Big shout out to my colleague Olivia for handling last week’s roundup while I was out of the office! I’m happy to be back at it now. I hope you’re ready for a couple of deeper dives than usual — there were some really interesting stories this week.
The Business Buzz
Traditional IPOs are so last year. There are a few different ways for a private company to go public and list shares on a stock exchange. But one untraditional method has been gaining attention — and dollars — recently. It’s called a special purpose acquisition company (SPAC), and it’s kind of a funny way to go public. Essentially, a SPAC is a company that’s started for the sole purpose of raising money, listing on a stock exchange, and then buying a private company. Through that acquisition, the private company becomes a public one and the SPAC becomes a “real” business.
SPACs were hot in 2020. The number of SPACs increased by fourfold between 2019 and 2020. And that momentum hasn’t stopped. This week saw the largest SPAC deal yet as United Wholesale Mortgage went public at a $16 billion valuation. EVgo — which owns and operates fast charging stations for electric vehicles — also went public via a SPAC this week. And ditto for telehealth and sexual wellness company Hims and Hers.
One of the reasons for the SPAC’s newfound popularity is that it’s a lot easier for many startups to manage. By letting the experienced institutional investors who start the SPAC handle the nitty gritty details of listing on a stock exchange, the startup can continue to focus on operations and growth. They avoid the hours of paperwork and bank-as-middle-man dynamic that traditional IPOs bring. But — as always — there’s also the question of whether it’s good for investors. And the answer is a bit of a mixed bag. Some argue that SPACs are great for wealthy, institutional investors, but not so great for everyday investors. But others think that SPACs attract higher quality investors who provide stability to the startup that’s targeted for acquisition. Either way, it looks like SPACs are here to stay for a while.
Azure and cobalt are more than just colors. Electric vehicles have been a buzzy topic lately. And with Microsoft investing in autonomous vehicles company Cruise, that buzz is ongoing. A big aspect of that story is the fact that Cruise and GM will both be using Azure — Microsoft’s cloud platform — for their software. But Cruise has also gotten attention for having a fleet of fully electric self-driving cars too. And here’s where cobalt comes in.
Electric vehicles (EVs) need specific kinds of batteries to work. In fact, good batteries are critical to an EV’s performance. And the growing demand for EVs is driving a shortage of cobalt, which is commonly used in many EV batteries. That shortage is indicative of a bigger market moment though — something you might call a “battery war.” Essentially, between high demand for EVs and alternative sources of energy, battery tech is a hotbed for innovation right now. Whether it’s improving on existing lithium battery designs or trying to design something entirely new, there’s a huge opportunity for companies to stake their claim in a forming market. You can even see it in recent startups we’ve covered. EnergyX is trying to make lithium extraction more efficient thereby driving down the price of lithium batteries. Meanwhile, StorEn Technology (Analyst Report coming soon!) thinks that vanadium batteries could be the battery of the future. It may not be as flashy as virtual reality or artificial intelligence, but battery tech might just be an industry to keep your eye on.
The Private Market
A different hot take on bitcoin. Bitcoin is in the midst of a correction right now, with the price hovering at around $33k currently. Treasury Secretary nominee Janet Yellen urged a balanced approach to cryptocurrency in a recent statement. She said that although crypto can be used to finance terrorism activities, encouraging its use in “legitimate activities” is something that should be considered.
But I want to highlight a different angle on crypto from what I usually cover. A recent TechCrunch article provides multiple examples of everyday people who have used bitcoin to help them weather the pandemic. Some of the people are immigrants who found themselves stuck between regulations, unable to open bank accounts and forced to rely on friends for payment transactions. Others who found themselves unemployed due to the pandemic relied on bitcoin’s 2020 gains to survive. I think it’s an interesting article, particularly because it provides a very different perspective on crypto. These aren’t institutional investors or finance specialists. They’re regular people who used bitcoin in creative ways — like using it to buy gift cards for groceries — as they struggled financially.
Is the cannabis boom coming? This week rapper Jay-Z announced that he is launching a fund that will invest in minority-owned cannabis startups. He wants to address a large disparity in the legal cannabis industry. Black-owned cannabis businesses were a tiny percentage of firms in Colorado, Washington, and Massachusetts — states where the substance has been legal for years. And that disparity could continue to grow as more and more states consider legalization. Virginia is actively considering legislation for marijuana legalization now. And New York is considering legalizing again as its neighbor New Jersey approved adult-use last year. There’s even talk of federal reform — a Florida representative has submitted a proposal to reclassify marijuana as a Schedule III substance.
And all of this could be good news for investors. With multiple cannabis firms showing excellent year-over-year growth and ongoing legalization efforts, cannabis stocks might be something to consider for your portfolio.
The Fun Stuff
This guy solves puzzles for a living. Puzzle boxes are often viewed as a cool piece of Japanese history. But for YouTuber Chris Ramsay, they’re way more than that. Ramsay transitioned from working as a magician and magic trick designer to solving puzzles of all kinds on his YouTube channel (and making money while doing it). People even design complex puzzles just to try and stump him. From rare lock puzzles to puzzles worth thousands of dollars, there’s something really satisfying about watching these intricate objects slowly come apart.
