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What is Venture Capitalism?

You may have heard about venture capitalism or VC before, but what is it? Venture capitalists range from Kobe Bryant to the cast of SharkTank.

A VC is a person or a firm who invests in a start-up or a smaller company with large growth potential. The companies that a VC invests in are usually private equity firms who are seeking investors and have promising revenues or a solid business plan.

The cast of SharkTank invests their money into promising companies in exchange for a stake in that company. This means their returns will flow into their pockets until the company they invested in diminishes or they sell their stake.

Venture capitalists are usually people who have a good amount of capital, as the minimum VC venture is about $5,000. VC’s are very fundamentally sound, and know how to sort through financial statements finding value companies.

Venture capitalists usually either experience impressive returns or tremendous downside. The amount invested and duration in the partnership highly impact the gain or loss of the VC.

Example of venture capitalism

Trevor has a bakery in NYC and needs 100,000 in funding. His business is not big enough to go to the market to raise capital so he will go to a venture capitalist. Dan who is a VC has 100,000 and likes the way Trevor runs his bakery so he decides to fund it. Dan can do one of two things.

He can give Trevor the 100,000 for a fixed interest rate until it is paid off or he could give Trevor the money for a certain % stake in the company. Either way he does it, he has the option to have an influence on the company.

How do venture capitalists spend their time?

Venture Capitalist Dana Mead explains the day in the life of a VC.

We invest in 1-2 companies per year taking 10% of our time. With an established portfolio, we don’t have nearly the time or bandwidth to allocate 70% of our time to pick and choose companies, but when we started out that was exactly how it went.

The second thing we do is networking. We spend 20% of our time networking, this is the most fun thing we do and I usually always find a partner at a networking event that I will do business with. I do not see them as competitors but as partners.

Lastly we spend the rest of our time supporting the companies in our portfolio. The people in the company are the most important aspect as they must be versatile for the rocky road of a start-up.”

 

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Sonos Speakers Files for an IPO

High profile speaker company “Sonos” files for an initial public offering. The company will be listed on NASDAQ under the ticker “SONO”

Sonos reported a net loss of 14.2 million the in 2017 on 992 million in revenue, just a step up from 2016’s 38 million net revenue loss.

The company is seeking 100,000 share float, with the current share price unknown.

Sonos competitors include Harmon Kordon, Bose, and UBL.

The underwriters for the IPO are Goldman Sachs, Morgan Stanley, and a private equity firm that has a 25% stake in the company.

As wireless speakers become increasingly popular, the technology gets increasingly more advanced. Sonos plans to do an IA speaker much like Amazon’s “Alexa.” 

As an investor IPO’s are very risky because of the low float and high volume. There is a lot of volatility meaning the price that is set for the IPO could be different price that it actually hits the market.

The best way to invest in an IPO is to make friends with insider and try to acquire shares from them before the stock hits the market.

 

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What Is Cryptocurrency?

Cryptocurrency is a digital asset that is used to work as a medium of exchange. Cryptocurrencies work on a block chain which utilizes strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.

History of Cryptocurrencies

Cryptocurrencies were created in 2009 after the financial crisis. They were created because of the lack of trust in the financial system. There are thousands of different cryptocurrencies including Bitcoin, Litecoin and Etherium.

Many people who live in countries where wealth is suppressed by government love it because there is no financial or government intermediary.

Where Does It Come From?

Like gold or silver cryptocurrencies can be mined, not with your average pick and shovel, but computers called “antminers” which solve complex problems with algorithms that dig through layers of code in a very complex process.

Antminers use a great amount of electricity. As far as the original creation, it can be made by anyone with complex coding and technical skills.

Blockchains

It works as a peer to peer network, meaning everyone who uses it is what it’s made up of. Blockchains are composed of blocks which, most simply defined, tell us 3 things

  1. Where the block came from
  2. Whats inside
  3. Where it went to

Each time a block is received by one person it is validated and the next move is validated by the next person. This goes on thousands of times which makes the chain more secure and harder to rewrite the bigger it gets.

Should I Invest?

Cryptocurrencies are very volatile meaning they move a lot and have a high % subject to change. Moving from a few dollars to $17,000 down to $6000 bitcoin is the best example of this. Be very careful investing in Crypto’s and don’t follow the crowd. Do your own research and be careful when investing.

 

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Micron Stock Plunges Because of Copy-Write Dispute, Trade War Fueling Outcome

Micron Technology (MU) an American microchip manufacturer is in a legal dispute with United Microelectronics Corporation commonly known as UMC. Micron is suing UMC for stealing IP addresses of Micron in its Taiwan factory and recreating Microns Semiconductors. Micron shares fell over 8% in today’s trading session.

UMC has taken counter-actions by suing Micron for disrupting business.

With that the court case was is being ruled in China and Micron is currently not allowed to operate in Chinese markets until the court case is settled. The reason being is UMC is a Taiwanese based company directly related to China.

President Donald Trump is currently not allowing China Mobile, a large cell company into U.S. markets because of fear for national security, this could very well heighten tensions.

How will this affect the industry?

Other semiconductor stocks also suffered, as the fight between China and Micron is seen as a bellwether amid a trade tussle between China and the U.S., and China’s fight for advanced chip technology and knowledge.

The PHLX Semiconductor Index closed down 1.8%, with almost all of that decline coming in the last hour of the session, after the news broke. Other chip stocks that declined just ahead of the bell included Intel Corp. INTC, -1.45% Nvidia Corp.NVDA, -2.23%  and Qualcomm Inc. QCOM, -1.51%.

Separately, Micron announced late Tuesday it was entering into a $2 billion revolving credit facility that matures in 2023. Micron has been aggressively paying down its debt over the past year. Micron has $6.51 billion in debt outstanding, compared with $11.16 billion in August 2017, according to FactSet data.

Of the 34 analysts who cover MU stock, 26 have overweight or buy ratings, seven have hold ratings, and one has a sell rating, along with an average target price of $51.80, less than 1% higher than Tuesday’s close. –MarketWatch

 

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Harley Davidson Receives Tax Threats From Trump, Stock Falls 9%

Trump threatens to tax Harley Davidson (HOG) for threatening to leave the country.
Over Twitter, the President said that he was surprised they were the first to throw in the “white flag” during the trade-war. Harley Davidson stock has been on a decline ever since the Tariffs from Britain in retaliation to the U.S. tariffs on steel and aluminum.
The company announced in May 2017 it would build a plant in Thailand to better reach the southeast Asian market. CEO Matt Levatich told Bloomberg News in April he made the decision after President Donald Trump withdrew the U.S. from the Trans-Pacific Partnership, a free-trade agreement with 11 other nations mostly in Asia.

Producing in Thailand lets Harley avoid the country’s tariff of up to 60 percent on imported motorcycles, and helps the company get tax breaks when exporting to nearby countries, according to Reuters. The company said in January it plans to grow international business to 50 percent of annual volume by 2027. –CNBC

Harley said the European tariffs will have an annual impact of $90 million to $100 million going forward, adding about $2,200 to the cost of each motorcycle, which the company will swallow rather than pass on to consumers.

“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.” the company said in a regulatory filing Tuesday. –Markets Insider

Harley Davidson Chart

It is unknown weather the move will just be rhetoric or actually plausible after Trump’s response. For now Harley Stock sits at $41.32, a near 9% drop from the past 5 trading days.

 

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