Headline Developments
Nassim Taleb, the celebrated Black Swan author and mathematician, has published a paper trashing bitcoin. In the paper (excerpts below), Taleb claims the theoretical value of bitcoin is zero, saying it is not a currency, can be neither a short or long term store of value, cannot operate as a reliable inflation hedge and, “worst of all”, does not constitute “not even remotely” a tail protection vehicle for catastrophic episodes (i.e. gold is recognised as a safe hedge against inflation and currency) . It’s a fascinating read regardless of which side of the fence you sit on (even if you’re on the fence!).
SpaceX’s (private) Starlink is expected to provide global coverage by September according to company president Gwynne Shotwell. According to Shotwell, the company has successfully deployed “1,800 or so satellites, and once those satellites reach their operational orbit we will have continuous global coverage, so that should be like September timeframe”. The end goal is to have 42,000 Starlink satellites in low-earth orbit (LEO) by mid-2027 (which is ~60x closer to earth than “traditional” satellites). At present, the company operates in beta phase in 11 countries including the US, Australia, New Zealand and parts of Europe. The fastest speed recorded by a beta subscriber is 209.17 megabits per second with Elon Musk claiming 300mbps is the target for year-end (but with ~2x the latency/time delay). Below I’ve overlaid an earth view showing the position of those 1,800 satellites, alongside a grid showing the satellite spacing vs orbital plane. For those interested, you can play around with it all here.
Tesla (TSLA) has teased the prototype of a supercomputer called “Dojo” which is expected to power vast amounts of video data to achieve vision-only (i.e. non-LiDAR) autonomous driving. During the Computer Vision conference, Tesla’s head of AI, Andrej Karpathy, said that to get a computer to respond to a new environment in the same way as a human requires an immense amount of data, and a massively powerful supercomputer, hence the development of Dojo. Musk has been testing LiDAR technologies, most likely as a benchmark for “vision-only” tech, and has so far refused to adopt the industry broad view of a multi-sensor automation (i.e. cameras + LiDAR + radar). Time will tell as to whether Tesla’s insistence on vision-only is a masterstroke or massive oversight.
Amazon (AMZN) smashed records in its latest Prime Day, saying the event was the biggest two day sales period for third-party sellers in its history. Prime members purchased more than 250m items worldwide over the two days, with online spending during the event surpassing $11b, a 6.1% increase compared to last year’s Prime Day held in October. That’s particularly impressive given the last Prime Day was at the height of the pandemic which generally saw the top of the market for digital engagement across e-commerce and other sectors.
That’s the good news for Bezos. The bad news is there’s a little petition gaining traction on change.org entitled “Do not allow Jeff Bezos to return to Earth” which has so far picked up 112k signatures! However, if you truly believe there's a risk that Jeff doesn’t return to earth after his upcoming voyage then perhaps a short on Amazon is your best bet (short interest is ~1%!). That’s not a recommendation btw - just an observation!
Other Developments
Netflix (NFLX) has struck a deal with Stephen Spielberg’s film production company Amblin Partners (private) who created classics like E.T., Back to the Future, Jurassic Park, Schindler’s List, Saving Private Ryan (and the not so classic Cats!). Under the deal (which is non-exclusive), Amblin will produce multiple feature films per year, some of which ‘may’ be produced, developed and directed by Spielberg. Netflix has various agreements in place with companies like Universal and Sony, however, at present do not own any major assets outside of their originals (i.e. Amazon and Disney create ‘originals’ but also own large franchises via MGM, Lucasfilms, Marvel etc). The big risk for Netflix is that companies like Comcast (who own Universal) may very well route those features through their own streaming services rather than sign exclusive deals with another provider. Same for Warner Brothers with HBO and Viacom (who own Paramount and Pluto TV). Here’s a little graph highlighting the streaming ecosystem, showing major corporations and their ownership of streaming services and key brands.
Separately, Bill Ackman’s SPAC Pershing Square Tontine Holdings (PSTH) has signed a deal to buy 10% of Universal Music (private) for ~$4b. Universal is currently in the process of being spun out from Vivendi (VIV.PA) to list separately on Euronext in late September. China’s Tencent (700.HK) has a 20% stake in the business.
Roblox (RBLX) is allowing fans of Stranger Things to explore the series’ Starcourt Mall in an exclusive virtual environment. The launch of the Stranger Things experience will act as a “persistent space” for fans to stay connected to the show year-round and features four mini-games and avatars tied to the Netflix (NFLX) hit. By winning games, fans also earn Stranger Things gear for their avatar. Collaborations like this show the future of advertising and give us a little glimpse into the huge monetisation potential of the Metaverse.
NVIDIA (NVDA) will turn your substandard brushstrokes into a work of art, thanks to a new AI app called Canvas. The app (below) uses AI to turn each brushstroke into a photorealistic stroke, helping you seamlessly create rocks, trees, clouds, animals and people without using the individual colours. How do they do this? Well, it’s something they’ve been working on for years and leverages deep learning models and a database of nearly 5 million images to predictively paint your vision. A beta is available to download today. Have fun!
Facebook (FB) is following Pinterest (PINS) in implementing visual search technology on Instagram. According to Zuckerberg, there will be two potential use cases for the solution - allowing users to find products using their cameras or, when browsing Instagram, offering similar products available elsewhere on the app. In addition, Zuckerberg also announced that Facebook Shops will soon be arriving on Marketplace and WhatsApp.
Semiconductor fab GlobalFoundries (private) is breaking ground on a new fab in Singapore, adding to an existing cluster of sites in the country. Once up and running, the new fab will be capable of producing 450k 300mm wafers every year. This comes at a time when leading fabs like TSM, Samsung (and GlobalFoundries) are running at absolute capacity amidst accelerated demand.
IPOs | SPACs
Another LiDAR SPAC. This time Quanergy Systems (private) has announced its intention to merge with China’s CITIC Capital Acquisition Corp (CCAC) in a deal expected to value the company at $1.4b. According to the investor presentation, the company has over 350 customers and 40 partners, with an enviable list of investors including Aptiv (APTV), Daimler (DAI.DE), Samsung (005930.KS) and Sensata (ST). The company differentiates itself from others through their Optical Phased Array (OPA) LiDAR technology - which means they have no moving parts and lower production costs. They are expecting to hit $549m in revenues in 2025 from a range of industries (below) such as mapping, security, smart spaces, industrial automation and automotive.
Mirion Technologies (private), a leading developer of radiation detection solutions, is listing on the NYSE after announcing a merger with GS Acquisition Holding Corp II (GSAH). The company is expected to have a pro-forma enterprise value of ~$2.6b; putting it on 13.3x EV/EBITDA per company projections, which is reasonable given guys like Bruker (BKRK) and Thermo Fisher (TMO) trade ~20x 2022e EV/EBITDA, whilst emerging companies like 908 Devices (MASS) trade at 50x 2022e sales (they’re EBITDA negative….but popular amongst the “hype” investors!).
Perimeter Solutions (private), one of the world’s leading developers of innovative fire retardant products (below), is merging with EverArc Holdings (EVRA.L) ahead of an anticipated listing on a US exchange. The lion’s share of its EBITDA (80%) comes from the sale of fire management products for wildfires, military and industrial purposes, including foams, retardants and prevention and protection solutions. The company generated $340m in revenues last year (up 42%), generating a Gross Profit of $162m (up 100%).
M&A | Cap Raise | Earnings
Boston Dynamics (private) is now officially in the hands of Hyundai (005380.KS) after the South Korean automaker’s acquisition was sanctioned by regulators. The deal, expected to be worth ~$1.1b and is expected to “accelerate the development of cutting-edge robotics featuring advanced mobility, manipulation and vision capabilities” an official statement from Hyundai and Softbank (the previous owners) said.
Amazon (AMZN) is considering buying a 20% stake in autonomous trucking company Plus, after playing an order to purchase 1,000 AV systems from the company, according to Bloomberg. Plus are currently in the process of listing via a merger with Hennessy Capital V (HCIC) in a deal that values the company at ~$3.3b. If Amazon pulls the trigger on this deal it would add to an already promising portfolio of auto (and automation) investments, including Aurora, Zoox and Rivian.
Hewlett Packard Enterprise (HPE) has acquired Determined AI (private), a US company focusing on the development of open-source models for machine learning, one of the more demanding stages of AI, which will benefit from HPE’s high-performance computing (HPC) position. In one use case, Determined AI claims they accelerated AI-guided drug discovery for one customer from three days to three hours.
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.