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Twenty years after the dotcom crash, is tech’s bubble about to burst again? | Business

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‘Everybody loves a party … but, inevitably, after a big party there’s a hangover,” billionaire investor Stanley Druckenmiller said last week as stock markets seesawed amid fears that a new tech bubble was about to burst. “Right now, we’re in an absolute raging mania,” he said.

And at times it did look like a tech bubble was about to burst again. Last Tuesday, Tesla’s shares fell 21% and Elon Musk’s net worth plunged $16.3bn (£12.7m), the largest single-day wipeout ever for a member of the Bloomberg Billionaires Index. Amazon’s founder, Jeff Bezos, lost $7.9bn. The whiplash continued throughout the week but, for many market watchers, it is still too soon to call time on tech’s stellar rise.

The sums lost are mind-bending – Musk’s $16.3bn loss is the amount China (population 1.4 billion) set aside to tackle coronavirus in March. However, the losses have hardly dented the historic fortunes the “techno-crats” have built during the technology boom and, for now, tech’s dominance seems intact.

The US tech giants have been on a tear for a year and have only increased in value since coronavirus hit the US. Last Friday, Bloomberg pegged Bezos’s fortune at $184bn, up $69.3bn from the start of the year. Even with Tesla’s recent heavy losses, Musk’s fortune is up $64bn for the year, ending Friday at $91.5bn.

If this is a tech bubble, it is made of stronger stuff than the one that burst at the turn of the millennium. That bubble was epitomised by young startup companies such as Pets.com, which went out of business just nine months after its much-hyped share sale. This one is being inflated by some of the biggest, most profitable companies the world has ever seen.

Alan Patrick, co-founder of analytics firm DataSwarm, has seen his share of tech bubbles and, while he sees plenty of “froth” at the moment, he doesn’t yet consider this is a bubble about to pop. Even today, with tech stock prices still so high, he said, we may only be at the “foothill of bubble phase”.

Elon Musk lost $16.3bn off his net worth as tech stocks wobbled.



Elon Musk lost $16.3bn off his net worth as tech stocks wobbled. Photograph: Patrick Pleul/AP

“The rise has mainly been from companies that stand to profit hugely from a world that has a ‘phase shift’ to a more digital, less physical world – Zoom, Amazon, Microsoft, Netflix, Apple all benefit hugely, as do the Covid drug and healthcare companies whose shares have rocketed,” Patrick said.

One big difference between today’s tech titans and their dotcom predecessors is size. These are huge companies that, in the main, also make huge profits. Last month, Apple’s valuation passed $2tn, the first US company to pass that milestone. Earlier this month, Apple was worth more than all the companies listed on the FTSE 100 index of the UK’s biggest firms combined.

Business has boomed for Apple, Amazon, Facebook and Google even as the wider US economy has collapsed. Tech has been a safe haven, and an industry achieving growth, at a time when investors have struggled to find safety or growth elsewhere.

But just because the situation is different this time, it doesn’t mean there isn’t a tech bubble to burst. “All of the elements of a bubble environment remain in place,” the strategist Chris Senyek of Wolfe Research wrote in a research note last week. And that bubble, he argued, was most inflated in the Nasdaq 100, the tech-heavy stock index whose biggest components include Apple, Amazon, Microsoft, Alphabet (Google’s parent), Facebook, Netflix and Tesla.

Nasdaq composite index

Approximately 29 million people are still on unemployment benefits in the US, and there are signs that the economic bounce-back from the coronavirus lockdowns has slowed. And yet US stock markets have remained close to their heady highs as the Federal Reserve has put its weight behind them and kept interest rates at close to zero.

But for Senyek and others, the recent wobbles may signal trouble ahead. “Typically, bubbles are unwound when the Fed takes away the punchbowl. Obviously, this is very unlikely to happen any time soon. However, this bubble can still be unwound by sustained economic disappointments,” he wrote.

The recent selloffs came after tech shares were driven to new highs by decisions by Apple, Tesla and others to split their stocks, a move that made them cheaper to buy but did nothing to change the fundamentals of their businesses. They were also pushed higher by a huge bet on tech by the Japanese conglomerate SoftBank that was tied to around $50bn worth of individual tech stocks.

The real problems may emerge only when the pandemic ends. Tech thrived as the world moved online, but will we ever want to Zoom again once it’s over? Yes, some fundamentals have changed – bricks-and-mortar shopping, deeply troubled before coronavirus, may never return to its old levels. But tech’s current dominance may also wane once the real world reopens.

Then there are the political headwinds. With coronavirus and the US elections dominating the headlines, tech’s growing monopolies have become a side issue. But if Europe and the US government have become increasingly concerned about Big Tech’s dominance, such concerns will only have been amplified by the lockdowns – and, post-virus and post-election, tech may finally face real political opposition.

DataSwarm’s Patrick said he would expect to see more classic bubble signs before any real blowout, such as “large numbers of consumers being sucked into investing – though that is starting, with new financial trading apps offering free share dealing and owning fractions of shares in companies”.

But he cautioned that in the current environment, anything was possible. There are too many factors that could lead to a stock market blowout, including a second wave of Covid infections, the possibility of more dire economic news or the outcome of the US election – arguably the most volatile in living memory.

“I don’t think there has been a time, probably since the end of the Cold War, when there are so many highly possible very large shocks that could stop the developing bubble in its track and crash it,” he said.

If and when that unwinding will happen is anyone’s guess. “I have no clue where the market is going to go in the near term. I don’t know whether it’s going to go up 10%, I don’t know whether it’s going to go down 10%,” Druckenmiller told CNBC.

“But I would say the next three to five years are going to be very, very challenging.”

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Ant Group final approvals for its massive Hong Kong, Shanghai IPO

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The Ant Group Co. logo and the Alibaba Group Holding Ltd. logo are displayed behind a reception desk at the company’s headquarters in Hangzhou, China, on Monday, Sept. 28, 2020.

Qilai Shen | Bloomberg | Getty Images

GUANGZHOU, China — Ant Group has cleared the final regulatory hurdle for its massive initial public offering (IPO) with the pricing of its shares slated to be released within the next week.

On Wednesday, the China Securities Regulatory Commission gave the green light for Ant Group’s dual Shanghai and Hong Kong listing to go ahead. That came after the Hong Kong stock exchange also gave its approval for the offshore portion of the listing.

The Chinese financial technology giant, which is 33% owned by Alibaba and controlled by founder Jack Ma, also updated its IPO prospectus with information on the share structure.

It will split its stock issuance equally across Shanghai and Hong Kong, issuing 1.67 billion shares in each location. That amounts to 11% of its total outstanding shares post-IPO. The number of shares could increase if the so-called overallotment option is exercised, depending on demand.

Ant Group will now proceed with a roadshow to market the IPO to investors and will price the shares on Oct. 27.

Strategic investors have agreed to subscribe to 80% of the company’s Shanghai-issued A shares. Alibaba, via it subsidiary Zhejiang Tmall Technology, has agreed to buy 730 million A shares. This will allow Alibaba to maintain its roughly 33% stake in Ant Group.

Ant Group also released some updated financial figures for the first nine months of 2020. It says monthly active users of its Alipay mobile payments app has increased from 711 million in June to 731 million in September.

Revenue was 118.19 billion yuan ($17.73 billion), a more than 42% year-on-year rise.

Ant Group’s listing could be one of the biggest of all time. Reuters has previously reported the listing could raise up to $35 billion. One analyst previously told CNBC that Ant’s valuation could exceed $200 billion.


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Facebook Dating lands in Europe as singles look for love in lockdown

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LONDON — Facebook announced Thursday that it has expanded its dating service to Europe, a little over a year after it launched in the U.S.

The platform, known simply as “Facebook Dating,” is designed to help Facebook users find partners through things they have in common such as interests, events and groups. Those wanting to opt-in to the service, which has a dedicated space in the Facebook app, must set up a Facebook Dating profile.

Once registered, Facebook users can share personal “Stories” on their dating profile, as well as Stories from their main Facebook or Instagram account.”(assume end quote here?)

There’s also a “Secret Crush” feature that enables users to select up nine Facebook friends or Instagram followers that they’re interested in. If one of those people also selects you as their crush then a match is generated. Here is a bit more on how it all works.

Julia Portelly, a 26-year-old PR consultant, told CNBC that she’ll definitely have a “poke around” the new dating service despite not using Facebook much these days. “I’m wondering if they [Facebook] will bring something completely new to the game, or just pinch features and repurpose them?” she said.

PR consultant Julia Portelly says she plans to “poke around” on Facebook Dating.

Julia Portelly

Another dating app user said: “I don’t use Facebook much anymore and I don’t know if I trust their ability to check people’s identities, so probably not for me.”

Unlike other dating services such as Tinder, Hinge, and Bumble, the Facebook Dating feature is completely free to use, with no premium offering.

A single male teacher in his early 30s told CNBC: “So many services these days taunt you with potential matches but then hide them behind paywalls. Set love free I say — I’m ready for Facebook to help set this straight.”

Dating has been upended by the coronavirus pandemic, with lockdowns and social distancing measures making in-person dates difficult in countries around the world. Politicians have faced tricky questions on the matter, with U.K. Prime Minister Boris Johnson last week saying “sex indoors” is banned for couples living in separate households in certain parts of the country.

Facebook said it is in the process of rolling out a feature that will allow singles who have matched on Facebook Dating to have video chats.

First announced at Facebook’s F8 developer conference in May 2018, the dating feature launched in the U.S. in September 2019, immediately sending shares in Match, which owns dating app Tinder, down 4.5%. The service is now available in 52 countries worldwide including 32 in Europe.

Facebook claims that the platform has generated 1.5 billion matches across 20 countries since it launched. The company did not immediately respond when CNBC asked how many of its users have opted-in to Facebook Dating.

Shaz Younas, chief executive and founder of Muslim dating app muzmatch, said Facebook Dating has been a bit of a “non-event” so far.

“Match group stock dipped when it was announced but quickly recovered,” said Younas, a former investment banker with Morgan Stanley. “Facebook branding isn’t great, but it cannot be underestimated.”

“Facebook’s ability to match . . . individuals based on their actual behavior is unparalleled. That is a real edge for them that no one can match. Even if 1% of their userbase uses it, that is still a wildly successful product purely based on their size. That said, as has been shown in the dating world, dating app members are often on multiple platforms, so anything to normalise people using dating app products only helps the sector too.”


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Airbnb teaming up with former Apple design boss Jony Ive

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SAN JOSE, CALIFORNIA – JUNE 03: Apple chief design officer Jony Ive (L) uses an iPad.

Justin Sullivan | Getty Images News | Getty Images

Former Apple Chief Design Officer Jony Ive will consult with Airbnb on hiring and future products, the company announced on Wednesday.

Ive is best known for being Apple’s longtime head of industrial design and an icon in Silicon Valley. He led teams that designed the iPod, iPhone, and Apple Watch before leaving the company last summer to start an independent design firm named LoveFrom, which counts Apple as a client.

Ive and LoveFrom will help Airbnb over a period of multiple years to design new products and services, as well as hire designers for an internal team, Airbnb CEO Brian Chesky said in a blog post.

“Jony and I have been good friends for many years, and he has been gracious enough to provide me with guidance and advice,” Chesky wrote. “We share the same belief in the value and importance of creativity and design.”

Chesky is notable among Silicon Valley founders for going to Rhode Island School of Design, where he majored in industrial design. Previously, Ive wrote an entry for Time magazine lauding Chesky and praising his background as a designer.

Airbnb struggled in the early days of the coronavirus pandemic, as lockdowns across the world curtailed travel plans, and the company laid off 25% of its staff in May. However, the company has since seen a resurgence in demand as city residents with the option to work remotely started booking stays in rural locations.

Airbnb said in August that it confidentially filed for an IPO. Reuters reported earlier this month that Airbnb is hoping to raise $3 billion in its IPO, which is expected to be one of the biggest stock market listings in 2020.


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