Unhappy Meal

Allegations continue to come out against former McDonald's CEO Steve Easterbrook.

What happened: The McDonald's head honcho was was fired in November after the company found that he had engaged in a consensual relationship with a colleague. He left receiving a "fired without cause" compensation package worth nearly $40m.

Yesterday, the Wall Street Journal reported that McDonald's has taken legal action against Easterbrook who it claims lied about relationships with multiple staff members.

In response to this new development, McDonald's wants to get that $40million back so they're suing Easterbrook arguing that they never would have agreed to the package had they known about the additional relationships.

Even weirder, the WSJ found out that the head of HR left the company one day after Easterbrook was terminated.

What's the big deal? What began as a normal 'divorce' over an undisclosed consensual relationship is looking more and more like a coverup – and shareholders are concerned.

Investors are worried that Easterbrook's quick dismissal is representative of bigger issues in the company and one shareholder is going so far as to call for an outside investigation.

No matter how you look at this, it's a huge HR disaster and McDonald's share price might take a hit as a result.
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Out of the shadows

Palantir, the shadowy Silicon Valley surveillance tech company, is (slightly) lifting its veil before their upcoming IPO.

Yesterday, Palantir released their S-1, a standard document that discloses the company's finances ahead of a public offering.

What did we learn?

Palantir is widely considered to be one of the most secretive tech companies in the US, mostly due to their expansive work with US government agencies. But we did get some interesting new details about the company in the filing:

  • Like most tech companies seeking a public offering, Palantir is not yet profitable and suffered a $580 million loss last year
  • But the good new is that they're on track to hit nearly a billion dollars in revenue, pointing to that revenues are up 49% this year against the same period.
  • Half(!) of Palantir's revenue is from government agencies, which is unique for a startup. Conventional wisdom is that governments are bad clients because they're slow and at the whim of politics.
Zoom out: Palantir is important because of how its tech is being used. Last year, there were protests at the CEO's house over the use of Palantir's technology to detain illegal immigrants by the controversial US Immigration and Customs Enforcement (ICE) division.

In the S-1, Palantir notes that these protests due pose a threat to their business. It'll be interesting to see if the controversial firm can maintain their contracts under a possible Biden Administration. On the other hand, a successful IPO may only expand their reach, sparking a new long needed conversation over the use of surveillance technology by governments.

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#CarneyWatch

All that hype for nothing. After weeks of speculation whether former Bank of Canada Governor Mark Carney would join Justin Trudeau's Liberal Government, we now know where he's actually heading...

Carney has been tapped by Brookfield Asset Management, the global investment firm, to support them on their ESG (environmental, social, and governance) and impact fund investing.

Why ESG? Carney's been a long time proponent of a new era of 'responsible investing'. He believes that private capital allocated with a social conscience is key to fighting climate change and driving social change.

In Carney's new role, he'll work with Brookfield's deep pocket clients to advise them on how to invest in companies that will get us closer to "net zero" greenhouse gas emissions. And there's demand for this, nearly 73% of all fund managers say they take ESG issues into account when making investment decisions.

But what about his much rumoured political ambitions? Carney said that he will continue to serve as an informal advisor to Prime Ministers Justin Trudeau and Boris Johnson, but he has no plans to run himself in the near future.

We'll see if that sticks! In the meantime, we wish Mark Carney nothing but the best at Brookfield.

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WeChat Worries

US companies are worried that President Trump's WeChat ban could hurt their bottom line. For those who missed it in all the TikTok hype, President Trump's executive order effectively banning TikTok in the US also banned WeChat.

WeWhat? WeChat is the most popular app in China. Technology commentators refer to it as a 'super app'. Chinese users use the app to do everything from pay for their cup of tea, message friends and order food...

Over the past 5 years, WeChat has grown exponentially and become an essential tool for anyone looking to do business in the PRC.

Why are they banned? For the same reason as TikTok. The White House is concerned that the close ties between WeChat's parent company, Tencent, and the Chinese Communist Party could put Americans and their data at risk.

But while WeChat claims to have 19 million users in the US, it pales in comparison to TikTok's 80 million.

So why dos it matter if we ban it? The Administration has not been clear about whether the ban applies only to WeChat's international operations. However, some US firms are worried that the executive order would prevent them from using the app to run their businesses in China.

This is a big deal. US firms, like Starbucks, Coca-Cola, and Nike, rely on WeChat not just for marketing but payments, e-commerce, and even internal employee communication. Restricting their ability to use the app would be like banning companies from using Visa, Slack and Shopify – it's a huge deal!

What now? US companies are actively lobbying the Trump Administration for clarification on the order, but we'll have to see if they get any results.

If the US Government does prohibit US companies from working with WeChat anywhere, expect to see a hit to the bottom line of American firms operating in China.
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Peak Picks

The Truth Is Out There: Aliens are hot right now, and whether or not we have been visited people want to believe. Rolling Stone looks at the rise of modern UFO culture.

Why You Always Double Check:
A Detroit woman was found alive in a funeral home hours after being declared dead by paramedics.

COVID Concerts:
Germany is asking thousands of volunteers to attend pop-up concerts with varying safety protocols to test how COVID spreads at large gatherings. I think I'll just listen at home, thanks!
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Leftovers

Hurricane Laura Gets Stronger: A hurricane warning has been issued for large parts of the Texas and Louisiana coastline as Laura was upgraded to a Category 1 hurricane.

Ride The Hyperloop:
Alberta's government is backing a project by a Toronto company to look at building a "hyperloop" vacuum-sealed tube that would transport vehicles from Edmonton to Calgary in 30 minutes.

No App Pour Vous:
Quebec will not ask its residents to download the Federal government's COVID Alert tracing app, saying it believes its existing system is good enough.
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Back In Business

Did you catch those photos of the massive pool party in Wuhan last week? It wasn't an illegal gathering or one-off event of risk-taking partiers. China, unlike pretty much everywhere else in the world, is pretty much back to normal.

  • Kids are going back to school without most of the restrictions in place elsewhere (including optional mask-wearing). 
  • Restaurants, gyms, cinemas, and bars are open again without social distancing rules.
  • The World Bank expects China's will be the only major economy to grow this year.
How they did it: China's recovery is largely due to the draconian measures they imposed early on to stop the spread of the virus, along with ongoing surveillance and mass testing.

Zoom out: The fact that China will grow this year while other economies continue to decline will accelerate China's ascendance as the dominant global economy. Deutsche Bank predicts China's economy will grow by 24% by 2023 while America's will grow by only 3.9%.
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Semi-Epic Win

A federal judge has ruled that Apple is allowed to kick Epic Games' Fortnite off its platform, it cannot cut off the company's developer account or restrict usage of its Unreal gaming engine by other developers.

Epic's argument: The game developer has argued that Apple is engaged in anti-competitive monopolistic behaviour by charging Epic a 30% fee on in-game transactions, a cost that gets passed on to consumers.

Apple's argument: Apple argues that there's plenty of consumer choice because people don't have to purchase an Apple device, meaning they aren't locked in to using the App Store.

What the judge said: Apple is within its rights to ban Fornite but not to damage the many other developers who rely on Epic's Unreal engine and aren't party to the case.

This thing might take a while: Epic's CEO Tim Sweeney appears to be motivated by principled objections to the dominant position of tech giants more than money (or at least he claims that's true) and Apple is unlikely to abandon a major revenue stream. If that's the case, this battle will likely go on until the bitter end.

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Ant Group's Gigantic IPO

Jack Ma's financial tech giant Ant Group Co. filed for an IPO split between Hong Kong and Shanghai targeting a market valuation of more than $200b.

Why it matters: Ant's IPO is likely to be the largest ever, passing the $29b raised by Saudi Aramco last year. This is also the first time we've had a full look at Ant's business, which generated $3b in profit for the first six months of 2020 with margins of 30% and profit growth of over 1,000% — extremely healthy numbers for a relatively young company.

What is Ant: The fintech wing of Alibaba, the Chinese e-commerce giant. Its largest piece of business is Alipay, the payments processor that dominates China and is used by 700m+ people and 80m+ businesses in China. Alipay has expanded from payments into mutua funds, insurance, and more.

The geopolitical angle: Ant's decision to list jointly on the Hong Kong and Shanghai exchanges is a clear message to the Americans that Hong Kong can survive as a financial hub even as China asserts more authority in the city.
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The Big Shrink

The Conference Board of Canada says the pandemic's impact on Canada's economy will be twice as bad as initially forecast.

By the numbers: The new report claims... 

  • Canada's GDP will shrink 8.2% by end of year, up from their estimate of 4.3% four months ago.
  • Alberta's economy will be hit hardest, shrinking 11.3% in 2020.
  • All provinces' economies except Manitoba, B.C, and P.E.I. are expected to decline by at least 6%.
 The Board doesn't expect business investment to pick up until Spring 2021 and thinks household spending will stay below normal levels into 2022.

++ Canada's banks are feeling the pinch too, with profits declining for a second straight quarter. The top six banks posted an average drop in profits of 30% in Q3.

Trouble ahead: Distressed mortgage holders sought deferrals on their payments at the beginning of the pandemic. Now those are deferrals are running out. 500,000 will expire in October and 221,000 will end in November. If borrowers can't make their payments within 90 days, they'll end up in arrears. If incomes don't recover by then, we could see a spike in defaults next year that ripple through the economy.
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