Headline Developments
The verdict is out in the Apple (AAPL) vs Epic (private) case, with the court ruling that Apple cannot stop app developers from directing users to third-party payment options, whilst ordering Epic to pay damages for violating Apple’s in-app purchasing system. Judge Gonzales Rogers stated that “Apple enjoys a considerable market share of over 55% and extraordinary high-profit margins”.... but …..”these factors alone do not show antitrust conduct. Success is not illegal”. Epic has now taken the case to the Court of Appeal with Apple, for now, assessing its options.
Apple (APPL) unveiled a range of new products this week including two new iPads, four new iPhones and a new Apple Watch. The iPhone 13 comes with improved performance, camera, and battery life and added features like cinematic mode (below left). Meanwhile, the Series 7 Apple Watch (below, bottom right) comes with an always-on retina display, improved durability (i.e. WR50 water resistance) and health functionality (i.e. ECG). The other notable product drops were a new and improved iPad mini 6 (below, top right) and iPad 9. None of this is altogether remarkable (or surprising), with a number of products waiting on the sidelines for the next product event likely in 4Q this year (i.e. Macbook) and in 2022 (i.e. Macbook Air, AirPod Pro and….who knows…...perhaps that Apple Car or AR Smart Glasses.
The week also saw Facebook (FB) and EssilorLuxottica (EL.PA) release Ray-Ban Stories - sunglasses equipped with dual 5MP cameras (for video and photos), in-frame speakers and mic and voice control. It will be fascinating to see how this product fares with Mashable slamming it as “creepy”, “likely ill-fated” with a “comically limited and shoddily executed feature set” that is “hard to take seriously as a product at all”. The WSJ agreed, calling them a mix of Cool (Ray-Ban) with Creepy (Facebook) - which is a perfect way of summarising the product and the marriage between these two brands. Shortly after the launch, agencies in Australia, Italy and elsewhere sought immediate clarification regarding the product’s data and privacy, with Australian Privacy Commissioner Angelene Falk particularly concerned about the potential to “covertly collect personal and sensitive information about Australians without their consent”.
Ethereum ‘rival’ Solana (SOL-t), which has trebled in value (to $80.5b) this past month, hit a major snag this week, with the network crashing due to what they called ‘resource exhaustion’ triggered through excessive demand for an Initial Decentralised Exchange Offering (IDO) - a cryptocurrency offering which, in this instance took place on the Solana-based DEX Raydium (RAY-t). According to Solana Labs CEO Anatoly Yakovenko, bots were flooding the network with 300,000 transactions per second. On one hand, such issues are part of the evolution of blockchain technologies, however, this simultaneously poses questions around the security and reliability of incumbent and emerging blockchain architectures (and risks relating to DeFi systems). You can see Solana and some of their key projects towards the top right of the below ecosystem map.
Insider trading has hit the NFT market with OpenSea (private), the preeminent NFT marketplace (bottom left quadrant above), admitting that its head of product Nate Chastain used internal information to buy NFTs that were about to be featured on its homepage. On Twitter yesterday, a user named ZuwuTV, identified a transaction on Tuesday where Chastain had sent 5 Ethereum from his wallet to an anonymous wallet which then sent the money to a third account. According to another user, ricefarmer.eth, that account purchased four NFTs by the artist Dailydust, one titled “Spectrum of A Remenfication Theory”, which OpenSea directly featured soon afterwards. Because the Ethereum blockchain is transparent (all transactions on a public ledger) users are able to follow the money in such situations, creating somewhat of a self-regulated ecosystem.
Other Developments
China’s Ministry of Industry and Information Technology (MIIT) has forced the hand of the country’s two-largest tech companies, Tencent (700.HK) and Alibaba (BABA), stopping the companies from blocking each other’s web links from their platforms. This follows a meeting between the department and the two companies which also included ByteDance, Baidu, Huawei and Xiaomi. According to the WSJ in July, the two companies had considered opening up their services to, for example, introduce Tencent’s WeChat Pay to Alibaba’s Taobao and Tmall marketplaces.
Olympus (7733.JP) was hit by a ransomware attack last week, with a ransom note left on the infected computers claimed to be from the “Ransomware as a Service” group BlackMatter. The note reads “your network is encrypted, and not currently operational……if you pay, we will provide you the programs for decryption”. BlackMatter’s business model is to rent access to their hacking infrastructure and take a clip of ransoms that are paid.
Fusion energy has taken a big step forward this week with scientists at MIT and Commonwealth Fusion Systems (CFS) developing the most powerful magnetic field ever (on earth), a High-Temperature Superconductor (HTS), below, measuring 20 teslas. Without boring you with details of plasma physics (on which I’m not an expert!), to achieve fusion energy, super-strong magnetic fields are required to keep the phenomenally hot plasma confined (this hits temperatures > 100 million degrees Celsius)! The world’s largest fusion power project (ITER) has a magnetic field of 12 teslas and the 20 teslas from the team at MIT/CFS means their SPARC reactor can be about 3x smaller than ITER, leading to significantly greater efficiencies and widening the scope of potential applications.
Sony (6758.JP) have outlined their PS5 vision at the latest PlayStation Showcase, dropping trailers for a number of upcoming game titles including “Star Wars: Knights Of The Old Republic” (developed by Embracer’s Aspyr), Borderlands spin-off Tiny TIna’s Wonderlands (developed by Embracer’s Gearbox), Ubisoft’s Rainbow Six Extraction, Microsoft (Bethesda’s) Ghostwire: Tokyo, Take-Two’s Grand Theft Auto Five and in-house titles Spider-Man 2, Gran Turismo 7 and God of War: Ragnarok (below).
Rivian (private), backed by Ford (F) and Amazon (AMZN), are ready to hit the road in all US states following certification from the National Highway Traffic Administration, the Environmental Protection Agency and the California Air Resources Board. The company has also received approval to start delivering vehicles to customers (which it will do via a direct sales model like Tesla). The R1T (below left) will be the first to reach customers (this month) whilst the R1S SUV (below right) is expected later in the year when the company expects to IPO (raising as much as $8b according to Reuters).
Michelin’s (ML.EPA) airless passenger tires have just been released on public roads for the first time, following ~15 years of R&D. The prototype, called Uptis (Unique Puncture Proof Tire System), is being refined with General Motors (GM) over the next four years. According to its concept note, the Uptis tire blends an aluminium wheel with a flexible load-bearing frame constructed of glass fibre reinforced plastic (GFRP). The tires, which are made out of recycled materials, are expected to be made available more widely in 2024.
NASA has selected five US companies to help the organisation enable an efficient pace of crewed trips to the moon’s surface under the agencies Artemis program. The awards, worth a combined $146m, will be divided between Blue Origin ($25.6m), Leidos’ Dynetics ($40.8m), Lockheed Martin ($35.2m), Northrop Grumman ($34.8m) and SpaceX ($9.4m). According to a release from NASA, the selected companies will develop lander design concepts, evaluating their performance, design, construction standards, mission assurance requirements, interfaces, safety, crew health accommodations, and medical capabilities. The companies will also mitigate lunar lander risks by conducting critical component tests and advancing the maturity of key technologies.
New Listings
POS platform Toast (private) is readying for its IPO next week which could value the company at over $16b. The platform serves more than 48,000 restaurant locations, with revenues hitting $703m for 1H21 (doubling YoY). Most of that revenue (82%) comes from financial technology solutions, with subscription and hardware contributing 10% and 7% respectively.
Chinese podcast platform Ximalaya (private) filed for a Hong Kong IPO this week. The company, which has more than 250m MAUs (as of 1Q21) aims to raise more than $500m. According to documents filed for the now withdrawn US IPO, the company generated $629m in revenues for 2020 (up 51% YoY), with gross margins rising from 43% to 49% over the same period. Of the 250m MAUs, 13.9m are paying users.
M&A | Cap Raise | Earnings
BAE Systems (BA.L) has announced the acquisition of UK-based nanosatellite manufacturer In-Space Missions (private). According to BAE’s CTO Ben Hudson, “this acquisition will allow us to combine a range of space capabilities that help deliver information advantage, multi-domain operations and networking for our customers”. In August, In-Space Missions won a $13.2m contract from the Ministry of Defence to build an experimental smallsat called Titania which will test space-to-ground laser communications when it launches in 2023.
Australian design platform Canva (private) is now valued at $40b following a $200m capital raise from T.Rowe Price, Franklin Templeton, Sequoia, Bessemer, Greenoaks, Dragoneer, Blackbird, Felicis and Airtree. This, according to CB Insights, makes Canva the fifth most valuable startup in the world behind ByteDance, Stripe, SpaceX and Klarna. During the announcement of the raise, co-founders Melanie Perkins and Cliff Obrecht (who own 36% of the company) also said that they plan to give away a vast majority of the stake to charitable causes. At present, the company has over 60m users in 190 countries and is on track to post $1b in revenues by years end.
Leading NFT platform Immutable (private) has raised $82m from investors including BITKRAFT, King River, AirTree and FTX. The company, whose Immutable X platform acts as the underlying infrastructure for NFT trading, intends to use the proceeds to expand the team and strengthen its partnerships with gaming companies (as well as expanding its in-house published NFT games Gods Unchained and Guild of Guardians). According to Immutable co-founder Robbie Ferguson, “we want businesses to create their game, marketplace or NFT application within hours via APIs, with a mainstream user experience”.
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.