May 7, 2021

Market recap

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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.


Top Story

White House Supports Waiving COVID-19 Vaccine Patent Protections

Sharing Information Worldwide

Earlier this week President Joe Biden showed support for waiving the patent protections on COVID-19 vaccines. The World Trade Organization (WTO) had called on the US to suspend some of the intellectual property protections on vaccines in an effort to get more people in developing nations immunized against COVID-19, but the US had opposed those calls until now.

The White House’s announcement means drug makers like Pfizer (PFE), BioNTech (BNTX), and CureVac (CVAC) may have to share information about their effective vaccines. After Biden voiced his support for lifting patent protections, the European Union and China signaled they might be willing to follow suit.

Controversy Surrounds Vaccine Patents

There are strong opinions the debate surrounding vaccine patent protections. United States Trade Representative Katherine Tai said the pandemic calls for “extraordinary measures,” and the Biden Administration still believes strongly in protecting IP rights. Defenders of IP rights are often willing to grant exceptions under unique circumstances for the greater good.

Vaccines have been very lucrative for drugmakers. Take Moderna (MRNA) as one example: it recently posted its first-ever quarterly profit driven by sales of its COVID-19 vaccine. Moderna also raised its full-year forecast for vaccine sales.

Drugmakers say lifting patent protections will cause more harm than good. They argue it will create vaccine development confusion between public and private entities, which could “weaken already strained supply chains” and spur a “proliferation of counterfeit vaccines.”

The Path Forward is Unclear

The vaccine makers’ stocks were under pressure after Biden made his announcement. The Biden Administration plans to lobby other countries to back its position.

It will be some time before a final decision takes place, and it is not yet entirely clear how vaccine companies will be impacted. WTO members need to figure out how the drug companies will share the IP needed to increase supplies of COVID-19 vaccines. EU officials warn negotiations at the WTO could last for months and potentially years.

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Amazon May Benefit From Apple’s New Privacy Tool

Amazon Can Still Track

Apple’s (AAPL) new privacy rule may benefit Amazon’s (AMZN) advertising business. Late last month, Apple launched its App Tracking Transparency tool as part of its new iOS 14.5 operating software. The tool gives users more control over their privacy, including the ability to prevent advertisers from tracking them online. This means apps like Facebook (FB) and Google (GOOGL) may not be able to collect data on users which they leverage for targeted ads.

Amazon users on Apple devices will see a prompt to opt out of tracking. However, this will have little impact because the ecommerce giant will still be able to track what users are doing for as long as they are logged in to their Amazon account.

Amazon’s Ad Business Is Already Booming

As it stands, Amazon is becoming a juggernaut in the digital advertising market. Revenue from the ecommerce company’s “other” business category, which is mainly ads, rose 77% in Q1 to $6.9 billion. Amazon collects a large amount of consumer data from its more than 200 million Prime members. That data will become even more valuable to advertisers if Apple users opt out of app tracking in large numbers.

Marketers are also eyeing data collected by other retailers including Walmart (WMT) and Target (TGT). They view that data as a valuable way to target ads and measure their effectiveness.

Looking Ahead

It is too early to gauge the impact of Apple’s new privacy tool but many think it will not significantly harm other tech giants like Facebook and Google. Both will still have access to information about what people are doing on their own internet properties.

But that data may not be as attractive to marketers compared to what Amazon collects. Since the pandemic, consumers have been making more purchases online, prompting brands to look for more intel on their ecommerce customers. With net sales of $108.5 billion in the first quarter alone, Amazon is well-positioned to give marketers that information.

Friday Fundings: Kajabi, Bitso, and ReCharge

Knowledge Ecommerce Platform Raises $550 Million

Kajabi, an ecommerce platform operator, raised $550 million in growth equity financing led by Tiger Global Management. The fundraising round values Kajabi at more than $2 billion and included participation by TPG, Tidemark, Owl Rock Capital, Spectrum Equity, and Meritech Capital.

Kajabi operates a platform which lets knowledge workers sell digital products like online courses, podcasts, and newsletters. The market for knowledge commerce is growing rapidly. Kajabi users are collectively generating more than $1.5 billion in annual gross merchandise value, which is up 150% year-over-year.

The startup will use the new funding to build out its product portfolio, expand into international markets, and for strategic mergers and acquisitions.

Mexican Crypto Exchange Raises $250 Million

Bitso, a Mexican crypto exchange, raised $250 million in venture funding. The Series C round was co-led by Tiger Global and Coatue and included participation from Paradigm, BOND, Valor Capital Group, QED, Pantera Capital, and Kaszek. The latest capital raise gives Bitso a value of $2.2 billion.

With the funding, Bitso is now among the most highly valued financial technology companies in Latin America. It raised $62 million in a Series B round in December. Bitso will use the latest funding to increase access to cryptocurrencies and to expand its operations.

Subscription Management Software Startup Raises $227 Million

ReCharge, an ecommerce subscription management software company, raised $227 million in venture funding. The Series B growth round was led by Summit Partners, ICONIQ Growth, and Bain Capital Ventures. ReCharge now has a $2.1 billion valuation.

The startup makes software to help online merchants start and scale subscription businesses. The company was founded in 2014 and was bootstrapped until last January when it raised $50 million in a Series A round.

ReCharge is using proceeds to hire more employees in engineering, customer support, sales, and marketing. The startup will also expand its relationships with ecommerce platforms in the US and internationally. Additionally, ReCharge is on the lookout for acquisitions which could accelerate its growth.

Not-So-Breaking News

  • Kellogg’s (K) first-quarter results topped Wall Street forecasts, boosted by demand for its snack food products. The maker of Pringles and Cheez-Its said net sales increased 5.1% year-over-year to $3.58 billion. It also raised its outlook for the full year.
  • Volkswagen’s (VWAGY) sales rebounded in the first quarter despite production difficulties related to the semiconductor shortage. Volkswagen said production lines could stop for days to weeks but still raised its earnings outlook for the full year.
  • Uber’s (UBER) stock sank yesterday after the ride-hailing giant posted $2.9 billion in revenue during the first three months of the year, compared to estimates of $3.3 billion. The company's losses shrank, however, which was partly due to the sale of its self-driving unit.
  • Fastly’s (FSLY) first-quarter net loss was wider than expected and it reduced its revenue forecast for the second quarter and full-year, which drove shares down. Additionally, the cloud software company’s Chief Financial Officer Adriel Lares is leaving, which weighed on shares.
  • Etsy’s (ETSY) first-quarter results topped analysts’ expectations, but the company warned of decelerating growth for the year. Esty expects revenue to grow 15% to 25% this year, which compares to triple-digit growth in the previous two years.
  • Parents who want their kids to learn about finance may have to DIY it. Lessons on investing can make things interesting. Learn more with Tips for Teaching Your Kids About Investing.

Financial Planner Tip of the Day

“According to the CFPB, a characteristic that all financially well people share is that they are committed to learning about how to manage their money. They understand that both the work and education is a continuous process.”

Brian Walsh, CFP® at SoFi

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