CIBC Tech & Innovation Market Update – November 2023

As the growth-at-all-costs era moves further into the rear view, streaming services continue to look for new strategies to drive profitable growth. Netflix has taken the lead when it comes to new initiatives, rolling out cheaper ad-supported tiers and cracking down on password sharing to drive subscriber growth. Disney has since rolled out a similar ad-supported tier and Amazon has followed with a slightly different approach to advertising that will see it make an ad-supported tier the default option in 2024 and charge users $2.99 to upgrade to a version without advertising. Amazon is no stranger to integrating advertising into its broader business, having generated US$10.7B in advertising revenue in its most recent quarter. Perhaps as a result of its advertising experience, Amazon is reported to be asking advertisers for commitments as large as $100MM to advertise on Prime. With new initiatives already translating into subscriber growth at Netflix, don’t be surprised if your streaming bill starts to look a lot like your old cable bill as the entire streaming ecosystem looks for new ways to generate additional revenue.

Shareholder activism is on the rise again, driven by declining valuations as well as broader economic uncertainty. In the tech space, Elliott Capital disclosed an upsized holding in SaaS company E2open, whose shares are down ~50% year to date, while Salesforce recently appeased a swarm of activist investors by acquiescing to the changes the group was demanding. The annual 13D Monitor Active-Passive Investor Summit was also held recently, a hedge fund activism conference created in 2010 where activist investors, C-suite executives, proxy solicitors and others gather to discuss the activist investing space. Shareholder activism has been gaining momentum; by the numbers, FTI Consulting reported a total of 233 activist campaigns involving U.S. and Canada-based companies launched in H1/23, up 4.5% Y/Y.

The traditional model for online password protection has involved users creating their own passwords, ideally passwords that were kept private and difficult to guess or hack. Companies like Toronto startup 1Password, a subscription-based password manager that generates and stores various passwords and other sensitive information in a virtual encrypted vault, gained popularity with individuals and businesses interested in taking additional steps to keep their passwords secure. As the sophistication of hackers and malicious actors increases, the effectiveness of traditional passwords is being called into question. The concept of passkeys has emerged as an easier and more secure alternative to passwords, and Google announced this week that it would be making passkeys the default options across personal Google accounts.

Competition regulation has been heating up in the US as the FTC continues to put forward complaints centered around illegal monopolies, targeting everyone from big tech to private equity. Earlier this month, the FTC filed a suit against Amazon for illegally maintaining monopoly power, as the historic Google monopoly trial continues in U.S. Federal courts. In September, the FTC also filed suit against United States Anesthesia Partners in a suit thought to be targeting private equity, rollup business models and acquisitions in the healthcare space. Recently, CIBC hosted a discussion on the changing competition regulation in both countries with Mark Warner, an Ontario and New York attorney specializing in trade, competition and investment law.

Many people in the bitcoin community know of the Swiss crypto investor Stefan Thomas who has been unable to access 7,002 bitcoins, worth close to $235 million because he lost his password to his IronKey USB drive. He has made 8 attempts, but if he doesn’t get it in two more tries then the USB drive will be wiped permanently and he loses this fortune forever. The San Francisco start-up company Unciphered, has developed an IronKey password-cracking technique that has successfully unlocked thousands of IronKey devices. Oddly, Thomas shows little interest in using their services despite Unciphered believing they have his password.

According to recent surveys, 65% of Canadians now work either remotely or in a hybrid format with 89% saying they are happy with hybrid work. That being said, there is no definitive answer as to what hybrid model works best across different job roles. As a starting point, companies need to document what work the company is looking to accomplish and identify what work functions are best suited for in-person vs. remote work.

From nuclear fusion to meatless burgers, MIT Technology Review curates their 15 climate tech companies to watch. The list includes Blue Frontier (air conditioning), Gogoro (electric vehicles), and Climeworks (carbon removal).