The SEC’s Crypto Crosshairs

In June 2021, Coinbase announced it would launch a new feature called Lend. Today, the Securities and Exchange Commission told Coinbase: “If you do, we will sue.” ⚖️

The regulator gave Coinbase a Wells Notice, which is a letter indicating that a regulator might bring charges against a respondent. The SEC supposedly believes that Coinbase’s Lend product constitutes an offering of a security. Lend allows users to earn 4% APY on USD Coin holdings.

Coinbase CEO Brian Armstrong was quick to express his frustrations with the agency, implying that Coinbase proactively entered into a dialog with the agency. Armstrong called the SEC’s behavior “sketchy.” According to Coinbase’s Chief Legal Officer Paul Grewal, Coinbase has been discussing the new product with the SEC for months.

Ripple — the company behind the fifth-largest crypto by market cap — has also been battling the SEC over similar claims. Ripple CEO Brad Garlinghouse tweeted in sympathy with Coinbase.

$COIN stock has fell more than 5% this week. The latest saga of “the SEC SEC-ing” indicates that other crypto lending firms will be next on the chopping block. 😪

Lululemon flexed some yogi-licious earnings in after hours today, pushing the stock up more than 13%. 🚀 🧘

The athleisure company posted earnings per share of $1.65 (analysts expected $1.19) and revenue of $1.45 billion (analysts expected $1.34 billion). Lulu’s revenue is up 61% YoY. Most surprisingly, revenue in the company’s men’s category grew marginally faster than its women’s category during the quarter.

As the economy has reopened, the company’s physical stores have reclaimed their share of sales. Company-operated stores’ net revenue is up 142% YoY. E-commerce, which appreciated significant growth during the COVID-19 pandemic, still grew despite the reopening. E-commerce/D2C sales blossomed 8%. Talk about a Power Vinyasa. 😉 

Lululemon briefly touched on its acquisition of MIRROR, an “interactive home gym.” MIRROR’s revenue has grown double-digits since the fitness startup was acquired last June in a $500 million deal. The deal represented an expansion into tech.

In 2019, Lululemon set ambitious revenue growth targets for the next five years. Based on these earnings, $LULU is running steeply ahead of its own revenue targets. The company is on track to best its 2023 target by the end of this year. 🎯 For the full year 2021, Lululemon expects to post more than $6.19 billion in net revenue.

Namaste, Lululemon. 🙌 You can read the whole report here.

PayPal is making a big jump into the buy now, pay later (BNPL) marketplace with a beefy $2.7 billion acquisition. The company is acquiring Paidy, a Japanese BNPL firm. 

PayPal’s move follows a flurry of catalysts for the BNPL space. In June, BNPL firm Klarna raised over half a billion. In August, we covered surveys conducted by The Motley Fool and Morning Consult which supported the strong adoption of BNPL services in the U.S. In the days that followed our coverage, Square acquired Afterpay for $29 billion. It was the biggest deal in Australia’s history. In the last week, Affirm Holdings announced a partnership that would bring BNPL to Amazon.  💪 💰

PayPal already offers BNPL in a handful of countries, most prominently in the U.S. However, Paidy will give PayPal access to the world’s third-largest e-commerce market. This will be PayPal’s second-biggest acquisition ever, second only to Honey (acquired for $4 billion in Nov. 2019). Guess we’ll have to wait and see how it pays off…  😉

The Theranos trial is live, and we have to say … it’s pretty juicy.

The ‘breakthrough’ medical company, valued at over $10 billion during its peak, is being prosecuted for lying to both patients and investors. Prosecution claims that Elizabeth Holmes, Theranos’ founder, knowingly produced faulty technology which put patients at risk and defrauded investors. 😬

Theranos’ patented technology involves small machines which rapidly generate blood tests and require tiny amounts of blood — a breakthrough in both blood testing and cost efficiency. In reality, though, one patient received a faulty negative pregnancy test from Theranos; the test illegitimately prompted her to change her medication. Several other patients also received faulty results. 

Holmes’ attorney, Lance Wade, claimed Theranos was an “innovative company that had proprietary technology and failed because of complicated reasons not related to fraud.” Theranos was awarded 176 patents for its blood-testing IP.

Prosecutor Robert Leach, however, asserted “[Holmes] skewed the medical decisions of patients and she put them at risk.” Regarding Theranos’ troubled financial situation, high monthly burn rate, and Holmes’ personal spending habits, Leach said “Out of time, out of money, Elizabeth Holmes decided to lie [to investors].”

Allegedly, Holmes claimed Theranos would make $100-200 million a year to investors when $100,000 was far more realistic. Yikes. We’ll be keeping up with this blockbuster trial. 🕵️‍♂️

Follow the WSJ’s live coverage of the trial here.