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ISOC Newsletter Volume 27
December 12, 2020
Picture by Anadolu Agency/Getty Images
Hello everyone and welcome to the last edition of Wellesley Investment Society's Newsletter for the Fall Semester,

It's Fatima, Gaby, Lucy, and Alexis. Here, we bring you a breakdown of current events in markets and different finance sectors to help Wellesley College students learn more about the ongoing of the business world. If you have any feedback, questions and comments for us, please reach out to us at isoc-eboard@wellesley.edu or faslam3@wellesley.edu, glichuck@wellesley.edu, 
We'll be back with another edition of the ISOC newsletter in the first week of the Spring Semester.

Want to receive your own newsletter? Join the mailing list here.
First off...Upcoming Events

Moelis Advance Access Program (Deferred MBA Admissions) at The Wharton School - Informational Meeting with Wellesley College
Friday, January 8, 2021
4:00pm - 5:00pm (ET)

The Moelis Program is a deferred admission program that offers undergraduate and master’s students in their final year of study a guaranteed pathway to the Wharton MBA after pursuing two to four years of quality work experience. Students from all academic fields and disciplines are encouraged to apply, and the program will accept a highly selective cohort of students whose academic and career interests expand the traditional notions of business education.
RSVP on Handshake here.

Wellesley Alumnae in Commercial Real Estate Hospitality Panel
Thursday, January 28, 2021
7:00pm - 8:00pm (ET)

RSVP on Handshake here.
In the News
(Please click on the underlined section headline to access news source)

Markets


Background: The S&P 500 and Dow Jones Industrial Average fell on Thursday, Dec. 11, due to broad losses that offset gains in the energy sector. Markets slipped at the start of the trading day, but a jump in oil prices helped propel shares of major energy producers higher, and major indexes finished well off the lows of the day. The S&P 500 finished down 0.1%, while the Dow Jones Industrial Average lost 0.2%. Meanwhile, the Nasdaq Composite rose 0.5%. 

Details: In recent weeks, analysts have hoped that a fragile economic outlook would heighten pressure on Congress to pass a fresh fiscal-stimulus bill that increases government spending to support businesses and households. However, data released by the Labour Department Thursday showed that U.S unemployment claims rose sharply last week—a worrisome sign for the labour market. The White House and policy makers have broadly agreed on an aid package that totals $900 billion, but negotiations about points of contention could spillover into the beginning of 2021. However, further disappointing job data could add urgency for an additional stimulus package.

Commodities


Background: Gold prices fell Wednesday, Dec. 11, trimming some of the December rally and continuing a run of volatility. Traders weighed in a recent spike in coronavirus cases against optimistic vaccine trial results and prospects for further fiscal stimulus. 

Details: Most actively traded gold futures fell 1.9% to $1,838.50 a troy ounce Wednesday. Prices for this haven asset are still up more than 3% from the start of December, but remain more than 10% below their record high in August, as the precious metal was hurt by a broad rally in stocks and riskier commodities due to the fading of investor anxiety after the presidential election. However, gold is still one of the better performing major assets in 2020, as it is up 20% for the year.

Future Outlook: Some analysts believe that gold prices will rise moving forward. The Federal Reserve’s near-zero interest rate policy and stimulus programs have lowered Treasury yields, making gold an attractive alternative to Treasurys for investors. Additionally, the dollar continues to weaken as traders project a global economic resurgence in 2021, making gold cheaper for foreign investors.

M&A

  • Uber off-loads unprofitable business ventures, due to pressure from investors

UberElevate: Uber has sold its flying-car unit, UberElevate to air-taxi start-up, Joby Aviation. Although the details of the deal were not disclosed, Uber will invest nearly $75 million in Joby Aviation and partner with the start-up when flying-cars hit the market by leveraging their brand name in ride-hailing and on-demand delivery. 

Uber ATG: A day before the announcement for UberElevate, Uber reportedly sold their autonomous car unit Uber ATG to autonomous vehicle start-up Aurora. The surprising detail about the deal is that Aurora will not pay any cash for Uber ATG. Instead, Uber will transfer their equity in the company to Aurora as well as invest $400 million in the start-up, effectively paying Aurora to buy the company. This will give Uber a 26% share in the post-merger company. Interestingly, Uber ATG was valued at $7.25 billion last year, while raising funds from investors.

Deal Rationale: The sales of UberElevate and Uber ATG coincide with Uber closing their acquisition of Postmates. In an effort to focus on the core ride-hailing and on-demand food delivery business, Uber is shelling its non-profitable business units. Both autonomous vehicles and flying-cars are seen as technology of the distant future, without any customer demand or regulatory approval right now. Both ventures are money-drying without any material returns at the moment, especially Uber’s autonomous vehicles, which led to the death of a pedestrian in Arizona. Tailwinds from the pandemic have breathed fresh air into the on-demand delivery business, in lieu of pandemic shutdowns and investor confidence in the recent Doordash IPO.

IPO

  • With massive IPO Pops, Doordash and Airbnb end the pandemic year with a bang

Background: This year was mired in financial uncertainty and stunted growth in profitability and credit, induced by the pandemic. However, undoubtedly the industry, which has weathered the storm of the pandemic and emerged triumphant among its peers is the tech industry. Doordash and Airbnb are textbook examples of the secular tailwinds experienced by the tech industry due to the pandemic. 

Doordash IPO: Doordash was set to price at $75-$85 per share, selling 33 million shares at IPO. The company increased its pricing range to $90-$95 a few days before the IPO launch. However, on the first day of launch on Wednesday Doordash stock soared 92% to $195.50, after pricing at $102 on the first day of trading. This was one of the largest IPO increases of any company this year. The company raised nearly $3.37 billion from its public offering. Doordash has a market capitalization of $68 billion.

Airbnb IPO: Similar to the trajectory of the Doordash IPO, Airbnb’s initial price range fell between $50-$60 per share, with 52 million shares on the market. The company raised nearly $3.5 billion from its public offering. Airbnb’s shares increased 113% on the first day of IPO, ending the day at $144.71. Airbnb now has a market capitalization of 100.7 billion, the largest for any tech start-up to go public this year. 

Fair valuations or over-hyped investor outlooks? Doordash and Airbnb perfectly embody the hopes and fears of many investors, concerning tech start-ups and their public offerings, stoking fears of a tech bubble brewing in the financial markets. Doordash has been a historically unprofitable company, only producing a positive net income in the latest quarter. However, the company did see their market share among on-demand delivery services increase above 50%. Many see Doordash’s growth and increase in revenue as a result of stay-home orders and lockdowns, easily reversed as the pandemic lessens and people return to in-person dining. Similarly, bets on Airbnb are informed by rising hopes of COVID-19 vaccines to eradicate the pandemic and allow people to resume travel.

Venture Capital


What happened? Calm, a meditation app, is now valued at $2 billion. Lightspeed Venture Partners led the investment round. 

How did Calm get here? Calm has a history of quick revenue growth and it is profitable. Mental health-focused startups have also been faring well this year, with the pandemic taking a huge psychological toll worldwide. 

How did Calm respond to the pandemic? They launched a page of free resources and focused on a partnership with nonprofit health system Kaiser Permanente. Kaiser made Calm’s premium subscription free for its members. 

Calm is not alone. Calm and its rival Headspace have now raised a combined $434 million. Calm is now considering acquiring smaller companies with this latest funding round.
Industry Close-up
Technology


What happened? On Wednesday 48 attorneys general and the U.S. government (the Federal Trade Commission) filed antitrust lawsuits against Facebook, claiming that it committed unlawful, anticompetitive acts that put rivals out of business and cemented its status as the pre-eminent social-networking giant. This lawsuit is the single biggest antitrust case in 40 years. 

What’s the issue for Facebook? The states’ lawsuit focuses on Facebook’s acquisitions of Instagram and WhatsApp and their role in driving Facebook’s market dominance. The FTC director also says that Facebook’s actions “deny consumers the benefits of competition.” Facebook may be forced to divest some of those businesses. 

The tricky part...years ago, the FTC already cleared these acquisitions. This lawsuit is setting a precedent that no sale is ever final.
 
How is their stock doing amid this lawsuit? Shares of Facebook closed down about 2%. The stock is up more than 34% in 2020, as the S&P 500 SPX, -0.56% has gained 14.6%.

They’re not alone out there. The Justice Department sued Alphabet’s Google in October, and Amazon and Apple are also under scrutiny and could face legal troubles next year.

Consumer & Retail


The Deal: On November 15th, Walmart announced that it would sell most of its shares in Seiyu to KKR and Rakuten. Seiyu, a Japanese supermarket chain, is valued at around $1.6 billion, practically signifying Walmart’s exit from its operations in Japan. A 65% stake will go to KKR, 20% to Rakuten, and Walmart will keep a 15% stake. 

Deal Rationale: Walmart has been struggling in Japan for years given strong market competition and low margins. Rakuten, due to its 2018 alliance with Seiyu, is already familiar with the business, so this deal is an intuitive next step.

Other Details: Seiyu is slated to become a part of Rakuten DX, which intends to move grocery stores online using Rakuten’s e-commerce platform. Though the Japanese online grocery delivery market has lagged behind other countries, partially due to a hesitance to purchase fresh produce on the internet, COVID-19 has shifted consumer habits. According to the Japan Times, internet sales jumped from 2.5 to 5% of total grocery sales during the course of the pandemic.
ESG


What is an ETF? ETF stands for exchange-traded fund, essentially a fund that trades on an exchange, which is similar to a stock. ETF shares can be bought throughout the trading day, which differentiates them from mutual funds.

What does ESG mean? ESG is an acronym that represents the core tenets of Environmental, Social, and Corporate Governance. These three factors measure the impact of an investment, made by a business, on sustainability and society. ESG is significant because they help evaluate criteria such as emissions, resource management, and risk management, ultimately providing a critical examination of carbon footprint and how it can be reduced in large firms.

Details about JPMorgan’s Involvement: JPMorgan has created the JPMorgan Carbon Transition U.S. Equity exchange-traded fund (JCTR), which marks the first U.S. ETF with a strong emphasis on ESG. It will be passively managed and use a gauge that screens the Russell 1000 Index in search of companies looking to reduce their carbon impact. Exploring funds in the carbon realm is rapidly gaining traction because carbon emissions are measurable and quantifiable. In addition, as clients are becoming more aware of climate related issues, sustainability seems to be increasingly relevant. 

Evaluating Holdings: This fund intends to evaluate firms based on their emissions, resource management, and risk management, with the final intention of narrowing down the Russell 1000 to 200 holdings. JCTR seeks out companies that are interested in changing their carbon behavior.
Breaking the Ceiling
Today we are speaking to Lily Wetherington'22 about her experience at U.S. Bank and Evolston.

Hi Lily! Thank you for taking time to speak with us today. Could you please tell me about yourself?
My name is Lily Wetherington and I'm originally from midcoast Maine, so not too far from here. I'm a junior, Class of 2022, purple class. I am currently studying economics and English. Outside of my internship at U.S. Bank, I actually work at Wellesley College mail services. I also did a brief internship this past spring with a real estate investment firm outside of Boston called Evolston. I had the opportunity to work on structuring two deals that ultimately led to us acquiring our first two commercial buildings, so that was really cool. 

How was your experience at the U.S. Bank as a Corporate Banking Analyst? What was the recruitment process like?
I really loved my time at U.S. Bank as a corporate banking intern analyst. The recruitment process was really quick actually and a bit later than most firms, I'd say. I applied in early January of 2020, so this year, and heard back about a week and a half later. That's when we scheduled the first phone screen interview with the campus recruiter. That was basically just to go over job requirements, program logistics, walking through resumes, and all that good stuff. I actually was notified the next day that they're considering me for their second round interview, and they helped me make arrangements to take a trip to their New York office about a week later. With COVID, unfortunately I think things are different now, of course. The second round interview was pretty laid back. I spoke with two hiring managers for about 30 minutes each. The first interview was typical behavioral and cultural questions that you would see for a job like this, and then the second round was more technical. Both interviews were definitely more of a conversation than a super-strict, formal interview, which was nice and I appreciated that. The hiring managers really made all of us feel super comfortable and relatively stress-free, which is nice. My interview was on a Friday and then I actually heard back the next business day—so Monday—that they had extended an offer, which was really great. Overall, the entire process took about a month. Everyone between the recruiting process and the internship itself was super nice and I actually still talk to several of my co-workers weekly. It's very exciting to go to them with career advice and they fill me in on deals they've been working on so it's been really cool.

How was your experience at Evolston and what was the recruitment process like for that?
Evolston is actually a very new firm so they're not—I’ll be completely honest with you—they're not very well established. They are currently working on their third and fourth deals right now so they're very, very small. They are a Babson college startup. It was a great internship, but ultimately, that was because I knew a lot of the people that were there and I was super interested in real estate itself. Full disclosure: no recruitment process here, just because I already knew most of the people but I got some really great experience using customer relationship management systems like salesforce that we used at the U.S. Bank. At Evolston, we use a different one called Nutshell. I also helped doing smaller tasks like creating vacancy reports and potential deals and the market trends in Boston at the time, earlier this spring. I was also working with the two guys calling and emailing brokers and investors. Ultimately smaller tasks, but still equally as good of an experience, just a bit of a difference with different firms.


We have only published part of Lily's interview. To read the whole interview, click here.