I like to try to keep these roundups informative without being overwhelming. And that naturally leads to some stories not getting covered. I want to give an honorable mention to the SEC’s proposed changes to regulations on Finders (individuals who help small businesses find investors). It’s an interesting development that I didn’t want to fall by the wayside.
Now, onto the full roundup!
The Business Buzz
Stimulus whiplash. Stocks tumbled this week after President Trump told his administration to cease discussions on a new stimulus package. Today, he seems to have reversed course as we got the news that the White House is proposing a $1.8 trillion stimulus package. The offer is being taken to Democrats — House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin were already set to continue discussions before the stimulus package was announced. The new package is less than the $2.2 trillion proposal Democrats most recently made. But it’s also a bit more than the White House’s previous proposal, so it looks like a step towards compromise.
Any stimulus package will still need to be approved by the Senate — which looks somewhat dubious since Senator Mitch McConnell has stated that he’s focused on the Supreme Court nomination right now. A delay in more federal aid could be disastrous for the American economy, according to Federal Reserve Chairman Jerome Powell. At the annual meeting of the National Association for Business Economic, Powell stressed that the economy is far from recovered and will continue to need help in order to return to pre-pandemic strength.
The fiesta comes to an end. John McAfee was arrested in Spain this week and is facing extradition to the US. The charge? It’s two-fold. Back in June, McAfee was indicted by the DOJ on charges of tax evasion. Between 2014 and 2018, McAfee failed to file taxes — while making millions as he promoted cryptocurrencies and took speaking events. He faces years in jail and possibly more than $350,000 in penalties for the crime. But — double whammy — on Monday, the SEC hit him with a lawsuit. The SEC accuses McAfee of making more than $20 million off of tweets that promoted various cryptocurrency initial coin offerings. The issue is that he didn’t disclose that said tweets were paid promotions, instead presenting them as impartial investing advice. Considering that McAfee has been in the news for his failed presidential bids, fleeing Belize as a person of interest in a murder, and being detained in the Dominican Republic (guns were involved), a story about tax evasion seems almost tame in comparison.
The scrutiny of big tech continues. The US House Judiciary Committee released a massive report this week detailing its findings after a 16-month investigation into the business practices of Amazon, Apple, Google, and Facebook. The Committee concluded that all four of the big tech companies benefit from monopoly-level power in the market. It also made recommendations for how to fix the issue — including the presumption that a merger between dominant platforms is inherently anticompetitive and requiring that dominant platforms make their systems compatible with competitors.
Big tech did not take long to fire back. And unsurprisingly, all four companies disagreed with the findings (in varying degrees). Google emphasized the usefulness of its free products and implied that Congress could “harm” the products that millions of Americans use everyday. Facebook painted itself as an American success story, and thus a champion of market competition. Apple’s official statement declared that it doesn’t have a dominant market share in any of the sectors it participates in while also claiming that its App Store created an entirely new market for apps and developers. Lastly, Amazon tried to imply that to break it up would be to harm the many small and medium businesses that use its marketplace to reach consumers. Methinks they doth protest too much, perhaps?
The Private Market
The bitcoin bull marches on. Digital payments company Square Inc. announced that it made a $50 million investment into bitcoin this week. Square put in approximately 1% of its total assets (as of Q2 2020) and got more than 4,500 bitcoin at an average price of $10,600. That’s a pretty sizable investment, especially when you consider that Square is only the second publicly-traded US company to make a bitcoin investment — MicroStrategy was the first.
Square’s move into bitcoin probably shouldn’t be overly surprising. The company allowed merchants to accept bitcoin as payment back in 2014. And last year, it created an independent team called Square Crypto that has been focused on open-source advancements in cryptocurrency. And CEO Jack Dorsey has been supportive of bitcoin as the currency of the future for some time. However, crypto advocates may not be out of the uncertainty storm just yet. The Department of Justice just published a major document that outlines its concerns over the use of cryptocurrency to enable crimes and how it plans to combat these issues. As bitcoin continues to gain legitimacy, I’m sure regulators will continue to consider how they can bring security and limitations to the digital coin.
Meanwhile, across the pond… This week saw the merger of two major UK crowdfunding platforms — Crowdcube and Seedrs. The merger will result in a platform that’s worth more than $180 million in all. Jeff Kalisky of Seedrs will be the new company’s CEO while Crowdcube’s Darren Westlake will be an executive chairman. Westlake stated in an interview that the merger would allow the resultant platform to “attack the global market for equity crowdfunding” but wasn’t more specific than that. Whether that means American investors should be on the lookout for a new branch (or possibly acquisition?) or if the company intends to expand into more nascent markets abroad, time will tell.
A win for Yieldstreet. I’ve written a couple of times about alternative investment site Yieldstreet (exhibit a and exhibit b). This time, the news is a little different. Yieldstreet was awarded a major victory in the British High Court this week in a case that related to allegations of fraud with loans the site had issued. As a result, a Dubai-based ship recycling company must pay the platform nearly $77 million. Because Yieldstreet required personal guarantees from the company’s owners — Muhammad Tahir Lakhani and his sons, Muhammad Ali Lakhani and Muhammad Hasan Lakhani — the assets of all three Lakhanis have also been frozen. This victory also bears strongly on an American lawsuit that Yieldstreet is facing (see exhibits above) and may help to clear the platform’s record in time.
The Fun Stuff
The Legend of Stingy Jack. In keeping with the season, I’ve decided to bring you some thematic fun content this month. Today we’re looking at the origin of jack o’lanterns. An Irish legend attributes them to a story about a man named Jack, who managed to trick the Devil so badly that he wasn’t accepted into either Heaven or Hell. Instead, he was given a burning coal and set to wander the Earth. He put the coal into a carved-out turnip — the original jack o’lantern vegetable — and has been an undead specter ever since. Pumpkins became the vehicle of choice after immigrants brought the practice to America, where pumpkins are native. (I’m thankful for this development, since carving turnips sounds a lot more difficult to do) If you’re looking for some pumpkin-carving-inspiration this year, this article has some fun ones to get you started.