🧔 Harry's Razors acquisition — You shall not pass

Tuesday, February 4, 2020 by Robinhood Snacks | Disclosures

Cutting off the deal

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Hey Snackers,

The Oscars arrive this Sunday — so we're introducing an award for businesses: the TBOYs. 🏆 Follow us @RobinhoodSnacks to vote for your 2020 biz awards. Here are the nominees for Best Product in a Supporting Role:

  • Apple, AirPods
  • Sam Adams, Truly Hard Seltzer
  • Lululemon, Men's pants
  • Walmart, Curbside pickup

🥇 Vote on Twitter — and let us know what Supporting Products you think we missed. FYI, our next award on Wednesday is Best CEO in a Leaving Role. Happy Snacking.

Shave
1. Harry's Razors $1.4B acquisition by Schick might not happen

We're sensing friction... Remember when the maker of Schick razors was going to buy trendy subscription shave-startup Harry's Razors months ago? Probably not happening now. The Federal Trade Commission just sued to block the $1.4B acquisition of Harry's by Edgewell Personal Care.

  • Anti-Competitive: The FTC claims the deal would eliminate a major competitive force in an industry that's mainly being controlled by 2 companies.
  • Duopoly: Procter & Gamble and Edgewell dominate the shave market — P&G is #1 with Gillete men's razors and Venus women's razors making up around 50% of the market. Schick is #2 with 10%.
  • Newbies' Edge: Startups like Harry's and Dollar Shave Club pushed shaving giants to lower their prices and offer more options.
  • But: Now that Dollar Shave was acquired by Unilever for $1B and Harry's was (nearly) scooped, the FTC's concerned that Big Shave brands are buying up startup rivals so they can resume their price-increasing, anti-competitive ways.

Investors feel smooth and relieved... Edgewell shares actually jumped 13% on news of the FTC's deal-blocking lawsuit. Turns out, investors weren't so crazy about a company with a $1.6B market cap dropping $1.4B on a fast-growing (but money-losing) startup. That's why shares plunged 16% when the deal was announced back in May. Still, Edgewell wants fast-scaling Harry's to grow its older slowing razor biz.

THE TAKEAWAY

If razors are getting such sharp scrutiny... maybe the Justice Dep't and FTC will finally go after the real giants of American biz. Right now, there are multiple ongoing government-led investigations into Amazon, Apple, Google, and Facebook. Could Instagram be forced to split from Facebook? Or AWS broken off from Amazon? YouTube from Google?

Watch

It's my time to shine... YouTube finally got its moment in the Alphabet earnings spotlight. First, the Google-parent reported a disappointing performance for its core search-ads biz. Then, for the first time ever, Alphabet revealed YouTube and cloud revenues (probably to distract from its buzz-kill ad earnings).

  • YouTube: Needs no introduction. Google bought it in 2006 for $1.6B and just revealed that YouTube brought in over $15B revenue in 2019 (up from $11B in 2018). Your "Babies & Puppies Compilation" views are sandwiched with ads — YouTube says it forwards most of those ad bucks to video creators.
  • Cloud: That includes G-Suite favorites like Google Drive, Docs, and Sheets, which "magically" save your edits and make them shareable in real-time (aka, the internet). Those upgraded storage cloud accounts brought in almost $9B, compared to nearly $6B in 2018.

Back to the core biz... Google's an ad company. Its overall revenue, mostly made up of online ads, rose only 16.5%, sending shares down 5%. Profits still topped estimates though, thanks in part to an extremely low tax rate for the quarter. Alphabet set aside just $33M for taxes (0.07% rate), down from $1.1B in the same quarter last year.

THE TAKEAWAY

YouTube may get milked... Despite the less-than-expected revenue, last month Alphabet became the 4th US company to hit a $1T valuation (that's 1,000 billions). But with success comes fresh challenges: government investigations threaten to break up Google's biz, while rivals like Amazon are gaining in the ad space. That could affect YouTube:

  • Alphabet might have to start milking more profit out of YouTube.
  • Google's CEO: There is “significantly more room” to make money off YouTube’s users.
Sanitize

Pass the Purell... We've been hearing plenty about companies shutting down stores in China (Apple, Starbucks), cancelling flights (Delta, American), and overall losing millions from the coronavirus spread. Travel, oil, tech, luxury goods — all lost out. But some companies and industries have surprisingly benefited...

  • Cleaning/Hygiene: Clorox wipes. Hand sanitizers. Masks. Humans are reaching for cleansing options during a viral outbreak, sending shares of Clorox, Procter & Gamble, and Colgate all up last week. The CEO of 3M is ramping up production of mouth/nose-covering masks too (currently in a shortage).
  • Video Conferencing: The biggest Work-From-Home experiment ever is going on in China right now. People who need to be in the room during big meetings can't enter their offices. Hence, video conferencing. Zoom shares have climbed 25% over the past week on hopes it'll get tried — and kept.
  • Pharma/Biotech: Mostly companies that say they're in the process of working on a coronavirus vaccine. Vir Biotechnology surged 111% over the past month, while Novavax popped 91%, and Inovio Pharmaceuticals is up 37% (even though a working vaccine could be years away).
THE TAKEAWAY

And let's not forget these other investments... When things in the stock market get bumpy, some investors look for perceived "safer" places to put their money (think gold, treasury bills, and bonds). These "safe-haven" assets aren't usually as affected by market drops as stocks are. Unrelated, but also thriving in uncertainty: Bitcoin, which has gained 30% since the end of 2019.

What else we’re Snackin’
  • Sorry: Microsoft's Slack-rival, Teams, went down because Microsoft forgot to renew a critical security certificate
  • Ship Goals: UPS teams up with Square to bring its shipping service to the payment processor's ecommerce platform
  • Gas Panic: OPEC and Russia might hold an emergency meeting to discuss tanking oil prices, as travel demand continues to decline (because, coronavirus)
  • Sold: A mall-owning group buys Forever21 for $81M (to keep shoppers at its increasingly-empty malls)
  • Map Hack: A guy used 99 phones to create an artificial traffic jam on Google Maps, clearing the street for himself

Sign up for Robinhood, our commission-free investing app, and get a free stock. Already on Robinhood? You'll still get a free stock for getting a friend to sign up (they'll get one too).

Snacks Daily Podcast

"Do you, internet search monopoly, take this, internet video monopoly, to be your lawfully wedded tech giant?"

We dissect the razor industry, flash back to Google's YouTube acquisition, and chat Coronavirus surprises. Try out our 15-minute daily podcast, Snacks Daily (you're gonna like it).

Tuesday

Disclosure: Authors of this Snacks own shares of Alphabet, Square, Spotify, Amazon, and a Bitcoin

ID: 1079081

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