The tech stock narrowed its full-year net loss by 12 per cent to $48.5 million from the year-earlier $55 million. Earnings before interest, taxes, depreciation, and amortization fell 23 per cent to $10.2 million, but turned positive in the fourth quarter.
It was during this quarter in early July, when chief executive Vincent English laid off 35 employees, citing the need to reduce costs and prepare for rising prices and inflation.
In the company’s announcement on Tuesday, Megaport said it had paid the employees out $1.6 million.
However, management is keen to point out Megaport’s positioning in a world where enterprises move steadily from on-premise data storage infrastructure to the cloud.
Megaport, which facilitates the communication of data between various cloud ports, reported an 8 per cent bump in direct network costs, thanks to 26 new data centers plugging into the network over the year as well as capacity upgrades on intra-regional routes.
Total customers jumped to 2,643 from 2,285 with average revenue per port lifting to $1,120 from $974.
In the past year, Megaport rolled out its Virtual Edge product and partnered with big-name clients Cisco and VM-Ware, which are selling the service to thousands of their customers.
Since launch, Megaport has signed up 73 Virtual Edge customers and reported an average monthly revenue of $12,000 per customer across 17.9 services, the company said. Megaport has $82.5 million in cash.
A basket of meme stocks tracked by Bloomberg rose 3.7 per cent, extending a six-day rally of its own. Among the group’s top performers were GameStop and Express. Newly-public Magic Empire Global, a little-known Hong Kong-based financial services firm, extended to 2,825 per cent two-day arises since going public, attracting some retail attention.
“These meme stock rallies that are emerging will only last if US stocks broadly continue to head higher,” said Ed Moya, senior market strategist at Oanda. “After AMTD Digital reminded the WallStreetBets crowd of the potential skyrocketing moves, many retail traders are scanning their favorite plays and are looking to get back in.”
The rapid rise and subsequent fall for AMTD Digital both puzzled and captivated the markets. The stock posted an eye-popping arises from more than 32,000 per cent at one point before erasing a chunk of gains.
Heavily-shorted stocks like Wayfair, Rent the Runway, and those that went public via blank-cheque merger including 23andMe Holding Co saw double-digit rallies at one point as investors braced for volatility.
short-squeeze
Short covering from institutional investors may have boosted the recent surge, according to some on Wall Street. More than half of Bed Bath & Beyond shares available for trading are currently sold short, according to data from analytics firm S3 Partners, while AMC Entertainment, GameStop and Wayfair short interest each sit around 20 per cent.
An index tracking hedge funds’ high-conviction bets rose 1.8 per cent last week, trailing those favored by retail investors by 2.7 percentage points, the most since March, data compiled by Goldman Sachs show. While still early into August, the firm’s basket of retail favorites is on track for the best month since January 2021 relative to firms favored by hedge funds. The retail basket carries names including Delta Airlines, which just clocked the longest streak of weekly gains since 2020.
“Retail traders have to move quickly, because one headline can change the entire trajectory of the stock market,” said Quincy Krosby, chief global strategist at LPL Financial. “Retail traders are daring the Fed and they’re daring some professional investors, and they’re doing well so far. It’s dicey because it can go in the other direction really fast.”
Eumundi residents have thrown their support behind a proposed new supermarket which would mean they don’t have to travel to neighboring towns to buy groceries.
More than 150 public submissions were made to the Sunshine Coast Council during the public notification period.
Most of the respondents were in favor of the development at the southern gateway to town on Memorial Drive.
It includes a service station and retail center comprising a limited line supermarket, 272sqm of specialty retail and 76 car spaces.
Resident Joe Bowden, who has lived in Eumundi his whole life, said in his submission that the town “desperately needs” a supermarket and service station.
“We believe something similar should have been built as much as 30 years ago,” wrote Mr Bowden.
“I believe it would be better if SCC could do its best to speed up the process. The sooner this is built the sooner we can stop traveling to other towns for the same services.”
Another local Brian Esplin wrote that he currently has to drive to Noosaville or Cooroy to find a shop with a “good range of supplies at a fair price”.
“I understand from many friends and neighbors that there is broad community support for this proposal,” he wrote.
However some residents like Andrew Hillhouse are opposed to what he said would be a “small expensive boutique convenience store that does not supply the full range of needs”.
“The development supermarket and specialty shops will compete directly with the small amount of retail that currently exists in the main street, further eroding the usefulness and viability of the main street and the locally owned businesses,” he wrote.
The supermarket is proposed by Altum Property Group. Group director Alex Rigby said the town was “calling out” for basic infrastructure such as a supermarket.
“Many other hinterland towns now have their own supermarket and Eumundi residents feel that they have been left off the strategic planning map and combined with the rising cost of living, they are hopeful that Sunshine Coast Council support this supermarket application,” said Mr Rigby.
“We have already addressed most of the objections which were submitted and while our application acknowledges there are some non-compliances with various planning scheme provisions, we believe it also includes relevant matters which justifies an approval from council.
Located at 10 Memorial Avenue, at the southern entrance to the town.
“We are now waiting for council to review and consider the submission which is due to conclude on August 9.
“Then council has 25 days to assess and decide the application, however, during this stage council has the ability to issue a Further Advice Notice to raise any outstanding issues required to be addressed before the application can be decided.
“There’s still a way to go but we are confident our design and planning is appropriate for the area and we are also buoyed by the positive sentiment received from a wide variety of locals,” said Mr Rigby.
Altum Property Group has prepared a project information booklet.
Morningstar analyst Nathan Zaia said NAB’s bad debts were lower than he was expecting, but the market was most likely reacting to the net interest margins being down slightly and the increase in the forecasts for operating costs.
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“We didn’t really expect much in the way of net interest margin upside to be evident in the third quarter. I think you’ll probably see more of it in the fourth quarter,” he said. “It takes time. The last couple of rate increases aren’t even in this result, and it takes time after you’ve passed that onto your loans to get that benefit.”
Citi analyst Brendan Sproules said NAB had posted a weaker than expected profit update, which would likely disappoint the market given expectations for revenue growth were rising amid cash rate rises. He pointed out NAB’s underlying revenue growth of 2 per cent was well below ANZ’s 5 per cent.
However, he said NAB’s $11 million in bad debts was well below the consensus estimates.
“Looking to [the fourth quarter]the impact of recent RBA cash rate rises will deliver a very different set of results,” he said.
Goldman Sachs’ Andrew Lyons also said that given the back-end nature of the cash rate rises in the third quarter, the bank will see the benefits in the fourth quarter. He said the lower than expected performance was driven by weaker revenue.
White Funds Management managing director Angus Gluskie agreed and was surprised by the market’s reaction to NAB’s update.
“I think a significant positive in that NAB update is the fact that not only did the bad and doubtful debts remain negligible in the period to June 30, but also the direction of the arrears or impaired loans, in fact, continued to diminish,” he said.
He said the full impact of the rate rises is more likely to be felt in the near future.
NAB, alongside the other big banks, raised variable interest rates for home loan customers by 0.5 percentage points last week, passing on the Reserve Bank’s cash rate rise in full.
Since the RBA began raising interest rates in May, banks’ home loan rates have risen by far more than their rates on deposits, a dynamic that is boosting bank profits while attracting growing scrutiny from politicians and regulators.
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As the number of retirees grows and international travel becomes more problematic and expensive because of the pandemic, there is a surge in the number of gray nomads traveling Australia.
After all, what could be simpler than taking your caravan to drive around our country? No lost luggage, no fluctuating fares, and the freedom to do what you want.
An extended period as a gray nomad has the potential to affect the age pension.Credit:Shutterstock
However, there is a potential problem: the effect on your age pension.
A reader tells me that they use their son’s home as a base for mail and have rented out their house for three years, to gain some income as they travel.
However, they are concerned that their pension may be negatively affected because, once they move out, it would become assessable under the pension assets test. Their home is worth $900,000 which, together with their superannuation, would be enough to wipe out their pension eligibility.
This issue certainly needs thinking about if becoming a gray nomad is on your bucket list.
A Centrelink spokesman tells me that you can be absent from your home for up to 12 months and still be considered a homeowner, which means your principal place of residence is exempt from the pension assets test.
If you are overseas and unable to return because of circumstances beyond your control, this period may be extended. However, except for this circumstance, once the 12 months have expired, your house would be counted for the assets test. And this could be enough to make you lose the pension.
If you resume occupancy of your home within 12 months, and later leave the home again, a new 12-month exemption period begins.
There is a stark difference in mood in the economy.
Key points:
Consumers are deeply pessimistic, but still spending
Business confidence has improved
However, economists think spending will start to drop as interest rate increases bite
Businesses are enjoying prosperous conditions with high profits and rising confidence, but consumer sentiment has fallen into deeply negative territory.
In fact, the gap between business confidence and the gloomy consumer sentiment is the largest on record.
Despite that, households are still spending money as though they’re optimistic about the future, and it’s complicating the economic outlook.
But economists say it’s likely that rising inflation and uncertainty will soon begin to weigh on spending, and when that tipping point occurs we may see a real slow-down in economic activity.
Many expect that slowdown to occur next year.
Business confidence rises, despite headwinds
The latest monthly surveys on business and consumer confidence were released on Tuesday.
The NAB monthly business survey showed Australian businesses reported very positive conditions last month.
Businesses said they were enjoying strong trading conditions, high levels of profitability, and more demand for staff.
It pushed business confidence back above its long-term average, and comes despite a steep increase in purchase costs and labor costs.
“How long this can persist before demand begins to fall is a key uncertainty for the economy,” Commonwealth Bank economist Belinda Allen said on Tuesday.
“The bounce in confidence and conditions was somewhat surprising to us given the combined headwinds of high inflation, rising interest rates and depressed consumer sentiment.
Business confidence is back above its long-term average(Source: NAB)
“It is our view that the multitude of headwinds are likely to weigh on economic activity throughout the second half of this year.
“As such, we expect business confidence and conditions to ease as consumers tighten their budgets in what is an increasingly complex and challenging economic environment,” she said.
Diana Mousina, a senior economist at AMP Capital, said businesses had been able to push some of their rising costs onto customers without hurting their profits in recent months, but that situation may not last for much longer.
AMP Capital senior economist Diana Mousina said the underpayment of workers was “clearly a problem.” (ABC News: Billy Cooper)
She said when that point occurred, it could show up in declining business confidence.
“While businesses have so far been able to pass on higher prices to consumers, this can’t last as consumer spending power has been hit from rate rises and high inflation,” she said.
“The monthly confidence surveys showed a divergence between unhappy consumers and upbeat businesses.
“Also, while selling prices have risen, purchase and labor costs are rising faster which indicates some potential margin pressure for firms.
“As consumer spending volumes decline, which is just starting now, business confidence and conditions should also fail.”
AMP Capital senior economist Diana Mousina says rising business costs could soon start to bite(Source: AMP Capital)
Consumer sentiment becomes deeply negative
The Westpac-Melbourne Institute survey of consumer confidence showed households had become deeply pessimistic.
Bill Evans, Westpac chief economist, said the rapid decline in sentiment last month pushed household confidence to levels similar to the lows of COVID and the global financial crisis.
However, he said they were still well above the lows reached in the recession of the early 1990s.
“Since the recent peak in November 2021 the Index has fallen every month for a cumulative decrease of 22.9 per cent,” Mr Evans said.
He said interest rate increases are now weighing noticeably on confidence after the Reserve Bank delivered yet another 0.5 per cent rate increase last week.
consumer feeling (Source: Westpac)
“Respondents holding a mortgage were particularly unnerved by the rate rise,” Mr Evans said.
“Their confidence fell by 8.9 per cent compared to modest moves from tenants (0.2 per cent) and those owners who do not have a mortgage (-2.1 per cent),” he said.
Curiously, economists say households are still spending as though they’re confident about the future and it’s complicating the economic outlook, but they didn’t expect that divergence to last.
“Consumers are feeling abnormally pessimistic at the moment,” said Ms Allen.
“The combination of higher inflation, aggressive interest rate hikes and falling home prices together have contributed to very low levels of sentiment.
“[It] raises the risk that spending growth will slow more materially from here,” she said.
Where to fromhere?
Stephen Wu, an economist from Commonwealth Bank, said consumer confidence and spending typically moved together, so the large gap that had developed between the two was puzzling.
“On one hand, we have seen consumer sentiment decline to very low levels that are consistent with major economic disruptions,” he said.
“But on the other hand, consumption growth was robust in the first quarter of 2022, and looks to have been fairly solid in the June quarter.
Why is spending so strong if confidence is so weak?(Source: CBA)
However, he said data suggested rising uncertainty and inflation were two key factors pushing sentiment lower, and internal CBA data show there’s a clear moderation in spending growth already underway, with spending declining noticeably for discretionary goods in recent months.
“That is consistent with households’ budgets feeling the pinch,” he said.
“We do expect the combination of materially higher mortgage rates, lower home prices, and rising cost of living pressures to put downward pressure on real consumer spending.
“We anticipate softer spending will drive below-trend economic growth over 2023,” he said.
Ms Mousina from AMP Capital agreed.
“The monthly confidence surveys showed a divergence between unhappy consumers and upbeat businesses,” she said.
“The strength in the business survey is unlikely to continue as consumer spending volumes start to weaken and margin pressure accelerates.”
“We do think there will be people who are going to struggle with these higher rates but it’s probably a small cohort at this stage,” she said.
First-time buyers using various government support measures clustered into particular parts of the country over the past three years. In Melbourne’s outer suburbs they included Cranbourne, Mickleham, Craigieburn and Mickleham while in Sydney they included Narellan, Camden and Riverstone.
The NSW central west city of Dubbo and the Logan-Beaudesert area of Brisbane also attracted large numbers of first-time buyers who used low deposit schemes to get a foothold into the property market.
While house prices soared 25 to 30 per cent nationally through the pandemic, some areas had only moderate increases. Those areas are now experiencing falls in values.
In Melbourne’s Toorak, values climbed by 11.1 per cent through the pandemic but have fallen 10 per cent over recent months. It’s a similar story in nearby Armadale (up by 11.6 per cent through the pandemic but down 10.4 per cent) and Hawthorn (13 per cent increase but a subsequent 8.6 per cent drop).
In Sydney, values lifted by 9.5 per cent in Lakemba through COVID but have since fallen 7 per cent. Macquarie Park values jumped by 17.5 per cent but have since gone backward by 11.9 per cent while in Chippendale values went up 18.2 per cent but have given back 10 per cent.
CoreLogic research director Tim Lawless said tougher serviceability tests introduced by banking regulators would take some sting out of the recent lift in rates, but there would be some pain for people who had most recently entered the property market.
“Considering the dual impact of higher interest rates alongside high rates of inflation for non-discretionary items such as fuel, food, renting and energy costs, the impact on households is likely to be broad-based,” he said.
“With the cost of debt rising, and with inflation so high, we are likely to see a lot of households needing to cut back on their discretionary spending to ensure they can meet their debt obligations and purchase essentials goods.”
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The most recent increase in interest rates has made an immediate impact on consumer sentiment.
The ANZ’s weekly measure of consumer sentiment fell by 4.5 per cent last week to its lowest level since April 2020 during the then-nationwide pandemic lockdown. Confidence among homeowners dropped by 7 per cent.
ANZ’s head of Australian economics David Plank said the confidence was being affected by the RBA’s interest rate increases.
“So far in 2022, household spending has been robust despite very weak consumer sentiment, with strong employment gains, high levels of household saving and a desire to travel more than offsetting concerns about the rising cost of living,” he said.
“It remains to be seen whether this divergence between confidence and spending can continue.”
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Macdonald would later tell Strauss, according to the writ, that he had negotiated with the ASX for the escrow period to be reduced to one year because he was never a director or employee of GetSwift.
Just days before the float in December 2016, Strauss signed an agreement prepared by GetSwift that stopped him from selling the stock for 12 months for “the purpose of complying with chapter nine of the ASX listing rules,” according to the writ.
GetSwift was co-founded by former AFL footballer Joel Macdonald.Credit:Christopher Pierce
The value of GetSwift shares surged from 20¢ to more than $4 within 12 months of listing, but plummeted when the company became embroiled in a series of scandals over breaches of its disclosure and reporting obligations.
In February 2018, the company announced that fewer than half the contracts it had been spruiking were actually generating revenue.
Statements to the ASX announcing agreements with companies such as Commonwealth Bank, Fantastic Furniture and The Fruit Box also failed to mention that clients were only trialling, or contemplating a trial, on the GetSwift platform.
When Strauss’ shares were eventually released from escrow – almost three months after the agreed date – he was forced to sell them at significantly reduced prices. Had he sold at the peak of the market, the footballer-turned-investor would have made more than $15 million.
He would later learn from correspondence with the ASX that it had never imposed an escrow requirement on his shares, which were only ever subject to a voluntary arrangement, according to court documents.
Macdonald, who according to recent social media posts now lives in Florida, did not respond to phone calls or emails from The Age.
In 2019, the Australian Securities and Investments Commission started legal proceedings against the company and its directors, alleging GetSwift repeatedly misled the market in a series of ASX announcements about client agreements.
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Late last year, the Federal Court found that GetSwift had made misleading statements and breached its disclosure obligations. Macdonald and another director, Bane Hunter, were also found to have failed to meet their obligations as directors.
Justice Michael Lee said the evidence showed “what might be described as a public relations-driven approach to corporate disclosure on behalf of those wielding power within the company”.
Penalties will be determined during a three-day hearing to be held in January next year.
During a case management hearing last month, ASIC’s lawyer told the court it is seeking a $15 million penalty against the company, million-dollar fines against Macdonald and Hunter, and 12-year disqualifications for each of them.
The company is also facing a class action run by Phi Finney McDonald. A conditional settlement agreement was reached in the Federal Court in mid-2021, without any admission of liability by the company or the directors.
The company left the ASX in January last year to relist on Canada’s obscure stock exchange Neo, a move which was opposed by ASIC and then federal Treasurer Josh Frydenberg.
The company’s Australian subsidiary was placed into liquidation last month and the parent company this week filed for bankruptcy in the US.
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Millions of borrowers have been tempted by ultra-low fixed rates, most locking in at or below two per cent, after the national interest rate rises.
For Shelley Fitzerald, insuring herself against rising interest rates by fixing her loan last year seemed like the best option.
“I think I’ll just look at that next year. At least this way I know exactly what I owe in terms of repayments until next year,” she said.
But the majority of these loans will expire mid to late next year which could expose borrowers to a new loan rate that could be double, even triple, what they’re paying now.
According to the online home loan marketplace Joust, variable loans are making a comeback due to fixed rates rising sharply.
“We’ve seen over the last 12 months, the number of customers specifically seeking a fixed rate mortgage has almost halved,” Joust chief executive Carl Hammerschmidt said.
“Because the cost of funding for fixed mortgages has declined,” AMP Capital chief economist Shane Oliver said.
Many Australians fixed their rates after multiple national cash rate hikes. (9News)
Now borrowers are facing a big gamble – do they fix rates again or roll the dice on the variable rate?
“Whether you go fixed or whether you go variable is a difficult decision,” Sally Tindall of RateCity said.
“But the one thing people should do is look for a competitive deal.”
After four recent official rate rises, some economists are now predicting rate cuts next year.
Of the big banks, Commonwealth Bank has the most optimistic outlook, believing the rate will be 2.60 per cent by November before dropping to 2.10 per cent by the same month next year.
ANZ holds the most negative outlook, seeing rates rise to 3.35 per cent by November before dropping to 2.85 per cent by late 2024.
Aussies warned about fresh scam on second-hand sites
Instead, tech valuations have taken a substantial hit in both public and private markets, as interest rates rise and the cost of capital goes up.
“Conditions changed faster than expected and those assumptions I made were wrong. I have many learnings to take into the next phase of building Linktree. That next phase involves narrowing our focus on our long-term strategy by reducing roles that are no longer aligned with our roadmap,” Mr Zaccaria said.
“Friday will be a company-wide mental health day at Linktree. For a company like ours, so focused on culture and camaraderie, this will be difficult news. I don’t expect anyone to be their normal selves.”
The company, which was founded by Mr Zaccaria alongside his brother, Anthony, and their business partner, Nick Humphreys, in 2016, has a host of high-profile users including Selena Gomez and Dwayne ‘The Rock’ Johnson and brands such as TikTok, Red Bull and HBO.
VC funds have been reducing their later stage investments in start-ups as valuations have slid and companies have had to make choices to extend their capital runways. The latest Cut Through Venture figures show Australian start-ups raised $228 million in July – about two thirds down on this time last year and down on the $409 million banked in June.
Linktree is just one of a growing group of tech start-ups and so-called scale-ups to reduce its headcount.
Other local tech companies to make layoffs include Sendle, Voly, 5B Solar, Brighte, and Eucalyptus. A number of start-ups have also collapsed under the funding market pressures, including grocery delivery players Send and Quicko, as well as property tech company Yabonza and IPO hopeful Metigy.
Globally, a website tracking public reports of tech company layoffs indicates the highest number of redundancies since COVID-19 in the past three months, with 486 tech companies reporting redundancies worldwide.
Linktree is providing the staff made redundant with an average payout of 11 weeks, accelerated vesting of their options, health insurance for US employees until October 31, mental health support for three months, and all their laptops and work from home equipment will be gifted to them.
Its talent acquisition team will also help the former employees try and find new jobs. On Friday, the company will publish an opt-in Airtable with details of the redundant staff in an effort to encourage other employers to snap up the talent.
Linktree declined an interview request on Tuesday.
“The opportunity for Linktree is immense, and I have no doubt we’ll achieve everything we intend to and more for our creators. The right path is rarely the easy path. Today’s change to our team is the hard way, but it puts us in a strong position to deliver on the opportunity we have in front of us, ”Mr Zaccaria said in his message from him to staff.
The move from the AirTree-backed company comes a week after the local venture capital fund marked down the value of some of its early funds by 18 per cent.
AirTree led LinkTree’s $US10.7 million Series A raise in 2020 alongside Insight Partners.
