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TikTok’s Future, Analog Devices’ Merger and Facebook Ads

TikTok stares down the barrel of a U.S. ban, Analog Devices announces the largest merger of 2020 to date and Facebook mulls a political ad blackout.
iPhone with TikTok app displayed.
"Tiktok" by TheBetterDay is licensed under CC BY-ND 2.0
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July 13, 2020 – TikTok stares down the barrel of a U.S. ban, Analog Devices announces the largest merger of 2020 to date and Facebook mulls a political ad blackout.

Today’s word count: 1,318 words (9 minutes)

Navarro Says More U.S. Action on TikTok, WeChat to Be Expected

TikTok’s U.S. future may be in jeopardy. During an appearance on Fox News Sunday, White House advisor Peter Navarro said he expected President Trump to take “strong action” against TikTok and Tencent’s social network, WeChat. Navarro went on to say the administration is “just getting started” with both apps and did not rule out U.S. bans against them. He also said a sale to an American buyer would not quell TikTok’s problems.

Why It Matters

Because of its Chinese roots, TikTok has consistently faced scrutiny for its collection and use of data worldwide. U.S. Secretary of State Michael Pompeo had said the Trump Administration’s examination of the popular short-form video app was “part of a broader effort to protect American citizens’ private data.” State and Justice Department employees are already not allowed to download the app on government-issued devices. In the private sector, Wells Fargo asked employees to remove TikTok from their work phones due to security concerns, and Amazon reportedly did so as well before later saying the directive was an error.

The escalating situation highlights a tumultuous period for TikTok and its parent company ByteDance in the last month. The app was banned in India, along with 58 others, in response to a border skirmish with China. TikTok also pulled out of Hong Kong voluntarily in response to the new “draconian” national security law China passed for the territory.

With a potential U.S. ban looming, the app is mulling changes to its corporate structure and placing a global base outside of China. TikTok recently poached former Disney executive Kevin Mayer to be its CEO as part of an effort to distance itself from its Chinese roots. Though Navarro compared the move to that of Huawei Technologies, saying the hiring of an “American puppet” won’t work.

TikTok has repeatedly denied any data misuse or national security accusations.

Read More: (BLOOMBERG)

Analog Devices in Talks to Buy Maxim Integrated for About $20 Billion

Semiconductor giant Analog Devices is negotiating the purchase of rival Maxim Integrated for approximately $20 billion. If successful, it would be the largest merger deal this year. And while the all-stock deal could be finalized as early as Monday, negotiations could still fall through.

Why It Matters

The semiconductor industry is a particularly active one – companies are trying to expand their product portfolios continuously. Acquiring a significant player like Maxim would help Analog become a more “muscular competitor” to Texas Instruments, the leader in analog semiconductors. Analog also has the ancillary benefit of acquiring Maxim’s army of hardware engineers.

The potential deal is a promising sign for the merger market. Most firms had put plans on hold after the Covid-19 situation first escalated in March. But even though merger deal volume is down about 50 percent globally in 2020, it’s starting to percolate again. Last week alone, Uber, Allstate and Sunrun all announced acquisitions. Healthcare provider MultiPlan announced Sunday it was merging with a special purpose acquisition company. And the semiconductor market has never failed to be a reliable provider of deals.

Numbers to Consider

  • $70 Billion – The value of Maxim’s shareholder’s 30 percent of the combined company, should a deal come together (this also includes debt).
  • $17 Billion – Maxim’s current market value, compared to Analog’s $46 billion.
  • $119 Billion – Texas Instruments market value, the leader in this space before Analog’s potential deal.

Read More: (WALL STREET JOURNAL)

Facebook Mulls Political-Ad Blackout Ahead of U.S. Election

Facebook is weighing whether it should impose a ban on political ads leading up to the U.S. election in November, Bloomberg reports. Ad blackouts before elections are common around the world in places such as the U.K. and Australia.

Why It Matters

It’s a surprising above-face for Facebook but could be a step toward curbing misinformation. The tech giant has generally seen letting politicians use targeted ads as a benefit for society. The problem is Facebook has a hands-off policy when it comes to political ads – the company doesn’t fact-check them like normal ones – and that’s inherently problematic as it gives politicians cover to lie in hyper-targeted messages to voters essentially.

With Covid-19 health risks changing the landscape of the upcoming election – people are stuck at home — Facebook could be more important as a platform for politicians than ever. In 2016, President Trump’s Facebook ad strategy arguably helped him win the election. Bloomberg also reported that Russian operatives used Facebook to spread misleading and divisive ads and posts in 2016.

The potential move drew immediate criticism from Democratic party operatives, but spokespeople for the Biden and Trump campaigns, and the Republican National Committee, have yet to comment. Political advertising only comprises a fraction of Facebook’s quarterly revenue.

Numbers to Consider

  • $245.07 – Facebook’s share price before opening Monday, according to Yahoo Finance.
  • $29.2 Million – The amount Trump and Biden have spent on Facebook ads in the last 90 days.
  • $17 Billion – Facebook’s second-quarter revenue.

Read More: (BLOOMBERG)

A Quick Look

PepsiCo Sales Fall, Driven by Beverage Segment

  1. Despite outperforming analysts’ projections, PepsiCo took a hit in the second quarter. The beverage giant announced Monday Q2 sales had dropped 3.1 percent year-over-year to $15.95 billion. Though, it still came in better than analysts’ prediction of $15.37 billion.
  2. Within the company’s North American beverage division, PepsiCo’s most significant segment, revenue fell 6.6 percent to $4.97 billion.
  3. PepsiCo did see a bump in its Frito-Lay North America Division, maker of Doritos, Lays potato chips and other snacks. Sales rose 6.6 percent to $4.27 billion. Also, sales at Quaker Foods North America rose 23 percent to $664 million.
  4. But overall, Q2 net income dropped from $2.04 billion, or $1.44 a share, last year to $1.65 billion or $1.44 a share.

Read More: (WALL STREET JOURNAL)

Worth Your Time

It’s Time to Go: Maybe it’s time to cancel college football. With each passing day, the Covid-19 situation worsens in the U.S., and it’s only becoming more prevalent in the collegiate athletic ranks. Through Wednesday, 426 student-athletes had tested positive across around 50 programs. And while the NCAA has a tremendous financial incentive to play – college athletics is an $18 billion enterprise – it’s time to ask whether the college football season is worth the risk. (NEW YORK TIMES)

The Big Time: Google is betting on India. The tech giant announced a $10 billion investment for the India Digitization Fund, becoming “the most recent tech leader to make a big bet on the country that many see as the world’s last great untapped growth market.” Google plans to invest the money over the next five to seven, helping the country in four areas: affordable access, new products and services, assisting businesses to get online, and using technology to promote social issues. (WALL STREET JOURNAL)

With A Little Help from My Friends: Alibaba co-founder Jack Ma is cashing out. Over the past year, the former e-commerce executive has divested around $8.2 billion and continues to pull back from formal business to focus on philanthropy. Ma, along with Alibaba Executive Vice Chairman Joseph Tsai, has donated millions of personal protective equipment to hospitals worldwide to help fight the spread of Covid-19. (REUTERS)

Tidbits

Despite cutting its workforce nearly to the bone, 60 percent to be precise, WeWork told the Financial Times it expects to generate profits and positive cash flow by 2021, a year ahead of schedule.

Qualcomm has become the latest high-profile backer of Mukesh Ambani’s Reliance Jio Platforms with a $97 million investment.

A Couple Cents Content

Check out the highlights from last week and a roundup of institutional research. (POST)

After a long wait, Justin Oh offers his Peloton valuation model, a stock he says he’s “very bullish” on. (POST)

In case you missed it, check out the A Couple Cents live show from Thursday, covering where to park your money, the great financial divide, Peloton and career advice. (YOUTUBE)

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Thanks for reading!

— Justin Birnbaum

Image: “Tiktok” by TheBetterDay is licensed under CC BY-ND 2.0

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