A Company That Received $3.6Mil In Funding On Kickstarter Has Failed

by 3 years ago

morning-brew

“Apparently there’s a term for someone who gets turned on by intellectual stuff. You know, just talking. What’s the word? I want to say ‘sodomy’?” — The ever-quotable CEO of Tinder, Sean Rad, whose parent company Match is set to go public today. Safe to say this is not exactly what Match was hoping for ahead of its big IPO.

MARKET SNAPSHOT 

Strong Day For U.S. Stocks

  • Thanks to some actual positive conviction from the Federal Reserve (more on that shortly), U.S. stocks had a strong day yesterday, with every S&P 500 sector in the green and healthcare and financials leading the way.
  • European and Asian markets held steady, so let’s stick with the U.S, and notably Apple, which rallied 3% after Goldman Sachs rated the company a “conviction buy,” one of the highest honors a stock can receive. The crux of the argument: Apple is no longer merely a hardware company, but a software and services one—and there’s a lot more growth potential there that investors aren’t accounting for.
  • Mobile payments company Square (and noted “unicorn”—i.e. a private company with at least a $1 billion valuation) makes its long-awaited public debut on the NYSE today. But with the IPO comes a fair amount of skepticism. Shares will begin trading at $9, a 42% discount to what investors were willing to pay a mere one year ago—suggesting increasing concern over the long-term viability of the payments industry and Square’s pessimistic prospects.
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U.S. MACRO 

Fed Provides Needed Clarity

The Federal Reserve released minutes from its October meeting yesterday, and to no one’s surprise, discussions centered on the potential for an interest rate hike in December. What was surprising: that the Fed was quite clear in asserting that a rate hike is more likely than not. At this point, yet another delay would unleash another wave of market uncertainty, undermine market confidence and (perhaps most importantly) erode the Fed’s credibility. Ultimately, the hot topic is no longer whether or not interest rates will be raised, but how much they will be raised.

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CORPORATE PRIMER

Target: Expect More, Pay Less

Investors: expect more. After posting strong growth in same store sales and revenue, Target raised its earnings guidance for the rest of the year. Shoppers: pay less. Target also slashed its minimum price for free shipping in half, down to $25. And on the other side of the street, Lowe’s followed up Home Depot’s strong earnings report earlier this week by beating analyst estimates itself. Specifically, same stores sales grew by 4.6 percent, fueled by strong homebuilder sentiment, which continues to prop up the housing market.

Nokia Getting Ahead of the Curve

Facing fierce competition, industry consolidation and an arms race to reach global scale in telecom, Nokia officially began courting Alcatel-Lucent with a $16.6 billion offer yesterday. Investors have been pressing Nokia to expand its productions and diversify its revenue streams—and the recent Ericsson-Cisco merger is a sign that all investors in the industry are thinking alike. If you’re an investment banker, the synergies of the deal include the ability to get ahead of the curve and align a larger platform behind 5G services going forward..

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TODAY IN TECH
Sprint Picking Up the Pace

Sprint has some major catching up to do. Specifically, the company desperately needs users after becoming the smallest of the four major U.S. wireless carriers last quarter with 57.7 million subscribers. Sprint is not one to sit idly by—it has decided to offer its service plans at half price compared to competitors’ prices, and if that’s not enough, will also cover switching costs. Power move? Hard to say. The company has lost millions of subscribers over the last few years due to a subpar network, and this aggressive new initiative shows confidence in the status of Sprint’s new “LTE Plus” network.

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OTHER STORIES

  • Amazon starts Black Friday early
  • ON Semiconductor buys Fairchild for $2.4 billion
  • ConAgra to split into two publicly traded companies
  • Suspected architect of Paris attacks is dead
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ECONOMIC CALENDAR

  • Monday: Dillard’s Earnings
  • Tuesday: Consumer Price Index; Walmart, Home Depot, Dick’s Sporting Goods Earnings
  • Wednesday: Fed Minutes; Housing Starts; Lowe’s, Target, Staples Earnings
  • Thursday: Best Buy, Gap Earnings; Weekly Jobless Claims
  • Friday: Abercrombie & Fitch, Foot Locker Earnings

KICKSTARTER IN TROUBLE

Kickstarter may be the undisputed king of crowdfunding, but that doesn’t make the events of yesterday any less worrisome:

  • The most successful European Kickstarter project to date, a miniature selfie-taking drone called Zano, announced yesterday that it was shutting down after raising $3.6 million from 12,000 backers. It’s a damaging blow to the credibility of Kickstarter, especially because it’s unclear if the backers will get their money back (plus, it was a cool idea).
  • Zano may have been the biggest European Kickstarter project to fail, but it’s not the first: projects enter so-called “development hell” more often than you’d think, and as Zano backers can attest, backing a doomed project may also doom your chances of a refund.
  • Adding insult to injury, yesterday Facebook released Fundraiser, essentially a Kickstarter for nonprofits. While not a direct competitor to Kickstarter yet, it’s feasible that Facebook will soon expand to all ventures, which could deal a major blow to Kickstarter—after all, Kickstarter gets a majority of its traffic from social media sites like Facebook.

INTERVIEW QUESTION OF THE DAY

A man wants to have a party in 31 days where he will be serving his 1,000 barrels of wine. The only problem is that one of his enemies poisoned one of the barrels. The poison kills any man who drinks any of the wine in about 30 days, give or take a few hours. The man has 10 plants that are also killed by the poison in 30 days and can be used to test the wine. How can he identify the single poisoned barrel of wine?. (Answer)

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BUSINESS TERM OF THE DAY

Managed Currency — Any currency that can have its exchange rate affected by the intervention of a central bank. This is opposed to a currency that is determined solely by the forces of supply and demand in the world market. Virtually no currencies truly fall into this latter category.

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FOOD FOR THOUGHT
15.71 seconds: the time it took Kenichi Ito of Tokyo to run the 100 meter dash on all fours, a new world record.

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