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He started a covid-19 vaccine company. Then he hosted a superspreader event.

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On Sunday, January 24, with Southern California’s intensive-care units (ICUs) at full capacity, a shuttle bus made its way from the beachfront Hotel Casa del Mar in Santa Monica to the office of the XPrize Foundation in Culver City, carrying business executives from as far away as Israel, Hawaii, and Vancouver.

They were on their way to a pandemic year rarity: an indoor, in-person, mostly unmasked business conference called the Abundance 360 Summit.

Created by Peter Diamandis, the founder of the XPrize Foundation and Singularity University, and co-founder and board member of covid-19 vaccine developer Covaxx, the conference was a lucrative opportunity to hold court with a group of “patrons”—businessmen (and a small handful of businesswomen) who pay large annual and conference fees for the privilege of gathering to talk about some of Diamandis’s favorite topics: AI, longevity, exponential growth, and “the abundance mindset.” Speakers at the 2021 event included Salesforce CEO Marc Benioff and Starlink SpaceX VP Jonathan Hofeller, among others.

A360, as its organizers call it, was being held despite widespread recommendations  from public health experts to limit contact with non-family members, wear masks, and hold any gatherings outdoors to limit the spread of covid-19.

And in California, this was more than a recommendation: on December 5, the state had banned all gatherings, public and private, until regional hospital ICU capacities rose above 15% again. The in-person portion of Diamandis’s gathering was illegal.

And at first, it seemed like they were in the clear—even though staff and attendees were mostly unmasked. Everyone took daily coronavirus tests. Nobody fell sick during the January 24-26 meetings.

But covid-19 can take time to incubate. The first confirmed positive results came back on January 28, during the conference’s online-only, virtual reality day, after most participants had flown home.

Over the next few days, the number of positive tests climbed sharply. By the morning of February 3 at least five A360 employees, two speakers, and one family member who wasn’t at the conference had tested positive, while an additional three people showed symptoms, according to internal communications I viewed.  (I granted anonymity to sources, who expressed fears of retaliation for speaking out.)

By the end of the day, that number would more than double. Another family member tested positive. Then, during a team Zoom meeting, Will Weisman, A360’s executive director, said that a large number of patrons had tested positive, including one who infected his wife and child, recounted an individual close to Diamandis on the call.

In a blog post published on the afternoon of February 12, Diamandis confirmed that 12 patrons had tested positive.

Less than a week after A360 attendees flew back to their pandemic home bases across the globe, at least 20 people, including not only those who were present at A360 but also some of their family members, had confirmed cases of covid-19.

Pandemic as business opportunity

When covid-19 first made its appearance in the United States, 59-year-old Diamandis, who has an MD from Harvard Medical School and degrees from MIT, was skeptical.

In mid-March, when six counties in the San Francisco Bay Area issued the nation’s first stay-at-home order, Diamandis tweeted, “We are witnessing the viral spread of fear that is definitively damaging both national economies and global markets” and, later, “the level of panic is doing as much damage.”

But ever the entrepreneur, Diamandis saw business opportunities in the pandemic. On March 26, the XPrize Foundation, which he chairs and which runs challenges using prize money to encourage innovative solutions to big problems, launched the XPrize Pandemic Alliance, with $7.5 million in prize money to fight covid-19.

He teamed up with Mei Mei Fu and Lou Reese, spouses and co-executives of biotech company United Biomedical. The three co-founded Covaxx, a vaccine development company that functions as a United Biomedical subsidiary (and is not to be confused with the global Covax effort to provide lower-income countries with vaccine doses).

Fu and Reese had already made news for providing free antibody testing for all residents of Colorado’s San Miguel County, home of Telluride, a resort town where many coastal millionnaires, including Fu and Reese, own second homes. “There are advantages to having biotech executives as neighbors,” as The Atlantic noted at the time.

In the days that followed, Diamandis praised the Chinese government’s “unprecedented” measures to contain the pandemic, from locking down an entire city to the “rapid national coordination of public action.”

Yet, by going through with the in-person portion of the Abundance 360 Summit, Diamandis ignored government notices and legal mandates implemented in the state of California.

Even A360’s parent company, Singularity University, had canceled its largest in-person gatherings due to the pandemic. “We have been closely monitoring the global pandemic situation and taking all measures to make sure our staff and program are safe. It’s been a difficult decision, but … we have decided to postpone our November SU Executive Program,” wrote Singularity staff in an email dated October 8.

As the fall wore on and positive cases, death rates, and hospitalizations in Southern California grew precipitously, some team members charged with marketing A360 were dismayed that the event was set to continue.

On November 30, James Del, Singularity University’s head of content, conveyed his team’s growing concerns to Diamandis in an email, copying Singularity University CEO Steve Leonard, Singularity investor and board member Erik Anderson, and A360 executive director Will Weisman.

In his email, which was shared with me, Del urged SU to “consider the appearance of hosting an in-person gathering as cases in Los Angeles shatter their own records daily.”

“The current restrictions in LA county ban gatherings nearly completely,” he continued. “Going out and inviting the entire SU community to a city that is under strict lockdown seems like a PR crisis waiting to happen, and I suggest that we strongly consider changing our marketing focus to digital only.”

Just days later, on December 3, California enacted a regional stay-home order, to be triggered when ICU capacity fell below 15%. The order went into effect on December 5 and prohibited private gatherings of any size, other than constitutionally protected religious services and protests; closed non-essential businesses, except for critical infrastructure and retail; and required 100% masking outside the home. It also banned the use of hotels and lodging for nonessential travel.

The event went ahead despite public health orders that made it clear that neither booking a hotel for nonessential travel nor the in-person gathering itself was permitted.

A360 made adjustments as well. It changed the meeting venue first from the Beverly Hilton to the Calamigos Ranch in Malibu, before finally settling on the XPrize Foundation’s office in Culver City. A360 also shifted where its guests would be staying, from a Four Seasons to Hotel Casa del Mar in Santa Monica. It cut the number of in-person attendees, from 127 to 16, as reported by Bloomberg in late December, before increasing numbers again to between 30 and 33 patrons, who each paid a $30,000 annual membership fee, according to conference materials I obtained.

Once speakers, A360 staff, and technical and support personnel were taken into account, however, at least 84 people were present, according to Diamandis’ own count. The event went ahead despite public health orders that made it clear that neither booking a hotel for nonessential travel nor the in-person gathering itself was permitted. 

“A360 is an event I’ve committed to run for 25 years. That’s sort of an important hallmark of an event,” Diamandis told me in an interview, by way of explanation as to why he was so keen for it to take place in person. “We’re in year nine, and it has always been an in-person event.” He added that one day, “Eventually A360 will be fully virtualized.”

When a conference isn’t a conference

On February 12, two days after Los Angeles Department of Public Health officials arrived at the doorstep of the XPrize office and had an “interaction” (as Diamandis described it) with Will Weisman and XPrize’s “operations person”, and just before a scheduled interview with me, Diamandis published his blog post, titled “A false sense of security.” In it, he wrote that he was “humbled and pained” by the experience, and detailed the precautions his team had taken to prevent covid-19 from entering and spreading in the “immunity bubble” they had created for the event.

In that same blog post, however, he also claimed that the event was not a conference at all, but a “virtual studio-broadcast production,” with patrons who were there because they had insisted on being there as a live audience.

“It was a pretty outspoken group saying, ‘We really want to come,’” he told me. “And that started a conversation around the lines of, could this be done? Could we have a small studio audience, and do it safely?”

“Could this be done? Could we have a small studio audience, and do it safely?”

Diamandis said that the decision to move forward was done in consultation with an audio-visual company that he contracted, the name of which he could not remember during our interview, and two medical providers: Fountain Life, an anti-aging health and wellness company that he co-founded, and Matt Cook, an anesthesiologist and founder of a similar integrative medical company, BioReset. 

A studio broadcast production would normally require a film permit. A360 did not apply for a permit from Film.LA, which handles filming requests for Culver City, where XPrize was located, both Diamandis and Film.LA confirmed. Diamandis suggested that because XPrize’s office often hosted web broadcasts, there was no need to apply separately for a film permit.

However, multiple employees recounted to me previous discussions on how A360 leadership might apply for filming or even religious exemptions to get around the ban on gatherings.

And even if the company had submitted an application, Culver City does not currently offer indoor filming permits, while the LA County Public Health Department’s protocol for music, television, and film production requires safety plans for special events to be approved 10 days in advance.

Additionally, the protocol does not allow live audiences of the general public, except for “small, hired audiences (50 people or fewer).” Given that the 30 or so patrons were not hired, but rather were paying upwards of $30,000 for their A360 memberships and event attendance, it is unlikely that they would fit this criterion.

Thank you for testing

On January 28, the day that the first employee tested positive for covid-19, the A360 team sent out a chipper email (subject line: “Please Re-Test / and Thank you!”) to event speakers and patrons, which a recipient shared with me. 

“What an amazing few days! We’re hopeful that our extensive Covid PCR testing protocol has kept you and everyone safe,” wrote “Peter & the 360 team,” before sharing that “one of our team members unfortunately has come up positive,” and asking everyone to re-test and let A360 know if anyone “should feel ill, or test positive.”

This request for follow-up does not, however, appear to have been for the purpose of reporting clusters of cases to county public health authorities, as required by several California state laws.

CA Assembly Bill 685, for example, went into effect on January 1, 2021, and requires employers to notify both employees potentially exposed and the local public health agency if more than three people living in different households test positive for covid-19 in a two-week period.

Diamandis admitted that no one from his organization reported the positive cases to the public health department, and suggested that his and his team’s struggles with covid-19 could be to blame. “I’ve been in bed for days, as have half my staff, and we’re trying to figure out, you know, which way’s up and down,” Diamandis told me. “This is the first time we’ve been able to actually take a full accounting of where we are, what went wrong and tell the story.”

Yet, while they did not have time to report the cases to the authorities, A360’s leadership did find time to contain information about the outbreak.

“Really important that there is no further outreach to a broader set of people,” Diamandis wrote. “There will be no further emails to attendees or vendors.”

On January 29, Weisman started a new group text among employees called “A360 Covid,” screenshots of which were provided to me. In it, he confirmed the names of two event attendees—an event speaker and a patron—who had tested positive. Then, he instructed employees to keep the news quiet.

“Really important that there is no further outreach to a broader set of people,” he wrote. “There will be no further emails to attendees or vendors.”

Diamandis chimed in by text as well. “Let’s keep all Covid related data, ideas, and communications on this single channel, please.”

In the following days, employees used the thread to share their test results and symptoms. At first, they self-reported their results through a company contract with a private testing provider. But after one employee expressed frustration that he was testing negative despite what he felt were clear symptoms (and especially since a family member had already tested positive), Diamandis suggested that employees use a “spit test” conducted at Calamigos Ranch, the venue owned by a friend that was, at one point, slated to hold the event.

On at least one occasion after A360 employees switched their testing location to the ranch, an A360 staff member shared the results on the group text message thread. “All tests were negative, except [Employee name], with a strong positive!” she wrote. The employee in question responded, “Oh wow! Ya feeling good,” suggesting that this was the first time that he was informed of his own test results. He did not respond to multiple requests for comment.

When asked about the incident, Diamandis said that he was not aware of the text message exchange, then said that if it did occur as described, he would be worried. “Of course,” he said, there are “HIPAA approved processes,” referring to the law protecting health data.

Under HIPAA guidelines, “COVID-19 test results are considered confidential medical information under both [California] state and federal law,” which requires separate record keeping viewable “only by members of management with a true need to know,” according to a blog post by law firm Davis Wright Tremaine. Moreover, it says, “If an employee tests positive for COVID-19, the employer must not reveal the employee’s identity to others in the workplace.”

Additionally, according to CDC guidelines, “Employees undergoing testing should receive clear information on the manufacturer and name of the test, type of test, purpose of the test, reliability, limitations, who will pay, how to understand the results, who will receive the results, and consequences for declining a test.” Some A360 employees interviewed said that they were not comfortable with the testing performed at the ranch, and how close its owner was to their employer.

A360’s precautions, according to Diamandis’s blog post, included requiring everyone who attended to obtain a negative test 72 hours before attending, and then be tested immediately on arrival and on every subsequent morning of the event. But mask-wearing was not enforced, and there was no request to the participants to self-quarantine for any length of time before the gathering.

It has been known since early in the pandemic that the virus can incubate for several days before becoming detectable. Self-isolation would have been especially important for anyone arriving from further afield—like the participants traveling from overseas. The CDC recommends that travelers take a covid-19 test three to five days after traveling and then quarantine for a further seven days even if the test is negative.

Diamandis apparently believed that testing could be an infallible way to circumvent these evidence-based precautions. Under a section in the blog post titled “Lessons Learned,” he wrote of being “flabbergasted” to discover, a year into the pandemic, how unreliable some tests could be, when he used them on himself after developing symptoms and they still came back negative.

Who’s tracking positive cases?

In the post, Diamandis admitted that 24 people, including himself, had contracted covid-19. The actual numbers he cited, however, added up to only 21 people: 12 members/patrons attending the event, four faculty, and five A360 staff.

When asked to account for this discrepancy, he admitted that there could be two support staff who had tested positive. “Someone is tracking,” he said, though he said he was not sure who.

I asked whether another number, 32 positive cases, that I had calculated based on reporting, was plausible. Diamandis responded that “to include the family members who have had cases,” a total of 32 “seems probably low.”

“I am trying my very best to turn the situation to one where I can speak loudly and clearly, and share what I learned in a positive fashion.”

Peter Diamandis

His blog post also did not acknowledge that public health orders had banned gatherings between December 3 and January 25 in California. Diamandis would not respond when I asked whether he was aware that he was violating state health rules by holding his event. “I knew that there were challenges. But I don’t know that I want to answer that on the record,” he said.

“I am trying my very best to turn the situation to one where I can speak loudly and clearly, and share what I learned in a positive fashion, not get burned in the fire but use it to drive a spotlight on,” he told me. “Listen, I screwed up here.”

 I asked how this “screw-up” reflected on his board leadership of a covid-19 vaccine company and an organization giving away $7.5 million in prize money to solve the challenges of covid-19, including encouraging mask-wearing.

 “I’ll have to take a minute to think about that,” he said. “Let me send you an email.”

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The one-shot vaccine from Johnson & Johnson now has FDA support in the US

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An advisory board to the US Food and Drug Administration voted unanimously in favor of the first single-shot covid-19 vaccine, clearing the path for the health agency to authorize its immediate use as soon as tomorrow.

The one-shot vaccine, developed by Johnson & Johnson, has the additional advantage of being easy to store, because it requires nothing colder than ordinary refrigerator temperatures. It stopped 66% of mild and serious covid-19 cases in a trial carried out on three continents.

It will join a US covid arsenal that already includes authorized vaccines from Moderna and Pfizer. Those vaccines, which use messenger RNA, were significantly more effective (they stopped about 95% of cases), but they require two shots, and the doses need to be stored at ultra-cold temperatures.

Globally, a growing list of injections developed in Russia, China, India, and the United Kingdom all are starting to see wide use.

While the new J&J vaccine isn’t as effective as those made using messenger RNA technology, health officials said that shouldn’t dissuade people from getting it, since it still sharply reduces the chance of illness and death.

“To have two is fine, and having three is absolutely better,” Anthony Fauci, the country’s chief virologist, said during an interview on NBC. “It’s more choices and increases the supply. It will certainly contribute to getting control.”

In the US, there have been approximately 28 million confirmed cases of covid-19 and 500,000 deaths.

The limited supplies of the Moderna and Pfizer shots mean most Americans are still waiting to be vaccinated. About 1.4 million doses of those two vaccines were given each day last week in the US. At that pace it would take about a year to vaccinate the whole nation.

In theory, an easily stored single-shot vaccine could kick up the pace. In practice, though, supply shortages of the J&J vaccine could limit the role it plays in the US vaccination campaign. In testimony before Congress this week, Johnson & Johnson said it had only 4 million shots ready to go, a third of the initial supply promised, and would deliver only 20 million doses by the end of March.

“I wonder if the J&J vaccine is going to be a significant part of the US landscape,” says Eric Topol, a doctor at the Scripps Research Institute, who called initial supplies “paltry” given that the company received extensive government support.

The vaccine also has what Topol called a “notable dropdown in efficacy overall” compared with messenger RNA shots, although many health experts this week rushed to defend the vaccine against any suggestion it was inferior.

“Everything we’ve seen so far says these are excellent vaccines,” Ashish Jha, a health policy researcher and doctor at Brown University, wrote on Twitter, where he argued that comparing “headline efficacy” among vaccines can be misleading since “they all are essentially 100% at preventing hospitalizations [and] deaths once they’ve kicked in.”

New shot

The new one-shot vaccine, called Ad26.COV2.S, was developed by Johnson & Johnson using work from Beth Israel Deaconess Medical Center in Boston. It employs a harmless viral carrier, adenovirus 26, which can enter cells but doesn’t multiply or grow. Instead, the carrier is used to drop off gene instructions that tell a person’s cells to make the distinctive coronavirus spike protein, which in turn trains the immune system to combat the pathogen.

The New York Times published a detailed graphical explanation of how the vaccine works.

Richard Nettles, vice president of US medical affairs at Janssen, a J&J subsidiary, told Congress during testimony on February 23 that production of the vaccine is “highly complex” and said the company was working to manufacture the shots at eight locations, including a US site in Maryland.

The manufacturing is complicated because the vaccine virus is grown in living cells before it is purified and bottled. Making a batch of virus takes two months, which is why there is no way to immediately increase supplies if timelines are missed.

Indeed, the biggest disappointment around the new vaccine is a supply shortfall caused by manufacturing problems. Jeffrey Zients, coordinator of President Biden’s covid-19 task force, said during a White House press conference on Wednesday, February 24, that the new administration had only “learned that J&J was behind on manufacturing” when it took office five week ago.

“It was disappointing when we arrived,” he said. “The initial production ramp … was slower than we’d like.”

Pretty effective

In late January, the company announced results from a 45,000-person study it carried out in the US, South Africa, and South America, in which people got either the vaccine or a placebo.

Overall, the vaccine was 66% effective in stopping covid-19, and somewhat better at stopping severe disease. In the trial, for instance, seven people died of covid-19, but all of these were in the placebo arm. Also, its effects increased with time—after a month, no one in the vaccine arm had to go to the hospital for covid-19.

Johnson & Johnson claims it will not be making a profit from the vaccine, which will also be sold outside the US. Instead, Nettles said, the vaccine will be sold at a single “not-for-profit” price to all countries “for emergency pandemic use.”

Nettles didn’t say what that price would be, but the US agreed last year to pay the company about $1 billion for a guarantee of 100 million doses and has given the company a similar amount of development funding, making it one of the major investments of Operation Warp Speed, as the vaccine effort was known during the Trump administration.

Shortage to surplus

At least for the moment, vaccine supply remains a limiting factor in the US inoculation campaign, which has seen 70 million doses administered since it began in December, according to Bloomberg. “I don’t see an excess of vaccine for a while,” says Peter Hotez, a virologist and vaccine developer at the Baylor College of Medicine.

All told, the US will have received enough shots to fully vaccinate 130 million Americans by the end of March, when projected supplies from Pfizer, Moderna, and J&J are tallied together.

Still, vaccine shortages could turn to excess before summer, creating a situation in which it’s no longer vaccines that are in short supply, but people willing or eligible to receive them.

That is because in the US, children under 18 make up about a quarter of the population but aren’t yet allowed to receive the shots. As well, about 30% of American adults claim they won’t get a covid-19 vaccine at all. Children and vaccine doubters together make up half the population.

By August, the three companies say, they will deliver the US enough vaccines for 400 million people, or more than the country’s population. That does not account for a fourth vaccine, manufactured by Novavax, that may also win US authorization.

“By the summer we will be in good shape. The question is how we navigate this space between now and June,” says Hotez.

Growing arsenal

The Johnson & Johnson shot joins a growing worldwide list of approved vaccines that includes the two messenger RNA vaccines, injections from AstraZeneca and Chinese manufacturers, and Russia’s “Sputnik” vaccine, all of which are in use outside the US.

People who get any of the vaccines will, on average, see their chance of dying from covid-19 plummet to near zero. That is down from an overall death rate of around 1.7% of diagnosed cases in the US—and a risk several times higher in elderly people.

The J&J shot has fewer side effects than the mRNA vaccines and has also proved effective against a highly transmissible South African variant of the virus that has accumulated numerous mutations.

The South Africa variant has alarmed researchers because it clearly decreases the effectiveness of some vaccines. A study in South Africa by AstraZeneca found its vaccine didn’t offer protection against the variant at all, causing officials to scrap a plan to distribute the shot there.

According to health minister Zweli Mkhize, South Africa is instead pivoting to the J&J vaccine, with a plan to vaccinate 80,000 health-care workers in the next two weeks.

This week, Moderna also said it would develop a shot tailored against the South African variant, and Pfizer indicated it was also preparing to counter new strains as they arise. Another strategy being contemplated to fend off variants is to give people extra booster doses of the current vaccines.

Some experts in the US continue to urge the government to adopt faster-paced vaccine schemes, like delaying second doses of the messenger RNA shots or using half doses, arguing that the more people who have “good enough” protection, the sooner the pandemic will end.

So far, though, it’s not clear what agency or official would be ready, or even legally authorized, to make that call.

“We are all scratching our heads about who could make that decision,” says Hotez. “And it all depends on how much urgency you feel. The big picture is if you know the numbers are going down, and feel they are going to stay down due to seasonality, then you have some breathing space. But if you are worried about variants, then you have a problem, and you want to vaccinate ahead of schedule.”

On NBC, Fauci said people shouldn’t wait for the best vaccine but take what’s offered. “Even one that may be somewhat less effective is still effective against severe disease, as we have seen with the J&J vaccine,” he said. “Get vaccinated when the vaccine is available to you.”

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Daily Crunch: Facebook launches rap app

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Facebook unveils another experimental app, Atlassian acquires a data visualization startup and Newsela becomes a unicorn. This is your Daily Crunch for February 26, 2021.

The big story: Facebook launches rap app

The new BARS app was created by NPE Team (Facebook’s internal R&D group), allowing rappers to select from professionally created beats, and then create and share their own raps and videos. It includes autotune and will even suggest rhymes as you’re writing the lyrics.

This marks NPE Team’s second musical effort — the first was the music video app Collab. (It could also be seen as another attempt by Facebook to launch a TikTok competitor.) BARS is available in the iOS App Store in the U.S., with Facebook gradually admitting users off a waitlist.

The tech giants

Atlassian is acquiring Chartio to bring data visualization to the platform — Atlassian sees Chartio as a way to really take advantage of the data locked inside its products.

Yelp puts trust and safety in the spotlight — Yelp released its very first trust and safety report this week, with the goal of explaining the work that it does to crack down on fraudulent and otherwise inaccurate or unhelpful content.

Startups, funding and venture capital

Newsela, the replacement for textbooks, raises $100M and becomes a unicorn —  If Newsela is doing its job right, its third-party content can replace textbooks within a classroom altogether, while helping teachers provide fresh, personalized material.

Tim Hortons marks two years in China with Tencent investment — The Canadian coffee and doughnut giant has raised a new round of funding for its Chinese venture.

Sources: Lightspeed is close to hiring a new London-based partner to put down further roots in Europe — According to multiple sources, Paul Murphy is being hired away from Northzone.

Advice and analysis from Extra Crunch

In freemium marketing, product analytics are the difference between conversion and confusion — Considering that most freemium providers see fewer than 5% of free users move to paid plans, even a slight improvement in conversion can translate to significant revenue gains.

As BNPL startups raise, a look at Klarna, Affirm and Afterpay earnings — With buy-now-pay-later options, consumers turn a one-time purchase into a limited string of regular payments.

(Extra Crunch is our membership program, which helps founders and startup teams get ahead. You can sign up here.)

Everything else

Jamaica’s JamCOVID pulled offline after third security lapse exposed travelers’ data — JamCOVID was set up last year to help the government process travelers arriving on the island.

AT&T is turning DirecTV into a standalone company — AT&T says it will own 70% of the new company, while private equity firm TPG will own 30%.

How to ace the 1-hour, and ever-elusive, pitch presentation at TC Early Stage — Norwest’s Lisa Wu has a message for founders: Think like a VC during your pitch presentation.

The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 3pm Pacific, you can subscribe here.

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Salesforce delivers, Wall Street doubts as stock falls 6.3% post-earnings

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Wall Street investors can be fickle beasts. Take Salesforce as an example. The CRM giant announced a $5.82 billion quarter when it reported earnings yesterday. Revenue was up 20% year over year. The company also reported $21.25 billion in total revenue for the just closed FY2021, up 24% YoY. If that wasn’t enough, it raised its FY2022 guidance (its upcoming fiscal year) to over $25 billion. What’s not to like?

You want higher quarterly revenue, Salesforce gave you higher revenue. You want high growth and solid projected revenue — check and check. In fact, it’s hard to find anything to complain about in the report. The company is performing and growing at a rate that is remarkable for an organization of its size and maturity — and it is expected to continue to perform and grow.

How did Wall Street react to this stellar report? It punished the stock with the price down over 6%, a pretty dismal day considering the company brought home such a promising report card.

2/6/21 Salesforce stock report with stock down 6.31%

Image Credits: Google

So what is going on here? It could be that investors simply don’t believe the growth is sustainable or that the company overpaid when it bought Slack at the end of last year for over $27 billion. It could be it’s just people overreacting to a cooling market this week. But if investors are looking for a high growth company, Salesforce is delivering that

While Slack was expensive, it reported revenue over $250 million yesterday, pushing it over the $1 billion run rate with more than 100 customers paying over $1 million in ARR. Those numbers will eventually get added to Salesforce’s bottom line.

Canaccord Genuity analyst David Hynes Jr wrote that he was baffled by investor’s reaction to this report. Like me, he saw a lot of positives. Yet Wall Street decided to focus on the negative, and see “the glass half empty” as he put it in his note to investors.

“The stock is clearly in the show-me camp, which means it’s likely to take another couple of quarters for investors to buy into the idea that fundamentals are actually quite solid here, and that Slack was opportunistic (and yes, pricey), but not an attempt to mask suddenly deteriorating growth,” Hynes wrote.

During the call with analysts yesterday, Brad Zelnick from Credit Suisse asked how well the company could accelerate out of the pandemic-induced economic malaise, and Gavin Patterson, Salesforce’s president and chief revenue officers says the company is ready whenever the world moves past the pandemic.

“And let me reassure you, we are building the capability in terms of the sales force. You’d be delighted to hear that we’re investing significantly in terms of our direct sales force to take advantage of that demand. And I’m very confident we’ll be able to meet it. So I think you’re hearing today a message from us all that the business is strong, the pipeline is strong and we’ve got confidence going into the year,”Patterson said.

While Salesforce execs were clearly pumped up yesterday with good reason, there’s still doubt out in investor land that manifested itself in the stock starting down and staying down all day. It will be as Hynes suggested up to Salesforce to keep proving them wrong. As long as they keep producing quarters like the one they had this week, they should be just fine, regardless of what the naysayers on Wall Street may be thinking today.

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