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Millennials are piling into Apple after it warned of a slowdown linked to China (AAPL)

Sat, 01/12/2019 - 12:16pm

  • Apple last week slashed its revenue guidance for the holiday quarter and blamed slumping sales on a slowdown in China.
  • As shares faced selling pressure following the announcement, down as much as 10%, millennials traders on Robinhood were piling into the stock.
  • Since peaking at $233.47 on October 3, Apple has lost 35% of its value. During the same time period, the number of Robinhood investors holding Apple shares increased by 30%.
  • Watch Apple trade live.

Apple last week sounded the alarm on a holiday sales slowdown, but investors on Robinhood, a no-fee trading app popular among millennials, brushed off the company's warnings and instead snapped up shares.

Last Wednesday, the tech giant said its revenue for the holiday quarter would be more than 7% below what it had expected and blamed slumping sales on a slowdown in China. Seven days later, the Nikkei Asian Review reported that Apple late last month asked its suppliers to cut production on new iPhones by 10% for the January-March quarter.

Apple shares were hit hard over the past week, down as much as 10%, but that didn't scare millennials away from the stock. According to weekly data tacked by Markets Insider, Apple is now held by 235,900 Robinhood traders, up 15,095 from a week ago. The smartphone titan has consistently been the favorite stock or Robinhood users, outranking all the others in each of the past nine weeks. 

And millennial's affection for Apple has strengthened as shares have weakened.

On November 1, the company posted underwhelming iPhone sales and said revenue for its holiday quarter would be on the low end of analyst expectations. During that week, a net 14,013 Robinhood users added Apple to their portfolio, allowing it to reclaim its crown as the most-popular stock on the app.

In mid-November, a handful of iPhone suppliers, including the main Face ID technology provider Lumentum and iPhone radio-frequency chip supplier Qorvo, cut their outlooks, citing a drop in demand from one of their biggest customers. At the time, Apple became the first stock to pass 200,000 owners on Robinhood, with a net 2,845 users buying the stock that week. 

Since peaking at $233.47 on October 3, Apple has lost 35% of its value. During the same time period, the number of Robinhood investors holding shares increased by 30%, or 55,000.

Apple was down 12% in the past twelve months.

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Cash was the best-performing asset of 2018. Here's what 'going to cash' means.

Sat, 01/12/2019 - 12:16pm

  • Cash was last year's best-performing asset, outperforming stocks, bonds, and commodities.
  • After a brutal year for investors across those asset classes, some strategists have suggested cash is an increasingly attractive investment.
  • So what exactly does "going to cash" mean? Here's what investors should know.

Cash was the best-performing asset of 2018. It reigned supreme among other investments like stocks, bonds, and commodities. Put another way, cash was the only major asset that posted positive returns last year, with a 1.9% rise, according to Bank of America Merrill Lynch.

"A perfect storm hit equities in 4Q18 — high oil prices, a strong dollar and a shift upwards in the U.S. yield curve — which altered perceptions towards risk assets and encouraged investors into cash," Sean Darby, the global head of equity strategy at Jefferies, told clients in a report last week.

Investments of all stripes last year were hit as a confluence of macroeconomic factors — at a late stage in the decade-old economic cycle — swelled and wreaked havoc on the market.

Now, strategists across Wall Street say cash is a more compelling investment as the global economy slows, US-China trade tensions persist, and questions swirl around the Federal Reserve's interest-rate hiking path. Even banks are doing their part to entice investors — Goldman Sachs is offering online savings customers 2.25% on their accounts, compared with some of its competitors' near-zero rates.

But what exactly does "going to cash" mean? Surely it must involve more than just shoving your money under a mattress.

Typically, going to cash means removing money invested in stocks, bonds, or other assets meant to grow your cash at a more attractive rate than if it were to simply sit in a savings account.

"Cash," on its own, simply means an asset in a portfolio that isn't invested. That could also mean cash-equivalent assets, such as money-market funds. It should be noted that while cash-equivalent securities are typically considered safe places to park cash, investors can still lose money. Here's a breakdown of some of those assets — traditionally defined as low-risk, low-return, but highly liquid vehicles — and what they all mean.

  • Money-market funds: These securities are like checking accounts that pay investors higher interest rates on their deposits. A money-market fund that Vanguard offers individual investors, for example, is $1 a share and is among the firm's most conservative investment options. Money-market funds saw massive inflows from October (roughly around the time when the stock market began its sell-off) through the end of last week, with investors pouring nearly $250 billion into them over that time, according to Deutsche Bank data.
  • US Treasury bills: These are US Treasury-issued debt securities lent in denominations of $1,000 to $5 million. They do not pay out interest like a Treasury bond, but the investor earns the yield — the difference between the price of purchase and the value at the time of redemption — on the bill when the asset reaches maturity. Macroeconomic factors like inflation, monetary policy, and investor demand affect T-bill prices, similarly to other debt obligations.
  • Commercial paper: This is a short-term, unsecured, corporation-issued debt instrument typically viewed as a liquid space, though one that's changed dramatically since the global financial crisis. Investors buy in for returns slightly higher than Treasury bills, while taking on, theoretically, relatively little credit risk. Maturities on commercial paper range up to 270 days but average about 30 days, according to the Federal Reserve. The assets are typically lent in denominations of $100,000. They are widely viewed as having played a key role in the crisis of 2007 to 2009 as mortgage defaults rose.
  • Short-term government bonds: Government bonds with short-dated maturities are debt obligations backed by a country's government and denominated in its currency. An example in the US would be a two-year Treasury note. These assets are typically considered stable investments and "safe havens" but are subject to volatility from factors like auctions and changes in monetary policy and economic conditions. Deutsche Bank told clients last week that government-bond funds — mostly short-term — saw a record $23 billion inflow in December alone.

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Pier 1 is a 'dumpster fire' and it's fighting for its survival (PIR)

Sat, 01/12/2019 - 12:16pm

  • Pier 1's market value has been almost completely wiped out over the past five and a half years, falling 97% since 2013.
  • Analysts say the outlook is discouraging. Of the few surveyed by Bloomberg who cover the name, none rate the stock a "buy," two carry a "sell" rating, and four say "hold."
  • Analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees.

Pier 1 is fighting to stay afloat.

Shares of the home-furnishings retailer have gotten decimated, down 97% from their 2013 high, as the company has struggled to compete against the likes of online retailers and its turnaround strategy has yet to take hold. Additionally, investors have had to grapple with a second executive departure in two months. All of this has culminated with shares sliding below $1 last month for the first time in a decade. 

So what happened?

Pier 1, based in Fort Worth, Texas, said last week that its chief information officer, Bhargav Shah, left the company effective in November after announcing his intent to resign in October.* Last month, Pier 1 named longtime board member Cheryl Batchelder as its interim CEO after Alisdair James' departure following 19 months at the helm of the company.

Read more: Pier 1 CEO steps down after turnaround efforts fail

These moves were just the latest chapter in what seems to be an increasingly concerning story for the retailer. In April, Pier 1 announced a three-year strategic plan to right the ship.

At the time, James said, "Pier 1 has a rich brand history and loyal customer base, a highly competitive e-Commerce platform and a team with the talent, experience and determination to succeed."

But analysts say a combination of overwhelming store environments, offerings that don't reflect the latest trends, and expensive sourcing and supply chain costs have brought the retailer to its knees.

"We are both sad and angry: sad that the company's associates and customers are now at significant risk and angry at a Board of Directors that, in our view, is culpable for allowing this crisis to develop," Budd Bugatch and Bobby Griffin, analysts at Raymond James, told clients after the company's most recent quarterly earnings report in December.

"F3Q19 was a 'dumpster fire,' which unfortunately has become all too common for Pier 1 quarterly earnings," they wrote.

Specifically, the analysts pointed to its 11.9% decline in total sales, 10.5% plunge in comparable sales, and a drop in operating income from $13.4 million last year to -$28.9 million this year.

Read more: We went shopping at Pier 1 Imports and saw why it has struggled to turn things around and compete with Amazon and TJ Maxx

Others tracking the stock echo a dim outlook. Pier 1 is one of three stocks in UBS's 28-member hardline retail coverage universe — alongside Office Depot and Sleep Number — that analyst Michael Lasser rates a "sell." He told clients earlier this month that Pier 1 would likely see "another tough year" after reporting "significant top-line deterioration" in 2018 despite last year's relatively strong spending environment.

"It seemed like everything was on sale at Pier 1," Business Insider's Jessica Tyler wrote after visiting a Pier 1 location in Manhattan last month.

"The issues raised about Pier 1's inability to keep up with trends, its overwhelming stores, and efforts to keep prices down were all clear when we visited the store. The brand has announced plans to rebrand the store and fix these issues, but it has a ways to go."

Ratings agency Moody's has taken notice of the company's struggles. Following Pier 1's quarterly earnings report in December, Moody's cut its outlook from "stable" to "negative," pointing specifically to the risk the company's turnaround efforts would have a hard time gaining traction.

"Pier 1's third-quarter fiscal 2019 results indicate that its turnaround will be more challenging and protracted than previously anticipated," analyst Raya Sokolyanska said in a report, adding that while liquidity was expected to be adequate in the next 12 to 18 months, it would "weaken over time if earnings do not recover."

*Correction: This post was updated to reflect Bhargav Shah announced his intent to resign in October. Previously, the post said the company made no mention of his departure in its most recent earnings announcement. 


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A top investor who just made $470 million on buzzy biotech Loxo's $8 billion takeover told us where he might place his next bets

Sat, 01/12/2019 - 12:16pm

  • Eli Lilly & Co.'s about $8 billion acquisition of biotech Loxo Oncology could mean a $470 million payday for venture-capital firm Aisling Capital.
  • Aisling Capital was a founding investor in Loxo and most recently held a 6.6% stake. 
  • Aisling Capital managing partner Steve Elms told Business Insider about the other biotechs and scientific areas the firm is intrigued by. 

Pharma giant Eli Lilly & Co.'s Monday acquisition of biotech Loxo Oncology for $8 billion was a big deal, both for Eli Lilly and the wider biopharmaceutical industry. 

It also represents a major payday for venture-capital firm Aisling Capital, with expected returns of around $470 million on its roughly 2 million shares, managing partner Steve Elms told Business Insider on Tuesday. 

The firm invests in life sciences companies, both public and private, with drugs in fairly advanced stages of research, and has raised about $1.8 billion since it was founded in 2000. 

Aisling got in on the ground floor with Loxo, literally — it was a founding investor in the biotech and incubated Loxo in its offices in the early days.

Read: Pharma giant Eli Lilly just made an $8 billion bet on a cutting-edge scientific approach that uses DNA to treat cancer

The venture-capital firm is also intrigued by other kinds of "targeted" approaches to cancer, cell therapies, and those that use the immune system to fight cancer, called immuno-oncology.

Among the "interesting areas we're watching really closely" are biotechs developing personalized vaccines to fight cancer, Elms said, though Aisling hasn't yet taken an investment.

Biotechs like Gritstone Oncology and Neon Therapeutics aim to use the immune system to treat cancer, like in immuno-oncology, and to do so are developing medicines that hone in on new targets, protein fragments called neoantigens.

Neon, for example, calls neoantigens "cancer's untapped vulnerability." 

Aisling is interested in other immuno-oncology approaches as well, with investments in biotechs Marker Therapeutics and Arcus Biosciences. But the firm has also been "really selective," Elms said. 

"With targeted medicine, you know really quickly, and can stop the program right away" if the drug isn't working or has serious side effects, Elms said. Unlike in immuno-oncology, "you don't have to worry about multiple clinical trials with multiple combinations" and wait for them to pan out. 

See: Pfizer has a new strategy for fighting cancer that could generate $5 billion a year. We got a look inside.

Aisling has history and close ties with Loxo, which develops medicines focused on gene mutations in the cancers, allowing them to treat patients across different types of the disease. Rivals with a similar approach include Blueprint Medicines and Deciphera Pharmaceuticals. 

Elms chairs Loxo's board, and Loxo's CEO, Dr. Josh Bilenker, and COO Jake Van Naarden, both came to the start-up from Aisling Capital. 

The firm's stake in Loxo was once as high as 18.6%, according to a Reuters report from 2016, though it most recently held an about 6.6% stake.

Its stake was roughly twice the size it is now last summer, when Aisling sold about two million shares at a lower price.

That was purposefully so, Elms said: "One of the important parts of our strategy is making sure to take some money off the table as the price increases, and that's something we've done historically at Aisling Capital." 

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Trump wishes Amazon CEO Jeff Bezos good luck with his divorce, says it's 'going to be a beauty' (AMZN)

Sat, 01/12/2019 - 12:15pm

President Donald Trump predicted Jeff Bezos' divorce would be "a beauty" when he was asked about the Amazon CEO outside the White House on Thursday.

Bezos, the richest man in the world, and his wife, the novelist MacKenzie Bezos, announced this week that they were planning to divorce after more than 25 years of marriage.

Trump stopped to answer questions from reporters Thursday morning before boarding Air Force One. Amid a partial government shutdown, the president is planning to visit cities along the US-Mexico border to attempt to garner support for his proposed border wall.

"I wish him luck," Trump told reporters Thursday morning when asked about the divorce. "It's going to be a beauty."

Trump on Jeff Bezos' divorce: "I wish him luck, I wish him luck. It's going to be a beauty."

— Bob Bryan (@RobertBryan4) January 10, 2019

Jeff Bezos posted Wednesday on his Twitter account that he and his wife would be splitting amicably after what a statement signed by the couple called "a long period of loving exploration and trial separation." Tabloids have since reported that the Amazon CEO has been quietly dating the former TV news anchor Lauren Sanchez.

The Bezoses met even before Amazon launched, and with reportedly no prenuptial agreement in place, MacKenzie Bezos is poised to become one of Amazon's largest shareholders after Jeff Bezos' $137 billion fortune and 16% stake in the e-commerce giant is likely divided up in the divorce settlement.

Historically, Trump and Amazon have had a frosty relationship. The news website Axios reported last year that Trump was "obsessed" with taking down Bezos' company, which he has criticized as destroying small businesses and taking advantage of the US Postal Service. On the campaign trail in February 2016, Trump said at a rally that if he were elected president, Amazon would "have such problems."

Trump has also taken aim at Bezos' ownership of The Washington Post. He accused The Post of being a "lobbyist weapon" for Amazon and tried to brand the paper with the hashtag #AmazonWashingtonPost.

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A Silicon Valley startup that pioneered a new way to fight diabetes is tackling depression after its CEO noticed a disturbing trend

Sat, 01/12/2019 - 12:15pm

  • Silicon Valley digital health startup Omada told Business Insider that it's expanding beyond treating obesity-related diseases like diabetes into depression and anxiety.
  • The move, which was officially announced on Monday, includes a partnership with the mental-health startup Lantern to offer customers cognitive behavioral therapy (CBT).
  • Omada has prominent backers, including Andreessen Horowitz and Cigna, and rose to prominence as employers like Costco and health plans like Kaiser began offering its services to members.

When Sean Duffy, the cofounder and CEO of a digital-health startup called Omada Health, took his first look at the results of his new diabetes-treatment program, he noticed a disturbing trend.

Many of the individuals weren't simply fighting diabetes or obesity. They were also battling psychological issues like depression and anxiety, and those conditions were making their obesity-related symptoms worse.

Duffy wondered if there was more Omada could do to help treat those psychological issues.

So roughly a year ago, he and his team began drafting plans for a program that would focus exclusively on depression and anxiety, while also giving existing customers access to a wider range of mental-health tools. Duffy officially announced the program, which includes a partnership with a mental-health startup called Lantern, on Monday.

"This is an area we’ve been deeply interested in for years, and we're excited to finally make it happen," Duffy told Business Insider.

The push into mental health builds on Omada's existing program, which has shown impressive results. The program links customers online with a coach, a peer group, and a clinical team of dietitians, physicians, and psychologists. Omada customers lose weight and reduce their risk of stroke and heart disease. Not surprisingly, they say they feel better, too.

As part of the existing program, Omada's clinical team had already been addressing some of the psychological factors that can be tied to obesity-related diseases, such as directing people to pay attention to social cues related to eating and ensuring people forgive themselves when they slip up. The new offering targeting anxiety and depression goes much further.

Using software designed by Lantern — which ceased commercial operations in August after failing to come up with a successful go-to-market strategy — Omada will offer a type of therapy known as cognitive behavioral therapy, or CBT, to people with anxiety and depression. Widely considered a gold standard treatment for depression, CBT helps people modify how they respond to emotionally challenging situations.

Taking what works in person and making it digital

Backed by big names like Andreessen Horowitz and Cigna, Omada rose to prominence as major employers like Costco and leading health plans like Kaiser Permanente began offering its services to members. Omada's digital program has enrolled 200,000 people so far, and the company says that employers and health plans save money and gain more productive members, while patients get healthier and gain the self-esteem and motivation to keep going.

The idea behind it is simple: take what works in an in-person setting and apply it digitally. 

Another startup called Virta Health takes a similar approach. Using a digital health intervention composed mainly of a coach and peer group, the company also helps patients reduce diabetes symptoms. Only where Omada is diet-agnostic but generally recommends a Mediterranean-style eating plan rich in vegetables and lean proteins, Virta encourages customers to adhere to a strict high-fat, low-carb ketogenic diet.

Read more: A new health startup boldly claims to reverse diabetes without drugs, and Silicon Valley's favorite diet is a big part of it

Both companies emphasize their focus on scientific research and peer-reviewed studies. And it was with that science-heavy bent — and a review of the data they'd been collecting during the sign-up and follow-up process — that the Omada team decided to expand into mental health. 

"We knew based on intakes and follow-ups that we'd been helping with some of those symptoms, but not to the extent that we liked," Omada’s vice president of medical affairs, Carolyn Bradner Jasik, told Business Insider.

In fact, the crossover between obesity-related diseases and psychiatric conditions like anxiety and depression went even deeper than Duffy initially thought. Close to half of all adults with depression are obese, according to data from the Centers for Disease Control and Prevention. And adults who’ve been diagnosed with depression are more likely to be overweight than those who haven’t.

Read more: There's even more evidence that one type of diet is the best for your body and brain

So with the new program, patients already enrolled in Omada to tackle diabetes, hypertension, and high cholesterol will have access to a broader and deeper set of mental health tools. At the same time, Omada will begin offering mental health services to people who may or may not also deal with obesity-related diseases. 

"Our customers tell us they love working with one partner in more comprehensive ways, so it’s a great match for customers and for the health plans we work with as well," Duffy said.

'We start with science and insist on outcomes'

Omada is using Lantern's model, which came out of partnerships with experts at Stanford, Penn State, and Washington University in St. Louis. Research indicated it helped curb depression and anxiety symptoms while reducing disordered eating behavior. Specifically, Omada is licensing Lantern's CBT technology and bringing on several members of its staff to help support the new offering.

Several studies of CBT suggest the method lends itself well to a digital setting. For a recent review of studies published in the journal World Psychiatry, researchers compared people who received CBT online with those who received it in person and concluded that the two settings were equally effective.

Read more: A Stanford researcher is pioneering a dramatic shift in how we treat depression — and you can try her new tool right now

Bradner Jasik, who spent more than a decade as a physician and clinical professor focused on obesity and disordered eating, said she couldn't wait to be able to offer Lantern's software to customers. One of her chief frustrations as a practicing doctor, she said, was not being able to treat patients for both weight management and depression because of issues with healthcare plans and reimbursement.

Read more: Digital health startups are embracing value-based payments

"It’s hard when you know what someone needs and there's an evidence-based treatment at your fingertips that you can’t give to patients," Bradner Jasik said. "It doesn't feel good."

The new program, she hopes, will finally address that.

"We start with science and insist on outcomes," she said.

SEE ALSO: A new health startup boldly claims to reverse diabetes without drugs, and Silicon Valley's favorite diet is a big part of it

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Dismal statistics show there are fewer female CEOs in healthcare because of manterrupting and male bonding events like football, golf and cigar bars.

Sat, 01/12/2019 - 12:15pm

  • The US healthcare workforce is female-dominated, but healthcare companies' C-suites are the complete opposite, a new report from Oliver Wyman has found. 
  • Only 33% of senior leaders at healthcare companies are female, and just 13% of CEOs, the report found. 
  • Many factors play into the disparity, but two appear especially distinct to healthcare: the professional backgrounds of CEOs and how people tend to get promoted. 

Women are sometimes called the "chief medical officers" of their households, because they make most decisions about what health services and products are bought and used. 

But the workplace is a whole different story. New statistics detailing just how uncommon female executives are in the healthcare industry are particularly bleak. 

Roughly a third of senior leaders at healthcare companies are female, a figure that slides to just 13% of CEOs, according to an Oliver Wyman report focused on the subject published on Monday.

It also takes more time for women to get to CEO: About three to five years more, on average, the report found. 

The disparity is hardly happening just in healthcare. But what makes it particularly glaring is not just that women make most healthcare decisions but also that, unlike other industries, the US healthcare workforce is already female-dominated.

Two particular factors also appear especially specific to the healthcare industry: The professional backgrounds CEOs come from, and how people tend to get promoted.

When Oliver Wyman looked at what 112 CEOs of health insurers and medical systems had done beforehand, 86% had experience in profit-and-loss — jobs that are very male-dominated.

Finance or government relations experience seemed to help individuals become CEOs of health insurers, according to the Oliver Wyman report, while medical leadership or service as chief operating officer appeared beneficial for provider CEOs. 

So when women make it to the C-suite, they are often in "technical" roles like chief human resources officer, chief legal officer and chief information officer, the report found. Interestingly, when the report analyzed the C-suites with more women on them, those were often bigger, with "most of these 'additional' positions being technical roles."

See: Meet the women under 40 unlocking new ways to treat diseases and shaping the future of medicine

See more: The first female big pharma CEO had the perfect response to a question about women in leadership

Organizations that had more women in their C-suites, or 40% or more positions held by women, tended to be led by CEOs who valued broader types of experience, the report said. 

Competency and "someone who is a good team member, collaborates, and is an effective listener" were valuable traits, one male CEO told the Oliver Wyman analysts.

Trends in promotion also appear to play a big role. Healthcare is an industry that usually promotes from within, rather than hiring executives from outside, per the report. That could make unconscious factors — and bias — play more of a role. 

Employees may have to leave to get the requisite experience for a bigger role at their former company, the report said, but that could entail a big move, because healthcare has many regional players. Moving is more complex in a dual-career household and when women see themselves as the caregivers. 

"I needed to come to terms with the fact that I loved my life and community and that would be as far as my career would go — or I had to give that up and go to another market," the report quotes one female senior vice president as saying. 

Other factors more commonly brought up as a reason for a lack of female CEOs are also cited in the report, including the phenomenon of "manterrupting" and the continued primacy of "male bonding" events like football, golf and cigar bars. 

Women are also known not to try for jobs they perceive they're unqualified for, while men will. That's also a factor in the healthcare field, the report found.

"Without mentors, I would have fallen into the trap of, 'I don't know anything about medical plans,' and not have taken over the product area," one female senior vice president told the Oliver Wyman analysts. "Men think you just need to surround yourself with the right people and don't need to be an expert." 

The solution, though, isn't to tell male healthcare workers to stop interrupting, according to the report. 

To get more women in top leadership roles, current healthcare executives should consider, for example, how candidates are assessed, as well as what kinds of roles they want represented on their C-suites, as well as how large those should be, the report found. 

Read: 10 female-founded startups that are expected to take off

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Genetic testing is the future of healthcare, but many experts say companies like 23andMe are doing more harm than good

Sat, 01/12/2019 - 12:15pm

  • Genetic testing will be a cornerstone of healthcare in 2019, experts say.
  • There are two ways to do the testing: getting a costly but complete genetic workup through a doctor or opting for a cheaper at-home test like those sold by 23andMe.
  • Clinicians and advocates criticize the at-home approach, which they say prioritizes convenience over privacy and long-term health.
  • But entrepreneurs counter that the at-home approach lets more people access information.
  • Which method will win out, and at what cost?

As millions of Americans sat down to Thanksgiving dinner, the biomedical researcher James Hazel sent out a stark warning about the genetic-testing kits that he surmised would be a hot topic of conversation.

Most of them are neither safe nor private.

Hazel reached this conclusion after reviewing the privacy policies and terms of service of nearly 100 genetic-testing companies that offer their services directly to people. Most people use these services either by submitting a sample of saliva or uploading their raw digital DNA signature to a public database. Their lofty common draw is enabling people to learn more about their health, family history, and ultimately their identity.

Hazel, a researcher at Vanderbilt University, studied companies ranging from popular startups like 23andMe — which offers health and ancestry information — to under-the-radar outfits such as GEDmatch, which simply houses genetic information to help people build family trees. His article, which was published on Thanksgiving Day in the journal Science, found that nearly half lacked even a basic privacy document that governed genetic data.

Privacy isn't the only concern that experts have with consumer genetic tests. In addition to collecting sensitive data on ancestry, companies like 23andMe claim to show how your DNA affects your health. But clinicians, medical professors, and genetic counselors told Business Insider that this information is misleading and could put people at risk of missing warning signs for diseases like cancer.

"It’s very scary for us because patients think they’ve had a genetic test when they haven't," said Theodora Ross, the director of the cancer-genetics program at the University of Texas Southwestern.

Still, comprehensive genetic workups — the kind that require a doctor's visit — remain expensive and time-consuming.

That's led millions of Americans to rely on at-home kits for most of their genetic knowledge. This holiday season, genetic-testing kits broke sales records. Ancestry announced after Thanksgiving that it had sold 14 million DNA kits worldwide. 23andMe has assembled genetic data on more than 5 million customers.

Experts agree it's time for a different model, something between a pricey doctor-ordered test and the limited spit kits available in drug stores. And though several companies are trying new approaches, none has emerged as a leader. In the meantime, sensitive customer data is being uploaded and housed in large databases — sometimes forever.

Your sensitive data can be shared with others — even if you've never taken a genetic test

For law-enforcement officials to arrest suspected Golden State Killer Joseph DeAngelo on charges including four murders and dozens of rapes, they did not need him to participate in any genetic-testing services.

Instead, DeAngelo's arrest hinged on the participation of several of his distant family members. At some point, 24 people distantly related to him uploaded their genetic data to a public DNA database called GEDmatch.

After creating a fake GEDmatch profile using DNA they'd gathered at the scene of a 1980 crime, investigators were led to those people. By cross-checking the list against several other databases such as census data and cemetery records, they were able to close in on DeAngelo.

That's something Hazel and other researchers call "reidentification." He said it's a significant risk for people, even if they haven't ever personally taken a genetic test.

"The fact that law enforcement has access to this with just a subpoena, that was the impetus for my article," Hazel said. "I wanted to use it to highlight the deficiencies of the system."

Still, the process required a specialist and years of work, Curtis Rogers, the cofounder of GEDmatch, told Business Insider.

"It takes many people, each supplying little bits of information, to begin the complicated process of solving a cold case," Rogers said.

'Informed consent' is not always informed

Most genetic-testing companies say they use something called "informed consent" to verify that people understand what their genetic data may be used for. Most well-established companies like Ancestry or 23andMe ask for consent when a customer signs up or registers their kit; others put it in a 10- or 20-page terms-of-service document.

Informed consent is especially important because some companies keep genetic data for a long time, sometimes indefinitely. That means it can be used in different ways, including for purposes like solving a murder, that customers might not have anticipated.

DNA data collected by the companies is also being used for drug research, like in the case of 23andMe's $300 million deal with pharmaceutical giant GlaxoSmithKline, and for research on longevity and aging, like in the case of Ancestry's now-ended partnership with Google spinoff Calico.

Read more: DNA-testing company 23andMe signed a $300 million deal with a drug giant. Here's how to delete your data if that freaks you out.

The conflict over informed consent mirrors a recurring debate in medicine about the role of gatekeepers in healthcare. Just as the web made it easy for patients to research their symptoms before reaching out to a doctor, consumer genetic tests have enabled people to query their genome without needing permission from a specialist.

Entrepreneurs say these new capabilities are empowering because they arm people with new information about themselves. Anne Wojcicki, the founder of 23andMe, has said repeatedly that giving individuals the ability to peek inside their genes allows them to be more active stewards of their health.

"My hope is that 23andMe, by being less and less regulated, will enable more people to open their eyes to science," Wojcicki said at a Fortune conference in 2016.

An Ancestry spokesperson shared that sentiment.

"Our highest priority is protecting our customers’ privacy, starting with enabling our customers to always maintain ownership and control over their own data and educating them on how to manage their privacy settings," they said.

"Any data included in research collaborations is based on customers' voluntary explicit informed consent to participate in research."

But privacy advocates and clinicians disagree with this view. Genetics is a scientific field that even experts are only beginning to understand, they say. Although there are several genetic mutations that we can firmly say are related to disease, there are thousands of tweaks to our genome that we still have yet to even identify, let alone fully comprehend.

Some genetic tests could mislead you about your risk of disease

Today, 23andMe is the only genetic testing startup that does not require interacting with a physician to get information about how your DNA might affect your risk of disease. For $199, you can order its "Health and Ancestry" product online or buy one at a pharmacy.

But genetics experts and clinicians caution against using the test for anything beyond entertainment. The tests are not comprehensive, meaning they don't look at all your DNA. Experts say they are also frequently misunderstood by patients. Ross, the University of Texas Southwestern clinician, said that whenever a patient comes in with results from an at-home testing kit, she tells them to throw them away.

"When it comes to health, 23andMe is not helping. They're getting in the way," she said.

The 23andMe health report looks at some of the genes related to diseases, including breast cancer, celiac disease, Parkinson's, and Alzheimer's. It also tells you if you carry a genetic variant that you could pass on to your children, increasing their risk of genetic diseases like cystic fibrosis or sickle cell anemia.

The problem is that a 23andMe report that comes back negative for those genetic variants doesn't mean you're at a low risk of disease, because the tests don't look at all your DNA. Instead, they analyze only a small selection of all the genes that have been highly studied and are known to relate to disease risk.

"If you think of your DNA as a book, the vast majority of consumer genetic tests [let you] see a few letters on the page," Elissa Levin, the senior director of clinical affairs for personal genomics startup Helix, told Business Insider.

"Those letters are very valuable if that is a particular mutation that's been highly studied," Levin added.

More important, while 23andMe tests for three of the tweaks known to be related to breast-cancer risk, there are other disease-linked mutations the test does not include.

"If someone did a consumer genetic test, they could be misinformed that there's nothing there of concern, when in fact they've only looked at a very small part of their genome," said Lisa Alderson, the CEO of genomic service network and medical practice Genome Medical.

Read more: Genetics testing company 23andMe has a new cancer test, but scientists say it's dangerous

A 23andMe representative said the company makes all these limitations clear to customers when they sign up for the test, and added that the product has been thoroughly reviewed by federal regulators at the Food and Drug Administration.

"Our health product undergoes levels of FDA scrutiny beyond most clinical tests," the representative said. "Our health tests meet a bar above 99% accuracy and contain information that meets the FDA requirements for clinical validity, meaning it's information related to one's health that's been well established in scientific literature."

They also said that the 23andMe health report clearly states that a negative report does not mean you are free of disease risk. The report reads:

"[Name], you do not have the three genetic variants we tested. However, more than 1,000 variants in the BRCA1 and BRCA2 genes are known to increase cancer risk, so you could still have a variant not included in this test."

Current tests may leave out 'the part that may save your life'

The single most important missing element when it comes to at-home genetic tests may be the human element, experts say.

That facet of genetic testing — translating genetic findings into health guidance that people can use — is the same one that's vital to a good doctor's visit. A person-to-person interaction can make the difference between a patient feeling defeated and determined.

Say you learned from a genetic test that you were at a heightened risk of a certain kind of cancer, for example. You might be left feeling hopeless and anxious. But imagine if instead of simply being told you were at a higher risk of cancer, you were also told that you could take a medical imaging test each year that has a high chance of catching your cancer early, when there's still time to intervene and save your life.

That's a role many experts say must be played by humans, at least until we have technology that can replace them.

"When you sit down with your doctor or genetic counselor or whoever the human being is who's talking to you about your result, you get a completely different view of it then if you’re sitting on a computer or it comes in the mail," said Ross.

But there aren't enough doctors or genetic counselors to meet the current demand for genetic-testing services. According to a recent report from the National Society of Genetic Counselors, for every graduate of genetic counselor training programs, there are two to three jobs available.

That's something Helix's Elissa Levin thinks about a lot. She's been watching the development of chatbots (robots that you can text or direct message with, similar to normal conversation) and wonders if they might one day play a role in helping deliver the findings of genetic tests.

"To me, part of the balance of providing something responsibly and making a safe and quality experience is making sure the information is provided in a really digestible way," she said.

But a new and better model hasn't emerged. There are some genetic testing services that let you order a genetic test through an independent physician who can help translate genetic findings remotely, including from Helix and a startup called Color Genomics.

A brave new world for genetic testing?

Some startups are beginning to experiment with new models for genetic testing. For instance, Nebula Genomics, says you can get your entire genome (your full book of genomic data, rather than simply a few letters) sequenced, own the data set, and earn digital money by sharing it.

Another approach is being pioneered by LunaDNA. Cofounded by Dawn Barry, a 12-year veteran of biotech giant Illumina, Luna is offering to pay people for their genetic information in the form of shares of LunaDNA.

Barry created Luna as one answer to the problematic genetic-testing landscape, which she said doesn't prioritize privacy or offer people control over their data.

"In many cases you're buying a product, but maybe you are the product, and those models don't feel as transparent as they should," Barry told Business Insider.

She said Luna ensures that when customers contribute their DNA data, that data is anonymized and maintained in what she called an "analytics sandbox," which protects it from hacking or leaks.

"If you want to delete your data, there's only one copy," Barry said. "It's gone. Your shares go back. You're forgotten about, so to speak."

SEE ALSO: A tiny startup wants to pay you for your DNA, and it could lead to the next wave of medical innovation

DON'T MISS: I tried a test that let me peek inside my microbiome, the 'forgotten organ' that scientists say is the future of medicine — and what I learned shocked me

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Why are Apple Pay, Starbucks’ app, and Samsung Pay so much more successful than other wallet providers?

Sat, 01/12/2019 - 12:06pm

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.

In the US, the in-store mobile wallet space is becoming increasingly crowded. Most customers have an option provided by their smartphone vendor, like Apple, Android, or Samsung Pay. But those are often supplemented by a myriad of options from other players, ranging from tech firms like PayPal, to banks and card issuers, to major retailers and restaurants.

With that proliferation of options, one would expect to see a surge in adoption. But that’s not the case — though Business Insider Intelligence projects that US in-store mobile payments volume will quintuple in the next five years, usage is consistently lagging below expectations, with estimates for 2019 falling far below what we expected just two years ago. 

As such, despite promising factors driving gains, including the normalization of NFC technology and improved incentive programs to encourage adoption and engagement, it’s important for wallet providers and groups trying to break into the space to address the problems still holding mobile wallets back. These issues include customer satisfaction with current payment methods, limited repeat purchasing, and consumer confusion stemming from fragmentation. But several wallets, like Apple Pay, Starbucks’ app, and Samsung Pay, are outperforming their peers, and by delving into why, firms can begin to develop best practices and see better results.

A new report from Business Insider Intelligence addresses how in-store mobile payments volume will grow through 2021, why that’s below past expectations, and what successful cases can teach other players in the space. It also issues actionable recommendations that various providers can take to improve their performance and better compete.

Here are some of the key takeaways:

  • US in-store mobile payments will advance steadily at a 40% compound annual growth rate (CAGR) to hit $128 billion in 2021. That’s suppressed by major headwinds, though — this is the second year running that Business Insider Intelligence has halved its projected growth rate.
  • To power ahead, US wallets should look at pockets of success. Banks, merchants, and tech providers could each benefit from implementing strategies that have worked for early leaders, including eliminating fragmentation, improving the purchase journey, and building repeat purchasing.
  • Building multiple layers of value is key to getting ahead. Adding value to the user experience and making wallets as simple and frictionless as possible are critical to encouraging adoption and keeping consumers engaged. 

In full, the report:

  • Sizes the US in-store mobile payments market and examines growth drivers.
  • Analyzes headwinds that have suppressed adoption.
  • Identifies three strategic changes providers can make to improve their results.
  • Evaluates pockets of success in the market.
  • Provides actionable insights that providers can implement to improve results.
Subscribe to an All-Access membership 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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THE IDENTITY VERIFICATION IN BANKING REPORT: How banks should use new authentication methods to boost conversions and keep their customers loyal

Sat, 01/12/2019 - 12:07am

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.

The way incumbent banks onboard and verify the identities of their customers online is inconvenient and insecure, resulting in lowered customer satisfaction and loyalty, and security breaches leading to compensation payouts and legal costs.

It’s a lose-lose situation, as consumers become disgruntled and banks lose business. The problem stems from the very strict verification standards and high noncompliance fines that banks are subject to, which have led them to prioritize stringency over user experience in verification. At the same time, this approach doesn't gain banks much, since the verification methods they use to remain compliant can actually end up compromising customers' personal data.

But banks can't afford to prioritize stringent verification at the cost of user experience anymore. Onboarding and verification standards are increasingly being set by more tech-savvy players within and outside their industry, like fintechs and e-retailers. If banks want to keep customers loyal, they have to start innovating in this area. The trick is to streamline verification for clients without compromising accuracy. If banks manage to do this, the result will be happier and more loyal customers; higher client retention and revenue; and less spending on redundant checks, compensation for breaches, and regulatory fines.

The long-term opportunity such innovation presents is even bigger. Banks are already experts in vouching for people’s identities, and because they’re held to such tight verification standards, their testimonies are universally trusted. So, if banks figure out how to successfully digitize customer identification, this could help them not only boost revenue and cut costs, but secure a place for themselves in an emerging platform economy, where online identities will be key to carrying out transactions. 

Here are some of the key takeaways from the report:

  • The strict verification standards that banks are held to have led them to create onboarding and login processes that are painful for clients. Plus, the verification methods they use to remain compliant can actually end up putting customers' personal data at risk. This leaves banks with dented customer satisfaction, as well as security breaches and legal costs.
  • Several factors are now pushing banks to attempt to remedy the situation, including a tougher regulatory environment and increasing competition from agile startups and tech giants like Google, Amazon, and Facebook, where speedy onboarding and intuitive service is a given.
  • The trick is to streamline verification for clients without compromising accuracy, something several emerging technologies promise to deliver, including biometrics, optical character recognition (OCR) technology, cryptography, secure video links, and blockchain and distributed ledger technology (DLT). 
  • The long-term opportunity such innovation presents is even bigger. Banks are already experts in vouching for people’s identities, so if they were to figure out how to successfully digitize customer identification, this could help them secure a valued place, and relevance, in a modernizing economy.

In full, the report:

  • Looks at why identity verification is so integral to banking, and why it's becoming a problem for banks.
  • Outlines the biggest drivers pushing banks to revamp their verification methods.
  • Gives an overview of the technologies, both new and established but repurposed, that are enabling banks to bring their verification methods into the digital age.
  • Discusses what next steps have to happen to bring about meaningful change in the identity verification space, and how banks can capitalize on their existing strengths to make such shifts happen.
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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SHUTDOWN STANDSTILL: The government shutdown enters a record 22nd day as Trump, Democrats continue to battle over the border wall and 800,000 workers go without pay

Sat, 01/12/2019 - 12:01am

  • The government shutdown entered day 22 at midnight Eastern Time, setting the record for the longest shutdown of the modern budgeting era.
  • The shutdown surpassed the 21-day shutdown of 1995 and 1996 as the longest ever.
  • The shutdown does not appear to be close to ending as President Donald Trump and Democrats remain dug in to their positions on the president's request for $5 billion to build a US-Mexico border wall.
  • The shutdown has also left 800,000 federal workers with no paychecks.
  • Airport security, food inspections, mortgage services, national parks, and more are being affected by the shutdown.

The partial shutdown of the federal government officially became the longest of the modern budgeting era on Saturday, as it entered day 22 with no end in sight.

By making it into the fourth week, the shutdown surpassed the 21-day funding lapse in 1995 and 1996 as the longest since the modern budgeting system was implemented in 1974. Where the new bar will end up remains to be seen as President Donald Trump and Democrats appear to be nowhere close to resolving the standoff over money for the president's long-promised wall along the US-Mexico border, despite constant discussions and posturing.

The shutdown has forced 800,000 federal workers and millions of federal contract employees to go without pay for three weeks, and disrupted government services across the country.

Well, how did we get here?

While the fight probably started as soon as Trump declared that he would build a wall along the US-Mexico border if elected in 2016, the shutdown officially started on December 22 — after Trump refused to support a bill that extended funding for some government agencies through February 8.

The Senate had passed the clean funding bill just days before federal funding expired, and Trump was poised to sign off on the measure before pushback from conservative TV pundits, such as Ann Coulter, swayed the president. Trump suddenly declared that the clean funding bill was not agreeable, leading to a standoff with Democrats.

The two sides barely talked over the holiday break, and talks in the new year have been acrimonious at best. In fact, Trump has even gone so far as to suggest that he could try and declare a national emergency in order to get funds for the wall, bypassing Congress altogether.

The most recent round of negotiations ended when Trump stormed out of the Situation Room after House Speaker Nancy Pelosi flatly refused to fund the president's wall, even if the government was reopened. According to Senate Minority Leader Chuck Schumer, Trump slammed the table on his way out, but the White House disputed the accusation.

Trump's tweet after the encounter on Wednesday probably serves as a neat summation of the state of affairs.

"Just left a meeting with Chuck and Nancy, a total waste of time," Trump said. "I asked what is going to happen in 30 days if I quickly open things up, are you going to approve Border Security which includes a Wall or Steel Barrier? Nancy said, NO. I said bye-bye, nothing else works!"

Once in a lifetime

The shutdown marks the 21st time since the budget process was overhauled in 1974 that the federal government has experienced a funding lapse.

The previous shutdowns have averaged eight days, but the current shutdown will push that average up to at least 8 1/2 days. Shutdowns have also been getting longer recently. Excluding the nine-hour shutdown in February 2018 caused by Sen. Rand Paul, shutdowns since 1990 have averaged 11 days.

The current government shutdown is also only the 10th shutdown to have workers on furlough, with the practice becoming much more common in recent years. Every shutdown since 1990, save the Rand Paul lapse, has forced workers to go on furlough.

Additionally, Trump is the only president to place federal employees on furlough while one party controlled both chambers of Congress — which Republicans did during both the January 2018 shutdown and the current one.

The current shutdown is also the only funding lapse during which a chamber of Congress changed party control. Democrats took over the House on January 3.

The latest shutdown also marks a total of three funding lapses during Trump's presidency, giving him the third most of any president, behind former President Jimmy Carter's five and former President Ronald Reagan's eight. Trump also ranks fourth in total shutdown days for modern presidents, behind Carter's 67 days and the 28-day mark shared by former President Bill Clinton and Reagan.

And 2018 became just the second year of the modern era to have three funding lapses, tying 1977's record.

Letting the days go by

As the shutdown drags on, the effects from the government closures are becoming more and more noticeable.

The shutdown does not affect all agencies because Congress passed bills to fund some departments, such as the departments of Defense and Energy in September, but there are many departments that are closed, including the departments of Agriculture, Commerce, Justice, Homeland Security, the Interior, State, Transportation, and the Housing and Urban Development.

Some 420,000 workers at those agencies have been deemed "essential" and therefore are continuing to work without pay during the closure. The other 380,000 have been furloughed, or barred from coming into work and left without pay.

The essential workers will immediately receive back pay when the shutdown ends, and Congress passed a bill on Friday that would give the furloughed workers back pay once the government reopens. Trump still needs to sign the bill.

In addition to the lost paychecks, there is a slew of other problems caused by the shutdown, including:

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$445 billion flowed into startups in the last five years. Now it's threatening to upend one of Silicon Valley's most celebrated customs (SPOT, GOOGL)

Fri, 01/11/2019 - 8:16pm

  • The traditional initial public offering process may be in the process of being disrupted.
  • Spotify went public last year using a different process and may soon be followed by enterprise software company Slack.
  • Startups have good reasons to spurn regular IPOs — they're costly and time-consuming.
  • Thanks to the massive amounts of money that have flowed into Silicon Valley in recent years, many companies are likely well positioned to go public a different way.

The avalanche of money that's piled into Silicon Valley lately may be starting to disrupt more than just the taxi business and commercial real estate — it might upend one of the most celebrated and time-honored traditions of tech startups: the IPO.

The Wall Street Journal reported Friday that Slack, the popular corporate messaging provider, plans to hit the public markets later this year through a direct listing. That's the unusual process that subscription music service Spotify used last year to go public. Should Slack's listing prove as successful as Spotify's, expect the floodgates to open for more of these listings.

Read this: Slack is reportedly following Spotify in going public through a direct listing. Here's how a direct listing works.

In a direct listing, a company's private shareholders sell some of their stakes more or less to investors at large on the open market. That differs from a traditional initial public offering, where investment banks typically line up institutional investors to purchase shares at a set price from the company and its early shareholders.

A big reason why companies hold IPOs is to raise additional funds. In a direct offering, the point is to allow insiders and early backers to freely sell some or all of their stakes; the company typically doesn't raise any funds from the listing event.

Slack and Spotify didn't need money from the public markets

The reason a company such as Slack and Spotify can go public and not worry about raising any funds in the process is that their coffers are already overflowing with funds. Before it went public last year, Spotify, for example, had raised $2.1 billion, according to PitchBook. It still had about $1.5 billion of that left and, because its operations were already generating cash, it was adding to that stash.

Slack is in a similar position. It's raised $1.2 billion to date, according to PitchBook. Even after CEO Stewart Butterfield said it had more than enough cash, he stuffed the company's treasury with hundreds of millions of more dollars. In fact, Slack had so much money in the bank that it started using some of it to invest in other startups.

Those companies certainly aren't alone in having a healthy surplus of funds. Over the last five years, some $445 billion was invested in venture-backed deals, including a whopping $130.9 billion last year alone, a new record, PitchBook and the National Venture Capital Association said in a new report this week. More than a third of that total is going into software companies and large amounts are also flowing into other parts of the tech industry.

And more money could be flowing in. Traditional VC firms — which represent just one of several sources of capital for startups — raised $55.5 billion last year, a new high, according to PitchBook and the NVCA. SoftBank's enormous $100 billion VisionFund is helping to push traditional VC's to create larger and larger funds; last year 11 VC funds topped $1 billion in funding, another new high.

With so much money flowing into startups in the private markets, many companies don't feel much need to tap the public markets for cash. One result has been that on the whole, startups are waiting longer to go public.

For the last five years, the median age of technology firms that went public was at least 10 years old, and it hit 12 years old last year, according to data from Jay Ritter, a finance professor at the University of Florida who closely tracks the public offerings market. By contrast, before the Great Recession, the median age never hit 10 years, and during the dot-com boom, it got down to as low as 4 years old.

IPOs are expensive and time-consuming

But the next place the effects of all that money may be felt is in how companies go public when they decide to do so.

Startup have good reasons for rejecting the traditional IPO model. It's expensive, for starters. The median gross spread — essentially the fee investment banks charge for taking companies public — has been stuck at 7% for the last 30 years, according to Ritter's data. What that means is that if a company raises $100 million in an IPO, it only sees $93 million of that; the other $7 million goes to its investment banks rather than to its bank account.

By contrast, when Spotify went public, its insiders and early shareholders registered to sell as much as $9.2 billion worth of stock. The company paid about $45.7 million in fees, including about $35 million to its bankers, according to documents it filed with the Securities and Exchange Commission. That works out to less than 0.5% of the potential proceeds, or a huge bargain.

And that's not the only savings. Investment bankers typically price an IPO significantly below what the market will actually pay for them, thus guaranteeing that the stock will get a press-worthy "pop" when it debuts. But the difference between the actual market price and the IPO price represents an opportunity cost to the company and its early shareholders. Instead of them gaining from what the market will actually pay for the company's shares, that gain goes to the institutional investors who buy at the IPO price and turn around and sell stock to other investors when the stock begins trading.

In a direct listing, by contrast, the early shareholders receive more or less the full market price for the shares they sell.

The regular IPO process can also be a big time suck for corporate managers. Typically, executives have to tour around the country, meeting with and giving formal presentations to potential investors, hoping to sell them on the offering.

But a direct listing can be much more informal and take far less time. Instead of going on a roadshow Spotify, for example, simply streamed a live webcast of its presentation to potential investors all at once.

Direct listings might succeed where Dutch auctions didn't

Companies have tried to buck the IPO system before. In the late 1990s and early 2000s, a handful of companies — most notably Google — went public through a Dutch auction process pioneered by investment bank WR Hambrecht. That process attempted to maximize the amount that companies could raise in an IPO by allowing a wide range of investors to place blind binds that stated how many shares they wanted to buy at a particular price. The company would go public at the highest price at which it could sell all the shares it placed to sell.

That process never gained much traction. The other investment banks and institutional investors — both of which lost out in the process as compared to a traditional IPO — never really supported it. And companies eager to raise funds in an IPO were generally willing to go along with the traditional process.

The direct listing process represents one of the first big efforts to reform the system since the Dutch auction effort. Spotify's IPO was novel. If Slack follows in Spotify's footsteps and its debut goes similarly well, it will likely embolden other companies to give the process a whirl.

And because of all the funding that startups have on their hands, many could feel freer this time around to spur the traditional process. If the company itself doesn't really need any cash and early shareholders can get a better price in a direct offering, why put up with the headaches and expense of an IPO?

To be sure, there are still going to be companies that go the traditional route, even if direct offerings catch on. Several of the biggest unicorns, such as Uber, Lyft, and WeWork, are still hemorrhaging money and almost certainly won't pass up the opportunity for an infusion of new cash from the public markets. And many smaller companies that aren't as well known as Spotify or Slack may feel they need the investment banks to get their names out and market them to investors.

But for startups looking to showcase another facet of an innovative spirit, the best way to buck the trend could be to go direct.

SEE ALSO: Spotify just proved that the streaming-music business is like a black hole — and investors may not see it until it's too late

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NOW WATCH: How Apple went from a $1 trillion company to losing over 20% of its share price in 3 months

How and why the payments industry will experience massive growth over the next five years

Fri, 01/11/2019 - 8:04pm
  • The payments ecosystem is undergoing a period of digital transformation, which will spur tremendous growth in money moved around the globe in the next five years.
  • Consumers and businesses will make 841 billion noncash transactions worldwide in 2023, up from 577 billion in 2018.
  • The next five years will mark a pivotal transformation in how companies and consumers handle payments.

The impact of payments’ digital transformation is rippling around the world, in both advanced economies and developing countries.

Across major global regions, the total volume of e-commerce transactions is expected to rise 91% over the next five years to hit $5.7 trillion by 2023.

With such impending immense growth, it’s crucial for any business that even touches the payments industry to understand what’s ahead.

Take, for example, noncash transactions, which include debit card, credit card, direct debit, and credit transfer transactions that are conducted either online or offline. Consumers and businesses will make 841 billion noncash transactions globally in 2023, a 46% surge from 577 billion in 2018. The rise in global card and terminal penetration, coupled with increasing digital payments volume, will will be the key drivers in this growth.

To successfully navigate this changing landscape, individuals and organizations must understand the full extent to which digital transformation will affect the payments industry, the key drivers of this growth, and how it all relates to the work they do every day.

Business Insider Intelligence, Business Insider’s premium research service, has forecasted the future of the payments ecosystem in The Payments Forecast Book 2018 — and the next five years will be critical for the following four areas:

  • Global Payments: Asia, North America, and Europe will be the three main growth regions in the next five years, and will make up 70% of all noncash transaction growth by 2023.
  • US Payments: In the US, P2P and retail payments combined will still be less than a quarter of the size of the B2B payments market by 2023 ($6.3 trillion vs. $27.3 trillion).
  • US E-Commerce: Total e-commerce spending in the U.S. will surpass $1 trillion by 2023, and the average consumer will spend $2,959 online.
  • US Emerging Payments: By 2023, 67% of US adults will have used BOPIS (Buy Online Pickup In Store) at least once in the last 12 months.

Want to Learn More?

People, companies, and organizations all over the world are racing to adopt the latest payments solutions and prevent growing pains amidst a technological transformation. The Payments Forecast Book 2018 from Business Insider Intelligence is a detailed four-part slide deck outlining the most important trends impacting the payments ecosystem around the world — and the key drivers propelling each segment forward.

Representing thousands of hours of exhaustive research, our multipart forecast books are considered must-reads by thousands of highly successful business professionals. These informative slide decks are packed with charts and statistics outlining the most influential trends on the leading edge of your industry. Keep them for reference or drop the most valuable data into your own presentations to share with your teams.

Whether you’re newly interested in a topic or you already consider yourself a subject matter expert, The Payments Forecast Book 2018 can provide you with the actionable insights you need to make better decisions.

Get The Payments Forecast Book

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SpaceX is reportedly laying off about 10% of its workforce

Fri, 01/11/2019 - 8:01pm

SpaceX, the rocket company owned by Elon Musk, will lay off about 10% of its employees, the Los Angeles Times reported on Friday, citing an unnamed source.

SpaceX has more than 6,000 employees and has been working rapidly to build and start testing a prototype of its brand-new rocket system.

Here's the statement SpaceX gave to the LA Times:

"To continue delivering for our customers and to succeed in developing interplanetary spacecraft and a global space-based Internet, SpaceX must become a leaner company. Either of these developments, even when attempted separately, have bankrupted other organizations. This means we must part ways with some talented and hardworking members of our team."

According to the LA Times, SpaceX is offering the affected employees eight weeks' severance pay and other career resources.

The news was sent to SpaceX employees in an email from company president and chief operating officer Gwynne Shotwell, the LA Times said.

The layoffs come less than a month after SpaceX announced plans to raise another $500 million in investment funding. The company had previously raised $507 million in April 2018.

That money is likely being used to further two ambitious projects. The company is trying to develop, build, and launch Starlink, an effort to cover Earth in ultra-fast broadband internet. It's also building the prototype of its Big Falcon Rocket system (BFR), which is designed to bring people to Mars.

SpaceX also hopes to use BFR to send a Japanese billionaire and a crew of artists around the moon and create the world's fastest transportation system.

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SoftBank spent $900 million in investment banking fees in 2018. The only entity it lagged — the People's Republic of China.

Fri, 01/11/2019 - 5:38pm

  • SoftBank spent $900 million in investment banking fees in 2018, more than any company in at least a decade.
  • The People's Republic of China is the only entity to outspend the Japanese tech conglomerate.
  • SoftBank has primarily paid fees to investment bankers to raise capital, but it also executed many high profile investments in companies like WeWork and Cruise Automation.

If you didn't have SoftBank as an investment banking client in 2018, you missed out on one of the most massive and lucrative fee opportunities in modern history.

The Japanese tech conglomerate run by billionaire Masayoshi Son spent a staggering $894 million on investment banking fees in 2018, according to financial data company Refinitiv, securing financial advice on deals and procuring an array of bonds, loans, and equity investments. 

That's not just the highest total for any company last year, but the highest in at least the past decade. 

The next-highest fee payer in 2018, German pharmaceutical giant Bayer, is leagues behind at $384 million — 57% less than SoftBank.

No corporation has come close to SoftBank's 2018 tally in recent years. The last time a company spent over $800 million in a year on investment banking fees was in 2009, according to Refinitiv, when Citigroup spent $813 million as it was restructuring its business following the financial crisis

To find a real competitor for Son's appetite for investment banking in recent years, you need to include government nations. The People's Republic of China has been the top spender in the world on such fees each of the past four years, according to Refinitiv's data. China spent nearly $1.3 billion on fees in 2018, down from $1.5 billion in 2017.

What's Son getting for that $900 million? Most of those fees stem from raising money — paying banks to underwrite debt and equity financing.

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Mergers and acquisitions comprises a much smaller piece of the pie, according to Refinitiv, but SoftBank was nonetheless exceptionally busy deploying the nearly $100 billion in its Vision Fund to make investments and acquisitions.

SoftBank's 2018 investments include a $2 billion infusion in WeWork, $3 billion for Alibaba's food delivery service, $2.3 billion for GM's self-driving unit Cruise Automation, and $2 billion for Coupang, a South Korean ecommerce company. 

The top beneficiaries of SoftBank's investment binge last year are Japanese banks Mizuho, Sumitomo Mitsui Financial Group, and Nomura, which together earned $319 million from Softbank — 38% of its investment banking spend, according to Refinitiv.

Morgan Stanley earned $83 million, a roughly 9% share of the total. 

Goldman Sachs and Deutsche Bank are also known to be top bankers to the firm. Each were lead underwriters on a $9 billion loan to the Vision Fund in October, and they're advising on the public offering for SoftBank's wireless unit as well, according to Bloomberg

Bank of America Merrill Lynch is also a top lender to SoftBank, though it reportedly balked at participating in the $9 billion financing last fall. 

Goldman formed a special group in 2017 specifically to earn more investment banking mindshare with giant, complicated clients like SoftBank — a well-timed and justified move in light of SoftBank's unprecedented spending this past year. 

But Goldman has lost some of its key bankers to the Japanese client of late. Michael Ronen left Goldman to work for SoftBank in 2017, and last week Simon Holden, an 18-year Goldman vet with deep ties to Softbank, retired. 

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Netflix investors are 'as blind as Bird Box,' Citron Research says (NFLX)

Fri, 01/11/2019 - 4:13pm

Netflix investors have too much confidence in the stock and lack adequate judgment, the short-seller Andrew Left's Citron Research said Friday. 

"NFLX investors at this level as blind as Bird Box," Citron Research wrote in a tweet. The firm said shares would fall back to the $300 level — more than 10% below Netflix's Friday closing price. Bird Box is a Netflix movie that stars Sandra Bullock as a mother who's trying to protect her children after a supernatural force that kills you if you see it wipes out most of humanity.

Shares of the video-streaming giant have been on a roller-coaster ride in recent months. 

On October 16, the company posted strong third-quarter earnings and subscriber growth, but shares tanked more than 36% over the following two months as the broader tech sector came under pressure. At the time, Bernstein analyst Todd Juenger linked the rising interest-rate environment, which tends to penalize companies, like Netflix, that are short of cash. 

After bottoming at $231.23 on December 24, Netflix shares have rebounded by more than 40%. The gains have come after the Federal Reserve said its future rate hikes were not on a preset course.

The stock's recent rally is too much, in the eyes of Left. Netflix's market capitalization has soared by $45 billion over the past 12 days, the equivalent of 12 DreamWorks Animations, 12 Lionsgates, 10 Rokus, or 5 Hulus, Citron said. 

But Wall Street is bullish on the tech giant.

"After six months of stock underperformance & key debates emerging about competition, margins & [free cash flow], we think these debates are better understood by investors and reflected in the current stock price," UBS analysts said on Thursday. The bank has a "neutral" rating and $400 price target.

Netflix was up 56% in the past twelve months.

Travis Clark contributed to this story.

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Ivanka Trump is reportedly under consideration to lead The World Bank

Fri, 01/11/2019 - 3:45pm

  • Ivanka Trump is one of the names being considered to replace The World Bank's outgoing president, Jim Yong Kim, the Financial Times reported Friday. 
  • Before joining the White House, she worked as a vice president of acquisitions at the Trump Organization.
  • She also directed her own fashion line, the Ivanka Trump brand, which was shuttered last summer. 
  • President Donald Trump also floated Ivanka as a replacement for the outgoing US ambassador to the UN Nikki Haley, but ended up nominating State Department spokeswoman Heather Nauert after concerns of nepotism were raised.

President Donald Trump's daughter, Ivanka Trump, who works as a White House adviser, is one of the names being considered as a replacement for The World Bank's outgoing president, Jim Yong Kim, the Financial Times reported Friday.

The DC-based World Bank, founded after World War II to finance economic-development projects in emerging economies, has traditionally been led by an American. Kim's sudden departure from the bank came as a surprise to employees and leaves the bank's future uncertain. 

The Trump administration, which has been wary of and even hostile toward Western-led international institutions like the World Bank, will now be tasked with submitting a recommendation to the bank's board. 

Other possible American nominees to lead the bank include undersecretary of the Treasury for International Affairs David Malpass, US Agency for International Development director Mark Green, and former UN ambassador Nikki Haley, the Financial Times said. 

Read more: From rich kid to first daughter: The life of Ivanka Trump

Unlike some of the other proposed candidates, Ivanka does not have a background in international trade economics, but she has been a businesswoman.

Before joining the White House, she worked as a vice president for acquisitions at the Trump Organization. She also directed her own fashion line, the Ivanka Trump brand, which was shuttered last summer. 

President Trump also floated Ivanka as replacement for Haley's position, but ended up nominating State Department spokeswoman Heather Nauert after concerns of nepotism were raised. 

"So nice, everyone wants Ivanka Trump to be the new United Nations Ambassador. She would be incredible, but I can already hear the chants of Nepotism! We have great people that want the job," Trump tweeted at the time. 

A spokeswoman for the Treasury Department told the Financial Times that the department been sent "a significant number of recommendations for good candidates" and was "beginning the internal review process" to choose a candidate to put forth to The World Bank's board. 

SEE ALSO: How Ivanka Trump and Jared Kushner built their $1.1 billion fortune and how they spend it

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Deutsche Bank is moving jobs out of the Sunshine State to India to cut costs

Fri, 01/11/2019 - 3:12pm

  • Deutsche Bank AG is offshoring around 60 accounting jobs out of Florida to India, Bloomberg reported on Friday, citing sources.
  • The move comes as part of a larger shift by the struggling German lender to move back-office staff members to lower-cost countries.

Deutsche Bank AG, which several years ago moved staff out of New York to cheaper US cities, is now shifting some of those those jobs to India.

Germany's largest lender is relocating around 60 accounting positions to Mumbai from Jacksonville, Florida, in a bid to reduce expenses, Bloomberg reported on Friday, citing anonymous sources. This move is part of a larger shift in which the bank intends to outsource more jobs from the US to India later this year. 

Big banks broadly have been moving workers from high-cost locales like New York to places like Jacksonville and Salt Lake City for years. For instance, Goldman Sachs is moving dozens of compliance jobs out of New York City to cheaper places like Salt Lake City, Business Insider previously reported

But Deutsche Bank is taking this a step further, by moving some back-office staff out of the US entirely. 

2018 was rough for Deutsche Bank.

See also: Deutsche Bank has hired a new managing director in credit trading, one of the bank's top businesses

The bank has been dogged by high levels of executive turnover and legal fines and a few months ago, prosecutors raided the lender's offices in Frankfurt. The raids were said to have included the offices of its board members, suggesting that the investigation linked to the bank's role in the "Panama Papers" money-laundering scandal is spreading. The news caused Deutsche Bank shares to fall to a record low. 

Anticipating a year of unease ahead, the bank's executives have pledged to keep a lid on costs, Reuters reported. The lender has set the costs to 22 billion euros in 2019. 

Deutsche Bank is also set to relocate its North American headquarters to NYC's Midtown from Wall Street after a 16-month search.

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How to file your tax return for free online this year

Fri, 01/11/2019 - 2:33pm

  • Tax Day 2019 is Monday, April 15.
  • The IRS has opened up its free tax filing portal, which lists companies where taxpayers who earned less than $66,000 in 2018 can file their federal return for free.
  • The IRS will begin accepting tax returns on January 28 and provide refunds to taxpayers, despite the partial government shutdown.
  • You can file your taxes once you receive your W-2 form from your employer, which must be filed and postmarked on or before January 31.

Despite one of the longest-running government shutdowns in history, the 2019 tax season will proceed as normal.

On Friday, the IRS released an updated version of its IRS Free File Lookup tool to help taxpayers navigate free tax filing options. The IRS will begin accepting tax returns on Monday, January 28. 

If your income was less than $66,000 in 2018, you can file your federal tax return for free; the IRS lists 12 different tax preparers, including H&R Block and TurboTax. Some companies also offer free tax filing for state returns, while others charge a fee. 

Read more: The IRS will accept tax returns even if the partial government shutdown continues, and you can file as early as January 28

You can still file for free if you make more than $66,000, but to do so you'll need to use the Free File Fillable Forms, which will be available online January 28. The IRS recommends using those forms only if you have experience preparing tax returns on your own.

Most tax-related documents must be submitted by your employer or other institution by January 31, and the statements must be postmarked by that date as well. That means you should have everything you need by early February.

Once you're ready to file your taxes, the IRS recommends electronically filing and requesting direct deposit for your refund. You'll typically get your tax refund within three weeks, rather than the standard six weeks, and it's safer than getting a check in the mail.

Experts say you should file ASAP, despite the government shutdown

Despite earlier reports that refunds would not be paid out in a timely manner due to the government shutdown, the IRS said in a press release this week that processes would continue as normal.

"We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period," IRS Commissioner Chuck Retti said.

Experts say taxpayers shouldn't wait for the dust to settle should the government shutdown continue — file ASAP.

"File early as you normally would and at least secure a place in line for when refunds will be issued. Don't wait until things get back to normal," Ed Slott, a certified public accountant who founded, told Business Insider.

Mike Savage, a CPA and the CEO of 1-800Accountant, had similar advice.

"It is still the best practice to file as soon as they can, but if they plan on receiving the refund at a specific time for budgeting purposes, they will need to plan further ahead in case the refund does not come through in time," Savage told Business Insider.

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Federal workers affected by the government shutdown have more than $400 million in mortgage and rent payments due this month, and it could cause chaos for the US housing market

Fri, 01/11/2019 - 2:21pm

  • The ongoing federal government shutdown could start affecting the US housing market soon.
  • Federal workers not receiving pay owe $249 million in mortgage payments and $189 million in rent payments this month, according to Zillow.
  • Some federal housing programs, such as Federal Housing Administration loans, Veterans Affairs loans, and US Department of Agriculture loans, are experiencing delays.
  • Additionally, the Department of Housing and Urban Development cannot pay rental assistance to landlords who provide roughly 100,000 low-income Americans with affordable housing.

The ongoing government shutdown looks like it may cause a mess for the US housing market.

As the shutdown enters a record-tying 21st day, a number of worries are piling up, including looming mortgage payments for federal workers and missing rent assistance from the Department of Housing and Urban Development (HUD).

The problems have left workers worried about making ends meet, potential buyers frozen out of loans, and affordable-housing experts concerned about evictions.

Missing paychecks mean missed payments

The most direct effect of the government shutdown on the housing market is the increasing possibility that the 800,000 federal workers who are not receiving paychecks during the shutdown are going to face a mortgage or rent bill without any income to pay it.

According to online real-estate-database firm Zillow, federal workers who are not receiving paychecks have $249 million in mortgage payments and $189 million in rent payments due this month.

Read more: From airport lines to food inspections, here are all the ways the government shutdown is impacting the lives of average Americans

While the Office of Personnel Management released guidance for federal employees who may experience problems, many employees worried that the suggestions — which include writing letters to landlords asking for a delay — are woefully inadequate.

"No payments means no gas for our cars, no money for our prescriptions, our groceries, our rents and our mortgages," Steve Ching, an electrician who contracts for NASA, told the Washington Post. "We're all wondering how long our families will be able to hold out."

Services for homebuyers are experiencing some problems

In addition to the looming payments for federal workers, the federal government has also stopped activities such as loan programs and income checks that people need to buy homes.

While Federal Housing Administration (FHA) and Veterans Affairs (VA) loans are going out during the shutdown, new applicants may experience delays as FHA and VA employees who work on the underwriting process are on furlough, which means they aren't working.

Additionally, the US Department of Agriculture (USDA), which provides loans for people buying homes in rural areas, is not processing those requests.

The IRS is also working through a backlog of income verifications that are needed for some borrowers because the process was paused when the shutdown went into effect, so some buyers may experience delays.

Read more: The government shutdown is in a record-tying 21st day and the fight between Trump and Democrats is only getting uglier. Here's everything you missed.

These pauses are causing problems for some people trying to buy a new home, according to a survey by the National Association of Realtors released on Tuesday.

Three-quarters of realtors surveyed reported no clients having issues because of the shutdown. But 22% said a client or potential client was having trouble, with reasons for disruptions including:

  • 25% said "the buyer decided not to buy due to general economic uncertainty, though they were not a federal government employee"
  • 17% had a client who was unable to get a USDA rural home loan processed because of the shutdown
  • 13% had a delay because of IRS income verification problems
  • 9% had a delay because of the FHA pausing loans
  • 9% said they had a client who decided not to buy because they were a federal employee
  • 6% had a seller who could not sell because their move was impacted by the shutdown
  • 3% had a client who was rejected for a loan because they were on furlough
  • 3% had a buyer who decided not to buy because they were on furlough
Affordable housing problems

The housing problems are also threatening to hit some of the most vulnerable Americans, with HUD experiencing a funding shortfall.

Contracts with 1,150 landlords who offer subsidized units for low-income Americans have expired during the government shutdown and another 500 contracts will expire in January, according to the Washington Post. This means those landlords will not receive the federal assistance to offset the lower rent costs, and as many as 100,000 low-income tenants could face eviction.

HUD has sent letters to those landlords who are no longer under contract asking for extensions and a HUD spokesperson told the Post that no one has ever been evicted because of a shutdown.

But the funding lapse is poised to set the record for longest shutdown in the modern budgeting era on Saturday — and the unprecedented length could mean unprecedented effects.

SEE ALSO: Here's what happens to food stamps and other federal food programs during the government shutdown

SEE ALSO: The housing market is cooling off — and uncertainty isn't helping

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