Daily Tech Snippet: March 29, 2017

• Tencent of China Takes 5 Percent Stake in Tesla: Tencent Holdings, one of China’s internet giants, has acquired a 5 percent stake in Elon Musk’s electric-car maker Tesla, according to a filing with the United States Securities and Exchange Commission on Tuesday. The purchase of 8.17 million shares makes the Chinese company one of Tesla’s largest shareholders. Tencent, whose internet empire includes businesses as diverse as online games and chat services, paid $1.8 billion for the stake, according to the filing. Shares of Tesla rose 3 percent in early trading in New York. The purchase came as Tesla has recently sought to raise more cash before it begins production of its Model 3, an electric vehicle targeting the mass market. Tesla has previously focused on higher-end electric vehicles that begin around $91,000, and the introduction of the Model 3 will probably represent a significant increase in production for the carmaker. The company expects to make 5,000 Model 3s a week in the fourth quarter, and 10,000 a week at some point in 2018, according to a shareholder letter. This month, Tesla, based in Palo Alto, Calif., said it would sell $250 million of common stock and $750 million of convertible senior notes. Tencent controls WeChat, the popular messaging service in China. It also reached a deal last year to take control of Supercell, the maker of the popular Clash of Clans game.

• Silicon Valley Startups Favor IPOs Over Deals as M&A Languishes: Until recently, startups could count on generous private funding, with the associated generous implied valuations, and avoid the perceived hassle of being accountable to public investors. If a company had both exit options on the table -- an IPO or an outright sale -- the sale option looked attractive. The pendulum is starting to swing the other way, according to Lise Buyer, founder of IPO advisory firm Class V Group.The shift is at least partly due to the success of some recent listings, Buyer said. That includes Snap Inc.’s IPO, which was 10 times oversubscribed, people familiar with the matter have said, and has soared as much as 59 percent above its IPO price. Cloud-software maker MuleSoft Inc. jumped 46 percent in its debut this month. “People get excited about the last transaction,” she said. “It’s a bit of, ‘What has the market done for me lately?’” Since September, 17 U.S. technology and communications companies have raised $6.3 billion through IPOs, according to data compiled by Bloomberg, compared with 13 companies that raised $4.6 billion in the year-earlier period. The four new 2017 stocks have gained an average of 31 percent, outpacing the 4.6 percent climb in the S&P 500 Index, the data show. Okta, which was valued at $1.2 billion in its most recent private financing round in 2015, filed for an IPO after about a year-long effort to sell itself. No suitors were willing to pay more than $1 billion to acquire the eight-year-old software maker, people familiar with the matter said.

• BlackRock cuts fees and jobs; stockpicking goes high-tech: BlackRock Inc on Tuesday said it would overhaul its actively managed equities business, cutting jobs, dropping fees and relying more on computers to pick stocks in a move that highlights how difficult it has become for humans to beat the market. The world's biggest money manager has faced active stock fund withdrawals and the revamp is its biggest attempt yet to engineer a turnaround. Last May, BlackRock said it had recruited Mark Wiseman, the head of Canada's biggest public pension fund, to oversee the stockpicking operations after he revamped that fund's operations to embrace data-mining and other technological approaches to investing. BlackRock is rebranding or adjusting investment strategies on about 11 percent of its $275 billion active stock fund business, putting a greater emphasis on technology-driven investing approaches in the largest set of sweeping changes for the business since transformational mergers that allowed it to grow to manage more than $5 trillion in assets. Among the changes, BlackRock is removing some seven traditionalist "Fundamental" portfolio managers from their current assignments, according to a source familiar with the matter. More than 40 employees are being laid off, including some of the portfolio managers, according to another source.

• Facebook pivots into Stories: In its biggest change in a decade, Facebook is evolving from text and link-focused sharing to the visual communication format it admits “Snapchat has really pioneered.” Starting today, all users will soon have access to the new Facebook Camera feature that lets them overlay special effects on photos and videos. They can then share this content to a Snapchat clone called Facebook Stories that appears above News Feed on mobile and works similarly to Instagram’s 24-hour ephemeral slideshows. Users also may share these posts to News Feed, individual friends through the new Facebook Direct private visual messages that disappear once digested or any combination thereof. But really it was the rapid ascent of Instagram Stories to 150 million daily users that he says inspired Facebook to start testing its own Stories in January, and keep expanding it to 12 countries before today’s rollout. That’s the worst news for Snapchat and best news for Facebook since the world’s biggest social network adopted the strategy of copying the competitor that refused its acquisition offer. If Facebook Stories clearly cannibalized News Feed sharing and consumption, it would have to demolish its most popular and lucrative feature to make way for the future where the camera is the new keyboard. And if users saw Facebook, Instagram, Messenger and WhatsApp’s Stories features as uncool clones or redundant as a set, it might have had to limit its attack on Snapchat to just one of its core apps. Instead, Facebook can charge in full-speed, attacking Snap from every angle without much penalty to its existing business. And with its enormous engineering and design teams, plus billions in profit each quarter, it can throw more resources at Camera, Stories and Direct visual messaging than Snap can. That product development strength is on display with today’s launch, and apparent from Facebook’s insistence on showing reporters forthcoming special effects that one-up Snapchat’s iconic lenses. Until now, Facebook was just running missile tests and fighting skirmishes on the frontier. Today Facebook declares total war on Snapchat.