Welcome to the Weekly Scan. Here’s what we’re following for the week of November 2, 2020:
On the up and up. The U.S. Gross Domestic Product (GDP) grew 7% in the third quarter of 2020, a pace not seen since 1950, when the GDP increased 3.9% in one quarter. The growth is equal to 30% on an annualized basis. Despite the quarterly growth, the U.S. GDP in 2020 is still 3.5% smaller than it was at the end of 2019.
- The takeaway: While the economy grew in the third quarter, some experts said that the growth demonstrates just how hard the economy was hit by the pandemic, and follows a period of widespread business shutdowns across the country, which caused GDP to decrease by 9% in the second quarter.
Testing the friendly skies. This month, United Airlines will pilot a mandatory Covid-19 testing program for some flights between Newark, New Jersey to London, England. The airline will conduct rapid tests at the airport, although passengers will still be required to wear masks onboard, and they will still have to quarantine for 14 days upon arrival in London. People who test positive won’t be able to board the flight, but the free testing program, which reportedly delivers results within 15 minutes, is meant to make it easier for people to travel during the Covid-19 pandemic. United reportedly said the number of people flying to Hawaii doubled when it made similar rapid tests available to those flying to the state, starting in September, 2020. Passengers who test negative can skip the state’s 14-day quarantine.
- The takeaway: United is hoping that its testing program will help jumpstart the struggling airline industry. Travel has dipped since March as Americans avoid airports and unnecessary travel during the pandemic. In the second quarter of 2020, United Airlines reported that revenue fell 87% to $1.5 billion year-over-year. United also furloughed 13,000 workers in October, 2020 as a result of decreased demand for flights.
One big Ant. Ant Group, which is partially owned by Alibaba Group Holding, is reportedly set to make the biggest initial public offering (IPO) in the world. The Chinese financial technology company is expected to raise $34.4 billion when it starts trading publicly on November 5, 2020. Ant listed its shares in Shanghai and Hong Kong, issuing a fixed share price in Hong Kong. The Hong Kong portion of the IPO is being handled by Citigroup, JPMorgan Chase, Morgan Stanley, and China International Capital Corporation. Saudi Arabian oil company Aramco previously set the record for the biggest IPO, raising $29.4 billion in December, 2019. Remember that a company’s IPO can be followed by a period of volatility, where prices change dramatically.
- The takeaway: Ant’s decision to conduct its IPO in Shanghai and Hong Kong could be a result of increasing tensions between the U.S. and China as the trade war continues. Since 2018, the Trump administration and China have taken turns levying tariffs on each other’s exports. Eight Chinese companies that typically would have gone public through the New York market have chosen to do so through Shanghai and Hong Kong since November, 2019.
UPDATE: On Tuesday, November 3, 2020 the Shanghai and Hong Kong stock exchanges suspended Ant Group’s IPO listing due to potential irregularities.
Up in smoke. Tobacco company Altria recently cut it’s valuation of vaping company Juul to $5 billion, from $13 billion earlier in the year. Altria purchased a 35% stake in Juul for $13 billion in 2018. At the time, Juul had a market valuation of $38 billion. In the days prior to Altria’s valuation cut, Juul executives reportedly told employees the company was worth $10 billion.
- The takeaway. In recent years, Juul has been caught up in numerous regulatory actions related to the safety of its products, and the way it has marketed them to teenagers. E-cigarette use increased nearly 80% among high school students in 2018, with more than 3.6 million youths, and one in five high school students vaping, according to the U.S.Surgeon General.
The color of money? Netflix announced that it will increase prices for standard and premium monthly subscriptions. The price for a standard plan will increase $1 to $14 per month and the price for a premium plan will increase $2 to $18 per month. Netflix’s most basic plan will remain at $9 per month. New subscribers will immediately pay the new prices while current subscribers will see prices increase over the next few months. Netflix last raised its prices in January, 2019.
- The takeaway: Although Netflix has had a strong year due to more at-home streamers related to the pandemic, the company is reportedly raising prices in response to slowing subscriber numbers. The company added 26 million new subscribers in the first two quarters of 2020, compared to the 28 million subscribers it added in all of 2019. Netflix’s price hike could reportedly inspire some other streamers, such as Disney+, to raise their prices.
Find out what we covered in last week’s Scan.