Weekly Innovation Review (WIRE) #16

Latest News from the World's Leading Innovators

Headline Developments

Twitter (TWTR) has released Birdwatch - what they call a ‘community-based approach to misinformation’.   The new feature works by allowing Twitter users to call out misinformation and provide notes that provide informative context.  In the early stages, notes will only be visible on an external site whilst Twitter monitors the usefulness of the feature.  All going well, the feature will be integrated and visible within the Twitter platform.

Along similar lines, let’s look at GameStop (GME) - what is viewed by Wall Street as a community-based approach to collusion and stock market manipulation.

GameStop - a gaming retailer (who own EB Games in Australia), were up almost 10x in the past week in, what some called, a “Nerds vs Wall Street” battle. In summary, Reddit group WallStreetBets (and other groups) are colluding to buy stock in GME to inflict pain on Wall Street short-sellers.  Those short-sellers borrow the stock with the aim of ‘’covering’’ (buying back) when the stock falls, for a profit.  In cases like GME, the stock rallies, and the short-sellers cover their losses by buying stock.  That’s called a “short squeeze” and amplifies the buying volume.  Adding fuel to the fire was Elon Musk (a favourite short-sell target) when he Tweeted “Gamestonk!” with a link to the Reddit forum.  In response, some trading platforms have started restricting activity in the stock (with Robinhood facing backlash for banning buying of GME altogether!).  Longer-term it will be intriguing to see how regulators (i.e. SEC, ASIC, MAS) respond.  There is no doubt they will respond, the question is how, and whether it will have any impact.

Now onto something slightly more constructive!

Elon Musk, in a break from antagonising short-sellers, has offered a $100m prize for “the best carbon capture technology”, with further details to be released during the week.  It is expected that one of his key goals is to lower the price of direct-air carbon capture so it can feasibly be used to make synthetic rocket fuel, replacing the fossil fuels used today.  Companies such as Carbon Engineering, Climeworks and Global Thermostat have each developed technologies to capture carbon dioxide from the air.

Joe Biden gave a big boost to EV companies, announcing the replacement of the Government’s entire fleet of cars (some 650k vehicles!) with EVs manufactured in the USA.  There are certain barriers (i.e. existing leasing contracts, charging infrastructure and the President’s likely union support), however, this is a significant step and message to other nations (such as Australia) where support for EVs and EV infrastructure is effectively dormant.  EV-makers Nikola (NKLA), Workhorse Group (WKHS) and Lordstown Motors (RIDE) jumped 25%, 30% and 14% respectively after the news.  On the infrastructure-side Plug Power (PLUG) rallied 11%.

Other Developments

General Motors (GM) announced a new climate pledge, saying it will become carbon neutral across its global operations by 2040 which it will achieve through “science-based targets”.

Walmart (WMT) is ramping up in automation, adding dozens of robots to warehouses across the USA.  The robots will be used for order fulfilment, pickup and delivery.  Walmart hasn’t mentioned any names, however, we would expect companies like Ocado (OCDO.L), Kuka (KU2.DE), ABB (ABB), Fetch Robotics and Fanuc (9954.JP) to be amongst solution providers being considered.

The Federal Aviation Authority (FAA) has given the first approval to automated drones without human operators on site.  Boston-based American Robotics (private) received the FAA’s first approval last week, making a first for the federal agency.  

Beyond Meat (BYND) has joined forces with PepsiCo (PEP) to develop a new range of plant-based food and drinks, under a brand called “PLANeT Partnership''.  Under the arrangement, Beyond’s expertise with protein development will be combined with PepsiCo’s product, marketing and manufacturing capabilities to flood the market with a range of new plant-based products.

Formlabs (private) has launched a new industrial 3D printer called Fuse 1 - a selective laser sintering (SLS) 3D printer for use by engineers and large manufacturers.  An SLS printer works by fusing nylon powder into various 3D objects.  The company has also developed preform software and post-processing systems.  Formlabs are trying to be more price-competitive to market leaders such as Stratasys (SSYS), 3DSystems (DDD), ExOne (XONE), Proto Labs (PRLB), SLM Solutions (AM3D.DE) and many others.

Pinterest (PINS) has unveiled a new feature called AR Try On which, as the name suggests, lets users try on cosmetics from brands such as NYX Cosmetics, Urban Decay and Lancome in augmented reality.  We expect these features, combined with in-app e-commerce functionality, will drive a considerable uptick in Average Revenue Per User (ARPU) in coming years.

Trucking company PACCAR (PCAR), the company behind Peterbilt and Kenworth trucks, has formed a strategic partnership with the Amazon (AMZN) / Hyundai (005380.KS) backed Aurora (private).  Under the arrangement, PACCAR will integrate their autonomous vehicle platform with the Aurora Driver (AV technology stack).  Aurora co-founder and CEO Chris Urmson said “this partnership brings us one step closer to unlocking the autonomous freight market and delivering goods to those who need them”.    Below you can see a Peterbilt decked, with Aurora branding, decked out with external LiDAR systems.  Remember as well that Aurora recently acquired Uber’s AV unit, so this new deal certainly puts them near the top of the list for AV platform solutions.

Baidu (BIDU) has become the sixth company to receive approval to test driverless cars on the roads in California.  Others include General Motor’s (GM) Cruise, Google’s (GOOG) Waymo, Nuro (private), Amazon’s (AMZN) Zoox and AutoX (private).   Another 60 companies have a permit to test AVs (but with a safety driver behind the wheel).  Last year Baidu showed off it’s Level 4 (penultimate level) AV which is part of its open automation platform Apollo.

Caesars Entertainment (CZR) is getting into the fantasy sports game, announcing an investment in Superdraft Inc (private) with an option to buy the whole company over time. Meanwhile, Bally’s Corp (BALY) - another casino operator - fantasy sports company Monkey Knife Fight (private) in an all-stock transaction.  MKF has about 180k registered users (80k of whom have cash deposits with the company).  As part of the SuperDraft deal, the company will join Caesars' online brands, World Series of Poker, Caesars Online Casino and William Hill as part of a full slate of mobile and online gaming channels.

Cloudscene (private) has revealed its latest leaderboard for Data Centre ecosystems. The results rank data centre operators based on their ecosystem of data centres, service providers, network fabrics and cloud on-ramps across five major regions: North America, EMEA, Asia, Oceania and Latin America. 2020 saw Equinix (EQIX) unseated in EMEA by Digital Realty (DLR) who acquired Netherlands based Interxion. However, EQIX still dominates cloud and network connectivity everywhere else!

IPOs

Kuaishou (private), a Tik-Tokesque video-sharing app, is hitting the market in Hong-Kong with an expected valuation of ~US$55-60bn.  Tencent (700.HK) are the company’s major backers, with a 22% stake.  According to the company’s prospectus, they have 305m DAUs, 769m MAUs and total e-commerce Gross Merchandise Value (GMV) of $31.5bn. That would value each active user of Kuaishou at $1,900 vs $439/user for Facebook (FB)’s 1.84bn DAUs and $316/user for Snap (SNAP)’s ~250m DAUs - quite a substantial premium!

WeWork (private) is reported to be assessing its options to go public!  According to the WSJ, the co-working company is in talks to merge with a SPAC (thus avoiding the public scrutiny which derailed its initial attempts at listing!)  Softbank (9984.JP) are the majority shareholders in the company whose value has declined from ~$47bn to ~$10bn today.  Softbank is also reported to be assessing private investment.

Website building and hosting company Squarespace (private) has filed to go public, submitting a draft registration statement on Form S-1 with the SEC.  In 2017, when General Atlantic invested $200m in the company, it was valued at $1.7bn.  However, a lot has changed since then!  It’s closest peer Wix.com (WIX) is up almost 5x since 2017 and their sales are expected to grow 25-30% p/a over the next few years.  Over at GoDaddy (GDDY), sales growth is a more meagre 10% p/a.

Coinbase (private) has officially announced plans to go public via a direct listing.  The company announced back in December that it had filed an S-1.  The cryptocurrency exchange, the most popular in North America, is reported to have ~43m users.  Initial estimates see a valuation of over $28bn.  Current investors include a who's who of US VC - Union Square Ventures, A16Z, YCombinator and FundersClub.

Alight Solutions (private) is going public after merging with the SPAC, Foley Trasimene Acquisition Corp (WPF).  Alright provides employee benefit solutions to more than 30m people and works with over 70% of the Fortune 100 companies. Post the merger the company will trade under the ticker “ALIT”

M&A | Cap Raise

Lumentem (LITE), a manufacturer of optical and photonic products, has announced the acquisition of fellow photonic developer Coherent (COHR) for $5.7bn.   The combination will form an exceptionally innovative organisation, with Coherent having deep expertise in laser technology (across material, scientific and materials processing applications such as MicroLED) whilst Lumentum invest heavily in optical, communications, micro material applications and the ever-expanding automotive and consumer 3D sensing sectors (i.e. LiDAR).

Twitter (TWTR) have bought Substack’s competitor Revue (private) for an undisclosed sum.  Twitter will continue to operate the newsletter platform as a standalone product with its team “remaining focused on improving the ways writers create their newsletters, build their audience and get paid for their work”. At its investor day on the 25th Feb, Twitter has the chance to discuss a raft of new innovations including new advertising technology, innovation in audio, Twitter Spaces and more details on Revue. 

Big data analytics company Databricks (private) is raising $2bn ahead of an expected IPO this year, according to various reports.  This funding round would put the company’s valuation at ~$27-$30 billion, with an expected target valuation of up to $50 billion come IPO time.  The company’s Databricks Lakehouse Platform encompasses a data sciences workspace, SQL analytics and unified data services.

SAP (SAP) has acquired Berlin startup Signavio (private). SAP did not disclose the purchase price, but Bloomberg reported that the deal could be worth $1.2 billion. With Signavio, SAP gets a cloud-native business process automation (BPA) tool. Understanding and automating businesses processes has become a key part of a company’s digital transformation efforts.

Have a great week.

Charlie

LinkedIn or E-Mail (cnave@granitebaycap.com)


Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.