Well it has been a big week in the tech world! Over the last week two major digital companies have filed for IPOs – and the market is buzzing. Dropbox went first, filing for a $500 million IPO with the SEC late last week with the intent of being listed on NASDAQ as ‘DBX’. Dropbox – a digital storage company that has seen consistent growth in the number of active users, paying users and revenue in recent years – has an estimated value of around $10 billion, implying an initial price per share of about $18.00 USD. The Dropbox IPO may have created waves, but it was perhaps Spotify’s Wednesday IPO announcement that made the bigger splash Spotify, a popular music streaming company, announced their $1 billion IPO this week – with the notable exclusion of underwriters on the announcement. This is a break from traditional IPOs. Typically, when a company ‘goes public’ they sell initial shares of stock to an underwriter (such as RBC Capital Markets or Morgan Stanley), who then markets and sells the shares to individual investors. Choosing to directly forego the underwriter ‘middleman’ is cheaper, but unconventional, and it is hard to determine the impact this will have on Spotify’s pricing. The company intends to list shares on the NYSE under the ticker ‘SPOT’. Without relying on underwriters to assess demand and set a price, we may see additional trading volume and price volatility on the market. These tech announcements have investors poised to jump on the next big IPO, but it appears they will have to wait – other tech giants, such as Uber and Airbnb, are said to be holding out on an IPO for at least another year.
Carrying on the technology trend, let’s turn our attention to Apple Canada. On Thursday representatives from Apple Canada were called to speak in front of the House of Commons’ standing committee on industry, science and technology On the agenda? Apple’s iPhone battery scandal. To recap, in December, Apple admitted to purposely slowing down older iPhones to compensate for battery degradation. As an iPhone battery ages, it gradually loses the ability to hold a charge. In response to this, last year Apple implemented a software feature that slows down a phone’s processing speed in the hope of extending battery life. That’s a nice explanation – but many critics argue that the slowed speeds were less about extending battery life, and more about encouraging customers to upgrade their phones on a frequent basis. The committee will hear from Apple Canada, in addition to the Competition Bureau and Primate Labs (the Toronto based company that designed an app which ultimately concluded that iPhones slow with age). Whether the Competition Bureau will commence an investigation into the company remains to be seen, but the decision to include the Bureau in Thursday’s talks suggests that Parliament is serious about handling this issue.
It looks like 2018 is off to a good start – for Canada’s biggest banks at least! This week TD announced their earnings for the period ended January 31, earning $2.946 billion after adjustments – a 15% jump over the previous year. TD’s results were the last of the ‘big five’ banks to be released, and rounded out a quarter that saw all five banks beat the street’s expectations. Collectively, the Royal Bank of Canada, TD Bank, Bank of Montreal, Scotiabank and the Canadian Imperial Bank of Commerce earned over $10 billion for the three month period, a 4.4% drop over previous year results, but a step above analyst projections. The primary driver of their success? International operations. In recent years Canadian banks have gradually focused on expanding their reach outside of our nation’s boarders. Scotiabank has a healthy presence in Latin America, TD’s U.S. division brands itself as “America’s most convenient bank”, and RBC posted double-digit growth in their U.S. wealth management division, driven by their Los Angeles-based City National division which was acquired in a $5.4 billion deal in late 2015.
Did you know that Canada is the number one provider of steel and aluminum to the United States? It is – last year the U.S. imported 26.9 million tonnes of steel, with over 4 million tonnes (16%) coming from Canada. That profitable relationship stands to change- this week U.S. President Donald Trump announced a quota on steel and aluminum imports, capping each country to 63% of the steel and 86.7% of the aluminum they shipped to the U.S. in the previous year. In addition to this quota, international exporters including Canada will be charged a tariff of 25% on steel and 10% on aluminum respectively. The announcement was almost universally criticized. Canada’s Foreign Affairs Minister Christia Freeland said that if restrictions are imposed on Canadian steel and aluminum products, the country will take responsive measures. Likewise the United Steelworkers union, which has members located in both Canada and the United States, has implored the government to exempt Canada from the new tariff regime. Industry groups who rely on metal imports (ex. the American International Automobile Dealers Association) expressed fears that tariffs would cause car sale prices to skyrocket. Finally, the market reflected the general sentiment, with both the Dow Jones and S&P/TSX composite index falling following the announcement.
And finally, Tim Horton’s annual ‘Roll Up the Rim’ campaign isn’t the only reason the beloved franchise is in the news! This week Tim Hortons locations across the country were forced to close after a computer virus interrupted the chain’s digital payment system. The number of impacted branches has yet to be confirmed (estimates place the numbers in the high hundreds), but what is confirmed is the impact forcing a closure has on a given location. Franchises lost sales, and incurred spoiled food and labour costs as a consequence of the closures. As a result, an association representing franchisees is threatening legal action if parent company Restaurant Brands refuses to meet with store owners.