Tesla took a knock this week, with drops in stock and bond prices. The company’s bonds were downgraded on Tuesday to B3 (very high credit risk) and it’s been put on negative watch by Moody’s.
It’s pretty unusual for a company with junk-rated debt to have a market cap of $50bn. But this is a company which, while it’s managed to send a car on an orbit around mars, is facing some struggles. The credit rating agency justified its move with the electric car firm’s failure to meet production expectations (2,500 cars per week), and the fact it’s burning through cash and might soon have to raise over $2bn.
Is Tesla long for this earth? Bill Blain of Mint Capital partners (who does a fantastic market roundup each morning, if you’re interested), also points out that Tesla has taken numerous customer deposits for cars it hasn’t yet built, is worth a multiple of traditional car firms that are selling millions of vehicles, and hasn’t yet turned a profit and so hasn’t been taxed. He asks what will happen when the traditional carmakers go electric (Volvo is from next year). Will Tesla manage to stay ahead?
The rise of the giant digital challenger bank. This week, Citigroup announced that it’s laying the groundwork to roll out a national digital bank across the US. The American heavyweight is developing a network of mobile banking tools that’ll bring retail banking services to any American household. The chief executive said that he’d be disappointed if the launch was more than three years away. It’ll be interesting to see which institutions follow suit – leveraging their size to reach customers that no longer need a branch.
Meanwhile, JP Morgan has brought Amazon’s Alexa onto its trading floors. The idea is to provide clients with an easy route to access research and get queries answered. And the bank and tech firm are currently testing other features, such as giving prices for bonds or swaps, Bloomberg reports.
In other partnership news, Vanguard, the world’s second-largest asset manager, has teamed up with Berlin-based fintech company Raisin to help boost its ETF sales to German retail investors. Raisin’s focus to date has been on providing savings products to its 100,000 customers. Now, it’s added ETF portfolios. This ties in with Raisin’s partnership model, and also how retail banking in Germany looks on the ground: branches offering customers investment products and asset management services. The difference is that this is all online.
The $1.7bn crypto sale. The numbers are getting even bigger in ICO land. Telegram, the encrypted messaging service which offers secure and instant communication via the blockchain and already has over 200m users worldwide, smashed the ICO world record last month when it raised $850m. This month, it’s raising the same again! According to Bloomberg’s sources, investors are putting in sufficient orders for tokens this month, even though their prices are over three times last month’s level. It feels like you can start guessing what some of the major winners of internet 3.0 will look like.
Back in the land of current web winners, Twitter has joined Facebook and Google in banning crypto ads. Sensibly, the company doesn’t want to give publicity to projects that are fraudulent or will likely result in huge losses for investors. The irony is that, of the hundreds of decentralised apps raising funds via ICOs, a handful may well be the successes of the decentralised web. In that world, there would be no Twitter middlemen to remove or block ads. Social networks would be unpoliced, but would likely self-regulate, because they would enforce greater transparency.
CAUGHT OUR EYE
UK challenger bank OakNorth is heading to China. Less than three years old, the bank has already turned a profit (unlike most of its competitors) and, with a valuation of over £1bn, has reached unicorn status. Chief executive Rishi Khosla says that expanding from the UK into China isn’t a question of “if” but “when”, and that the bank is already having conversations across multiple countries.
The vatican is hosting a hackathon. The Atlantic has published a piece on the subject: blessed by the pope and backed by Silicon Valley (in the form of Google and Microsoft), the hackathon will see 120 students from around the world work on new ways of solving issues that bother the pontiff, like social inclusion, the treatment of migrants and refugees and interfaith dialogue. The Atlantic reckons the event will help both organisers with their image problem.
You do get some weird hackathons. At the end of last year, Goldsmiths, University of London, held one for sex toy invention and improvement.
PS I started reading something the other day about Cambodia and fintech, which lead me to this piece – a Q&A with two fintech entrepreneurs launching a financial services app for Cambodians. The article is from last year and it looks like Clik still hasn’t launched, but if you’re interested in under-the-radar countries with huge addressable markets, it’s worth a read.