Volume 12 | March 7, 2019

💸 Weekly Business News 💸

Welcome to ISOC's weekly newsletter! Hi everyone, it's Shawn. Here, we break down and analyze key current events in the markets, recent deals, and industry trends to help Wellesley College students better understand what's going on in the business world. Have any questions or comments? ISOC loves feedback! Let me know what you think or drop me a message at either isoc-eboard@wellesley.edu or eluo@wellesley.edu . Received this from a friend? Take a look at our previous editions , and join the conversation here .

First off... Upcoming Events 📅 Goldman Sachs On-Campus Info Sessions Friday 3/15, 9:30am- 1:30pm @ Location TBD Goldman Sachs invites students to attend an informative presentation providing an overview of Goldman Sachs, our culture and career opportunities for our 2020 Summer Opportunities. The session will be followed by Coffee Chats. These informal conversations with a Goldman Sachs professional are an opportunity for you to build your network and learn more about the firm. Register on Handshake for the info session and coffee chats , and don't forget to bring printed copies of your resume to the event!

Coffee and Cookies with MUFG - An Introduction to the World of Banking and Finance Thursday 3/14, 4:30 - 6:00pm @ Lulu 212 Are you interested in a career in finance or investment banking? Come and warm up over coffee and cookies and meet senior leaders from MUFG , one of the largest financial groups in the world. MUFG operates a global network spanning over 50 countries and regions. Founded in Japan over 300 years ago, MUFG is now the largest foreign bank operating in North America. RSVP on Handshake before the event.

ISOC x CFA Society Boston Trek Friday 4/12, 8:30 am - 5:00pm @ Boston ISOC has arranged for 4 Companies in the CFA Society ( State Street Global Advisors , Eaton Vance , Loomis Sayles , Massachusetts Pensions Reserves Investment Management Board ) to host interested Wellesley students in their Boston Offices on Friday, April 12th. The events includes panels and networking sessions. Wellesley alumnae will be present. The approximate time commitment is 8:30 am to 5:00 pm on April 12th. ISOC will cover transportation costs. All class years are welcome to apply. Apply with a ONE-PAGE resume on Handshake before EOD March 16.

Fidelity Investments Boundless Bootcamp for Young Women Wednesday 3/20, 4:30 - 7pm @ Fidelity Boston HQ Boundless, a discovery program for young women, allows you to explore your opportunities at Fidelity Investments. Themed “Bound to be an Intern,” the Boundless Bootcamp will feature a discussion about crushing it during your internship, a career panel discussion with Fidelity women, LinkedIn headshots to enhance your profile, a networking reception and swag bag. More info on Handshake .

In the news 📢

Markets After two months of US stock rallies, all three major indexes posted a 3-day losing streak. Investors take a breather from gains as they await a trade decision. What: Over the weekend, news outlets reported that the U.S. and China were in the "final stages" of trade talks. U.S. Secretary of State Mike Pompeo also said Monday he thought Washington and Beijing were "on the cusp" of reaching a deal. Background: Stocks have been hot in 2019, with the S&P rising 11% since the end of 2018. However, this rally has coincided with downward growth in the economy during the past earnings season, suggesting increasing expectations of a successful trade deal have definitely helped equities surge. Anticipated investor reaction: There is growing fear that an agreement may be fully priced in as talks have spanned over a year, possibly limiting any more gains from positive trade news. With the fundamental mismatch between stock prices and the economy, if the deal doesn't play out to investors' assumptions, we could be due for a sharp fall in stocks. What's next? It will be interesting to see how the Huawei lawsuit (which we cover in the tech section below!) will affect trade negotiations. BEFORE YOU KEEP READING: I always find it tricky to write our Markets section-- please help me fill out this 30-second anonymous Google survey so I know what you are interested in learning about! Form HERE.

M&A Deals Gap announced a demerger this week: the firm will be spinning off Old Navy into a separate public company after a dismal year for retail. Gap will also close 230 stores over the next two years. Details: Old Navy will make up the entirety of the new firm while original company will contain Gap’s namesake label, Banana Republic, Athleta, Intermix and its new Hill City brand. Gap is aiming to complete the transaction in 2020, and the two companies will end up similar in size. How is Old Navy different from Gap? Old Navy was founded by Gap as a less expensive version of itself and has become the strongest brand in the company, bringing in $8 million last year compared to a combined $9 million from all other Gap brands. Deal rationale: As Gap executives explained, "Old Navy’s value-creation levers, business model and customers have increasingly diverged from [the other] specialty brands... the best way for each company to grow and meet the evolving needs of our customers is to allow them to pursue tailored strategies separately.” So what exactly is a spinoff? In a spin-off, the parent company distributes shares of the subsidiary that is being spun-off to its existing shareholders on a pro rate basis as a special dividend. Existing shareholders benefit by now holding shares of two separate companies after the spin-off instead of one. The spin-off is a distinct entity from the parent company and has its own management. Learn about other types of demergers here.

Venture Capital Motif Ingredients, a plant-based food ingredient startup, raised $90 million in Series A funding. The round was the largest amount to date by a foodtech company. What does Motif do? Boston-based Motif will work to identify ingredients, including vitamins and proteins found in foods like milk or meat, and will then produce them with engineered yeasts and bacteria. By focusing on the micro-level of plant-based foods, Motif can allow potential customers (vegetarian food companies) to focus their investments/time on creating food instead of proteins. Why does this matter? Says Motif executive, “There are going to 10 billion people on the planet. We just need a lot more protein than we have right now, period, from just a global nutrition standpoint... [and millennials] want to eat more plant-based stuff in [their] diet, want to be more nutritious, want to have less of an impact on the planet and the foods [they] choose." Chinese shared housing startup Danke Apartment closed a $500 million Series C funding round, valuing the firm at over $2.5 billion. The round was led by returning investor Tiger Global Management and newcomer Ant Financial. What does Danke do? Beijing-based Danke (whose name translates to "eggshells") aims to provide more affordable housing for young Chinese working in large urban centers by turning traditional apartment complexes into smaller, dorm-like units. Why does this matter? Home prices in China are rising faster than almost anywhere else in the world, especially in megacities like Beijing and Shanghai, where homeownership and, increasingly, rent has become prohibitively expensive for many young workers.

IPOs Lyft publicly released its 272-page S-1 last Friday, revealing the company's financials for the first time before the planned IPO. What's an S-1? Companies are required to file an S-1 in anticipation of an IPO. requires companies to provide information on the planned use of capital proceeds, detail the current business model and competition and provide a brief prospectus of the What did investors learn? Some of the key takeaways were: (1) The company lost almost $1 billion last year. Its rival, Uber, lost over $3 billion in the same period so this may be characteristic of the ride-sharing industry as a whole. This can be due to the industry’s low barriers to entry, high variable costs, low economies of scale and intense price competition. At this rate, it is difficult to tell if the firm will ever become profitable. (2) Lyft has 1.9 million drivers and made up 39% of market share at the end of 2018. This is much higher than analyst expectations and many speculate this could be attributed to higher driver incentives and more rider discounts in the last quarter in order to polish the firm's numbers ahead of the S-1. (3) Uber is still 5-6x bigger than Lyft when comparing revenue and bookings. It can take a lot of investment to compete against a larger competitor. While its recent price war may have benefitted the firm's user and driver metrics, price wars have always proved harmful to profitability.

Industry Focus 🔎

Technology Huawei sues the American government, arguing that the country's ban on the use of its telecommunications equipment in federal networks was unfair and unconstitutional. This lawsuit further showcases the global arms race for 5G dominance. Background: The US barred Huawei from building its fifth generation (5G) network in January, arguing that its equipment could be used by Chinese authorities to spy on communications and disrupt telecommunications networks in the country. Huawei has argued that the the US has failed to produce evidence of its concerns. Why is 5G important? 5G is a system of physical networks of switches and routers as well as complex layers of software that are constantly updating. The concern over control of 5G systems ultimately is a concern over who control information flow to users in the network. What now? This lawsuit may force the government to make its case against the company more public but also leave Huawei vulnerable to deeper scrutiny of its business practices and relationships. Facebook shifts its strategy, moving focus towards private communications. The firm will now work to make communications of its trio of apps "encrypted [and] ephemeral." What: Facebook’s messaging platforms will evolve to more closely resemble WhatsApp. End-to-end encryption will become standard across Facebook’s suite of messaging apps and data will not be stored. Why? The move could be an effort to improve its reputation which has worsened after spending the past two years mired in scandals around data privacy. It could also be a business move, as private, encrypted communications will also create room for new business tools — especially ones around payments and commerce, the company’s current "pet obsessions."

Retail Amazon rethinks its retail strategy. The firm is planning on open dozens of grocery stores separate from Whole Food, which it acquired in 2017, and close its pop-up stores. What: The firm will shutter the 87 pop-up stores that let customers try and buy its products and services. and open new grocery stores. They aren’t intended to compete directly with the more upscale Whole Foods stores and will offer a different variety of products, at a lower price point.. and analysts aren't too sure about why Amazon thought this was a good idea. When: According to a source, the company plans to open its first outlet, in Los Angeles, as early as the end of the year. Investor response: Amazon shares rose 2% while share prices of other supermarket operators tumbled, with Kroger losing 4.5% of its value and Walmart ending down 1.1%, signaling investor confidence in the project.

Breaking the Glass Ceiling 🔨 Jenny Xie '18 Investment Science Associate @ Wellington Management