Snap is in talks to buy Chinese selfie drone maker Zero Zero Robotics for $150M-$200M
It looks like Snap is enlisting outside help to advance its expansion into new hardware projects. The U.S. company is in talks with China-based drone maker Zero Zero Robotics over an acquisition, according to a source with knowledge of discussions.
The deal, which was first reported by The Information, is in the range of $150 million-$200 million, the source told TechCrunch. That price would represent quite an outlay, but Snap previously paid upwards of $250 million for social map company Zenly which is its most expensive acquisition to date. (Although Snap hasn’t confirmed its price for Zenly.)
Neither Snap nor Zero Zero Robotics had returned our requests for comment at the time of writing.
Zero Zero Robotics is best known for its Hover Camera drone, which is designed for taking aerial selfies and was on display at our TechCrunch China event in Shanghai last year. The device launched to the public in October, it is sold exclusively by Apple for $500 via both its online and physical retail stores.
When we first began to hear rumors that Zero Zero Robotics had been acquired by a “major U.S. company” earlier this summer, it was easy to assume that it had followed the fate of other drone companies in struggling to build a sustainable business and was seeking a soft landing. Most prominently, Lily, a Kickstarter success story, was forced to shutter earlier this year due to financial issues.
Snap does have a track record in shopping for bargains among defunct drone companies. The fact that Lily had held unsuccessful acquisition talks with Snap as an alternative to closing and that Snap reportedly did acquire drone firm Ctrl Me Robotics, which was about to shutdown, played into that theory. While increased competition from drone pioneer DJI, which announced its own take on Hover Camera, the $499 Spark drone, may well have put some heat on the Hover Camera.
However, these negotiations are not driven by failure. Not only is Snap in talks to pay a lot more than the $25 million which Zero Zero Robotics has raised from investors to date, but, according to The Information, the Chinese company actually approached Snap over a potential investment — and that turned to a prospective acquisition.
For Snap, the deal makes sense as it looks to push its hardware business on from its Spectacles product. While another, more advanced iteration of the wearable camera glasses that could include augmented reality technology is currently under development, as TechCrunch recently reported, Snap has shown a desire to get into drones as part of its broadening focus on being a camera company.
Snap once looked into developing its own drones in house, according to a New York Times report, but in the end it looks to have opted to lean on specialists outside of the company.
Snap is under pressure from Wall Street to show growth, which could explain why it is prepared to pay a large sum to get a product that is already in the mark. Its stock just came out of the dreaded lock-up period, when insiders are able to sell their shares, relatively unscathed, but its current value of $13.10 is well down on the $17 that it priced its IPO at in March.
Kosmos to test investors’ energy appetite with London listing
Flotation is first for a large oil group on UK bourse since crude prices fell in 2014
Kosmos Energy is aiming to become the biggest oil and gas company to join the London Stock Exchange since the oil price slide three years ago, in a test of investor sentiment towards the sector.
The Dallas-based explorer is to pursue a secondary listing on London’s main market in addition to its existing membership of the New York Stock Exchange.
Kosmos, which had a market capitalisation of $2.5bn in New York on Tuesday, has earned a reputation as one of the most successful international exploration companies after a string of big discoveries off the coast of west Africa.
Andrew Inglis, Kosmos chief executive, said the company wanted to widen its shareholder base beyond the US, where offshore exploration has been eclipsed by onshore shale oil and gas production in investors’ affections.
“The US shareholder base has become very focused on shale and we believe there is a better understanding in the UK market of the opportunities that exist in conventional offshore exploration,” he told the Financial Times.
Kosmos already has strong ties to the UK as a partner of London-listed Tullow Oil in Ghana and with BP in Senegal and Mauritania.
The listing, planned to take place before the end of September, comes as the oil industry gradually stabilises after three years of pain since crude prices crashed from above $100 per barrel in 2014.
UK investors still carry scars from heavy losses on debt-laden companies such as Premier Oil, EnQuest and Tullow during the downturn. Kuwait Energy, a Middle East-focused oil and gas company, has so far failed to get its planned London initial public offering off the ground since announcing an intention to float in May.
However, Mr Inglis said he was confident of an enthusiastic reception for Kosmos because it has a healthier balance sheet than most peers with $1.2bn of available liquidity, strong cash flow from production in Ghana, and one of the biggest potential resource bases among independent explorers.
“This is not about raising money,” said Mr Inglis. “It’s about diversifying the shareholder base to reach investors who cannot currently access our shares.”
Mr Inglis said New York would remain the company’s primary listing and Dallas its headquarters.
Founded in 2003, Kosmos has had success in “frontier” oil territories along the west coast of Africa, exploring areas considered too risky by rivals or taking a second look in places where others had drawn blanks.
This approach led to the 2007 discovery of the Jubilee field in Ghana — one of the largest in African waters for years — followed by others nearby which, together, produced an average 132,000 barrels of oil per day in the first half of this year. Of this, Kosmos’s share amounted to 26,900, with the rest going to partners including the operator, Tullow.
Further discoveries have come in Senegal and Mauritania, which led to a $1bn deal with BP last December. A “major” gas find off Senegal in May increased confidence behind predictions that the area could hold up to 50tn cubic feet of gas — comparable with some of the world’s biggest offshore gas developments of recent years.
As well as additional exploration in Senegal and Mauritania, Kosmos also has licences off the coast of Suriname in South America close to where ExxonMobil recently gave the go-ahead for its giant Liza oil field in neighbouring Guyana.
Mr Inglis said Kosmos would stick to its strategy of investing in exploration and bringing in partners when oil and gas is found. “We’re good at frontier exploration but the development and production phases require the skills of Big Oil,” he added.
Jacobs Engineering Nears Deal to Buy CH2M Hill
Acquisition increases Jacobs’s exposure to infrastructure and government-services business; Trump’s promised infrastructure package would boost sector
Jacobs Engineering Group Inc. JEC 1.01% is nearing a deal to buy CH2M Hill Cos. for $2.85 billion, in an effort to capture more lucrative infrastructure and government-services business.
A cash-and-stock deal for the engineering-services firm is expected to be announced Wednesday, people familiar with the matter said.
CH2M, based in Englewood, Co., is one of the largest employee-controlled companies in the U.S., according to its website.
While CH2M has a share price, it isn’t publicly traded on a stock exchange. The company’s board determines its stock price each quarter based on the performance of the business. Shares of CH2M currently have a price of $50.69.
The deal is expected to value CH2M at $88.08 a share and will be structured using 60% cash and 40% in Jacobs stock, one of the people said.
CH2M was founded in 1946 and works on projects such as the expansion of the Panama Canal and a 15.5-mile tunnel designed to improve London’s sewage system. It has around 20,000 employees and in 2016 logged revenue of $5.2 billion.
A year ago, private-equity firm Apollo Global Management LLC bought a minority stake in CH2M in a deal that valued the company at roughly $2 billion.
Jacobs is based in Dallas. It serves the aerospace, infrastructure, industrial and energy sectors, building space-systems facilities for NASA and designing plans for highways, bridges, tunnels and airports, among other projects. It had $10.9 billion in revenue in 2016.
Engineering and construction companies are expected to get a lift from President Donald Trump’s promised $1 trillion infrastructure-spending package. As a result, investors have plowed money into stocks of companies in the sector. Jacobs stock has nearly doubled this year, for example, giving it a market value of about $6.3 billion.
CH2M has exposure to fast-growing and profitable segments of the infrastructure and government-services sector that are attractive to Jacobs. Acquiring the company is expected to produce $150 million in annual cost savings too, according to one of the persons familiar with the matter.
If a deal is signed, it would be one of the largest ever in the engineering industry, after Aecom’s roughly $4 billion deal to buy URS Corp. in 2014. There have been a number of other deals recently, including the acquisition, completed this month, of WS Atkins PLC by Canada’s SNC-Lavalin Group. In March, Amec Foster Wheeler PLC and John Wood Group PLC also agreed to merge.
Dow +0.33% S&P +0.24% Nasdaq +0.23% Russell +0.22%
US Market Closed Higher. Eight of eleven sectors managed to settle in positive territory. The top-weighted financials (+0.8%) and technology (+0.5%) spaces exhibited relative strength with financials extending its week-to-date advance to 1.4%. The technology sector's most influential component--Apple (AAPL 150.05, +1.32)--moved sharply higher in the final minutes, adding 0.9%, ahead of its afternoon earnings release.Sprint (S 8.87, +0.89) led the telecom services space (+0.3%) to another win, its fifth in six sessions, after beating bottom-line estimates and raising its profit guidance. It's also worth noting that the company believes an M&A announcement will come "in the near future." S shares settled higher by 11.2%. energy sector (+0.1%) managed to eke out a victory despite crude oil's negative performance; the commodity dropped 2.0% to $49.19/bbl, ending its six-session winning streak. ILMN +10%, PZZA +8%, FEYE / AAPL / VVV +6%, TEX +3.5%, ALL +2% higher and RSYS -26%, AMC -25% MTSI -21%, COHR / BGFV -14%, ULTI -12.3%, FARO / SPWR -10% lower following earnings/guidance. Apple (AAPL) suppliers : CRUS +4.2%, SWKS +3.4%, AVGO+2.7%, QRVO +2.7%, ADI +0.7%.
Asian MArket : The Apple effect rippled across the region with tech names surging to highs (Hynix 3%; LG Innotek 9%; Murata 4%). Trump said to be planning to force China to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market; though no specifics were given.
Nikkei +0.54% Hang Seng +0.62% CSI +0.27% Shanghai +0.24% Shenzen -0.15%
Eur$ 1.1824 CNH 6.7317 CNY 6.7267 JPY 110.78 GBP 1.3208 CHF 0.9662 RUB$ 60.3453 WTI$ 48.80 -0.73%
S&P +0.11% EuroStoxx +0.06% FTSE +0.15% Dax +0.10% SMI +0.59%
Macro :
- Goldman CFO Says Low Volatility Continuing Into Third Quarter
- Goldman Sees Oil Majors Thriving at $50/Bbl as Cash Flow Rises
- Brazil’s Real at 2-Month High as Temer Seen Surviving: Inside EM
Keep an eye on :
- ANA SM : Acciona to Redeem Remaining 3% 2019 Bonds Early
- AKE FP : Arkema Lifts Full-Year Target as 2Q Ebitda Climbs 17%
- SPR GY : Axel Springer First Half Sales EU1.7 Bln
- ACA FP : Credit Agricole Sees ‘Favorable Conclusion’ of Italy Purchase
- BMW GY : BMW’s Duesmann Says Co. Never Discussed Defeat Device: SZ
- CBK GY : Commerzbank 2Q Loss of EU 637M Versus Estimates for EU547M Loss
- CSGN VX : Credit Suisse Is Said to Plan $1B Quant Fund Spin Out: HFM Week
- FCA IM : Fiat Chrysler Investor Suit Over Defect-Reporting is Narrowed
- G IM : Generali 1H Net Beats Estimates; Combined Ratio 92.9%
- BOSS GY : Hugo Boss Comp Store Sales Climb for First Time in Two Years
- LUPE SS : Lundin Petroleum Second Quarter Ebitda Beats Estimates, Revises Guidance as Edvard Grieg Outperforms
- LHA GY : Lufthansa Reaffirms FY Forecast for Adj. Ebit to Rise
- MS IM : Vivendi Limiting Mediaset Vote Rights Is Said Insufficient: Rtrs
- KN FP : Natixis 2Q Net Climbs 28%; Revenue Beat Estimates. Natixis Posts Very Strong Results, Shares May Rise: Jefferies
- KN FP : Natixis Has No Plans for ‘Massive’ Moves Out of London: CEO
- PFV GY : Pfeiffer Vacuum Second Quarter Ebit Misses Lowest Estimate
- GLE FP : SocGen 2Q Net EU1.06b, Matching Estimates; Legal Charge Booked
- UBI IM : UBI Banca Says It Has Received Notice of Indictment Request
- VIV FP : Vivendi Limiting Mediaset Vote Rights Is Said Insufficient: Rtrs
- VNA GY : Vonovia Confirms FY FFO I Forecast, Investment Program on Track
>>> Up
* BBVA Raised to Buy at Independent Research, PT EU9.20
* Deutsche Post Raised to Buy at Commerzbank, PT EU41
* EON Raised to Neutral at Citi
* H&M Raised to Neutral at Goldman, PT SEK215
* Italgas Raised to Buy at SocGen, PT EU5.12
* Morrison Raised to Hold at HSBC, PT GBP2.40
* OMV Raised to Equal-weight at Morgan Stanley, PT EU49
>>> Down
* Auto Trader Cut to Underweight at JPMorgan, PT 353p
* Hikma Cut to Equal-weight at Morgan Stanley, PT 1,600p
* Man Group Cut to Neutral at Citi
* Scout24 Cut to Neutral at JPMorgan, PT EU34
* SES Cut to Underweight at JPMorgan, PT EU18
>>> Initiation
* Aegean Marine New Hold at Odeon Capital
* Babcock New Outperform at RBC, PT 1,100p
>>> Call
Closing Market Summary: Equities Tick Up on TuesdayThe equity market registered a modest win on Tuesday as the Dow Jones Industrial Average (+0.3%) climbed to another record close, its fifth in a row. Trading was fairly tight, leaving the S&P 500 (+0.2%) within a seven-point range from start to finish. The Nasdaq (+0.2%) also finished in the green, but stopped short of reclaiming all of Monday's decline.
Eight of eleven sectors managed to settle in positive territory. The top-weighted financials (+0.8%) and technology (+0.5%) spaces exhibited relative strength with financials extending its week-to-date advance to 1.4%. The technology sector's most influential component--Apple (AAPL 150.05, +1.32)--moved sharply higher in the final minutes, adding 0.9%, ahead of its afternoon earnings release.
Sprint (S 8.87, +0.89) led the telecom services space (+0.3%) to another win, its fifth in six sessions, after beating bottom-line estimates and raising its profit guidance. It's also worth noting that the company believes an M&A announcement will come "in the near future." S shares settled higher by 11.2%.
American automakers tumbled on Tuesday following some disappointing sales figures for the month of July. General Motors (GM 34.76, -1.22) dropped 3.4% after reporting a 15.0% year-over-year decline in total U.S. sales. Meanwhile, Ford Motor (F 10.95, -0.27) slipped 2.4% after reporting a year-over-year decline of 7.5%.
The U.S. auto market has struggled so far in 2017 following seven straight years of growth. Today's slide leaves Ford shares and GM shares with year-to-date losses of 9.7% and 0.2%, respectively.
Still, despite automakers' tumble, the consumer discretionary space (+0.2%) settled in line with the broader market. Under Armour (UAA 18.30, -1.72) was the sector's weakest component, dropping 8.6% to its lowest level in nearly four years, after announcing a restructuring plan and lowering its guidance for the fiscal year.
The energy sector (+0.1%) managed to eke out a victory despite crude oil's negative performance; the commodity dropped 2.0% to $49.19/bbl, ending its six-session winning streak. The downward move came on the heels of a Bloomberg survey that suggested OPEC crude output rose by 210,000 barrels per day in July.
As for the three sectors to finish in the red--industrials (-0.2%), health care (-0.2%), and consumer staples (-0.1%)--losses were relatively modest. Within the industrial space, Cummins (CMI 157.48, -10.42) was the weakest performer, dropping 6.2%, after missing bottom-line estimates.
Biotechnology names weighed on the health care sector, evidenced by the 1.0% decrease in the iShares Nasdaq Biotechnology ETF (IBB 315.77, -3.32). Meanwhile, Dow component Pfizer (PFE 33.08, -0.08) registered a modest loss of 0.2% following a mixed earnings report; PFE beat earnings estimates but fell short of revenue expectations.
In Washington, Senate Majority Leader Mitch McConnell (R-KY) announced that Congress plans to take up tax reform following its August recess, which concludes on September 4.
U.S. Treasuries rallied in a curve-flattening trade on Tuesday after June Personal Income and June Construction Spending both came in short of estimates; the benchmark 10-yr yield dropped four basis points to 2.25% while the 2-yr yield surrendered just one basis point, settling at 1.35%.
Reviewing Tuesday's economic data, which included June Personal Income and Personal Spending, June Construction Spending, and the July ISM Index:
- Personal income was unchanged in June (consensus +0.3%) after a downwardly revised 0.3% increase for May (from 0.4%). Personal spending rose 0.1%, as expected, while the prior month's reading was revised to 0.2% from 0.1%. The core PCE Price Index, which excludes food and energy, increased 0.1%, as expected.
- The key takeaway from the report is that the inflation data supported the market's preconception that the Fed is unlikely to raise the target range for the fed funds rate at its September meeting.
- The Construction Spending report for June declined 1.3% while the consensus expected an increase of 0.5%. The prior month's reading was revised to 0.3% from 0.0%.
- The key takeaway from the report is that the 1.6% year-over-year growth rate in total construction spending is the second-lowest growth rate since 2011.
- The ISM Index for July declined to 56.3 from an unrevised reading of 57.8 in June while the consensus expected a downtick to 56.2.
- The key takeaway from the report is that its core components all remain in a growth mode. According to the ISM, if the PMI for July is annualized, it corresponds to a 4.1% increase in real GDP annually.
On Wednesday, investors will receive just two pieces of economic data--the weekly MBA Mortgage Applications Index and the ADP Employment Change Report for July (consensus 187K). The two reports will be released at 7:00 ET and 8:15 ET, respectively.
- Nasdaq Composite +18.2% YTD
- S&P 500 +10.6% YTD
- Dow Jones Industrial Average +11.1% YTD
- Russell 2000 +5.3% YTD
After Hours Summary: ILMN +10%, PZZA +8%, FEYE / AAPL / VVV +6%, TEX +3.5%, ALL +2% higher and RSYS -26%, AMC -25% MTSI -21%, COHR / BGFV -14%, ULTI -12.3%, FARO / SPWR -10% lower following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: ILMN +10.2%, OMI +9% (light volume), PZZA +7.9% (also authorizes $500 mln increase to its share repurchase program), CORT +7.1%, GNW +6.2% (also merger agreement deadline with China Oceanwide extended to November 30, 2017), FEYE +6.1%, AAPL +6.1%, VVV +5.6%, VNOM +5.4%, FMI +5% (light volume), BOOT +4.9%, HBI +4.6%, GSS +4.5%, LOPE +4.1%, LNTH +4%, DXCM +3.5%, TEX +3.5%, FMC +3.4%, BZH +2.9% (ticking higher), EYES +2.5%, ALL +2.3%, FANG +2%, ZAGG +1.7%, PAYC +1.7%
Companies trading higher in after hours in reaction to news: OGXI +15.4% (Achieve Life Sciences closed previously announced merger with OncoGenex; to commence trading on NASDAQ Capital Market on August 3 under ticker symbol ACHV), CLDX +5.7% and DRYS +4% (continued strength), OCUL +2% (approves strategic restructuring to eliminate a portion of the workforce; appoints Antony Mattessich CEO), DISCA +0.5% (CFO disclosed purchase of 20000 shares worth more than $460K), T +0.3% (won a place on the U.S. General Services Administration's Enterprise Infrastructure Solutions technology purchasing program)
Apple (AAPL) suppliers / related tech names are higher: CRUS +4.2%, SWKS +3.4%, AVGO +2.7%, QRVO +2.7%, ADI +0.7%After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: RSYS -25.8%, AMC -24.5% (sees Q2 rev below consensus; sees net loss including write-down of NCMI investment; announces restructuring), MTSI -21.4%, COHR -14.2%, BGFV -13.7%, ULTI -12.3%, FARO -9.8%, SPWR -9.6%, NANO -8.2%, PXD -6.9%, UIS -6.3%, MTCH -6.2% (also names Mandy Ginsberg to succeed Greg Blatt as CEO), MRCY -5.9%, TRUP -4.7%, HLF -3.8% (also promotes Dave Pezzullo to Chief Operating Officer), EOG -2.9%, FISV -2.5%, FTR -2.5%, VOYA -1.9% (also discloses entry into Master Agreement for Outsourced Services with Cognizant Technology Solutions), GLUU -1.5%
Companies trading lower in after hours in reaction to news: TNXP -4.1% (discloses entry into Sales Agreement with Cowen and Company to sell shares of its Common Stock having an aggregate offering price of up to $9 mln), WAC -3% (entered into a Restructuring Support Agreement with its senior lenders holding more than 50% of the loans and/or commitments outstanding), RGC -2.8% (following AMC downside guidance), DKS -1.3% (following BGFV results), FSLR -1.3% (SPWR sympathy), COST -0.3% (announces death of co-founder and Chairman of the Board Jeff Brotman)
Asia Mid-Session Market Update: Apple results boost tech names; China PBOC to use a wide array of measures to keep liquidity stable
***Asia Summary***
- The Apple effect rippled across the region with tech names surging to highs (Hynix 3%; LG Innotek 9%; Murata 4%) after Apple reported better than expected results and iPhone sales. Bond yields softened after tepid inflation lowered expectations for the Fed to hike rates again this year. Dollar weakness remains though moves are muted today. New Zealand Q2 employment came in weaker than expected causing the Kiwi to fall 35pips. In Australia June building approvals fell for the 10th consecutive month y/y to -2.3%, but was better than the expected decline of 11%. Crude oil fell after a surprise inventory build in the weekly API data.
- Trump said to be planning to force China to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market; though no specifics were given.
***Key economic data***
- (NZ) NEW ZEALAND Q2 UNEMPLOYMENT RATE: 4.8% V 4.8%E; EMPLOYMENT CHANGE Q/Q: -0.2% V 0.7%E; Y/Y: 3.1% V 4.1%E
- (AU) AUSTRALIA JUN BUILDING APPROVALS M/M: 10.9% V 1.0%E; Y/Y: -2.3% (10TH CONSECUTIVE DECLINE) V -11.0%E
- (JP) JAPAN JUL MONETARY BASE Y/Y: 15.6% V 17.0% PRIOR; MONETARY BASE END OF PERIOD: ¥468.3T V ¥468.0T PRIOR
***Speakers and Press***
Hong Kong
- (HK) Hong Kong Chief Exec Lam: H1 property prices +6% y/y; to set up panel to discuss land supply
China
- (CN) China FX Regulator SAFE said to be examining loan guarantees for top dealmakers - financial press
- (CN) China PBOC said to use a wider array of instruments to keep liquidity stable in August - Chinese press
Korea
- (KR) US may send 2 aircraft carriers to South Korea to engage in military drills - South Korean Press
- (KR) US Sec of State Tillerson: US has been trying to apply 'peaceful pressure' on North Korea, but options are limited
Japan
-(JP) Bank of Japan (BoJ) Funo: Reiterates price momentum is still not sufficient for CPI target, still halfway to 2% price target
Other
- (UK) National Institute of Economic and Social Research (NIESR): BoE should not wait until Brexit has occurred to raise rates
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.6%, Hang Seng +0.4%, Shanghai Composite +0.1%, ASX200 -0.4%, Kospi +0.2%
- Equity Futures: S&P500 +0.1%; Nasdaq +0.8%, Dax +0.1%, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1818-1.1794; JPY 110.70-110.31; AUD 0.7974-0.7942; NZD 0.7474-0.7416
- Aug Gold -0.6% at 1,265/oz; Sept Crude Oil -0.9% at $48.74/brl; Sept Copper -0.2% at $2.87/lb
- (AU) Australia sells A$900M in 2.75% 2028 bonds, avg yield 2.7523%; bid-to-cover 2.93x
- (CN) China PBOC OMO injects CNY120B in 7-day and 14-day reverse repos v CNY170B prior in 7-day
- USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.7205 V 6.7148 PRIOR
- (KR) South Korea sells KRW2.6T in 2-yr monetary stabilization bonds; avg yield 1.64% v 1.66% prior
***Equities notable movers***
Hong Kong/China
- SJM, 880.HK Reports H1 (HK$) Net 955.4M v 1.09B y/y; Rev 20.6B v 21.0B y/y; -8%
Japan
- Honda,7267.JP Reports Q1 Net ¥207.3B v ¥174.7B y/y; Op ¥269.2B v ¥266.8B y/y; Rev ¥3.71T v ¥3.47T y/y; Raises outlook; +3.2%
- Toyota, TM Reports July US sales +3.6% y/y, 222K units v 206.9Ke; -5%
Australia
- QBE.AU To refund A$15.9M in add-on insurance premiums – ASIC; -1%
Korea
- Doosan Infracore,042670.KR Reports Q2 (KRW) Net 60.4B v 62.4Be, Rev 1.77T v 1.76Te; +2%
Bitcoin splits into two as transaction volumes increase
Forking exposes differences over crypto currency’s future
much-anticipated split into two currencies has taken effect, triggering a process that some fear could divide and undermine the crypto currency community.
Following an ideological conflict over the future of bitcoin, as transaction volumes increase to unmanageable levels, rebel users on Tuesday created a new version of the currency known as Bitcoin Cash.
As the crypto currency market now grapples with the most significant change in its architecture to date, it could still be days before the long-term effects of the change are known.
But with Tuesday’s so-called “hard fork” upgrade flying in the face of a separate agreement made by community heavyweights in New York in May, analysts say the development exposes a crisis at the heart of the community.
“You’ve got various vested interests at work fighting for the future of the bitcoin network,” said Charles Hayter, chief executive of CryptoCompare. “How the network develops and forms will define it . . . now we have an experiment at work.
“It is like the Greek city state, there are various political systems with money involved.”
Bitcoin’s systems have been threatened by a recent surge in popularity, which has seen its value jump to over $2,697, from around $997 at the start of the year. As transaction levels increase, the currency has run up against inbuilt limitations in its ability to process payments.
Bitcoin only allows one megabyte of data to be added to its ledger of asset ownership, the blockchain, every 10 minutes — a restriction that has caused huge delays and higher fees as transaction levels increase.
Bitcoin Cash, which launched on exchanges such as China-based ViaBTC and multinational Kraken on Tuesday, also uses the blockchain but allows 8Mb of data to be added every 10 minutes.
Investors will be given both versions of the currency once the split has been finalised.
Masterminded by a breakaway group including former Facebook engineer Amaury Sechet, Bitcoin Cash is thought to favour larger mining pools, which are predominantly found in China.
It is also supported by Craig Wright, the Australian who last year failed to prove decisively he was Satoshi Nakamoto, the architect of bitcoin, but who many people still consider influential in the market.
Many data miners switched to the new currency, which began trading on Tuesday. Bitcoin itself fell 6.1 per cent to $2,697.
The alternate proposal to Bitcoin Cash is known as Segwit2x. It is designed to facilitate more transaction processing capacity off the main blockchain, using so-called sidechains or compatible systems such as the Lightning Network.
Some commenters in online forums fear it may take days before enough blocks are forged to make Bitcoin Cash credible.