Weekly Newsletter- Week of 7.4.2021
Housing Market Begins to Cool
This week we learned that mortgage applications are down nearly 17% from this time last year. As fewer homes are actually being sold, prices continue to rocket higher- in April, the reported increase was 14% year-over-year. For additional context, cities like Seattle, San Diego, and Austin each saw annual prices increase by over 20%. As we hinted at above, home sales have been on fire throughout the bulk of 2020. The surge came on the coattails of an artificially low rate environment mixed with a mass relocation out of densely populated states like New York and California. There was a slight increase in the amount of available housing reported this past week. The news is a possible sign that limited supply and surging prices may finally be at a crossroads, as it appears rising prices may finally be impacting housing demand.
Tourism Space Race
As we noted in the previous newsletter, shares of Virgin Galactic went soaring after the company received FAA approval to send passengers into space. The approval prompted huge media coverage and titans like Jeff Bezos, Richard Branson, and Elon Musk all had the spotlight. As this week opened, we saw the share price begin to trace back to the mean. That all changed when Richard Branson, Virgin founder and billionaire investor, announced he will participate in the next Virgin Galactic test flight which is scheduled for July 11th- the news brought with it a 30% spike in pre-market trading. July 11th is significant because it would put the flight ahead of Blue Origin’s first planned flight. Blue Origin, the space company founded by Jeff Bezos, announced just weeks prior that Bezos himself will be participating in the flight.
The race between Bezos and Branson (and their respective companies) has begun and investors are watching closely. In the public markets, Virgin Galatic is one of the only pure-play space tourism stocks available- shares of Virgin are up over 80% year to date.
Robinhood to Join the Public Markets
Robinhood formally submitted their S-1 paperwork, the initial step required by the SEC to take a company public. The release was the first time we’ve ever been able to take a deep dive into Robinhood’s financials. To the surprise of no one (especially after the trade-halt controversy), the S-1 showed their primary source of revenue from selling trading data to institutions.
Aside from their clear reliance on trading data, there were a few other key points that investors took away from the filing:
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Despite surging revenue, Robinhood is currently operating under a $1.4 billion loss. Although that sounds like a lot, most companies, especially in the financial technology space, operate with huge losses their first 1-3 years.
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Nearly 18 million users are on their platform- based on their data sharing model, this equates to an estimated $81 billion in assets.
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Users currently carry over $11.5 billion in cryptocurrency on the platform
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Robinhood discussed the possibility of allowing its users to buy into the offering at the listing price in advance, a move seldom seen on Wall Street.
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Before the controversy mentioned above, this was considered one of the hottest potential IPOs around. We’ll have to wait and see how they trade as a public company.
Who's Mining the Crypto?
As regulation continues to increase in China, uncertainty appears to be rising over the future of mining. The added risk is beginning to force many miners to relocate their operations out of China or sell off some of their hardware. It’s estimated that Bitcoin mining has seen a drop of nearly 65% in revenue just over the last few months.