• Chris Simpson

“The Presidential Race Is Set”-Market Update August 14, 2020

On Tuesday, Joe Biden finally announced his running mate for the upcoming presidential election: Kamala Harris. This marks the first time that a woman of color was nominated for national office by a major political party (she’s also only the fourth woman in history to be nominated for a presidential ticket).

More on Kamala:

She is the daughter of two immigrant academics, an Indian-American mother and a father from Jamaica. Ms. Harris was raised in Oakland and Berkeley, Calif., attended Howard University in Washington, D.C., and pursued a career in criminal justice before becoming only the second Black woman ever elected to the Senate.

Let’s take a look at some of the business updates from this past week.

Airbnb plans a pandemic IPO

Despite reporting a 67% drop in revenue last quarter, Airbnb has announced that they are still moving forward with their IPO (Initial Public Offering). If you’re not familiar, an Initial Public Offering is just the first time that a private company’s shares are made available to the public. Airbnb hopes to go public by the end of 2020.

➢ This is interesting timing for Airbnb to go public since we are in the middle of a global pandemic and economic shutdown with no end in sight. This will, unfortunately, mean that they will be worth significantly less when they go public than if they had done this last year.

➢ Airbnb bookings have also collapsed by as much as 96% since January.

Despite this not being the most ideal timing, Airbnb can definitely use the money that will be raised by going public. They may be hoping to raise some much-needed capital to help weather the storm. They’ve also been private for 12 years which is an unusually long time for a company as big as Airbnb is.

Facebook now announces “Facebook Financial”

Facebook might win the award for “Company Most On The Move” as it feels like we write about them almost every week. Here are a few of the most recent headlines they’ve made:

1. Facebook Shops - These were announced recently to help compete with Amazon.

2. Reels - Reels were also just introduced in an attempt to copy highly popular competitor, TikTok.

3. Mark Zuckerberg went before congress to testify about Facebook’s actions.

4. Facebook was the subject of the #Stophateforprofit boycott where over 1,000 companies boycotted using the platform’s ads.

In addition to these, Facebook has been at the center of an ongoing debate about election meddling and disinformation. Their most recent headline, Facebook Financial, is about instituting a payment network across the Facebook family of apps (Facebook, Whatsapp, and Instagram, and Messenger).

Facebook has a lot of users across a lot of different platforms and trying to bring everything under one roof has been an initiative of theirs in recent years. They believe that if they can convince users to make purchases across their family of apps, it will make their advertising more valuable (since they will be able to literally track what their users spend money on).

Their goal is to have you sign on to Facebook to scroll your timeline, (virtually) jump into a Facebook Shop, and then pay using Facebook Pay.

This isn’t Facebook’s first jump into the payments industry. Earlier this year they announced a new cryptocurrency initiative called Libra (which has since been scaled back).

Apple and Tesla announce a stock split

This week, both Tesla and Apple announced that they will be instituting a stock split (4-1 for Apple and 5-1 for Tesla).

What does this mean - A stock split just means exactly what it sounds like. One share of company stock gets split into multiple. This means that if you own one share of Tesla stock valued at $1,500, after this stock split you will own 5 shares worth $300 each (still valued at $1,500 total). It’s essentially like cutting a pizza into smaller slices. The size of the pizza hasn’t changed, now there are just more slices to choose from.

What’s the point - Stock splits can help lower the price of a company’s stock to make it more accessible for investors. Some investors might not have $1,500 to drop on a single share of Tesla but might be interested now that a single share only costs $300.

That’s it for this week -- Join us next week for another market update.

Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc.

This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.

All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc.

The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

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