09/17/2020

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Wednesday,
September 30, 2020

Market recap

Dow Jones

27452.66

-131.40 (-0.48%)

S&P 500

3335.47

-16.13 (-0.48%)

Nasdaq

11085.25

-32.28 (-0.29)

Spotify

$242.45

$6.03 (2.55%

LVMH

$96.00

$1.66 (1.76%)

Microsoft

$207.2

-$2.18 (-1.04%)

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

Palantir and Asana’s Direct Listings This Week

What Is a Direct Listing?

Investors are carefully watching two unicorn startups as they debut on the New York Stock Exchange today. Palantir Technologies (PLTR), a software company specializing in big data analytics, and Asana (ASAN), a work management software company, will both list today.

Both companies opted for a direct listing rather than a traditional IPO or a blank check merger. With a direct listing, no new shares of the company are created and only existing shares are sold. Direct listings also do not involve underwriters, making them a less expensive, but sometimes riskier option. Going public with a direct listing is also usually a faster process that involves less scrutiny than an IPO.

Looking at Other Companies’ Choices

Many companies have had success going public through traditional IPOs this year, like software company Snowflake (SNOW). Others, like DraftKings (DKNG), benefitted from merging with SPACs. Palantir and Asana are breaking these trends, and will follow in the footsteps of Spotify (SPOT) and Slack (WORK), which both used direct listings to go public in 2018 and 2019, respectively.

Palantir and Asana are not profitable, but their revenue is growing fast and they are both expected to garner multibillion dollar valuations. Palantir’s market value is expected to be over $20 billion, and Asana’s market cap will be over $5 billion.

Direct Listings Could Become More Common

Other companies considering options for going public will be watching closely to see how these direct listings unfold. More companies could follow in Palantir and Asana’s footsteps—especially if the rules surrounding direct listings change.

Last month, the SEC approved new regulations that would allow companies to raise money by issuing new shares through direct listings instead of just selling existing shares. The Council of Institutional Investors objected to the change, and it is currently under review. This change does not impact Palantir and Asana, since they are only selling existing shares, but it would affect companies thinking about pursuing a direct listing, and it could make this a more popular strategy for going public.

In-Person Fashion Shows Begin in Paris and Milan

A Fashion Week Like No Other

This Fashion Week, face masks, face shields, and hand sanitizer are some of the most popular accessories. Over the next two weeks, luxury fashion brands including Louis Vuitton (LVMUY) and Dolce & Gabbana will host in-person fashion shows in Paris and Milan. Shows started on Monday in Paris and will begin today in Milan.

Organizing a fashion show during a pandemic is a difficult endeavor. Fashion houses are implementing temperature checks for models and guests, measuring air flow patterns in venues, and spacing attendees according to social distancing recommendations. Despite these complications, some brands feel that any type of in-person event will be more helpful for creating buzz than virtual events. Events were almost exclusively online during New York Fashion Week, and some brands were disappointed with fan engagement.

Difficulties for the Fashion Industry

The pandemic has battered the fashion industry. Luxury brands are dealing with unprecedented drops in sales as well as supply chain disruptions. These difficulties pushed some brands, like Brooks Brothers and Lord & Taylor, to file for bankruptcy.

In 2019, the global luxury fashion market was worth $334 billion. However, according to recent research from BCG, global luxury sales could drop by up to 45% this year. It is estimated that the industry will not see pre-pandemic levels of growth until 2023 or 2024.

Looking Ahead

Some analysts say that the fashion industry will never look the same as it once did after the pandemic subsides. Over the past year, ecommerce has become a much more important part of the industry. In 2019, only 12% of luxury sales happened through ecommerce. The in-store experience used to be an important part of luxury shopping, but now customers are much more concerned about safety and are turning to online platforms.

Amazon (AMZN) is working to carve out a space in the new world of fashion. Earlier this month the company launched a fashion marketplace called Luxury Stores. Farfetch, an online fashion retail platform, said it saw a 60% rise in traffic during its second quarter compared to a year earlier.

Leaders in the fashion world will be eager to see how the next two weeks of fashion shows in Paris and Milan unfold, and what that could mean for the future of the industry.

Microsoft Teams Creates Virtual Commute Feature

Microsoft Aims to Replicate Some Positive Aspects of Commutes

As some people look ahead at months of working from home, many are missing the comradery of the office and the ease of face-to-face discussions. One aspect of in-person work that many are probably not missing is commuting to and from the office.

However, Microsoft (MSFT) is creating an update to its Teams package which will replicate some of the positive aspects of commuting that are no longer a part of many people’s work days.

Creating Time to Reflect and Boundaries Between Life and Work

The new feature will allow users to schedule virtual commutes at the beginning and end of their days. Teams will prompt people to start the day by setting goals and reflecting on how they are feeling. At the end of the day, the platform will allow users the opportunity to think about what they accomplished. Users can also answer questions about how they are feeling and document if they are overwhelmed or frustrated. They will then be given the option to listen to a 10-minute Headspace meditation.

The virtual commute is also designed to help people create a distinct start and end to the work day. Microsoft reported that chat volume on Teams between 5 p.m. and midnight has gone up by 48% over the past six months, showing that when people do not physically leave the office, they can feel more pressure to do work throughout the evening.

Microsoft’s Goals

The development of this virtual commute feature is part of Microsoft’s larger goal of providing services—not only for employee connectivity and productivity, but for employee wellness. Companies are realizing the importance of caring for their employees’ mental health during this time of remote work, and Microsoft wants to give them tools to do this.

As Kamal Janardhan, General Manager for Workplace Analytics at Microsoft 365 explained, “I think we at Microsoft have a role, almost a responsibility, to give enterprises the capabilities to create these better daily structures and help people be their best."

Not-So-Breaking News

  • LVMH Moet Hennessy Louis Vuitton SE (LVMHF) sued Tiffany & Co (TIF) after a $16 billion merger between the two companies unraveled. LVMH first backed out of the deal and Tiffany’s sued the French luxury brands conglomerate. Now, LVMH is counter suing, saying that it has the right to walk away from the deal because Tiffany’s has been mismanaged and that disruptions in the jewelry industry related to the pandemic will cause problems for the company for years to come.
  • NTT Docomo Inc., the top cell phone provider in Japan, plans to return 100% control to its parent company, Nippon Telegraph and Telephone Corp., for roughly $40 billion. The parent company already owns 66% of the cell phone provider, but feels that minority shareholders have gotten in the way of its decision-making.
  • Yesterday, Amazon (AMZN) showcased a new biometric technology called Amazon One, which allows people to check out of stores by simply waving their hands in front of scanners. First time users register by scanning their palms and inserting their payment card at a terminal. After that, they can pay for merchandise with a wave of their hand. Amazon plans to use the technology at its own stores and to sell it to other retailers.
  • Disney+ (DIS) launched a co-watching feature yesterday, which allows subscribers to view movies at the same time. Each person watching can press pause, play, rewind, or fast forward for the whole group. Netflix (NFLX), Amazon (AMZN), and other streaming services have developed similar features to help people feel connected during the pandemic.
  • Nokia (NOK), a Finnish company, signed a 5G equipment deal with BT (BTGOF), one of Britain’s largest telecom groups. The news comes after Britain announced that it would not allow Huawei equipment to be part of its 5G network in July.
  • When it comes to creating or improving upon a budget for yourself, your family, and your household, the last thing you want to do is keep it all in your head. Visit SoFi Learn for 9 steps to better budgeting.

Financial Planner Tip of the Day

If you’re looking for tips on how to reduce your grocery bill, making a budget is a good place to start, so you can understand how much money you are currently spending and where you can cut back. If you’re spending hundreds of dollars a month on take out dinners and artisanal coffee, it might be time to evaluate your purchases and limit the money you spend on those items.

Brian Walsh, CFP® at SoFi

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