TheChek News Flow

Recently departed (but still friend of the site!) Mark Gurman went on the Jay and Farhad Show podcast this evening and gave his predictions for WWDC 2016 and beyond. Most of the conversation material was either posted previously on 9to5Mac or elsewhere but there were certainly some new “whispers”…

The biggest news about WWDC is that it won’t likely have hardware product announcements. Jordan reported that yesterday and it was reiterated on the podcast. But there would be some announcements across the four Apple operating systems (yes, three are iOS-based but marketing-wise there is iOS, MacOS, tvOS, watchOS).

MacOS will get Siri which will come to the top right corner and was covered at length back in February plus the new MacOS name which we’ve noted previously. Photos will see upgrades.

Changes on iOS which all fall in line with expectations with the possible exception of what Gurman called a whisper or something that isn’t 100% and shouldn’t be reported as fact: iMessages money transfer via Apple Pay. While Google has had this for quite some time, this would be a big shift for Apple users and has been rumored since last year.

* Changes on iOS:

- iOS design refresh. More colors. Notifications will change. Tweaks in operating system.

- Big enhancements to Photos. System-wide feature like Mail Markup sketches. Snapchat/Skitch-y. More pro editing options in Photos.

- Apple Music app. More Spotify-ish. A lot more black. More album art. User interface refresh but not low level. Main menu change.

- Siri is going to be a big part of the keynote (used to control music, text, calls, email, etc). On iPhone, Siri SDK will be released. The reason why it is taking so long is privacy concerns. Will apps have to be approved to be part of the SDK?

- iMessage to get financial transfers via Apple Pay?

- New encryption software?

* On Later this year and beyond:

- MacBooks will get Touch ID and an OLED screen above keyboard (as reported by KGI two weeks ago)

- Next iPhone: Not three year cycle, one year cycle. Simplifies antenna lines. Removal of headphone jack plus waterproofing.

- iPhone 2017 will be bigger screen with no bezels. Touch ID behind the screen (reported on Daring Fireball).

- “Is Apple exciting? The car project is.”

Recharge is a new mobile app that allows users to rent rooms for $40 an hour, or 66 cents a minute — and it insists that on-demand hanky-panky is not the idea.

Instead, Recharge says its users are ordering room service as they prep for business meetings, catch conference calls, and take quick naps and showers ahead of lunches and dinners.

“If you talk to the general managers of these hotels, initially there was a concern” that unsavory trysts would top the menu, admits Justin Caldbeck of Binary Capital, which just led a round of $2.3 million in seed funding for the year-old app.

“But the use cases they’re seeing are not brothel-use cases.”

Indeed, Caldbeck likens any giggling about Recharge to early, overhyped claims across Silicon Valley that Snapchat was little more than a sexting platform.

“The reality is that [sexting] was never a majority or even meaningful minority of [Snapchat] use,” according to Caldbeck.

Recharge has Snapchat-size ambitions when it comes to growth, with its backers likening its disruptive potential to Uber, Airbnb and Priceline.

“Imagine a world where my flight lands, and I can quickly book a Recharge, access a room-service menu in the app, order it, and when I show up the room service is there,” Caldbeck said.

“That’s not something today that any of these hotels are able to offer or even trying to.”

For the past year, Recharge has been testing at three hotels in its hometown of San Francisco, owned by Hyatt and Starwood. But insiders say it aims to expand into New York and Los Angeles later this year.

Bad News!!!!

J.P. Morgan Chase & Co. is loosening its collar, adopting a more casual dress code as the bank tries to stay in step with the tastes of clients and technology upstarts.

In a break from tradition, the largest U.S. bank by assets is allowing employees to wear business-casual attire on most occasions, according to an internal memo reviewed by The Wall Street Journal.

The move—trading pinstripes for pullover sweaters—is relatively unusual for a Wall Street bank, in which suits are typically required for men and women due to longstanding industry customs and the etiquette involved in dealing with wealthy clients.

It also reflects the ever-changing world of banking, in which big financial institutions are constantly evolving to stay relevant as financial technology firms attempt to take away business and as many bank clients, including in Silicon Valley, continue to shun formal wear.

Though most other big banks haven’t changed their dress codes, some have casual summer Fridays, and other financial-services firms are beginning to let employees know it is all right to dress down.

Accounting-and-consulting firm PricewaterhouseCoopers moved to a more casual dress code a few weeks ago, allowing employees to wear jeans so long as there are no client meetings.

“This is all part of a pivot as large organizations like ours try to do more and more listening to our employees,” said PricewaterhouseCoopers Vice Chairman Tim Ryan. “The banking industry has similar challenges…we are in a war for a decreasing talent pool.”

Mr. Ryan, who takes over as the firm’s chairman July 1, said he went shopping more than once to find the right jeans, shirts and shoes for the office. His six children helped advise him.

“Authenticity is very important to this generation of job seekers,” said Nancy Gill, former head of human resources for J.P. Morgan’s investment bank who is now a talent-development consultant.

Big banks could use relaxed dress codes to compete for talent with the likes of Google, Facebook Inc. and hedge-fund firms whose employees favor more comfortable garb.

It isn’t the first time banks have adjusted. During the late 1990s technology boom, some banks, including J.P. Morgan, also toned down their dress codes. But after the financial crisis, bankers started dressing more formally again.

Banks then said, “we want to look professional and are fighting for business,” said Lissa Broome, a professor of banking law at the University of North Carolina’s School of Law.

In the memo, J.P. Morgan spelled out that athletic clothing, including sweatpants, leggings and yoga pants, aren’t acceptable, nor are halter tops, flip-flops, hats or hoods. “Distracting, tight, revealing or exceptionally loose or low-cut clothing” isn’t allowed either, according to a copy of the dress code.

But casual pants, capri pants, polo shirts and dress sandals are OK, according to the dress code. Jeans and athletic shoes aren’t considered business casual unless communicated otherwise by the manager, though they already are allowed at certain sites.

J.P. Morgan said if an employee’s appearance or attire isn’t acceptable under the guidelines, then the person’s manager can ask the employee to leave, change clothes or subject that person to disciplinary action “up to and including termination of employment.”

“Business casual is not weekend casual, and if you’re seeing a client you should dress for that client,” according to the memo.

The bank said the change “reflects how the way we work is changing.” Bank branch employees will still wear apparel from a recently expanded Chase uniform collection.

The memo was sent just weeks after J.P. Morgan’s management committee, which includes Chairman and Chief Executive James Dimon, returned from a Silicon Valley trip to meet technology companies. After the meetings, J.P. Morgan executives felt the bank’s policy was out of sync with other industries, a person familiar with the bank’s thinking said.

Some J.P. Morgan employees said executives, including Mr. Dimon, already had begun dressing down a few years ago, while others noted that employees wore more casual pants after seeing the memo Thursday night.

“It’s a sign of the times,” one managing director said. “Half my meetings now, the clients aren’t in ties.”

Another managing director said khakis and a polo shirt would be rare at the bank’s investment-banking hub on Madison Avenue in Manhattan. Younger workers, some said, would be less likely to dress down because they are looking to impress and could always be pulled into an unexpected client meeting.

The firm’s private-bank and wealth-management businesses will be closely watched, as executives weigh employee comfort versus conveying conservative formality to the bank’s wealthier, older clients, bankers said.

J.P. Morgan already has casual Fridays in many locations, with some of its 237,000 employees going with business casual attire if they don’t have clients in the building.

More broadly, about 50% of senior managers said employees wear less-formal clothing than they did five years ago, research from OfficeTeam, a unit of consultant Robert Half International Inc., showed, while 31% of office workers would prefer to be at a company with a business-casual dress code.

The most common dress-code violation? Wearing overly casual clothing, followed by showing too much skin, according to the survey.

In 2013, Barclays PLC began allowing casual Fridays, although the bank stipulated that more-formal outfits were a must for “all client and external meetings, for interviews, and for customer and client-facing areas.”

The bank last year adjusted the policy, spelling out that no flip-flops are ever allowed, among other changes.

In 2010, UBS Group AG sent some of its Swiss retail banking staff a 43-page code giving guidelines on how to impress customers with a polished appearance. The move was part of a test UBS was carrying out in Switzerland across five retail branches. The bank has since ended that pilot program, a person familiar with the matter said.

A paradox is brewing in Silicon Valley and beyond. Entrepreneurs and venture capitalists have spent the past decade creating bulletproof technology companies, a direct response to the Valley’s 1990s failures. The private firms—such as Uber Technologies, Dropbox, and Airbnb—have legitimate business models that are disrupting mature markets, and capital has poured in. The so-called unicorn class now has 147 members, each with a value, on paper, of at least $1 billion.

But the mythical beasts are running into a mundane reality. While venture capitalists are eager to pump money into the potential “next big thing,” individual investors are hardly clamoring to get into the act. There hasn’t been an initial public offering for a Silicon Valley–based tech company in seven months.

The IPO lull isn’t just in tech. Five months into the year, just 31 companies have gone public in the U.S. That’s down from 69 in the first five months of 2015, and 115 over the same five-month period in 2014, according to Renaissance Capital, manager of IPO exchange-traded funds, including Renaissance IPO (ticker: IPO). While the public’s coolness has been well reported by the business press, there’s a more important message buried beneath the headlines: The bad news for IPOs could be a bullish sign for the market.

Since 2000, there have been eight calendar years with fewer than 100 IPOs. In the 12 months following each of those years, the Standard & Poor’s 500 index climbed an average of 13.1%, including dividends, according to data compiled by Jay Ritter, a University of Florida professor who has studied the IPO market for 35 years. In the 12 months following a strong year for IPOs—100 or more offerings—the S&P 500 lost an average of 1.2%.

There are many factors at play here. A robust IPO market typically comes during a period of irrational stock market exuberance. IPOs peaked at 677 in 1996 and averaged 474 in the late 1990s before the Nasdaq crashed in early 2000. They picked up steam again in 2004, heading into the housing crash. Usually, rising markets beget more IPOs, which adds to the paradox of the current climate. “The lack of IPOs when stock indices are near their record highs is unprecedented,” Ritter says.

Bankers, lawyers, and accountants say a confluence of events has contributed to the current IPO lull. The brutal stock market crash of 2008-09 has curbed investor enthusiasm for speculation, and, not coincidentally, new sources of liquidity have emerged for company founders and insiders. At the same time, regulatory changes have simultaneously made it easier to stay private and harder to be public.

And in a business where timing is everything, getting it wrong is more devastating than ever. Take Square (SQ), the financial technology firm, which went public in November. The stock has struggled to maintain its IPO price, which was already lowered by bankers prior to the offering. Other notable tech outfits that went public last year, including Fitbit (FIT), Box (BOX), Etsy (ETSY), and Pure Storage (PSTG), have suffered even worse fates.

CURIOUSLY, WHILE IPOS have faded, venture-capital firms are still cashing in through mergers and acquisitions. M&A for VC-backed companies has held fairly constant for the past decade, at about 120 mergers per quarter. The first three months of 2016 saw 112 such VC-backed deals, according to Dow Jones VentureSource.

Put another way, the IPO weakness is less about the sellers and more about suddenly discerning buyers. “The IPO market has become more institutional, because most individual investors and their advisors are buying indexed products,” says Kathleen Smith, principal at Renaissance Capital. “They are not in there flipping IPOs. The individual investor participation, which tends to be the easy money, is not there, and it’s very unlikely to come back.”

Thus, Uber continues to grow behind closed doors. Last week, the ride-hailing service raised $3.5 billion from Saudi Arabia’s Public Investment Fund. With a $62.5 billion valuation, Uber is more valuable than 85% of the companies in the S&P 500. Lodging-rental platform Airbnb already rivals the world’s largest publicly traded hotel companies, with a value of $25.5 billion.

But there are cracks forming in the lavish world of private investment that go beyond the unicorn class. A year ago, venture-capital investments were being made at a median valuation close to $60 million, a record high. The valuation fell precipitously in the first three months of this year, to $19.7 million, according to Dow Jones VentureSource.

Many think the corrections are necessary to revive the IPO market. Square’s IPO price valued the company below its last round of private investment, leading some to believe that companies and bankers were taking the corrective needed to restore public offerings. Instead, the market for tech IPOs entered an even-deeper freeze, leading to the current seven-month lull.

There are new signs that the freeze might be thawing, albeit slowly. Several small IPOs have priced in recent weeks. San Francisco–based Twilio filed its IPO papers two weeks ago, suggesting it could be listed soon. The firm, which helps companies build mobile-communication tools, is valued at $1 billion, according to a Wall Street Journal/Dow Jones VentureSource database.

James Palmer, head of equity capital markets for the Americas at UBS, says IPOs have been complicated by a host of global events this year, including the timing of the Federal Reserve’s interest-rate hikes, the Spanish election, and the U.S. election. “I think you’ll see the real IPO retest in 2017, as it relates to Silicon Valley,” he says.

EVEN IF ALL OF THE UNICORNS find a way to go public, it won’t change a broader point: U.S. IPOs are in long-term decline. From 1980 to 2000, an average of 310 companies went public every year, according to Ritter. Since then, the average has fallen to just 111. The Nasdaq has recovered from its dot-com bubble woes, but IPOs have not.

The new dynamic has forced mutual funds to look at private firms for growth opportunities. Fidelity Investments, T. Rowe Price Group, and Wellington Management all have sizable stakes in unicorns, though they remain a small slice of their total holdings.

Andrew Boyd, head of global equity capital markets at Fidelity, views the moves as down payments on long-term investments, and he expects the companies to go public when they’re ready—even if it takes some time. Fidelity invested in Facebook (FB) prior to its IPO, for example, and is now its largest investor.

“The detriments have grown,” Boyd says of going public, but “the benefits have not shrunk. You just have to need to be more prepared than you were in the past.”

In effect, Fidelity and others have created a well-funded minor-league system in which companies can hone their business models outside of the public spotlight. Public investors are spared pain when immature companies flame out. A similar path in the 1990s might have spared investors much agony.

MOST PARTICIPANTS in the IPO process say being public has become a hassle that’s best avoided for as long as possible. The U.S. Congress obliged, to a certain degree, when it passed the JOBS Act in 2012. While the legislation was intended to ease the IPO process for small companies, the net effect has been to stall the market.

In one key provision, the JOBS Act allowed companies to accumulate up to 2,000 private investors before being forced to disclose public-company type information, and that limit no longer includes employees granted stock as compensation; previously, the limit was 500. The original, lower figure forced Facebook to go public in May 2012, before it was ready. While Facebook is thriving today, the stock stumbled out of the gate, mainly because it had not yet figured out how to make money on smartphones.

PwC has built a consulting practice to avoid those scenarios, says Mike Gould, a PwC partner and its IPO-services leader. The firm offers an IPO-readiness assessment and provides counseling on how to go—and how to be—public. “Fifteen years ago, we used to get a phone call that said we’re putting a registration statement together in the next few months. It was very much a fire drill,” Gould says. “Now, we’re generally getting the phone call two to three years earlier. It’s a more orchestrated process.”

Josh Bonnie, an IPO-focused partner at law firm Simpson Thacher & Bartlett, has more to discuss with clients since Congress passed the Sarbanes-Oxley Act in 2002, which raised the bar for public-company disclosures. “The truth is the IPO market took a one-two punch,” he says. “The tech bubble crashed in 2000—that dried up a lot of the flow of new companies to the market. We had a financial crisis, and Congress responded with the Sarbanes-Oxley Act. The bottom line is that it became more expensive to be a public company. It just naturally shifted the cost-benefit analysis for companies to stay private until they were bigger.”

Congress is also using public companies to advance policy goals. Bonnie points to mineral mines in the Congo, which are helping to fund warfare. Instead of passing a law against the importation of the minerals, Congress pointed its quill at public companies, requiring a new set of disclosures. “When you’re a public company, you get hit with all this public-policy stuff,” Bonnie says. “It’s just become that much more of a hassle.”

Notes UBS’ Palmer: “With the speed and availability of information, which has come concurrently with the advent and growth of the hedge fund industry, stocks move like lightning, particularly at lofty valuations, where there aren’t traditional earnings metrics.”

Fitbit, the activity-tracking pioneer, has delivered a series of better-than-expected quarterly reports after going public last June. Even so, its shares are down 26% since then, and the company’s every move is being tracked in the harsh light of the stock market. The company’s new smartwatch was deemed a failure by investors months before it hit the shelves. By the time the watch was available, it barely mattered; the stock had already fallen 50%. Decent sales for the watch have hardly revived the stock.

LAST YEAR, Nasdaq (NDAQ)—the still-dominant market for tech stocks and a major beneficiary of IPOs—agreed to buy SecondMarket Solutions, a well-known marketplace for private stock. The acquisition will bolster Nasdaq’s own fledgling private-market business, which includes Pinterest, DocuSign, Shazam, and Tango, all members of the $1 billion-plus unicorn club. In a 2015 year-end report, the unit, known as Nasdaq Private Market, said transaction volume had reached $1.6 billion, a slight uptick from 2014.

Shortly after the SecondMarket deal was announced last year, Nasdaq CEO Bob Greifeld told Barron’s that it would prove significant over the coming years. “I certainly think it’s our job to provide to companies that want to stay private for a longer period of time the ability to bring liquidity—one, to their employees, and two, to their early-stage investors,” he said. “That need is there.”

The typical company on the private Nasdaq exchange is now nine years old with 440 employees and is worth $1.8 billion. “This profile is similar to the traditional definition of a public mid-cap company,” Nasdaq Private Market noted in its recent report. “The line between public and private is becoming increasingly arbitrary.”

April’s rebound in consumer spending after a six-month slump brightened the investment horizon last week.

The Return of Shopping

Spring found consumers in the mood for...shopping. April’s rebound in consumer spending after a six-month slump brightened the investment horizon last week. The 1% rise from the previous month marked the fastest rate of growth since August 2009. Accounting for two-thirds of the U.S. economy, consumer spending is a closely watched barometer of economic strength, and the latest data are seen as a sign that better times are ahead.

Demand for consumer durables was at the heart of the spending spree, with the category gaining 2.2% during the month, compared with a measly rise of 0.02% the previous month. Motor-vehicle purchases accounted for much of the strength.

Confidence grew along with personal-income levels, as wages and salaries increased amid a tight labor market. Personal incomes grew at a healthy 4% pace year over year in May on a nominal basis. At the same time, the savings rate eased to 5.4% in April, the lowest level this year, from 5.9% in March. Private payrolls rose by 173,000 in May, according to payroll firm Automatic Data Processing, higher than expected but below the stronger pace of a year ago, when 207,000 jobs were created.

The shoppers were out in force at Michael Kors Holdings (ticker: KORS) last quarter and turned the beaten-down stock into a star performer.

The London-based “affordable” luxury fashion house, best known for its handbags and accessories, posted strong fiscal fourth-quarter and year-end results that beat expectations, and also bested year-ago results. The company has been struggling with declining mall traffic and department-store weakness as well as sluggish watch and handbag sales. The stock rose nearly 16% on the week, closing Friday at $48.46, up from $41.66 where it opened Tuesday following the long Memorial Day weekend. It’s up 20% for the year so far, but still down 17% since mid-March, when Barron’s ran a favorable feature on the company.

While Kors expects full-year earnings of $4.54 to $4.64 a share on flat revenue, compared with the Street estimate of $4.50 a share on a 3% gain in revenue, it offered a gloomy outlook for the current quarter. It now sees adjusted earnings of 70 cents to 74 cents a share, on revenue of $940 million to $950 million, as spending on new stores and digital ventures increases. That is well below the consensus view of 94 cents on more than $1 billion in sales.

Clearly, investors looked beyond the current quarter as they bid up the stock.

The United Kingdom goes to the polls June 23 in a referendum to decide whether the country should remain in the European Union, a vote that could have profound implications if the electorate chooses to leave.

For the U.K., a vote for Britain’s exit from the EU—commonly referred to as Brexit—could be very damaging. The consequences of a withdrawal aren’t entirely clear, but it could prove costly due to a decline in trade, particularly with the EU, which accounts for more than 40% of British exports, lower foreign investment, and a weaker financial sector.

In the event of an exit, economists estimate that U.K. gross domestic product could shrink 2% to 4% in two to three years.

If the U.K. votes to leave, it could take two years of negotiations to untangle the country from the EU apparatus, but the impact could be more immediate.

The British pound could tumble sharply. RBC Capital Markets senior U.K. economist Sam Hill notes that Brexit could precipitate a 10% to 15% move lower in sterling exchange rates, “with the adjustment happening in weeks rather than months.” The pound has fallen 1.5% against the dollar in 2016 and Friday was trading at $1.45.

A steep drop in sterling could prompt a policy response from the Bank of England. An interest-rate cut could push U.K. sovereign bond yields lower. On Friday, U.K. government 10-year bonds yielded 1.33%. The coupon on German government debt with similar maturity was a paltry 0.1%.

A vote for the U.K. to leave would be a body blow for the EU. The departure would set a dangerous precedent and prompt anti-EU proponents in other countries to push for withdrawal, too, threatening political and economic union.

The vote is too close to call. Polls have narrowed in recent weeks, but a poll of polls suggests a razor-thin 51% to 49% victory for the U.K. to remain. It doesn’t offer a margin of error, and a significant portion of the electorate is still undecided. Bookmakers, whose track record in recent U.K. elections has been more accurate than pollsters, estimate that there is only a 30% chance of the U.K. leaving the EU.

The campaigns focus on the economic costs or benefits of leaving, and of migration. Claims are met with counter- claims. Each side accuses the other of scaremongering. Messages are muddied, voters are confused, and neither side has gained any real advantage.

For months, U.K. stocks have been off limits to international investors due to the uncertainty. Allocations to U.K. equities are at the lowest level in seven years, according to Bank of America Merrill Lynch’s latest monthly survey of European fund managers, even though more than 70% of respondents indicated that they thought it was unlikely the U.K. would vote to leave the EU. London’s benchmark FTSE 100 index is roughly flat in 2016, while the more domestically focused FTSE 250 index is down 2%. The Stoxx Europe 600 index is up 6.7% since Jan. 1.

Getting past the referendum, whatever the outcome, will remove the uncertainty. The FTSE 100 should hold up, even in the event of Brexit, since most of its constituents are multinational companies with limited exposure to the U.K. market. “We don’t think the U.K. is unique in its exposure to Brexit,” says Luiz Sauerbronn, who manages the Brandes International Equity fund. He argues that the domestic exposure of U.K.-based health-care company GlaxoSmithKline (ticker: GSK.UK), the fund’s largest holding, is “not that different to competitors based elsewhere.”

IN THE EVENT that the U.K. decides to remain, investment professionals could return to the market, and domestically focused stocks could be the biggest beneficiaries.

Grocer Wm. Morrison Supermarkets (MRW.UK) could be a winner. Morrisons fell out of favor along with the retail sector during the global financial crisis as established players conceded market share to discounters like Aldi and Lidl.

But Morrisons is fighting back. Aided by a loyalty plan, a revamped delivery service, and store improvements like self-service checkouts, Morrisons is regaining market share faster than its competitors. Like-for-like sales in the quarter through May 1 were up 0.7% from a year earlier.

Its shares are up 27% in 2016, closing Friday at £1.89 ($2.74). They trade for about 17 times estimated earnings for the next fiscal year, but Brandes’ Sauerbronn argues that it isn’t expensive. He sees downside protection from Morrisons’ valuable real estate portfolio.

One sector that could take a hit from Brexit would be the U.K. real estate market. Demand for property could erode, particularly in London. Real-estate investment trusts that could suffer include British Land (BLND.UK), Land Securities (LAND.UK), and Great Portland Estates (GPOR.UK).

Federal prosecutors in Brooklyn filed a superseding indictment containing one count of conspiracy to commit securities fraud against Martin Shkreli, the pharmaceutical firm operator who made headlines for raising the price of a life-saving cancer drug by 5,000 percent.

Shkreli faces up to 20 years in prison for allegedly paying off debts from two failing hedge funds and covering up some personal expenses by skimming assets from Retrophin, a biopharmaceutical firm he ran.

The ex-chief executive of Turing Pharmaceuticals will appear in Brooklyn federal court Monday morning to possibly be arraigned on the new charge.

“There is nothing in the new indictment that changes the flawed theory of the case as applied to Mr. Shkreli,” said his lawyer Benjamin Brafman.

Shkreli is free on $5 million bond.

He and former Retrophin lawyer Evan Greebel are charged in the eight-count indictment.