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Asia tech share rally helps boost global markets

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Global stocks started the week on a strong footing led by gains for technology shares across Asia-Pacific markets.

Hong Kong’s benchmark Hang Seng index climbed 1.9 per cent on Monday while South Korea’s Kospi rose 2 per cent and China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks added 1.4 per cent. Japan’s Topix index was flat.

Technology stocks led the charge in Hong Kong, with shares in internet group Tencent rising by as much as 10 per cent to take the company’s market capitalisation gains for 2021 to $230bn. Tencent-backed livestreaming platform and TikTok rival Kuaishou plans to raise up to $6.3bn in a Hong Kong initial public offering, the Financial Times reported on Monday.

Analysts said the IPO, the biggest tech share debut since Uber’s in 2019, encouraged sentiment across the broader market. The Hang Seng Tech index jumped 4.4 per cent.

“We’re expecting Kuaishou will be very hot,” said Dickie Wong, head of research at Hong Kong-based broker Kingston Securities. “That is boosting not only Tencent’s share price but also most internet-related companies.”

The Hong Kong-listed shares of Chinese tech groups have also been sustained this month by inflows from mainland Chinese investors via market link-ups with Shanghai and Shenzhen.

On Monday alone, Chinese investors poured HK$13.5bn (US$1.7bn) into Hong Kong stocks as of mid-afternoon trading, chief among them Tencent. Chipmakers also rallied, with China’s Semiconductor Manufacturing International Corp up as much as 8.3 per cent.

In South Korea, stocks were boosted by local media reports that the government was considering payments to individuals and small businesses to soften the impact of coronavirus-related restrictions. Shares in Samsung Electronics rose as much as 3 per cent.

Futures for Wall Street’s tech-heavy Nasdaq Composite were up 0.8 per cent during Asian trading, while those for the broader S&P 500 were up 0.4 per cent. Futures for London’s FTSE 100 rose 0.4 per cent.



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IPOs / FFOs

Rocket Lab/Spire Global: Spacs, the final frontier

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Life sometimes imitates emojis. Social media stock tipsters are fond of littering posts with rocket symbols. Rocket Lab, which is floating at a $4.1bn enterprise value, makes the real thing. It was one of two space-related businesses to join the market via special purpose acquisition companies (Spac) on Monday, as the surge in these listings continued.

Just two months into the new year and Wall Street has raised a staggering $58bn through 188 blank cheque vehicles, according to Refinitiv. With hot money appearing to outweigh the supply of merger candidates, sponsors are howling to the moon for deals.

Rocket Lab launches smaller satellites into space. Its celestial twin was Spire Global, a satellite data group that is combining with a Spac at a $1.6bn equity valuation.

Like many recent Spac companies, Rocket Lab and Spire are justifying their valuations with lofty sales and earnings growth projections. Rocket Lab, which generated $35m in revenues last year, said it expected to pull in more than $1.1bn in 2026 and become cash flow positive in 2024. Spire, with just $28m in sales in 2020, is forecasting $900m in revenue by 2025 and positive cash flow in three years’ time.

Tesla founder Elon Musk and his SpaceX rocket company have reignited investor interest in US space companies. Annual revenues from space-related business — at present worth $350bn — could almost triple in size by 2040, according to Morgan Stanley.

SpaceX was reportedly valued at $74bn by its latest private funding. Shares in Virgin Galactic, Richard Branson’s space tourism company, have almost doubled since last September to give it a $9bn valuation, even as the group reported a $273m loss in 2020.

Space companies are a moonshot borne aloft by the rocket fuel of cheap money. That momentum trade has more to recommend than some others, such as fledgling electric vehicle companies. Both Rocket Lab and Spire have proven technologies to accomplish highly demanding tasks. This really is rocket science. But like space exploration itself, these investments are only for the brave.

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Coinbase’s offering docs have just dropped [Update]

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Just when you thought you’d seen it all in SEC filings, along comes the Coinbase prospectus. Which is really a direct listing. But who can tell during these days of ICOs and ITOs what a public offering even is.

The cryptocurrency platform which aims to “create an open financial system” is planning to go public via a Direct Listing on the Nasdaq in the near future. The docs dropped an hour ago.

While we dig through the paperwork, we thought we’d just share this gem from the “Definitions” page — the section of an IPO prospectus dedicated to those terms erstwhile investors might not have heard of.

Won’t you look at that:

Hodl: A term used in the crypto community for holding a crypto asset through ups and downs, rather than selling it.

There’s also an excellent use case (with our emphasis):

Borrow & Lend. We allow our U.S. retail users to borrow against and lend their crypto asset portfolios. Our first product is a portfolio-backed loan: a flexible, non-purpose 12-month term loan that allows retail users to borrow U.S. dollars using their crypto assets as collateral. Secured by their investment portfolio, customers can use the line of credit to access U.S. dollars while maintaining a “hodl” investing strategy. Over time, we plan to offer our retail users the ability to opt into lending their crypto assets to earn a passive return on their long term investments.

This is otherwise known in the real financial world as . . . a basis trade.

Meanwhile, Izzy has been pointing out some other curiosities on Twitter:

We’d also add this, which Preston Byrne on Twitter pointed out:

Satoshi as a risk factor, who’d have thought?

More tomorrow, we’ve not even got to the financials yet.





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Coinbase files to become first listed major US cryptocurrency exchange

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Coinbase, the largest US-based cryptocurrency exchange, revealed the scale of its business for the first time in paperwork for a long-awaited public listing that comes during a booming market for bitcoin and other digital coins.

Coinbase generated $1.3bn in revenue last year, up from $534m the year prior, enabling the company to turn a profit of $322m in 2020 after losing $30m in 2019, according to a filing with US securities regulators.

The company’s public debut, the first for a large US cryptocurrency exchange, is likely to rank as one of this year’s largest new tech listings and would mark a milestone for backers of the emerging sector. Coinbase is aiming to list in late March, said one person familiar with the company’s thinking.

Public investors have recently bought up shares in new market entrants such as Airbnb and DoorDash, fuelling a surge in public listings that has drawn comparisons to the 2000 dotcom bubble.

Coinbase filed for a direct listing rather than a traditional initial public offering, meaning it will not raise additional capital when it goes public.

Brian Armstrong, chief executive of Coinbase, warned that prospective investors should expect volatility in the company’s financials.

“We may earn a profit when revenues are high, and we may lose money when revenues are low, but our goal is to roughly operate the company at break even, smoothed out over time, for the time being,” Armstrong wrote in a letter attached to the filing.

Almost all of Coinbase’s revenue came from transaction fees last year, it said in the filing, underlining the company’s dependence on cryptocurrency trading fees.

Shares in the company have recently changed hands in private markets at prices that would give it a roughly $100bn valuation, according to people briefed on the trades, up from $8bn less than three years ago.

Coinbase could use those trades, in addition to input from public investors and its financial advisers, to determine its opening price on public markets.

Coinbase quickly grew into a favoured destination for cryptocurrency traders after it emerged from the Y Combinator start-up programme in 2012. It has recently touted services designed for large institutional investors and a series of acquisitions expanding its reach into software products for cryptocurrency developers.

The company said institutional activity made up almost two-thirds of its total trading volume in the fourth quarter, when transaction revenues jumped more than 70 per cent from the previous quarter to $476m. It said it had 2.8m monthly transacting users in 2020, almost tripling from the year prior.

Coinbase said it oversaw about $90bn in total assets stored on the platform, representing more than 11 per cent of the total market for cryptocurrencies at the end of last year. It has also made venture capital investments in more than 100 companies.

As trading volumes exploded this and last year, the cryptocurrency market has attracted increasing scrutiny from lawmakers and regulators, including over concerns about digital coins being used for money laundering.

In its filing, Coinbase noted the “extensive and highly evolving regulatory landscape” was a risk factor, and that its obligations to comply with various regulations would only increase as the exchange continued to expand internationally.

Among the company’s biggest investors, controlling more than 5 per cent of stock each, are Andreessen Horowitz, Paradigm, Ribbit Capital, Tiger Global Management, and Union Square Ventures.

Goldman Sachs, JPMorgan, Allen & Co and Citigroup are advising Coinbase on the direct listing.



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