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Morning Cents: July 2, 2020

Apple CEO Tim Cook in a meeting with President Donald Trump
"Donald Trump tiene una reuniĂłn con Tim Cook para hablar de los planes de Apple" by iphonedigital is licensed under CC BY-SA 2.0
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July 2, 2020 – Tech CEOs agree to testify, Zoom misses its transparency deadline and private equity firms sweat out their misuse of PPP funds.

Today’s newsletter 1,297 words, an 8-minute read. Let’s get to it:

Major Technology Company CEOs to Testify Before Congress

Chief executives from Amazon, Apple, Facebook and Google will all testify before the House Judiciary Committee this month as it continues to investigate these tech giants’ collective power over the digital marketplace. Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg and Google CEO Sundar Pichai have appeared before Congress in the past, but this would be a first for Amazon CEO Jeff Bezos (though he’s previously committed and bailed on doing so).

Why It Matters

Big technology has been the subject of a constant stream of antitrust scrutiny in the last few years. The bipartisan House investigation is “looking at whether U.S. antitrust laws need to be updated to curb what some lawmakers perceive as excessive power wielded by tech giants over markets such as online advertising, online retail and smartphone apps,” according to The Wall Street Journal.

The committee has gathered information about large tech companies for the past year and called for and received “reams of documents” from the CEOs and other top executives of the firms. Its been pushing further, seeking guarantees for public testimony from the firms’ high-ranking employees.

Congress isn’t likely to pass a law on the matter this year. Still, lawmakers are working on a report that could recommend policy changes to address the perceived lack of competition or monopolistic behavior in technology markets. This could directly influence ongoing antitrust inquiries into these firms by the Justice Department, FTC and state attorneys general. Google appears to be the one in the hottest water – The Wall Street Journal previously reported the government may bring an antitrust against the tech company.

Numbers to Consider

  • 4.63 Trillion â€“ The combined market cap of Amazon, Facebook, Google and Apple, according to Google Stocks.

Read More: (WALL STREET JOURNAL)

Zoom Misses Its Own Deadline to Publish Its First Transparency Report

It’s hard to get a feel for Zoom. After promising to deliver its first transparency report, the video conferencing giant has bumped the deadline again. The outside world will have to wait to learn how many government demands for user data Zoom has received until “later this year,” according to a blog post from the company.

Why It Matters

A massive amount of people has turned to Zoom in the wake of the coronavirus pandemic. According to The Verge, the company’s daily meeting participants grew from 10 million to over 300 million from December to April. But Zoom’s substantial spike in users has drawn attention to several security issues and privacy concerns.

“Zoom said last month it would launch its first transparency report after the company admitted it briefly suspended the Zoom accounts of two U.S.-based accounts and one Hong Kong activist at the request of the Chinese government. The users, who were not based in China, held a Zoom call commemorating the anniversary of the Tiananmen Square massacre, an event that’s cloaked in secrecy and censorship in mainland China,” Tech Crunch writes.

Transparency reports aren’t mandatory, but the rare insight into the requests or demands for user data a company gets can paint a picture of the scale and scope of government surveillance. Zoom plans to deliver its report sometime this year, but in the interim announced a reversal on its policy of dealing with China, saying, “it would change its policies to disallow requests from the Chinese government to impact users outside of mainland China,” according to Tech Crunch.

Numbers to Consider

  • $328.2 Million â€“ Zoom’s first-quarter total revenue, up 169 percent year-over-year.
  • 265,400 â€“ The number of customers with more than 10 employees, a 354 percent improvement year-over-year.
  • 300 Million â€“ The reported number of daily meeting participants on Zoom, a substantial rise from 10 million in December.

Read More: (TECH CRUNCH)

Private Equity on Edge With U.S. Plan to Name Relief Recipients

Dozens of private equity firms navigated around government restrictions and received funds from the U.S. Paycheck Protection Program, a relief program aimed at helping small businesses survive the coronavirus pandemic. Organizations adjusted governance or ownership arrange ownership arrangements with portfolio companies in entertainment, fitness, sports and dermatology to circumvent the rules. “What’s more, some portfolio companies also benefited from indirect taxpayer support after helping scores of related businesses apply for PPP loans, keeping revenue flowing,” Bloomberg writes.

Why It Matters

Bloomberg didn’t report any legal action in the works, but some of these firms face the prospect of severe public scrutiny, as they should. Under no circumstances should federal relief funds back private equity. The Trump administration now faces pressure from lawmakers to name the borrowers who drew “potentially forgivable loans from taxpayers.”

And as bad as this sounds, the blame doesn’t fall solely on private equity firms and their portfolio companies. “Congress and the SBA intentionally stopped short of outright banning relief to companies backed by private equity investors,” Bloomberg writes. This created a gray area in determining whether a private equity firm controls a company, and naturally, workarounds arose.

It’s unclear how many private equity firms may soon be outed and what further action will be taken.

Numbers to Consider

  • $669 Billion â€“ The funds distributed in small business relief by way of the Paycheck Protection Program.
  • $38 Billion â€“ The value of the loans returned or otherwise canceled across the entire PPP program.

Read More: (BLOOMBERG)

A Quick Look

U.S. Daily Coronavirus-Case Count Crosses 50,000

  1. The U.S. passed a grim milestone Wednesday, notching more than 50,000 cases in a single day for the first time. As the number of patents surges, some states and businesses have reversed course on reopening.
  2. According to Johns Hopkins University, the U.S. accounts for roughly 25 percent of the nearly 11 million coronavirus cases worldwide. The U.S. death toll has climbed above 128,000.
  3. Texas was averaging around 1,100 and 1,800 new coronavirus patients per day for most of April and May. The state broke 2,000 in early June and, this week, reported 6,533 Covid-19 patients were in hospitals.

Source: (WALL STREET JOURNAL)

Worth Your Time

Race Against Time: As the race for a coronavirus vaccine progresses, The Wall Street Journal highlights Moderna and its CEO StĂ©phane Bancel. Moderna is one of three companies selected for a U.S. government-funded vaccine study this summer, representing one of the best shots the country has at quelling the pandemic. But can a company with no commercially available products and experimental technology really be the answer to the world’s biggest problem right now? And how does the drug maker’s $24 billion valuation fit in as well? (WALL STREET JOURNAL)

Trust Issues: Speaking of antitrust concerns, U.K. regulators are taking a hard look at Google’s exclusive deal with Apple. The agreement makes Google the default search option for Apple’s Safari web browser. But a report from the U.K. Competition and Markets Authority calls out the pact for creating “a significant barrier to entry and expansion” for Google’s rivals in the search engine space, such as DuckDuckGo and Bing. (THE INFORMATION)

What’s the Difference: What’s the point of switching to streaming TV services if they’re just going to carry the same hefty prices and unused channel selections as cable? It’s a question anyone who “cut the cord” has to ask themselves with YouTube TV and FuboTV institute price hikes. As TV-over-internet bundles become more comprehensive, they’re starting to lose what made them so attractive: minimalism and simplicity. (WALL STREET JOURNAL)

A Couple Cents Content

I took a look at the positives and negatives of Lululemon’s acquisition of Mirror. (POST)

From Monday night’s live show, you can check out Justin Oh’s thoughts on Alibaba/Tencent/Amazon (YOUTUBE), how institutional money invest their money (YOUTUBE) and a market update (YOUTUBE).

Also, I now have a dedicated twitter for investing, finance and all things A Couple Cents. Follow me! (TWITTER)

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See you tomorrow!

— Justin Birnbaum

Image: “Donald Trump tiene una reuniĂłn con Tim Cook para hablar de los planes de Apple” by iphonedigital is licensed under CC BY-SA 2.0

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