Alpha-Centric ESG Research

Kyle Rudden

<p>Oh, the inhumanity of <em>Monopolium Inquisitorum</em>, leviathans made to stand before the judgement of inquisitorial courts. Repent and reform, or burn in everlasting… fine, maybe just shed a few worldly possessions, WhatsApp would be a good start, and stop coveting thy neighbors' data so much.</p><p>Big technology companies (aka "Big Tech") are the subject of ever-expanding antitrust inquisitions by regulators and courts around the world. In the U.S., informal inquiries into prominent members of FAANG by the U.S. Congress turned into formal antitrust suits, first Alphabet then Facebook.</p><p>Yesterday, the U.S. Federal Trade Commission (FTC) announced yet another inquiry, this one into the data collection practices of social media companies. It mentioned nine companies by name, a few of which are "new" to this conversation (ByteDance, Tencent-investee Discord, and Snap).</p><p>This Insight looks at one particular ESG angle to this antitrust stuff. Specifically, the potential for antitrust investigations – not the outcomes, but the process – to trigger ESG ratings downgrades and, in turn, constituency changes to major ESG indices. Summary points, for the cover page:</p><ul>
<li>Antitrust investigations will inevitably result in additional ESG ratings downgrades, and since most ESG indices are constructed using those ratings, constituency changes are likely.</li>
<li>Index changes might not happen until annual reviews a few months from now, but they are not tied to eventual antitrust outcomes (e.g., breakups) that could be years away, or not at all.</li>
<li>Presently, Facebook and Alphabet are the only U.S. stocks that stand out vis-à-vis the potential for antitrust-driven changes to ESG ratings and/or ESG indices (more so for Facebook).</li>
<li>Let's be honest, we are not talking about Tesla being added to the S&amp;P 500. Even for larger ESG indices, index-linked AUM is <em>comparatively</em> small vis-à-vis broader market indices.</li>
<li>However, one thing keeps it interesting. ESG indices are bloated with Big Tech, many of which are right behind Facebook and Alphabet on the antitrust plank walk.</li>
</ul><p>Herein, I explain my thought process – antitrust, to ESG ratings downgrades, to ESG index changes – then cover Facebook and Alphabet in some detail (albeit limited by constraints). There is less to say about the other U.S. "antitrust stocks" at the moment, but that may change. More importantly, I am looking into something similar, but related to Asian stocks. So, more to come.</p>

Oh, the inhumanity of Monopolium Inquisitorum, leviathans made to stand before the judgement of inquisitorial courts. Repent and reform, or burn in everlasting… fine, maybe just shed a few worldly possessions, WhatsApp would be a good start, and stop coveting thy neighbors' data so much.Big technology companies (aka "Big Tech") are the subject of ever-expanding antitrust inquisitions by regulators and courts around the world. In the U.S., informal inquiries into prominent members of FAANG by the U.S. Congress turned into formal antitrust suits, first Alphabet then Facebook.Yesterday, the U.S. Federal Trade Commission (FTC) announced yet another inquiry, this one into the data collection practices of social media companies. It mentioned nine companies by name, a few of which are "new" to this conversation (ByteDance, Tencent-investee Discord, and Snap).This Insight looks at one particular ESG angle to this antitrust stuff. Specifically, the potential for antitrust investigations – not the outcomes, but the process – to trigger ESG ratings downgrades and, in turn, constituency changes to major ESG indices. Summary points, for the cover page:
Antitrust investigations will inevitably result in additional ESG ratings downgrades, and since most ESG indices are constructed using those ratings, constituency changes are likely.
Index changes might not happen until annual reviews a few months from now, but they are not tied to eventual antitrust outcomes (e.g., breakups) that could be years away, or not at all.
Presently, Facebook and Alphabet are the only U.S. stocks that stand out vis-à-vis the potential for antitrust-driven changes to ESG ratings and/or ESG indices (more so for Facebook).
Let's be honest, we are not talking about Tesla being added to the S&amp;P 500. Even for larger ESG indices, index-linked AUM is comparatively small vis-à-vis broader market indices.
However, one thing keeps it interesting. ESG indices are bloated with Big Tech, many of which are right behind Facebook and Alphabet on the antitrust plank walk.
Herein, I explain my thought process – antitrust, to ESG ratings downgrades, to ESG index changes – then cover Facebook and Alphabet in some detail (albeit limited by constraints). There is less to say about the other U.S. "antitrust stocks" at the moment, but that may change. More importantly, I am looking into something similar, but related to Asian stocks. So, more to come.

Big Tech Antitrust Scrutiny Could Mean ESG Ratings Downgrades, Constituency Changes for ESG Indices

TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Thematic (Sector/Industry)

<p><strong>This week we highlight Snapchat's platform ambitions, the rebound in social media ad dollars, and the conclusion (?) of the Grubhub deal saga.</strong></p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

This week we highlight Snapchat's platform ambitions, the rebound in social media ad dollars, and the conclusion (?) of the Grubhub deal saga.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

TMT Weekly: 3 Things that Stood Out The Week of 6/​​12/​​2020

<div><p>Over the past two weeks we saw Snap, Google, Facebook, and Twitter all report earnings, and the stocks mostly reacted very positively.</p></div><div><p>The key points from the earnings calls align with our thinking that coming out of recessions, “Do More with Less” thinking dominates constrained budgets for consumers and corporates alike, companies that can provide more (better ROI, lower friction, ease of use, etc) take share.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>

Over the past two weeks we saw Snap, Google, Facebook, and Twitter all report earnings, and the stocks mostly reacted very positively.The key points from the earnings calls align with our thinking that coming out of recessions, “Do More with Less” thinking dominates constrained budgets for consumers and corporates alike, companies that can provide more (better ROI, lower friction, ease of use, etc) take share.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

1Q20 Digital Marketing Recap: The Power of Measurable ROI

<div><p>Some datapoints that caught our eye last week in TMT.</p></div><div><div><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div></div></div>

Some datapoints that caught our eye last week in TMT.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

Beyond the Virus: 3 Things from TMT Land that Stood Out Week of 4/3/​​​​2020

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li><strong>In this note, we look at the Google Play rankings of some popular mobile apps in the US, offered by public companies and potential IPO candidates, to get an idea as to how online businesses are shaping up as the US goes into an indefinite lockdown. </strong></li>
<li>A rather surprising theme across the board is that entertainment-related apps (such as video streaming, music, social media, gaming, etc.) haven’t really picked up despite people being stuck at home. Could this be because people are still in panic?</li>
<li>On the other hand, the lockdown seems to be working out well for some relatively newer apps, like Disney+, Amazon Prime, Smule, TikTok, and Nintendo Switch Online, with people willing to try new things in their newfound “free” time.</li>
<li>The sharing economy is falling apart – with both ride-hailing and food delivery services being interrupted.</li>
<li>As expected, the beneficiaries of the lockdown are, grocery delivery, video conferencing/team working and distant learning services.</li>
</ul>


In this note, we look at the Google Play rankings of some popular mobile apps in the US, offered by public companies and potential IPO candidates, to get an idea as to how online businesses are shaping up as the US goes into an indefinite lockdown. 
A rather surprising theme across the board is that entertainment-related apps (such as video streaming, music, social media, gaming, etc.) haven’t really picked up despite people being stuck at home. Could this be because people are still in panic?
On the other hand, the lockdown seems to be working out well for some relatively newer apps, like Disney+, Amazon Prime, Smule, TikTok, and Nintendo Switch Online, with people willing to try new things in their newfound “free” time.
The sharing economy is falling apart – with both ride-hailing and food delivery services being interrupted.
As expected, the beneficiaries of the lockdown are, grocery delivery, video conferencing/team working and distant learning services.


What Are US Smartphone Users Downloading While in Lockdown?

United States

Twitter, Inc. provides online social networking and microblogging service. The Company offers users the ability to follow other users activity, read, and post tweets. Twitter serves customers worldwide.

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Twitter Inc (TWTR US)

Big Tech Antitrust Scrutiny Could Mean ESG Ratings Downgrades, Constituency Changes for ESG Indices

Antitrust broaches several highly-material ESG issues. Growing antitrust scrutiny of "Big Tech" could lead to ESG rating downgrades, and in turn,...

Kyle Rudden

TMT Weekly: 3 Things that Stood Out The Week of 6/12/2020

This week we highlight Snapchat's platform ambitions, the rebound in social media ad dollars, and the conclusion (?) of the Grubhub deal...

Aaron Gabin

1Q20 Digital Marketing Recap: The Power of Measurable ROI

Over the past two weeks we saw Snap, Google, Facebook, and Twitter all report earnings, and the stocks mostly reacted very positively.The key...

Aaron Gabin

Beyond the Virus: 3 Things from TMT Land that Stood Out Week of 4/3/2020

Some datapoints that caught our eye last week in TMT.Obex’s fundamental research process is focused on secular change in the TMT and Consumer...

Aaron Gabin

What Are US Smartphone Users Downloading While in Lockdown?

In this note, we look at the Google Play rankings of some popular mobile apps in the US, offered by public companies and potential IPO candidates,...

Supun Walpola

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Big Tech Antitrust Scrutiny Could Mean ESG Ratings Downgrades, Constituency Changes for ESG Indices

Antitrust broaches several highly-material ESG issues. Growing antitrust scrutiny of "Big Tech" could lead to ESG rating downgrades, and in turn,...

Kyle Rudden

TMT Weekly: 3 Things that Stood Out The Week of 6/​​12/​​2020

This week we highlight Snapchat's platform ambitions, the rebound in social media ad dollars, and the conclusion (?) of the Grubhub deal...

Aaron Gabin

1Q20 Digital Marketing Recap: The Power of Measurable ROI

Over the past two weeks we saw Snap, Google, Facebook, and Twitter all report earnings, and the stocks mostly reacted very positively.The key...

Aaron Gabin

Beyond the Virus: 3 Things from TMT Land that Stood Out Week of 4/3/​​​​2020

Some datapoints that caught our eye last week in TMT.Obex’s fundamental research process is focused on secular change in the TMT and Consumer...

Aaron Gabin

What Are US Smartphone Users Downloading While in Lockdown?

In this note, we look at the Google Play rankings of some popular mobile apps in the US, offered by public companies and potential IPO candidates,...

Supun Walpola

TMT Weekly: 3 Things that Stood Out The Week of 6/12/2020

Beyond the Virus: 3 Things from TMT Land that Stood Out Week of 4/3/2020