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Insurtech Research Report: The trends & technologies allowing insurance startups to compete

Tue, 01/15/2019 - 11:15pm

Tech-driven disruption in the insurance industry continues at pace, and we're now entering a new phase — the adaptation of underlying business models. 

That's leading to ongoing changes in the distribution segment of the industry, but more excitingly, we are starting to see movement in the fundamentals of insurance — policy creation, underwriting, and claims management. 

This report from Business Insider Intelligence, Business Insider's premium research service, will briefly review major changes in the insurtech segment over the past year. It will then examine how startups and legacy players across the insurance value chain are using technology to develop new business models that cut costs or boost revenue, and, in some cases, both. Additionally, we will provide our take on the future of insurance as insurtech continues to proliferate. 

Here are some of the key takeaways:

  • Funding is flowing into startups and helping them scale, while legacy players have moved beyond initial experiments and are starting to implement new technology throughout their businesses. 
  • Distribution, the area of the insurance value chain that was first to be disrupted, continues to evolve. 
  • The fundamentals of insurance — policy creation, underwriting, and claims management — are starting to experience true disruption, while innovation in reinsurance has also continued at pace.
  • Insurtechs are using new business models that are enabled by a variety of technologies. In particular, they're using automation, data analytics, connected devices, and machine learning to build holistic policies for consumers that can be switched on and off on-demand.
  • Legacy insurers, as opposed to brokers, now have the most to lose — but those that move swiftly still have time to ensure they stay in the game.

 In full, the report:

  • Reviews major changes in the insurtech segment over the past year.
  • Examines how startups and legacy players across distribution, insurance, and reinsurance are using technology to develop new business models.
  • Provides our view on what the future of the insurance industry looks like, which Business Insider Intelligence calls Insurtech 2.0.
Subscribe to an All-Access pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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Netflix's 18% price hike shows it got too comfortable being the only game in town, and it could be a costly mistake (NFLX, DIS, T, CMCSA)

Tue, 01/15/2019 - 10:30pm

  • Netflix's price hike, announced Tuesday, could hurt the company eventually, if not immediately, Wedbush analyst Michael Pachter said.
  • Customers may not notice it right away, but may pay more attention later this year when Disney launches a rival service with movies and shows that are no longer on Netflix, he said.
  • Few consumers are likely to choose more than one pure streaming service, and Netflix's price hike has left it vulnerable to price competition, he added.

Netflix's price hike may come back to bite the streaming video leader — and maybe not so far in the future.

The company's second price increase in less than two years, announced on Tuesday, delighted investors accustomed to the intoxicating pricing power that comes when a business dominates a market the way Netflix does. 

But Netflix is about to face a new class of heavyweight competitors, Michael Pachter, a financial analyst who covers the company for Wedbush, told Business Insider in an interview Tuesday. What's more, many of these new rivals are likely to remove the movies and TV shows they currently license to Netflix, folding the content into their own streaming video services instead.

With its prices going up, its offerings arguably becoming less attractive, and a growing number of options to choose from, consumers, including some of Netflix's current customers, are likely to start opting for other streaming services, Pachter said.

When it comes to which streaming video offering customers subscribe to, "it's not going to be all Netflix anymore," Pachter said.

Analysts and investors seem sanguine about the price hike

Netflix announced its biggest-ever price increases on Tuesday, saying that it will hike its plan prices by 13% t0 18%. Thanks to the move, its most popular plan will cost $13 a month, up from $11 currently. That puts Netflix's price within spitting distance of that of traditional premium TV leader HBO, which charges $15 a month for its standalone HBO Now streaming service.

Despite the steepness of the price hike and the fact that it is the second for the company in less than two years, few analysts seemed worried about it. Netflix's subscriber base continued to grow after its last price hike, noted Tuna Amobi, a financial analyst who covers the company for CFRA. Netflix added about 4 million new paying subscribers in the first nine months of last year, following its late 2017 price increase.

"It went seamlessly," Amobi said. He continued: "I think they have pricing power in [their business] model."

For their part, investors seemed enthused by the latest price hike. Following Netflix's announcement, the company's stock finished Tuesday's regular trading session up 6.5%.

Although Pachter is a longtime bear on Netflix's stock — he has an underperform rating and a $150 price target on it — he's similarly sanguine about the price hike. Few, if any, Netflix subscribers will cancel their service immediately due to it, he said. Instead the real danger to the company of the increase will materialize later this year, he said.

Read this: Netflix is betting billions on its original shows and movies — but this analyst warns it's a far riskier gamble than investors realize

Netflix is losing content and gaining rivals

Netflix's deal with Disney is ending this year, and the company will likely start pulling its movies and show from the former's service soon. Assuming it completes its planned acquisition of 21st Century Fox, it could also start pulling Fox's shows.

Consumers likely won't notice many of the changes right away, Pachter said. But when Disney launches its own streaming service later this year with content that used to be on Netflix, that likely will be a wakeup call.

"Sometime later this year, people are going notice that there's nothing on Netflix," he said.

And the situation could soon get worse. Warner Bros. plans to launch its own streaming service later this year and could similarly pull its shows and movies from Netflix and put them on its offering. Comcast owned NBC Universal announced this week that it will launch its own streaming service next year.

Together, video from Disney, Fox, Warner, and Comcast comprise some 20% of all the content on Netflix, according to research from Ampere Analysis reported by Recode.

"When all that shit disappears, Netflix has a problem," Pachter said bluntly.

It could be undercut on price

And by raising its prices, Netflix has also made itself vulnerable to competition on price. Disney CEO Bob Iger has said his company's streaming service will be "substantially cheaper" that Netflix — and that was before the latter's latest price hike. Likewise, Netflix's current rivals, Amazon and Hulu, could play up the difference in price between their offerings and that of the streaming giant. Hulu's ad-free service costs $12 a month, while Amazon Prime costs $10 a month on an annual basis.

"If you don't think Amazon going exploit that in advertisements, you're wrong," Pachter said. "They will."

To date, consumers interested in streaming video have generally opted to subscribe to Netflix. While many consumers subscribe to Amazon Prime also, most do so because they signed up for the service's free shipping offering, not for streaming video, Pachter said. Hulu also doesn't directly compete with Netflix, because most consumers use it to watch broadcast TV shows they missed, he said.

The upcoming services from Disney and Warner are likely to be much more competitive with Netflix. Because most consumers have limited budgets, Patcher reckons the streaming video market is likely to shake out similarly to the market for premium cable channels: the majority of consumers will subscribe to just one. Although HBO is the leader, many consumers subscribe to Showtime or Starz instead, he said.

"Most people pick one," he said.

SEE ALSO: Netflix is now the most popular TV service in the US — here's why its lead is likely to only get larger

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Beyond Bitcoin: Here are some of the new use cases for distributed ledger technology

Tue, 01/15/2019 - 9:11pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Of the many technologies reshaping the world economy, distributed ledger technologies (DLTs) are among the most hyped. DLTs are most often associated with cryptocurrencies like Bitcoin, but such coverage sidelines the broader use cases of DLTs, even though they stand to make a far bigger impact on the broader the financial services (FS) industry.

DLT's value lies in its ability to centralize record-keeping, while cutting out the need for authorization by an overseeing party, instead allowing a record to be confirmed by multiple parties with access to the database. This means DLTs have the potential to streamline financial institutions' (FIs) operations, boost data security, improve customer relationships, and drastically cut costs. But many FIs have struggled to implement DLTs and reap the rewards, because of organizational obstacles, but also because of issues rooted in the technology itself. There are a few players working to make the technology more usable for FIs, and progress is now being made.

In a new report, Business Insider Intelligence takes a look at what DLTs are and why they hold so much promise for FS, the sectors in which DLTs are gaining the most traction and why, and the efforts underway to remove the obstacles preventing wider DLT adoption in finance. It also examines the few FIs close to unleashing their DLT projects, and how DLTs might transform the nature of FS if adoption truly takes off. 

Here are some of the key takeaways from the report:

  • DLTs are proving attractive to FIs because of their ability to act as a single source of truth, distribute information securely, cut out middlemen, improve transaction times, and cut redundancy and costs.
  • DLTs like blockchain and smart contracts stand to save the FS industry up to $50 billion a year through improved operational efficiencies, reduced human error, and better regulatory compliance. 
  • The technology is being explored actively across FS, with trade finance, insurance, and capital markets proving especially active. Overall adoption is still low because of organizational and technical hurdles, but these are now being eliminated, promising to boost implementation.
  • A few FIs have pulled ahead of the curve and are very close to taking their DLT projects live, if they haven't already. These players can serve as useful case studies for other institutions in getting their DLT solutions live.

In full, the report:

  • Looks at what DLTs are, and why the FS industry is working hard to make use of them. 
  • Gives an overview of the financial segments which are seeing the most DLT activity, and what they stand to gain.
  • Outlines efforts being made to make DLT more approachable and usable for the FS industry.
  • Examines use cases in which FIs have managed to take their pilots live, and what they can teach their peers. 
Subscribe to an All-Access pass to Business Insider Intelligence and gain immediate access to: This report and more than 250 other expertly researched reports Access to all future reports and daily newsletters Forecasts of new and emerging technologies in your industry And more! Learn More

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Andreessen Horowitz-backed startup PagerDuty has confidentially filed for an IPO but because of the shutdown no one can review its prospectus

Tue, 01/15/2019 - 8:09pm

  • PagerDuty, an IT incident response startup, has reportedly filed confidentially for an IPO.
  • PagerDuty was last valued at $1.3 billion in funding round backed by Silicon Valley VCs like Andreessen Horowitz and Accel.
  • Despite filing the paperwork, PagerDuty isn't likely to get comments from the SEC anytime soon since the Securities and Exchange Commission is closed with the rest of the federal government.

The hot developer-focused startup PagerDuty has confidentially filed for an IPO, Bloomberg reported Tuesday.

PagerDuty was last valued at $1.3 billion in its $90 million Series D, which closed in September. It's backed by big Silicon Valley venture capital firms including Andreessen Horowitz, Accel, and Bessemer Venture Partners.

Morgan Stanley will lead the IPO, according to Bloomberg.

PagerDuty helps companies quickly respond to IT incidents and alerts the best people to respond to any given incident, giving information about what happened and providing analysis. It's a vital tool in a DevOps workflow, where incidents have to be resolved quickly so the pace can continue.

DevOps got a vital boost in 2018 after Microsoft acquired the venture-backed GitHub for $7.5 billion in June. PagerDuty CEO Jennifer Tejada leveraged investor excitement into a unicorn funding round at the end of last year, representing an impressive step up from its $650 million valuation a year earlier, in 2017. 

While filing with the SEC puts PagerDuty in a good place for an early 2019 IPO, the company faces a major roadblock heading into its IPO. So long as the SEC and federal governement remain closed, IPO-ready companies aren't getting feedback on the paperwork they file, leaving most IPOs on hold. 

PagerDuty did not immediately return a request for comment. 

Read more: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show'

SEE ALSO: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show'

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Chipotle is considering raising prices as minimum wages rise, but the CEO says not to panic — they 'don't want to be like Whole Foods' (CMG)

Tue, 01/15/2019 - 6:31pm

  • Chipotle is considering raising prices as minimum wages increase and the labor market tightens. 
  • "We have a model that we can invest in our labor," CEO Brian Niccol told Business Insider. "And, we will use sales growth coupled with some pricing to handle it."
  • Niccol said that Chipotle wants to remain accessible, and that the chain will be careful to avoid raising prices to a degree that could scare away customers.

ORLANDO, Florida — Your Chipotle burrito may get more expensive in 2019. 

The fast-casual chain hired an outside consultant to analyze the menu's pricing, item by item, executives said at the ICR Conference on Tuesday. 

The analysis comes at a time when a number of chains are investigating ways to avoid having rising labor costs cut into profit margins. 

"Every cost in the business is a challenge," CEO Brian Niccol told Business Insider. "The good news is we have a model that we can invest in our labor. And, we will use sales growth coupled with some pricing to handle it."

Chipotle executives have been hinting for months that changes in menu prices are in the works. The chain has held off on raising prices significantly in recent years. In January 2018, the chain finished implementing waves of price increases that began in April 2017. 

Read more: Chipotle has quietly raised its prices at all of its locations

Niccol and CFO Jack Hartung emphasized that Chipotle plans to keep prices well within customers' price range. 

"We're behind on raising prices," Hartung said. "I think we want to say we're always behind. What that means is we're making Chipotle accessible to everybody." 

"We chose a long time ago, and we're still sticking with this, we don't want to be like Whole Foods," Hartung said. "Whole Foods does a great job, but they historically have charged very, very high prices."

Chipotle says the analysis of the menu is not complete, so it is not yet clear how the new pricing strategy will play out. In addition to possibly tweaking menu prices, the company hopes to offset rising labor costs with new advertising, boosting digital sales, and opening new locations.

But, executives are confident that — if they are deemed necessary — Chipotle's prices are competitive enough that an increase won't scare away customers. 

"We have more pricing power in the bank that, if we need to, we can pull it out and tap into it," Hartung said.

However, at other, franchised companies, Hartung said, "if the labor inflation is high and they are already fully priced, they have a choice to make: Do they want to eat into their margins or do they want to increase prices and lose customers?"

SEE ALSO: Chipotle is adding new items to the menu, and it could be the key to finally convincing customers to come back to the chain

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A JPMorgan exec explains why AI won't take over the fintech world any time soon

Tue, 01/15/2019 - 6:06pm

  • JPMorgan announced the five fintech firms joining its Financial Solutions Lab, which is aimed at helping customers who are living paycheck to paycheck.
  • Colleen Briggs, the head of community innovation at JPMorgan, said people who are "financially stressed" are less likely to accept using financial tools with no human interaction.

The robot takeover in financial services is not imminent.

That's the perspective of one big-bank executive, who says some customers might be willing to trade in the efficiency of using a financial tool backed by artificial intelligence for the comfort of dealing with a real person.

Colleen Briggs, the head of community innovation at JPMorgan Chase, told Business Insider in an interview that low-income households aren't as willing to use tools for managing money that are completely devoid of human interaction.

Briggs oversees the Financial Solutions Lab, which is run by the Center for Financial Services Innovation and JPMorgan and focuses on partnering with fintechs that are aimed at improving the financial health of consumers living paycheck to paycheck. On Tuesday, CFSI and JPMorgan announced the five companies it selected to join the lab.

In addition to being able to work with executives from CFSI and JPMorgan, the five startups will also receive $125,000 in capital. Since launching four years ago, the Financial Solutions Lab has worked with over 30 fintechs from a pool of over 1,600 applicants and raised over $500 million in funding.

Of the more than 300 firms that applied in 2018 to join the lab, Briggs said there was a noticeable trend of companies using a hybrid approach that included AI techniques and humans working hand in hand.

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"A digital-only solution might not be the right mix for somebody who is really financially stressed," Briggs said. "I think the really thoughtful solutions are coming with some interesting models to think about — 'all right, let's drive digital solutions through AI and machine learning when we can, but then also know when is the moment when I need to refer someone to a human touch or a human element to actually help them with a really particular pain point that they are facing.'"

Managing one's money is emotional, Briggs said, and some fintechs are recognizing customers' hesitancy to deal solely with computers. Cash-strapped consumers often feel that decisions about managing their money might require a conversation with an actual human.

Briggs said that while some are willing to adopt digital-only solutions for a majority of their financial needs, when it comes to specific, significant choices about their financial future, many customers feel more comfortable dealing with a real person.

Even younger generations, which are often lauded as early and welcome adopters of new technology, have shown an interest in more hybrid approaches.

"We see this even with millennials, who everyone says want to go purely digital," Briggs said. "When it comes to really tough decisions, they often want a person. I think it is, again, that emotional connection to money."

Here are the five fintechs that will be joining the Financial Solutions Lab:


This San Francisco startup aims to serve as a personalized-financial-health platform for all of its customers' financial needs.

Through the platform, customers can do anything from access emergency cash to manage credit-card debt and student loans.

According to the company's website, families save an average of over $800 using the platform.


HoneyBee works with employers to offer their employees an extra week's pay for unplanned expenses.

The service has no credit requirements and can provide up to $2,500. Customers can repay the amount over three months at a 5% service fee that maxes out at $50.

The San Francisco company has over 2,200 companies signed on, including Patagonia and Ben & Jerry's.


This Chicago fintech is focused on making 401(k) transfers as easy as possible.

Manifest looks to standardize the process by linking providers to decrease the cost, the number of compliance issues, and time spent transferring a 401(k).

See the rest of the story at Business Insider

REGTECH REVISITED: How the regtech landscape is evolving to address FIs' ever growing compliance needs

Tue, 01/15/2019 - 6:02pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

Regtech solutions seemed to offer the solution to financial institutions' (FIs) compliance woes when they first came to prominence around 24 months ago, gaining support from regulators and investors alike. 

However, many of the companies offering these solutions haven't scaled as might have been expected from the initial hype, and have failed to follow the trajectory of firms in other segments of fintech.

This unexpected inertia in the regtech industry is likely to resolve over the next 12-18 months as other factors come into play that shift FIs' approach to regtech solutions, and as the companies offering them evolve. External factors driving this change include regulatory support of regtech solutions, and consultancies offering more help to FIs wanting to sift through solutions. Startups offering regtech solutions will also play a part by partnering with each other, forming industry organizations, and taking advantage of new opportunities.

This report from Business Insider Intelligence, Business Insider's premium research service, provides a brief overview of the current global financial regulatory compliance landscape, and the regtech industry's position within it. It then details the major drivers that will shift the dial on FIs' adoption of regtech over the next 12-18 months, as well as those that will propel startups offering regtech solutions to new heights. Finally, it outlines what impact these drivers will have, and gives insight into what the global regtech industry will look like by 2020.

Here are some of the key takeaways:

  • Regulatory compliance is still a significant issue faced by global FIs. In 2018 alone, EU regulations MiFID II and PSD2 have come into effect, bringing with them huge handbooks and gigantic reporting requirements. 
  • Regtech startups boast solutions that can ease FIs' compliance burden — but they are struggling to scale. 
  • Some changes expected to drive greater adoption of these solutions in the next 12 to 18 months are: the ongoing evolution of startups' business models, increasing numbers of partnerships, regulators' promotion of regtech, changing attitudes to the segment among FIs, and consultancies helping to facilitate adoption.
  • FIs will actively be using solutions from regtech startups by 2020, and startups will be collaborating in an organized fashion with each other and with FIs. Global regulators will have adopted regtech themselves, while continuing to act as advocates for the industry.

In full, the report:

  • Reviews the major changes expected to hit the regtech segment in the next 12 to 18 months.
  • Examines the drivers behind these changes, and how the proliferation of regtech will improve compliance for FIs.
  • Provides our view on what the future of the regtech industry looks like through 2020. Get The Regtech Revisited Report


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Snap is losing its CFO after less than a year, and the stock is plummeting (SNAP)

Tue, 01/15/2019 - 5:28pm

  • Tim Stone, the CFO of Snapchat parent company Snap Inc., is quitting.
  • Stone, who came to Snap from Amazon, only took the job in May 2018. He is walking away from most of a $20 million pay package.
  • Snap has said that Stone will be sticking with the company through at least its quarterly earnings call on February 5th. 
  • The company's stock has cratered around 8.5% on the news.
  • Snap says that it's Q4 2018 financial results are likely to be "slightly favourable to the top end of our previously reported quarterly guidance ranges."

Tim Stone, the CFO of Snapchat parent company Snap, is quitting.

On Tuesday, the exec notified the beleaguered messaging app company of his intention to quit "to pursue other opportunities," Snap said in a SEC filing, becoming the latest in a growing line of Snap execs to part ways with the company. Snap's stock price is down around 8.5% in after-hours trading following the news. 

Snapchat has struggled in recent years as Facebook-owned Instagram has aggressively cloned its features, siphoning off users and stifling the app's growth.

Stone, a former Amazon executive, had joined Snap less than a year ago, in May 2018, following a disastrous quarter for the company He replaced the company's first CFO, Andrew Vollero. It's not clear exactly why Stone is leaving now, though Snap says it is "not related to any disagreement with us on any matter relating to our accounting, strategy, management, operations, policies, regulatory matters, or practices."

Stone was brought on with a $20 million pay package, scheduled to vest over four years — most of which he's now forfeiting. $1 million in "sign-on" grants vested six months after he came on board, meaning the money is his, but he's leaving well before the rest of the $19 million vested. 

His exit is the latest of a growing line of Snap execs to jump ship from the company in recent months.

On Monday, Business Insider reported that the company's HR head Jason Halbert was leaving. Head of global strategic partnerships Elizabeth Herbst-Brady left earlier in January. Chief Strategy Ifficer Imran Khan bailed in September 2018. Other high-profile departures include communications VP Mary Ritti, product head Tom Conrad, and sales head Jeff Lucas.

Later on Tuesday, Cheddar's Alex Heath reported that Kristin Southey, the company's VP of investor relations, also quietly left in November 2018.

Here's what Snap said in its SEC filing:

"On January 15, 2019, Tim Stone, our Chief Financial Officer and principal financial officer, notified us of his intention to resign to pursue other opportunities. Mr. Stone has confirmed that this transition is not related to any disagreement with us on any matter relating to our accounting, strategy, management, operations, policies, regulatory matters, or practices (financial or otherwise). Mr. Stone’s last day has not been determined. Mr. Stone will continue to serve as Chief Financial Officer to assist in the search for a replacement and an effective transition of his duties, including through our scheduled full year 2018 financial results announcement."

Reached for comment, Snap spokesperson Russ Caditz-Peck sent Business Insider the following statement, which was sent from CEO Evan Spiegel to the whole company:

Hi Team,

I wanted to let you know that Tim Stone, our CFO, has decided to leave Snap.

Tim has made a big impact in his short time on our team and we are very grateful for all of his hard work. I know we have all benefitted from his customer focus and the way he has encouraged all of us to operate as owners.

Tim will remain at Snap to help with the transition, including through our Q4 and full year earnings call on February 5th.

Tim’s transition is not related to any disagreement with us on any matter relating to our accounting, strategy, management, operations, policies, regulatory matters, or practices (financial or otherwise).

Please join me in wishing Tim all the best in his future endeavors!

Also in the SEC filing, Snap said that it expects to report financial results for Q4 2018 are "slightly favorable to the top end of our previously reportedly quarterly guidance ranges."

This story is developing...

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Share your opinion — become a BI Insider!

Tue, 01/15/2019 - 5:28pm

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Morgan Stanley just promoted 145 new managing directors — we got a peek at an internal memo with all the names (MS)

Tue, 01/15/2019 - 5:17pm

  • Morgan Stanley just announced its 2019 managing director class. 
  • 145 employees were promoted to MD, 61% based in the Americas, according to an internal memo sent out Tuesday.
  • The bank promoted 153 MDs last year and 140 in 2017.

Morgan Stanley just announced a class of 145 new managing directors — the highest rank at the bank and a coveted career milestone on Wall Street.

An internal memo was sent out around late Tuesday afternoon announcing the hires, according to a person familiar with the matter. 

According to the memo, a portion of which was seen by Business Insider, 68% of the new MDs are in Institutional Securities, Investment Management, and Wealth Management.

Other stats about the new class:

  • By region: 61% of the promotes were based in the Americas, 26% in Europe, the Middle East, and Africa, and 13% in Asia.
  • There are 39 new female MDs (27%), compared with 40 last year (26%).
  • 7% of the US class is Black, up from 5% in 2018, and 4% of the US class is Hispanic, up from 1% last year.

Morgan Stanley promoted 153 MDs last year and 140 in 2017

Elsewhere on Wall Street, Bank of America Merrill Lynch promoted nearly 140 employees to MD in late November, Citigroup promoted 125 MDs in its Institutional Clients Group in December, and Barclays promoted 85 MDs a couple days later.

At Goldman Sachs, where MD is one rung below the prestigious role of partner and the classes are announced every two years, 509 employees were promoted to MD in 2017 and 69 were promoted to partner in November.

Here's the full list of employees who just got promoted to managing director at Morgan Stanley:

Institutional Equity

Keshiv Desai

Sina El Bied

Andrew Fearnside

Taso Giannopoulos

Ollie Hoeldin

Keiko Kawauchi

Paul Kondratko

Richard Smerin

Tyler Sorba

James Spencer-Lavan

Michelle Stratton

Nim Warshawsky

Ellen Weinstein

Jenny Zupan



Matthew Harrison

James Lord


Fixed Income

Ashwin Anand

Jordan Brink

Qing Chen

Richard Condon

Lucy Dabinett

Marcel De Boom

Alexandre de Latour

Xu (Kurt) Jian

Rodrigo Jolig

William Lee

Louis Li

John McDonald

Derek Melvin

Geoff Proulx

Ara Tachdjian

Olivier Treuer


Investment Banking

Jaehoon Ahn

Usman Akram

Alexandre Bartolin

Gwen Billon

Thomas Bimont

Luis Brossier

Vipin Chhajer

Winton de St John-Pryce

Malick Diop

RD Gauss

Keith Heller

Taylor Henricks

David Kitterick

Melissa Knox

Clarence Kwok

Brendan Lee

Philippe Neff

Jigar Patel

Mital Patel

Chris Reynolds

Matthias Sahm

Rakesh Shankar

Yiyang Tao

Atsushi Tatsuguchi

Pekko Tonteri

Tony Uccellini

Moritz Zschoche


Global Capital Markets

Howard Brocklehurst

Lauren Cummings

Eric Farina

Patrick Gallagher

Brendan MacBride

Angus Millar

Michael Occi

Elizabeth Rosner

Gustavo Siqueira


Wealth Management

Josh Carmody

Vince Colucci

Tanya Curry

Alex Dunlap

Mark Landers

Suzanne Lindquist

Chris Link

Paul McGeary

Stewart Monday

Frank Murray

Ali Nest

Dawn Nordberg

Jodie Resnick

Bobby Singh


Investment Management

Joshua Attie

Bobby Bassman

Max Boeser

Lisa Buhain Winslow

Logan Burt

Aaron Greeno

Anuj Gulati

James Ham

Catherine Hong

Manfred Hui

Nic Sochovsky

Federico Vettore

Miguel Villalba Leiros

Krace Zhou


Internal Audit

Sim Gian Chin

Claire Gavey

Dougie Paton

Barbara Tam



Zviad Ashvil

Annie Foster

Amit Khanna

George Konstantoulakis

Greg Parent

JonPaul Pizza

Prakash Venkataraman

Al Ramos

Aaron Satlow

Peter Troy

Priyanka Vasudevan

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Big companies are crushing their competition in the US, and it's creating a dangerous 'fake capitalism' that hurts workers and consumers

Tue, 01/15/2019 - 5:08pm

  • The following book excerpt is an adaptation of the introduction to "The Myth of Capitalism: Monopolies and the Death of Competition," by Variant Perception's founder Jonathan Tepper and head of business development Denise Hearn.
  • The authors argue that an increase in market concentration across the United States has resulted in a system that is not true capitalism, since freedom is being restricted.
  • They believe that updating antitrust regulations should be an issue both the left and right could unite around.
  • This article is part of Business Insider's ongoing series on Better Capitalism.

On April 9, 2017, police officers from Chicago's O'Hare Airport removed Dr. David Dao from United Express Flight 3411.

The flight was overbooked, but he refused to give up his seat. He had patients to treat the next day. Fellow passengers recorded a video of him being dragged off the plane. You could hear gasps of disbelief from fellow passengers.

In the video he could be seen bleeding from the mouth as police dragged him down the aisle. The video quickly went viral. Eventually, the outrage was so great that the CEO apologized and the airline reached an undisclosed settlement with Dr. Dao.

Years ago, such a public relations disaster would have caused United's stock to stumble, but it quickly recovered. Financial analysts agreed that it would have no effect on the airline. Once investors started focusing on United's dominant market position, the stock price, in fact, went up.

The analysts were right. The American skies have gone from an open market with many competing airlines to a cozy oligopoly with four major airlines. They have the landing slots, and they are willing to engage in predatory pricing to keep out any new entrants. At 40 of the 100 largest US airports, a single airline controls a majority of the market.

The United episode became a metaphor for American capitalism in the twenty-first century. A highly profitable company had bloodied a consumer, and it didn't matter because consumers have no choice.

Something is broken

All around the world, people have an overwhelming sense that something is broken. This is leading to record levels of populism in the United States and Europe, resurgent intolerance, and a desire to upend the existing order. The left and right cannot agree on what is wrong, but they both know that something is rotten.

Capitalism has been the greatest system in history to lift people out of poverty and create wealth, but the "capitalism" we see today in the United States is a far cry from competitive markets. What we have today is a grotesque, deformed version of capitalism.

According to the dictionary, the idealized state of capitalism is "an economic system based on the private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions."

Parts of this definition have universal appeal today, but the harder part is the last section. The battle for competition is being lost. Industries are becoming highly concentrated in the hands of very few players, with little real competition. Capitalism without competition is not capitalism.

Read more: Nobel Prize-winning economist Joseph Stiglitz says the US has a major monopoly problem

Competition matters because it prevents unjust inequality, rather than the transfer of wealth from consumer or supplier to the monopolist. It creates clear price signals in markets, driving supply and demand. It promotes efficiency. It creates more choices, more innovation, economic development and growth, and a stronger democracy by dispersing economic power. It promotes individual initiative and freedom.

An absence of competition means an absence of evolution, a failure to adapt to new conditions. It threatens our survival.

This affects all of us

If you believe in competitive free markets, you should be very concerned. If you believe in fair play and hate cronyism, you should be worried. With fake capitalism, CEOs cozy up to regulators to get the kind of rules they want and donate to get the laws they desire. Larger companies get larger, while the small disappear, and the consumer and worker are left with no choice.

The list of industries with dominant players, from beer corporations to internet providers, is endless. It gets even worse when you look at the world of technology. Laws are outdated to deal with the extreme winner-takes-all dynamics online. Google completely dominates internet searches with an almost 90% market share. Facebook has an almost 80% share of social networks. Both have a duopoly in advertising with no credible competition or regulation.

Amazon is crushing retailers and faces conflicts of interest as both the dominant e-commerce seller and the leading online platform for third-party sellers. It can determine what products can and cannot sell on its platform, and it competes with any customer that encounters success. Apple's iPhone and Google's Android completely control the mobile app market in a duopoly, and they determine whether businesses can reach their customers and on what terms.

Read more: Billionaire tech investor Reid Hoffman said the explosive growth of tech giants like Facebook has led to major problems, but warns that regulation may not be an easy fix

Existing laws were not even written with digital platforms in mind. So far, these platforms appear to be benign dictators, but they are dictators nonetheless.

It was not always like this. Without almost any public debate, industries have now become much more concentrated than they were 30 and even 40 years ago.

After the dot-com bust, the economy rebounded but growth was more anemic than during the 1980s or even 1990s. After the financial crisis, growth was even more pathetic. Each expansion has experienced lower growth than the previous one. There is not one variable that answers all questions, but a growing mountain of research shows that less competition has led to lower wages, fewer jobs, fewer startups, and less economic growth.

It's not too late to save capitalism

Capitalism is a game where competitors play by rules that everyone agrees. The government is the referee, and just as you need a referee and a set of agreed rules for a good basketball game, you need rules to promote competition in the economy. Left to their own devices, firms will use any available means to crush their rivals. Today, the state, as referee, has not enforced rules that would increase competition, and through regulatory capture has created rules that limit competition.

In 1776 Adam Smith wrote "The Wealth of Nations," and the Continental Congress declared independence from Britain. Smith complained bitterly about monopolies. He wrote of the East India Company: "the monopoly which our manufacturers have obtained . . . has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature."

That same year, among the reasons the American Continental Congress cited for separating from Britain in the Declaration of Independence, was, "For cutting off our Trade with all parts of the world: For imposing Taxes on us without our Consent." The Boston Tea Party was in response to the East India Company's monopoly on tea. The Wealth of Nations and the Declaration of Independence were bold statements against the abuses of monopoly power. Americans wanted entrepreneurial freedom to build businesses in a free market.

Today, we need a new revolution to cast off monopolies and restore free trade.

This excerpt is adapted with permission from "The Myth of Capitalism: Monopolies and the Death of Competition" (2018) by Jonathan Tepper and Denise Hearn, from Wiley.

SEE ALSO: Nobel Prize-winning economist Joseph Stiglitz says it's time for the US to update its antitrust laws

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How tech giants are using their reach and digital prowess to take on traditional banks (GOOG, GOOGL, AAPL, FB, MSFT, AMZN)

Tue, 01/15/2019 - 5:04pm

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here.

As headlines like "Amazon Is Secretly Becoming a Bank" and "Google Wants to Be a Bank Now" increasingly crop up in the news, tech giants are coming into the spotlight as the next potential payments disruptors.

And with these firms' broad reach and hefty resources, the possibility that they'll descend on financial services is a hard narrative to shy away from. To mitigate potential losses under this scenario, traditional players will have to grasp not only the level of the threat, but also which segments of the financial industry are most at risk of disruption.

Google, Apple, Facebook, Amazon, and Microsoft, collectively known as GAFAM, are already active investors in the payments industry, and they're slowly encroaching on legacy providers' core offerings. Each of these five companies has introduced features and offerings that have the potential to disrupt specific parts of the banking system. And we expect a plethora of additional offerings to hit the market as these companies look to build out their ecosystems.

However, it remains unlikely that any of these firms will become full-blown banks or entirely upend incumbents, due to regulatory barriers and the entrenched positions of big banks. Moreover, consumers still trust traditional firms first and foremost with their financial data. That means these companies are far more likely to rattle the cages of incumbents than they are to cause their total demise. That said, these companies have a proven capacity to revolutionize industries, making their entry into payments critical to watch for legacy players, especially as their moves demonstrate an intent to be a disruptive force in the industry.

In this report, Business Insider Intelligence analyzes the current impact GAFAM is having on the financial services industry, and the strengths and weaknesses of each firm's position in payments. We also discuss the barriers these companies face as they push deeper into financial services, as well as which aspects of a bank’s core business provide the biggest opportunities for the new players. Lastly, we assess these companies' future potential in payments and the broader financial services industry, and examine ways incumbents can manage the threat.

Here are some of the key takeaways: 

  • GAFAM has been actively encroaching on the payments space. This includes offering mobile wallets for in-store and online payments, peer-to-peer money transfer services, and even loans for small- and medium-sized businesses. 
  • These firms' broad reach and hefty resources have put them in a strong position to take on legacy players. GAFAM has products that have been adopted by millions of users, and in some cases, billions. They also have access to a tremendous amount of capital — Apple, Microsoft, and Google had over $400 billion combined in cash at the end of 2016.
  • However, these firms have to overcome major barriers to compete against legacy players, which includes regulation and trust. For example, 60% of respondents to a Business Insider Intelligence survey stated that they trust their bank most to provide them financial services.
  •  As a result of these barriers, it's more likely that GAFAM will make a dent in very specific segments of the financial services industry rather than completely disrupt it. 

In full, the report:

  • Explains what GAFAM's done to place themselves in a position to be the next potential payments disruptors.
  • Breaks down the strengths and weaknesses of each company as it relates to their ability to build out an extensive financial ecosystem. 
  • Looks at the potential barriers that could limit GAFAM's ability to capture a significant share of the payments industry from traditional players. 
  • Identifies what strategies legacy players will have to deploy to mitigate the threat by these tech giants.
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A $200 million marijuana VC breaks down how he picks what companies to invest in

Tue, 01/15/2019 - 4:34pm

  • The dealmaker behind one of the most active marijuana venture capital funds describes his outlook for the industry in 2019.
  • Canopy Rivers, the venture arm of Canopy Growth, announced a $6.8 million investment into Greenhouse Juice Company on Monday, on top of participating in a $12 million funding round for marijuana analytics startup Headset earlier in January.
  • He gives his outlook on the cannabis industry and explains the investment themes he's watching. 

It's been a hot few weeks for venture capital deals in the marijuana industry, and one firm has been behind most of the headlines.

Canopy Rivers, the venture arm of marijuana cultivation giant Canopy Growth, has so far participated in a $12 million funding round for marijuana analytics startup Headset, invested $6.8 in convertible debt into Greenhouse Juice Company to develop CBD beverages, and landed an $80 million loan from two of Canada's largest banks for a joint venture — all in the last two weeks.

The firm has raised $200 million so far, but some of that has already been deployed, a Canopy Rivers spokesperson confirmed.

The Greenhouse deal, announced on Monday, falls into what Canopy River's VP of business development Narbe Alexandrian calls "wave three" of the nascent cannabis industry.

"We look at the cannabis industry as coming in waves," Alexandrian, a veteran of OMERS Ventures, Canada's largest VC fund, said in an interview. "Wave number one was cultivation, wave two is ancillary technology, wave three is CPG [consumer packaged goods], wave four is pharma, and wave five is mass-market, where you have your Coke and Pepsi-type oligopolies in play."

'If you talk to a beer company, they don't own any hops farms'

Right now, it's all about CPG, Alexandrian said. 

"We're really looking for brands in this new wave of cannabis," said Alexandrian. It comes down to simple supply-and-demand economics: being only a cultivator doesn't cut it — wholesale marijuana prices will eventually fall, and margins will collapse.

"If you talk to a beer company, they don't own any hops farms," said Alexandrian. "What they've developed is a strong marketing presence, and created a product that commands a premium because of the brand."

Read more: Marijuana could be the biggest growth opportunity for struggling beverage-makers as millennials ditch beer for pot

That's what led to the Greenhouse deal. Nominally an organic juice company, Greenhouse owns 15 brick-and-mortar stores as well as an e-commerce platform. But Alexandrian said they can easily plug CBD products into their suite.

"The technology behind how they develop their products is what really got us going," said Alexandrian.

CBD or cannabidiol is a non-psychoactive compound in marijuana that's become a trendy ingredient in food and beverages. The company aims to market CBD-containing products across Canada — and eventually, in every jurisdiction where the substance is legal. 

"They've done a fantastic job of creating a brand locally, and we think that can be replicated over and over again," said Alexandrian.

Creating the 'Nielsen' of cannabis

In order to make decisions about what products to develop, or what new markets to enter, they need data. That's where Canopy Rivers' Headset investment comes into play

"Our thesis behind that was: there's a lot of companies out there in the industry right now that are posting large growth and high revenue numbers, but they don't follow the same DNA as traditional CPG companies where you do two years of R&D before pushing out a product," said Alexandrian.

Because the cannabis industry is so new, there are scant data to base decisions off of, so companies just push out product and "hope someone buys it," said Alexandrian.

Headset wants to provide that data — what Alexandrian calls the "Nielsen" of cannabis — to help brands and manufacturers understand trends, customer habits, and what the market looks like before making costly decisions about developing new products.

Overall, Alexandrian says it's "such a greenfield" for investing in marijuana.

"If you believe like I do, that legalization is going to spread and the end of prohibition is inevitable in a lot of the industrial countries in the world, it's very early in the game and you can get a lot of value for both companies and shareholders," said Alexandrian.

Read more: Marijuana M&A is already hot in 2019, with a pot tech-vape tie-up worth $210 million

And that data is going to be crucial as more traditional CPG companies look to either make strategic investments or acquire marijuana companies outright as more markets open up. Expect these companies to become Headset's clients, the startup's CEO, Cy Scott, told Business Insider.

"We're getting a lot of interest right now from consumer-packaged-goods industry companies like beverage/alcohol, tobacco, pharma, and even financial services who are all interested in the cannabis industry," said Scott in an interview.

Already major food-and-beverage companies have either pursued joint ventures or taken equity stakes in marijuana companies.

Bill Newlands, the incoming CEO of Constellation Brands — the beverage maker behind Corona — said on the company's earnings call earlier in January that marijuana "represents one of the most significant global growth opportunities of the next decade and frankly, our lifetimes."

Last year, Constellation closed a $4 billion investment into Canopy Growth, paving the way for other major corporations to move into the industry. Molson Coors entered a joint venture with Hexo in August, and Heineken's Lagunitas Brand has developed a hoppy, marijuana-infused sparkling water beverage for the California market.

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Netflix's price hike tells us a lot about its subscriber numbers, analyst says (NFLX)

Tue, 01/15/2019 - 4:24pm

Netflix's price hike for US subscribers is a strong signal that its subscribers are growing strong, according to one Wall Street analyst.

The company on Tuesday said it's raising US prices by 13% to 18%, its biggest increase ever. As of January 15, Netflix's basic plan will see a $1 per month increase to $8.99 while its most-popular standard plan will jump to from $10.99 per month to $12.99. It's the fourth price hike over the past 5 years for Netflix's US product, but just the first hike for the basic tier. 

The price increase came two days before the streaming giant's fourth-quarter earnings release, prompting investors to speculate about whether the company's subscriber trends are strong enough to encourage it to raise price or too slow that it has to increase the price to offset the weakness. 

We "got a strong signal that subs are growing at/above management expectations as well," Todd Juenger, an analyst at Bernstein, said in a note out on Tuesday.

"If sub trends were weak, we would expect at this point to observe other efforts, aimed at driving adoption. Not a substantial price increase."

After Netflix raised its price globally in late 2017, subscriber growth continued to blow past Wall Street estimates. By Juenger's calculation, even as the standard plan increased to $12.99 per month, its users will still stick to the platform because of the value of the service. 

Juenger has an "outperform" rating $421 price target — 19% above where shares are trading Tuesday. Shares rallied 6% following the price-hike announcement.

And Eric Schiffer, CEO of the Patriarch Organization, a private investment firm agrees that Netflix's loyal consumers will embrace the price increase.

"This is not enough of an incremental price increase," Schiffer told Markets Insider. "That's not gonna horrify a large number of subscribers."

Schiffer added that the price hike provides Netflix an opportunity to raise cash for its content spending. 

Netflix in October warned investors the costs of developing original content will take a bite out of its profit. It said that its cash burn in streaming content will hold steady at $3 billion for the fiscal year 2018, and that its negative free cash flow will remain negative in 2019.

To offset its negative cash flow, Netflix has been borrowing heavily to pay for content. In October, the company launched a $2 billion debt offering and has accumulated more than $10 billion of debt so far.

Netflix was up 60% in the past year.

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The pound is fighting back after Theresa May suffers a crushing defeat in Brexit vote

Tue, 01/15/2019 - 3:29pm

The British pound is fighting back Tuesday evening after Prime Minister Theresa May suffered a record breaking defeat over her Brexit deal in the House of Commons.

Immediately after the vote the pound was lower by as much as 1.5% against the dollar, trading below the $1.27 mark. However, in the minutes after the vote, the pound has bounced back, and as of 8.25 p.m. GMT (3.25 p.m. EST) is narrowly in positive territory.

The rally seemingly reflects expectations that a no deal Brexit is now less likely than before, a positive for investors.

"Markets are firmly focused on the risks of a no deal and/or a potential general election. Though the former isn’t out of the question, the danger of such an outcome seems to have diminished in recent weeks, given Parliament has expressed its desire to avoid it," Dean Turner, UK Economist at UBS Global Wealth Management said in an email.

"The lack of immediate downside in sterling supports this view."

May was widely expected to suffer a crushing, and that defeat came to pass, with MPs voting 432-202 against the Withdrawal Agreement.

Labour party leader Jeremy Corbyn has now tabled a motion of no-confidence in the government, which will be voted on on Wednesday.

Richard Falkenhäll, senior FX strategist at Swedish bank SEB believes the pound could actually rally in the coming days, if it appears the UK is moving towards delaying or cancelling Brexit.

"From a GBP perspective, any alternative going forward that increases the likelihood that the UK in fact stays a member of the EU, like a referendum on the government agreement or even a new election demanding an extension of the withdrawal period, is therefore likely to be supportive for the GBP," he wrote in an email in the hour before the vote.

"Although uncertainty is bad for the economy and bad for financial markets, in this case uncertainty may in fact be a positive factor for the British currency as it increases the likelihood the UK will remain an EU-member."

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Blue Apron is soaring after saying it will 'reaffirm confidence in achieving profitability' on an adjusted basis (APRN)

Tue, 01/15/2019 - 2:55pm

  • Blue Apron said Tuesday it plans to reaffirm confidence in turning a profit in both the first quarter and fiscal year 2019 when it reports Q4 results later this month.
  • The meal-kit maker has had difficulty retaining customers in the past.
  • Blue Apron shares were up more than 38% Tuesday.
  • Watch Blue Apron trade live.

Blue Apron was surging Tuesday morning, up more than 38% to $1.44 a share after the company said it plans to reaffirm confidence in achieving profitability next year when it releases its fourth-quarter and full-year results later this month.

"Based on its current view of the business, Blue Apron plans to reaffirm confidence in achieving profitability on an adjusted EBITDA basis both in the first quarter of 2019 and for full year 2019 as it actively pursues the appropriate strategies to create value for its stakeholders," the company said in a press release out Tuesday.

Wall Street analysts surveyed by Bloomberg were less confident, forecasting an adjusted loss of $0.09 a share in Q1 and $0.32 a share for fiscal year 2019. 

Blue Apron has had a rough go of things since announcing plans to go public in June 2017. First, Amazon announced plans to buy Whole Foods, causing Blue Apron to slash its IPO range to $10 to $11 a share, down from $15 to $17, as investors worried about the competition such a deal would bring. Then, less than a month later, Amazon rolled out its meal-kit business

And in August of last year, Blue Apron announced it was having trouble keeping customers. The meal-kit maker said its total number of customers plunged by 24% in the second quarter versus the prior year and that revenue per customer dipped by $1 to $250.

Blue Apron shares had a difficult 2018. They cratered by as much as 84%, falling below $1 for the first time and putting in a record low of $0.65. They finished the year at $1.02.  

Blue Apron was expected to report an adjusted fourth-quarter loss of $0.17 a share on revenue of $137.78 million when it reports on January 31, according to analysts surveyed by Bloomberg. 

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Amid fears of an impending recession, some employees at Silicon Valley's IPO-bound startups say they're starting to get anxious

Tue, 01/15/2019 - 2:48pm

  • 2019 was supposed to be a blockbuster year for tech companies going public — but the volatility of the public markets is making some employees at IPO-bound tech companies nervous. 
  • We spoke to a current employee at Uber and a current employee at Airbnb. Both companies are expected to hold their long-awaited IPOs this year. 
  • The Uber employee says that there's a lot of anxiety within the company over the company's valuation — conflicting reports have said that Uber could go public with a market cap as high as $120 billion or as low as $90 billion. That number has a huge bearing on the value of employees' shares. 
  • Meanwhile, the Airbnb employee says that the company is doubling down on customer service and safety so as to make sure it avoids any scandals ahead of an IPO. (A spokesperson for Airbnb says that this is "false," and that its investments in those areas are independent of any IPO plans.)
  • Indeed, both companies are very sensitive to negative press in the run-up to IPO, say both tech workers.

This is slated to be a blockbuster year for IPOs — mega-valuable startups like Uber, Lyft, Slack, Palantir, and Airbnb are all anticipated to make their public-market debut in 2019, giving investors and employees the chance to hopefully cash out big on their shares. 

And as you might imagine, the excitement at the possibility of becoming an instant millionaire is getting to employees. A current Uber employee, who wished to remain anonymous, tells Business Insider that the recently-announced IPO is the talk of the office, with employees bringing it up at every company-wide all-hands meeting.

Some engineers are fantasizing about buying their first homes in the wildly expensive San Francisco Bay Area, while others are planning on using the windfall to put their kids through college, the Uber employee says. 

"It’s such a big event when so much of your compensation is tied up in equity," the Uber employee told us. "Definitely, the entire climate is like: When are we IPO-ing? How much money am I going to get?"

Uber declined to comment for this story.

At Airbnb, the excitement has manifested in the form of a renewed focus on the work, as workers go "heads down," says a current employee at the home-sharing firm. 

"We just want to make sure [the IPO] happens," he said. While the company has not formally announced an IPO, the company said on Tuesday that it's profitable, and is widely expected to make the move this year. Early last year, CEO Brian Chesky told Fortune that Airbnb would be "ready" to IPO in 2019, "but I don’t know if we will,” 

Still, this enthusiasm is tempered by a healthy dose of reality, says the Uber employee. As fears of a recession swirl, and the public markets go through a period of volatility, there are concerns within the ride-sharing firm that its IPO may fall short of early projections. The employee says that at Uber, they "aren’t necessarily getting their heads over their skis" — as in, they're trying to keep their expectations in check. 

Read more: 2019 was supposed to be a banner year for IPOs, but now it's turning into a 's---show'

Specifically, Uber employees are worrying a lot about the company's potential public valuation. Early reports pegged Uber at going public with a market cap of $120 billion, but a more recent analysis of leaked Uber financials show that its market cap could be closer to $90 billion at the time of its debut. That discrepancy would make a huge difference in the value of employees' shares — contributing to internal anxiety, says the employee.

“Will it be $90 [billion]? Will it be $120 [billion]? Will it be less than that?" the current Uber employee told us, referring to the company's potential market cap at the time of IPO. "People are kind of more like, ‘let’s see what the price is before we start speculating wildly.’”

Even Uber CEO Dara Khosrowshahi showed signs of restraint last week when he spoke to The Wall Street Journal about going public in an unstable market. “We’ll do it when we’re ready, and, hopefully, the markets will be in a good state,” Khosrowshahi said.

The bad news factor

Another big point of concern at both Uber and Airbnb is the possibility of bad press in the run-up to the IPO, say both employees we spoke to. This is important, as both companies have found themselves at the center of controversy in recent memory — something to which employees are very sensitive, says the Uber employee.

“The pure fact that we’re pre-IPO just means our valuation can fluctuate so much based on news stories. Everyone is very sensitive about every news story that comes out, which there are a lot for Uber," says the Uber employee. 

In 2017, Uber founder Travis Kalanick stepped down as CEO after a string of high-profile scandals, and in 2018, a self-driving Uber vehicle was responsible for the death of a pedestrian.

And the Airbnb employee cites an episode from early 2018 where a guest allegedly threw a massive 300-person party, doing lots of damage to the home — and the host said that she didn't hear back from Airbnb about the issue for weeks afterwards, sparking an outcry.

The Airbnb employee told us that the company is building out its customer support teams to avoid any such public relations scandals ahead of its public offering. 

“A lot of the talk internally is about buttoning everything up,” the Airbnb employee said. “So we’re bulking up on teams like Trust & Safety and Support.”

However, Airbnb disputed this account of things in a statement to Business Insider, saying that any investments in customer service and safety are just a natural extension of its continued popularity, and unrelated to a potential IPO.

"This rumor is false," said Nick Papas, Airbnb's global press secretary.

"We are always committed to supporting our community and continuing to scale this support as the community grows. Our ongoing investments in trust and safety have nothing to do with an IPO and everything to do with continuing to support a community that is on course to grow to 500m guest arrivals over this quarter."

Regardless of the reasoning, the Airbnb employee is glad that the company is taking proactive measures now, before these incidents potentially impact the value of employees' shares later.

“It’s better to remedy things now before you’re on the public markets," says the Airbnb employee. 

Got a tip? Contact this reporter via Signal at +1 (209) 730-3387, email at, or Twitter DM at @nickbastone.

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AI IN BANKING AND PAYMENTS: How artificial intelligence can cut costs, build loyalty, and enhance security across financial services

Tue, 01/15/2019 - 1:03am

This is a preview of a research report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here

Artificial intelligence (AI) is one of the most commonly referenced terms by financial institutions (FIs) and payments firms when describing their vision for the future of financial services. 

AI can be applied in almost every area of financial services, but the combination of its potential and complexity has made AI a buzzword, and led to its inclusion in many descriptions of new software, solutions, and systems.

This report from Business Insider Intelligence, Business Insider's premium research service, cuts through the hype to offer an overview of different types of AI, and where they have potential applications within banking and payments. It also emphasizes which applications are most mature, provides recommendations of how FIs should approach using the technology, and offers examples of where FIs and payments firms are already leveraging AI. The report draws on executive interviews Business Insider Intelligence conducted with leading financial services providers, such as Bank of America, Capital One, and Mastercard, as well as top AI vendors like Feedzai, Expert System, and Kasisto.

Here are some of the key takeaways:

  • AI, or technologies that simulate human intelligence, is a trending topic in banking and payments circles. It comes in many different forms, and is lauded by many CEOs, CTOs, and strategy teams as their saving grace in a rapidly changing financial ecosystem.
  • Banks are using AI on the front end to secure customer identities, mimic bank employees, deepen digital interactions, and engage customers across channels.
  • Banks are also using AI on the back end to aid employees, automate processes, and preempt problems.
  • In payments, AI is being used in fraud prevention and detection, anti-money laundering (AML), and to grow conversational payments volume.

 In full, the report:

  • Offers an overview of different types of AI and their applications in payments and banking. 
  • Highlights which of these applications are most mature.
  • Offers examples where FIs and payments firms are already using the technology. 
  • Provides descriptions of vendors of different AI-based solutions that FIs may want to consider using.
  • Gives recommendations of how FIs and payments firms should approach using the technology.
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Some of the $107 million in donations Trump's inaugural committee received were reportedly spent in odd ways

Tue, 01/15/2019 - 12:10am

  • President Donald Trump's inauguration in 2017 drew more than $100 million in donations, according to interviews and documents reviewed by The New York Times.
  • The record-breaking $107 million in contributions from private donors amounted to at least twice that of Trump's predecessors.
  • Expenses for the estimated 20 events around the Capitol reportedly included $10,000 spent on makeup services for 20 aides, and $30,000 to cover the daily expenses of contract staffers.
  • About $6.4 million in potential hotel-room revenue was lost when a number of rooms booked by the Republican National Committee were left vacant after guests acquired housing accommodations elsewhere, The Times reported.
  • Around $5 million was also given to charity, according to organizers, who claimed it was the largest amount of presidential inaugural funds donated. INSIDER has not independently verified that claim.

President Donald Trump's inauguration in 2017 drew more than $100 million in donations, $1.5 million of which was spent on the Trump International Hotel, according to interviews and documents reviewed by The New York Times.

The record-breaking $107 million in contributions from private donors amounted to at least twice that of Trump's predecessors, Presidents Barack Obama and George W. Bush, The Times' report said.

Expenses for the estimated 20 events around the Capitol reportedly included $10,000 spent on makeup services for 20 aides, and $30,000 to cover the daily expenses of contract staffers — who had already had their hotel rooms, room service, transportation costs, and laundry fees paid for.

Most of the expenses went to payroll and around 40 business that included hotels and vendors, according to The Times.

Around $5 million was also given to charity, according to organizers, who claimed it was the largest amount of presidential inaugural funds donated. INSIDER has not independently verified that claim.

Tom Barrack, a businessman and a friend of Trump's, previously said any leftover funds would go to charity, and subsequent tax filings revealed some of those donations went to hurricane relief and housing renovations for Vice President Mike Pence.

About $6.4 million in potential hotel-room revenue was lost when a number of rooms booked by the Republican National Committee were left vacant after guests acquired housing accommodations elsewhere. The RNC incurred some financial penalties for that, The Times reported.

The majority of the committee's funds reportedly came from large corporate entities and Republican donors, such as AT&T and Bank of America. Federal investigators are looking into whether the Trump inauguration committee received any funds from foreign entities, a matter that took on added significance amid concerns about the Trump election campaign's contacts with Russian operatives.

Read the full story at The New York Times »

SEE ALSO: CLINTON: I heard the first ponchos for Trump's inauguration 'could have looked something like KKK hoods'

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NOW WATCH: MSNBC host Chris Hayes thinks President Trump's stance on China is 'not at all crazy'

Here's how fintech is taking over the world — and what's coming next

Mon, 01/14/2019 - 10:16pm

Digital disruption is affecting every aspect of the fintech industry.

Over the past five years, fintech has established itself as a fundamental part of the global financial services ecosystem.

Fintech startups have raised, and continue to raise, billions of dollars annually, pushing incumbent financial institutions to get in on the action. Legacy players have begun using fintech to remain competitive in a rapidly evolving financial services landscape.

So what's next?

Business Insider Intelligence, Business Insider's premium research service, explores recent innovations in the fintech space as well as what might be coming in the future in our brand new exclusive slide deck, The Future of Fintech: How Fintech Is Taking Over The World and What Comes Next.

To get your copy of this free slide deck, click here.

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