Weekly Briefing No. 114 | A Blockchain Cure for Baldness and Spotify’s “Weird” Listing Plans

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Welcome to 2018 and bone-chilling cold that seems to have frozen everything but financial innovation. Here’s what warmed us up this week:

  • Blockchain hype
  • Spotify’s disruptive/odd listing plans
  • Frank, Wealthfront and MoneyLion raise; Amazon’s HQ2’s talent vortex
  • State Street’s Kensho-based ETFs; A blow to cannabis banking; MoneyGram
  • Company of Note: Earny

A blockchain cure for baldness (and everything else) in 2018.

As 2018 rolls in, the blockchain industrial complex has readied a raft of thought pieces, quasi-thought pieces and outright propaganda extolling the virtues of blockchain in financial services and pretty much everywhere else. If you believe all of the puffery, distributed ledgers are ready to solve nearly every problem and friction point involving money or information flow. Ending global corruption? Check. Reducing the cost of energy? Check. Turbocharging a company pivot? Check. Bringing transparency to ad buying? Check. Combating censorship? Perhaps, says Mark Zuckerberg. But, as in most technological breakthroughs, there are bound to be setbacks and challenges. So while we do not agree with the bleak blockchain assessment provided by entrepreneur Kai Stinchcombe entitled, “Don't believe the hype: There are no good uses for blockchain,” we want to send a shoutout his way for raging against the blockchain machine. Because when it comes to financial services and other industries, the best stuff often happens when the carnival barking fades. Sure, it’s tempting to sell conference tickets and attract new consortia members by saying blockchain can help you kill enemy fish or cure a bald financial innovation strategy. But more healthy skepticism can redirect blockchain energy away from theatrical pomp and towards the important grunt work of integrations and other endeavors that involve less talk and more action.

Will Spotify’s direct offering solve its legal woes?

Streaming giant Spotify is set to do something special and weird. The company, which has filed to go public, has opted for a direct listing (a.k.a. DPO), which is a fairly obscure new issue approach. In a DPO, no capital is raised, no pricing or stabilization by a bookrunner happens, and no glazed salmon roadshow lunch at the Four Seasons occurs. It’s what equity listings would be like if libertarians ran the world. But why choose such a “risky” pathway to public ownership? One clue may be found in a $1.6-billion lawsuit recently filed by Randall Wixen of Wixen Publishing. Look past the eye-popping number and the core legal issues come down to whether a so-called mechanical royalty is owed every time someone streams a song on Spotify. And if such a claim exists, what is the mechanism and formula that establishes how music publishers get paid? While major music labels seemingly support Spotify’s legal stance to date, the myriad of smaller music publishers and administrators such as Wixen probably won’t. And even if Spotify settles the Wixen case as it has others, a big settlement would likely encourage more Wixens to follow suit. Add it all up and it’s possible that Spotify is choosing to take a strange listing route so that insiders can sell immediately to the expected throngs of retail investors who love the company’s service. Having those kinds of shareholders sounds a lot better than being beholden to Wall Street and prying portfolio managers who ask hard questions that don’t have easy answers.

Let me “AlphaSense” that.

Sponsored by AlphaSense

Come on, you can admit it. Even the savviest financial services pros use Google. It’s easy, simple and free. We use it, you use it, Grandma uses it. But let’s face it: Google isn’t purpose-built for financial professionals. That’s why we got hooked on AlphaSense soon after we discovered the company’s intelligent search product. Whether it’s scouring an 8-K filing for a keyword, creating custom searches and alerts or saving hours of research time, AlphaSense allows us to keep tabs on any company or investment theme, covering large institutions and start-ups alike. That’s why “Let me Google that” has turned into “Let me AlphaSense that” at our office. But don’t take our word for it; we encourage you to try AlphaSense for yourself.

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IN BRIEF

Frank, Wealthfront and MoneyLion kick off the year in fintech financings.

Frank, a New York-Tel Aviv online platform that streamlines the Free Application for Federal Student Aid (FAFSA) application process, has announced a $10-million Series A to further its mission to be an ally for students in the battle for financial aid. We are hard-pressed to find many fintech start-ups with a more noble purpose. Also this week, Wealthfront announced a $75-million financing led by Tiger Global Management and MoneyLion, a personal finance and consumer lending app that has experienced torrid growth in recent years, closed a $42-million Series B.

Employers: Do you really want Amazon’s HQ2 in your city?

"Jeff Bezos can be the mayor, CEO, king, whatever they want to call it." That’s a recent quote from Atlanta-area Mayor Jason Lary in breathless support of his city’s bid to win the Wonka golden ticket as Amazon’s HQ2. But as city politicians across the nation trip all over themselves to woo the giant, perhaps they haven’t considered the downsides. Specifically, what will happen to the winning city’s financial and technology companies if Big Orange comes to town? Companies currently waging a furious battle for engineering and data science talent may find Amazon’s decision to be a long-term plus in that its presence is likely to serve as a powerful talent lure. But in the near term, Amazon could be a turbocharged talent vacuum cleaner that looks to suck in every desirable professional who’s not tied to their chair.

State Street launches ETFs on Kensho indices.

“If you don’t have the eye of kensho, it is impossible for you to use a single drop of the Buddha’s wisdom.” That’s a quote from Japanese Zen master Hakuin Ekaku, which came to mind this week upon seeing that State Street Global Advisors has officially launched three new ETFs that track “New Economies Indices” created by Cambridge fintech highflier Kensho. The ETFs, which each field a 0.45% gross expense ratio, will seek to reflect Fourth Industrial Revolution trends including intelligent infrastructure, smart transportation and future security.

Geopolitics and fintech collide with MoneyGram.

This week, Ant Financial’s bid to buy MoneyGram was shot down by the Treasury’s Committee on Foreign Investment in the US, catchily named CFIUS. Jack Ma’s charm offensive was impressive, but the outcome was hardly surprising. In 2013, it was widely reported that the CIA and the NSA used their authority under the Patriot Act to monitor suspicious transactions, money laundering and other financial crimes around the world that could be conducted through America’s leading money transferring services. Ant Financial may have offered a juicy price for MoneyGram, but the feng shui on this deal couldn’t have been worse.

Marijuana and cash transactions are staying hitched for now.

Partner Colorado is a credit union originally chartered in 1931 to serve postal workers. In 2017, though, the Colorado-based member cooperative took in a whopping $931 million worth of marijuana-linked deposits. However, all's not well in cannabis-related banking, thanks to a move on Thursday by Attorney General Jeff Sessions to rescind the Cole Memo. With Sessions’ action, the stage is set for rampant federal-state legal uncertainty to hang over the industry, making it unlikely that any Tier I financial institution will be joining Partner Colorado anytime soon.

COMPANY OF NOTE

Earny.

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Earny is a fintech start-up to know in the burgeoning consumer advocacy space. That’s because the Santa Monica-based company, which bills itself as a personal assistant, has automated the process by which customers can claim refunds from retailers and credit card issuers after prices have dropped on recent purchases. In a discussion with company CEO and co-founder Oded Vakrat, The FR’s Gregg Schoenberg identified some specifics worthy of note: 1) Unlike other price-protection startups that focus on retailer or credit card issuer policies, Earny monitors the policies of both groups in order to ensure that customers receive all refunds they are owed; 2) The company will be extending its price-protection offering to the hotel and air travel sectors in 2018; and 3) Earny’s referral program is compelling because it awards the referrer five percent of the refunds obtained by friends and five percent of the awards of the friends of the friends, allowing the original referrer to build a refund empire of sorts. “Our mission at Earny is to become the number one consumer advocate app in the world,” said Vakrat. “We have several hundred thousand users today, some of whom have managed to rack up thousands of dollars in annual savings.”

QUOTE OF THE WEEK

“No ruler in the history of the world has ever been able to afford a war. They're not affordable things. No prince ever says, ‘This is my budget, so this is the kind of war I can have.’”

~ Hilary Mantel