Pod Insights Equity Podcast Equity Monday: Elon Musk reinvents corporate governance About this episode This is Equity Monday, our weekly kickoff that tracks the latest private market news, talks about the coming week, digs into some recent funding rounds and mulls over a larger theme or narrative from the private markets. You can follow the show on Twitter here. I also tweet.
The stock market wasn't incredibly dramatic this morning, from an index-viewpoint. Crytpos were slightly more exciting but only moderately. A host of earnings results this week should provide us with fireworks, however.
And on the subject of crypto regulation, news from Congress isn't great for fans of coins and chains. And the rising popularity of NFT games could put consumers in bad tax territory.
The SoftBank Vision Fund 1 posted poor results, harming SoftBank's earnings, and leading to the company promising a huge share buyback.
And Elon Musk made news not only for tweeting some sort of dick joke at an American Senator, but also for polling Twitter regarding whether or not he should sell 10% worth of Tesla shares. That's one way to do corporate governance, I suppose.
Matter Labs raised $50 million, while H2O.ai raised $100 million.
And weekend chat concerning this piece detailing Google's history with AMP underscores just how much trust is being lost between major American tech companies and their communities.
We are back Wednesday! Hugs!
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products.
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Transcript 0:11 Speaker 00 Good morning, everybody. This is Alex. This is Equity Monday, your weekly kickoff that also dives into the numbers and nuance behind the headlines. It's November 8th and just as a little data point, I am slightly under the weather. So if I sound a little bit less stoked than usual, well, it's not because I'm not hyped about what's coming up. It's that I feel a little bit snively. So that's why. Anyways, the good news is there is plenty of technology news to get hype about. But first, some market updates. Asian stocks and European stocks mixed this morning. Not quite a lot of news out of there. And of course, the American exchange, as I talk to you, is not yet open, but things also look pretty tame here. So looking to cryptos, then, anything fun to see? Well, Bitcoin and Ethereum are up. Other cryptos are down a little bit, but just not the volatility we tend to see on a Monday morning. Sorry to be so boring.
0:55 Speaker 00 The good news is, looking forward, there is quite a lot that could spike some numbers up and down. We should see this week earnings from PayPal, DoorDash, Unity, Toast, Affirm, Roblox, and others. If my notes are holding up, of course. That's a lot of data about tech performance in a host of areas, including fintech, delivery, gaming, food tech, BNPL, etc. Those results will, of course, drive volatility on their own as we learn how companies performed in Q3. And with that, let's talk some big news.
1:24 Speaker 00 All right. In big tech news today, we're going to kick off with some notes about crypto. Now, on Friday, a bill made its way through the American Congress that included a number of provisions that are making the domestic crypto market nervous. And reading coverage this morning, I would say that there's general concern that the American government could put undue legal reporting requirements onto domestic crypto participants, both consumers and miners and so forth. There's tax issues, there's reporting issues, there's quite a lot of questions. Now, precisely how the Treasury Department intends to interpret this law is not clear at this point, but crypto participants here in America are not happy about what's going on and the direction that things are moving. Now, at the same time, there are other tax issues with crypto that are worth considering. And as I said from the weekend, from Protocol, it knows that NFT gaming, something that has truly exploded in popularity in the last couple of months and quarters.
2:10 Speaker 00 Creates a blizzard of taxable events for individual consumers, AKA players. And I don't think that people are ready to report those properly. There is some software out there that does allow you to track crypto transactions and do your taxes reasonably. But as Protocol points out, some of these NFT games don't actually pluck into those systems well. And so even if you wanted to use software to better understand your crypto tax liability, in some cases, you kind of can't. And that's not great for consumers because these games are aimed at the folks, you know? I don't think everyone playing Axie Infinity is a hedge fund. I hope not, at least. That would be kind of ridiculous use of hedge fund time. But I mean, these regular folks are going to have some issues that are coming up. And I don't think we're ready to support them to prevent them from getting in trouble with the government. Not very good. Next up, we have news from SoftBank.
2:53 Speaker 00 SoftBank, of course, the Japanese telco and conglomerate and investing powerhouse that has put together not just one Vision Fund, but two. However, in this case, it is the Vision Fund One that is making headlines because of the decline in value of some of its most lucrative investments, which dragged down SoftBank's aggregate performance in its most recent set of numbers. What are we talking about here? Well, you've heard of Coupon and you've heard of Didi. Coupon, of course, is the South Korean e-commerce company. And Didi, of course, is the Chinese ride-hailing giant. And they both have seen their values decline, which has generated quite a sticky situation for the SoftBank company. I believe that Masayoshi Son said that they're in a blizzard these days, which is not good. He loves an analogy and I love his analogies. Blizzard, a little pedestrian for SoftBank, but we'll take it.
3:35 Speaker 00 Now, looking at the overall results, and I'm going to just share this in yen, okay? Because it just makes more sense that way. But essentially, the SoftBank Vision Fund One recorded an unrealized loss on valuation that was on a net basis worth 1.4 trillion yen. And this was due to basically 1.9 trillion yen in declines from 13 recorded portfolio companies. And inside of that, there was 1.2 trillion yen worth of losses regarding Coupon and 321 billion yen worth of losses from Didi. Now, there were some positive gains on investments as well. And so that means that the number kind of shook out to 1.4 trillion yen in losses. Okay, why does that matter? Well, it's kind of interesting, frankly, because we've seen regulations in China shake things up.
4:17 Speaker 00 And we've seen Didi go public in the US and we've seen lots of things go on. But what has happened is this. Investors in the Middle East. Gave a Japanese telecom conglomerate and investing company lots of money for the Vision Fund One, which was then invested into a Chinese company called Didi, which then absorbed a big chunk of an American company called Uber that SoftBank also invested in. And then Didi went public in the US, raising money from other investors in the United States. And then the Chinese government introduced new regulations, cracked down on Didi, and it has since kind of torpedoed its value. Now, this works backwards now through the chain, because the value of Didi's stock went down, devaluing the company rather sharply. And that means that SoftBank took a big loss, which means that the value of its Vision Fund returns has gone down, which means that lots of folks in the Middle East lost money.
5:01 Speaker 00 So essentially, because Didi went public and got the ire, if you will, of the Chinese Communist Party, some folks in the Middle East now have less money. And because SoftBank had poor results, it's going to do a massive share buyback. So that is the global economy in a nutshell. It's a little bit tricky, but in essence, after a couple of better quarters, the Vision Fund One is back in the penalty box for poor results. All right. And then finally, Elon Musk, he made news over the weekend, as always, it appears, not only for tweeting this weekend an infantile joke at a sitting US senator. That happened. I had to go check that those tweets were real. They were. All right. Fair enough. But also for polling his Twitter audience about whether he should sell a big chunk of Tesla stock. This would generate a taxable event, and that was kind of the context of the note. Now, naturally, if Elon just wanted to diversify his personal wealth and sell some Tesla stock,
5:46 Speaker 00 which is at or near all-time highs, and, I don't know, own some cash, sure, why not? Not a big deal. Everyone diversifies. But by making it into a Twitter poll, he attracted all sorts of commentary. I voted, even though I'm not an individual owner of Tesla stock, though I'm sure I own some of it in an index fund somewhere, but like, you know, I don't own Tesla, I'm not a shareholder, so I couldn't normally vote in what the company does. But because of Twitter and Elon being very much an online person like the rest of us, I got to weigh in. I voted yes. We'll see what happens. But not everyone was stoked about this. The Journal had an editorial out, kind of mocking Elon for his hijinks, but I don't think Elon cares.
6:22 Speaker 00 All right, let's talk about some startups. Ladies and gentlemen, we're going to kick off with a company that I've heard of, but never dug into, AKA Matter Labs. The company just raised a $50 million Series B for its Ethereum underpinned rollup product. In essence, the company is building a way to de-bloat the Ethereum blockchain by, quote, "offloading the hard work of processing transactions to efficient secondary chains that record data of transaction batches to the main Ethereum network." That's according to our own Lucas Mattney, who does a great job on the crypto beat and is also off this week. Lucas, have a lovely vacation. So why do all that work when there are chains on the market that have lower fees and faster confirmations already? Why do all this extra work to build, I don't know, infrastructure on top of Ethereum to make it work better? It feels like an exoskeleton around a cat. Well, essentially Ethereum is probably the leading blockchain in the world for developer
7:07 Speaker 00 activity, and therefore I would say security. And critically, maybe the word is meaningfulness? An NFT on the Ethereum blockchain is probably worth more than if it was, I don't know, on the Alex's super rad, awesome, totally neat blockchain. Because who cares about that one? Ethereum is more sense the truth, right? Now, I don't know if the word is cogency or relevancy or meaningfulness or whatever, but there's a certain resonance to building on Ethereum that seems to be rather popular. And so companies like Matter Labs are going to try to make that overall ecosystem work better and presumably make lots of money in the process. In this case, A16Z Crypto led the Series B just a couple of months after Union Square Ventures, or USV, put a Series A into the company. So it's a very 2021 round. It's an esoteric crypto product that raised a zillion dollars in rapid fire fashion from some of the best investors known, at least here in America.
7:52 Speaker 00 Whew, a lot of work ahead of this company. Let's see how fast it can monetize all those words. And elsewhere in startup land, H2O.ai has raised a Series E worth $100 million. That values the unicorn at 1.7 billion. Not bad. That's not much dilution for nine figures worth of capital. Anyways, what does H2O.ai do? Well, according to our own Ingrid London, it has, quote, "developed an open source framework as well as proprietary apps that make it easier for any kind of enterprise to build and operate artificial intelligence-based services." Aha! So essentially, it's making it easier for companies to build and deploy complex machine learning work, which, as it turns out, is big business. Not every company is going to be able to attract the sort of talent they would need to build from scratch, let alone have the confidence to take that on.
8:34 Speaker 00 So companies like H2O could, I don't know, mature into providing a faster on-ramp for many companies that want to get busy with AI and need some help. And, you know, probably wouldn't even jump in with a large budget because they just don't have the know-how. So I kind of dig it. Let's see how it monetizes.
8:52 Speaker 00 Closing out this morning, we are going to go up a couple of levels and talk about some major American tech companies. So kind of the opposite of startups, if you will. But what we're going to talk about does very much involve startups. So roll with me. Over the weekend, there was a conversation in tech circles concerning a piece written by Sarah Gooding on the WP Tavern site, WP Tavern is kind of a WordPress news service, if you will, discussing Google's AMP product and an antitrust suit against the company that has a number of allegations about AMP that are, oh, gosh, I don't know, terrifying? Might be the right word. In essence, Google points out that the complaint alleges that, quote, "Google throttles the load time of non-AMP ads by giving them artificial one-second delays in order to give Google AMP a nice comparative boost," end quote. That's from the complaint as quoted by Gooding. Now, there's a lot to this matter, but essentially,
9:34 Speaker 00 it all makes Google look like a huge company bending the market in its own favor so that it could reap unearned benefits at the cost of its competitors. Now, this, Gooding notes, undercuts publisher trust in Google, which maybe you might want to say was low to begin with, but it's another kind of obviation of the previously warmer relationship between the largest American tech companies and their communities. Just to throw some examples into the mix here, Apple has seen developer goodwill fall as it demands a 30% rake, if you will, or cut or vig of App Store revenues. Google has seen publisher trust decline, as we just mentioned. Facebook has been in hot water with advertisers and publishers and privacy advocates and governments around the world forever. And Amazon is in a different sort of trouble for allegedly copying marketplace partner products, perhaps even using data
10:18 Speaker 00 that it promised it wouldn't. We're seeing the vaunted values of big tech companies in America run up against their need for continued growth. It's kind of an uglier, more bare-knuckle chapter of tech and one, I think, that should create many places for startups to attack these huge companies as they are willing to trade trust for near-term EPS.
10:39 Speaker 00 All right, that is our show. Do not forget that Equity Pod has the world's coolest Twitter account. We tweet under the handle @equitypod. It's where we host our Twitter Spaces, post the occasional meme, the occasional extra episode. It is all good fun. Do that if you're cool. If you're not cool, you can follow me on Twitter. I tweet under the handle @Alex. And I'm back Wednesday with the show and then Friday with the show again. So we'll see you then. Hugs. Bye.
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