2020 presidential race could weigh on FANG stocks

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The 2020 presidential race could weigh on ‘FANG’ stocks as Democrats attack big tech

As 2020 presidential campaigns accelerate, the dominance of Silicon Valley technology companies is likely to remain a key issue for Democratic candidates, Bank of America analyst Justin Post said in a note to investors on Monday.

“Campaign focus on FANG regulation [is] likely here to stay,” Post said.

Sen. Elizabeth Warren last week unveiled a plan to break up the biggest tech companies if she is elected president. The Massachusetts Democrat is especially focused on four of Wall Street’s beloved “FAANG” stocks: Facebook, Amazon, Apple and Google-parent Alphabet. The group also includes Netflix.

“The giant tech companies right now are eating up little, tiny businesses, start-ups – and competing unfairly,” Warren told CBS on Sunday.

“We’ve got to break these guys apart,” Warren added. “It’s like in baseball: You can be the umpire or you can own one of the teams, but you don’t get to be the umpire and own the teams.”

Post analyzed the “breakup scenarios” for Alphabet, Amazon and Facebook, which Warren referred to repeatedly in her criticism. While forced spinoffs may largely help the former two tech giants, Post thinks Facebook is the most at risk to seriously losing shareholder value.

Bank of America sees “a partial breakup of Alphabet (including spin of YouTube or Waymo)” as possibly “value enhancing.” With the broad reach of each of Alphabet’s business units, as separate entities, each brand “has enough scale to capture vast advertiser interest,” Post added.

Similarly for Amazon, Post said a breakup “would be somewhat neutral for the stock,” as investors in Jeff Bezos’ empire “are generally comfortable” with how much Amazon’s businesses would be worth on their own.

Breaking up Facebook “could be most concerning for investors,” Post said. He found that if Facebook’s Instagram and WhatsApp platforms were separated, they “would likely compete directly with Facebook for usage and advertisers, raising concerns on increased competition.”

That overlap in Facebook’s businesses is a key reason Warren believes they should be separated.

“They bought the competition and now they’re sucking the data out of the competition,” Warren said.

While Bank of America did not include Apple in its breakup analysis, Warren confirmed to CNBC that she intends to break up the iPhone maker. In her interview with CBS, Warren argued that she is not against markets, which she said “produce a lot of good,” but instead thinks “markets have to have rules.”

“It is not capitalism to have one giant that comes in and dominates, a monopolist that dominates a market,” Warren said.

Warren said recent talks with technology venture capital firms revealed that the places where Amazon, Facebook and Google compete are known as “kill zones” to entrepreneurs.

“They call it the kill zone because they don’t want to fund businesses in that space because they know Amazon will eat them up, Facebook will eat them up, Google will eat them up,” Warren said.

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Y Combinator-backed Trella brings transparency to Egypts trucking and shipping industry

Y Combinator has become one of the key ways that startups from emerging markets get the attention of American investors. And arguably no clutch of companies has benefitted more from Y Combinator’s attention than startups from emerging markets tackling the the logistics market.

On the heels of the success the accelerator had seen with Flexport, which is now valued at over $1 billion — and the investment in the billion-dollar Latin American on-demand delivery company, Rappi, several startups from the Northern and Southern Africa, Latin America, and Southeast Asia have gone through the program to get in front of Silicon Valley’s venture capital firms. These are companies like Kobo360, NowPorts, and, most recently, Trella.

The Egyptian company founded by Omar Hagrass, Mohammed el Garem, and Pierre Saad already has 20 shippers using its service and is monitoring and managing the shipment of 1,500 loads per month.

“The best way we would like to think of ourselves is that we would like to bring more transparency to the industry,” says Hagrass.

Like other logistics management services, Trella is trying to consolidate a fragmented industry around its app that provides price transparency and increases efficiency by giving carriers and shippers better price transparency and a way to see how cargo is moving around the country.

If the model sounds similar to what Kobo360 and Lori Systems are trying to do in Nigeria and Kenya, respectively, it’s because Hagrass knows the founders of both companies.

Technology ecosystems in these emerging markets are increasingly connected. For instance, Hagrass worked with Kobo360 founder Obi Ozor at Uber before launching Trella. And through Trella’s existing investors (the company has raised $600,000 in financing from Algebra Ventures) Hagrass was introduced to Josh Sandler the chief executive of Lori Systems.

The three executives often compare notes on their startups and the logistics industry in Northern and Southern Africa, Hagrass says.

While each company has unique challenges, they’re all trying to solve an incredibly difficult problem and one that has huge implications for the broader economies of the countries in which they operate.

For Hagrass, who participated in the Tahrir Square protests, launching Trella was a way to provide help directly to everyday Egyptians without having to worry about the government.

“It’s three times more expensive to transport goods in Egypt than in the U.S.,” says Hagrass. “Through this platform I can do something good for the country.”

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