Gapping down
In reaction to earnings/guidance:
- CTRN -7.5%, CAH -6.7%, LULU -5.7%, BFI -4.8%, EXEL -3.9%, AMRN -2.8%, TLYS -2.6%, RPID -1.5%
Other news:
- TTWO -7.2% (Zynga and Take-Two (TTWO) to merge in cash and stock deal which values the total enterprise at approx. $12.7 bln)
- LFC -2.8% (reports Chairman and Secretary under disciplinary review and investigation by the Central Commission for Discipline Inspection and the National Supervisory Commission)
- KOR -2.2% (to delist from NASDAQ)
- TSLA -2% (Elon Musk tweets that full self driving price will increase to $12,000 on Jan 17)
Analyst comments:
- ABNB -3% (downgraded to Neutral from Overweight at Piper Sandler)
- LVS -2.7% (downgraded to Underperform from Neutral at BofA Securities)
- GLPI -1.8% (downgraded to Underperform from Buy at BofA Securities)
- HLT -1.1% (downgraded to Mkt Perform from Outperform at Bernstein)
Gapping up
In reaction to earnings/guidance:
- TLRY +6.4%, NSTG +5.3%, NVTA +2.9%, EXAS +2.4%, TSM +1.8%, HOLX +1.7%, NVRO +1.7%, ALNY +1.2%, OSW +1.1%, CMC +1%, FIGS +1%, WEC +0.8%, ASX +0.8%
Other news:
- ZNGA +51.7% (Zynga and Take-Two (TTWO) to merge in cash and stock deal which values the total enterprise at approx. $12.7 bln)
- APR +24.6% ( to be acquired by Owens & Minor (OMI) for $37.50/share in cash)
- MOLN +21.7% (Molecular Partners and Novartis Report Positive Topline Data from Phase 2 Study for Ensovibep (MP0420), a DARPin Antiviral Therapeutic for COVID-19 )
- IPSC +12.1% (Century Therapeutics and Bristol-Myers (BMY) enter collaboration agreement to develop iPSC-derived allogeneic cell therapies)
- DNAY +8.3% (strategic collaboration and licensing agreement with Pfizer)
- OCGN +6.9% (reports COVAXIN booster dose study demonstrates robust immune responses and long-term safety)
- SWAV +6.4% (received takeover interest according to Bloomberg)
- BMRN +5.6% (Announces Stable and Durable Annualized Bleed Control in the Largest Phase 3 Gene Therapy Study in Adults with Severe Hemophilia A; 134-Participant Study Met All Primary and Secondary Efficacy Endpoints at Two Year Analysis)
- ORTX +5.5% (Announces Recent Commercial and Regulatory Progress for Late-stage HSC Gene Therapy Programs and Outlines Key 2022 Milestones)
- BEAM +4.9% (Reports Progress Across Ex Vivo and In Vivo Pipeline of Base Editing Therapeutics and Outlines Key Anticipated 2022 Milestones; Beam Therapeutics and Pfizer (PFE) enter exclusive multi-target research collaboration to advance novel in vivo base editing programs for a range of rare diseases)
- SDC +2.8% (CFO Kyle Wailes to step down)
- HGEN +2.2% (aligns with FDA on potential registration phase 3 study for lenzilumab with CAR-T)
- PTRA +1.9% (Postive Barrons article)
- CVAC +1.6% (publishes timeline for several program)
Analyst comments:
- INFY +2.4% (upgraded to Positive from Neutral at Susquehanna)
- GOSS +2.3% (upgraded to Outperform from Neutral at SMBC Nikko)
- H +2% (upgraded to Buy from Underperform at BofA Securities)
- AR +1.2% (upgraded to Outperform from Market Perform at BMO Capital Markets)
- GNRC +1.2% (upgraded to Buy from Neutral at UBS)
Video Games Already Do What the Metaverse Just Promises
Virtual hangouts, digital currency, weddings? Online games have been making space for these things for decades.
Hanging out in virtual spaces? People have been doing that in Second Life for years. COURTESY OF LINDEN LAB
LAST MONTH,The New York Times wrote about something that was hardly new or newsworthy: a wedding in the “metaverse.”
The bride wore a flower crown with a gray, buttoned skirt fit for a midtown office. The groom resembled Jeff Bezos. At the reception, there were guests and a stage and a photo slideshow. Everything was familiar, except the venue. Where were they? Turns out, the bride’s corporate attire wasn’t too out of place. Instead of a church or hall, their wedding took place in the “metaverse,” specifically an unknown, low-fi virtual world called Virbela, an outgrowth of realty company eXp World Holdings, which employs both halves of the couple.
Let’s be clear about one thing: There is no metaverse. At least not yet. No one really agrees on what a metaverse is, but averaging together the more credible definitions yields a persistent, social cyberspace that intersects with the IRL economy and integrates with other online platforms. Right now, nothing is doing this at any notable scale. Instead, we have a couple of well-attended virtual worlds like Second Life, a handful of popular massively multiplayer online role-playing games like World of Warcraft, and a lot of tech companies salivating over a new way to brand their sprawl of digital products and services. And, of course, there’s also Virbela and its kin of strange, underpopulated thingies snatched right out of a 2005 iteration of Internet Explorer.
There is definitional gristle, of course. Tech companies have discovered the benefits of characterizing a metaverse as a continuation of their own products or services. Meta, for example, has decided that virtual reality integration is essential to a metaverse; and conveniently, its Horizon Worlds runs on the company’s Oculus Quest headset. Then there are the blockchain companies preaching the essentiality of their own coins to their own cyberspaces. Now, after almost a year of hype, it has become marginally easier to separate meat from metaverse fat. What we’re dealing with here is cyberspace—connected, incarnated, and economized. There’s still just one problem. Everything actually desirable about this metaverse resembles a pared-down version of the online games millions have been playing for decades.
It’s been more than 20 years since wedding bells first rang in Second Life. Game developer Square Enix included mechanics for sending out invitations, composing vows, and exchanging rings in 2002’s Final Fantasy XI. Outside of nuptials, online games already provide the most compelling functions associated with the “metaverse”—often, with greater graphic fidelity, more complex social systems, and at a significantly larger scale. As professional cyberspace architects and governors, it is game developers who have iterated on and mastered the two to three actually promising attributes of a metaverse, mostly revolving around socializing in virtual worlds.
Since 1996, players’ furry avatars have stood around cybering in MMORPG Furcadia’s 32-bit meadows. Yet here we are, more than two decades later, hearing tech executives preach about things digital catgirls were doing back then. It would be cute if it weren’t so unsettling to see those executives doing it with that same bravado. Mark Zuckerberg’s delirious pitch to build the future of work in Meta’s metaverse evokes early tech journalists’ breathless forecasting about how, in some brave new world to come, corporate culture would migrate onto Second Life. There we would be, they promised, floating our winged Sonic the Hedgehog avatars to each other’s cubicles to talk about the Dow Jones. School, too, would be uploaded, technologists believed. “Aaron Delwiche, an assistant professor at Trinity University in San Antonio,” reads one 2004 WIRED article, “often gathers students in his Games for the Web class in an unlikely classroom: the metaverse known as Second Life.”
“Yes, it is amazing how quickly we forget about things that are not at the top of the news feed,” says Philip Rosedale, cofounder of Second Life creator Linden Lab. At the height of Second Life fever in 2006, he says, more than 500 articles were written about it per day. Today’s metaverse excitement isn’t quite as grand, but those working on the new crop of platforms could benefit from revisiting the hype of yore. “People designing these systems today (in particular the more complex things like governance and moderation) would do well simply to go back and read through some of the thousands of articles about virtual real estate, weddings, legal disputes, banking, music concerts, big brand invasions, and the like,” Rosedale says.
What are Decentraland or Horizon Worlds giving us that Second Life did not? More barriers to entry, it seems. To access Horizon Worlds, users must purchase a $300 Oculus headset from Meta. In Decentraland, users need crypto wallets for the game’s proprietary ERC20 token, and in its most popular “experience,” avatars mill about in a low-poly field next to a “Coin Cart” selling the proprietary cryptocurrency.
Even with virtual currencies and digital asset ownership, video games got there first. Games have had sophisticated virtual economies that meaningfully intersect with IRL ones for decades. The in-game intrigue of Eve Online, released in 2003, once prompted a user to spend the equivalent of $30,000 on a virtual space ship. That amount may sound dinky compared to today’s NFT prices, but bear in mind that Eve Online’s economy is also so intricate, so involved, that it employed its own economist to oversee the market. As far back as 2010, Entropia Universe users were collectively investing hundreds of thousands of dollars in virtual real estate in the form of space docks for ships and biodomes.
Remember this, then, when some sect of metaverse preachers says notions of “ownership” are lacking in games. A metaverse, they might argue, would be more “real” because business conducted in it would translate elsewhere. It could be very cool to own—really own—in-game outfits and items, through NFTs, they suggest. Bring my Keanu Reeves Fortnite skin over to World of Warcraft, for example, or use my favorite Valorant gun in Counter-Strike: Global Offensive. It’s a pretty picture; and even pushing aside copyright hurdles or the logistics surrounding competing game companies dismantling years’ worth of code to integrate brand-friendly cosmetics, there is one glaring issue: The target audience doesn’t seem into it. Ubisoft’s December decision to integrate NFTs into Ghost Recon Breakpoint and other games, in the form of artificially scarce in-game items, was met with mass skepticism, even derision. On top of the environmental impact of NFTs, many players said, it seemed like a shameless money-grab.
A month later, the president of Square Enix, Yosuke Matsuda, announced the company’s interest in NFTs, acknowledging potential backlash up front: “I realize that some people who ‘play to have fun,’ and who currently form the majority of players, have voiced their reservations toward these new trends, and understandably so,” he wrote. “However, I believe that there will be a certain number of people whose motivation is to ‘play to contribute.’”
Even if Matusuda is right and video games do start looking more like "metaverses," and vice versa, it will still be a long time before even the most advanced virtual worlds reach any kind of Snow Craft-ian level of functionality or usefulness. For a metaverse to be truly interoperable, change-leading companies like Meta will have to work with other technology companies like Epic Games or Square Enix to stitch together their platforms and services. This seems unlikely, considering the past decades have shown tech companies are more inclined to consolidate than cooperate. It worked when big fish like Meta (then Facebook) were buying smaller ones like Oculus, but getting all the big fish into one happy pond seems doubtful—and would produce a whole new set of problems.
It’s also challenging to imagine a metaverse that can scale to accommodate anywhere near as many digital bodies as there are physical ones browsing the internet today. And part of why it’s unfathomable is because the games industry has already proven that server space is a limiting factor. Amazon, which owns Amazon Web Services, a backbone of the internet, also runs the MMORPG New World which, at launch, couldn’t accommodate the number of players attempting to log in. Final Fantasy XIV welcomed 87,831 concurrent players one day in early December, all sharing space, dancing, singing, playing music, buying dresses, and of course fighting dragons; but to enter many of the game’s servers, there was a 5,000-person wait.
The things that make the promise of a metaverse intriguing, for the most part, already exist in online games. And much of what remains of that promise is unappealing, impossible, or greedy. That’s why, over the last year-plus of lockdown, not one existing virtual world has been in a position to capture corporate meetings and ecommerce. Online games, in the meantime, bloated to accommodate a baser and more prevalent desire: to be together and relate as people, not as workers or consumers.
Maybe it was the wrong time, just like Second Life was wrong for corporations in 2004. Maybe all we need are $300 Oculus Quest 2 headsets to feel like we are really there. Or, perhaps, fun and games were the best uses for cyberspace after all.
Microsoft Hit by Defections as Tech Giants Battle for Talent to Build the Metaverse
Around 100 people on the team developing Microsoft’s HoloLens augmented-reality headsets have left, mostly to Facebook parent Meta
Microsoft Corp.’s MSFT 0.05% augmented-reality team has lost around 100 people in the past year, many of them to Meta Platforms Inc., FB -0.20% said former employees of the software company and online job profiles, as the battle heats up for workers with skills to build the metaverse.
Competitors have been snapping up people with experience developing Microsoft’s HoloLens augmented-reality headsets, sometimes offering to double their salaries, said former Microsoft employees. The Microsoft augmented-reality group employs around 1,500 people, they said.
The LinkedIn profiles of more than 70 former employees on the HoloLens team show they have left Microsoft in the past year. More than 40 joined Meta, formerly known as Facebook, which is making a big push into alternate-reality tech, the LinkedIn profiles show.
The departed staffers include some longtime leaders of the team. Charlie Han, who was responsible for taking customer feedback for HoloLens, left over the summer to join Meta. Josh Miller, who worked in the display team, became the display director at Meta in recent months. Mr. Han and Mr. Miller didn’t respond to requests for comment about the moves.
A Microsoft spokesman said the company has been at the forefront of innovation in metaverse technology for years and “will keep advancing state of the art hardware that is more immersive, affordable and in various form factors.”
The company declined to share details about the HoloLens team but said that employee attrition is a regular challenge many teams face and that Microsoft does what it can to retain employees and hire new ones when needed.
Meta declined to comment about its recruiting practices.
Top tech companies poaching from each other and from smaller companies is nothing new. What is notable now is the scale and speed as a big company like Meta tries to grow quickly, said Matt Stern, chief operating officer at Mira Labs Inc., a startup that helps organizations adopt augmented reality for their workplaces.
“It’s driven up prices in the market,” he said. “It’s difficult for smaller companies to compete.”
In October, Facebook changed its name to Meta and said it would be repositioning the company around the metaverse. It said spending on the new unit for the effort would dent its total operating profit by around $10 billion in its 2021 results. The company said it plans to hire many more employees to build out its metaverse products, including 10,000 workers in Europe over the next five years.
Microsoft isn’t the only company facing Meta’s growing appetite for talent. Apple Inc. AAPL 0.10% is also losing employees to Meta, according to former Microsoft employees who have moved to Meta and LinkedIn profiles of former Apple employees. Bloomberg previously reported on Apple’s attempts to limit departures. Apple declined to comment.
The metaverse is a largely unrealized virtual realm where proponents say people will work, play, learn and shop. Tech leaders like Microsoft, Meta and Apple are pouring billions into building the augmented- and virtual-reality hardware and software that could become the building blocks of this emerging digital world.
Virtual reality completely immerses users in a virtual world—a videogame for example—with a headset closed off from the real world. Meta’s Oculus dominates that headset market with around 75% share in 2021, according to research firm International Data Corp. There were 9.4 million VR headsets sold last year, a number that could rise to 13.6 million by the end of this year, according to IDC.
Augmented reality overlays digital content, such as 3-D images or visual instructions, onto a user’s view of the real world. Some in the tech industry see it as a bigger market opportunity than VR eventually but more difficult to develop. Only around 325,000 AR headsets were sold last year. That number could jump to 1.35 million units this year, according to IDC.
Most tech titans are now planning to release their own smart glasses, which are regular-size glasses that include some AR capabilities, so engineers with experience with AR and VR are seeing their profiles and salaries soar. The use of the term metaverse has skyrocketed in job listings. The share of job listings that mentioned the metaverse in December was more than 10 times the level a year earlier, according to the job site Indeed.
Microsoft was one of the first movers in augmented reality. HoloLens was first announced more than five years ago and has evolved into one of the world’s most advanced headsets. While it has focused on business applications, it is developing a lighter, more affordable version for consumers as well, though it is likely years away from hitting the market, said the former Microsoft employees.
Meta is also working on AR glasses, prompting its hiring binge, said the former Microsoft employees. In September, it made an early step into the market with a pair of smart glasses in a partnership with EssilorLuxottica SA, maker of Ray-Ban glasses. For now, they include more basic functions such as taking pictures and short videos.
Because Microsoft has been ahead of the competition on AR, its employees make particularly attractive targets for headhunting, said analysts.
“Until someone else ships another AR product, Microsoft still has quite a bit of a head start in the AR space,” said Jitesh Ubrani, research manager at IDC.
Microsoft Chief Executive Satya Nadella announced the first-generation HoloLens back in 2015. Rather than peddling its headset as a consumer platform for gaming and entertainment, Microsoft has focused on using it as a productivity tool for workplaces.
Microsoft has invested billions of dollars into developing the technology, but the HoloLens headsets, which cost $3,500 each, have sold little relative to popular consumer electronics.
Microsoft has shipped between 200,000 and 250,000 HoloLens units since launch, estimates IDC. Some senior leaders at Microsoft even considered reducing funding of the HoloLens program before the team won a big military contract, said people familiar with their thinking.
Last March, Microsoft won a U.S. Army contract to develop ways to use AR headsets to help soldiers see through smoke and navigate battlefields. The contract could be worth more than $20 billion over the next 10 years, said Microsoft.
Since then the company hasn’t hired enough engineers to handle the additional work, said the former employees. This made some staff question Microsoft’s commitment to developing the technology, making them more likely to accept offers from competitors, they said.
The army project ran into unexpected technical difficulties. For example, bringing high-quality, night-vision capabilities into the HoloLens proved difficult, said the former employees. The departures could now make it more difficult to address these kinds of challenges, they said.
Microsoft said it has a strong team and is making progress on the project.
SEC Pushes for More Transparency From Private Companies
‘Unicorn’ firms have a huge impact and ‘absolutely no visibility’ for regulators, says SEC Commissioner Allison Lee
WASHINGTON—The Securities and Exchange Commission is preparing to force more transparency from big private companies, as regulators grow concerned about the lack of oversight of the private fundraising that has fueled their rise.
Private capital markets have become an increasingly popular way for companies to raise money in the U.S. in recent decades, allowing firms to acquire funding from institutions and wealthy individuals without the regulatory burdens of going public. The number of so-called unicorns—private companies valued at $1 billion or more—has continued to grow even amid the recent boom in initial public offerings.
The SEC, Wall Street’s top regulator, has begun work on a plan to require more private companies to routinely disclose information about their finances and operations, according to a semiannual rule-making agenda and people familiar with the matter. It is also considering tightening the qualifications that investors must meet to access private markets, and increasing the amount of information that some nonpublic companies must file with the agency.
“When they’re big firms, they can have a huge impact on thousands of people’s lives with absolutely no visibility for investors, employees and their unions, regulators, or the public,” said Democratic SEC Commissioner Allison Lee, who has called for the change. “I’m not interested in forcing medium- and small-sized companies into the reporting regime.”
The SEC’s push is at an early stage, but it is likely to garner stiff resistance from Silicon Valley and other sectors, such as oil and natural-gas infrastructure, that rely heavily on funding from private markets. The information that public companies have to disclose—about their earnings, business outlooks, risks and manager pay—is closely guarded by private companies.
Promising young companies typically source much of the money they need to grow from venture-capital funds, private-equity firms and wealthy individuals. Small individual investors have to wait until a company conducts an initial public offering to get in on the action.
Regulators and investor advocates have worried for years that public stock and bond markets, where companies must meet the SEC’s strict disclosure requirements, are losing their allure for startups.
They also say the abundance of private capital has enabled many of the best startups to delay going public for years, turning the traditional IPO into little more than an opportunity for wealthy insiders to cash out. Highlighting these concerns, two-thirds of the companies that went public in the U.S. in 2021 were trading below their IPO prices at the end of the year.
And despite last year’s record IPO volume, private markets have continued to grow. According to research firm CB Insights, there are currently 959 private companies valued at more than $1 billion, up from 513 at the end of 2020.
Federal statute requires companies with more than 2,000 shareholders “of record” to register their securities with the SEC and periodically disclose key information, whether or not they have conducted an IPO. But that threshold is rarely crossed because SEC rules allow an unlimited number of people to own shares in “street name”—through the same broker-dealer or investment vehicle—and be counted as one shareholder.
“The SEC has been intentionally undercounting shareholders for decades,” said Tyler Gellasch, executive director of the Healthy Markets Association, an investor trade group.
Now, the agency is working on a proposal that would enable regulators to look under the hood of such entities for a more complete shareholder tally. Its goal is to push large, private companies into the same disclosure regime that their publicly traded counterparts face.
It is unclear how many private companies could be forced to register with the SEC under the plan. In large part, that is because regulators have little visibility into the shareholder base of private companies.
The largest U.S. unicorn is financial-services company Stripe Inc., which was most recently valued at $152 billion. According to data provider PitchBook, it has 79 active investors. Some of them are individuals, such as billionaires Peter Thiel and Elon Musk. But others are venture-capital funds, mutual funds and private-equity firms, which can pool the investments of many shareholders.
A spokesman for Stripe declined to quantify the company’s shareholder base.
A recent analysis by advisory firm Different Funds, part of Assure Services Inc., found that the median number of investors in venture-capital funds—known as limited partners—has more than doubled over the past five years to 63 in 2021. But even that figure can be misleading, because a limited partner can also represent a pool of investors.
“For a private company that’s received funding from venture-capital or private-equity funds…you could probably get to 2,000 investors pretty quickly,” said Marc Ponchione, a partner at Debevoise & Plimpton LLP’s investment-management group.
The impact of the SEC’s planned changes will likely depend on the types of entities the agency decides to look through. One option would be to count each investor in a feeder fund—a vehicle set up by broker-dealers to pool assets from multiple clients for private-market deals—as distinct shareholders of record. A more aggressive path would be to count the number of people investing through a venture-capital fund or private-equity fund.
Because the plan is at an early stage, such decisions have yet to be made, according to a person familiar with the matter. But Ms. Lee, fellow Democratic commissioner Caroline Crenshaw, and key members of SEC Chairman Gary Gensler’s staff have all expressed a desire to draw more companies into the public markets.
Doing so would also increase the impact of Mr. Gensler’s plans to scale up disclosure requirements for public companies around climate change and other issues, supporters say.
Industry lawyers say the transparency sought by the SEC would hit companies with the cost of going public—regularly producing reams of paperwork—without any of the benefits.
Republican SEC Commissioners Elad Roisman and Hester Peirce said the plan would hurt growing companies in need of capital. They added that the 2012 JOBS Act raised the number of shareholders a private company can have without registering with the SEC to 2,000 from 500, to allow companies greater flexibility.
“Lowering these thresholds may both contradict the express will of Congress and potentially undermine our mission to facilitate capital formation,” Ms. Peirce and Mr. Roisman said in a joint statement on Dec. 13, after the SEC updated its rule-making agenda.
Early premarket gappers
- Gapping up:
- MOLN +19.3%, OCGN +8.4%, BEAM +8%, SWAV +6.4%, BMRN +5.6%, NSTG +5.3%, PTRA +3.4%, HGEN +3.2%, HOLX +3%, SDC +2.4%, CVAC +1.9%, EXAS +1.6%, ALNY +1.2%, EVRG +0.8%, MGM +0.8%
- Gapping down:
- EXEL -3.8%, LFC -2.5%, KOR -2.2%, PXLW -0.5%