New social order 😎
G-sec, Vlad’s ultimatum, and unending SPAC mania.
Hi 👋, Tanvi here.
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Let’s go ahead and get started:
What’s brewing hot? ☕
✅ Unfortunate glacier disaster—a massive glacier portion breaking off and causing a deluge in the Alaknanda river is throwing Uttarakhand in turmoil. Nearly 150 men are feared missing (16 or so were heroically rescued late last night), homes along the riverside have been swept away in the forceful currents, and a few hydel power projects have been destroyed as well. Things unfolding, but definitely not looking good.
✅ Pharma earnings show promise—Divi Labs, one of the largest generic active pharma ingredient makers in India, reported pretty impressive quarterly earnings numbers over the weekend. Revenues shot up 22%, while net profit jumped 31%, as Indian pharma continues to outshine during the pandemic and on the back of China’s woes. Divi’s stock had a remarkable run for the last 6 months, but management’s guidance for an even better fundamental performance in the near future is likely setting the path for more gains.
✅ Myanmar bans internet—Myanmar’s latest military government, which was set up after a coup in the country, is now massively throttling internet services in the region, forcing overall connectivity down to some 16% of the daily average internet traffic. Facebook, Twitter and Instagram were some of the early services to be explicitly banned. Global community is obviously quite furious at the open attempts to block citizen protests.
Softbank going full on gas into the SPAC mania 🔥
Softbank is filing for two more SPACs (blank check acquisition companies), with intentions of raising close to $630 million in total to take a couple more private companies public via a merger. FYI, just last month had they wrapped up a $530M+ SPAC.
Securities regulator in the US is claiming that they’re literally receiving 1 application for a SPAC every hour—that’s how absurdly hot the game is! Startups of all shapes and sizes, from revenues from zeros with parabolic projections, to credible businesses are going public, opting for the easier path vs. a well scrutinized IPO.
And Softbank kinda has a notorious rep for lacking financial discipline, which is throwing off some alarms that we’re probably too far in this game already.
Anyway, it's unclear what Softbank plans on acquiring yet, but considering the wide portfolio of opportunities at their disposal, that is the least of their worries. OYO rooms please?
Key takeaway: last year, a record $79 billion was raised by SPACs. For comparison, 2019 had barely seen about $18 billion in total capital raise. This is in addition to a record number of IPO raises that we had seen. So far in 2021, SPACs have raised over $35 billion. Almost 2x 2019 levels. Just shows you how HOT the plate really is.
That’s a ballsy call 😎
Vlad Tenev “thinks” Robinhood can get its IPO done in the first half of this year, and that there should be no problem whatsoever in terms of backlash from retail investors.
The optimism definitely raised a few eyebrows, but turns it was part of the deal promised to emergency investors who wrote the company big checks when the Gamestop mania nearly broke them.
The day after record trading in Gamestop, Robinhood’s clearing firm basically put them on an ultimatum to keep billions of dollars in liquidity if they want to remain open for business the next day. Obviously Vlad and other executives were frantically calling investors, existing and new, for a sum of money that had very rarely been raised overnight ever before.
Existing investor Ribbit and a few others stepped up, and to seal the deal, management inevitably had to promise some kinda liquidity event in 6 months, and a note meant to be convertible into equity at that liquidity event, was signed, with cash wired into RH’s bank accounts the next day.
Here’s a nice story from WSJ detailing what actually went down between the 48 or so hours.
BTW—the revolt against Wall Street ended leaving an $18 billion hole in the pocket of retail investors holding Gamestop which ended the week down 80% or so (or maybe more if you count other stonks that took off overnight only to crash land the next day). Not a surprising ending.
Open gates for the public 💰
GOI has decided to sell government securities directly to retail investors, via a new platform that will be rolled out by the RBI, in a bid to improve its borrowing options and add some more liquidity to the market.
Some hand holding: in the simplest terms, a government security is basically a debt-based financial instrument (like a loan) that the government uses to borrow money from the private markets to finance its activities, promising to pay a certain interest rate for the cash.
Considering the “limitless” resources of the govt., odds that the debt won’t be paid back is pretty low, hence g-secs are kinda considered risk free and are part of portfolios of institutional investors who seek rock solid safety of capital. Mutual funds, insurance companies, banks are regular buyers of these assets.
Until today, these securities would usually be traded in blocks of ₹5 crores in India, which would prohibit direct participation by the small guy.
Bottomline: in the coming year, GOI plans on borrowing ₹12 lakh crores from the private market to keep financing India's growth revolution. Adding retail investors to the fold will add more liquidity on the demand side, which gives the government favorable interest rates and likely a wider and never ending source of funds to finance some ambitious projects.
Closing out—the emerging platforms are unstoppable 👋
Towards the end of last week, Snapchat and Pinterest reported their numbers for the past quarter, highlighting just how strong the wind supporting digital platforms remains even this far out since lockdowns had hit.
Quick look,
Pinterest crushed estimates, growing advertising revenues 76% YoY to $706 million
Global user bases expanded 37% to 460 million!
These are astounding growth rates for organic expansion of companies of this size, and stock was rewarded with 7% gains
For Snapchat,
$911 million in ad revenues, were up 63%
265 million users, mostly young folks, use the platform EVERYDAY!
Investors seemed bothered by never ending cost drain, and took stock to the woodshed, only to get massive fomo and return the next day to buy it back
The markets are due for earnings from Twitter later this week, and expectations are already set quite high. With stonk-bois taking the baton for “engagement” over from President Trump, markets are eyeing for some serious expansion in the overall user base.
What else are we snackin’ 🍿
🗼 J&K to go online again - India is restoring 4G internet services in Jammu and Kashmir almost 18 months after a communications blackout. The blackout was imposed in an attempt to curb the spread of potential backlash over New Delhi’s decision to revoke Kashmir’s semi autonomous status in August of 2019.
👋 Succumbing to domestic competition - PayPal is planning to shut down its India operations that focused on domestic payment services, starting April 1, believing it's not worth it anymore to compete against domestic giants such as Razorpay, Mobikwik etc. Instead the company will work on being a viable option for merchants processing cross border payments and remittances.
Aight, that’s it for today. Have a good week ahead folks!
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