personal_noteS – Page 26

Too Low The Value For Bristol Shareholders

The $74 billion merger between Bristol and Celgene was an uncertain one, opposed by Wellington (more than 8% of BMY) & Starboard (recently added position of less than 0.5% of BMY).

The merger in assets actually makes sense to me and should make sense to many investors. But the question of BMY-only shareholders, who don’t own much CELG stocks, is that the benefits are probably captured unevenly by Celgene.

Suppose the base case for Celgene stock price without acquisition is $75 and the merger price is $50 cash + 1 BMY share ($52 value) + $9 option ($3 value) -> $105 per share – when it was traded at $90/share, the market suggested a probability 50% of a successful merger. [75*(1-p) + 105*p = 90]

When CELG was traded at $84, the market suggested a success rate of 30%. [75*(1-p) + 105*p = 84]

(Yes, the market just take simple numbers… )

Wellington/Starboard might just want to add more negotiation power to get some other benefits (special board treatment e.g.) or to load up some CELG…

BMY alone probably won’t perform very well, they should understand that.

China’s Greater Bay Area vs. San Francisco Bay Area – Transit

SF Bay Area’s rail transit

SF Bay Area BART (one of the major rail transits above) service’s map, including planned projects

SF Bay Area airports map (3 major airports: SFO, SJC, OAK)

China’s Greater Bay Area newly-built bridge

Hong Kong-Zhuhai-Macau bridge is adding Hong Kong’s direct conenction with Zhuhai. To some extent, it is reducing the unparalleled weight of Hong Kong-Shenzhen bond.

China’s Greater Bay Area transit map

China’s Greater Bay Area airports map

Shenzhen and Hong Kong’s airports will be the dual core. Macau’s airport will gain more importance (towards tourists). Guangzhou’s airport will probably share more responsibility as the connecting point for all other cities China (the connecting hub was Hong Kong).

JPM Coin…

So JP Morgan has created its coin… JPM Coin

Three early applications:

Cross-border payments. The cryptocurrency will enable Chase to settle international payments between clients in real-time, and at any time of day (which does not happen today).
Securities transactions. Rather than relying on wires to buy a debt issuance–which would create a time gap between when a transaction settles and when investors get paid–institutional investors can use the token to generate instant settlements.
Transaction consolidation. Clients of J.P Morgan’s treasury services business will be able to replace the dollars they hold in subsidiaries across the world, enabling them to move money to subsidiaries around the world with greater fluidity.

“The JPM Coin will be issued on Quorum Blockchain and subsequently extended to other platforms. JPM Coin will be operable on all standard Blockchain networks.” — JPM

Here is what others are saying/reporting…

“In trials set to start in a few months, a tiny fraction of that will happen over something called “JPM Coin,” the digital token created by engineers at the New York-based bank to instantly settle payments between clients.” — CNBC

“For years, Chase–by itself and with the other big banks–has invested in reducing its reliance on legacy payments networks. Coin, like previous endeavors such as clearXchange, appears to be another example of that strategy to directly control the manner and method by which payments activities flow. If successful, Coin and the Chase Quorum blockchain could find many other uses.” — Charles Potts, Managing Director, First Performance

“It’s a competitive approach by Jamie Dimon to compete directly with Western Union in the $600 billion remittance market where Chase holds the #2 spot and Bank of America is on their heels. Ripple has done all the hard work by paving the way for a blockchain coin network. Our US payment systems are proprietary and not interoperable–the only way to seriously compete is a syndicate like Early Warning with Zelle and The Clearinghouse.” — Travis Dulaney, CEO, PayFi

“It’s an ecosystem play pure and simple. It’s about reducing costs and securing market share.” — Bradley Leimer, Co-Founder, Unconventional Ventures

“It really isn’t an ‘end run’–it’s more like creating a whole new playing field. It’s an acceleration of the continuing erosion of money fiefdoms. Due to margin pressures, money movement will eventually become a free utility. What the JPM Coin starts to enable is the elimination of the payment rails–which is really just a connection of ledgers–because with blockchain, there’s just one ledger. Once you have that shared ledger, the applications go beyond institutional payments to any payment type like remittances.” — James Wester, Research Director, Worldwide Blockchain Strategies, IDC

“The bank is also running a blockchain payments trial launched in conjunction with Australia’s ANZ and the Royal Bank of Canada. As reported, the three banks set up the project in October 2017, aiming to slash both the time and costs required for interbank payments using traditional methods. Called the Interbank Information Network (IIN), the platform is also built on Quorum – which itself may eventually be spun off into its own enterprise.” — CoinDesk

A data/IT system named with “coin”

Think about Gold and US Dollar in the history – Congress acted on Hamilton’s recommendations in the Coinage Act of 1792, which established the dollar as the basic unit of account for the United States; 1900, with the passage of the Gold Standard Act, US government guaranteed the dollar as convertible to gold

Semiconductor Comparables

Apparel Comparables

Fast Food Comparables

with Yahoo Finance and Google Sheet…

And fast food companies can be such profitable

India E-commerce Chaos and Complexity

The New E-commerce Regulation in India – Be a participant or an organizer, not both

Starting from February 1, 2019, Amazon India and Flipkart by Walmart, among others, are not allowed to hold inventory and sell to customers.

The rules now bar any entity in which an e-commerce firm or its group companies have a stake from selling on their online platform. This is a problem for Amazon, which had been picking up stakes in offline Indian retailers to boost its market share. (Reuters)

The Regulation In Four Dimensions

eCommerce in India can be broadly categorized as:

domestic and cross-border
B2B and B2C
marketplace and inventory based
single brand and multi brand

B2B: 100 percent FDI is allowed in companies engaged in B2B eCommerce, e.g. Walmart and Alibaba can operate a cash & carry (B2B) business.

B2C Marketplace: 100 percent FDI is allowed in the online retail of multi-brand goods and services B2C under the marketplace model, e.g. Amazon, Flipkart, Snapdeal. Any eCommerce entity providing a marketplace cannot exercise ownership over the inventory and is not permitted to sell more than 25 percent of total sales through its marketplace from one vendor to their group companies. There are also conditions restricting to offer discounts by marketplace.

B2C Inventory-Based: FDI is not allowed in inventory-based model of eCommerce.

Single Brand: A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through eCommerce subject to local sourcing requirements. Food retail: 100 percent FDI is allowed for trading (including eCommerce) of food products manufactured or procured in India.

Multi-Brand Retail: No FDI is allowed in companies which engage in multi-brand retail trading by means of eCommerce.

Source: https://www.export.gov/article?id=India-e-Commerce

Other Conditions

E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
An e-commerce entity will not permit more than 25% of the sales value on financial year basis affected through its marketplace from one vendor or their group companies.
In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.
The government has also prohibited e-commerce firms from pushing merchants to sell any product exclusively on its platform. The sellers can, however, choose to have a preferred online partner.

Source: https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17.pdf

Some Context

Indian marketplace is dominated with many small shops and business. If foreign investment in multi-brand retail is to be permitted, then the business of these small shop owners will be in danger. Consumers will be spoilt with choices and due to high competitions, prices will go down, thus these multi-brand retail establishment will be able attract consumers at a large scale. However, in case of single-brand retail shops, they usually bring premium or luxury goods in the market so as such they are not in direct conflict with Indian small business. (blog.ipleaders.in)

EHR and HIPAA, A Dilemma

EHR and HIPAA – Overview

Both are essential parts of running a successful business in health care.

An electronic health record (EHR) is a digital version of a patient’s paper chart. EHRs are real-time, patient-centered records that make information available instantly and securely to authorized users. (healthit.gov)

The Health Insurance Portability and Accountability Act (HIPAA) sets the standard for sensitive patient data protection. Companies that deal with protected health information (PHI) must have physical, network, and process security measures in place and follow them to ensure HIPAA Compliance. (digitalguardian.com)

PHI is any demographic information that can be used to identify a patient. Examples include: names, dates of birth, Social Security numbers, insurance information, phone numbers, full facial photos, and health care records, to name a few examples. (compliancy-group.com)

A Short History

EHR Emerging in the 1970s

US federal government began implementing VistA (formerly known as the Decentralized Hospital Computer Program) at the Department of Veteran Affairs. A study by the Institute of Medicine (now National Academy of Medicine) began in the 1980s, and its findings recommended the use of EHRs when they were published in 1991. (readwrite.com)

The Health Insurance Portability and Accountability Act introduced in 1996

The Health Insurance Portability and Accountability Act (HIPAA) was passed on August 21, 1996, with the dual goals of making health care delivery more efficient and increasing the number of Americans with health insurance coverage. Since its implementation, healthcare organizations have been issued huge fines for non-compliance, e.g. Anthem $16 million HIPPA fine paid in 2018.

The Dilemma

Tough regulations were implemented before the applications (EHRs, etc.) grow into their best format/position in the healthcare system. The regulations made the softwares slow to upgrade/adjust themselves and prevented certain competitions.

EHRs are only an example of healthcare data regulated by HIPAA but a good one. It could have been a program like Apple Health Kit (on patients’ end) in the current era of well-designed apps like uber/gmail/amazon/instagram; but it was limited at the beginning stage and was left no time to refine itself. No wonder most parts are a vivid demonstration of tech/IT system some twenty years ago.

Left-turn Nightmare

Left turn problem while driving, on the one hand, is so common that most people won’t think about it; on the other hand, it is so complicated and “evil” that remains mainly unsolved and avoided.

UPS avoided it

The most famous no-left-turn application is probably demonstrated by UPS. It’s route planner system ORION, based on heuristic algorithm, told UPS drivers not to turn left. Since 2004, turning right, plus other efficiency-optimizing efforts, has saved about 10 million gallons of gas and reduced emissions equal to taking more than 5,000 cars off the road for a year. (UPS)

Accident Rate

According to the US National Highway Traffic Safety Association, turning left is a leading critical pre-crash event, and occurs in 22.2 percent of crashes.

Law

The driver making a left hand turn will only have the right of way if they are proceeding on a left-turn arrow.

Otherwise, the driver turning left at a green light must wait until all oncoming traffic is gone or far enough away to allow for a safe and complete turn.

If a traffic light is not present, the left turning driver must still abide by the same precautions. The oncoming traffic will have the right of way and do not have to stop or slow down to allow left-turning drivers to pass.

Drivers making left turns must also wait for all pedestrians and cyclists are safely across the street before they can proceed with the turn.

This is why it is rare to find the other driver at-fault for this type of accident, and can be even more difficult to prove.

However with that being said, like anything, there are always a few exceptions to the rule.

The car driving straight was driving significantly over the speed limit when they were going through the intersection.
The car that is driving straight ran a red light or stop sign.
Unforeseen circumstances may warrant the other driver at-fault for the accident.

According to Price Benowitz blog

Selft-driving & Waymo

Self-driving car prototypes have been known to wait for long intervals at intersections before they finally made the left turn – heavily testing the patience of human drivers stuck behind them.

When a self-driving car hesitates at an intersection, the reason is not a problem with the algorithm but rather that the self-driving car finds that the safety margins for executing the turn are too small in the current situation: the risk is too high. Unfortunately, this problem can not be solved through better algorithms but only by increasing the level of acceptable risk! (driverless-future.com)

The Waymo vans have trouble with many unprotected left turns and with merging into heavy traffic in the Phoenix area, especially on highways. (The Information)

Tencent vs. Toutiao and Tencent’s Core Asset

Just two days ago, one of the most popular growing app China “Douyin/Tiktok” (owned by ByteDance, formerly known as Toutiao) was founded to be blocked to login with WeChat (owned by Tencent) for new users.

The two old king in social apps is fighting the rising new star.

In March 2018, WeChat global MAUs surpassed 1 billion.

Douyin said its global MAUs is over 500 million in July 2018.

Tencent’s WeChat has been on the market way earlier (since 2011). Douyin was launched in Sep 2016 but its growth has been so terrifying that Tencent has adopted several defensive actions, including blocking sharing Douyin links in WeChat.

Tencent has also backed Qutoutiao to combat with Jinri Toutiao (Toutiao’s flagship and first product) and Weishi for Douyin.

Now the war has escalated. Toutiao launched a new social app “Duoshan” to challenge the King and Tencent blocked WeChat login for Douyin.

Things are just getting started. But it reminded me of the 3Q war in 2010 between Tencent and Qihu360. Tencent didn’t have WeChat yet and relied on its QQ platform (the previous King).

Tencent vs. Qihu360 | Source: tech.sina.com.cn

During the war, one particular action by Qihu was seen by Pony Ma (Tencent founder and CEO) as the most threatening and he forced users to log off QQ if they don’t uninstall Qihu.

The key in that situation and in Ma’s mind is the copy of social map. The full connections between almost every relevent Chinese internet user.

This is probably what Ma values most and is one of Tencent’s core secrets.

That is what Toutiao is trying to obtain with Duoshan and Douyin today ina different way than Qihu) – the social map of almost every relevant Chinese (young) mobile users. And those would be the future Chinese internet revenue sources/assets/reserves.

The war will continue to unfold and Toutiao is much more powerful than Qihu. Toutiao is one of the most valued private companies in the world, but it is also taking on Baidu for news feeds and ads – multi-battleground just like Uber.