Super Typhoon Maria Threatens Asia – Hurricane Maria Haunts Islands And Chris Forms

The tropics are quite active this morning. As the weekend draws to a close, meteorologists like me are tracking Super-Typhoon Maria, Tropical Storm Beryl, and the newly formed Tropical Storm Chris. Each of these storms brings unique threats. However, I could not overlook the fact that a current storm named Maria is bearing down on Asia as the impacts of Hurricane Maria still haunt Puerto Rico and the Caribbean as Tropical Storm Beryl approaches the islands.

CIMMS

Super Typhoon Maria in the Pacific.

According to the NOAA Hurricane Research Division website, a super-typhoon is a “term utilized by the U.S. Joint Typhoon Warning Center for typhoons that reach maximum sustained 1-minute surface winds of at least 65 m/s (130 kt, 150 mph). This is the equivalent of a strong Saffir-Simpson category 4 or category 5 hurricane in the Atlantic basin or a category 5 severe tropical cyclone in the Australian basin.” Super-typhoon Maria is a significant threat to parts of Asia including Japan’s Ryukyu Islands, eastern China, and Taiwan in the coming week. The storm carries the potential for significant flooding, landslides, and wind-related threats.

Some readers tend to be “Atlantic or Gulf of Mexico”-centric when it comes to tropical cyclone activity, which is why I often like to draw attention to the western Pacific and other regions. Some of the most powerful tropical cyclones on the planet happen in that region. Typhoons, on average, tend to be stronger because the waters of the western Pacific are typically warmer. A recent study published in Nature Geoscience by researchers at the University of North Carolina-Chapel Hill also revealed that typhoons have gotten stronger by 50% in the past 40 years. This finding is consistent with previous studies in the region.

Joint Typhoon Warning Center

Projected path of Super Typhoon Maria

The Joint Typhoon Warning Center (JTWC) is an agency of the U.S. Department of Defense with responsibility for issuing tropical cyclone warnings for the Indian and Pacific Oceans. The graphic above illustrates the current JTWC projected path for Super Typhoon Maria. Several major populated areas in China could experience excessive rainfall, winds, and storm surge by mid-week.

Ironically, as people in Asia keep a close eye on Maria, U.S. citizens in Puerto Rico and residents of the Leeward Islands are preparing for Tropical Storm Beryl or its remnants. While the National Hurricane Center expects Beryl to weaken to a Tropical Depression or Wave in the coming hours or days, strong gusty winds and locally heavy rainfall are expected for Puerto Rico, the Leeward Islands, the Virgin Islands, Haiti, and the Dominican Republic. This is not trivial since Hurricane Maria ravaged the region in 2017. The power grid was essential “repaired” not replaced in Puerto Rico. Puerto Rico Governor Ricardo Rossello has declared a state of emergency, and people are purchasing supplies. Hurricane Maria is justifiably the reason for high alert. It changed every person’s life on this island and caused many to flee the island.  Jacksel Rodriguez worries about Puerto Rico and whether it is ready for even a minimal tropical system. On the CNN website Rodriguez said, “most of the power grid was just repaired, not updated, and the power goes out even with light winds — imagine a big storm.” Electrical power and resources are no longer taken for granted on the islands, and they will be haunted by Hurricane Maria for years to come.

Even as Beryl advances, the National Hurricane Center, at the time of writing, is monitoring Tropical Storm Chris off the coast of the Carolinas. The storm is expected to linger for a few days before moving out to sea along a northeastward trajectory. It may even reach hurricane strength. The main threats for the Carolina and nearby coastal regions are rip currents, rough seas, windy conditions, and persistent rainfall. Mariners, residents and visitors to the region should stay on alert.

NOAA/B. McNoldy on Twitter

Tropical storms Beryl and Chris

Dr. Marshall Shepherd, Dir., Atmospheric Sciences Program/GA Athletic Assoc. Distinguished Professor (Univ of Georgia), Host, Weather Channel’s Popular Podcast, Weather Geeks, 2013 AMS President

Fast-Growth Royalty LP Dropping K-1s, Yields 7.6%, Big Q3 Deal Will Up DCF 15%

Have you ever owned a royalty LP? Usually, there’s a fixed amount of assets for which the LP gets paid royalty interests in a variety of ways, and a target termination date, usually with no growth. The reserves are just drawn down, and may or may not be replaced.

However, Kimbell Royalty Partners LP (KRP) is a royalty LP with a difference – it’s actively managed, meaning that it can grow its interests through acquisitions and dropdowns. This is precisely what KRP’s management has done. Since its February 2017 IPO, production has grown 19%, and revenue has grown 44%:

(Source: KRP site)

This, in turn, has led to 40% distribution growth since the IPO:

(Source: KRP site)

Profile:

KRP is based in Ft. Worth, TX, and is managed by its general partner, Kimbell Royalty GP, LLC, and owns mineral and royalty interests in approximately 5.7 million gross acres in 20 states and in nearly every major onshore basin in the continental United States, including ownership in more than 50,000 gross producing wells with more than 30,000 wells in the Permian Basin.

(Source: KRP site)

KRP has ~35% of its gross acres and 60% of operators’ rigs in the very active Permian Basin, but it also has a presence in several other major production areas, which gives it some asset diversification:

(Source: KRP site)

Management succinctly pointed the advantage of KRP’s royalty setup on the Q1 ’18 earnings call:

“We are (a) pure mineral and royalty company with no working interest unlike some of our peers, and with no operating costs or capex requirements. We are currently generating 9.6% cash on cash yield with a tax yield of over 90%.”

The infographic below details the cycles of KRP’s mineral leases. Unlike a working interest, in which an LP shares production costs, KRP’s receives royalties, typically 20% – 25%, based upon revenues from mineral leases, with the operators assuming all production costs.

(Source: KRP site)

Here’s a look at KRP’s proved developed reserves and proved undeveloped reserves, as of 12/31/17:

(Source: KRP 2017 10K)

Proved developed reserves comprised 74% of KRP’s total reserves, with production evenly split between oil and NGL liquids vs. natural gas. However, 73% of KRP’s revenues came from oil and NGL liquids, and 27% came from natural gas:

(Source: KRP site)

KRP’s acreage has an overall average breakeven price of $40.00 due to its concentration in the Permian, SCOOP, and STACK production areas. Although its royalties are based upon revenues, these lower cost areas are attractive to operators, which aids KRP’s leasing program.

(Source: KRP site)

Distributions:

Like most of the LPs we cover in our articles, KRP pays in a Feb-May-Aug-Nov. cycle.

We’ve added KRP to our High Dividend Stocks By Sector Tables (in the Basic Materials section).

In general, royalty LPs pay out all of their cash available for distribution – CAFD – to unitholders, so their distribution coverage is usually ~1X, which is what it has been for KRP over the past three quarters. Due to KRPs not having any capex costs, its CAFD is very close to its EBITDA amounts:

Taxes:

Although KRP currently issues a K-1, management intends to convert the company to a C-Corp structure soon. Unitholders would receive a 1099 instead of a K-1, after this conversion.

They mentioned this on the Q1 ’18 earnings call, referring to one of their competitors, Viper Energy Partners, (VNOM):

“we definitely saw the 30%-plus uptick in Viper’s price when they converted to a C-Corp. And I think that the market seems to be valuing the liquidity that generates. It opens an investor base of roughly 60 times greater than what the existing MLP universe is.”

They also stated on the press release for the Q3 deal: “Increased liquidity in the stock attracting new people that would rather have 1099 than a K-1, we think is very attractive for us.”

A Big Deal Coming In Q3 ’18:

“On 5/29/18, KRP announced that it had agreed to acquire the mineral and royalty interests held by Houston-based Haymaker Minerals & Royalties, LLC and Haymaker Resources, LP (collectively, “Haymaker”) in a transaction valued at approximately $404M.”

“The purchase price for the acquisition is comprised of $210M in cash and 10 million common units of Kimbell, valued at approximately $194M. KRP will raise the cash portion of the purchase price through a private placement of 7.00% Series A Cumulative Convertible Preferred Units to an affiliate of Apollo Global Management, LLC, for gross proceeds of $110M, and through borrowings of $114M under a new $200 million revolving credit facility. The Boards of Kimbell and Haymaker have unanimously approved the acquisition, which is expected to close in the third quarter of 2018, subject to customary closing conditions.”

Bob Ravnaas, Chairman and CEO of Kimbell, said,

“This is a transformative acquisition for our company which we expect to deliver significant value and benefits through both increased scale and significant operating leverage that will drive improved profitability.”

“We expect the acquisition to be immediately accretive to distributable cash flow per unit.” (Source: KRP site)

Although this deal will increase KRP’s unit count by 10M units, to ~26.34M units, the acquisition should increase KRP’s production by 148%, which translates into a production rise of 56% per million common units. Its pro forma Net Royalty Acres will grow by 60% to more than 114,000 net acres.

Management expects this acquisition to increase KRP’s DCF/unit by 15% initially, (accounting for one-time integration costs), and then by 20% on a run-rate basis.

(Source: KRP site)

Based upon the Q1 ’18 DCF figure of $0.42/unit, this 20% rise implies DCF of $0.50/unit, which would translate into a ~9% yield:

Risks:

Asset Impairment Charge – KRP took a non-cash $54M impairment charge to its properties in Q1 ’18. By law, they must periodically assess the carrying value of their properties. The net capitalized costs of proved properties aren’t allowed to exceed their future net revenues discounted by 10%. This risk increases during commodity pricing downturns.

(Source: Q1 ’18 10Q)

This non-cash charge resulted in a negative net income of -$52.82M in Q1 ’18. Excluding the $54M charge, adjusted net income was $2.28M:

(Source: Q1 ’18 10Q)

Commodity Prices – KRP has exposure to commodity prices, for which it has a partial hedging program in place. In Q1 ’18, management extended KRP’s hedging program to include hedges through Q1 2020. They hedged ~30% to 40% of oil and natural gas revenue streams using fixed price swaps.

“At March 31, 2018, fixed price swaps for the remainder of 2018 consisted of 32,450 Bbl of oil (fixed rate at $56.00 per Bbl) and 265,650 MMBtu of natural gas (fixed rate at $2.71 per MMBtu).

Fixed price swaps for 2019 consisted of 43,070 Bbl of oil (fixed rate at $53.07 per Bbl) and 352,590 MMBtu of natural gas (fixed rate at $2.76 per MMBtu).

On March 29, 2018, we entered into additional fixed price swaps for the first quarter of 2020 consisting of 11,011 Bbl of oil (fixed rate at $56.03 per Bbl) and 96,915 MMBtu of natural gas (fixed rate at $2.94 per MMBtu).” (Source: KRP site)

Additional Positive Factors:

Premium Permian Land Values – KRP owns a lot of increasingly valuable land in the Permian Basin, which it can also monetize, via asset sales. In Q2 ’18, management sold a minor asset, acreage in the Delaware Basin, which was less than 0.06% of KRP’s total net royalty acres, for ~$9M. These 41 net royalty acres were only producing ~24 Boe/day, which is less than 0.7% of the company’s total production.

“Permian Royalty assets are very expensive right now. We are (were) fortunate to acquire a lot of Permian assets before the latest drilling boom at extremely attractive prices. So this sale will allow us to monetize a small portion of our previous investment and maximize value for our unitholders. We are very well positioned in the Permian with about 35% of our total Royalty portfolio situated there, and we may consider additional sales when we have the opportunity to deliver compelling value to our unitholders.” (Source: Q1 ’18 earnings call)

Future Dropdowns – KRP’s sponsors also have additional assets which they can drop down to KRP, with production and reserve characteristics similar to Kimbell’s existing portfolio. In fact, these assets are larger than KRP’s current holdings, so there’s plenty of room for growth via dropdowns.

Performance:

Early unitholders have done well with KRP – it’s up 21.82% since its February IPO and has risen 35.38% in 2018. It has risen from ~$17.50 to ~$22.00 after its well-received Q1 ’18 earnings report in early May.

Analysts’ Price Targets:

Even with that big rise, KRP is still 8.3% below analysts’ lowest price target of $24.00 and is 14.73% below the $25.80 average price target.

Valuations:

We took a look at KRP’s valuations vs. two peers, BSM Minerals LP (BSM) and Viper Energy Partners LP (VNOM). Currently, KRP is a much smaller entity, with a market cap of just $380M, vs. $3.7B and $3.6B for BSM and VNOM, respectively. KRP tops the list for yield, at 7.64%, and has the cheapest price/book by far, at 1.82. Its price/CAFD per unit is in the middle of the group, as is its price/sales.

Leverage:

KRP is the most conservatively leveraged of these three LPs, with a net debt/EBITDA of 1X, and a tiny debt/equity of just .15. Its current ratio is strong, at 6.07X, but VNOM wins the prize there, at 21.60. Its net debt/EBITDA ratio improved from 1.2X, as of 12/31/17, to 1X in Q1, due to increased production and higher commodity prices.

Although the Haymarket deal has a pro-forma debt/EBITDA leverage of 2X, management is committed to keeping KRP’s debt/EBITDA leverage below 1.5X on a long-term basis.

Debt and Liquidity:

KRP has a credit facility borrowing base of $100M, and commitments of $50M, leaving availability of $50M. KRP had borrowings of $30.8M as of 3/31/18, with current liquidity of $69 million if they exercise the accordion feature that doubles their revolver to $100 million.

However, in connection with the Haymarket acquisition, they secured a new, larger revolving credit facility of $200M, which activates upon the closing of that deal in Q3 ’18. They’ll draw $114M to close the deal, leaving $64 million in undrawn capacity.

(Source: KRP site)

Options:

KRP doesn’t have options available yet, but you can track more than 30 option-selling trades daily in our Covered Calls Table and our Cash Secured Puts Table.

Summary:

We rate KRP a long-term buy, based upon its attractive yield, and its expected distribution and production growth.

All tables furnished by DoubleDividendStocks.com, 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 KRP.

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.

Mapbox Ushers In The Next Generation Of Mapping With New SDKs

Anshel Sag is a Moor Insights & Strategy associate analyst focusing on mobility and virtual reality

Mapbox

A glimpse of the new Mapbox Vision SDK.

Right now, a lot of people are very excited about the future of technologies like AR, VR, AI, and autonomous vehicles. However, as I’ve written before, most of these technologies are relatively useless without contextual awareness. I have also written in the past about the importance of image sensors and how they enable AI and autonomous systems to better understand the world around them. Combining location awareness and vision is incredibly difficult and is fundamentally what enables app developers to anchor digital assets in the real world for augmented reality. There are currently only two companies capable of doing this— Google and Mapbox. Today I wanted to talk about the lesser known of the two.

Mapbox announces new SDKs and partnerships

Mapbox has a leg up on Google in that it provides more flexible options for linking image sensors and contextual awareness. Just in the last month, Mapbox announced numerous partnerships and initiatives to further improve location awareness. First, Mapbox announced a partnership with the world leader in mobile chip design, Arm, to implement its new Vision SDK. Mapbox claims the Vision SDK will provide a fusion of visual and location data to improve the accuracy and overall experience of AR. The Vision SDK is arguably one of the biggest announcements out of Mapbox in quite some time—it expands the company’s capabilities while also giving its developers more tools to work with when it comes to live location. It will help developers enable more robust AR in places like automotive navigation. The more developers utilize Mapbox’s platform in their applications, the more Mapbox will thrive.

Mapbox also announced the React Native AR SDK and SceneKit SDK for iOS—two developer kits geared towards building AR experiences for mobile. These announcements have the potential to be game-changers. Most AR applications today behave very similarly to VR applications, confined to a single room or a single surface (like a table). Because of this, many consumers and businesses don’t find AR much more compelling than VR—both confine you to a certain space. The real world is where AR really shines, but only if applications can utilize live location correctly and with a reasonable amount of accuracy. I believe Mapbox’s live AR mapping capabilities will enable the next phase of world-scale AR apps, bringing AR much closer to realizing its full potential. Mapbox is investing heavily to enable AR virtually anywhere, which is why you see them continuing to add SDK support and features that make world-scale AR easier to implement.

While Google and Mapbox both offer similar capabilities, its worth noting that some of the biggest applications in the world run on Mapbox’s mapping platform. These companies include Foursquare, Snapchat, Tinder, Uber , and many more who rely on map accuracy and live location. Mapbox’s trustworthy status as an independent, 3rd party likely appeals to many of these companies. As more users become aware of how their data is used by companies like Google, they will likely become more concerned about how their location data is gathered, and by whom.

Wrapping up

Ultimately, I believe these new SDKs from Mapbox will help usher in the next generation of AR, AI, and Autonomous Vehicle applications. The company’s flexibility and independent status make the company an attractive option for developers wary of Google, and I think we’re going to see its platform integrated into more and more applications in the coming years. We’re only at the very beginning of what’s possible with this technology, and I look forward to seeing what’s next.

Disclosure: Moor Insights & Strategy, like all research and analyst firms, provides or has provided research, analysis, advising and/or consulting to many high-tech companies in the industry, including Google , Mapbox, and many others. The author does not have any investment positions in any of the companies named in this article.

Venture firm Atomico signs up ex-Uber and Google managers

LONDON (Reuters) – Atomico, which runs Europe’s largest independent venture fund, has hired former managers from Google and Uber to help drive international expansion for its portfolio of more than 50 start-ups and growth stage firms, it said on Thursday.

Jambu Palaniappan and Steve Crossan who have both just been employed by Atomico, which runs Europe’s largest independent venture fund, are seen here at Atomico’s offices in London, Britain, July 4, 2018. REUTERS/Eric Auchard

Jambu Palaniappan, an early Uber [UBER.UL] executive who spearheaded the company’s expansion into Europe, Middle East, Africa (EMEA) and India, will be an adviser on international expansion for Atomico companies.

Atomico also named former Google manager Steve Crossan as an entrepreneur in residence and adviser on artificial intelligence, “deep tech” engineering (AI) and industrial internet strategies.

London-based Atomico, co-founded by Skype pioneer Niklas Zennström, has been an outspoken advocate of the idea that Europe can develop world-class companies in emerging technology categories to compete with U.S. and Chinese tech giants.

It argues that Europe is now funding ambitious entrepreneurs and technical talent, but needs more executives with operating experience to build bigger, more globally competitive firms.

“There’s a huge opportunity for companies to internationalize from their beginning,” Palaniappan said of the impact of cheap, cloud-based software, standard mobile software platforms and the rise of cross-border payment mechanisms.

“There is now so much of an infrastructure out there for new businesses to draw on,” Crossan added.

Palaniappan, who left Uber as EMEA regional manager for its food delivery business, Uber EATS, late in 2017, will focus on the venture fund’s marketplace start-ups, which include investments such as second-hand goods exchange Fat Llama.

As Google’s first product manager recruited in Europe, Crossan launched Google Maps in the region, ran its Cultural Institute and led Google’s integration of AI firm DeepMind into Google products and datacentres.

Crossan led a team of Google engineers who created “speak2tweet” one weekend at the height of the Arab Spring protests in 2011. It provided a bypass to Egyptian government efforts to block social media, allowing people in Egypt and later Syria to dial an international number and leave a voice message that was converted into text and posted to Twitter.

Early last decade, Crossan also ran or founded a series of UK start-ups including Runtime Collective, which later became social media monitoring site Brandwatch.com.

Reporting by Eric Auchard; Editing by Mark Potter

Ketogenic Diet Improves Response To Cancer Drug In Mice, But Alone May Accelerate Cancer

Mice on a ketogenic diet have shown remarkable responses to a class of cancer drug, which has previously experienced largely underwhelming results in human clinical trials. The study published today in Nature shows how a combination of a ketogenic diet with a type of cancer drug called a PI3K inhibitor, strongly improves the effect of the drug in mouse models of cancer.

A well-described side-effect of PI3K inhibitors is high blood sugar and increased insulin levels. This side effect normally passes, but can be prolonged in patients with insulin resistance, such as those with diabetes. When this happens, the therapy is discontinued because insulin stimulates PI3K signalling in tumors and can cause cancer growth. This gave the researchers a clue that artificially modifying levels of insulin and glucose could affect the response to the drug.

“We knew from the early 1990s that PI3Ks were mediating insulin responses. The (PI3K inhibitor) drug was taking effect, but just for 30mins then insulin overrides it. When the insulin level is down, it is very effective,” said Lewis Cantley, leader of the research and Professor of Cancer Biology in Medicine at Cornell University.

Cantley and his team used mouse models of several different types of cancer to show that glucose and insulin can block the effects of PI3K inhibitors, possibly affecting their efficacy. Giving the mice a ketogenic diet to lower blood glucose, or treating with a drug called a SGLT2 inhibitor, which prevents reabsorption of glucose by the kidneys, made the drug much more effective in slowing cancer growth in the mice.

PI3Ks are a family of enzymes involved in regulating how a cell metabolizes glucose and are vital to control cell function. PI3K mutations affecting this process are found in a variety of cancers and are found in a high proportion of some common cancers, for example up to 40% of breast cancers and 50% of endometrial cancers. Two PI3K inhibitors are currently FDA-approved for use; Zydelig by Gilead Sciences and Bayer’s Aliqopa, both for certain types of blood cancer.

Some PI3K inhibitors have, however, shown largely disappointing and irregular results, such as Roche’s Taselisib, which was mothballed last month after disappointing phase III trial results were presented at ASCO. There are, however, hundreds of ongoing clinical trials featuring multiple PI3K inhibitors for the treatment of a variety of cancers.

A ketogenic diet consists of lots of fats with adequate protein and low amounts of carbohydrates and is regularly a component of popular ‘fad’ diets, including most notably The Atkins Diet. This low consumption of carbohydrates forces the body to get some of its energy from a different source and results in a state known as ketosis.

The diet is not currently recommended for patients by any major cancer organization or medical board, with major cancer centres urging caution. It is also an unfortunate magnet for a lot of pseudoscientific claims, such as some entirely unsubstantiated statements saying the diet will be able to replace chemotherapy and radiotherapy. Some healthcare professionals are dismissive of the diet as having any potential role in cancer treatment, but with some cancer patients already adopting the diet, many are curious about the potential benefits, whilst also stressing that the diet is not going to treat cancer alone.

“This is a very interesting preclinical trial which goes further to explain why some metabolic drugs aren’t working as expected at the moment. There’s a lot of growing anecdotal evidence which is increasingly hard to ignore, but most of the research so far has been done on patients with very advanced cancer and aggressive tumors,” said Angela Martens, Registered Dietician and Clinical Lead of Nutrition Services at CancerCare Manitoba.

Despite the lack of formal scientific evidence, a handful of scientific studies and case reports show some benefit in some types of tumors, often in combination with other drugs, such as this small study on patients with glioblastoma when combined with anti-angiogenic drug bevacizumab, but notably showing it had no effect alone.

“There is so much heterogeneity in clinical evidence, it’s hard to make any definitive conclusions. We need to look at it in a more systematic way,” said Martens.

While the new research provides badly needed, robust scientific data showing a ketogenic diet in combination with PI3K inhibitors may be beneficial, it also showed no clear evidence to suggest that a ketogenic diet alone may be useful in treating cancer. In fact, the study showed that a ketogenic diet alone accelerated the progression of mice with acute myeloid leukemia.

“A ketogenic diet may be useful in a majority of cancers, but may also be harmful in some patients. We need to figure out who might potentially benefit and who won’t,” said Martens.

Further tests are required in human clinical trials before distinct conclusions can be made, but the new study is definitely worth thinking about for those who work with cancer patients on nutritional approaches.

“The potential positive influences this diet may have on cancer treatment justify the need for large human trials. As the findings from this article highlight, nutrition should be seen as a metabolic therapy (i.e targeting the metabolism of cancer cell and its treatment) rather than a dietary approach,” said Carla Prado, Registered Dietician and Associate Professor in Nutrition, Food and Health at the University of Alberta, who was not involved in the study.

Cantley and colleagues have designed a clinical trial with Bayer, which is pending ethical approval and which will test the combination of a ketogenic diet and Aliqopa in a small number of patients with lymphoma or endometrial cancer. He hopes to start recruiting patients within the next year.

“While a ketogenic diet is not yet ready for prime time yet, the findings of this article once again support the need for increased attention and investment on its role in cancer,” said Prado.

Facebook Is Killing Off an Anonymous Social App That Turned Out to Be a Failure

Last year, Facebook bought an anonymous social app called tbh, which was apparently popular with teenagers—a crucial demographic for Facebook, which is seeing engagement drop among its younger users.

At the time, tbh—a platform for providing positive feedback to friends—was enjoying a terrific rise in popularity, but that doesn’t seem to have lasted. On Monday, Facebook announced that it was killing off tbh, along with two other apps that it bought or launched in recent years. The reason for closing all three apps was “low usage.”

“We know some people are still using these apps and will be disappointed—and we’d like to take this opportunity to thank them for their support. But we need to prioritize our work so we don’t spread ourselves too thin. And it’s only by trial and error that we’ll create great social experiences for people,” the social networking and advertising giant said in its announcement.

The other two apps were Hello, a service that was developed in-house in 2015 to help Android users combine information from Facebook with their phone contacts data, and a fitness app called Moves that Facebook (fb) bought in 2014.

The company said it would be deleting the user data from all the apps over the next three months.

Recent research has shown that teenagers are using Facebook less these days, in the U.S. at least. Back in 2014-2015, the Pew Research Center found 71% of American teens were using the service, but now that figure is down to 51%.

The researchers reckon that teens these days typically use more than one platform. The good news for Facebook is that, while its core app has lost its lustre among the young, its Instagram image-sharing service is riding high, being used by 72% of American teens.

What Is A Blockchain Operating System?

, I track enterprise software application development & data management. Opinions expressed by Forbes Contributors are their own.

Nynja

The Nynja blockchain-enabled virtual operating system has a communications layer and a secure payments layer, with a multi-currency wallet.

Blockchain, as more and more people are finding out, is a ledger system for keeping records. More specifically, blockchain is an open (i.e. public, not held inside one company, unless it’s a private blockchain) distributed (it exists on many computers) immutable (it can not be altered, in theoretical terms, although it can be reverse-engineered and compromised to degrees) and permanent (needs no explanation) ledger system to record transactions between two parties.

Built initially as the underpinning foundation for Bitcoin and other cryptocurrencies, blockchain has since been applied to other use transaction-focused use cases.

What is a blockchain Operating System?

So if blockchain is blockchain and your computer, tablet and smartphone has an Operating System (OS) such as Windows, Apple OS X or iOS, Linux or Android… then what is a blockchain Operating System?

Actually the question should be: what is mobile blockchain-enabled virtual Operating System? First emerging for smartphones (hence the mobile prefix), a blockchain-enabled virtual operating system is one that gives the mobile device the ability to combine communication and commerce in a single unified platform. The ‘virtual’ aspect meaning that the intelligent stuff happens back in the cloud datacenter, not on the device itself per se.

The emergence of this newly unified technology proposition means that, in the theory at least, users can start engaging with blockchain-based services on smartphones with security and privacy already locked down.

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Windstream Bondholders Can Reject Uniti's Lease In Bankruptcy

Uniti Group (UNIT) is a perfect example of how emotions always do the driving in the stock market.

Chart

UNIT data by YCharts

From its February low UNIT provided investors with a total return of over 50%, completely disassociating itself from Windstream Holdings Inc, (WIN). This was a rare feat as the two have in the past been joined at the hip with 65% of UNIT’s revenues coming from the distressed WIN.

Why we had gone long

The crux of our logic was that the high short interest and bear raids in UNIT were misplaced and the worst case scenario had little chance of coming to fruition any time soon. That coupled with a decimated stock price and high options volatility allowed us to pick up shares on the ultra cheap. At the time we were confident about three things.

1) UNIT would not cut the dividend, as the numbers, in spite of others making claims to contrary, made zero sense. A cut would only worsen UNIT’s problems without giving it any meaningful revenue diversification.

2) WIN would be to able stabilize its business in 2018 through a combination of cost cuts, acquisitions and strategic initiatives.

3) In the absence of an immediate catalyst, bears would be forced to cover, driving the stock close to a fair value of about 8-10X adjusted funds from operations, or somewhere in the $20-$25 range.

Why we exited and went short

UNIT’s price did go parabolic in the May-June timeframe and seemed to show zero correlation to WIN. Our rationale for selling and then going short hence had to do with the stock approaching 9-10X AFFO in June. While the multiple was in the range of “fair value”, we downgraded our view of what fair value was after looking at Q1-2018 results from WIN.

Here, our rationale was that WIN’s revenue deterioration trend will reprice the market expectation for long term revenues to UNIT. WIN continues to lose customers and revenues in every department and contrary to management’s optimism we see the glass as about two-thirds empty.

Source: Windstream Q1-2018 supplemental

While we have argued that even in a WIN bankruptcy a cut to UNIT’s lease payments is unlikely, we think the odds of of a payment cut continue to rise with each dollar of revenue decline. Let us provide some color on that.

In 2014 & 2015, around the time of WIN’s spinoff of UNIT, WIN produced $5.5 billion in revenues.

Source: Windstream 2015 10-K

Since then WIN has completed two acquisitions, Broadview Networks and Earthlink. These acquisitions totaled about $1.5 billion in annualized base revenues as can be seen here and here. WIN will also have spent a stunning $2.5 billion by the end of 2018 since then in capital expenditures. The guidance for 2018 is now for about $5.6 billion in revenues. So WIN’s ex-acquisition base revenues will have declined by about $1.4 billion ($5.5+1.5-5.6) in the space of 3 years or close to 25%. This is in spite of $825 million in annual capital expenditures. At current trajectory this base revenue on which UNIT’s network derives revenues will have declined by 40% by 2020. Yes WIN is taking steps to mitigate this and perhaps they will be successful, but there is now a material risk that UNIT’s lease will be considered to be way above market coming 2020.

An introduction to game theory

Taking the above argument further let’s consider what happens in a bankruptcy under one specific set of circumstances. Let’s assume that WIN projects 2021 revenues to be 25% below that of 2018. On the surface this sounds as though it would be the WIN equity and bondholders problem and not present issues for UNIT. After all UNIT repeatedly boasts of 3X rent coverage from WIN. But look at the numbers this results in.

Source: Author’s estimates and calculations

Using the same OIBDAR (Operating Income before depreciation, amortization and rent), free cash flow (NYSE:FCF) is a negative $411 million. Note that this means that WIN bondholders will not get no interest payments (let alone principal), if they accept the master lease payment as is. So a WIN bondholder should be indifferent to walking away from the UNIT lease as they get no money whether or not they accept the UNIT lease. Now, there is a neat little sleight of hand there in our numbers. We have assumed that the $825 million of capex is necessary to sustain the business. We don’t know the exact numbers but WIN has spent over that on average for the past 3 years and has still lost business and customers. So we think that sustaining (and we use the word really loosely here) capex cannot be too far below that. If that is true, and if revenues decline by even 25%, UNIT is coming to negotiating table, regardless of what they say now.

Current position

We initiated our short position at $23.31 and covered at $19.75. We are still short using ratio spreads, where in we hold 1X long positions in the $20.00 puts and short positions in the 2X $17.50 puts.

This was a credit spread trade and we feel this was the best way to continue to short the stock while not using any of our money. We maximize our profits if the stock is at $17.50 at expiration and we do become net long at $15.00. However the chance of that happening by August expiration is slim in our opinion and that is a level we would consider getting long in any case.

Conclusion

With rating agencies chasing UNIT and WIN, both stocks are vulnerable to even slight seizures in the capital markets. It is debatable whether UNIT deserves its extremely low credit rating from Moody’s. The argument for such a move stems from UNIT’s low interest coverage of 2.5X and non-Windstream revenues being not enough to even cover interest expenses.

The key factor continues to remain whether WIN is a terminal business or one that has a future. As a terminal business, we would put the worst case value of UNIT at about $15, extrapolating a 40%-50% rent cut in a bankruptcy. With WIN definitely having a future, we would put fair value at $25. Currently the jury is out on that one. In the interim our positioning allows us to either pick up shares at what we think is a worst case fair value with substantial upside and try and make money on more downside.

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Disclaimer: Please note that this is not financial advice. It may seem like it, sound like it, but surprisingly, it is not. Investors are expected to do their own due diligence and consult with a professional who knows their objectives and constraints.

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Disclosure: I am/we are short UNIT.

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.

Additional disclosure: Short position is through ratio spreads.
We are long 1X August $20 puts on UNIT.
We are short 2X August $17.5 puts on UNIT

I Tried To Find Out How Many Thought Leaders Are on LinkedIn. I'm Still in Shock

Absurdly Driven looks at the world of business with a skeptical eye and a firmly rooted tongue in cheek. 

Many people are headed to the beaches.

They’re running away, desperate to get a little rest and a few rays of hope.

I live in California, however. 

We have an overabundance of beaches, sun and hope. 

So I have to look elsewhere for respite and inspiration. 

Which is why a thought popped into my mind and took the lead over all the other thoughts hovering there.

The thought is:  How many thought leaders are there on LinkedIn?

I wanted answers, so I took the simple first step. I inserted the phrase Thought Leader into the LinkedIn search box.

I wasn’t sure how many people had designated themselves Thought Leaders

Truly, I’m not sure I know what one is, save for a pair of words that purportedly makes you sound interesting.

Well, what a surprise. 

My search for Thought Leader brought up 306,531 results.

There are that many of these precious people? Have they all done TED Talks? That would be 4,597,965 minutes of TED Talk, if the average length was 15 minutes.

That would be far more thoughtful leadership that there’s been in Congress for the last 10 years. No, 20.

I want to know that thoughts these 306,531 people have had. I want to know how many people they’ve led to superior thinking. 

There should be a scoreboard that ranks Thought Leaders according to their Big Think score.

I regret to say that, stunned from having performed this search, I didn’t stop.

Next was a search for Guru

I stopped breathing for several hundred seconds when I saw LinkedIn throw up 474,602 people.

It takes quite some estimation of one’s own self-worth to self-designate as a guru.

I should add, of course, that Guru is a first name, so this may mean there are still more Thought Leaders than, you know, Gurus.

Still, I was now emboldened beyond control.

I searched Visionary.

Oh, Lordy. That threw up 293,537 results. Which seems a little short-sighted on the Imaginative Title scale.

People on LinkedIn really think a lot of themselves, though, don’t they?

So I searched Successful.

I braced myself for the result.

5,641,454 people or entities responded to that description.

They can’t have all been guided by one of the mere 160,138 people on LinkedIn who are entitled Business Coach, can they?

I tried Inspirational Leader.

Pah, a mere 57,874 results. Now we’re getting to the heart of the issue. A lot more people think they’re Thought Leaders Than Inspirational ones.

Doesn’t that tell you something about those who write self-help books?

I was numb from all this excellence. I wanted to email Tony Robbins to ask him what he thought all this meant.

Instead, I girded myself for one more push.

There was only one search left to make. There was one search that would surely reveal those who truly knew themselves, those who bathed in reality, rather than puffery.

I searched Idiot.

A mere 7,907 results. 

Please, I know that these searches have a few flaws.

I know that my Idiot search includes those who work at Idiot’s Guide, those who perform Idiot tests and those who come up for no apparent reason whatsoever, save that LinkedIn’s algorithm seems to think they have some connection with idiocy.

Still, I’m the sort of idiot who wants to find moments of amusement amid a cavern of bloviation. 

So, for the next week, I’ll contemplate the fact that there may be 60 times more people who think they’re Thought Leaders than think they’re Idiots.

Why do I think it should be the other way around?

The No. 1 Mistake People Make When Handling Tough Conversations

I hardly have to tell you that the role of a leader is an important one. You’re responsible for guiding and motivating your team to achieve its goals, and when things don’t go right, you’re the one who needs to offer guidance and constructive criticism. Doing that can be tense and awkward for some people, but when you’re able to effectively communicate what needs to improve, these conversations can be easier and more helpful for everyone involved.

When it comes time to prepare for these conversations, there are a lot of things to consider. You’ll want to be specific in your feedback so that everyone knows exactly what happened, what needs to change, and how. You should consider your team members’ personalities and how they respond best to challenging situations.

Too often, though, leaders ignore these important considerations and worry instead about their own performance. And that is the single biggest mistake they can make.

Many leaders want to make a strong impression, so they write out what they want to say and enter the conversation with a script. Sure, everyone wants to feel ready for a tough situation, but there’s a big difference between preparing and performing.

If you want to be the kind of confident leader who can handle tough conversations well and inspire your team to keep going, you’ll need to ditch the script. Here’s why:

1. You can end up derailing your self-confidence.

Have you ever had a meeting where you were supposed to give a presentation and just drew a complete blank? I know I have. Many people create scripts to avoid this very situation, but as it turns out, scripts create that scenario more often than they prevent it. Think about it: If you’ve memorized a script and forget a sentence, how do you feel? What if you’ve missed an important point? What if you forget more?

Trying to stick to a script makes you feel more and more flustered with each word you forget, and then you just spiral. It destroys your confidence because you’re trying to rely on a piece of paper and not on yourself. Instead, spend your preparation time developing your ideas and rely on yourself and your knowledge of those ideas in your meeting.

2. You probably won’t sound like your authentic self.

I remember when “Frozen” came out and my kids were very into all things “Frozen” — dolls, games, accessories, you name it. One toy of theirs would sing the same part of “Let It Go” over and over again. Was it OK to hear it repeatedly for the first couple of days? Of course. That song is a classic. But after a while, hearing the same things again and again can wear on you — and your team feels the same way about your scripted meetings.

These people work with you day in and day out. They know how you speak normally, and they can tell when you’re reading from a script and trying to check all the boxes to say the right things. Rather than trying to pass yourself off as some amazing orator, just go out and be yourself. You’ll be much more comfortable and able to elaborate on problems in your own language: one that your team will recognize.

3. You can’t predict surprises.

If there’s anything I’ve learned over the years, it’s that tough conversations never go how I expect them to. There could be personal issues in the mix that you don’t know about, or maybe someone was given incorrect information to start with that led to a mistake. You never know what information is going to come up during these conversations that can totally change your viewpoint.

A script renders you totally useless when circumstances change — and they almost always will. While it’s true that you can’t prepare for everything, you can mentally prepare yourself in a way that’s flexible and leaves room for new ideas and information.

4. Your focus should be your team, not yourself.

Leaders should be supporters and helpers to their teams, not dictators. Scripts are inherently self-serving because they totally ignore the viewpoints of others. When you rely on a script, it’s about “making sure that my team understands my plan to reach my goals,” no matter how many times you might use the words “we,” “us,” and “our.”

While you do need to be decisive as a leader, you’ll do your team a disservice by focusing exclusively on methods and solutions that you identified alone. Monologues can be scripted; conversations can’t be.

Preparation, on the other hand, encourages conversation. When entering a tough conversation, you should be familiar with the situation — what happened, why, and who was involved — but you shouldn’t immediately assert how you think it should be fixed.

Instead, have an open conversation with the right people to find the best resolution. When you’re prepared and understand how the issue came about, everyone is much more likely to have a positive experience than if you just read your solution out loud to them.

Even the best leaders struggle to have difficult conversations with their teams. It’s only natural to try to prepare what you want to say to avoid an awkward situation, but in many cases, scripts do more harm than good. Rather than spending time writing a script that covers all the bases in an eloquent way, prepare by learning everything you can about the issue and having a genuine conversation with those involved.