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Is It Time to Go Back to the Moon, This Time to Stay?

Follow Sam on Twitter @skorusARK


Jeff Bezos’s private space company, Blue Origin, held an exciting event Thursday night during which it made some announcements and took some swipes at SpaceX. The talk began with Bezos’s vision for O’Neill colonies, miles-long structures floating in space that are rotating to create artificial gravity. Bezos believes that humans have become “planet chauvinists” and that the long-term solution to overcrowding and scarce resources is to live in space.


Bezos understands that O’Neill colonies will take generations to evolve. He was able to create Amazon because shipping services, credit cards, the internet, and other infrastructure already were in place. In contrast, Blue Origin will have to build the infrastructure for space in two key steps: slashing the cost to reach space and then using materials.


Blue Origin’s plan to reduce rocket costs is embodied in the New Glenn Rocket which will be inexpensive, reliable, and timely. Bezos expects that the first stage rocket will be reused 25 times with minimal refurbishment and will be able to launch in weather conditions suitable more for planes than traditional rockets. It also should be able to land on a moving barge, avoiding delays associated with rough seas. 


Bezos also announced a lunar lander that will be able to land 3.6-6.5 metric tons on the surface of the moon and could be instrumental in helping the US to achieve its goal of landing humans on the moon by 2024. In development for three years, it has been designed to be refueled by hydrogen extracted from ice on the moon. 


The new space race is taking shape and generating significant excitement. We are familiar with Musk’s vision for a Mars colony and now we know that Bezos’s vision is for floating space. Both center on reusable rockets, but the similarities end there. 


A full clip of Blue Origin’s presentation is available here.



Uber’s Future Looks Troubling

Follow Tasha on Twitter @tashaARK


After pricing at $44, the low end of the expected $44-$50 range, Uber closed on Friday at $41.57. Uber’s current $70 billion valuation seems difficult to justify.


To reach profitability, both Uber and Lyft probably will be forced either to raise prices or to increase the cut they take from their drivers. Uber’s contribution margin already has declined and this week, in its first earnings report since going public, Lyft did not disclose gross bookings, perhaps because growth in its core ride hailing business is slowing down, leaving its scooter business to bolster net revenue growth. According to ARK’s research, the scooter business is uneconomic and unsustainable as currently configured. Now we wonder if Uber will take the same route, reporting net revenue growth that has been boosted by scooters and Uber Eats and obfuscating the fact that its core riding hailing business is faltering.


Having faced a number of setbacks, Uber also is lagging in the longer term race to develop autonomous technology. Without the requisite technology stack, it probably will be forced into partnerships like the one it struck with Daimler, which does not seem to be very far advanced either. Even if such relationships were to be successful, ARK expects that Uber’s share of gross revenues would shrink from over 20% today to just 3-5% as it evolves toward nothing more than a lead generator for the autonomous platform provider.


Uber Cash Is Using Deposits as a Customer Retention Strategy

Follow Max on Twitter @mfriedrichARK


One of the challenges Uber and other ride-hailing services are facing is high customer churn. As a result, they are sparing no effort to make their customer bases more sticky, offering anything from loyalty rewards to actual credit cards. In the words of New York University (NYU) Professor Aswath Damodaran: “They are throwing everything at the wall and [hoping] it sticks”.


One of Uber’s efforts to retain customers is Uber Cash, a Digital Wallet the balance of which can be spent on Uber rides and Uber Eats. Users can top-up their Uber Cash balance by $25, $50 or $100 and get cash-back rewards. A $100 top-up costs consumers only $95, as Uber pays the $5 balance.


Uber Cash appears to be operating at a loss. As shown below, given payment processing fees and rewards, for $100 worth of rides, Uber pays $4 more for a customer who uses Uber Cash than one who does not. Uber pays higher fees per transaction for non-Uber Cash users. The reward payments of $0.5, $1.5 or $5, respectively, for Uber Cash users who top up with $25, $50 or $100 seem to make it unprofitable. Based on its underlying economics, Uber Cash’s customer retention strategy seems to be causing operating losses as the ride-hailing companies battle for rider loyalty.


Uber Cash




Binance’s Security Breach Sparks Controversy on the Possibility of a Bitcoin ‘Reorg’

Follow Yassine on Twitter @yassineARK


Cryptocurrency exchange Binance reported a security breach that resulted in the theft of 7000 bitcoin (BTC), or $45 million.


Binance disclosed that it would reimburse holders for the stolen funds with its user-funded emergency insurance fund. In the meantime, it has frozen all user deposits and withdrawals until a full investigation of the breach is complete. According to The Block, this hack brings the total amount of bitcoin stolen from cryptocurrency exchanges to $1.35 billion.


Binance’s security breach has stirred controversy around whether it could have or should have coordinated a chain reorganization to recoup the funds. Jeremy Rubin, one of Bitcoin Core’s contributors, was the first to bring up the possibility in this tweet.


A blockchain reorganization occurs when an alternative chain accumulates more proof of work from miners than the original one. If so, transactions on the previous chain are invalidated as miners switch over to the ‘longest’ chain.


In the scenario proposed, Binance would reveal the private keys of the hacked coins, sign a Bitcoin transaction conflicting with the hack, and redistribute the stolen BTC to miners in the conflicting transaction. If the incentive to conduct a blockchain reorg is high enough, miners would construct an alternative chain, invalidating the stolen funds.


Under Bitcoin’s design rules, nothing should stop Binance from attempting to incentivize miners to carry out a reorganization on Bitcoin. Whether a reorg would have been feasible to coordinate at scale in a timely manner is highly unlikely, as was realized by Binance’s CEO, who quickly ended the pursuit.




Roku Seems to be Winning the Smart TV War

Follow James on Twitter @jwangARK


One in three smart TVs sold in the US run on Roku’s operating system (OS), making the Roku OS the #1 OS for smart TVs. OS wars are notoriously hard to win. Remarkably, at only $9 billion in market cap, little Roku has bested both Google and Amazon in the fight for control of smart TVs.


Like many success stories, Roku started off in hardware but diversified to software and content. Few TV vendors have the software chops to create a modern connected TV OS. By focusing purely on Roku OS and practically giving it away, Roku has attracted TV manufacturers and increased its installed base. Today, it has more than 29 million active accounts streaming 3.5 hours of content per day on average, making it one of the most engaging platforms in the US.


The $70 billion US TV ad market represents a huge opportunity for Roku. Despite their best efforts, Google and Facebook have yet to attract anything more than marginal TV ad dollars. YouTube ads are considered low-end inventory while Facebook does not have enough long form videos to serve advertising. Roku provides ad formats reminiscent of traditional TV while targeting and measuring with the latest digital tools. A secular shift in TV consumption from cable to over the top (OTT) could position Roku as one of the winners in the future of TV advertising.


The First Use of CRISPR to Target Cancer Directly May Enter US Clinics

Follow Manisha on Twitter @msamyARK


CRISPR genome-editing promises to cure genetic diseases and cancer while accelerating the pace of therapeutic discovery. While several CRISPR-based investigational drugs are treating cancer in human trials, all of the trials have been using CRISPR as a tool to create therapeutic products instead of using it as a drug. Now, however, the first investigational drug application (IND) using CRISPR to target cancer directly probably will be filed this year and probably will recruit patients in 2020.


The Gene Editing Institute at Christiana Care Health System, a nonprofit medical system headquartered in Delaware, plans to combat chemotherapy resistance in k-ras positive non-small cell lung (NSCL) cancer patients by deploying CRISPR against the NFR2 gene. The NFR2 gene prevents chemotherapy from penetrating tumors. Eviscerating it could help patients respond to chemotherapy.


In pre-clinical studies, the Gene Editing Institute demonstrated that the elimination of NFR2 slowed the proliferation of cancerous cells and prolonged life. If the IND is accepted by the Federal Drug Administration (FDA), the Institute plans to enroll 6-10 metastatic NSCL chemo-resistant cancer patients and delete their NFR2 genes, using CRISPR, to convert the patients into positive responders.


In the future, CRISPR could treat and cure cancer.

ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.



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