09/17/2020

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Friday,
September 18, 2020

Market recap

Dow Jones

27901.98

-130.40 (-0.47%)

S&P 500

3357.01

-28.48 (-0.84%)

Nasdaq

10910.28

-140.19 (-1.27%)

Facebook

$254.665

-$8.855 (-3.36%)

Carrier Global

$30.66

$0.411 (0.36%)

McDonald’s

$222.675

-2.135 (-0.95%)

Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority. For more information on COVID-19 and your finances click here.

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Top Story

Big Tech’s Impact on the Commercial Real Estate Space

The Work From Home Boom Causes Changes in the Real Estate Market

When the COVID-19 pandemic first hit the US in March, millions of tech workers grabbed their laptops and went home for what they thought would be a few weeks of working remotely. Now, about six months later, many big tech companies are still out of the office indefinitely. Facebook (FB) and Google (GOOGL) said they will give employees the option to be remote well into 2021. Twitter (TWTR) and Square (SQ) said employees will be able to work from home “forever.”

The work from home boom is not just a temporary anomaly. Big tech companies changing their business models is impacting the real estate landscape—both in urban areas where offices are closed, and in more rural areas.<.p>

Subleases Surge in San Francisco

In San Francisco, a hub for big tech offices, demand for office space has plummeted. Last week, Twitter listed 104,850 square feet of space in its San Francisco headquarters for sublease. In August, Pinterest (PINS) broke its 490,000 square-foot lease in SoMa.

The amount of office space available for sublease in San Francisco has gone up by 65% as a result of the pandemic. There is about 6.7 million square feet of office space for sublease in San Francisco currently, compared to normal levels of about 1 million square feet. Some analysts expect that even more companies will abandon their office space in the coming months, and the market will not bottom out for another year.

Tech Companies Snap Up Real Estate Elsewhere

While big tech companies are vacating office space in some urban centers, they are buying real estate in other places. For example, Amazon (AMZN) is making plans to put 1,000 new warehouses in suburban neighborhoods, which will impact the real estate landscape across the country. The company is also adding warehouse space near big cities to help with last mile delivery.

Additionally, Facebook just paid $367.6 million for a custom-built office complex that was supposed to be the headquarters for REI, the outdoor clothing and gear retailer. REI decided not to move into the campus, located outside of Seattle, because of the pandemic. The move shows that Facebook plans to have at least some employees return to working from physical offices eventually.

The Unsung Hero of the S&P 500: An Air Conditioning Company

Carrier Global’s Stock Surges

Tech titans like Apple (AAPL), Amazon, (AMZN) and Nvidia (NVDA) have been generating buzz on Wall Street, but one less flashy stock has outperformed them all: Carrier Global (CARR).

Carrier Global is a 105-year-old heating, ventilation, and air conditioning company which has seen its shares rise by 143% on the year after it split from United Technologies and became an independent company. By this measure, it is currently the best performing stock in the S&P 500. The next-closest stock is Nvidia, the chipmaker, which has seen 119% gains.

Solutions for Indoor Air Quality Safety

The COVID-19 pandemic has caused demand for Carrier Global’s services to rise. Over the summer, people working at home were eager to install new HVAC systems. Carrier saw residential HVAC orders jump by 100% in June.

Additionally, offices, schools, malls, and other indoor spaces are turning to Carrier Global for solutions to prevent the novel coronavirus from spreading indoors. In just three weeks, Carrier developed a portable air cleaning system called OptiClean, and sold thousands of units to school districts and other clients. "COVID has shined a light on the criticality of safe and healthy indoor environments. And that's exactly what we do," explained David Gitlin, Carrier’s CEO.

Potential Vaccine Distribution Business

Carrier also makes refrigeration systems that help companies transport food, medicine, and other perishable items. This equipment could be very helpful for distributing a COVID-19 vaccine. As COVID vaccine trials unfold, Carrier is in discussions with several companies about engineering refrigerated distribution chains for these vaccines.

Though Carrier has not been in the limelight as much as some other companies during the pandemic, its shares have seen stunning growth, and investors will be eager to see if this trend continues.

Friday Fundings: Klarna, Zwift, Tonal, and dLocal

Klarna Hits a $10 Billion Valuation

Klarna, a Sweden-based online payment unicorn, just raised $650 million in a new financing round. This brings the company’s total valuation to $10 billion. Silver Lake led the round with participation from GIC, BlackRock (BLK) and HMI Capital.

Klarna is best known for its “buy now pay later” services. Online retailers use Klarna to give their customers ways to pay for products in installments. This kind of payment system is quickly becoming more popular. For some time, retailers have offered installment payments for big-ticket items like furniture, but recently ecommerce vendors are allowing customers to pay for smaller items, from beauty supplies to electronics, in small chunks.

Over one third of consumers in the US have used an installment payment system. At a time when ecommerce is booming, and many people are in strained financial situations, these types of payment systems may become even more widespread.

At-Home Fitness Companies Zwift and Tonal Secure New Funding

The at-home workout boom shows no signs of slowing down. As evidence of investors’ belief in the industry, Peloton’s (PTON) shares have more than tripled since the company’s IPO. Startups in the sphere are also raking in funding. Zwift, an online fitness service that gives users biking and running workouts in virtual worlds, raised $450 million in a Series C round led by KKR. Tonal, which makes home gyms designed for strength training, just raised $110 million in a Series D round with participation from several high-profile athletes including Steph Curry, Bobby Wagner, and Michelle Wie.

Though some gyms have reopened, many remain shuttered. Even when the pandemic subsides, it’s likely that some fitness enthusiasts will stick to habits formed during the pandemic, and may still be more inclined to work out at home.

Cross-Border Payment Platform, dLocal

dLocal, a cross-border payment system, has become the first unicorn based in Uruguay after a $200 million funding round. Existing investor General Atlantic led the round with participation from new investor, Addition.

dLocal processes payments from 20 emerging markets for large companies including Spotify (SPOT) and Google (GOOGL). dLocal plans to use its new financing to move into 13 new markets in Central America, Africa, and Southeast Asia. Since the company began in 2016, dLocal has been profitable every year and has seen 100% annual growth over the past four years.

Not-So-Breaking News

  • MetLife (MET) announced it will acquire Versant Health, a managed vision care company which owns the brands Davis Vision and Superior Vision, for $1.68 billion. MetLife’s stock has tumbled 26.2% year-to-date, but the company’s leadership hopes this acquisition will give it a boost.
  • Richard Branson, the billionaire founder of Virgin, is raising $460 million to launch a new SPAC called VG Acquisition, which will be registered in the Cayman Islands. Over the next two years, the company will look for an investment that operates in one of Virgin Group’s main sectors, which include travel, financial services, and media.
  • McDonald’s (MCD) launched a collaboration with rapper Travis Scott last week to promote a combo meal which includes a Quarter Pounder and fries dipped in barbecue sauce for $6. The campaign has been so successful that McDonald’s is experiencing shortages of the ingredients used to make the meal. This is the first time the company has dealt with supply issues during the pandemic.
  • Chuck E. Cheese’s (CEC) parent company, which filed for bankruptcy in June, has asked for permission from a bankruptcy court to shred 7 billion paper Prize Tickets that have piled up in their supply chain due to the pandemic. The company says these tickets could fill about 65 40-foot cargo shipping containers and it will cost $2.28 million to destroy them.
  • The Labor Department reported 860,000 jobless claims during the week ending September 12. Six months after the employment crash caused by COVID-19, initial claims remain extremely high. For context, the figure came in at 211,000 in the same week last year.
  • Cryptocurrency wallets are used to store your private keys. These hexadecimal keys must be matched with your public keys in order to move crypto from one wallet to another. Some wallets can be used to store multiple types of cryptocurrency, while others can only store one type. Read more about securely storing your cryptocurrency at SoFi Learn

Financial Planner Tip of the Day

"If you are employed, the easiest way to dip your toe in the market is to get involved in your company’s 401k savings program as soon as possible. This way, you’ll automatically send a percentage of your paycheck directly into your savings. And if your company has a 401k matching program, you’ll be earning essentially free money."

Brian Walsh, CFP® at SoFi

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