The Next Theranos?

Nikola was one of the hottest stocks of the summer. The electric truck maker's valuation skyrocketed to nearly $20bn after being publicly listed in June despite never having shipped a vehicle.

But that changed late last week when short seller Hindenburg Research issued a report alleging Nikola is nothing more than an "intricate fraud" out to siphon cash from naive investors to insiders, sending the stock into a 20% decline over the past few days.

Now the Justice Department and U.S. Securities Regulators are getting involved, putting Nikola and the allegations against it under a microscope.

What the short sellers say: 

  • Hindenberg alleges Nikola does not have a working product or revenue and has faked demo videos to juice investor interest.
  • They claim Nikola has misled investors about its assets and technology.
  • And they report that the CEO and other insiders have spent the summer cashing out their shares before the ship goes down.
What Nikola says: 
  • They are the next Tesla and the share price is justified by expected future profits. 
  • That Hindenburg is just looking to crash the stock in order to make a buck through their short positions. 
What matters: The market is going to determine the fate of Nikola now. And that may not be bad for Nikola. Retail trading and a "buy the dip" mania has boosted plenty of conventionally unattractive stocks over the past several months (remember how Hertz's stock rose 95% in the weeks after it declared bankruptcy?). 
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Aluminum Tariffs Foiled

The Trump administration has backed off of tariffs on Canadian aluminum imports just before retaliatory counter measures were set to come into force.

Background: The U.S. brought in 10% tariffs on certain types of Canadian aluminum, claiming a surge of Canadian aluminum was hurting American producers.

Why the tariffs were introduced: President Trump has accused Canada of "killing" American aluminum jobs, and saw the tariff fight as a way to appeal to blue collar voters in key Rust Belt swing states ahead of the November election.

Why the tariffs were dropped: But the tariffs coupled with Canada's retaliatory measures could have backfired politically. Canada's package of retaliatory tariffs were designed to target key swing states and political constituencies.

What's next: The U.S. has indicated that if Canadian imports exceed 105% of the normal volume over the next four months they will re-introduce the tariff. This fight is probably not going away. 
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Back in Banks

Grocery store Loblaw is moving back into banking after exiting the business three years ago. Their relaunch in the financial sector will be focused on personal bank accounts with ties to rewards.

Backstory...Loblaw exited from the everyday banking space three years ago, ending a 20 year relationship with CIBC. The grocer's financial brand PC Financial maintained their 3 million credit card clients, while the 2 million banking clients were moved to CIBC's new digital bank Simplii Financial.

Why Go Back?

  • Loblaw's rewards program, PC Optimum, is massive. Boasting 18 million members, a result of the merger of PC Plus and Shoppers Optimum points. Everyday banking allows Loblaw to expand their relationship with customers, offering PC Optimum points as banking rewards.
  • Now is the time. Traditionally popular travel rewards don't have the same appeal in the age of pandemics. On the other hand spending on household items is up, it's an attractive time for consumers to earn points that they'll be able to use.

Look Ahead...
The financial business has been stagnant for Loblaw since the breakup three years ago, clocking $26 million in profit in Q2 2017, while only bringing in $12 million in the same period this year. There is hope that banking business will prove more profitable, but the real bet is continued loyalty to the primary grocery business.

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Pfizer's Finish Line

Let's face it, we're already in the second wave of the pandemic, the only way out is a vaccine. It's not regularly we refer to a pharma CEO as a ray of sunshine, but the boss at Pfizer is looking like that today after announcing his company is on track to distribute a vaccine by the end of the year.

Hold Up...Does the vaccine work? We don't know that yet. But Pfizer says they'll have results by the end of October. Just this weekend Pfizer, along with their development partner BioNTech, applied to expand their Phase 3 trial to 44,000 people.

Other Candidates... The halting of AstraZeneca's vaccine trials after a participant ended up sick scared us, but it's now back on track after a short delay. Canada's partnership with China's CanSino remains delayed, likely due to political tensions.

Bad News...Manufacturing delays could mean it won't be until 2024 that the whole world would have access to the vaccine, according to the world's largest manufacturer of vaccines. Two doses of a vaccine will be required, meaning a total of 15 billion. Pfizer has already started manufacturing ahead of approval, but will have a lot more work to do.
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Investors for Climate Action

Climate Action 100+, a group of investors who collectively manage $47 trillion in assets, is pressuring the world's largest corporate polluters to transition to net zero emissions. CA 100+ wrote to the boards of 161 companies, representing 80% of all greenhouse gas emissions, asking for clear emission reduction strategies, saying they would be judged on their performance. Those that don't deliver will face action at AGMs.

Who is CA 100+
Climate Action 100+ is comprised of over 500 investor members globally, including notable Canadians; Alberta Investment Management Corporation, Caisse de Depot et Placement du Québec,Canada Post Corporation Pension Plan, and the Ontario Teachers’ Pension Plan.

Who Are They Targeting?
100+ of the world's biggest polluters, 34.8% of which are located in Europe, and another 33.5% in North America. Canadians targeted include Canadian Natural Resources Limited and Teck Resources.
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Clients Seek $50M From BMO

A group of 27 BMO clients has filed a pair of lawsuits against the bank for losses they suffered because of what they say were risky trading strategies employed by their financial advisor without their consent.

Big Risk, Little Reward: The plaintiff's say their portfolios shrank between 50% and 80%, with losses between $500,000 and $16 million.

Bad Calls: The clients allege the advisor engaged in very risky strategies including long/shorts whereby they would short Canadian government bonds in order to purchase long positions in preferred shares. Further compounding the losses were margin trades, where the adviser borrowed money on behalf of the clients to buy shares.

Clients say they were not informed of these risky strategies.

BMO's Reaction: The bank is backing their advisor saying his advice was "appropriate for their investment objectives – which includes risk tolerance – and investor profiles."
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China Tracks Canadians

An investigation has revealed that a Chinese company has amassed a massive database of 2.4 million people including many influential Canadians. The data does not appear to be private, but rather a collection of publicly available information scrapped from social media and news websites.

The List Builder..Shenzhen Zhenhua Data Information Technology Co. Ltd., the company responsible for assembling the massive database, has only 30 employees and is headquartered in an apartment building in Shenzen, China. The company also claimed to have developed tools to manipulate content on Facebook, Twitter and other platforms.

It is unknown if this company is an arm of Chinese intelligence or just hoping to sell its findings.

Canadians Involved...The database includes 16,000 mentions of Canada with a short list of 3,767 Canadians who are categorized by grades of 1,2 or 3.

  • Grade 1s include elected officials and senior bureaucrats, many MPs are on the list, and interestingly there is an emphasis on western mayors.
  • Grade 2s are relatives of those in power, this list includes the Prime Minister's 11 year old daughter.
  • Grade 3s are Canadians who have committed, mostly financial, crimes.

Zoom Out...All of the information in the database is publicly available, and in many cases nothing more than a single link but the layering of this information with other hacks sourced back to China can be combined for extremely precise insights. In fact, security experts believe China has collected personally-identifiable information on 80% of the U.S. population.

Let's not forget Canada's relationship with China has been rocky as of late, we doubt the Prime Minister will be happy to see his daughters name on a list.

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Market Updates

  • Climate: Thousands of Californians and Pacific Northwesterners are displaced as crews struggle to beat 'apocalyptic' fires.
  • IPOs: A dozen tech IPOs are expected to raise $6.8bil this week as companies cash in on investor appetite for tech stocks.
  • COVID: US COVID cases rise by most in a week, prompting fears of a second wave.
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Peak Picks

  • When the US took in Jewish refugees from WWII, some were housed in a temporary refugee camp. Here are their stories.Italian scientists complete an extremely socially distanced surgery.
  • Exxon Mobile used to the most valuable company in America – what happened?
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Leftovers

  • Pork Problems: China bans pork imports from Germany in what looks like retaliation over a number of political issues between the two nations.
  • Gridiron Returns: The NFL returned this weekend with nods to unrest by players and billions of dollars on the line.
  • US Open: Austrian Dominic Thiem came back from 2 sets down to become the 2020 Men's Single US Open champion.

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