Apple’s concessions are too late

September 7, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on September 2nd, 2021.

Developers and legislators around the world are questioning Apple’s business model. Slowly, the company has been forced to back down. But the latest concession will not solve the big app conflict.

“Once we are making over $1B a year in profit from the App Store, is that enough to think about a model where we ratchet down from 70/30 to 75/25 or even 80/20 if we can maintain a $1B a year run rate?“

That’s what Apple executive Phil Schiller wrote in an email in 2011 to, among others, Steve Jobs, then CEO of Apple. Even then, ten years ago, it was suggested that the profitability of the App store could be maintained with a different revenue split.

“70/30” that Schiller refers to is the commission model that Apple has in the App Store. For every dollar a developer sells for, Apple charges 30 percent. That fee was also the first concession that Apple made, when the company last year lowered the commission to 15 percent for developers who had less than $1 million in revenue per year.

This change affected the majority of developers – close to 97,5 percent, according to the computer company Sensor Tower. But the reduction was criticized because it would not, in principle, affect Apple’s revenue at all. Moody’s, a research firm, estimated the effect to be less than 1 percent of Apple’s profits from the App Store, whose total revenue is secret.

The App Store is very top heavy – it is the biggest developers who basically make all the money. Retaining these developers – and revenue from them – is Apple’s primary interest. It is in light of this that last week’s rule change, and Wednesday’s adjustment should be seen. Apple will now allow apps that provide video, music, and news to link directly to a web page where you can charge your customers without having to give Apple any commission.

In practice, this is a very small change. Major apps such as Netflix and Spotify are already charging outside Apple’s ecosystem. The only difference now is that they can link directly to their web pages instead of relying on users to find their web sites on their own. The change will therefore mostly symbolic, and does not cost Apple anything. A way of trying to appease both politicians and developers, but which will have very little economic impact.

The big question for Apple concerns mobile games. This is where the absolute majority of revenue in the App Store comes from. If the gaming companies can circumvent Apple’s payment system completely, this could start to make a dent , even in the income statement. A decline in revenue in their important service sector could worry a stock market that has seen this as an area for growth. Giving Spotify and Netflix a link to a website is therefore a cheap concession – as long as the regulators allows Apple to keep a tight grip on game developers.

Another question is whether this attempt at self-regulation is coming too late. This week, South Korea – as the first country in the world – came up with legislation that forces Apple and Google to allow more payment systems in their app stores. The big lawsuit between Epic and Apple, where a verdict is expected this fall, has pointed the spotlight on the issues. Judge Yvonne Gonzales Rogers has indicated that neither party will be completely satisfied with her decision. But just the fact that there is now talk of Apple as a monopolist can be seen as a win for Epic, regardless of the outcome of the case.

In parallel, lawsuits and legislation are underway in several countries, all of which look at issues of competition and monopolistic behavior. It is unlikely that all these instances would be satisfied with the small adjustments that Apple itself has initiated. For many years, Apple refused to adapt its rules at all, and that attitude has upset both developers and legislators. A more pragmatic approach could have deescalated the issue. Instead, Apple is now in a position where they are playing defense and trying to reduce the damage of potential regulation, rather than proactively changing their rules before the problems arise.

This column was first published in SvD Näringsliv, in Swedish, on September 2nd, 2021.

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The crypto hype has reached Lionel Messi’s pockets

August 28, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on August 28th, 2021.

When Leo Messi closed the door on FC Barcelona, another one opened wide – and it shows that Silicon Valley is currently tearing down old structures in sport. One of the many ways he is compensated is through the club’s own cryptocurrency.

“Bartomeu was plugging holes in the short term and mortgaging the club in the long term. That leaves us a dramatic inheritance. […] In total, our debt is now €1.35bn”

That’s how the newly appointed Joan Laporta, chairman of the soccer team FC Barcelona, ​​described the financial situation in the club a couple of weeks ago. The person he blamed the financial problems on was his predecessor, Jose Maria Bartomeu. With wage costs exceeding revenues by 115 percent, one can understand his frustration.

However, the almost $1.6 billion that the club has in debt says more about a traditional view of how to conduct business than an individual’s poor judgment. And on the horizon, we now see how Silicon Valley – with both its innovations and compensation structures – is beginning to find its way into the sports world.

The first indication of this is how the super star Lionel Messi, from the just mentioned FC Barcelona, ​​negotiated his new contract with the French soccer club PSG. In addition to a salary of around $41 million per year, he also received a bonus in the club’s own cryptocurrency, called $PSG Fan Tokens. The cryptocurrency can be used to influence smaller decisions in the club. But it can also be traded – and speculated on – as any currency. After the news about Messi, the club sold fan tokens for another $35 million. The price is now up over 350 percent in one year, according to Coinmarketcap.

Cryptocurrencies are a way to take advantage of the strong fan culture that prevails in the soccer world. By going directly to your fans and involving them with both commitment and financial incentives, you can create a more direct relationship. There are already clubs that are publicly traded today, including the English Manchester United and the Italian Juventus. But the shares there do not come with any promises of more impact on the business than an average investor who owns shares in an industrial company. Mostly a theoretical idea, in other words.

Today, much of the soccer world’s revenue comes indirectly from fans. These include club memberships, ticket sales, merchandise, and TV rights to broadcast the games. The TV rights are where the really big money is, but there are also many middlemen before the fans’ TV subscriptions finally reaches the club in the form of revenue. A separate cryptocurrency bypasses many of these intermediaries and reaches fans directly, although the company Socios – which provides the technology for PSG’s cryptocurrency – also takes a share. PSG is not alone in creating cryptocurrencies. Clubs such as Manchester City and AC Milan have also launched their own variants, as has the Soccer Association of Argentina.

Someone else who has reacted to Barcelona’s poorly managed economy is the Silicon Valley legend Mike Moritz, partner at the venture capital company Sequoia and board member of Klarna. In an op-ed in the Financial Times, Moritz writes that the soccer world should look at Silicon Valley and its way of compensating its employees. If Barcelona paid Messi with shares in the club instead of just cash – and in addition ensured that he had to sell the shares when he left – then both parties in the deal would have been in a much better financial position, Moritz states.

Paying with options and shares is standard with the big tech companies, but unusual in a sports context. It is, however, not impossible. When David Beckham left Spanish Real Madrid to play for LA Galaxy in the American MLS league in 2007, many were surprised. However, part of Beckham’s contract was an option to buy an MLS team when he had stopped playing. Since 2013, he owns part of the club Inter Miami CF, and paid a greatly reduced price to get them into the MLS league.

Silicon Valley influences the outside world through both technology and behavior. The technology NFT, which a year or so ago seemed obscure and a bit absurd, is today one of the American basketball league NBA’s newest and fastest growing revenue streams. In total, they have sold digital NFT collector images via their service NBA Top Shot for over 700 million dollars.

One of PSG’s other big stars – Kylian Mbappé – is now said to be on his way. If so, what will his compensation look like? Will he get cryptocurrency to change clubs? The soccer world – with its enormous global interest – has so far only scratched the surface for how technology could help them grow even more.

This column was first published in SvD Näringsliv, in Swedish, on August 28th, 2021.

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Tech giants just the first to get aligned in China

August 25, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on August 20th, 2021.

Contribute to the state’s goals – or suffer the consequences. This is the message that the Chinese state has recently sent to the country’s tech companies. Fears are now being raised that the same harsh stance will spread to more sectors.

50 billion yuan – about 7,75 billion dollars – will be invested to revive the countryside and raise wages for Chinese low-wage workers. The major investment, announced this week, was an addition to an earlier reform of another 50 billion yuan aimed at supporting “sustainable social values”.

As a political reform, this may not sound too controversial. But the money is not coming from the Chinese state – it is a donation from the Chinese internet giant Tencent.

The company called its move a “proactive response to the national venture” and stressed that the company “constantly thinks about how we can use our technology and our digital skills to help society develop, and give back to society.”

However, there are many indications that the donation was anything but proactive. Rather, a reactive response to the ever-increasing pressure that the Chinese state put, and continues to put, on its domestic tech companies.

The latest tightening, which came on Friday, is about new legislation regarding data management and which will be introduced from November. Chinese tech stocks fell sharply on the news, including Alibaba, which has also seen its share price pushed down sharply these past months. In total, Nasdaq’s Golden Dragon index, which lists the largest Chinese stocks traded on the US stock markets, has plummeted nearly 53 percent since its peak in February, according to the Financial Times.

The uncertainty in the market, on the other hand, is not so much about an individual new law, but more about how the Chinese state acts. Admittedly, it may almost be a matter of symbolic politics, since in practice the state could still have gotten its will through. But by using legislation, they now get better control tools for curbing the unwanted behavior of the tech companies.

We have seen several examples of the state having the power and mandate to act. When the financial group Ant Group was to be listed on the stock exchange last year, China quickly changed the law on capital requirements just 48 hours before the introduction. The listing had to be canceled with immediate notice. The Chinese transport company Didi has lost almost half of its market capitalization after the Chinese state set new, higher requirements regarding data security.

The Chinese state’s ambitions to get tech companies to contribute to their long-term, strategic goals for the country are about both power and economy. They want companies such as Tencent, Alibaba and Bytedance to act as good citizens by contributing to the goals that have been set for the country as a whole. These goals include dealing with a rapidly aging population, and maintaining China’s strong position in the manufacturing industry. But the ambition to contribute applies to more than just the tech companies. Xi Jinping himself said in a meeting that he wanted to “encourage high-income earners and companies to give back more to society”. Both increased income and wealth tax for private individuals are now expected.

Concerns are now spreading that the tougher pressure will also affect other sectors. Kweichow Moutai, the world’s largest alcohol producer, fell five percent on the stock market just after rumors that China would introduce new legislation to reduce alcohol consumption in the country. Several pharmaceutical companies have also been turbulent since online sales of prescription drugs were criticized in the state-friendly newspaper People’s Daily.

The question now is how far Chinese companies need to go to satisfy Xi Jinping. When Tencent’s CEO, Martin Lau, spoke to investors this week, he touched on the new reality they are in. He said that “we should expect more legislation in the near future”, but also that “we want to establish us as completely accommodating towards it ”. Tencent’s donation of 15 billion dollars can be assumed to be a good step in that direction.

This column was first published in SvD Näringsliv, in Swedish, on August 20th, 2021.

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Crypto world shaken after million dollar theft

August 25, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on August 13th, 2021.

This week’s million dollar theft of cryptocurrency has shaken the financial world. The theft comes in the middle of a major discussion about increased regulation of cryptocurrencies, writes SvD’s tech analyst Björn Jeffery, and clarifies the crossroads the industry is facing.

Imagine the following scenario:

A bank is robbed of 610 million dollars.

The next day, the robbers decide to give back a little more than half of the money. They explain to the bank and their customers that they only robbed it to prove that it could be robbed. And a little because they thought it was fun too.

As compensation for the fact that they have now returned $342 million, they would like the customers, the bank, and possibly other people to donate some more money to them as a thank you. This is in addition to the $268 million they still had left from the robbery.

This is exactly what happened this week, although the bank was a platform for cryptocurrencies and the robbers were hackers. The affected platform is called Poly Network and provides a way to link different blockchains.

According to Bloomberg, security experts have found personal information about the hackers, which may have been one of the reasons why some of the money was returned. It is the biggest theft in the crypto world so far, and it also comes at the completely wrong time for its enthusiasts.

In April this year, all cryptocurrencies reached a market value of over $2,000 billion in total. Interest from the establishment, despite repeated criticism of the phenomenon from many places, is also steadily increasing.

According to a study conducted by the fund manager Fidelity, seven out of ten institutional investors expect to invest in cryptocurrencies in the future and half of those surveyed had already done so.

But as the institutional capital begins to roll in, questions about security, taxation and regulation are also raised. In order for investors to feel completely comfortable with investing in cryptocurrencies, a regulatory framework is needed that ensures that normal requirements for investments are met. This is largely missing today.

There is also a great deal of ignorance from almost everyone in the market. Cryptocurrencies and blockchains are technically complex systems that use some terminology from the established banking and finance world, but basically does not work in the same way – intentionally. In fact, systems are often designed to be completely decentralized, and thus difficult to monitor and control. For many crypto enthusiasts, this was the appeal from the very beginning.

The fact that politicians and the judiciary are starting to look more closely at cryptocurrencies is therefore not met with cheers from all sides of the market. But the proposals for regulation now come from an unusually qualified place. Gary Gensler, chairman of the SEC, has himself lectured on, among other things, cryptocurrencies and blockchains at the prestigious American university MIT.

Gensler gave a speech at the Aspen Security Forum earlier this summer in which he clearly pointed out that the SEC regarded many cryptocurrencies to be just like any other type of security. Thus, they should be regulated accordingly. The speech was received with relative calm, probably driven by Gary Gensler’s experience in the field. The market has expected some form of regulation, but the nightmare would be rules that are technically impossible to live up to. With Gensler, it significantly reduces that risk.

The crypto world is therefore at a crossroads. The explosive development that has taken place in recent years is what has attracted everything from individual speculators to large institutions and corporations. If strict regulation and correct taxation are introduced, there is a risk that that enthusiasm could diminish.

At the same time, there’s a need for legitimization in order to be truly accepted into the old school world of finance, where the really big money is. This will be difficult to get when the market is more like the “Wild West”, as Gary Gensler himself described it.

On Friday, the news came that Poly Network had offered the hackers half a million dollars as a thank you for noticing a weakness in their security. The payment would be part of the negotiation to get back the remaining stolen money.

Whether the hackers in question accepted the offer was still unclear on Friday afternoon. In any case, it is clear that the discussion about regulation of the crypto world is unlikely to diminish in the future.

This column was first published in SvD Näringsliv, in Swedish, on August 13th, 2021.

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China to the tech giants: Contribute or be punished

August 25, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on August 6th, 2021.

China’s attacks on the country’s own tech giants look like attacks on an entire sector, but behind it is a more conceived idea, writes SvD’s tech analyst Björn Jeffery. If companies do not contribute to China’s national goals, they are in a risky position.

“To get rich is glorious.”

That quote is often attributed to Deng Xiaoping, the man who was China’s supreme leader from the late 1970s until his death in 1997. It is debatable whether he actually expressed himself in that way, but it is in line with the distinct change of course China took under Xiaoping. His reforms and views on prosperity laid the foundation for what would become the new and economically fast-growing China we have seen in recent decades.

A more modern adaptation of the quote would perhaps rather be “to get rich is glorious – but not in any way“. The Chinese tech sector has recently experienced this.

In a series of initiatives, Chinese authorities have pushed everyone from Alibaba founder Jack Ma to most of the education sector and, by all accounts, the entire Chinese gaming industry. All this within a few months. The company Didi, often described as Uber of China, fell sharply on the stock market in July when Bloomberg reported that the company could be severely fined for concerns regarding data security. In the worst case, they would have to delist from the stock exchange altogether.

The sudden outbursts can be seen as a way for the Chinese state to clarify the balance of power in a sector that has exploded in value and size for many years. Tech companies have done a lot to digitize China’s economy, but its success has become a double-edged sword.

The fact that there is a tug-of-war over market share is nothing new in either the tech or corporate world. The difference in China is that the successes in the tech world often take place at the expense of the Chinese state, which to a large extent represents the establishment that is being overthrown. When Jack Ma creates new banking and financial services with Ant Group, existing banks in the country are challenged. And who owns these banks? Well, usually the Chinese state.

But it is not only the amount of power that the authorities oppose, but also what it is used for.

One of the founders of Tech Buzz China, the Chinese analyst Rui Ma, believes that tech companies must both adapt to the national strategic goals for China, and create more value for the country than just money. These goals are, for example, to deal with the demographic changes in the country and to maintain its position regarding industrial production.

Rui Ma urges Chinese companies to try to understand the intentions of the regulation.

“Do understand the intent. What you probably need to first decide is if you can understand this framework. If you can’t, maybe don’t stick around. If you can, then you can start assessing risks. ”

The taxi service Didi does not help any of these national and strategic goals. Companies like Huawei, on the other hand, which produce digital infrastructure, still seem to have strong support from the authorities. This is despite the fact that the company, with its size, possesses both power and influence.

To say that China is marking its power against Chinese tech companies is therefore a truth with some modification. The marking is rather towards those who are not considered to contribute to more than their own income statement. The companies that steer their operations to be in line with China’s other national priorities should not have to be as worried.

China’s many investments in AI can also be seen in this light. It is a centralized technology that can be used for both industrial production and national security. It can be profitable in individual companies, but also contribute to more strategic goals.

The enormous success that, for example, the chat service Wechat has had in the country has created a platform for a completely new wave of Chinese companies. The demand created there is extremely valuable and has become a driving force in the Chinese economy. But when only two companies – Wechat and Alipay – have a combined market share for digital payments of over 94 percent, it is difficult not to see them as potentially problematic power players at the same time.

It is unclear what the ultimate goal is for the Chinese state’s new attitude. It is probably under development for themselves as well. What is happening now in China’s tech sector has never happened before. But it is clear that the country’s tech companies have a new reality, where companies must guess at what is required to be able to continue as before. And where an unintentional violation can suddenly become devastating.

This column was first published in SvD Näringsliv, in Swedish, on August 6th, 2021.

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How Apple’s ideals in China collapse

August 25, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 28th, 2021.

A new service from Apple is intended to protect privacy. But it also exposes one of the IT giant’s biggest challenges right now – choosing a path in China, where they are squeezed between the country’s exercise of power and its own ideals.

Happy and confident, Apple CEO Tim Cook stepped up to the podium in Washington DC. The year was 2015 and he was just about to give a speech to graduate students at George Washington University. Cook, who had previously been the chief operating officer in the shadow of Steve Jobs, was four years into the role of CEO of Apple and had now begun to find his stride.

In his speech to the students, he referred a lot to Jobs and the philosophy he had introduced at Apple. But in a nutshell, he also revealed his views on leadership, which would fundamentally change Apple.

— I was trained to be pragmatic – a problem solver.

There is a lot to be said for Steve Jobs, but pragmatic he was not. Quite the opposite – stubborn, visionary and a little headstrong.

And nowhere has Apple’s new pragmatic view been more clearly felt than in their stance towards China, under Tim Cook’s rule.

The country has been an important production partner for Apple for the past 20 years. China was the country that got to produce Apple’s then major new product line, the iPhone. This would probably not have happened if China had not joined the WTO in 2001, which facilitated a larger establishment there. The success of the iPhone also cemented the importance of good relations between the two parties, and laid the foundation for more factories and data centers to be built.

Meanwhile, the country also began to grow as a market for Apple. The Chinese started buying iPhones, iPads and Macs like never before. In the most recent quarter, their Chinese revenue was $17.7 billion. This means that almost every fifth dollar that Apple earns comes from China. And the country’s importance is growing rapidly. Growth in the market was 87.5 percent compared with the previous year.

But lately, it has started to get a little rocky for Apple. Their ongoing war against Silicon Valley neighbors like Facebook and Google over ad data comes from a strategy to position themselves for the privacy and security of each individual. “Integrity is a fundamental human right,” Apple tends to say.

It is therefore a bit precarious when the company launches a new service, “Privacy relay”, which will reduce the tracking of individuals’ web data – but that does not work in China. And not in other countries such as Belarus and Saudi Arabia either. Due to their local laws.

This is where the view of the individual’s integrity is crossed with the importance of maintaining good relations with one of Apple’s most important markets and production partners. What will Apple’s values ​​end up costing them?

The attitude risks undermining Apple’s principled argumentation in data issues around the world. If the principles do not apply in all countries – then what is the real motive behind them?

That Tim Cook would prioritize China and its legislation at this stage, however, is no surprise. As early as 2017, he spoke at a conference on whether Apple should be in China or not, and how they related to developments in the country.

— My strong opinion is that you show up and participate. You are in the match, because nothing can change if you are off the field.

This is how it sounds when a pragmatist reasons. The question is how far he is willing to go to appease a country that does not share Apple’s fundamental view of integrity. Unlike its competitors in Silicon Valley, Apple has succeeded very well in China.

But that success has now come at a high price. The more Apple loosens up, the harder China can push. And soon Tim Cook could get so cornered that his pragmatic way of working may end up being forced out altogether.

This column was first published in SvD Näringsliv, in Swedish, on June 28th, 2021.

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Future worries causes Visa to pump billions into Tink

August 23, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 24th, 2021.

The Swedish company Tink has 18 billion reasons to thank the US Department of Justice. Their stopping of Visa’s intended deal with the similar company Plaid laid the foundation for today’s giant acquisition.

Al Kelly, CEO of the card company Visa, seems to know what he wants.

In 1.5 years, he has tried to make two billion dollar deals of a very similar kind.

The segment that Visa is interested in is called “open banking” – a new standard for being able to share financial information between banks and companies. The first deal, with the fintech company Plaid, was blocked by the US Department of Justice, which accused Visa of breaching anti-trust.

After a 364-day wait, the acquisition was canceled and the deal worth 5.3 billion dollars was canceled.

Then Kelly got another chance to do the same thing again – but on the other side of the Atlantic. The card company Visa wants to buy Swedish Tink for 1.8 billion euros, about 18 billion SEK.

Both acquisitions point to the major change that is currently taking place in the banking world. The idea of ​​the legislator, the European Parliament in this case, is that consumers should be able to move money, accounts and financial services between different providers in a simple way.

But what is easy for the consumer is not always easy for the bank that has to deliver it.

This is where Tink comes into the picture.

Simply put, Tink has built a technology that makes it easier for banks, systems, and apps to talk to each other. In Sweden, Tink has long had collaborations with, among others, Nordea, Avanza, and SEB.

The great interest from Visa indicates one more thing: a concern about the future of payment cards.

For a long time, Visa, Mastercard and American Express have in practice functioned as the global infrastructure for moving money between people and companies.

But then there are upstarts like Trustly who offer several different options for moving money, where debit cards are just one of them and rarely neither the fastest nor the cheapest. And already today there are Swedish stores and e-retailers that, for example, only accept the Swedish payment system Swish as a form of payment.

Anyone who has ever tried to transfer money between different countries knows that it is anything but smooth, with long IBAN numbers and SWIFT codes.

Open banking makes it possible – in theory at least – to circumvent both debit cards and other hassle. Bad news for someone who is the CEO of a card company, if you do not have a real pile of billions to invest.

Al Kelly at Visa has just that.

Now he wants to be part of that movement.

The deal with Tink was therefore fairly expected. When the analysis company Forrester listed the leading companies in open banking, Plaid came in first place, and Tink in second.

Tink also has an advantage in that they operate in 18 European markets. Thus, the US Department of Justice does not have much to say about this deal.

However, their European counterparts could have similar objections. The acquisition will now undergo the usual review by the European Commission before the deal closes completely.

Even if Visa should have legal problems this time too, Tink is expected to emerge as the winner. After the deal with Visa went awry for Plaid, it took only three months before they received a new investment – at an almost three times higher valuation than what Visa had paid.

This column was first published in SvD Näringsliv, in Swedish, on June 24th, 2021.

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Why Telia wants to sell TV4 – 1.5 years after the big deal

August 23, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 22nd, 2021.

Only one and a half years in its possession – but already Telia is rumored to want to dump the Swedish broadcaster TV4. Surprising? Not at all. The world’s telecom companies never seem to learn from history – and all indications are that Telia will soon buy a “new” TV4.

A giant deal valued at almost SEK 10 billion. Transformative for both buyers and sellers. This is how it sounded when Telia bought Bonnier Broadcasting, which includes TV4, the Finnish equivalent MTV3, and the pay TV channels under the C More brand.

Only a year and a half later, Dagens Media states that Telia, where the Swedish state is the largest owner, wants to get rid of everything except C More.

How did we end up here?

The answer can be found with Telia Company’s current CEO, Alison Kirkby, who described the telecom market for SvD Näringsliv in October 2018.

I think it is very difficult for small, regional telecommunications companies to invest in both technology and content at the same time.

Kirkby was then the incoming CEO of the Danish telecom giant TDC, which blew off a merger with the Swedish television company MTG a few months earlier.

Content is difficult, she stated laconically.

That Kirkby would be skeptical of her new employer’s huge acquisition was perhaps therefore no surprise. The deal, which was examined by the European Commission for over a year, took place before she started. But it has now become her headache to solve.

The solution for Telia, which rejects the story, can therefore be to sell TV4 and Finnish MTV3. The article in Dagens Media refers to internal dissatisfaction and conflicts between the television unit and the telecommunications company. But more than anything, there are other mechanisms behind a potential sale.

The underlying reason is rather the identity crisis that the entire telecom industry is suffering from. It is, essentially, an infrastructure company that delivers broadband, television and mobile telephony – sometimes via cable, sometimes without. Infrastructure can be very profitable, but is also difficult to differentiate. Who really cares about the name of your broadband provider? Provided that the service works, is fast, and fairly cheap, the company behind it plays a minor role.

The same pattern can be found at telecom companies around the world. American Verizon, for example, bought the content companies Yahoo and AOL for a total of almost $10 billion, and then wrote off $4.6 billion just 2.5 years later.

Their competitor, AT&T, bought the media company Time Warner for $85.4 billion in June 2018. In May this year, they announced that Warner Media, as the company is now called, will instead be merged with Discovery.

These big, failed deals have been done to try to create an edge over the competition. The strategy is usually that you can share data with each other to increase the precision of your ads, and to be able to sell joint subscriptions to your end customer. Buy Telia’s broadband, get C More for a few extra bucks – that kind of offer.

However, that is easier said than done. The culture of telecom and media companies could not be further apart. The synergies rarely arise, and instead an internal strategy review is often appointed to go through the business. The investigation almost always comes to the same conclusion – the telecom company should focus on its core business instead. Which means the underlying technology.

A clear example of this is Swedish Hans Vestberg, who took over as CEO of Verizon 2018. He quickly stated that the company’s future was called 5G, and that the content it recently bought did not fit into that vision. They would invest in technology and infrastructure again. The social network Tumblr, acquired through the acquisition of Yahoo, was sold for $3 million. Original price: $1.1 billion.

Shortly before Allison Kirkby left TDC for Telia, she carried out a similar maneuver. TDC was divided into two parts – a content company and a technology company. In other words, Kirkby has already shown in action how she sees the telecom companies’ future vis-à-vis the media.

So what happens now? If one is allowed to speculate, Telia’s advisers will be given the somewhat ungrateful task of finding new owners for a traditional media company in 2021, and Telia will return to expanding its infrastructure instead.

But then, in a couple of years, it is conceivable that a new CEO will join Telia. They will find that it is difficult to differentiate yourself when you only have cables and technology to offer. And then they will – just like every other telecom company – start looking at buying media companies again.

This column was first published in SvD Näringsliv, in Swedish, on June 22nd, 2021.

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This determines the next GameStop

August 23, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 14th, 2021.

When the speculators on an online forum decide on a stock, things can move very fast. This week, companies such as Clover Health, Aethlon Medical and Geo Group got to experience what it is like to become a so-called meme stock. But what forces really affect what will be the next Gamestop?

The medical technology company Aethlon has just had a couple of very strange days. It started with the company published a study on the treatment of Covid-19, using one of their products. However, the research was preliminary, and the article had not yet undergone peer review. The whole thing was pretty normal and undramatic. Aethlon’s stock stood still after the announcement.

A couple of days later – when the online forum Reddit drew attention to the company – the stock suddenly soared 465 percent in a single day. Aethlon took advantage of the situation and quickly issued new shares for sale. Suddenly, they had received just over 12 million dollars – at a share price that was almost 300 percent higher than a few days ago.

It’s easy to feel that the stock market – and perhaps the world – is upside down when you read this type of event. But in some cases, there is more behind the big price fluctuations than it first seems. It is therefore interesting to look at what parameters come into play when a share goes from being virtually unknown to becoming a popular meme stock.

Slightly simplified, it can be said that there are two types of investors who invest and speculate in this type of stock. The first group – which we can call the “head” – does their research and presents their thesis like any other stock analyst. They seem to see an opportunity in the market, explain their thoughts publicly on online forums, and let others judge whether it sounds reasonable or not. This is a proportionately small group of people – but all the more influential. A typical example here is Keith Gill, the man who started the Gamestop rally.

The second group – which we call the “tail” – is more opportunistic and speculates mostly based on the reasoning of others. Or for that matter on pure humor – as in the case of the cryptocurrency Dogecoin, which started as a joke.

Buying shares based on someone else’s analysis is in principle no different than following a share tip in a daily newspaper. The big difference is the risk propensity and the scale at which this takes place. This tail of speculators is now so large that they can drive an entire market. Aethlon’s shares were traded 93.1 million times in recent weeks, despite the fact that there are only 827,000 shares available on the market.

The risks are enormous. Was there anything substantial in Aethlon’s new study? Perhaps. But reasonably, not all Reddit speculators can correctly assess this. And even if they are wrong, it may turn out that they are right in the end. The stock price goes up. But not because the study was important, but because everyone buys the share at the same time.

For investors, which we call the “head”, there is a special parameter that provides rocket fuel for share purchases. It is about finding stocks that are very heavily shorted, often by hedge funds. They have thus borrowed and sold shares on the assumption that they will fall in value.

If the share price goes up instead, these hedge funds can have problems, as they have to buy back the share at some point in order to be able to redeem their loans. If the amount of outstanding shares on the market is lower than demand, what is known as a short squeeze can occur – that is, buyers push up the price because they try to buy back the shares again. One of the most well-known examples of this happened in 2008, when Porsche speculated with Volkswagen shares. It was a financial maneuver that cost the hedge funds billions.

If we look at the present, we see clear similarities with both Gamestop and AMC. Both were heavily shorted shares, they managed to get the tail of investors, and then came the big ride in the form of all the shorters who quickly needed to buy back their shares.

So how should one look at the online forum stock pickers – are they risky speculators or geniuses? Both are well represented in the forums. But what they are above all, is dependent on each other. They need insight and they need the scale. If one fails, the other also loses its power.

This column was first published in SvD Näringsliv, in Swedish, on June 14th, 2021.

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Free popcorn made the AMC stock soar

August 18, 2021
by Björn Jeffery
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SvD Näringsliv

This column was first published in SvD Näringsliv, in Swedish, on June 3rd, 2021.

By enticing with free popcorn, the cinema chain AMC’s share soared by 95 percent – in one day. The incident reveals a change of attitude towards speculators from internet forums. From skepticism to addressing them directly.

Fund manager Mudrick Capital made probably the worst stock market trade of the week.

On Tuesday, they began by buying newly issued shares for over 230 million dollars in the American cinema company AMC Entertainment. The price immediately jumped 23 percent. On the same day, Mudrick announced that they would instead sell their entire holding at a profit. They suddenly thought the stock was overvalued, according to a Bloomberg source.

But what at first looked like a quick and good deal took an unexpected turn instead. The next day, the AMC share soared by as much as 95 percent.

The price was driven by extreme activity from individual speculators, and during the day the stock was the most traded on all US stock exchanges. To put it in context, the trading volume of AMC was higher than Amazon ever had in a single day. And the valuation was one day higher than it is for half of the companies on the S&P 500. This for an extremely hard-pressed American cinema chain.

An optimistic interpretation of this sudden interest in cinemas could be that the sale of cinema tickets actually had its best weekend in the United States since the beginning of the pandemic.

But it is probably not ticket sales that are behind the sharp rise. Instead, the price increase is more similar to Gamestop, which was driven by a huge number of speculators from the internet forum Reddit in February. AMC was one of the stocks that joined the rally, but has been fairly stable until now when it reached a new all-time high.

However, there is a bio-related news that can be linked to both the price rush and the Gamestop phenomenon. AMC, which has about 30,000 Swedish investors via Avanza, launched a new platform for its shareholders on Wednesday which would – believe it or not – give free popcorn to its shareholders.

While Gamestop stood rather paralyzed and surprised when their stock suddenly soared, AMC seems rather to have decided in advance to use this to its advantage. The reasoning seems to be that if the share is still only traded in pure speculation – without connection to the underlying business – then why not appeal directly to the speculators? And to do it with the same kind of humor that drove the whole phenomenon from the beginning. There may be something reasonable in this complete unreasonableness.

If shares on the stock exchange are completely decoupled from the company’s operations, we leave the image of a trading venue and instead approach what can be compared to a casino. And as in all gaming-related businesses, it is important to get to know your customer. If traditional investors might be looking for generous stock dividend policies, speculators are looking for signals that will make more people hang on and continue to push up the price. And that’s where we seem to be now. In the situation where you buy a share, to get free popcorn.

The drama also continued on Thursday. At that time, the AMC share fell by more than 30 percent after the announcement that the company would take advantage of the current rise and issue new shares.

In the accompanying material, however, they themselves warned of the fluctuations in the price and wrote that “our current market price reflects a market and trading dynamic that is not related to either our underlying business, or macro and fundamentals, and we do not know how long this dynamic will hold up. ”

This column was first published in SvD Näringsliv, in Swedish, on June 3rd, 2021.

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