Aerie Rises, Fargo Falls, Hanjin Sinks | French Toast & Finance #1
Welcome to the first installment of French Toast & Finance! If you want to catch up on this week’s business news, I’ve got you covered. So, on this beautiful Sunday morning, pour yourself a big mug of coffee and enjoy some warm French Toast with these bite-sized bits of business news.
Aerie’s Acension- $AERI gains $13.74 in two days
If you haven’t yet heard of Aerie Pharmaceuticals’ skyrocketing stock, you must be living in Antarctica. The biotech company’s announcement that they had received positive phase 3 trial results for their glaucoma treatment Roclatan. This is very good news for the company, as the $2.5 billion glaucoma drug market is held by a few firms, none of whom really control the space. The drug isn’t just the product of hype: a combination of Aerie’s drug Rhopressa, which was also filed for FDA approval, and a drug called PGA latonoprost, Roclatan outperformed both of those drugs separately in clinical trials.
What has investors truly salivating is not just the drug’s positive FDA outlooks, but Aerie’s apparent dedication to spur growth. Aerie announced that, on top of a successful $50 million dollar funding round, they will be conducting another public equity fundraising round, in which they intend to sell $75 million in common stock. This additional $125 million will supply Aerie with the cash they need to sustain operations, development, and market their new drugs, which should hit the market as early as 2018. This is an exciting company, and while they seem a good target for acquisition, their latest funding rounds suggest they plan to stay solo.
Wells Fargo Isn’t Doing So Well
Imagine you had a button, and if your button gets pushed by customers enough times each month, you get money. Naturally, that seems like incentive to provide killer customer service and improve your salesmanship, right? That’s what Wells Fargo management thought, until their employees realized that it doesn’t matter who presses the button, as long as it gets pressed! Wells Fargo gave employees monthly quotas for opening accounts, and it looked like all was going well. This is important, since Wells Fargo uses these numbers to estimate their quarterly sales and revenues.
In order to meet these quotas, Fargo employees started opening ghost accounts, credit cards and checking/savings accounts with real people’s names and information, that hadn’t been opened by the people whose names appeared on the accounts. Wells Fargo even billed these people without their knowledge!
The bank has been fined a total of $185 million, of which $100 million comes in the form of the largest ever fine from the Consumer Financial Protection Bureau. In response, over 5,000 employees have been fired and the stock has tumbled to a present price of $45.43. The good news? Wells Fargo has finally incited some bi-partisan agreement in Congress… senators both Republican and Democrat are demanding a full explanation.
iPhone Sales Overshadow EU Tax Ruling
Call it boring, un-inventive, cry over lost earbud wires, Apple couldn’t care less, as their newest iPhone 7 has shattered previous pre-sale records.
While Sprint reported that this year’s per-order numbers were up by more than 375% compared to last year. No, I didn’t forget a decimal point: three hundred and seventy five percent. Apple announced that for the first time ever they will not be publishing initial sales numbers, so there is no solid figure for iPhone sales. But that doesn’t seem like it will be an issue. (Apple’s stock has surged to $114.92)
This news couldn’t come at a more needed time for Apple. The sales numbers and media attention have helped the public forget the fact that the European Union just fined Apple for fourteen billion dollars. But hey, that’s why you’re reading this; because you know that some of the most important news can be pushed to the side in favor of other stories. The iPhone 7 sales are still enormous indicators of Apple’s success; not only because it proves there is still an appetite for new iPhones, but because the subtle and not-so-subtle features and design of the iPhone 7 signal a step Apple is taking towards changing the entire world of personal computing.
That aside, let’s talk about the EU. The European Union has found Apple guilty of evading taxes by funneling their European revenues through their European headquarters, located in the tax haven of Ireland. The EU has accused Ireland of giving Apple a sweet-heart deal that cheated the EU out of fourteen billion dollars in due taxes. Ireland, of course, denies that anything illegal occurred, and Apple says it will be appealing the ruling. So this ruling really has no bearing on Apple’s finances in the near-term (or in the long run, really… I mean, they have a couple hundred billion in cash overseas), but it raises some questions about the EU and business there: Will the EU go after other corporations incorporated in Ireland? Will Ireland consider leaving the EU if pressured (they have said no)? Is the EU overstepping its bounds and making it more difficult to do business overseas? If you have any theories/opinions on these issues, I’d love for you to leave a comment.
Twitter live-streams football, stock surges
Twitter made a natural business move on Thursday, and live-streamed their first full NFL game. As a fan, I don’t really see the appeal: now everyone at your game day party can sit and stare at their phones? Strategy-wise, though, this is a great move. While it might seem this option would make parties a bit less social, that would be ignoring the fact that everybody watching the game is already absorbed into their phones.
Twitter has worked hard to make in-roads with live television, and studios have embraced it, posting Tweets and conversational hashtags during shows. Because of this second-screen phenomenon, in which almost nobody watches television without also engaging their mobile device, Twitter had two moves in order to stoke further engagement: either let you stream Twitter on your TV next to game coverage, or consolidate both into the device in your hand. Really, there was only ever one choice.
Twitter is positioning itself to be the main media provider in your life. Will it succeed? It just might, and the stock market seems to like their odds, with $TWTR shares buoying to $19.11, a week-long high.
Hanjin bankruptcy leaves hundreds of people, billions of dollars stranded.
Hanjin Shipping, South Korea’s largest shipping company, has gone bankrupt. Ports around the world, save a few in America, have denied Hanjin access to terminals to unload their cargo, which is valued at some $14 billion. Apparently nobody thinks you can pay docking fees when your company is $5.4 billion in debt; go figure. With these port refusals, ships carrying workers, an art student, and cargo are simply floating in over 80 ships around the world.
At the time of writing, 3 ships have already been purchased by other firms, and this is an opportunity shipping companies should take advantage of. The industry as of late has not been the best business to be a part of, but the low prices sparked by Hanjin’s desperate need of cash will help companies expand their capabilities cheaply and quickly. This actually deserves a much more in-depth article… Good thing I wrote one! Read it here:
Tesla tells Mobileye, “It’s not me, it’s definitely you.”
Tesla announced Thursday that they were officially splitting with Mobileye, the company contracted by Tesla to help develop their Autopilot program. Mobileye’s stock had been on a positive tear for the most part before the announcement, as their services have drawn interest from other automakers looking to enter the autonomous car market. Tesla confirmed that they would be updating their Autopilot with radar-based systems that Tesla claims would have helped prevent Autopilot-related crashes. Why did this prompt a breaking of ties? Because the software Tesla is sending out to drivers is not developed by Mobileye.
Tesla confirmed their in-house development of driver-less software and components, claiming that Mobileye found out about this and tried to pressure Tesla into paying more for Mobileye services and hardware. Mobileye instead maintains that they decided the split was the best move, as Tesla is promoting dangerous uses for Autopilot, inflating its capabilities that encourage unsafe driving (The word “driving” is important: Mobileye urges drivers to use Autopilot to assist in, not to take over the task of driving). Mobileye has more than Tesla as clients, but the EV manufacturer really put them on the map and was a major client. As such, Mobileye has come out the loser in this feud, their stock falling $1.27 to $42.94.
While splitting with the company responsible for giving Autopilot its vision may seem like it would reduce Tesla’s prospects, its shares have actually risen $4.98 per share to $205.40. This makes sense: Tesla announced they have their own team developing autonomous technology, meaning their driver-less vision is still going strong, and now there are no fees to be paid to a third party.
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I’ll be putting out a weekly roundup every Sunday, as well as other posts on… not Sundays (there must be a better way to say that).
Have a fantastic week and I’ll see you next Sunday.
I almost forgot- Let’s Go Steelers!
