Headline Developments
This week’s headline developments is a bit of an NFT special, with some very reputable brands getting in on the action (often the best way to learn is to just dive right in!).
Firstly, Visa (V) bought one of the 10,000 CryptoPunk NFTs for $150k in ethereum. In a blogpost, Visa’s head of crypto Cuy Sheffield said “to help our clients and partners participate, we need a firsthand understanding of the infrastructure requirements for a global brand to purchase, store, and leverage an NFT”. This is by no means a ‘material’ acquisition, however, it does show continued curiosity and adoption amongst larger corporations of technology with practical application (i.e. authenticity, collecting, metaverse). According to the latest numbers from DappRadar, CryptoPunk historical volume has now hit $900m, with the top sale (CryptoPunk #7804) going for $7.5m!
Following suit was beverage giant AB InBev’s (ABI) Budweiser who paid $95,000 (in ethereum) for a Tom Sachs rocket ship. Last month, AB InBev’s VP of global brand Richard Oppy said the company is investing in a new NFT media shop run by Gary Vaynerchuk as a “long term business play” that will see IP of Budweiser and other beer brands packaged and sold as NFTs.
We’ve already seen Coca-Cola’s (KO) NFT loot box, Pizza Hut’s (YUM) non-fungible pizza, Pringles (K) CryptoCrisp, Atari’s (ATA) digital sneakers and Nike’s (N) cryptokicks - a patent linking a physical pair of shoes to their NFT.
Sticking with the blockchain headline news, PayPal (PYPL) has announced that customers in the UK will be able to buy, sell and hold (but not pay with) bitcoin, ethereum and litecoin, in what is the first international (ex-US) crypto expansion for the payments conglomerate. They are joined by Square (SQ), Revolut (private) and many other financial services organisations rushing to enable crypto services off the back of ever-growing global acceptance.
Other Developments
Virgin Hyperloop (private) CEO Josh Giegel has released a video highlighting the company’s plans for passenger pods, sending passengers between cities at over 1,000km/h, using magnetic levitation. Unlike a train, the pods will be part of a convoy, joining or leaving independently. However, despite a successful test run last year (reaching 170km/h), there remain considerable economic and technological challenges ahead before we would expect to see the solution supersede rail and air any time soon.
A big week for New Zealand’s Rocket Lab (RKLB), completing its SPAC merger (and falling 10%) whilst announcing that they will commence manufacturing of two interplanetary Photon spacecraft for a science mission to Mars. The mission will see two spacecraft orbit Mars to understand the structure, composition, variability, and dynamics of the planet’s ‘magnetosphere’. The ESCAPADE mission also “aims to support crewed exploration programs like Artemis through improved solar storm prediction”.
Japan’s lunar exploration startup Ispace (private) has unveiled the next generation of its Series 2 cargo lander (below) which is currently under development with Draper (private) and General Atomics (private). The lander is being developed to position Ispace as the partner of choice for civil, commercial and scientific missions to the moon from 2024 onwards. In terms of specs, the new lander will be 9x14ft and capable of delivering 500kgs to the surface or as much as 2,000kgs to lunar orbit.
Amidst a takeover from Desktop Metal (DM), ExOne (XONE) has announced a new innovation - the ability to 3D print copper e-winding parts for electric motors for its customer Maxxwell Motors (private). What 3D printing does is enable more complex copper designs including a patent for an electric motor featuring 36 copper coils (which can now be consolidated into just one part).
Microsoft (MSFT) is entering the next phase of Xbox Cloud Gaming, announcing that more than 100 games will be able to be played on Xbox consoles without having to download them first. They’re currently working on Xbox game streaming sticks as well as a smart TV cloud gaming app. Competition in the game streaming market is really heating up so expect ongoing announcements like this from Apple, Google, Amazon, Netflix, Sony and many others over the coming months and year(s)!
New Listings
Virgin Orbit (private), Branson’s satellite-launching company, is going public via a merger with NextGen Acquisition Corp (NGCA). The deal, valuing the company at $3.7b, is expected to close towards the end of the year, with funds used to further develop capabilities of the ‘air launch’ system which sees the LauncherOne rockets dropped from a Boeing 747 at 35k feet before the engines fire and send the payload up into low-earth-orbit (for satellite deployment). According to the investor presentation, the company is expecting to hit $2b in revenues in 2026 thanks to increased demand from defense and commercial customers like the US Space Force, ANA (9202.JP), SatRevolution (private) and Arqit (private).
ForgeRock (FORG), a leading supplier of identity and access management solutions, has filed to go public on the NYSE via an IPO. It’s annualised revenue is ~$170m (54% YoY growth) with annualised net loss ~$40m and gross margins of 82%. Compare that to its closest competitor, Okta (OKTA), which is expected to pull in around $1.2b for 2022 (46% YoY growth) with ~$500m net loss and a 73% gross margin). Assuming similar 50% growth through to 2022, it’s likely we see a EV/S multiple in excess of 30x once the stock hits markets (putting a price tag on the company at ~$9bn).
M&A | Cap Raise | Earnings
Western Digital (WDC), a leading provider of data storage solutions, is reported to be in advanced talks to merge with Japanese peer Kioxia (owned by Bain and Toshiba) in a deal that could be valued at $20b. Kiokia is the second-largest maker of flash memory chips and last year halted plans for a domestic IPO. According to the WSJ, executives are planning to reach an agreement by mid-September.
Databricks (private), a leading platform that enables massive-scale data engineering and machine learning capabilities for the likes of Shell, Comcast and T-Mobile, is raising over $1.5b in capital according to Bloomberg. The deal, led by Morgan Stanley, would value the Snowflake (SNOW) and Datadog (DDOG) competitor at $38bn.
Palo Alto Networks (PANW) surged 20% this week after smashing its quarterly earnings. Firstly, the company beat the street revenue and earnings estimates by 4% and 11% respectively and secondly, in 2022 they’re expecting revenue of $5.28-$5.33b with EPS of $7.15-$7.25 - 6% and 2% ahead of the street. These strong earnings and outlook comes at a time of increased demand for enterprise cyber products, with Palo Alto Networks being a huge beneficiary thanks to a strong enterprise product suite across network security (strata), secure access (prisma access), security automation (cortex) and cloud (prisma cloud).
Salesforce (CRM) jumped 3% following a big earnings beat ($1.48/share vs 92c expected) whilst revenue jumped 23% YoY (with a modest beat). Similarly to Palo Alto Networks, there was an upward revision to revenue and earnings guidance for FY22. In particular, products like Mulesoft and Tableau contributed to a 24% jump in the $1.9b platform revenue vs a 15% rise (to $1.5b) for the ‘core’ sales product.
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.