Welcome to another news roundup! This will be the last one of 2020, but cheer up! I’ll be publishing a special edition News from the Future piece the week of New Year’s Day — so you won’t be rid of me that easily. That piece will look at some current trends in the startup investing and consider what 2021 might hold for the space.
But until then, I hope you all enjoy this final 2020 roundup. Stay warm and safe — I’ll meet you in the new year!
The Business Buzz
The growing emphasis on privacy. This week the Federal Trade Commission (FTC) ordered some major tech companies to share information on their data collection practices. The FTC wants to know not just how the companies collect data on their users, but also details on how they use it — including things like how companies decide what ads users see, how they measure and encourage user engagement, and how specific practices might affect teens and children. The companies include Amazon, Facebook, YouTube, and Twitter, among others. There’s no litigation or legal action at risk — yet. The FTC is allowed to gather information like this as part of broad studies that are separate from legal investigations. However, the findings of the study can be used after the fact to inform legal decisions.
There’s an interesting argument to be made that privacy is going to become a major area of differentiation for tech companies in the next few years. There’s no denying that many people don’t trust major companies with their personal data — so finding ways to reassure users while still benefiting from data analytics is a tricky balancing act for companies. Businesses that figure out how to innovate on that concern could end up being the major winners.
Robinhood’s “good guy” image is under fire. This was a rough week for stock trading app Robinhood. On Wednesday, Massachusetts hit the company with a complaint that accused it of manipulating inexperienced investors through aggressive marketing and gamification. In particular, Massachusetts regulators allege that the app encourages users to make repeated trades throughout the day, regardless of their level of experience. The more trades made on the app the more money Robinhood receives, since payments from order flow are a major source of revenue for the company. Massachusetts says the company prioritized revenue over investors and thus violated state laws. The complaint also estimates that as of December there were nearly 500,000 Massachusetts-based Robinhood users with accounts totaling more than $1.5 billion.
And as if that weren’t enough, the SEC on Thursday charged Robinhood with deceiving customers and not delivering on promises of optimal trades. This looks to be the result of the SEC investigation I wrote about in September — but the final fine is much higher than the possible $10 million initially estimated. Instead, Robinhood agreed to pay $65 million in a civil penalty — meaning that the company doesn’t confirm or deny the SEC’s charges. The most that it has said is that the practices cited by the SEC “do not reflect Robinhood today.”
The Private Market
Cryptocurrency meets litigation funding. Crowdfunding platform Republic certainly seems to be shooting for the “one-stop shop” moniker in the crowdfunding space. The platform covers real estate, (some) crypto, video games, and startups already — and now it’s planning to add yet another vertical. In partnership with Ava Labs (maker of the Avalanche blockchain platform) and Roche Cyrulnik Freedman, LLP, Republic Advisory Services — which handles a lot of the crypto matters at the platform — is going to offer initial litigation offerings (ILOs) to everyday investors. Basically, when people don’t individually have the funds to pursue a civil claim of some kind, they can choose to create a litigation fund. Investors can contribute money to the fund and share in the gains of a successful claim — there is no reward for a case that’s lost. And ILOs specifically are when those funds are raised through digital tokens.
It looks like the first ILO will take place sometime in Q1 2021, though an exact date hasn’t been given. Meanwhile, Republic also debuted an app this week. It’s currently only available on the App Store, but hopefully there will be an Android equivalent for the plebs like me soon.
How high can you go? Bitcoin has officially hit a new all-time high this week after breaking past $20,000. Much of the cryptocurrency’s recent rally has been attributed to major institutional investors getting involved. CNBC reported that investors with young investor accounts (less than a year old) that have bought at least 1,000 bitcoin have “bought half a million bitcoins, or $11.5 billion worth, in the past three months.” And in that same timeframe, bitcoin’s price has more than doubled. But some people think this is only the beginning of the coin’s growth. Guggenheim Investment CIO Scott Minerd said that bitcoin should be worth $400,000 due its inherent scarcity and value compared to gold. By the way, Guggenheim Investments is one of those institutional investors I was just talking about. It’s filed paperwork to put 10% of its Macro Opportunities Fund — worth more than $5 billion — into bitcoin.
Meanwhile, in related — but not causal — news, Coinbase has confidentially filed for IPO. Coinbase is a major US digital currency exchange. Its most recent private valuation was for $8 billion, and it is expected to hit the public markets in early 2021.
The Fun Stuff
It’s the time for year-in-review content, so here’s my suggestion. Science magazine Nature has released its collection of the best science images from 2020. From transparent squid to a lightning strike mid-volcano eruption, there’s a lot to be amazed at in this list. Of course, COVID-19 makes an appearance (literally). But there’s plenty of other great pictures to take your mind off the ongoing pandemic — and maybe inspire a little science reading to boot.