June 12, 2020 – DoorDash secures funding, Comparing Covid to SARS and antitrust worries on Facebook’s acquisition of Giphy.
Today’s newsletter is 1,162 words, a 7-minute read. Let’s get to it:
DoorDash Nears Deal to Secure Funding from T. Rowe Price, Fidelity, Others
Well, I guess DoorDash couldn’t let Grubhub steal the show for too long. While the latter announced a $7.3 billion merger to join Just Eat Takeaway.com, DoorDash, the largest company in the U.S. food delivery space, is close to securing new funding that would value it at an astounding $15 billion. The plan is to sell hundreds of millions of dollars to T. Rowe Price Group, an existing backer, as well as Fidelity Investments and multiple others. The details of the deal are still being finalized, and it could fall through.
Why It Matters
Well, it’s Newton’s third law – for every action, there’s a reaction. After Grubhub announced a power move, it only made sense DoorDash had one in the works.
In the short term, the deal is a “common tactic,” according to The Wall Street Journal. Doordash is working toward an IPO, and raising money from big institutional investors is a way to increase the chances of a successful listing.
Though long term, the Covid-19 pandemic has created an unprecedented consumer dependence on food delivery companies, and industry experts predict there’s really only room for two major players in the space. Between Uber, DoorDash and the Grubhub/Just Eat Takeaway.com, somebody will eventually lose significant market share.
Numbers to Consider
- $13 Billion – DoorDash’s value in 2019, which was nearly ten times what it was a year before.
- Around 50 Percent – DoorDash controlled nearly half of the U.S. market in April.
- $7.3 Billion – The price of Grubhub’s valuation, less than half of DoorDash’s.
Differences Between New Coronavirus and SARS Show Why Quick Economic Recovery Is Unlikely
We’re all waiting to see what the path to economic recovery from Covid-19 will look like, and to make an educated guess, researchers examined the closest equivalent – Hong Kong in 2003 after SARS ripped through the country.
The timeline was similar – the outbreak began early in the year. But while the recovery from SARS proved to be quick – eight months later, Hong Kong was hosting a concert series featuring the Rolling Stones, Prince and Neil Young – Covid-19 is expected to be more of a gradual return to normal.
Why It Matters
The viruses come from the same family, but Covid-19 is more persistent and harder to detect. Even with parts of the country reopening, quelling the virus is not a likely short-term outcome. And with infections spanning the world, economies are less likely to recover “until their trading, travel and business partners have recovered.”
“I don’t think we will see a V-shaped recovery,” says Nicholas Kwan, research director at the Hong Kong Trade Development Council, according to The Wall Street Journal. To get back to pre-Covid levels will take “a year or two, or even longer,” he says.
There are similarities between the two viruses. But as we’ve already come to know, Covid-19 isn’t like anything ever seen before.
Numbers to Consider
- 8,098 – The number of people who became sick with SARS during the 2003 outbreak, according to the CDC.
- 7.4 million – The total confirmed cases of coronavirus around the world, according to The New York Times.
- $6 Billion – The airline industry loses in Asia as a result of SARS. By comparison, the global airline industry forecasts an $84 billion this year.
U.K. Competition Watchdog Launches Investigation Into Facebook’s $400M Acquisition of Giphy
In Facebook’s quest to become an all-encompassing social platform, the company agreed last month to purchase Giphy, a service allowing users to use short, looping videos to convey sentiments in online conversations, to integrate into Instagram.
However, the UK Competition and Markets and Authority may unravel the agreement. The country’s “antitrust watchdog” has launched an investigation into the deal, according to TechCrunch.com. The goal is to evaluate how and if the agreement would lessen competition in each company’s market.
Why It Matters
Giphy isn’t a moneymaker, the app has yet to produce any revenue. But GIFs are so ubiquitous on the web that there’s inherent value in controlling the medium. In the short-term, sponsored GIFs could be a way to drive revenue, but the long-term play is to increase engagement on Facebook and draw more ad money. GIFs are core to internet culture, and GIPHY controls the flow of a large chunk of that particular market, creating a new advantage for Facebook’s platform.
Facebook has been the target of antitrust investigations in the past. When the company acquired the WhatsApp messaging platform, the CMA looked into the matter. The deal ultimately went through, but “fines after the fact” may be a signal of “antitrust regret.”
Numbers to Consider
- $400 Million – The price Facebook agreed to pay to acquire Giphy.
- 50 Percent – The amount of Giphy’s traffic that came from its already existing integrations with Facebook and other company-owned properties Instagram, Messenger and WhatsApp.
- $19 Billion – What Facebook paid to acquire WhatsApp.
A Quick Look
U.K. Economy’s 20% Record Plunge Adds Pressure for More Stimulus (FULL STORY – BLOOMBERG)
- The U.K. economy shrank a record 20.4 percent in April as businesses and workers felt the effects of the Covid-19 lockdown. The contraction effectively wiped out 18 years of growth in two months.
- The OECD says the country could see one of the world’s worst recessions – output could slump more than 11 percent, the most in more than 300 years. The government has already doled out massive financial relief, paying the wages of 11 million people at 27 billion pounds ($34 billion).
Worth Your Time
Zoom Suspends Accounts in China: At the request of the Chinese government, Zoom shut down three accounts holding memorial services for victims of the Tiananmen Square protests in 1989. As Tech Crunch writes, it’s a sign of the company’s “potentially too-cozy” relationship with the Chinese government and makes for an interesting case study of Zoom’s policies going forward. (LINK – TECH CRUNCH)
Fire Ravages the Twin Cities: In the wake of protests spurred by the killing of George Floyd, widespread arson has arisen in the Minneapolis/St. Paul area. The chaos threatens to complicate the Twin Cities’ recovery. (LINK – WALL STREET JOURNAL)
Some Immune Systems are Primed to Fight Covid-19: Some, who have encountered a version of the pathogen, appear to be able to generate a partial immune response. Understanding those samples could aid researchers in the hunt for an effective vaccine. (LINK – WALL STREET JOURNAL)
What We’re Writing About
I took a quick look at Grubhub’s merger with Just Eat Takeaway.com.
Read the second part of Justin Oh’s guide to investing in real estate – how to analyze potential investments.
A Couple Cents on Social
Watch Justin Oh explain how to buy Nikola stock at half price and discuss an arbitrage opportunity. (YOUTUBE)
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See you Monday!
— Justin Birnbaum