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TikTok picks a buyer, but Chinese regulations threaten any deal, Reliance Retail expands its dominant grip on India’s retail market and GoodRx goes public.

Market Summary:

“U.S. stocks wavered, but the S&P 500 is still on track for a 7% advance in August after closing higher in all but four trading days this month,” WSJ writes.
S&P 500 $3,506.98 - 0.03%
Nasdaq $11,773.33 + 0.66%
Bitcoin $11,738.97 + 0.25%
U.S. 10-Year 0.716%  

Today’s word count is 1,215 words (6 minutes)

1. Justin Oh's Quick Read:

  • Is the stock market overvalued? I’m starting to fear it might be. The S&P 500 is trading at 26x forward P/E, which is the highest since 2000. And after the tech bubble burst, the S&P 500 took seven years and the NASDAQ fifteen years to reach new highs again. Even $AAPL took more than five years and the invention of the modern smartphone to see meaningful gains again. The counter-argument to this is that money printing, a weakening dollar, and negative real interest rates might justify elevated valuations and that they are averaged up by the largest, most COVID-resistant companies. But the current “Robinhood boom" is reminiscent of the Dot-Com retail investor boom, which profoundly worries me. For now, I’m maintaining our ROIC target asset allocations, but I am emphasizing that I AM NOT chasing stocks at elevated valuations. This obviously includes $TSLA, of which I have sold off all my shares recently, and stocks like $AAPL.

2. TikTok Picks Bidder, While New Chinese Restrictions Threaten To Disrupt Any Deal

(By Wachiwit)

Just a few weeks away from the deadline set by President Trump’s executive order, TikTok has chosen a bidder for its U.S., New Zealand and Australian businesses. A deal could be announced as early as Tuesday.

Why It Matters

TikTok was facing a ban in the U.S., one of its most lucrative markets.

  • Citing economic and national security risks, President Trump signed an executive order earlier this month, mandating the sale of TikTok’s U.S. operations to an American company.
  • Microsoft emerged as the leading potential buyer and later partnered up with Walmart for its bid. Oracle is also a top contender to land the app.
  • The uncertainty of the situation has shaken up TikTok’s C-Suite. TikTok CEO Kevin Mayer, formerly of Disney, resigned last week after just 100 days.
China’s not thrilled and has now taken action.
  • The Chinese government updated its technology export list on Friday to include artificial intelligence tech used by TikTok.
  • Now, ByteDance needs a license from the Chinese government to complete a sale to a U.S. company.
  • “China’s move to give the government a say in the outcome is an attempt to level the playing field with the U.S. and could affect other Chinese companies,” WSJ writes.
The tension between the U.S. and China continues to escalate.
  • The conflict, which was once focused on tariffs, has become increasingly centered on technology.
  • In addition to TikTok, the WhiteHouse has targeted other Chinese tech companies such as Huawei Technologies and Tencent Holdings.

Numbers to Consider
  • The sale price of the TikTok deal is expected to range between $20 billion and $30 billion.
Read More

3. India’s Reliance Retail To Acquire Future Group’s Units For $3.4 billion

(By ALensAndSomeLuck)

Reliance Retail, India’s largest retail chain, is expanding its already-dominant position in the country with the $3.4 billion acquisition of Future Group’s retailer and wholesaler businesses, as well as its logistics and warehousing business. The move will put Reliance Retail in control of one-third of India’s modern retail sector’s brick-and-mortar stores.

Why It Matters

India’s economic potential is massive.

  • Earlier this year, Deutsche Bank estimated India’s economy will reach $7 trillion by 2030 (it’s around $3 trillion now), making it the world’s third-largest.
  • It’s retail market is projected to hit $1.3 trillion by 2025, an increase from $700 billion last year.
U.S companies are getting in on India across the board.
  • Mukesh Ambani, India’s richest man and managing director of Reliance Industries, raised around $20 billion earlier this year from Facebook, Google and 11 other high-profile investors for his telecom venture Jio Platforms.
  • Amazon has invested $6.5 billion in its India business and also inked a deal with Future Group in January to help the Indian company sell online.
  • In 2018, Walmart acquired a 77 percent stake in Indian e-commerce retailer Flipkart for $16 billion.
But India’s e-commerce market could be the biggest prize.
  • E-commerce only accounts for 3 percent of all retail sales in India.
  • Last year, Jio Platforms and Reliance Retail announced an e-commerce ventured called JioMart.
  • Facebook said it will work with Reliance to “digitize the nation’s 60 million mom and pop stores as well as other small and medium-sized businesses.”

Numbers to Consider
  • Reliance Industries has a market capitalization of $13.69 trillion.
  • Mukesh Ambani has a net worth of roughly $80 billion.
  • Facebook invested $5.7 billion into Jio Platforms.
Read More

4. Number Crunch: GoodRx Files to Go Public

(By Postmodern Studio)

Prescription drug coupon company GoodRx has joined the wave of companies going public in 2020. However, there’s one distinction separating it from its contemporaries -- profitability.

  1. GoodRx posted a profit of $55 million during the first half of 2020.
  2. It’s a 77 percent increase from the same period a year ago, during which GoodRx netted $31 million. The company has been profitable since 2016.
  3. Two years ago, GoodRx was valued at $2.85 billion. Its success partly came from being an early entrant into “what as become an increasingly competitive industry,” but now faces competition from traditional healthcare giants, as well as Amazon and Walmart.
Read More

5. Justin Oh's Target Allocation

Find Justin Oh's detailed investment ideas and strategies on the ROIC Big Board at

6. Worth Your Time

(By Pe3k)

Sci-Fi Future: It sounds straight out of a science fiction movie, but Elon Musk’s startup Neuralink announced Friday it had implanted a Bluetooth-controlled device into pigs’ brains. The device, described as a “Fitbit in your skull,” transmits neural activity from the animals’ brains to a computer wirelessly. Neuralink scientists say the first human trials will help people dealing with spinal injuries and conditions such as paraplegia. It also inches society closer toward Musk’s ambitions of reaching “symbiosis with artificial intelligence.” Neuralink has raised $158 million and employs about 100 people, with a valuation of $500 million. (THE INFORMATION)

Silver Screen Return: “For the first time since March, big-budget movies are being released again in theaters. ‘The New Mutants’ cost at least $70 million to make and market. Coming next week is Christopher Nolan’s ‘Tenet,’ a hotly anticipated $200 million thriller. But the willingness of Americans to return to theaters — to sit inside a closed room with strangers for hours, regardless of the safety protocols — remains anything but certain. For Hollywood, which has come to rely on superheroes and star directors like Mr. Nolan as relatively sure bets, releasing these films is like stepping off a ledge without knowing where the ground lies.” (NEW YORK TIMES)

Flip This Asset: KKR, which has around $220 billion in assets under management, has been one of the most active private-equity firms since the Covid-19 pandemic began, and it’s showing no sign of slowing down. KKR is nearing a deal to sell Epicor Software Corp to a group led by PE firm Clayton Dubilier & Rice for around $4.7 billion. Epicor has made a name producing back-office and sales software for manufacturing, distribution, retail and service industry customers. The deal isn’t final and could still fall through. (WALL STREET JOURNAL)

7. Tidbits

Popular games Fortnite and Infinity Blade are no longer available through the App Store after Apple terminated Epic Games’ developer account for intentionally violating the platform’s in-app purchase rules.

AT&T is calling on the Trump administration to modify Section 230, a legal immunity that protects internet companies from the dangers of inaccurate, third-party content, while urging to close the gap in legal treatment between online platforms and more traditional businesses.

“AT&T is [also] in talks with a number of private equity firms, including Apollo Group, about buying its DirecTV satellite business.”

GM is shifting some of its Corvette engineers to the company’s electric and autonomous vehicle programs to “push the boundaries” on what future EV battery systems and components can deliver.

Warren Buffett is making one of his largest-ever bets on Japan’s economy by Berkshire Hathaway picking up a collective $6 billion stake in five of the country’s biggest trading companies.

Nestlé is continuing its transition deeper into health after spending $2.6 billion, including debt, to buy Aimmune Therapeutics, a biopharmaceutical company that won approval this year for the first treatment for peanut allergies.

8. A Couple Cents Featured

TikTok’s endgame is finally close. So, let’s jump back a few weeks to Justin Oh’s breakdown of Microsoft and TikTok.
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