Overheard

• "Uncertainty is the enemy of the IPO and the friend of a $5 billion SPAC with the largest amount of committed capital." — Bill Ackman's SPAC thesis could prove useful amid the current market volatility. He told Bloomberg this week that he's held talks with Airbnb and Stripe.
• "If more positive announcements regarding a viable and effective vaccine are forthcoming, as expected, selling in technology could continue as funds raised will be allocated across the sectors most closely associated with the other side of the pandemic." — Prudential's Quincy Krosby offered one explanation for Thursday's selloff.
• "Apparently Chinese fashion designers are leaving the back pockets off jeans because no one uses them anymore (for wallets) … We would love to make that happen in India." — Mahendra Nerurkar, head of Amazon Pay in India, outlined the company's new fintech strategy.

The Big Story

What would Biden mean for tech stocks?

No one quite knows what sparked Thursday's dramatic tech selloff.

But one thing that could've played a part: new polls published Thursday that suggest Biden still has a healthy lead in the election race, after weeks of it seeming increasingly likely that Trump would win.

Biden could pose a threat to the tech industry, according to analysts I've spoken to this week. And investors might be starting to get a little spooked.

"If Biden gets control of both the House of Representatives and the Senate, that could potentially be the most bearish outcome for U.S. equities, at least in the long run," Schroders' Sean Markowicz told me. That's because of his proposed tax changes, which could reduce tech companies' earnings-per-share by more than 6%. Others agree: AGF's Greg Valliere said a Biden win "would be a net negative, in my opinion, because of the tax threat."

• That said, some think the risk is overplayed. In a JP Morgan research note from July, analysts pointed to the consensus view of Biden being bad for equities, but said they think the "headline risk might be greater than actual policy." They also noted that tech companies are well-placed to absorb extra costs of Biden's planned minimum wage hike. In fact, the bank put Facebook, Google and Apple on its outperform list in the event of a Democrat sweep.

Valliere and Markowicz were split on the other big Biden threat: antitrust action. Markowicz pointed to the increased likelihood of antitrust scrutiny under a Biden presidency, saying that could have more of an impact on long-term profits than a tax hike. Valliere disagreed, saying the process "would be pretty glacial, so I don't worry that much for the industry."

But the Senate majority will be pivotal in deciding the impact Biden would have. "If [Biden] loses the Senate to the Republicans, then obviously any of that tax legislation is unlikely to pass," Markowicz explained. Valliere agreed: "If Mitch McConnell hangs on by one seat, I think that would greatly diminish the risk to the industry."

• Markowicz actually thinks a Biden presidency with a Republican Senate could be the best possible outcome for tech equities: Investors get all the upside of more stable foreign policy, without the threat of higher taxes. "It's kind of a win-win scenario," he said.
• China, for what it's worth, very much wants a Biden win, and analysts are fairly (and unsurprisingly) agreed that his win would boost Asian equities.

Whoever wins, one thing is almost certain: uncertainty. "It's definitely going to be a very tumultuous few weeks around November," as Markowicz put it. It looks increasingly likely that we won't get final results on election night, and there could be uncertainty for months, especially if Trump challenges the result.

• "Markets hate uncertainty, and it's entirely possible we could have a stretch between Nov. 3 and mid-December of tremendous uncertainty," Valliere said. We might only be two months away from Election Day, but we're a long way from this being over.

A MESSAGE FROM PHILIPS

Stronger care … from anywhere, to anywhere

A strong healthcare system can scale to meet increasing patient demands. At Philips, we're charting a new way forward by moving care beyond the hospital's walls with advanced virtual health capabilities that expand clinical reach and increase care team capacity.

Learn more.

Up to Speed

• Monday: Zoom earnings beat expectations. Rackspace earnings beat expectations. The SEC and FINRA were reported to be investigating Robinhood. CD&R bought Epicor for $4.7B. Wish filed for an IPO. Coinbase was reported to be considering a blockchain element to its IPO. NextPay said it's planning a 2022 IPO. Reid Hoffman, Mark Pincus and Michael Thompson launched a SPAC.
• Tuesday: Tesla announced a $5B capital raise. AT&T was reported to be considering a Xandr sale. AT&T was reported to have scrapped a Warner Bros. gaming sale. Dialpad bought Highfive. Patreon raised $90M at a $1.2B valuation. Bumble was reported to be planning a $6B IPO. Rocket Internet said it would delist.
• Wednesday: Cloudera earnings beat expectations. CrowdStrike earnings beat expectations. Zuora earnings beat expectations, but its forecast missed. PagerDuty forecasts missed expectations. Skillz announced an IPO at a $3.5B valuation. Unacademy raised $150M at a $1.45B valuation, led by SoftBank Vision Fund 2. Alibaba doubled its YTO stake.
• Thursday: Broadcom earnings beat expectations. DocuSign earnings beat expectations. SoftBank was reported to be planning a TikTok India bid. Episerver bought Optimizely. QuantumScape said it would list via a SPAC, valuing it at $3.3B.
• Today: Unemployment fell by more than expected. SoftBank was reported to have bought $4B in Nasdaq call options. ByteDance bought UIPay. Yandex spun out its self-driving car unit from a joint venture with Uber.

Diving Deeper

Is subscription securitization the next big thing?

It's not often that an entirely new asset class comes along — but financing fintech Pipe thinks it's come up with one. The company lets SaaS businesses sell their customers' subscriptions to external investors, effectively offering a way to securitize recurring revenue, providing companies with a new way to raise money that doesn't involve selling equity or taking on debt.

People have talked about something like this for a while, but Pipe seems to be the first startup to actually do it. Founder and CEO Harry Hurst told me that he's not sure why no one else beat Pipe to it, but he's grateful that they didn't.

• It works pretty simply. SaaS companies sign up to the platform, and their monthly or quarterly subscriptions get rated by Pipe, a bit like Moody's would, and added to its exchange. Investors can then buy up those subscriptions at a discount to par value.
• For instance, if a customer is due to pay $100 a month for the next 12 months, an investor might be able to buy that subscription for $1,100. The investor then receives that customer's payments, netting them a $100 profit. Meanwhile the SaaS company gets the money up front, allowing it to use the capital to grow.

According to Hurst, the discount companies take when using Pipe is significantly less than the roughly 20% discount they'd normally offer customers to pay annually rather than monthly — and it comes without sacrificing the top-line revenue on which valuations are based.

• He said the lowest priced subscription on Pipe sold for 85 cents on the dollar, with the highest-priced one in the high 90s. Hurst said the former was sold by a first-time seller, who was able to charge more as they built up trading history on the platform.
• The relatively high prices are because investors include pension funds, Hurst said, who just need an inflation-beating return, meaning the discount doesn't need to be too steep.

For investors, Pipe operates in a sort of robo-adviser capacity. Investors set the amount they're willing to buy at different risk tolerances, and when those subscriptions appear on the platform, they're assigned to those investors. That allows for much faster subscription-selling, but it means investors are very reliant on Pipe's risk assessment abilities. For now, though, they seem to be fine with that.

We're still in the very early stages of this model: Hurst said that part of the challenge for Pipe is educating people about this new asset class, and given the prior chatter, it seems Pipe won't be alone in doing it for very long.

Coming Up

• U.S. markets are closed for Labor Day on Monday, but once we're back there are some big stay-at-home earnings reports. Slack announces on Tuesday, Zscaler on Wednesday, and Oracle, Chewy and Peloton on Thursday.

A MESSAGE FROM PHILIPS

Stronger care … from anywhere, to anywhere

A strong healthcare system can scale to meet increasing patient demands. At Philips, we're charting a new way forward by moving care beyond the hospital's walls with advanced virtual health capabilities that expand clinical reach and increase care team capacity.

Learn more.