Corona Capital is a column updated throughout the day by Breakingviews columnists around the world with short, sharp pandemic-related insights.
– Palantir Technologies
Narrowing the spread. Everybody gets a little lucky sometimes. And DraftKings, the online sports betting outfit that went public through a special purpose acquisition company in April, is on a hot streak. Covid-19 lockdowns that have kept people out of casinos are sending them to virtual bookmakers in droves. That helped drive a 98% jump in revenue compared with the same quarter last year, to $133 million, as monthly unique users increased almost two-thirds.
DraftKings raised its 2020 revenue guidance, too, sending shares up almost 11% in pre-market trading. That’s a good look not just for online betting, but for SPACs too. Managers of similar vehicles, from former Citigroup bigwig Michael Klein to hedge fund manager Bill Ackman, have been hunting for big, respectable companies that can perform well on public markets, to show that SPACS, which used to be pretty speculative, are more than a roll of the dice. In that respect, DraftKings’ winnings will be widely shared. (By Lauren Silva Laughlin)
Not out of the Shire. Palantir Technologies is on the right path, but needs to go faster. The $24 billion data analytics company unveiled some good news late on Thursday, its first quarter as a public company. Revenue rose 52% compared with the same period last year, it raised its revenue outlook for the year slightly, and said the firm’s concentrated customer base had widened out – the top 20 customers has fallen 7 percentage points to 61% over the past year.
Yet the 17-year-old company is still chalking up losses and its operations burned more than $50 million of cash in the quarter. Its convoluted share structure that leaves control tightly in insiders’ grips makes it hard to do anything if fortunes reverse. The market is increasingly confident growth will eventually outweigh these long-running problems – Palantir’s shares have risen over 50% from its opening price. At 17 times estimated sales over the next 12 months, according to Eikon figures, investors are assuming too much. (By Robert Cyran)
Hot buys. China’s Pinduoduo is on a roll. The $160 billion e-commerce phenom eked out an adjusted net profit in the September quarter – its first since going public two years ago. That, and a blistering 89% year-on-year rise in revenue, to $2 billion, sent its New York shares up by more than a fifth on Thursday.
Even before the latest rally, Pinduoduo’s stock had more than tripled since the start of the year. Amid the pandemic and a shaky economic recovery, the company’s Groupon-meets-Facebook deals app has been wildly popular among Chinese shoppers and bargain-hunters for everything from fresh fruit to electronics. Monthly active users increased by half from a year earlier, to over 640 million – faster than at Alibaba and JD.com. New antitrust rules curbing market dominance may also benefit the smaller challenger. Pinduoduo is catching up, and fast. (By Robyn Mak)
Chemical bonding. Thyssenkrupp is taking a clearer side in the debate over hydrogen and climate change. Reuters reported on Thursday the struggling German industrial giant is removing the “For Sale” sign from its Uhde electrolysis unit, a leading producer of membranes needed to make the gas. The joint venture with Italy’s De Nora could be worth as much as 1 billion euros, says Deutsche Bank.
Chief Executive Martina Merz netted 17 billion euros from the sale of Thyssenkrupp’s elevator division in February. But she could still use some extra cash. The conglomerate’s steel unit was a mess even before the pandemic, with estimated operating losses of 1 billion euros last year. Bloomberg says it might need 5 billion euros of state aid to get back on its feet and pivot towards low-carbon steel. But another crucial ingredient for the latter is hydrogen. Merz’s – and the government’s – thinking may be taking shape. (By Ed Cropley)
WeBurn. More than a year after a failed initial public offering, WeWork is still incinerating cash in its mission to bring shared-office space to the world’s workers. The company, which was eventually bailed out by SoftBank Group, burnt through $517 million in the three months to September. At that rate, its $3.6 billion pile of cash and unfunded commitments will have evaporated by the second quarter of 2022, potentially necessitating more help from SoftBank boss Masayoshi Son.
WeWork Chief Executive Sandeep Mathrani has hope. In a staff memo he argued Covid-19 accelerated a “seismic shift” in office space and boosted the appeal of WeWork’s flexible, short-term leases, Reuters reported on Thursday. If he can keep cutting costs and harness that emerging demand, the strain on cash would ease. But there’s little evidence for his theory yet: WeWork’s revenue slumped by 8% from the previous quarter. The cash fire is still burning for now. (By Liam Proud)