Shares in Software Maker Elastic Soar 94% in First Day of Trading

Shares of enterprise software company Elastic boomed on the company’s first day trading.

The company’s shares, priced at $36 the previous day, closed on Friday at $70, a whopping 94% increase.

Elastic raised $252 million in its IPO, but the huge investor interest on Friday means that the company left a lot of money on the table by failing to price its shares higher.

In an interview, Elastic CEO Shay Banon said that he’s happy with the decision to set the $36 IPO price, which he described as “fair” given a market that he believes is “frothy.” He said that Elastic was “in the unique position where we didn’t really IPO to raise money,” but did so in order to be perceived by customers as a “mature” company that’s no longer merely a startup.

The sudden spike in the company’s share price appeared to have surprised Banon.

“I think how quickly it shot up, I think it’s people believing in the future of the company,” Banon said. “I cannot control the market.”

Elastic’s IPO marks a major event for Banon, who first began developing the company’s search technology while “trying to build a recipe app” for his wife who was a chef at a London restaurant. The challenge proved daunting.

“How the hell do you implement a search box into all these recipes?” he said.

Since then, Banon and Elastic has been embedding search systems into several popular companies’ apps and internal technology. When people swipe left or right on the dating app Tinder, Elastic’s search technology helps retrieve and match users to their potential true love.

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Elastic’s technology also powers Uber’s ride-sharing app so that drivers are matched to passengers, Banon said. Uber also uses Elastic’s technology to help it search within and calibrate its internal data centers so that the app doesn’t suddenly go offline, he added.

Like most technology companies that have either recently gone public or plan to do so in the near future, Elastic is unprofitable. The company lost $52.7 million on sales of $160 million for its fiscal 2018, according to regulatory filings, and lost another $52 million last year on $88 million in revenue.

The results show that Elastic’s sales are growing quickly while its losses remain flat, which signals an improving business.

The company has the added challenge of creating a profitable business based on open-source technology, which developers can access for free. Elastic’s search tech is based on the popular open-source Lucene search technology, but it sells to companies extra features like security and support.

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The goal is “making sure we have enough incentives to convert those free users to paying customers and then retaining them,” Banon said.

Elastic’s competitors include some of the world’s biggest technology companies like Amazon and its AWS cloud business, and Oracle’s Endeca search product, the company said in its regulatory filing.

And while Elastic is a partner of Google and its cloud computing business, Google could always invest more in its Google Custom Search Engine tool, to make it more of a competing product. For now, Elastic refers to Google’s search product, which companies can add to their websites for search capabilities, as merely an “an advertisement-based site search tool with limited user controls.”

To compete with tech giants, Banon is optimistic that Elastic’s connection with the Lucene search tool and open source community will ensure that customers will keep buying Elastic’s proprietary software and support.

“It is a great moat,” he said.

Tesla's Musk, ordered to defend fraud settlement, takes aim at SEC

(Reuters) – Tesla Inc Chief Executive Elon Musk on Thursday mocked the U.S. Securities and Exchange Commission, hours after a federal judge ordered him and the regulator to justify their settlement of securities fraud charges.

FILE PHOTO: Tesla Chief Executive Elon Musk stands on the podium as he attends a forum on startups in Hong Kong, China January 26, 2016. REUTERS/Bobby Yip/File Photo

“Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work,” Musk, a frequent critic of investors betting against the electric car company, wrote on Twitter. “And the name change is so on point!”

The settlement last Saturday was intended to resolve charges that Musk misled investors in tweets on Aug. 7, including that there was “funding secured” to take his Palo Alto, California-based company private at $420 per share.

Musk agreed to pay a $20 million fine, and step aside as Tesla’s chairman for three years.

Tesla also accepted a $20 million fine, despite not being charged with fraud.

Musk’s latest tweet came less than four hours after U.S. District Judge Alison Nathan in Manhattan ordered him and the SEC to explain by Oct. 11 in a joint letter why their settlement was fair and reasonable and would not hurt the public interest.

The judge said it was her regular practice to request such letters.

Nathan “may want to know why Tesla is paying a fine because the CEO doesn’t know when to shut up,” said Adam Pritchard, a University of Michigan law professor and former SEC lawyer.

FILE PHOTO: A newly installed car charger at a Tesla Super Charging station is shown in Carlsbad, California, U.S. September 14, 2018. REUTERS/Mike Blake

Tesla declined to comment. The SEC did not respond to requests for comment on Nathan’s order and Musk’s tweet.

Shares of Tesla closed down 4.4 percent at $281.83, and fell another 2.2 percent after market hours following Musk’s tweet.

Some judges have complained about being viewed as rubber stamps for SEC settlements.

Among them was Nathan’s colleague Jed Rakoff, who had objected to the SEC’s decades-old policy of letting some corporate defendants settle without admitting or denying wrongdoing, as Musk did.

But in 2014, the 2nd U.S. Circuit Court of Appeals overturned Rakoff’s rejection of a $285 million SEC settlement with Citigroup Inc, saying he should have given “significant deference” to the regulator.

The 2nd Circuit has jurisdiction over Nathan’s court, and lawyers said prior to Musk’s latest tweet that his settlement would likely win approval, though orders such as Nathan’s are not too common.

“In and of itself it’s not an ominous sign,” said Jordan Thomas, a partner at Labaton Sucharow and former SEC lawyer. “The vast majority of settlements like this are approved by courts.”

Pritchard said he saw no “serious chance” for Musk’s settlement to be rejected based on 2nd Circuit precedent. “This is just a hoop to be jumped through,” he said.

The settlement was announced on Sept. 29, two days after Musk was charged.

The case is SEC v Musk, U.S. District Court, Southern District of New York, No. 18-08865.

Reporting by Joanthan Stempel in New York and Sonam Rai in Bengaluru; Editing by Anil D’Silva and Lisa Shumaker

Instagram COO Says the App Is in Good Hands After Founders’ Exit

The tech world was stunned last week when Kevin Systrom and Mike Krieger, the co-founders of the wildly popular, Facebook-owned photo-sharing app, Instagram, abruptly announced they were leaving the company.

The platform’s billion users were, meanwhile, left to wonder and worry—what will happen to the beloved app?

Instagram COO Marne Levine, speaking at the Fortune Most Powerful Women Summit in Laguna Niguel, Calif., on Wednesday, assured her audience that the business was in safe hands. (As it happens, Levine is also leaving her role at Instagram. Earlier this summer, she accepted a job to run global partnerships and business development for Facebook and she is currently transitioning into the role.)

While calling the departure of the co-founders “so sad” and a “big loss for us all,” Levine, who considers the founders mentors and close friends, as well as “product visionaries,” waved off a question about reported clashes between the founders and Facebook and promised the photo app’s future was sound.

“Kevin and Mike are just so thoughtful,” she said, suggesting that the Instagram founders had considered the app’s future in deciding to leave. “It would only be that they would look out across the entire thing and say, ‘What is the state of the product, what is the state of the business? Do we have the right leaders in place? Does this make sense to think about what the next chapter is?’”

She added that, while the moment was unexpected, it was “only natural” that the founders, “whose vision… had fundamentally changed the way we connect and share,” would be thinking about what’s next after spending six years steering Instagram at Facebook. She pointed out that when the social media giant acquired Instagram, the photo-sharing platform had just 13 employees and “no business.” Today, it has more than a billion users and “a thriving and growing business” with more than two million active advertisers and more than 1,000 employees worldwide. “It’s is in a very different place,” she said.

She added that Systrom and Krieger had “established a model for successful acquisition and integration” at Facebook. Mark Zuckerberg, Sheryl Sandberg and other leaders, she said, “really value Instagram and its unique value and really understand and appreciate what it’s all about.”

Of Instagram’s new leader, Facebook veteran Adam Mosseri, she also had good things to say. “Adam is going to be great…he has deep product experience, deep design experience…he shares Kevin’s sensibilities around simplicity and craft. He really gets it.”

NYSE President Wants Regulators To Make It Easier For Companies To Go Public

New York Stock Exchange President Stacey Cunningham wants it should be easier for companies to go public, saying the need for sophisticated compliance sometimes delays how quickly a rising company lists shares on the stock exchanges.

And that runs counter to the very purposes of the public markets.

“When a company goes public they’re available to all investors to take benefit of that growth,” Cunningham said on Tuesday at Fortune‘s Most Powerful Women conference in Laguna Niguel, Calif.

Cunningham said that the number of public companies has fallen by about half in 20 years because of a multitude of factors, including the availability of massive amounts of private capital. But she also said that compliance requirements and other requirements such as those governing how to communicate with shareholders, were leading many companies to wait to be of a certain size so they could afford and support such units before listing on the stock market.

“If you wait for a company to become a really big company then most of that growth has already happened, so the everyday investor misses out,” she said.

Cunningham became the first female leader in the 226-year history of the NYSE, a unit of Intercontinental Exchange (ice), in May, about a year and a half after archival Nasdaq OMX (ndaq) also named a woman to lead it, CEO Adena Friedman.

Both face enormous pressure on the business as stock trading continues to shift to different marketplaces- some 40% of stock trading now occurs off of stock exchange, a far cry from the NYSE-Nasdaq duopoly of only a few years ago. The two exchanges fight hard for new listings. Some of NYSE’s big wins this year include Spotify (spot), BJ’s Wholesale Club (bj) and AXA Equitable Holdings.

Defending Wall Street, which she said “often gets a pretty bum rap,” Cunningham said flourishing exchanges were key to helping companies thrive. “It (NYSE’s core mission) is to raise money so they can go out and change the world and to provide investors with the opportunity to participate in that growth,” she said.

UK could go it alone on digital services tax: finance minister

BIRMINGHAM, England (Reuters) – Britain will unilaterally implement a digital service tax if there is no international agreement soon on how to tax big internet companies, finance minister Philip Hammond said on Monday, blaming U.S. tax reforms for slow multilateral progress.

Britain’s Chancellor of the Exchequer Philip Hammond delivers his keynote address at the Conservative Party Conference in Birmingham, Britain, October 1, 2018. REUTERS/Toby Melville

“The best way to tax international companies is through international agreements but the time for talking is coming to an end and the stalling has to stop,” Hammond told the Conservative Party conference in the English city of Birmingham.

“If we cannot reach agreement, the UK will go it alone with a Digital Services Tax of its own,” he said.

Britain has previously said it was considering taxing the revenues of internet firms such as Facebook and Google until international tax rules are changed to cope with digital firms that can shift sales and profits between jurisdictions.

Speaking at a later event, Hammond said the tax would only apply to firms above a “quite substantial” size threshold and would involve putting a value on the content and data of British consumers as a share of the firms’ overall value and calculating what proportion of the business is based in the UK.

He said talks at an international level had been stalled by U.S. tax reforms aimed at ensuring internet firms pay their taxes there.

“I have to say my prognosis is that it is quite unlikely that we will be able to achieve international agreement in anything like a sensible time scale because the U.S. isn’t frankly onside with this agenda,” he said.

Hammond said Britain was also looking at ways to update its competition policy in response to the power of major companies.

“The expansion of the global tech giants and digital platforms, while of course bringing huge benefits to consumers, raises new questions about whether too much power is being concentrated in too few global technology businesses,” he said.

Hammond has appointed President Barack Obama’s former chief economist, Jason Furman, to lead a review of Britain’s competition regime, to ensure it is fit for the digital era.

The Confederation of British Industry warned that any tax moves should not damage the UK’s global competitiveness.

“All businesses are increasingly digital. Any new approach must be built on evidence from enterprise or it risks being blunt and counterproductive,” Carolyn Fairbairn, the CBI’s Director-General, said in a statement.

Reporting by William James, Writing by Guy Faulconbridge and William Schomberg; editing by Michael Holden, Richard Balmforth