Cloud News & Opportunities
Free Edition - Google FLoC, Deliveroo flop, military AR training, $2 trillion infrastructure package
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Google FLoC. After announcing that the company will phase out of using cookies to track online user behavior, Google is now rolling out its cookie alternative named Federated Learning of Cohorts (FLoC) for Chrome as a developer origin trial. FLoC enables interest-based advertising without sharing the browsing behavior of individual users. Instead of a personally identifiable cookies, FLoC analyses your browsing behavior and groups you into different cohorts with other users who have a similar interest profile without sharing your browsing history with Google. FLoC is supposed to be specific enough to allow advertisers to show you relevant ads, but not specific enough to allow marketers to identify you personally. More on TechCrunch and Google.
PayPal Crypto Checkout. PayPal announced that it will enable consumers to check out at millions of online shops using cryptocurrency. The way it will work is that customers effectively sell their cryptocurrency through PayPal at the time of checkout and then settle the actual transaction in USD. For the online shop nothing really changes as they’re still being paid in USD, not cryptocurrency. PayPal does not take on exposure to cryptocurrency risk as it is merely facilitating the sale of crypto with a buyer and then processes the flow of USD to the online shop. End users will gain the additional flexibility to pay with crypto but have to pay a spread of 0.50% for PayPal’s market-making service. At launch, the service will support Bitcoin, Litecoin, Ethereum and Bitcoin Cash — but only one type of cryptocurrency can be used for each purchase. More here.
Global chip shortage. The global shortage of chips has caused Foxconn, key maker of iPhones and the biggest supplier to many global tech groups including Google, Microsoft and HP, to reduce its shipments by 10%. "The [supply in the] first two months of this quarter was still ok, as our clients are all very big, but we started to see changes happening this month". This is a rare acknowledgement and may cause even tech heavyweights like Apple -- which tends to have more resources and greater bargaining power with suppliers than smaller companies -- to face difficulties in securing supplies. More here.
Microsoft military VR/AR. Microsoft won a contract worth up to $22 billion over 10 years to outfit the US Army with 120,000 units of an upgraded version of the HoloLens 2 AR headset. This is a massive scale-up for AR tech and gives Microsoft a significant budget to tackle base technology problems. Benefits are likely to trickle down to consumer and enterprise-level devices in the future. More here.
(Another) $2 trillion recovery package. US President Biden announced his plan for a $2 trillion infrastructure and economic recovery package. The plan includes investments into US transportation infrastructure, water systems, broadband and manufacturing, and is supposed to be — at least partially — financed through an increase in the corporate tax rate from 21% to 28% and measures designed to prevent offshoring of profits. Besides rescuing failing infrastructure, the ambitious plan would create a large number of jobs and start a transition to cleaner energy sources. More here.
$0 in Federal Taxes. At least 55 of the largest corporations in America paid no federal corporate income taxes in their most recent fiscal year despite having substantial pretax profits in the US. The tax-avoiding companies collectively generated over $40 billion in US pretax income in 2020, according to their annual financial reports but were able to take advantage of several tax breaks, including from the new CARES Act launched in the spring of 2020. More here.
$6.7 billion VC fund. In January, Tiger Global sent a letter to its investors saying it was raising $3.8 billion for its thirteenth venture fund. The SEC filing now shows that the new fund closed with almost twice that amount at $6.7 billion, thereby raising one of the biggest venture funds ever. Tiger Global has been deploying capital very actively in recent weeks. This week alone, Tiger co-led HighRadius’s $300 million Series C round, led Cityblock Health’s $192 million Series C extension and participated in several other deals with decent ticket sizes. Only last year, Tiger Global closed its twelfth fund with capital commitments of $3.8 billion. More here.
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Coursera, the MOOC platform, went public this week raising $520 million. Its IPO share price of $33 increased to $46 at Friday’s close, giving the company a market cap of about $6 billion. Due to the boom in remote learning during the pandemic, Coursera grew its revenues by 60% in 2020 to $294 million with a net loss of $67 million. More here.
Deliveroo’s share price dropped by 30% during the company’s first day of trading on Wednesday. According to Fabian de Smet, head of investment banking at Berenberg, “Investors are turning away from the work-at-home play and putting their money into the economic recovery play. Deliveroo got caught in the middle of a huge rotation”. Closing down 26.3%, the company’s debut was the worst first-day performance for a sizeable IPO (>£1 billion) in London on record. Similarly, the share price of US competitor Doordash has fallen 40% between mid February to mid March. More here.
Coinbase, the cryptocurrency exchange, will begin trading on April 14th, after receiving approval from the SEC for its direct listing. More here.
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Active
Docebo (DCBO) - Target price: $70 (+63% to current)
Pexip (PEXIP) - Target price: $24 (+114% to current) — this marks a decrease to my initial target of $30 from February, due to an overall drop in valuations among cloud companies. Pexip continues to perform very well and the market outlook for the company has not changed; however investor behavior has. With less demand for cloud stocks, the multiple/price paid for the same fundamentals has decreased. We cannot know for certain if this change in investor sentiment will continue or reverse, but we can observe that companies with comparable profiles to Pexip are still trading at much higher multiples. Based on their fundamentals and valuations, the relative price target for Pexip is $24.
Wix.com (WIX) - Target price: $350 (+19% to current)
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🤡 Voltswagen. or not.
🚀 VC funding in Europe more than doubled in Q1-21 vs Q1-20 .
💯 a16z’s Top 100 Marketplaces.
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Disclosure: I am long DCBO, PEXIP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from paid subscribers of my newsletter. I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: I am not a registered investment, legal or tax advisor or a broker / dealer. All investment / financial opinions expressed by me are from personal research and experience and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.