What's Behind This 24% Yield?

We last wrote about the popular InfraCap MLP ETF, (AMZA), in October ’17. At that point, it was trading at $8.51. We stuck a toe in the water, bought some units, collected a $.52 payout, and, as of 1/5/18 am, it was at $8.51.

Normally, you might think, “OK, it’s a breakeven on the price, no cap gain, but I’m ~ $.52 ahead from the distribution – if I sell, I’ll walk away with a 6% profit, and just owe 15%-20% on the qualified distribution”.

Not so fast pardner – there’s a problem with your calculation. If you bought those shares in a taxable account, about 80% of your $.52 distribution would have been return of capital, and would have decreased your cost basis by ~$.42.

So, your taxable short term capital gain would = $.42, plus the normal 15%-20% tax on the qualified distribution.

This problem wouldn’t have arisen, if you had bought AMZA in a tax deferred account, such as an IRA. AMZA also gets rid of K-1’s, and possible UBTI tax issues for IRA holders.

Sounds great right? But, there’s another problem, which SA contributor Trapping Value did a good job of explaining in his recent article about AMZA.

It’s about AMZA’s dividend coverage, or lack of it. The following info is from AMZA’s most recent financial statement, for year ending 10/31/17. It shows that their dividend coverage was only 60% for the last 2 fiscal years:

Here’s a quarterly breakdown, which shows the coverage increasing slightly, but only up to 62% in the most recent fiscal quarter:

(Source: Virtus site)

As the statements show, the fund made ~54% of its income on distributions from its underlying holdings, with the remaining income from writing and selling options. Looking at the funds underlying LP buys/shorts and its options sales and purchases shows a rather complex operation, to say the least, but one item stood out to us – its large position in the United States Oil ETF, (USO), and in the United States Natural Gas ETF, (UNG).

As of 10/31/17, AMZA had these positions in USO and UNG:

(Source: Virtus site)

That made us wonder if there was a correlation in price between AMZA and USO and/or UNG. It seems that AMZA and USO correlated fairly closely, especially in mid-2016 to mid -2017. This makes sense, USO is used as a proxy for the price of US oil. If oil prices crash, as they did in 2015, it eventually affects midstream companies, (especially those which have a lower % of fee-based contracts). (AMZA is the light purple line, and USO is the thicker magenta line.)

In October 2017, however, the AMZA/USO correlation fell apart, when USO headed north, and AMZA headed south, after its 10/3/17 ex-dividend date.

This made us curious, so we took a look at AMZA’s short positions. As it turns out, they had a minor short position in USO, as of 4/30/17.

(The right column is the $ value of the position, and the left column is the shorted share count):

(Source: Virtus site)

But sometime between then and 10/31/17, they entered into a much larger short position on USO. The right column is the $ value – their short position went from $5.5M as of 4/30/17, to $43.5M. as of 10/31/17.

(Source: Virtus site)

During this period, USO went from $10.19, on 4/30/17, to $10.93, as of 10/31/17, a ~7% move upward. This wasn’t a huge move, but it may explain part of the decoupling of AMZA and USO until late November 2017, when USO kept moving higher, and AMZA kept dropping. AMZA’s management was also long USO calls, which would’ve helped to mitigate losses on the short positions.

The other factor in this was also post ex-dividend trading – AMZA’s shares often tend to fall after its ex-dividend dates.

Given this trend, it makes you wonder if taxable account short term traders would be better off buying and selling AMZA in between its distribution dates, and avoid the quarterly distributions. That may sound counterintuitive, but those valleys and peaks sure look interesting, in hindsight.

As usual, though, the problem is figuring out when to buy, and not catch a falling knife, as buyers found out in 2015, when oil crashed, AMZA went south with it.

Holdings:

Energy Transfer Partners LP (ETP) still heads up the list – in fact its now over 20% of the fund’s holdings, as of 1/5/18. We covered ETP’s recent rejuvenation in one of our recent articles.

ETP’s GP, Energy Transfer Equity LP (ETE), is also #5 in the top 10 holdings. Management cut the distribution in half in 2017, which improved the distribution coverage.

Also on the list are Williams Partners LP (WPZ), Buckeye Partners LP (BPL), the venerable Enterprise Products Partners LP (EPD), MPLX LP (MPLX), Enbridge Energy Partners LP (EEP), EnLink Midstream LP (ENLK), Andeavor Logistics LP (ANDX), and ONEOK Inc., which replaced EQT Midstream Partners LP (EQT) in the top 10, as of 10/31/17:

As you may have heard, MLP’s are finding favor once again in the market, partially due to a more favorable tax rule – shareholders of pass-through entities, such as Energy MLPs, may now deduct 23% of the attributable income, before being subject to any taxation.

In addition, the new tax bill contains a bonus depreciation provision that allows all companies to immediately write off the full costs of capital improvements, instead of depreciating the new asset over time.

Couple the tax breaks with better oil prices, and you get a more upbeat attitude toward midstream MLP’s, which has played out in the past month. AMZA’s top 10 holdings are up anywhere from 5% to nearly 12% over the past month. Even with this recent resurgence, however, they’re mostly showing negative performance over the past year, excepting WPZ, EPD, and MPLX:

And there’s still a wide disparity between most of these LP’s unit prices and analysts’ average target prices – ETP, for example, is still 24% below its target price of $24.70, even though is has risen 11.7% in the past month:

These top 10 holdings range in yield from 5.35% to 12.05%, with an unweighted average of 7.47%. Their DCF/Distribution coverage factors run from a low of .82x for ETE, up to 1.40x for OKE, with an average of 1.11x:

Valuations:

EEP and ETP have the lowest Price/DCF, at 7.08 and 8.08 respectively. At the other end of the spectrum, ETE has an outlier 18.61 Price/DCF valuation. ETP and MPLX have by far the lowest Price/Book, at .80 and 1.38.

We took a look at various EPS projections for these LP’s. Although EPS isn’t the most meaningful metric for LP’s, (due to non-cash depreciation adn amortization charges knocking down net income), we wanted to get a general sense of growth projections for this group.

Yes, that 1750% growth figure is ridiculous – (we haven’t been smoking wacky tobacky) – it’s only that high because ENLK is projected to swing from a -$.02 loss to a $.33 gain). At any rate, you can see that there’s a lot of growth expected from these companies in 2018, with an average of over 25% for the group.

Financials:

WPZ has the lowest leverage in the group, at 3.46x for Net Debt/EBITDA, and.72 for Debt/Equity.OKE has the best ROE and ROI, with ANDX, EPD, and BPL also showing strong figures. EPD wins the ROA race, followed by BPL, and ANDX, while ANDX and EEP have the highest Operating Margins.

NAV:

AMZA’s NAV went from $25.00 at inception, down to $10.63, as of 10/31/16, and further declined to $8.37, as of 10/31/17. It was of $8.5125, as of 1/4/17.

(Source: Virtus site)

Summary:

So, what to do? With all of this good news about MLP’s, you’d think that AMZA could get some support from the market in 2018, which should support its NAV. This remains to be seen, and the declining NAV, and poor distribution coverage are big concerns.

We like the concept of the fund – it does solve some problems for IRA holders, giving them very high yield exposure to the MLP universe, without K-1 and UBTI hassles. Normally, we’d be long term holders in this type of investment, in an IRA, where the ROC wouldn’t bite us if we chose to sell. But, we wonder how long the fund will continue to pay $.52/quarter, which continues to decrease its NAV.

If they do cut the distribution at all, how will the market react? There are probably investors with IRA’s who were lucky enough to have bought it for under $7.00 in early ’16 – they may be approaching a breakeven below $4.00, so they could weather a further decline in price.

For now we’ve chickened out, and sold our AMZA shares, and we’ve opted for investing directly in some of the underlying LP’s, such as ETP, which is up 6% in the 2 weeks since we wrote about it.

Alternative Ideas:

Although it doesn’t yield 24%, this covered call trade for ETP is one way to generate a higher yield. It’s on our Covered Calls Table, along with over 30 other trades.

ETP’s March $20.00 call is $1.26 out of the money, with enough headroom for potential price gains, if it gets assigned. The Static Yield is 5.4% over this ~10-week period, or 26.10% annualized. The breakeven is $17.78.

If you want to play it even more conservatively, here’s a March put-selling trade that pays $.85, and gives you a lower breakeven of $17.15. You can see more details in our Cash Secured Puts Table.

A note of clarification – We offer 2 very different investing services – our new Seeking Alpha Marketplace site, Hidden Dividend Stocks Plus, focuses on undercovered/undervalued high yield income vehicles from US and foreign markets.

Our independent legacy site, DoubleDividendStocks.com, offers options selling strategies in tandem with high yield stocks.

All tables furnished by DoubleDividendStocks, unless otherwise noted.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.

Disclosure: I am/we are long ETP, MPLX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Two Major Shareholders Push Apple to Study Harmful Effects of Smartphone Addiction in Children

Two big shareholders of Apple (aapl) are concerned that the entrancing qualities of the iPhone have fostered a public health crisis that could hurt children—and the company as well.

In a letter to the smartphone maker dated Jan. 6, activist investor Jana Partners LLC and the California State Teachers’ Retirement System urged Apple to create ways for parents to restrict children’s access to their mobile phones. They also want the company to study the effects of heavy usage on mental health.

“There is a growing body of evidence that, for at least some of the most frequent young users, this may be having unintentional negative consequences,” according to the letter from the investors, who combined own about $2 billion in Apple shares. The “growing societal unease” is “at some point is likely to impact even Apple.”

“Addressing this issue now will enhance long-term value for all shareholders,” the letter said.

An Apple spokesman declined to comment on the letter, which was reported earlier by the Wall Street Journal.

Parental Controls

It’s problem most companies would kill to have: Young people liking a product too much. But as smartphones become ubiquitous, government leaders and Silicon Valley alike have wrestled for ways to limit their inherent intrusiveness.

France, for instance, has moved to ban the use of smartphones in its primary and middle schools. Meanwhile, Android co-founder Andy Rubin is seeking to apply artificial intelligence to phones so that they perform relatively routine tasks without needing to be physically handled.

Apple already offers some parental controls, such as the Ask to Buy feature, which requires parental approval to buy goods and services. Restrictions can also be placed on access to some apps, content and data usage.

The activist pressure is the latest in a series of challenges for the tech giant. Last week, Cupertino, California-based Apple said that all of its Mac computers and iOS devices, which include both the iPhones and iPads, faced security vulnerabilities due to flawed chips made by Intel (intc). At the tail end of 2017, the company apologized to customers for software changes that resulted in older versions of its iPhones running slower than newly introduced editions.

8 Big Predictions for Platforms in 2018

It’s that time of year again. Last year we made 7 predictions for 2017. By our count we went 7 for 7. So with 2018 primed to be a big year for platforms, here are our 8 predictions for platform businesses in 2018.

1.     No mainstream blockchain breakthrough, but several more cryptocurrencies explode in value

The Bitcoin and blockchain hype train rolls on. Much like AR and VR a year ago, Bitcoin is getting its moment in the media spotlight This year Bitcoin peaked just shy of $20,000 before cratering back to earth. But it still ended the year up 16x over its value on January 1, 2017, when it just topped $1,000. We aren’t predicting where it will end up this time next year – truthfully, nobody knows.

So far, most of Bitcoin’s, and the blockchain’s value is speculative. Despite a massive influx of investment and speculative cash this year, they still have no proven mainstream applications. Expect that to continue for 2018. While blockchain technology remains promising, there are still a host of challenges left to solve before it’s ready for prime time. It’s still at least a couple years away.

2.     Major tech unicorns start to go public

Last year produced a solid pipeline of tech IPOs, but 2018 should be even bigger. This year should see the first wave of the mega-unicorn platform startups going public.

While Uber is likely still more than a year away – not withstanding its cultural and legal problems, the company still has to figure out a path to profitability – Airbnb and Lyft look like contenders to go public. Other outside contenders include Slack and Pinterest. Airbnb, reportedly already profitable, is our pick for this year, but expect at least two major platform startups to hit public markets in the next twelve months.

3.     IoT gains traction with machine manufacturers

The Internet of Things hype cycle has come and gone over the last few years with little to show for it in terms of mainstream success. Yet in the background, investment and enthusiasm has been building for IoT in the industrial sector. Though GE has struggled and failed to achieve its goal of becoming a modern monopoly around the Internet of Things, many other companies have been experimenting successfully.

We expect 2018 to be the year where many of these smaller investments start to pay off. Early platform players will emerge this year in this area.

While it may take a few years for the winners to emerge, the Industrial Internet of Things will start to take practical shape in 2018.

4.     Large US platform companies take cues from China and start experimenting with more financial services

In China, Alibaba’s spinoff company, Ant Financial, has sparked a revolution in financial services. In a country that has lacked for consumer investment options, Ant and Alibaba rival Tencent have built large financial services platforms on top of their payment platforms.

Platforms in the U.S., both blessed with and challenged a much more robust financial services sector, have looked at their Chinese counterparts with envy. But slowly, this gap has started to narrow. Amazon, for example, has successfully been lending to merchants on its marketplace.

Over the next year, expect to see more of the major platforms experiment with offering financial products. The potential here is massive, and many banks aren’t exactly popular with consumers. While progress will be much slower than it was in China, for the major U.S. platforms it’s too big to ignore.

5.     Walmart continues its success due to Jet.com and its renewed platform approach

One of the biggest platform stories of the last year was Walmart’s newfound success. After years of failing in its efforts to combat Amazon, Walmart gained ground. Its acquisition of Jet.com has paid off handsomely as Walmart has begun to win back digital customers and merchants to its marketplace as well as to Jet’s.

This stark reversal will continue in 2018, as Walmart truly emerges as the second dominant player behind Amazon for ecommerce marketplaces. As we wrote at the time, Walmart’s acquisition of Jet was an expensive price to pay for second place, but it’s a move that will prove well worth the investment.

6.     Alexa continues to explode, but competition increases

This is the first of our predictions that continue from last year. After multiple failed attempts at building development platforms, we predicted that Alexa would be a big success. And in 2017, it was. Over the last year, Alexa has gone from a voice service on a handful of niche devices to a platform present on a growing number of hardware devices – many of them not made by Amazon – and supported by a large developer ecosystem.

Alexa’s success will continue in 2018, as it has become a centerpiece of Amazon’s future growth. However, given the promise of voice as a new interface, all the major platforms will continue to pour investment into their own voice development platforms. So far Google is the largest competitor, but expect to see more in 2018 from Facebook, Microsoft and others, such as Baidu in China. For now, Alexa remains the dominant number one in voice, but by the end of the year we expect a clear challenger to emerge.

7.     Modern monopolies face more political scrutiny

This was another of our predictions from last year – that platforms would become hot-button political topics. And boy did they ever. From fake news to Uber’s legal troubles, Google’s antitrust case in the EU, and the occasional presidential rant about Amazon, platforms were never far from the media and political spotlight.

And this issue isn’t going anywhere soon. Given platforms growing economic dominance, the unresolved challenge of how they should be handled politically will gather more attention this year. So far, these discussions have resulted in a lot of opinion pieces but little actual legislation. In 2018, that will likely start to change, as governments grapple with the economic and political implications of the growth of modern monopolies.

8.     More linear players engage in platform innovation by either building or buying

Last year we predicted that more linear enterprises would look at platform startups as big acquisition targets. And 2017 saw a host of major platform acquisitions, including IKEA buying Taskrabbit, Caterpillar acquiring Yard Club and Wyndham Hotels buying Love Home Swap. Verizon also finally bought Yahoo, which includes platforms like Tumblr. Other enterprises have taken a build approach, such as Klockner, a German metals company that announced at its recent Capital Markets Day its plans to launch a marketplace in 2018.

In 2018, we will see this trend continue in a big way, as more large enterprises come under pressure from platform businesses. Those who don’t launch platforms, like Grainger in 2017, will continue to struggle. While those that embrace platform innovation like Walmart will see much greater success.

All in all, 2018 will be a major year for platform businesses. Check this space for the latest major platform news!

Google Is Struggling With Friendly Neighborhood Bike Thieves

Between 100 and 250 company bicycles are stolen from Google’s campus every week, out of a fleet of around 1,100 so-called Gbikes. Or maybe ‘borrowed’ is a better word than ‘stolen’ – it’s complicated.

According to the Wall Street Journal, the bikes wind up in odd places, like schools, tavern roofs, and Burning Man. The people who take them are often residents of Mountain View, the town that’s home to Google’s headquarters. They often view the bikes as a kind of community service, even though they’re ostensibly meant for Google employees to use on the Google campus.

Google has been trying to control its losses, using roving teams to collect the bikes from around town, and recently installing GPS trackers. That’s how they learned one had made it all the way to the Burning Man festival in Nevada.

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But according to comments to the Journal from Mountain View residents, the deeper issue may be mixed feelings about the corporate giant. Some locals didn’t realize the bikes were supposed to be for Google employees only, suggesting they regard Google as a benevolent part of the community.

But others – perhaps including a man who claimed to have an entire garage full of the bikes – regard their borrowing as a kind of retributive justice against the massive company. One woman specifically cited the annoyance of Google Buses, which bring employees to work from around the San Francisco Bay, saying she borrowed the bikes to “balance it out.” The Google buses have been the target of protests in San Francisco, as a kind of proxy for income inequality and rising rents that have been blamed on the tech boom.

The bike situation is subtler and more complex, as befitting lower-key Mountain View. But it still reflects, in the words of one local speaking to the Journal, a sense among residents that “Google owes them somehow, someway.”

Ford Motor: Shares Can Roar A Lot Higher In 2018

Ford Motor‘s (F) shares have staged a strong breakout in September, and again in January 2018 on the back of an improving economic outlook. Even though Ford Motor has broken out to the upside again last week, shares are still quite cheap and provide income investors with a steady stream of sustainable dividend income. Ford Motor could surprise to the upside in 2018.

2017 was a good year for Ford Motor after all. Though auto sales have fallen off of their peak in previous years, 2017 was a successful year for auto companies nonetheless. Investor sentiment with respect to auto companies turned around in the second half of the year, and stocks have started off 2018 on a strong note, too. The Dow Jones Industrial Average reached above 25,000 points, the first time in the stock index’s history, fueled by investor confidence in the U.S. economy.

Ford Motor, heavily dissed and dismissed in the first half of 2017, has managed to come back.

Very strong breakout. See for yourself.

Source: StockCharts.com

One of the biggest successes for Ford Motor were F-series sales in 2017. F-series sales surged 9.3 percent year over year to 896,764 trucks being sold, which was Ford Motor’s best performance since 2005. Ford Motor achieved numerous other sales records in 2017, even though total sales slightly declined year over year. For instance, Ford Motor sold the most brand SUVs in a single year, 796,302 vehicles to be precise. Ford’s Escape and Edge also hit record sales in 2017, and Explorer sales produced the best results since 2005.

Despite those successes, Ford Motor’s total sales volume decreased year over year. While the company sold 2,614,697 cars, trucks and SUVs in 2016, Ford Motor sold only 2,586,715 vehicles in 2017, reflecting a decline of 1.1 percent.

That said, though, there are a lot of reasons to be optimistic for 2018, which could see an increase in the value of cyclical risk assets like Ford Motor.

Positive investor sentiment, record consumer confidence, and an upbeat economic outlook for 2018 all support an investment in Ford Motor. The recent Republican legislative success in pushing tax reform through Congress further aids both consumer and business confidence in the U.S. economy. Homebuilder confidence also hit an 18-year high in December.

In other words, the U.S. economy is on fire, and has potential to grow further, supported by fiscal stimulus and a high level of confidence in this economy. Confidence in higher wages/earnings down the road supports consumer spending, so there is a very decent chance that car, truck and SUV sales will surprise to the upside in 2018. Given the economic backdrop, now is not the time to get out.

Ford Motor Is In The Bargain Bin

Ford Motor’s shares are still dirt cheap (despite the surge in valuation in the last four months), and have an attractive risk-reward. They currently sell for ~8.4x next year’s estimated profits, which is a low multiple for a blue chip stock with a 4.6 percent dividend yield.

Chart
F data by YCharts

Your Takeaway

Investors have been speculating on an end to the boom in U.S. auto sales for years. However, 2018 is shaping up to be a pretty good year, for both the U.S. economy and U.S. car companies. Ford Motor has reached multiple sales records in 2017, and I expect momentum to carry over into 2018. SUV and truck sales have the potential to outperform as the U.S. economy roars ahead. Ford Motor is still dirt cheap, and has an appealing risk-reward. Investors hardly overpay for Ford Motor when paying a little more than eight times next year’s estimated profits. Buy for income and capital appreciation.

If you like to read more of my articles, and like to be kept up to date with the companies I cover, I kindly ask you that you scroll to the top of this page and click ‘follow‘. I am largely investing in dividend paying stocks, but also venture out occasionally and cover special situations that offer appealing reward-to-risk ratios and have potential for significant capital appreciation. Above all, my immediate investment goal is to achieve financial independence.

Disclosure: I am/we are long F.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Uber ex-CEO Kalanick selling nearly a third of stake for $1.4 billion: source

(Reuters) – Uber Technologies Inc co-founder Travis Kalanick, who was ousted as chief executive in June, is selling nearly a third of his 10 percent stake in the ride-services company for about $1.4 billion, a person familiar with the matter said on Thursday.

Kalanick’s sale is part of a deal struck by a consortium led by SoftBank Group Corp which is taking a 17.5 percent stake in Uber, mostly by buying shares from early investors and employees. SoftBank last week secured agreements from shareholders who were willing to sell, and the deal will close early this year, Uber said.

The SoftBank deal values Uber at $48 billion, about a 30 percent discount from its most recent valuation of $68 billion. However, the investor consortium is also making a $1.25 billion investment of fresh funding at the older, higher valuation.

Kalanick had offered to sell half of his total shares, but because there was a limit on how much SoftBank will buy, he will sell just 29 percent, according to the source. Other investors also did not get to unload as many shares as they had hoped because of such widespread interest to sell.

The former CEO owns 10 percent of the company, which means his sale will unload 2.9 percent of Uber shares and earn him about $1.4 billion, the source added.

A spokesman for Kalanick declined to comment. SoftBank and Uber could not be reached immediately for comment.

The sale would make the Uber co-founder a billionaire for the first time, not just on paper. Kalanick has never before sold shares of the company he ran for almost a decade, the source said.

The SoftBank deal offers investors and employees what could be their last chance to sell shares in a company-approved transaction before Uber’s long awaited initial public offering, planned for 2019.

The transaction marks a victory for new CEO Dara Khosrowshahi, who helped broker the deal and who will benefit from a deep-pocketed investor like SoftBank.

Bloomberg first reported Kalanick’s plans to sell part of his stake.

Reporting by Liana B. Baker and Heather Somerville in San Francisco; Additional reporting by Philip George in Bengaluru; Editing by Lisa Shumaker and Muralikumar Anantharaman

Uber ex-CEO Kalanick plans to sell 29 percent of stake: source

(Reuters) – Uber Technologies Inc co-founder Travis Kalanick, who was ousted as chief executive in June, is selling nearly a third of his 10 percent stake in the ride-services company for about $1.4 billion, a person familiar with the matter said on Thursday.

Kalanick’s sale is part of a deal struck by a consortium led by SoftBank Group Corp which is taking a 17.5 percent stake in Uber, mostly by buying shares from early investors and employees. SoftBank last week secured agreements from shareholders who were willing to sell, and the deal will close early this year, Uber said.

The SoftBank deal values Uber at $48 billion, about a 30 percent discount from its most recent valuation of $68 billion. However, the investor consortium is also making a $1.25 billion investment of fresh funding at the older, higher valuation.

Kalanick had offered to sell half of his total shares, but because there was a limit on how much SoftBank will buy, he will sell just 29 percent, according to the source. Other investors also did not get to unload as many shares as they had hoped because of such widespread interest to sell.

The former CEO owns 10 percent of the company, which means his sale will unload 2.9 percent of Uber shares and earn him about $1.4 billion, the source added.

A spokesman for Kalanick declined to comment. SoftBank and Uber could not be reached immediately for comment.

The sale would make the Uber co-founder a billionaire for the first time, not just on paper. Kalanick has never before sold shares of the company he ran for almost a decade, the source said.

The SoftBank deal offers investors and employees what could be their last chance to sell shares in a company-approved transaction before Uber’s long awaited initial public offering, planned for 2019.

The transaction marks a victory for new CEO Dara Khosrowshahi, who helped broker the deal and who will benefit from a deep-pocketed investor like SoftBank.

Bloomberg first reported Kalanick’s plans to sell part of his stake.

Reporting by Liana B. Baker and Heather Somerville in San Francisco; Additional reporting by Philip George in Bengaluru; Editing by Lisa Shumaker and Muralikumar Anantharaman

Why the Bomb Cyclone Hitting the East Coast Is So Unusual

Now, the first thing you should know about a bomb cyclone is it’s just a name—and unlike a sharknado, it’s not a literal one. The very real scientific term describes a storm that suddenly intensifies following a rapid drop in atmospheric pressure. Bombing out, or “bombogenesis,” is when a cyclone’s central pressure drops 24 millibars or more in 24 hours, bringing furious winds that can quickly create blizzard conditions and coastal flooding.

It’s actually not that rare a phenomenon; meteorologists estimate these kinds of storms break out in the Northern Hemisphere about 10 times a year. They can go by other names, like Nor’easter and mid-latitude cyclone, which may explain why you’ve never heard of one before Winter Storm Grayson started dumping snow in Tallahassee on Wednesday morning. But Grayson isn’t your typical bombogenerator.

It’s what happens when everything comes together just right (or just wrong). Grayson is expected to explode up the East Coast between now and Friday, intensifying as it makes its way from Florida to Nova Scotia, blowing record snowfalls around at category 3 hurricane wind speeds. “This storm is a synoptic meteorologist’s dream,” says Paul Huttner, who watches the weather for Minnesota Public Radio. “It’s a perfect alignment of the three things we look for.”

The first is a warm conveyor belt of tropical moisture, which the Gulf Stream is shuttling out of the Caribbean and right up the Atlantic coast. That’s pretty normal for this time of year. What’s less normal is the huge subzero air mass that dipped down from the Arctic about 10 days ago, plunging the Great Lakes and Eastern US into a sustained deep freeze.

Every year, around this time, the sun stops shining above the Arctic circle. No radiation means no heat, which means all that air gets real cold real quick. Most of the time, jet streams—the easterly flowing air currents near the upper reaches of the atmosphere—keep that cold air bottled up in the Arctic. But sometimes, upper air waves shift, forcing a buckle in the jet stream and allowing all that air to spill southward.

“The coldest air on the planet just happened to slide over Northeast America,” says Huttner. “And with this incredible moisture feed we’ve now got a huge temperature contrast. By the time this thing gets up into New England we’re talking about a good 100 degrees of temperature contrast across the center of the storm. And generally speaking, the stronger the temperature contrast, the deeper the storm.”

Differences in temperature, you see, lead to differences in pressure. As the pressure drops, air rushes in. The faster it drops, the faster the air moves. And thus, a winter storm is born.

Unlike hurricanes, which slow down as they head north and get away from the moist heat of the ocean, bomb cyclones tend to reach their peak intensity when they hit New England. That’s where the maximum temperature contrast usually is. It’s also where the third thing meteorologists look for—a low pressure trough in the upper levels of the atmosphere—happens to be occurring right now.

NOAA scientists are estimating that Grayson will wind up dropping between 60 and 70 millibars over 48 hours, ending Thursday evening near Nova Scotia. Not only would this be one of the most rapid rates of bombogenesis associated with an East Coast storm, but with its central pressure expected to bottom out near 950 millibars, it puts Grayson among the strongest offshore storms in recent history. (For comparison, Nor’easters such as Nemo, Juno, and Stella didn’t dip below 970 mb.)

This is leading to faster and stronger winds than you’d typically see in a storm this time of year, says Gregg Galina, a meteorologist with NOAA’s Weather Prediction Center. He’s been monitoring Grayson from the agency’s outpost in College Park, Maryland, which was just starting to get some snow and light winds by 9pm Eastern time Wednesday. It’s the first winter storm to really test out NOAA’s new GOES-16—its most advanced weather satellite ever—which first locked into position over the US in December.

GOES-16 scans the Earth five times faster than previous sats, sending back images every 15 minutes. That, along with new ozone-measuring capability, helps Galina forecast the storm’s impact. The compound acts as a kind of tracer for low pressure pulling down on the stratosphere, and gives an idea about the vorticity—or the spin—of the atmosphere. “It’s kind of like an ice skater spinning with her arms out,” says Galina. “As she brings them closer to her body she spins faster. It’s the same in a cyclone; the increased spin tightens the wind field.”

Galina and others on his team will be feeding satellite data into their models over the next few days to predict what Grayson has in store. And they’ll also use data collected from inside the eye of the storm. On Wednesday afternoon, a military air crew loaded up a WC-130J Super Hercules with about 30 dropsondes—parachute-equipped weather sensors—and took off from Keesler Air Force Base in Biloxi, Mississippi headed straight into the storm’s path. Over the next 10 to 12 hours, they released the sensors into the frozen gale, and as they fell they sent back real-time readings on air pressure, temperature, humidity, wind direction, and speed.

All of this is necessary because there’s still a ton scientists don’t know about winter storms. In particular, how much of a power boost they draw from rapidly-warming oceans. “The global ocean is as warm now as it has ever been,” says Kevin Trenberth, a senior scientist at the National Center for Atmospheric Research. “The main consequence of that is that winter storms can dump much bigger snowfalls if they combine with cold air, like the kind coming down on the Montreal Express right now.”

And at least according to some climate scientists, this pattern is likely to repeat itself even more in the future. Rutgers climatologist Jennifer Francis is one of a growing number of researchers who believe that the warming Arctic will leave less of a temperature difference between the equators and poles, weakening the jet stream. A weaker jet stream would allow cold air to push down, or warm air to wander north, more frequently, setting up more opportunities for a violent atmospheric showdown. “We expect these patterns to become more frequent, but they may align differently in different years,” says Francis.

Others are less sure. Kerry Emanuel, an atmospheric scientist at MIT, notes that as you go higher up into the atmosphere, the opposite trend is true: The tropics are warming faster than the poles, 10 miles up. “Winter storms depend on both surface temperature and higher up in the atmosphere,” he says. “The models are all over the place about whether these are going to get more or less intense. Frankly, it’s an unsolved problem in the field.”

Researchers will have to wait until Grayson runs its course to know for sure whether it’s a record-breaking storm. And a little bit longer to find out if “record-breaking” is just the new normal.

Peter Thiel’s Founders Fund Goes Big on Bitcoin

Peter Thiel and his venture capital firm, Founders Fund, are big believers in Bitcoin.

The PayPal co-founder and other Founders Fund partners bought $15 million to $20 million worth of the cryptocurrency that’s now worth hundreds of millions of dollars, according to a Wall Street Journal report on Tuesday that cites unnamed sources.

The report didn’t say exactly when Thiel or his VC firm first bought Bitcoin, whose value has fluctuated from record highs to dramatic declines in recent months. The volatility has alarmed some economists, who worry of a bubble.

Thiel and the Founders Fund, however, don’t appear to share those concerns, and are instead pitching Bitcoin to their investors as “a high-risk, high-reward wager similar to its other venture bets,” the report said.

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Shares of Bitcoin jumped over 13% on Tuesday from $13,412 to $15,216 after the report, according to Coindesk.

In October, Thiel reportedly said during an investment conference in Saudi Arabia that people are “underestimating” Bitcoin and he compared the cryptocurrency to gold.

“If bitcoin ends up being the cyber equivalent of gold it has a great potential left,” he said at the time. About other cryptocurrencies, however, Thiel said he was “skeptical of most of them.”

Other cryptocurrencies include Ripple, Ethereum, and Litecoin.

A Founders Fund spokesperson declined to comment on the report.

Facebook Will Live-Stream This Year’s Golden Globes Pre-Show

The event billed as Hollywood’s biggest party will kick off early on Facebook this year. The 2018 Golden Globe Awards pre-show will live-stream exclusively on the social network this Sunday, Jan. 7.

On Tuesday, the Hollywood Foreign Press Association (HFPA) and Dick Clark Productions announced the new partnership with Facebook, which will live-stream the two-hour event (dubbed “The HFPA Presents: Globes Red Carpet Live”) including awards handicapping and A-list stars in red carpet interviews, between 6 and 8 p.m. ET on Sunday. The actual broadcast of the 75th annual Golden Globes will then air immediately afterward on NBC from 8 to 11 p.m. ET, with late-night comedian Seth Meyers hosting.

NBC will also air its own red carpet coverage ahead of the awards show, starting one hour before the main event. Meanwhile, once the main broadcast starts at 8 p.m. ET, Facebook will still offer online fans some behind-the-scenes footage on the Golden Globes Facebook page as well as on the @goldenglobes account on Facebook-owned Instagram.

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Sibyl Goldman, Facebook’s head of entertainment partnerships, noted in a statement that the tech giant has enjoyed “a long collaborative relationship” with Hollywood. “We always aim to create unique experiences which bring communities together, and partaking in the kickoff of award season in conjunction with the Hollywood Foreign Press Association, is a demonstration of our commitment to bring fans together through entertainment they enjoy,” Goldman said.

Last year, HFPA and Dick Clark Productions partnered with Twitter on the Golden Globes pre-show live-stream, with AdWeek reporting that roughly 2.7 million Twitter users tuned in at some point to watch that streaming event. The Golden Globes page on Facebook currently has about 2.3 million followers. And, by switching allegiances from Twitter to Facebook, the Globes can benefit from being promoted on two popular social platforms (Facebook and Instagram) that have a combined 2.8 billion active monthly users.