What cheap oil means for cleantech

Protocol Index


Good morning, and welcome to Protocol Index, your daily pop-up report about the financial movements that matter to tech during the COVID-19 crisis. Want Index in your inbox each morning? Subscribe here.

Today: Stimulus loan confusion continues, more details on Airbnb's debt, and so many teens own AirPods.

What Matters Today

  • 6:15 a.m. PDT: Treasury Secretary Mnuchin will appear on CNBC. Expect him to be quizzed about new stimulus measures, including the further cash infusion into the Paycheck Protection Program that the administration has asked for.
  • 11 a.m. PDT: Minutes are released from the Fed's March 15 emergency meeting, when it decided to cut interest rates. The notes should give a clearer indication of the Fed's priorities, as well as its sense of what's to come.

Layoff Watch

  • Tesla is reducing salaries and furloughing some staff. In an email seen by Protocol, HR boss Valerie Capers Workman called the move "a shared sacrifice across the company."
  • Toast laid off around 50% of its staff, saying sales dropped by 80% in March.
  • Online corporate catering platform ezCater laid off over 400 people, almost half its staff.
  • Microsoft has frozen hiring, except in "certain strategic areas," thought by Business Insider to be its cloud business.

Today's News

As of 4:15 a.m. PDT: Nasdaq Futures: 0.97% | Euro 600: -0.81% | Nikkei: 2.13% | Hang Seng: -1.17%




  • SoFi bought financial services API company Galileo for $1.2 billion.
  • Accenture acquired cybersecurity firm Revolutionary Security.
  • CNN bought content recommendation startup Canopy.
  • A federal judge approved Sabre's acquisition of the travel booking software company Farelogix, after the Justice Department attempted to block it over antitrust concerns.
  • Airbnb is looking to raise another $1 billion in first lien debt, convertible notes, or an equity issuance, Bloomberg reports. Bloomberg also had more details on the $1 billion Airbnb already raised, which is reportedly second lien debt at an 11-12% interest rate, along with warrants for around 1% of its equity at a $18 billion valuation.
  • AT&T borrowed $5.5 billion to "provide additional financial flexibility."

Everyone's Talking About

What's going on with stimulus loans?

It feels like this may never end. There's still so much confusion around whether startups are eligible for Paycheck Protection Program loans, and it's stressing out investors and founders alike.

  • Protocol's Emily Birnbaum and Biz Carson wrote a great story yesterday about the race against time many have found themselves in.
  • "The overall sentiment has been that the funds will go quickly … and there's going to be a huge shortage of companies that don't get what they need," Brad Luttrell, co-founder of hunting app GoWild, told Protocol.
  • "I hope the SBA takes immediate action because this assistance is needed right now," said Rep. Anna Eshoo. "My office has been inundated with calls, emails and letters from small startups who cannot access this critically important economic lifeline."

With uncertainty around who qualifies for the loans, some startups are trying to modify their deal terms to remove VC control.

  • "We are spending plenty of time reading venture deal documents to see if there are offending provisions and to ensure those provisions are irrevocably waived or amended out of those deals," said Lowenstein Sandler lawyer Ed Zimmerman.

Mostly, lenders and borrowers alike just want clarity. Guidance "still seems to be insufficient, and lenders are still hesitant to make these loans," one Democratic congressional aide told Protocol.

  • Until the guidance is clear, some startups might apply who don't actually need the loans, raising both eligibility and ethical concerns.
  • "This misconception that it's a free two months of payroll is bizarre to me," one anonymous startup CEO said. "I think it's incredibly reckless of founders."


  • "CIOs/CTOs are already telling us they are beginning efforts to reprice their tech contracts and/or push for more-generous billing terms." — Deutsche Bank's Karl Keirstead, in a research note highlighting the risk to software contract renewals.
  • "For each highly active [digital] venture added to a county, median income increased by $331 from 2016 to 2017; a 19 percentage point increase controlling for other factors." — A new study from Arizona State University and the University of Iowa found that online businesses had a positive effect on local prosperity. The New York Times has a report on the study.
  • "52% of teens noted they already own AirPods. In addition, 18% of respondents noted that they do not currently own the product but plan to buy them within the next 12 months." — That's from Piper Sandler's semi-annual survey of more than 5,000 U.S. teens, which also found that teens already spend 7% of their video consumption time watching Disney+, compared to 33% for Netflix.

Diving Deeper

What cheap oil means for cleantech

A crashing oil price is unsurprisingly awful for oil producers. Less obvious is the effect on perhaps the most anti-oil crowd around: companies whose businesses are built around renewable energy. If they're trying to replace oil, it's seemingly in their interest for the price to be high — a low oil price should theoretically make renewables, and the cleantech industry around them, less appealing.

  • Investors seem to be getting wary of cleantech as a result: According to PitchBook data shared with Protocol, VC funding in cleantech is slowing.
  • As oil prices slumped, 170 deals were completed last quarter, compared to 246 a year earlier, with a total deal value of $1.4 billion vs. last year's $1.7 billion.

Things are perhaps most complex for electric vehicles, which find themselves caught between the strong pulls of market forces and regulation.

  • "If we know one thing from studying the oil price collapses of the past, it's that we know that people start buying much more fuel intensive vehicles in times of low oil prices, consumers especially," senior Eurasia Group analyst David Livingston explained in the Political Climate podcast.
  • But Morgan Stanley analysts make the compelling argument that "the transition to EVs and rail has always been about policy rather than economics. This is for climate reasons, but also health." They added: "EU and China vehicle emissions targets are unlikely to be suspended."

In the power sector, meanwhile, the relationship between oil price and renewables isn't as simple as it may first seem.

  • The dominant source of U.S. electricity is natural gas, which is produced as a by-product of oil. If low oil prices cause shale drillers to go out of business (which has already begun to happen), natural gas supply could decrease, driving up its price.
  • "You could have a situation in which solar and wind and other renewable and clean energy technologies suddenly become more competitive against now slightly more expensive natural gas," Livingston explained.

And then there's the trillions of dollars of stimulus packages. The EU already suggested it will spend heavily on renewable infrastructure through the downturn, and Morgan Stanley thinks "there will be a green recovery."

All in all then, cleantech may not need to worry too much. Morgan Stanley noted that "Shell's new lower capex guidance for 2020 still includes New Energy spending at the expense of investment in its traditional oil & gas activities."

  • So this coming quarter is one to watch. PitchBook found that Q2 of 2019 had the year's highest cleantech deal value, with $3.3 billion invested. We'll check back in July to see how this year compares.

Closing Bell

Animal Crossing is political now

Hong Kong's protests came to a screeching halt when the coronavirus took hold, but the protestors' concerns haven't gone away. Instead, they've been channeled into the hottest game of the moment: Animal Crossing. Joshua Wong told Wired that Animal Crossing lets activists express their message to a wide audience: "Even lawmakers in Hong Kong are playing this game." He's put a protest banner alongside portraits of Xi Jinping and Carrie Lam in his island's garden.

Thoughts/feedback/tips? Email me — shakeel@protocol.com — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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