Klarna Files Now to IPO Later

Good morning.

The grass is greener on the winning side of America's political divide. 

On Tuesday, Morning Consult released its first poll capturing US consumer sentiment since this month's elections — and the results are, well, unsurprisingly partisan. Sentiment among Republican consumers shot up 30%, to the highest level since the Trump 1.0 administration. Sentiment among Democrats swung the other way, plummeting 13% since Election Day. It's the biggest rapid flip-flop in consumer sentiment since — yep, you guessed it — the 2020 election. How you see the economy depends on whether you take the red pill or the blue pill, Neo.

If looser regulations are what led Swedish buy-now-pay-later firm Klarna to choose the US over the UK to host its IPO, its decision is looking even smarter today. 

Klarna, like the rest of the BNPL industry, has been bedeviled by regulators on both sides of the Atlantic. But on Wednesday, the day the BNPL giant filed paperwork with the US Securities and Exchange Commission to go public, news broke that incoming President Donald Trump has wrangled Elon Musk and Vivek Ramaswamy to set up a new "Department of Government Efficiency," which Musk has promised would feature a "bonfire of nonsense regulations."  

Buy Now, Regulate Later

Klarna is slightly late to the party in the USA, where rivals like Affirm and Sezzle are already publicly traded companies. Both companies' share prices have been beneficiaries of the Trump trade, buoyed by promises of relaxed regulatory scrutiny. Questions have been mounting about whether BNPL companies in both the US and the UK should be bound by the same laws that restrict how banks and other financial services companies loan money to consumers. In the UK, the government is planning to place BNPL companies under its financial services regulator.

In the US, the go-to BNPL hawk has been Rohit Chopra, head of the Consumer Financial Protection Bureau, but Chopra's future, and that of the agency he runs, is now looking extremely fragile:

• A 2020 Supreme Court ruling means that the president can remove the head of the CFPB at will. Trump is widely expected to fire Chopra as soon as he can, Bloomberg reported, unless Chopra steps down first.
• In Trump's first term, he installed an interim CFPB director, Mick Mulvaney, who openly despised the agency and cut back both its budget and enforcement. 

In other words: It's a fairly good bet that the CFPB's in the gutting line.

To the Moon: Musk and Ramaswamy's department has been meme-ifically named the DOGE, a nod to a cryptocurrency called dogecoin for which Musk is prone to public displays of affection. But the whole "Elon Goes to Washington" thing is starting to make Wall Street sweat just a bit. Bloomberg reported that even Tesla bulls are finding it hard to believe the scale of Tesla's stock rally post-election. "There has been a renewed memefication of Tesla stock playing into the political momentum, and it makes no sense," David Wagner, portfolio manager at Aptus Capital Advisors, told Bloomberg. 

Written by Isobel Asher Hamilton

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You can get a party size bag of potato chips on Amazon for less than $15, but Amazon itself is struggling to get its hands on the computer chips it needs to run its business. 

Its solution is very Amazon: The company is doubling down on efforts to become a sizable player in the semiconductor business, according to a Financial Times report, with its latest chip to roll out soon. The idea is to reduce its reliance on chipmaking giant Nvidia and offer an alternative to Nvidia for Amazon Web Services clients in the process. 

Chip Shot

Amazon read the tea leaves on the chipmaking boom early, acquiring Annapurna Labs, an Israeli chipmaking start-up with operations in Austin, Texas, back in 2015 for $350 million. In the time since, the AI boom has proven a major crunch for cloud computing. Amazon has long collaborated with Nvidia to service AWS customers who need the extra punch for AI tasks. But, like fellow major players in the cloud computing space — Microsoft, Google, Meta — it is prioritizing its own in-house chip infrastructure, too.

This year, Amazon is projected to drop around $75 billion in capital spending, largely on improving its tech infrastructure, and CEO Andy Jassy has suggested that could increase even more in 2025. That spending spree has resulted in Annapurna's latest product, an AI chip called Trainium 2, which is expected to be formally announced and showcased next month, the FT reports. It could be the first step to chip, chip, chipping away at Nvidia's market stranglehold:

• The company says building AI chips from the ground up to fit AWS infrastructure could keep costs down. One of Amazon's current AI chips, Inferentia, is around 40% cheaper to run for generating responses from AI models than Nvidia chips.
• That might come at a performance tradeoff (Amazon doesn't submit its chips for independent performance benchmarks) but lower performance at a cheaper cost might be a way to crack the market. Nvidia has around a 90% market share on AI chips, and, in its latest quarter, did around $26 billion in chip sales, or close to all of AWS' revenue in the latest quarter.

Cheap Seats: There may not need to be a premium on performance, anyhow. OpenAI's latest model, Orion, has been an internal disappointment, Bloomberg reported, failing to prove itself as a marked improvement on GPT-4. Google and Anthropic have hit similar plateaus as the industry runs short on high-quality human-made training data. Almost makes you feel better about that pile of books you will, for sure, eventually, one day read.

Written by Brian Boyle

Fine-dining delivery service Wonder is known for its partnerships with past Michelin star recipients like José Andrés and Bobby Flay. Grubhub's most popular item is a burrito bowl. But there is plenty of accounting for taste in the nearly $30 billion food delivery market. 

On Wednesday, Wonder gobbled up food ordering and delivery platform Grubhub for $650 million. The global delivery giant Just Eat Takeaway, the seller, had acquired the company in an all-stock deal for $7.3 billion in 2020.

Eat Your Losses

The latest venture of serial entrepreneur Marc Lore — the man who brought you Diapers.com (sold to Amazon) and Jet.com (sold to Walmart) — Wonder started out in 2018 as a high-end food truck delivery service and then evolved into food halls, with 28 in five east coast states and 20 more on the way, according to its website. Delivery customers can order from the tens of restaurants at each location where staff hastily churn out meals designed by top chefs like Flay.

Last year, Wonder also entered the meal kit business with its $103 million acquisition of Blue Apron, hinting at plans to expand into a wider one-stop-shop food app. Investors last valued the business at $3.8 billion in a 2022 round, according to Pitchbook data. Wonder also announced Wednesday that it raised $250 million from new investors, though it didn't disclose a valuation. One key question hangs over all the news: Can companies in this line of work make money?

• Just Eat Takeaway, Deliveroo, Delivery Hero, and DoorDash piled up $20.3 billion in operating losses from the time they went public until May of this year, according to calculations by the industry analyst theDelivery.World and the Financial Times. So it's little surprise that Wonder will pay just $150 million in cash for Grubhub and assume $500 million of debt.
• Just Eat reported a €301 million ($317 million) net loss in the first half of this year, up from €258 million ($272 million) in the same period last year. But it said adjusted EBITDA in North America, where Grubhub was its primary delivery operation, increased by 57% to €80 million ($84 million), so maybe Wonder is on to something.

Hungry Like The Wolves: Not all deals digest as well. Sports fans may know Lore's name from his minority ownership in the NBA's Minnesota Timberwolves, and his attempt to buy the team with former baseball star Alex Rodriguez. Current owner Glen Taylor claims they missed an option payment earlier this year and tried to call off the deal — it's now embroiled in a legal arbitration, while Lore and Rodriguez brought in some big guns, Michael Bloomberg and Eric Schmidt, to shore up their group of partners.

Written by Sean Craig