Founder, Chairman, CEO and President of Amazon Jeff Bezos gives a thumbs up as he speaks during an event about Blue Origin’s space exploration plans in Washington, U.S., May 9, 2019.
Clodagh Kilcoyne | Reuters
At an all-hands staff meeting in March, Amazon CEO Jeff Bezos told employees that he’s fascinated by the recent developments in the auto industry, adding that it was one of the main reasons why Amazon led a $700 million investment in the electric vehicle startup Rivian in February.
“If you think about the auto industry right now, there’s so many things going on with Uber-ization, electrification, the connected car — so it’s a fascinating industry,” Bezos said according to a recording of the meeting CNBC has heard. “It’s going to be something very interesting to watch and participate in, and I’m very excited about that whole industry.”
Bezos’s comments give a rare glimpse into his interest in the auto industry, which Amazon entered in February through its investments in Rivian and another self-driving tech start-up, Aurora. Investing in autonomous technology could eventually help Amazon offer faster and cheaper delivery, as well as automation in other areas, like its cashier-free grocery stores.
Rivian is best known for its electric trucks and has raised $1.4 billion in funding so far, including $500 million from Ford in April. Aurora, a self-driving tech startup run by former Uber, Google, and Tesla executives, is now reportedly worth over $2 billion following its $530 million funding round in February.
Following those two investments, Amazon’s ownership stake in private companies shot up to almost $1.4 billion last quarter, marking the first time it crossed the $1 billion mark since disclosing that figure in 2015. That’s up by almost $1 billion from the previous quarter, and roughly five times more than what it owned just two years ago, filings show.
Amazon doesn’t break out individual investment amounts, but discloses the total value of its equity and equity warrant investments in both public and private companies.
Amazon did not respond to a request for comment.
Investing in autonomous companies gives Amazon “greater insights into cutting edge technology” that could directly help its core e-commerce business, according to Gene Munster, an analyst at Loup Ventures. The investment in electric and self-driving cars, for example, could give insights into improving Amazon’s last mile logistics strategy and potentially reduce its overall shipping costs, he said. Amazon’s shipping cost jumped 21% to $7.3 billion last quarter.
“It’s a form of outsourced R&D,” Munster said.
There are many ways that autonomous technology could help Amazon. In January, for example, Amazon rolled out a new self-delivery robot called Scout, and it has also partnered with self-driving truck startup Embark to handle parts of its cargo shipments. When it first launched the Amazon Go cashierless stores in 2016, Amazon said it used the same technology found in self-driving cars.
More important, the investments signify Amazon’s growing appetite for spending on other companies, both public and private, as the company faces slowing growth despite hitting record profits and cash flow.
In the first quarter, Amazon had $4.4 billion in operating profit and a cash balance of $47 billion, both record-highs. But its quarterly revenue growth was just 16.9%, the slowest since 2015.
Meanwhile, filings show that Amazon spent a total of $1.2 billion in cash payments related to “acquisition and other investment activity” in the first quarter, a record amount for a single quarter excluding the third quarter of 2017, when it spent $13.7 billion to buy Whole Foods. During the quarter, Amazon bought Eero for roughly $100 million and CloudEndure for $250 million, while its two largest investments were in Rivian and Aurora, according to Pitchbook. Amazon continues to be an aggressive investor this quarter, having led the $575 million funding round in Deliveroo last week.
While that’s a tiny amount relative to Amazon’s total revenue ($232 billion in 2018) or assets ($178 billion as of the first quarter), it’s still a notable shift from its reputation for being a low-key corporate investor, according to Daniel Aobdia, an accounting professor at Northwestern University.
“Amazon is stepping up its investment in start-ups, and this has been made easier because of the increased cash flows from operations,” said Daniel Aobdia, an accounting professor at Northwestern University. “This is an interesting development, in line with Amazon being interested in expanding its businesses in several different directions.”
During the March staff meeting, Bezos tried to temper expectations by saying that he doesn’t view the Rivian investment to turn into Amazon’s next growth driver yet. He said it’s still just a minority investment and electric cars wouldn’t become the company’s next major “pillar” anytime soon.
But he went on to highlight one other reason he was drawn to the Rivian investment: its founder and CEO R.J. Scaringe. Calling him “incredible,” Bezos touted Scaringe’s decade long experience in the auto space, adding that his personality perfectly fits in with Amazon’s culture and values.
“As with most of our major investments, and acquisitions, we’re always looking for mission-driven entrepreneurs — missionaries instead of mercenaries,” Bezos said. “And the guy who leads the company, a guy named R.J., is one of the most missionary entrepreneurs I’ve ever met.”
Bank of Canada Governor Stephen Poloz to step down in June 2020
Carolyn Wilkins, senior deputy governor of the Bank of Canada, left, and Stephen Poloz, governor of the Bank of Canada, leave the Bank of Canada building for a press conference in Ottawa, Ontario, Canada, on Wednesday, Oct. 24, 2018.
Justin Tang | Bloomberg | Getty Images
Bank of Canada Governor Stephen Poloz will step down when his mandate expires next June, the bank said on Friday, and the front-runner in the race to take his place could become the first woman to head the country’s central bank.
Many economists and market strategists surveyed by Reuters this week said Senior Deputy Governor Carolyn Wilkins could be his successor.
Poloz, who is in the final year of a seven-year term, will not seek a reappointment and a process to select the next governor has begun, the bank’s board of directors said in a statement.
The board of directors oversees the selection process of a new governor, but the finance minister and the prime minister have the final say.
Poloz said that during his tenure the bank had “created the conditions for steady economic growth, low unemployment, and inflation close to target through very challenging times,” according to the statement.
Unlike some of its global peers, Canada’s inflation rate is near the central bank’s 2% target. The Bank of Canada has held its overnight interest rate steady since October 2018, even as several of its counterparts, including the U.S. Federal Reserve, have eased.
Kudlow says a trade deal with China is ‘close’ amid ‘intense’ talks
Larry Kudlow, White House National Economic Council director, said the U.S. and China are “close” to a trade deal but that the administration was prepared to walk away if it did not get the terms they wanted.
“The president has said many times if the deal is no good, if the assurances with respects to preventing future thefts, if the enforcement procedure is no good he has said we will not go for it. We will walk away,” Kudlow said on CNBC’s “Squawk on the Street” on Friday. “The president has said that if we can not get the enforcement and the assurances, then we will not go forward.”
The two countries are in talks to finalize a so-called phase one trade deal as 15% tariffs on $165 billion in Chinese imports are set to kick in Dec. 15. Kudlow said the two sides are moving closer to a deal.
“The deal is close. It’s probably even closer than in mid-November,” Kudlow said. “Deputy level met again … The reality is constructive talks, almost daily talks. We are in fact close…There’s no arbitrary deadlines, but the fact remains December 15 is a very important date with respect to a no go or go on tariffs.”
Kudlow characterized the recent talks between the world’s two largest economies as “intense.”
“I say intense because this is a very important matter,” Kudlow said. “There’s so much at stakes here when you go through the various categories… We can’t afford, we must not permit any country, China or whoever, to willy nilly steal our breakthroughs in technology and advanced micro-processing related to 5G.”
Trump said on Thursday that trade talks with Beijing were going “very well.” He added that something could happen regarding those tariffs that are set to be imposed in less than 10 days, but added they are not discussing that yet.
The Wall Street Journal reported on Thursday the U.S. and China still haven’t reached a consensus on the amount of agriculture goods that China would buy.
Oil on track for weekly gain as OPEC+ set to confirm supply cut
A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
Oil prices fell on Friday, but were set for weekly gains ahead of the OPEC+ meeting which kicked off Friday in Vienna.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia – a grouping known as OPEC+ – agreed on Thursday to more output cuts to avert oversupply as economic growth stagnates amid the U.S.-China trade war.
But OPEC stopped short of pledging action beyond March and analysts have questioned the impact of the latest curbs.
Brent futures were down 18 cents at $63.21, but are set to rise 1.5% on the week.
West Texas Intermediate oil futures fell 33 cents to $58.10 a barrel. They are set to rise nearly 6% on the week.
The cuts next year will expand the existing agreement by an extra 500,000 barrels per day (bpd) reduction in the first quarter next year, through tighter compliance and some adjustments. OPEC’s current agreement is a supply cut of 1.2 million bpd and the increased amount represents about 1.7% of global oil output.
“If we were to have an outcome of an extension of cuts with only the official quota of the OPEC+ group being reviewed lower (the 500,000 bpd), rather than actual production, then the change in supply policy would be cosmetic (given below target production in some countries, notably Saudi Arabia and Angola),” said Harry Tchilinguirian, global oil strategist at BNP Paribas.
OPEC is likely to shoulder 340,000 bpd in fresh cuts and non-OPEC producers an extra 160,000 bpd, one source said on Friday.
Any price gains from the OPEC+ output cut are likely to benefit American producers not party to any supply curbing agreement. American drillers have been breaking production records even as they cut the number of oil rigs in operation, filling gaps in global supplies.
“North American shale supply will continue growing even in an environment with lower oil prices,” Rystad Energy said in a note.
Higher oil prices are also supporting the initial public offering of Saudi Arabia’s state-owned oil company, Saudi Aramco, which priced its shares on Thursday at the top of an indicated range.
The sale was the world’s biggest initial public offering (IPO), beating Alibaba Group Holdings’ $25 billion listing in 2014, but fell short of a $2 trillion valuation for Aramco sought by Saudi Crown Prince Mohammed bin Salman.
Foreign investors stayed away and the sale was restricted to Saudi individuals and regional investors.
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