Stock market rallies, S-1s, and a guide to ESG investing
Welcome to the eighth edition of In The Money – your weekly newsletter on keeping up with the financial markets. With the inauguration in the US, markets reached all-time highs this week. Kamala Harris became the first female Vice President – a powerful sign to all women. I remember growing up in Finland when we a female President and as a child I imagined myself becoming the president one day. That’s the power of role models.
This week we take a look at the recent stock market rallies, deep dive into Bumble’s S-1 (and define what exactly an S-1 is) and explore how individual investors can actually invest according to one’s values. I hope you enjoy this week’s newsletter.
All-time highs 📈
On Wednesday, the stock market rallied to a record high close as President Joe Biden was sworn into office. The inauguration sparked optimism and hopes for a new stimulus package and smoother vaccine rollouts.
The Dow Jones Industrial Average jumped 257.86 points (or 0.8%) to a new closing high of 31,188.38, while the S&P 500 rose 1.4% also to a record close of 3,851.85. The tech-heavy Nasdaq Composite jumped nearly 2% to 13,457.25, notching a fresh record. All three averages touched their intraday highs during the session.
Historic Firsts 🥇
President Joe Biden is on track to having the most diverse Cabinet ever. Kamala Harris became the first female Vice President, and the Cabinet comes with other firsts too. The positions are contingent on Senate confirmation and if approved it will include for example Congresswoman Deb Haaland as the first Native American cabinet secretary. In December Joe Biden pledged that his cabinet would be more representative of the American people than any other cabinet in history.
The Cabinet will also include Janet Yellen, the former chair of the US Federal Reserve. And if confirmed she will become the first woman to lead the Treasury Department. Yellen previously served as head of America's central bank and as a top economic adviser to former President Bill Clinton. She has been credited with helping steer the economic recovery after the 2007 financial crisis and the recession that followed. As chair of the US Federal Reserve, Yellen was known for focusing attention on the impact of banks’ policies on workers and the costs of US rising inequality. Since leaving the bank in 2018, Yellen has been outspoken about climate change.
During her confirmation hearing on Tuesday, she told lawmakers that the US needs a robust set of fiscal stimulus measures to get the pandemic-stricken economy back on track.
Making the first move – Bumble IPO 🔔
A couple of weeks ago I wrote that the dating-app Bumble had filed confidentially for an IPO. Last Friday Bumble Inc filed its prospectus. From the S-1 (see definition below) we learn that the two dating apps Bumble and Badoo, as of September 2020 had 12.3 and 28.4 million monthly active users respectively. In total the two dating apps had 2.4 million paying users, an 18.8% increase from the previous year.
If you want to deep dive into Bumble’s S-1, you’ll find it here.
Definition
S-1 The Form S-1 is the initial registration form for new securities for public companies based in the US. The Securities and Exchange Commission (SEC) requires all companies to file an S-1 before their shares can be listed on a national exchange, such as the New York Stock Exchange. In simpler terms, when a company wants to go public, they need to first file an S-1. The form contains detailed information about among other things the planned use of capital proceeds, a description of the business, and a prospectus of the security offered itself. The SEC also requires that the S-1 is released online to the public, so investors can perform their own due diligence prior to the issue.
Apple goes Virtual Reality 🍏
Apple is reportedly working on developing a high-end virtual reality (VR) headset to be (potentially) released for sales in 2022, according to Bloomberg. However, as is typical for a report this far out from the launch date, these plans could be changed or completely canceled. The headset will reportedly cost more than some of the current higher-priced VR headsets on the market, which are ranging up to nearly $1,000. The headset will reportedly focus mostly on VR but will also include some augmented reality features.
On Thursday Apple jumped 3% bringing its week-to-date rally to more than 7% after Morgan Stanley raised its price target on the company to $152 from $144. They are expecting a record December quarter earnings, when Apple reports its earnings on January 27th.
Lost and Found
Three months after his last public appearance, Alibaba’s billionaire founder, Jack Ma resurfaced as he spoke to 100 rural teachers through a video call. The e-commerce firm’s shares were up more than 8% in Hong Kong after this.
Ma last appeared publicly at a conference where he criticized China’s financial regulatory system. His controversial remark is thoughts to have prompted the Chinese regulator to halt Ant’s initial public offering. Ant Group which owns China's largest digital payment platform Alipay was planning on going public in November. It was gearing up to raise just under $34.5 billion in what would have been the world’s biggest initial public listing. Ant’s valuation has since then dropped by $108 billion (yes, you read it right, Billion), now valued at less than 1 trillion yuan from 1.44 trillion yuan (yuan is a unit of the Chinese currency Renminbi). Alibaba owns a roughly 33% stake in Ant Group. Alibaba is also under scrutiny as regulators opened an investigation into alleged monopolistic practices.
Netflix and Trade 🎬
Netflix ended a year of impressive growth by adding 8.5 million net new paying subscribers during the fourth quarter of 2020. The streaming giant now has a total of 204 million paying subscribers worldwide. This accounts for a net growth of 37 million new subscribers for the full year. The company also reported $6.64 billion in revenue and earnings per share of $1.19 during Q4. In response to the earnings report, Netflix shares were up 12.4% in after-hours trading and ended up advancing 16.9% after the reporting.
There is growing competition in the streaming services space. There are a lot of new(-ish) players such as Disney+, Peacock, and HBO Max. However, Netflix’s user numbers still put it far ahead of any competition. For example, Disney+ had 86.8 million subscribers as of December (Disney’s service launched a little over a year ago and is still rolling out globally).
Be a Superhero, Wear a Mask 🦸♀️🦸♂️
Evolvetogether a New York City-based brand that produces the only consumer-facing, FDA-approved medical masks currently on the market. They have already sold 10 million masks in the few short months since launching last year. Evolvetogether founder Cynthia Sakai, an Asian-American jewelry designer with no previous experience in this field, quickly pivoted to the face mask business after the pandemic broke out. Sakai felt that the masks on the market were not the most hygienic, so she ensured that Evolvetogether masks were sterile from start to finish. In just one month, Sakai launched her medical mask company which is privately funded to this day with just 11 employees.
Some of the most popular and followed celebrities (Justin Bieber, Ariana Grande, Katie Holmes, Jennifer Lopez, and many more) were photographed wearing the masks, after which Evolvetogether had more than 40,000 people on a wait-list with the masks selling out in less than a week of being restocked. Read the full Fortune interview with Cynthia here.
Are you a student and interested in startups and venture capital? Then you do not want to miss Seedery – the two-day online conference that connects students, founders, and investors. You’ll hear from world-leading entrepreneurs and investors such as Michael Seibel CEO of Y Combinator, Alice Bentinck Co-Founder of Entrepreneur First, Sarah Nöckel Investor at Northzone, and so many more.
Book your calendar for February 27-28 and get your ticket here.
A guide to investing according to your values 🌱
Earlier this week I had a conversation with Heidi Lindvall, co-founder, and General Partner at Pale Blue Dot, an early-stage, climate tech-focused venture capital fund. You can read more about them in this recent Techcrunch article here. She asked me, how can one as an individual investor invest in companies that are good for both the planet and us living here. So here goes a quick guide to investing according to your values and your best vision of the future.
A couple of weeks ago I wrote that sustainability-focused investing had a record year in 2020. The increased demand comes as investor interest in environmental, social and governance (ESG) issues is growing. Money managers are also starting to pay attention. Larry Fink, founder, and CEO of the world’s largest asset manager BlackRock announced in his annual letter that BlackRock will make investment decisions with environmental sustainability as its core goal. He called this the most important letter that he had ever written. According to a report from the United States Forum for Sustainable and Responsible Investment, total US-domiciled assets under management that employ ESG investing strategies increased 42% over the past two years, to $17 trillion in 2020. This figure represents 33% of all US assets under professional management, which means that one in three investing dollars is invested in this manner.
So how do you invest in socially responsible companies? Unfortunately, there is no easy, quick, nor definitive way for individual investors to tell if a stock is truly sustainable. Beware of for example that now with the increased interest in ESG investing there may be the risk that companies or fund managers make unsubstantiated claims. That’s why doing your own due diligence is going to be important. Yes, this will require time and effort. But let’s first take a look at some other ways that can give some ball-park indications.
Individual stocks
Morningstar, the financial rating company has a division called Sustainalytics which rates publicly listed companies based on their ESG risk. You’ll also see where a company ranks in its industry and in the global universe. The lower the risk, the better. As an example, here’s Apple’s risk rating.
Mutual Funds
Morningstar also rates funds based on ESG metrics. Here you can sort funds based on different sustainability criteria.
When looking for investment opportunities I sometimes pick a fund that I like and go through their holdings. Funds are required to list their holdings - The SEC requires mutual funds to report the complete lists of their holdings on a quarterly basis.
Indices
Here is a list of Morningstar Sustainalytics supported indices.
As mentioned above doing your own research is essential in investing responsibly. Companies are increasingly required to report on ESG. So, what I would recommend doing is the following. Pick a company that you are interested in, go on their website to the Investor Relations section, and download their latest annual report. In the annual report go to the Sustainability Report section and start reading it. Do you feel that it is genuine, has the company actually measured something, does it have a plan, is it doing anything practical, or are they just empty words? In the end, it will be down for you to decide if you feel that the company and what it is doing aligns with your personal values.
I’ve focused very much on environmental aspects here, but would highly recommend considering, for example, the governance structure of companies – do they have diverse people on the board? In this newsletter, we saw that the to-be publicly-listed Bumble’s board, women make up 73% of it.
I hope this short guide can help you navigate the, not always so easy, the process of finding investment opportunities that fit your values. After all, concern about ESG goes hand in hand with long-term thinking. Plenty of research and data backs up the thesis that high-ESG companies are well-run, ultimately producing financial results superior to their low-ESG peers.
Woman of the Week
Dhivya Suryadevara
Dhivya Suryadevara is the chief financial officer of Stripe, the American e-commerce payments company.
Suryadevara was born and brought up in Chennai, India along with two sisters by her mother. Suryadevara received her bachelor's degree in commerce from the Ethiraj College for Women of the University of Madras and went on to pursue Chartered Accountancy at the Institute of Chartered Accountants of India. She is also a chartered financial analyst and has an MBA from Harvard Business School.
Suryadevara started her career at PricewaterhouseCoopers while attending University. In 2002 she interned at the World Bank after which she went on to UBS to work in investment banking. In 2004 she joined General Motors, where she in 2018 was appointed as the company’s chief financial officer at the age of 39, becoming the first female finance chief in the carmaker’s century-long history. During her time at General Motors, she managed the business operating at a massive scale and helped steer the transformation of the iconic manufacturer. At the Fortune 20 company, she oversaw the financial operations amounting to over $100 billion in annual revenue, millions of vehicles delivered annually, and 180,000 employees across six continents. She also played a significant role in capital allocation and headed several strategic transactions for the company.
In August 2020 Suryadevara joined Stripe, the San Francisco-based global tech company building economic infrastructure for the internet, as CFO. Stripe was ranked alongside Elon Musk’s SpaceX as the most valuable private tech company in the US in 2020.
Suryadevara has been named to Fortune's 40 Under 40 in 2015 and 2018.
Thank you so much for reading this week’s newsletter. I would love to hear your feedback and please share this with a few friends you think would find this interesting. Have a lovely weekend 💜
I’m Marianne, an early-stage VC based in Stockholm. You can reach me by replying to this email, or find me on Twitter or LinkedIn.