🎶The Lizzo IPO

Monday, February 10, 2020 by Robinhood Snacks | Disclosures

You can't be a music boss, but you can own like 1 millionth of one

Last Week’s Market Moves
Dow Jones
29,099 (+2.98%)
S&P 500
3,328 (+3.16%)
9,518 (+4.01%)
$9,756 (+4.09%)
10-Yr US Treasury

Hey Snackers,

Please turn your electronic devices to airplane mode. We're about to set a subsonic record. A British Airways flight notched a record speed, making it from New York to London in just 4 hours and 56 minutes (almost 2 hours earlier than scheduled).

Markets jumped on a stellar January jobs report (+225K jobs) and word that China's cutting tariffs on US goods.

PS: Valentine's Day is Friday (breadstick bouquets are in).

1. Warner Music files to IPO — it could become the top "music" stock

"Three-opoly" is our favorite made-up word... Perfect for an industry that loves making up words (supercalifragilisticexpialidocious, for example). The music biz is dominated by 3 labels: Universal Music, Sony Music, and Warner Music. The first two are owned by much bigger conglomerates (Vivendi and Sony), but the last one just filed to become a publicly traded stock. Here's what Warner Music does for a living:

  • Sign artists: Kind of like VCs or European soccer clubs, music labels spot talent early, convince them to sign, then try to make them big stars.
  • Pick winners: Besides Macklemore rap/bragging about doing it solo, there aren't many musicians who found fame without being signed by a record label.
  • Negotiate with streamers: The labels ensure musicians get paid for each stream on Apple Music, Pandora, and Spotify.
  • Market, monetize, manage: According to Warner's S-1, it makes 86% of its revenues by managing the careers of Lizzo, Metallica, Ed Sheeran, and Madonna and other stars. Warner just took a DNA test and it turns out: it just made its highest quarterly revenue in 16 years.

The music industry was dead. It's almost back... thanks to streaming. The industry was popping platinum bottles in the year 2000, aka "Peak CD."

  • 2000 - Peak CD - $14.3B: When cars were racing to hold more CDs in their XX disc-changer stereo, musicians made $14.3B selling their music in the US.
  • 2010 - Peak Free Music - $7B: Over 10 years, revenue halved thanks to Napster, Limewire, and other web apps that made musical theft insanely easy. Plus Youtube is/was free (less so now with ads).
  • 2018 - Streaming Comeback - $9.8B: Thanks to easy monthly subscriptions to Spotify, Apple, and/or Pandora, people are used to paying for music again.
  • But music industry revenues are still below 2000's Peak CD.

You can own a piece of your favorite music... Wondering why Taylor Swift can't do what she wants with her music? It's owned by her record label. As one of the top labels, Warner Music's stock (ticker symbol is TBD — we're hoping for "JAM") will let investors benefit from the continued rise of the streaming industry... or suffer if the revenue comeback dies.


Keep the Baby Yoda memes coming... Disney already has over 28M US subscribers for its new streaming service, Disney+ — for CEO Bob Iger, that launch exceed "even our greatest expectations." It took Netflix 5 years to reach 28M subs (it now has 167M globally), but Mickey only needed a few months. That's thanks to a combo of a much-loved brand, nostalgic content, pixie dust, and free year for Verizon subscribers.

Who pressed 'Ludicrous Mode'... on Tesla stock? Tesla surged 54% and added $56B to its market value in just a few days last week — that makes it #2 most valuable carmaker on Earth (after Toyota). And it's worth almost double GM and Ford combined... despite being unprofitable and producing barely 3% of the number of cars that GM and Ford did last year. Investors think Tesla's future profit potential is bigger than Detroit's. But the ludicrous rally was possibly driven by a short squeeze coupled with FOMO buyers.


It was all a dream... Casper stock has fallen an anti-climactic 28% since the mattress icon went public Thursday. A month ago, Casper was valued privately at $1.1B. When it woke up Friday post-IPO, it was worth $346M as a public company. A charming brand and cut-out-the-middleman biz model hasn't saved Casper from unprofitability (investors aren't into the $80M lost on returned/refunded/discounted mattresses). Now other D2C startups (Warby Parker, Glossier, Allbirds) might second-guess the IPO life.

Less high... Aurora Cannabis. The Canadian pot-company's stock fell 13% after the founder/CEO Terry Booth announced his departure and 500 employees were laid off. When weed was first legalized in Canada and some US states, producers went into full-hype mode building production facilities. But demand's been lower than expected, so overproduction has dropped pot prices. Aurora shares are down 80% since March and other pot producers have fallen over 50% on average in a year.

What else we’re Snackin’
  • Lead: There are more top female execs now than in the past, but few are responsible for the bottom line. Where are all the women CEOs?
  • Relate: The 4 types of people at work, and how they control (or fake) their emotions — are you a deep actor, a regulator, a low-actor, or a non-actor?
  • Wonder: Astronomers captured the aftermath of a fight between stars, thousands of light years away from earth (aka, Stars Wars IRL)
  • Decide: The 'aha' moment that changed Jeff Bezos' life and career path (hint: cosine)
  • Earn: 7 beliefs that differentiate self-made millionaires from the middle class
Snacks Daily Podcast
  • Uber lost about $8B last year and claims it'll be profitable by the end of this year — depends how you define "profit" (Uber's word-of-the-day is "adjusted" profits)
  • We've never covered the US government acquiring a publicly-traded company, but that could happen to Sweden's Ericsson or Finland's Nokia... because the Trump administration badly wants a US counter to China's Huawei. It's a 5G story.
This Week

Disclosure: Authors of this Snacks own shares of Beyond Meat, Amazon, and Alibaba

ID: 1085083

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