Alphabet Is Sitting on About $11 Billion in Startup Investments

Google shared a result from its years of prodigious startup investing for the first time on Monday: The holdings are worth about $11 billion, based on company estimates.

A new accounting rule prompted Google parent Alphabet Inc. to disclose the fair value for its private stock holdings in earnings reports starting this year. The figure includes the company’s stake in some of Silicon Valley’s most highly valued private firms, such as Uber Technologies Inc., Airbnb Inc. and Stripe Inc.

Previously, Alphabet reported private stock holdings based on the price it paid for the shares. Last quarter, the company said those holdings were worth $7.81 billion. After the accounting change this quarter, Alphabet valued them at $11 billion. That contributed $3.40 to the company’s earnings per share.

Alphabet’s largest stake on paper is likely Uber. GV, the company’s venture capital arm, led a $258 million investment investment in the ride-hailing startup in 2013 when it was valued at less than $4 billion. A recent deal led by SoftBank Group Corp. pegged Uber’s valuation at about $54 billion. Alphabet sold some shares in that offering, and then added some more in a legal settlement in February over self-driving cars, a transaction that valued Uber at $72 billion.

If GV had held onto that original stake of $258 million, it would have been worth almost $5 billion based on the highest valuation. But estimating what Uber is worth has become something of a parlor game after last year’s turmoil, which led to the ouster of Travis Kalanick as chief executive officer. Alphabet didn’t say what valuation it uses for Uber, nor did it disclose the number of shares it owns.

Alphabet invests in privately held companies through a variety of entities, including GV and Google, as well as CapitalG, a private equity fund, and Gradient Ventures, a VC fund focused on artificial intelligence.

By –Bloomberg

Walmart Is Close to $12 Billion-Plus Deal for Flipkart

Walmart Inc. is close to finalizing a deal to buy a majority stake in India’s leading e-commerce company for at least $12 billion and may complete the agreement in the next two weeks, according to people familiar with the matter.

All the major investors in Flipkart Online Services Pvt are now on board with the Walmart purchase, after an earlier debate over an Amazon.com Inc. acquisition, said the people, asking not to be named because the matter is private. Tiger Global Management will sell nearly all its 20 percent stake in Flipkart, while SoftBank Group Corp. will offload a substantial part of its 20 percent-plus holding, the people said. Walmart will likely end up with 60 percent to 80 percent of Flipkart, valued at about $20 billion, they said.

Among the issues still to be resolved are whether Flipkart’s founders will lead the business after the purchase, how much each existing investor sells and what Walmart’s final stake will be. It’s also possible that terms will change or the talks will fall apart.

The deal, if completed, will give Walmart a substantial foothold in an emerging market of 1.3 billion people. The Bentonville, Arkansas-based company is the world’s largest retailer, but it has struggled against Amazon as consumers migrate to online commerce. India is the next big potential prize after the U.S. and China, where foreign retailers have made little progress against Alibaba Group Holding Ltd.

“There isn’t another country with this kind of an opportunity,” said Satish Meena, a New Delhi-based senior forecast analyst at Forrester Research Inc. “India may not be a big deal now, but it’s the future opportunity that Walmart and Amazon are eyeing.”

Walmart declined to comment, while Flipkart didn’t respond to requests for comment. Walmart shares were down almost 1 percent to $86.16 at 10:16 a.m. in New York. Amazon was little changed at $1,528.33.

Flipkart’s board had seriously considered Walmart and Amazon as potential partners, but ultimately decided Walmart could close a deal more easily. Walmart likely faces fewer regulatory hurdles because it has no online retail presence in the country now, while Amazon is the second-largest e-commerce player and Flipkart’s primary rival. Flipkart founders Sachin and Binny Bansal are also said to have favored Walmart. The U.S. retailer has been courting the Indian company since at least last year.

Amazon has already been aggressively expanding in India on its own. Founder Jeff Bezos has committed $5.5 billion to the country and his local chief, Amit Agarwal, has made progress by adapting the site to local conditions.

After Losing China, Jeff Bezos Really Wants to Win in India

Amazon has been gaining ground quickly on Flipkart and it tried to derail the Walmart transaction at least in part because it will fortify the Indian rival. Walmart can aid Flipkart with deep pockets and decades of retailing expertise in skills from logistics to marketing.

"What Flipkart took a decade to do, Amazon has achieved in half that time,” said Meena. “Now Amazon will get ready for the battle ahead, and pump more into investments, particularly in food retailing and fashion.”

The $20 billion pricetag would be substantially higher than Flipkart’s valuation of about $12 billion last year. It is already the most valuable startup in India.

SoftBank stands to make a tidy profit on a deal it cut last year. The Japanese company invested $2.5 billion at the earlier valuation, people familiar said at the time. That stake could be worth more than $4 billion at the Walmart deal’s valuation.

SoftBank and Tiger Global are currently the startup’s largest shareholders, followed by South Africa’s Naspers Ltd. If the deal goes through, it would be the biggest in the nascent history of Indian e-commerce.


Malaysian police wear Chinese start-up’s AI camera to identify suspected criminals

As China establishes itself as a global leader in artificial intelligence, its innovations are being met with increasing demand from abroad.

There is a growing appetite in particular for its advanced surveillance systems, the latest example being a body-mounted camera being used by Malaysian police that employs facial recognition technology to identify suspects.

The Auxiliary Force (AFSB), part of the Royal Malaysia Police Cooperative, has been equipping its officers with the cameras that use cutting-edge facial recognition capabilities designed by the Chinese artificial intelligence start-up Yitu Technology. The system enables officers to promptly compare and match images captured by the body-camera with those stored in the police database.

The surveillance camera works at night but, for now, only allows officers to review captured video footage to identify people of interest after the event.

“This is a significant step forward for us as we leverage artificial intelligence to increase public safety and security. Looking ahead, AFSB also intends to expand the capabilities of our body-worn camera system to include real-time facial recognition and instant alerts to the presence of persons of interest from criminal watch lists,” said Dato’ Rosmadi Bin Ghazali, CEO of the Auxiliary Force, in a press release.

China is home to a number of leading AI companies, including SenseTime Group, Megvii – also known as Face++ – and Yitu Technology. The country accounted for 48 per cent of the total US$15.2 billion raised by AI start-ups worldwide last year, outstripping the 38 per cent raised by US firms, according to American research firm CB Insights.

The world’s most populous country is also en-route to creating a national facial recognition system that would be connected to cameras, with the ability to recognise any of the country’s 1.3 billion citizens in less than three seconds.

Founded in 2012, the Shanghai-based start-up Yitu, which completed series C funding of US$55 million in May 2017 from Hillhouse Capital Group and other investors, said three seconds is all it takes to identify someone from the 1.4 billion faces stored in China’s national databases.

Public security agencies have been the major source of demand for Yitu’s technology so far, Lin Chenxi, one of the two co-founders said in an interview in November.

Yitu’s facial recognition software has been widely used for safety and surveillance purposes in China. It is used by banks to verify ATM transactions, while surveillance cameras at borders are using it to match and cross-reference travellers with national databases to identify smugglers and illegal entrants.

The solution from Yitu is also being used for security at Chinese tourist location including ports, and public spaces which require high safety standards. In its first three months of operation, it has helped Shanghai’s Metro operator to apprehend 567 lawbreakers, according to the company.

The Chinese firm has said aims to generate more revenue from overseas markets by exporting its technology overseas, to countries in Africa and Europe, where governments are grappling with the threat of terrorism.

In January, Yitu opened its first international office in Singapore, trying to use the country as a springboard to enter more adjacent markets in the region including Malaysia, the Philippines and Indonesia.

The global facial recognition market is forecast to be worth US$6.5 billion by 2021, up from US$2.3 billion in 2016, according to estimates by the research company Technavio.

From – South China Morning Post

BYD, backed by Warren Buffett, gets more love from analysts than Tesla

A 14 per cent slide in the Hong Kong-traded shares of BYD this year has not shaken analyst confidence in the Warren Buffett-backed Chinese electric carmaker.

Long-term growth prospects for China’s new-energy vehicle market are overshadowing concerns about tighter government subsidies and increasing foreign competition that have wiped out more than US$3 billion from BYD’s market value this year.

A majority of the 27 analysts who cover the company remain bullish, with 18 recommending buy, rising from 15 at the end of last year, data compiled by Bloomberg show. BYD’s recommendation consensus -- a Bloomberg gauge of analyst confidence in a stock on a scale of 1 to 5 -- stands at 3.96, above the 3.13 for global EV producer Tesla.

BYD’s “near-term earnings are under pressure from the adjustments of subsidies,’’ said Kelvin Lau, a Hong Kong-based analyst with Daiwa Securities. But its new models in the pipeline will qualify for higher amounts under the government’s revised subsidies, and thus BYD will see a recovery in the second half, he said.

The Chinese government has been cutting subsidies for new-energy vehicles to encourage competition, with a goal of phasing out the incentives by 2020. BYD last month predicted a drop of as much as 92 per cent in first-quarter earnings, citing decreased government handouts for new-energy vehicles. Government grants made up 23 per cent of BYD’s pre-tax profit in 2017, a jump from 11 per cent in 2016, according to Bloomberg Intelligence.

Yet China remains hugely committed to electric vehicle development. To cut roadside pollution and reduce reliance on oil imports, President Xi Jinping’s administration is implementing NEV production quotas, targeting a sevenfold increase in NEV sales, and considering a ban on gas guzzlers.

The nation is also increasing subsidies for longer range electric cars, benefiting leading home-grown makers like BYD that have taken the lead in developing such models. BYD’s new and redesigned SUVs could help lower the risk of government subsidy cuts for EVs in China, Bloomberg Intelligence said in a report this month.

Earnings per share at BYD, the only major Chinese EV maker that also produces battery cells, are expected to rise 32 per cent this year, above an average of 29 per cent for Hong Kong and mainland-listed Chinese automakers, according to data compiled by Bloomberg. Its sales are expected to gain 24 per cent, higher than the approximately 17 per cent increase forecast for the group.

BYD can also make money by selling credits from new-energy vehicle production after 2020, said Ka Leong Lo, a Hong Kong-based analyst with Maybank Kim Eng Securities, as the government rolls out a mandatory dual credit system that will require most automakers to either produce enough NEVs themselves or buy credits from those with a surplus.

As a rare, listed Chinese company focused on new-energy vehicles, BYD’s stock enjoys scarcity value. The Hong Kong-listed shares trade at more than 21 times earnings forecast for this year, more than double the average P/E for Hong Kong-listed Chinese carmakers, based on data compiled by Bloomberg.

Still, the company’s growth isn’t without threat. BYD faces increasing competition as China liberalises the auto market for foreign investors, including global EV leaders Tesla and Nissan.

BYD’s 12-month consensus target price has slipped about 7 per cent to HK$72.65 from a five-year high of more than HK$78 in February. Based on the stock’s current price, that indicates a return potential of 25 per cent.

From - South China Morning Post

Software Maker Ceridian Tops IPO Range to Get $462 Million

Ceridian HCM Holding Inc., the software maker backed by Thomas H. Lee Partners, raised $462 million in its initial public offering.

The company priced 21 million shares at $22 apiece, above the $19 to $21 price range marketed to investors, according to data compiled by Bloomberg. The IPO gives Ceridian a market value of almost $3 billion, according to the number of shares to be outstanding after the offering and a concurrent private placement.

Ceridian makes human capital management, or HCM, software to help its more than 3,000 customers with 2.5 million active users manage HR functions, payroll and benefits, according to its IPO filing. The Minneapolis-based company competes with companies such as Workday Inc. and Automatic Data Processing Inc.

Ceridian posted $751 million in total revenue last year, up 6.6 percent from a year earlier, it said in the filing. In 2017, its net loss excluding non-controlling interest was $9.2 million, down from $93 million a year earlier.

Thomas H. Lee is expected to own 51 percent of the shares after the offering, according to the filing. Investment firm Cannae Holdings Inc., which also held private shares, will have a 27 percent stake after the IPO. Thomas H. Lee and Cannae also intend to buy $100 million worth of stock in a private placement concurrent with the IPO.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. led the offering. Ceridian’s shares are expected to trade Thursday on the New York Stock Exchange under the symbol CDAY.

From – Bloomberg

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