Jan 19

Wonder & Blunders: Oh Whoa IPO Remix by Spotify

 

 
 OUR CRITICAL ANALYSIS OF THE WEEK’S NEWS
We’re only half way through January, and we’ve already seen many wonders and blunders this year.
 
Spotify goes beyond disrupting the music industry and makes waves on Wall Street. The company is going public, but rather than the traditional IPO route, it’s shaking things up by listing directly. It provides ‘music for everyone,’ but not ‘money for everyone’ – the company is saving millions by cutting out the underwriting process. This unusual method has the industry wondering if this could signal sea change. If successful, how many other unicorns will follow suit? Time will tell.
 
Blunders abound in the financial and technology world, culminating with recent news of Intel’s CEO selling stock last year after learning of the company’s chip flaws – not publically announced until this month. Free tip of the day: If the ethics or legality of your decision may come into question, don’t do it – not all press is good press.
 
If you have a retirement account (which we hope you do), you may be interested in learning how the cost of financial data, which continues to rise exponentially, may ultimately be eating away at your retirement account.
 
We’d love to hear your feedback on the types of content you want to see in this newsletter. Reply to this email or tweet your heart out to @kcdpr.
 
Battle for Affordable Financial Data Hits Home
The key to better investment decisions is access to financial data. We know banks, asset managers and high frequency traders need data to effectively do their jobs. However, you probably haven’t thought about how it’s purchased or worried about financial data fees, but you should now. The increasing cost of market data from major U.S. exchanges “threatens the very progress made possible by this democratization of the markets, and ultimately eat away at American retirement savings,” according to Business Insider’s Kirsten Wegner.
 
Trading firms report that fees have increased up to 700 percent for the same data usage, as compared to fees five years ago. The article equates this situation to a scenario in which you are forced to pay more for your monthly smartphone bill in eight years than you do today because of extra fees added to your billing statement, despite operation costs and the cost of the device going down. It’s a formula for disastrous customer relations and dissatisfaction.
 
Wegner’s article calls on exchanges to back up their data fee increases with explanations comparable to the SEC’s credit card disclosure policies, a battle cry for transparency trending throughout the industry.
 
Big Banks Beware: Spotify Disrupts IPOs
As someone once said, ‘the more you know,’ so here is a potted summary of the traditional IPO versus the Spotify IPO. We’ve been watching this for a while now and want to make sure ‘you know’ the latest. (Hint: it’s going to be an exciting ride.) 
 
Every Initial Public Offering (IPO) is essentially two auctions that occur on two consecutive days.
  
  • The first is the ‘true IPO’ – only open to banks. During this period, the price of shares is determined by banks. They determine this by asking investors how many shares they would like and at what price. The banks then set trading prices and allocate shares to investors based on demand, relationships and ultimately who they think ‘should’ get access.
  
  • The second auction, termed ‘the opening,’ is for those people who didn’t get shares from the banks and try to buy stock via the exchange. The prices on opening day are usually very predictable because the stock was trading the day before. 
 
However, our friends at Spotify have decided to disrupt this process. Maureen Farrell reports in the Wall Street Journal that the company filed its intentions with the SEC to go public via a direct listing. This means it won’t go through the typical IPO process of pricing and then selling shares based on investor feedback. One day soon Spotify will become public and the shares will be traded on the exchange. It will have no previous trading price, no IPO price and a whole lot of interest and excitement from the market. There are a number of ways to view this from a PR perspective – generating hype by being different is certainly one. Another is at the roots of what Silicon Valley initially stood for, disruption to archaic processes. Fingers crossed this will be a success and IPOs can become a little more democratic.
 
Emoji Index
The Sale: Ill-Timed or Intel Inside-r Trading?
It’s bad enough when your company suffers through a major malfunction of its product, potentially costing millions of dollars. It’s sure to result in bad press and loss of public trust. As CEO, perhaps the only bigger mistake would be…selling half your stock around the same time you learn about the flaw, not yet public knowledge.
  
Intel CEO Brian Krzanich sold the most stock allowed by corporate bylaws in November, five months after Intel discovered the flaws in its chip design, nicknamed “Meltdown” and “Spectre.”
  
While Intel claims the stock sale was unrelated to the product flaw, Kirsten Korosec of Fortune explains it is common practice for companies dealing with security problems to delay announcing an issue, crossing their fingers that hackers won’t discover the cybersecurity weaknesses before the problem is fixed.
  
No matter the reason for the stock sale, this is a significant blunder in our book – either Intel’s CEO failed to recognize how the timing of the sale could impact public perception or the security flaw was in fact the reason for the sale, which not only would be a PR fail, but also illegal.
 
» IN THE NEWS
Forbes speaks with Charles Thorngren, CEO of Noble Alternative Investments, about a fluctuation in Ripple prices.
» BOTTOM LINE: Corporate Citizenship: Persona Outweighs Product
Corporate citizenship has increasingly become a central part of most businesses structure with consumer companies like Warby Parker and Toms leading the way. The ‘corporate social responsibility’ of old is no longer effort enough. Today’s B2B businesses need to adopt a similar integrated approach in order to succeed. Potential clients, investors and partners now not only at the numbers and they evaluate a company’s persona when making key business decisions, whether the company is B2B or B2C.
 
What is corporate citizenship? It’s all about ensuring companies are doing their part and operating as good global citizens, meaning they obey the law and protect their communities and environment. The key to ensuring the ideal corporate citizenship is remembering the four C’s: comply, connect, contribute and call to action.
» FEATURED CASE STUDY:
Noble Gold Investments
Noble Gold Investments (“Noble Gold”) is a precious metals IRA investment firm located in Los Angeles. The firm had the exclusive rights to the first gold depository located in Texas and approached KCD PR to assist with the rollout of this announcement. Despite this significant news, Noble Gold was competing in a challenging environment and struggling in terms of driving national media awareness for its business. Furthermore, the firm’s marketing initiatives were sporadic, uncoordinated and executed without a strategic approach.
 
 
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