Thursday Morning Reads
- Carlyle Group (CG) is mulling split of Sequa Corp and is considering options for its Precoat Metals unit. Bloomberg
- President Biden considering plan to give seniors $800 debit card to spend on dental care (SDC, HSIC, NVST, PDCO, XRAY, ALGN). Washington Post
- Elliott Management has acquired large stake in Canadian National Railway (CNI, KSU). WSJ
- Equinox is in discussions to merge with Ares Acquisition (AAC) and go public (SPACS, IPOXX). Bloomberg
- China might intervene to lower increasing coal prices (KOL, BTU). Reuters
- Former President Trump to launch social media site through SPAC merger (DWAC, SPACS, FB, TWTR, SNAP). CNBC
- Amazon (AMZN) employee group in New York wants vote on unionization. WSJ
- Odd Lots: Axie Infinity, the crypto game that’s grown over 200x this year alone.
- The hidden ways the ultrarich pass wealth to their heirs tax-free.
- Britain’s economy finds out what it is like to live with Covid.
- Hundreds sick as onion-linked salmonella outbreak hits 37 states.
- Blankfein takes up day trading with Goldman’s door to D.C. shut.
- Donald Trump’s pitch for his new technology and media empire.
- Did the Earth tip on its side 84 million years ago?
Some predicted the move since he left office, but former President Donald Trump is finally launching his own media network. The new business, called Trump Media & Technology Group (TMTG), will include a social media platform called "TRUTH Social," as well as a subscription video-on-demand service (TMTG+) that features "non-woke" entertainment programming, news and podcasts. The company will go public via a SPAC merger with Miami-based Digital World Acquisition (NASDAQ:DWAC), which surged more than 50% premarket to $15/share.
Quote: "I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech," Trump wrote in a press release. "We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable. Trump Media & Technology Group's mission is to create a rival to the liberal media consortium and fight back against the 'Big Tech' companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America."
Earlier this year, Trump was restricted, and then banned, by major social media giants like Facebook (NASDAQ:FB), Twitter (NYSE:TWTR), Snapchat (NYSE:SNAP) and YouTube (GOOG, GOOGL) after the Jan. 6 storming of the U.S. Capitol. Following the incident, Parler - a free speech social network popular with conservatives - was also removed from the Apple and Google app stores, while Amazon (NASDAQ:AMZN) ended its web hosting agreement. As a result, TMTG appears to be targeting multiple fronts, saying on its website that it eventually hopes to compete against AWS and Google Cloud, as well as Disney (NYSE:DIS) and Netflix (NASDAQ:NFLX).
Along ideological lines? While "TRUTH Social" intends to be America's "big tent" social media company that encourages "free speech," we could be witnessing a further polarization of the corporate landscape. Once upon a time, politics was not married to the business world as it is today, and competing services may continue to sprout up as the country appears more divided. According to a survey from The Hill, 30% of respondents said they'd use a "Trump-backed social media platform," though 54% said they wouldn't and 16% would consider it. TRUTH Social is set for a beta launch next month and a full rollout in the first quarter of 2022. (111 comments)
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Tesla hits the track
The EV maker posted record revenue and profit in Q3 as it scaled up despite some problems along the supply chain. "A variety of challenges, including semiconductor shortages, congestion at ports and rolling blackouts, have been impacting our ability to keep factories running at full speed," Tesla (NASDAQ:TSLA) declared, as shares slipped 1.3% AH on Wednesday. However, the firm still reiterated prior guidance of "achieving 50% average annual growth in vehicle deliveries" over a multi-year horizon.
By the numbers: The company racked up $1.6B in GAAP net income ($2.1B in non-GAAP net income), while producing 237,823 vehicles in Q3 (+64% Y/Y) and delivering 241,391 (+73%). Operating margin was 14.6% of sales to easily top the guidance range and analyst expectations, while automotive gross margin came in at 30.5% vs. 28.4% consensus (and 28.8% with credits backed out). The improvement was struck even with the average selling price of a vehicle down 6% due to a shift in the model mix.
On the operations side, Tesla said its buildout for the Berlin-Brandenburg Gigafactory remains on schedule with testing of equipment well underway. It expects to receive final permit approval by the end of this year and continues to target the first Model Y production there and in Austin before 2021 comes to a close. Tesla also notched $806M in revenue from its energy business (solar deployments of 83MW were up 46%), though costs of revenue rose to $803M, the highest number in the last five quarters.
Recharging: The automaker revealed some changes to its battery cell chemistry, using lithium-iron-phosphate (LFP) for its standard range vehicles rather than nickel-cobalt-aluminum which it will continue to use in its longer-range EVs. "LFP is significantly cheaper and stable, which makes it safer," said Sam Abuelsamid, principal analyst at Guidehouse Insights. However, the cells are less energy-dense, meaning they offer lower range for the same weight as other cells, while cold weather affects them more. (380 comments)
In a combination that could blur the landscape between fintech and social media, PayPal (PYPL) has reportedly offered $45B to buy Pinterest (PINS). The transaction would be financed mostly through stock, though the talks are at an early stage and may not lead to a deal. If it does happen, the tie-up would be the biggest acquisition of a social media company, topping Microsoft's (MSFT) $26.2B purchase of LinkedIn in 2016.
Analyst commentary: The potential combination makes "zero sense," Truist analyst Andrew Jeffrey wrote to clients. "We see such a move as an act of near desperation as PayPal grapples with increased Buy Button competition, a formidable new BNPL tie-up between Square (SQ) and Afterpay (OTCPK:AFTPY) and lagging Venmo monetization." The acquisition of Pinterest could also increase risk as it could create a conflict with PayPal's other large marketplace customers.
Others feel differently about the combination. "It would be a significant positive for PayPal's ongoing monetization initiatives on both sides of its merchant and consumer platforms, especially if Pinterest's social commerce platform gets integrated with Honey's AI into PayPal's destination app," Wedbush analysts added in a research note. Pinterest shares climbed 10% on Wednesday following the report, while PayPal slid 5%.
Outlook: Recall that almost a week ago, co-founder and board member Evan Sharp resigned as Pinterest's chief design and creative officer. PayPal had also been looking to boost its e-commerce offerings in recent years as shoppers increasingly buy items they see on social media. It bought Japanese "buy now, pay later" firm Paidy for $2.7B earlier this year, return-service provider Happy Returns in May, online coupon finder Honey Science for $4B in 2019 and iZettle for $2.2B in 2018. (112 comments)
The FDA is significantly widening America's COVID-19 booster campaign by allowing additional doses of Moderna (MRNA) and Johnson & Johnson's (JNJ) vaccine. The jabs will be authorized for the same population as the Pfizer-BioNTech (PFE, BNTX) booster: 65 years and older; below 65 at high risk of severe disease; and below 65 due to frequent institutional or occupational exposure. The clearance means that every COVID vaccine approved in the U.S. now also has a booster (Pfizer got the green light on Sept. 22).
On the conference call: "Vaccines are one of our greatest tools in the fight against the pandemic, and ensuring the availability of boosters for those who need them is one of our highest priorities," announced acting FDA Commissioner Janet Woodcock.
Another interesting detail that emerged was the FDA is authorizing "mix and match" vaccines. That will allow booster doses to be administered which are different from the ones received during the original vaccination series. According to health authorities, this will help ensure doses are available to anyone who wants one, while increasing options for fully vaccinated people.
Earlier this week: Pfizer CEO Albert Bourla said that COVID-19 is "here to stay," but he expects the medical community "should be able to have it well under control." Bourla also sees a U.S. regulatory decision on COVID vaccines for children "in a matter of weeks" and is pushing for changes in the medical approval process. Looking longer-term, he expressed confidence that enough doses of the vaccine can be created to provide shots to the entire world "within several months." (70 comments)
In Asia, Japan -1.9%. Hong Kong -0.5%. China +0.2%. India -0.6%.
In Europe, at midday, London -0.5%. Paris -0.3%. Frankfurt -0.1%.
Futures at 6:20, Dow -0.3%. S&P -0.2%. Nasdaq -0.2%. Crude -0.7% at $82.80. Gold +0.2% at $1787.60. Bitcoin +3.5% at $66125.
Ten-year Treasury Yield +1 bps to 1.65%
Today's Economic Calendar
8:30 Initial Jobless Claims
8:30 Philly Fed Business Outlook
9:00 Fed's Waller: U.S. Economic Outlook and Monetary Policy
10:00 Existing Home Sales
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
4:30 PM Fed Balance Sheet
9:00 PM Fed's Williams Speech
Companies reporting earnings today »
What else is happening...
Crypto stocks rise with Bitcoin (BTC-USD) trading at new all-time high.
IBM (NYSE:IBM) shares slump 5% AH as tech services sales drop.
5G boosts Verizon's (NYSE:VZ) postpaid users and full-year profit view.
Exxon (NYSE:XOM) debates abandoning some of its biggest projects - WSJ.
Baker Hughes (NYSE:BKR) slides on weaker than expected Q3 earnings, revenues.
Monetary policy: Fed's Mester doesn't see rate hikes 'any time soon.'
Biogen (NASDAQ:BIIB) raises guidance despite slow uptake of new Alzheimer's drug.
Evergrande (OTCPK:EGRNF) tumbles after sale of services unit collapses.
Coconut water brand The Vita Coco Company (NASDAQ:COCO) prices IPO below range.