Volume 06 | November 6, 2018

💸 Weekly Business News 💸

Happy election day, everyone! We hope everyone went out to the polls and made their voices heard yesterday. Welcome to ISOC's weekly newsletter! 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? We love feedback! Email us at: isoc-eboard@wellesley.edu  Received this from a friend? Join the conversation here .

First off... Upcoming Events 📅 ISOC x BlackRock NYC Trip Friday 11/16 12:30pm Learn about summer internship and full-time opportunities at the NYC headquarters of BlackRock, the world's largest as set management firm with over $6 trillion in assets under management. Alum Susan Wagner '82 is the co-founder, former Vice Chairman, and COO of the firm.  Lunch and travel expenses to and from NYC will be covered. Please expect to miss the entire day of class as we will be leaving very early in the morning and returning late at night. Students may choose to remain in NYC after the event. Apply with your resume on Handshake here by 11/7 .

Bank of America Merrill Lynch On-Campus Info Session Wednesday 11/7 5:30pm - 7:30pm (TODAY!) Join Bank of America Merrill Lynch business representatives and learn more about Global Banking & Markets internship opportunities for the summer of 2020! Global Banking & Markets includes Corporate and Investment Banking, Sales, and Trading. RSVP on Handshake here .

Federal Reserve Bank of Boston On-Campus Info Session + Panel Wednesday 11/7 5:00pm - 6:30pm (TODAY!) Interested in careers at the Federal Reserve Bank of Boston in economics research ? Come learn about internships, entry-level jobs, and long-term career paths at the Federal Reserve Bank of Boston. Two current Wellesley research assistants will discuss their work and paths to the Fed and you'll hear from a PhD economist about long-term career options. The recruiter for the research program will also be on-hand to discuss the application process and provide insight into what they are looking for in young economists. Professor Sichel , who also has experience working at the Fed, will moderate the panel! This is a wonderful opportunity to learn more about working at one of the Federal Reserve Banks!  RSVP on Handshake here .

In the news 📢

Markets The big number from the October jobs report could be bad news for the market. What: The unemployment rate currently sits at its lowest level since 1969, with average hourly earnings close to breaking over the 3 percent barrier which would mark the highest wage gains since April 2009, just a few months before the financial crisis ended. Why does this matter? This would indicate that wage pressures are building, which could spill over into broader inflation fears, something that has been keeping investors on edge. An inflation scare earlier this year also spurred a market correction, prompting worries that the Fed would raise rates higher and faster than anticipated. What is the relationship between inflation and interest rates? The Fed often adjusts rates in response to inflation and is currently raising rates after years of near-zero interest rates to tighten the economy. Low interest rates, in theory, lead to inflation because cheaper, increased spending can stimulate economic growth. Raising interest rates higher than they should be could potentially lead to deflation so the Fed must watch these numbers carefully to maintain a delicate balance. Learn more here. Global markets are surging after reports Trump is ready to back down in his trade war with China. What: News of a potential trade breakthrough between the United States and China prompted stocks to surge in China, Hong Kong, and Europe. President Trump has asked key officials to draft a trade agreement with China, which will be finalized at the G20 summit at the end of November. What this means for the economy: October was brutal in stock markets and was the worst month for the S&P 500 in seven years. The trade war was partly to blame for these sell-offs as investors worried about volatility in both economies. These signs of progress between China and the US will encourage investors to buy more stocks and take on more risk. Corporate Buybacks Return, Supporting Market. Companies like IBM, Shell and Estée Lauder authorize significant share repurchases. What: U.S. companies are ramping up share buybacks again, offering potential support to volatile markets. Analysts say that during the market slump last week, “some companies [may have seen] the equity correction as an opportunity to buy back their stock" at a cheaper price. What are share repurchases? Stock buybacks are when a company pays shareholders the market value per share and re-absorbs a portion of its ownership previously distributed. Why? Companies choose to repurchase its shares to consolidate ownership, return to an undervalued status, and boost key financial ratios. Buybacks are also an efficient way to return capital to shareholders by boosting the share price. However, buybacks are also criticized as they channel profits away from the research and capital expenditure that could improve productivity in the longer term.

M&A Deals Natural gas company Encana Corp (NYSE: ECA) will Newfield Exploration Co. (NYSE: NFX), another natural gas company, in a $5.5 billion all-stock deal. The deal will give Encana greater access to North America’s biggest oil fields, and potentially spurring further deals. Why? Thursday’s all-stock deal will give Canada-based Encana more acreage in the fast-growing Anadarko basin in Oklahoma, a fast-growing shale oil play that is attracting investment from oil producers expanding beyond Texas’s giant and lucrative Permian basin. The expanded Encana would immediately become one of the top shale producers in North America. Background: Encana’s Newfield acquisition comes against the backdrop of increased deal-making in the U.S. shale industry as the field matures, forcing companies to consolidate to grow and become more efficient. The firm is the third Texas oil producer acquired last week. Gene sequencing company Illumina Inc (Nasdaq: ILMO) said on Thursday it plans to buy smaller rival Pacific Biosciences of California Inc (Nasdaq: PACB). The $1.2 billion all-cash deal, representing a 77% premium on PACB's closing price, will help Illumina expand its capabilities as the market grows. What? Gene sequencing is a method to analyze the genome, and can among other uses, help identify inherited disorders and markers of disease progression. What do they do? Illumina’s gene sequencers stitch together the sequences of small stretches of DNA, whereas PacBio has advanced the technique of scanning long expanses of the genome, albeit at greater cost. A PacBio sequencer can analyze a human genome for $12,000—Illumina can do it for less than $1,000—although technological upgrades should make long-read sequencing cheaper in the near future. Why? Illumina’s CEO says PacBio will complement the company’s short-read sequencing products. “What it will mean for the market and customers is that by combining these two approaches and the data from these two companies we will give consumers a more perfect view of the genome,” Illumina’s CEO Francis deSouza says.

IPOs Synthetic DNA startup Twist Bioscience raised $70 million in its IPO. The firm sold 5 million shares at $14 apiece. It will trade on the Nasdaq under the ticker TWST. What does Twist do? Twist has developed a proprietary way of manufacturing DNA by “writing” it on a silicon chip. The company says in its prospectus that its technology makes DNA synthesis scalable and less expensive than traditional methods. Metrics and customers: Unlike many other biotech firms that have IPOed this year, Twist is generating revenue. In the company's first three fiscal quarters of 2019, the company generated $17 million in revenue. The firm served 539 customers in the past fiscal year, with its largest customer being Gingko Bioworks, a Boston company that uses synthetic DNA to develop microorganisms used in many industries. Medical devices firm Axonics Modulation Technologies raised $120 million in its IPO. The firm sold 8 million shares at $15 per share and will trade on the Nasdaq under the ticker AXNX. What does Axonics do? The firm creates medical devices for treating issues related to overactive bladders, fecal incontinence and urinary retention.  British gene therapy startup Orchard Therapeutics raised $200 million in its IPO. The firm sold 14.3 million shares at $14 apiece and will trade on the Nasdaq under the ticker ORTX. What does Orchard do? Orchard is developing a type of gene therapy, in which patients’ stem cells are harvested, equipped with a healthy version of a gene, and then infused back into the body. The company is developing gene therapies for rare, immune, and metabolic diseases.

Venture Capital Professional social platform Handshake raises a $40 million Series C on a $275 million valuation. The funding round was led by EQT Ventures, with participation from the Chan Zuckerberg Initiative, True Ventures, KPCB, Spark Capital, and Lightspeed Venture Partners. What: Handshake, the professional networking and recruiting platform aimed at college students that we use here at Wellesley, just raised $225 million to give LinkedIn a run for its money. Unlike Linkedin, Handshake focuses on a specific niche university students and recent grads, with a focus on diversity and inclusion. The platform’s recent round comes after it recently hit 14 million users in the U.S. across 700 universities, and 300,000 employers targeting them. The plan is to use the new funding to expand into more markets like Europe. Pizza delivery and food-logistics company Zume raises $375 million from SoftBank at a $2.25 billion valuation. This valuation reflects an additional Softbank investment of $375 million in the company through a second tranche that is expected to come soon, according to a person with knowledge of the matter. The startup was valued at $170 million in 2017. What: Based in Mountain View, CA, Zume has been delivering pizza locally using robotic food preparation and recently changed its name from Zume Pizza to simply Zume. It has also developed logistics technology to help make meal delivery more efficient for other businesses, partly by preparing the food while in transit. Zume expects its platform to be used by restaurants of all sizes. MORE open-source $$!! Open-source cloud infrastructure firm Hashicorp raises $100 million at a $1.9 billion valuation. The round was led by IVP, with participation from Bessemer Venture Partners, GGV Ventures, True Ventures, and Red Point Ventures. What: HashiCorp is probably best known for Terraform, its open-source tool for automatically provisioning infrastructure by describing it as code. The company also offers a whole range of additional open-source security tools and products that enable multi-cloud deployments, as well as enterprise versions of these tools that add features for larger teams on top of these free versions. To monetize those tools, HashiCorp focuses on making sure that the open-source products focus on the needs of individuals, while the commercial products focus on teams. Metrics and customers: The open-source tools HashiCorp maintains have been downloaded more than 45 million times in the past 12 months, up from 22 million the year before. The firm counts hundreds of firms as its customers, including Adobe, Barclays and Walmart's Jet.com. Softbank invests $1.1 billion in “smart window” glass company View. Demand for View’s intelligent windows is rapidly growing as companies increasingly recognize the benefits of modernizing their work environments to improve the health and productivity of their employees. What: View is a Silicon Valley-based maker of glass used in internet-connected windowpanes. View’s technology allows customers to control the level of tinting in so-called smart windows. This sort of “dynamic glass” can help lower cooling costs and remove the need for blinds or other accessories. This improves human health and wellness by preserving unobstructed views, automatically letting in the optimum amount of natural light, and greatly reducing heat and glare. It also cuts the building energy consumption by up to 20 percent. Metrics and customers: View Dynamic Glass is installed in 35 million square feet of buildings and is growing rapidly.One of its largest customers is Dallas Fort Worth International Airport, which found that the windows kept terminals cooler. View also counts Facebook Inc., FedEx Corp., JPMorgan Chase & Co., USAA and Texas A&M University as customers and has completed 450 projects to date with another 250 projects in progress.

Industry Focus 🔎

Technology Google employees walk out over sexual harassment scandals. What: Nearly 17,000 Googlers worldwide staged a walkout on Thursday to protest the company's process for handling sexual harassment cases. The walkout came in the wake of an NYT article that revealed several executives were given seven or eight-figure exit packages after credible misconduct allegations were filed against them. Walkout organizers published an Op-Ed asking for pay equality, transparency in the misconduct reporting process, and an end to forced arbitration.

Consumer & Retail Chinese luxury liquor maker Kweichow Moutai Co., reported its weakest profit expansion in almost three years amid Chinese market slump, increasing investor alarm. The company’s famous baijiu liqour is a luxury gift often used during business in China. Background: A narrative that’s captured traders’ attention in recent weeks has been a “consumption downgrade” in the world’s second-biggest economy. The Shenzhen CSI 300 Consumer Staples Index slid 22 percent in October, its worst month since the 2008 global financial crisis. What: Moutai, considered a bellwether of China’s consumer stocks, is the premium white liquor brand in the country. The company has limited output every year, and Moutai became increasingly sought-after amid the consumption upgrade trend. Its decrease in sales of it liquor, often prized as a luxury gift, was “concrete proof of China’s consumption-growth slowdown,” analysts say.

Financial Institutions The Federal Reserve proposed on Wednesday loosening rules for 16 financial institutions. This has been an important move forward in the Trump administration’s effort to roll back regulations on banks that do not have volatile Wall Street businesses. What: This new deregulation proposal allows midsized lenders with $100-$700 billion in assets to stop complying with the liquidity coverage ratio, which requires banks to stockpile liquid assets that can be sold quickly. In addition, smaller banks will now be subject to stress tests once every two years, instead of every year. What's a stress test? A bank stress test is an analysis conducted under hypothetical unfavorable economic scenarios, such as a deep recession or financial crisis, designed to determine whether a bank has enough capital to withstand the impact of adverse economic developments.

Breaking the Glass Ceiling 🔨 Sophie Li, ISOC Senior Co-Advisor This week we will be introducing our other senior co-advisor, Sophie Li! Sophie is a senior from Chongqing, China majoring in Economics. She has spent her past two summers interning at Rogers Investment Advisors in Tokyo and at J.P. Morgan in NYC. She will be returning to J.P. Morgan's Investment Grade Finance/Private Placements team after graduation. What got you interested in finance? I had the chance to intern at Rogers Investment Advisors, a fund of hedge funds in Tokyo the summer of my sophomore year. I found the experience very rewarding: we had daily lectures on many different financial products and concepts. I also really enjoyed working in a fast-paced environment. What was your experience working in Investment Grade Finance/Private Placements this past summer? I worked with mostly investment-grade companies (companies with a BBB- credit rating or higher), helping them raise capital and gain access to the debt private placement market, which is mostly comprised of insurance companies such as Metlife, Prudential, etc. Our team is responsible for debt structuring, debt origination as well as debt syndication. What is your advice for Wellesley students who are interested in finance? My advice to underclassmen is to get hands-on work experience as early as possible. It's the fastest way to gain exposure to the industry. It is also a good way to see if the job matches with your motivation and interests.