Markets take a dump 💩
Big ticket raises, new virus, and more SPACs.
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Market summary: 📊
Indian markets took a massive dump yesterday as increasing lockdown risks spooked investors. Global markets showed similar skepticism, although not as harsh.
US:
S&P 500 - down 0.47%
Nasdaq 100 - down 0.51%
India:
Nifty 50 - down 3.14%
Sensex - down 3.00%
First things first ☕
1️⃣ Honda scaling back ops—although demand for automobiles showed a decent bounce back during the last few months of 2020, recovery hasn’t been kind to all companies in equal proportions. Honda is still seeing sales down nearly 40% since before COVID, and the company is forced to shut one of its manufacturing facilities in Delhi to avoid any further losses. In addition to India, they’re also closing some plants in Japan and the UK.
2️⃣ Future told to calm down—Future Retail had asked the Delhi High Court to stop Amazon from approaching any more regulatory bodies with its concerns around blocking the Future-Reliance $3.4 billion transaction. Instead, the courts have asked Future not to overstep and that Amazon has all the rights to seek all the legal recourse it needs. The trio (Future-Amazon-RIL) had gotten into an ugly spat after Amazon claimed it owns rights to invest in Future and tried to block the Reliance-Future acquisition.
3️⃣ COVID making last lap, travel bans are back—the UK reported a strain of coronavirus that’s spreading around its geographies at a much faster rate (70% faster transmission), throwing the world into another limbo just as we thought we were done. Then Italy, South Africa reported similar strains within its borders. Lockdowns and bans followed, with several EU countries cutting ties off, and then India imposing a UK travel ban until Dec 30. Saudi has blocked its borders to ALL visitors. Tough few weeks ahead.
Sensex takes a HUGE dump 💩
Spooked yesterday by the rapidly spreading mutant virus that looks like it could cause wider damage, forcing more lockdowns and some more economic carnage, Indian investors ran for cover, abandoning the Sensex’s solid run so far to pull it down 3% in a single session.
This is the worst pullback the markets saw in over 7 months (not as terrible as it sounds though, when you consider the YTD run). During the worst moment during the day, the index was down 4.57%, slowly recovering to settle slightly up.
Investors and analysts are concerned but the smart ones were anyway expecting some kinda pullback given weeks on weeks on gains made by the markets since the vaccines were announced. We’ll see how things pan out for today’s session.
Bottomline: pullbacks are part of the market and if anything, they’re usually a good opportunity to add to a portfolio. But considering how much the markets have run up in no time in 2020, this pain may last for a bit longer. Fasten your seatbelts, stop looking at your portfolio, and save up some cash to jump in when the turbulence is done.
Fintech wildfires continue 🔥
Pine Labs, one of India’s leading merchant acquiring platforms, picked up checks for $100 million from Lone Pine Capital—a prominent hedge fund based in the US. Post round, Pine Labs will be valued at over $2 billion.
Indian fintech had been on fire since several structural changes in basics like digital identity and then UPI opened the floodgates on innovation here. Then COVID further accelerated adoption of tools, lifting market leaders like never before. Earlier this year, Pine Labs had raised over $300 million from Mastercard at a $1.6 billion valuation. Now, they’re the third most valued fintech after Phone Pe and Paytm.
Pine Labs basically offers end-to-end payment processing and digital selling tools for big merchants as well as SMEs, serving over 150,000 merchants in 3,700 cities across India, broader Asia and the Middle East.
Freshly raised capital will be put to further drive expansion in India, as well as Southeast Asian Markets and to fuel product innovation—for example, the “buy now, pay later” trend is on the company’s radar.
Takeaway: Digitization in India is barely getting started and the opportunity at the disposal of these leaders is just gigantic. Don’t be surprised if some of these companies achieve the scale of PayPal ($250 billion), Square ($100 billion), and other global giants in a few years. Foreign investors of all types and sizes chasing these players is another big vote of confidence.
Softbank’s own SPAC—how could they not? 😎
Softbank is finally jumping on the SPAC train, looking to raise between $500 to $600 million for its blank check acquisition company.
Quick reminder, SPAC’s are basically “holding” companies that are going public to raise money with the intention of acquiring a much smaller startup, ideally pre-revenue but something that has tremendous market potential but public investors yet fail to recognize its value.
Anyway, Softbank hasn’t disclosed any targets it plans on acquiring so far, but between high-flying Silicon Valley names and Softbank’s own portfolio names like OYO, PayTM, Policy Bazaar and a range of other global companies, the options at their disposal are countless.
However, Softbank’s notoriety for lack of discipline in tech-investing and its active role in making the late stage investing landscape frothy is making analysts a bit cautious.
Closing out 👋
The US yesterday announced another round of stimulus—a $900 billion package that assures citizens $600 in a one time payment to deal with the pandemic. There are several other benefits including an unemployment check each week, and a range of other initiatives to protect small businesses and corporations. Citizens however seemed quite displeased by how “tiny” the stimulus checks are.
About time the Indian government takes some cue from global counterparts and offers a respectable stimulus to its own citizens as well? Could be a huge accelerant to recovery.
What else are we snackin’ 🍿
🤝 Helping merchants get by - Zomato is working with Incred to extend credit facilities to Zomato’s restaurant partners and merchants. The tie up is basically designed to help cash-strapped small businesses with all the financial assistance (growth capital and working capital) they need right now to survive.
🎵 Short video music deals- Short video platform Mitron has struck a deal with Zee Music giving users access to Zee’s extensive music catalogue. Several such deals have been signed by other music labels and short-video platforms lately, and this is slowly becoming a competitive advantage.
💪 Chesky looking to give back - Airbnb CEO Brian Chesky announced an empowerment award to sponsor YC entrepreneurs working on creating more economic empowerment opportunities across the world. That startup will then be funded by Airbnb with “no strings attached” and also receive personal mentoring from investor Ron Conway and Chesky.
Hit that 💚 if you liked today’s issue.
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