for bankruptcy protection. It agreed to sell assets to Aurify Brands. Read more.
EXITS
- Verisk (Nasdaq: VRSK) acquired Franco Signor, a Bradenton, Fla.-based provider of Medicare Secondary Payer compliance solutions for self-insured companies, insurers, and third party administrators, from BV Investment Partners. Financial terms weren't disclosed.
- Unnamed investors have submitted bids for Planview, an Austin-based maker of a team organization solution for enterprises, backed by Thoma Bravo. Read more.
- Nubank agreed to acquire Easynvest, a Brazil-based digital investment platform. Easynvest backers included Advent International. Financial terms weren't disclosed.
- Thomas H. Lee Partners plans to acquire a majority stake in Insurance Technologies, a provider of sales and regulatory automation solutions, from NexPhase Capital. Financial terms weren't disclosed.
IPOs
- Snowflake, the San Mateo, Calif.-based cloud warehouse, now plans to raise a larger $2.9 billion via an offering of 28 million shares priced between $100 to $110. Read more.
- GoodRx Holdings, a Santa Monica, Calif.-based app for discounting medicines, plans to raise $900 million in an offering of 34.6 million shares priced between $24 to $28. It posted revenue of $388.2 million and income of $42.7 million in 2019. Silver Lake, Francisco Partners, and Spectrum back the firm. Read more.
- JFrog, an Israel-based seller of software tools for app development, plans to raise $463 million in an offering of 11.6 million shares (31% insider sold) priced between $39 to $41. The firm posted revenue of $104.7 million and losses of $5.4 million in 2019. Gemini Israel Ventures, Scale Venture Partners, and Sapphire Ventures back the firm. It plans to list on the Nasdaq as “FROG.” Read more.
- Corsair Gaming, a Fremont, Calif.-basd supplier of gaming hardware, plans to raise $238 million in an offering of 14 million shares (46% insider sold) priced between $16 to $18. It posted revenue of $1.1 billion and a loss of $8.4 million in 2019. EagleTree Partners backs the firm. Read more.
- Oncorus, a Cambridge, Mass.-based biotech developing virus therapies for solid tumors, filed to raise $86 million. The firm posted a loss of $35 million in 2019. MPM Capital, UBS Oncology Impact Fund, and Deerfield Management Company back the firm. It plans to list on the Nasdaq as “ONCR.” Read more.
- The Cambridge, MA-based company was founded in 2015 and plans to list on the Nasdaq under the symbol ONCR
- OVH Groupe SAS, a French cloud-computing provider, is preparing for a potential initial public offering early next year, per Bloomberg. Read more.
SPAC
- TWC Tech Holdings II, a blank check company formed to acquire a tech business, raised $525 million. True Wind Capital formed the company. Read more.
- Altimeter Growth Corp., a blank check company formed by Altimeter Capital to seek out a tech acquisition, filed to raise $450 million. Altimeter founder Brad Gerstner leads the firm. Read more.
- Ribbit LEAP, a blank check company formed to acquire a fintech business, raised $350 million. Created by Ribbit Capital, Ribbit founder Meyer Malka leads the SPAC. Read more.
- Qell Acquisition, a blank check company formed by PIMCO to seek out a sustainable tech business, filed to raise $300 million. A former senior executive at General Motors, Barry Engle, leads the firm. Read more.
- Broadstone Acquisition, a blank check company formed to acquire a business in the U.K. or Europe, raised $300 million. Sun Capital Partners created the fund. Read more.
- Delwinds Insurance Acquisition, a blank check company seeking an acquisition in the insurance industry, filed to raise up to $200 million. The Gray Insurance Company formed the venture and an investment consultant at the firm, Andrew Poole, will lead Delwinds. Read more.
- Jupiter Acquisition Corp., a blank check led by former Sunglass Hut International CEO James Hauslein, has postponed a $230 million IPO, per Bloomberg. Read more.
F+FS
- Conductive Ventures, a California-based venture firm focused on enterprise software and hardware, closed its second fund with $150 million.
- Greenfield Partners, a Tel Aviv, Israel-based investment firm, raised $150 million for its fund.
PEOPLE
- HGGC, a middle-market private equity firm, promoted Peter Cozzi and Hao Qin to vice president; Patrick Malanga to senior associate, and added Victor Rudo as a vice president.
- Eurazeo, a Paris-based investment firm, named Eric Sondag as a managing director.