Tuesday May.19, 2020

☎️ SoftBank's tech yard sale

_When you find out 1 company owns your entire sugar/caffeine fix_

Hey Snackers,

Tired of rotating between the couch, your desk, and the kitchen table during WFH? Why not buckle into the latest trend: WFC, or "Work from Car" — your family won't think you're trying to avoid them at all. "BRB honey, going to WFC."

Markets surged for their best day in 6 weeks after biotech company Moderna revealed positive early results for its COVID-19 vaccine trial. Investor optimism was also stoked after Jerome Powell said the Fed has not run out of economy-reviving ammunition "by a long shot."

Sell

SoftBank Vision Fund lost $18B, so it's trying to sell its T-Mobile shares

"Into the valley of the coronavirus..." Where SoftBank's founder/CEO Masayoshi Son said some of his beloved tech unicorns had fallen. The Japanese tech and telecom investment giant posted a record $18B operating loss for its Vision Fund — almost $10B of those losses came from the plunged values of its Uber and WeWork investments (WeWork dropped from $47B value to $2.9B in a year).

SoftBank revealed its depressing results in a slideshow — the first 10 slides are dedicated to showcasing everything in the world that coronavirus ruined (complete with stock images of a sad chef).
SoftBank is under pressure from activist investor Elliott Management (aka the most aggro fund on Wall Street) to salvage the situation — now SoftBank is aiming to sell $41B of its own investments to get cash.

"Can I interest you in some T-Mobile shares?"... What SoftBank is asking at its big tech yard sale. It's reportedly in talks to sell its T-Mobile shares to German carrier Deutsche Telekom. Currently, Deutsche owns a 43% stake in T-Mobile, Softbank owns 24%, and common stockholders like us own 33%.

When you're broke, you sell your valuables... Companies do the same. Under different circumstances, SoftBank probably wouldn't be selling its T-Mobile shares. After its recent merger with Sprint, T-Mobile is the #3 carrier out of the new "Big Three" in the US (after AT&T and Verizon) — and the stock is up 24% in the past six months. But the corona-conomy left Softbank with few choices — and it might have to sell other holdings to make a comeback.

IPO

Peet's Coffee might get a $2.2B IPO: it has more than just shops up its (coffee) sleeve

If you're not writing a novel... then you don't belong in a Peet's Coffee. Peet's was founded in Berkley, CA in 1966 by a man who "ignited a revolution that forever changed the expectations of American coffee drinkers." Today, it's owned by the privately held (and weirdly mysterious) German conglomerate JAB Holding — JAB also owns Panera, Krispy Kreme, Stumptown, and Keurig Dr Pepper. Now...

JAB is looking to take Peet's public (again), aiming to raise $2.2B in an IPO (according to #PFWTM) — it would be one of the biggest IPOs this year so far.
While many of Peet's 200+ shops are closed, 80% of Peet’s coffee is actually sold for home consumption (those fragrant bean blends hitting you at grocery stores).
Ground coffee sales at US groceries jumped 11% in April, proving that demand for "Arabian Mocha-Java" bags is even stronger in the corona-conomy (people are trading $5 store-bought lattes for bags of beans).

But first, coffee... Caffeine-obsessed JAB is creating its own special blend of coffee (companies). Back in December, it mixed Peet's with Dutch brand JDE — its portfolio includes "iconic household names" like L’OR, Tassimo, and Pickwick. That combo is what is IPO'ing, and is expected to generate $7.5B in annual revenues.

JAB thinks coffee is pandemic-proof... As the most widely used psychoactive substance in the world, coffee is one of the most popular (and most addictive) consumer staples. In a recession, humans don't drink less coffee — they just drink cheaper coffee. That's why JAB will probably lean in even more into its pandemic-proof, at-home coffee biz.

Produce

Detroit's "Big 3" reopen for business this week — this is bigger than carmakers

Chicago had Jordan, Pippen, and Rodman... Detroit's Big 3 are carmakers: GM, Ford, and Chrysler. And they're reopening their factories, which have been closed since mid-March. Based on recent upticks in demand in China, automakers are hopeful that sales will follow when production restarts in the US:

133K American workers are expected to return to Big 3 plants across the country — Ford alone is bringing back 47K workers this week.
If the regular speed limit is 60, automakers are cruising 30: They're only bringing back around half the full capacity of workers, and are implementing precautions like: temperature checks, face shields, plexiglass barriers, and staggered shifts.

When times get tough, the profit puppies get more attention... While automakers are taking health/safety precautions, another COVID-19 outbreak could spell another major closure. That's why the Big Three will focus on producing its profit puppies — trucks & SUVs — while they can.

This is about much more than Detroit Big Three... It's about the fate of all their auto industry buddies, like auto parts suppliers and car dealers. A whopping 3M Americans work in the auto industry, and rely on automakers to fuel their businesses. Car part-making companies have already begun cranking production this week for the highly anticipated factory reopenings.

What else we’re Snackin’

Fortune: Walmart and Amazon top the 2020 Fortune 500 list — check out the other 498 companies that made the cut.
Slash: Uber is cutting 3K more jobs less than two weeks after laying off 3.7K employees — it'll also shut or consolidate 45 global offices.
Crypto: Reddit is launching Ethereum-based tokens to reward users for contributing content.
Sell: Berkshire Hathaway sells off most of its Goldman Sachs stake after it plunged over 33% thanks to the corona-conomy.
Compete: FedEx teams up with Microsoft's cloud service to deliver packages that can be tracked in real-time (they have one thing in common: hating Amazon).

Tuesday

Treasury Secretary Steven Mnuchin and Fed Chair Jerome Powell visit the Senate to talk Corona-conomy
Earnings expected from Walmart, Home Depot, Nordstrom, and Urban Outfitters

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1190844

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Do you want to run the State Department of McDonald’s?

A couple of days ago, a tweet making fun at McDonald’s hiring a “Manager for Diplomatic Relations” went viral.

At first glance, the idea that McDonald’s, a burger franchise known for its double quarter pounders and perfectly salted fries, is expanding its diplomatic influence with policy makers in Foggy Bottom and the world at large sounds comical. But it’s actually crucial.

There are more than 40,000 McDonald’s locations spread across 115 countries around the world, and 90% of these stores are independently owned and operated franchises that pay royalties to the parent organization to operate. Tens of thousands of franchises operated by different owners with different beliefs, priorities, and values can get complicated, fast.

As we noted in Snacks in February, McDonald’s received heavy backlash from franchisees in countries including Saudi Arabia, Oman, Jordan, Kuwait, and Pakistan after McDonald’s Israel donated thousands of free meals to IDF personnel. But it wasn’t McDonald’s, as an entity, that made the donations. It was the owner of the company’s Israel franchises, who was acting under his own volition.

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Nuke stocks up on AI excitement

For most of humanity, the thought of “nuclear-powered AI” sends a shiver down the spine. But the stock market is all for it! Just check out the list of top performing S&P 500 stocks this year. Just behind established AI plays — Super Micro Computer and Nvidia, you’ll find Constellation Energy, the largest operator of nuclear plants in the U.S. NRG Energy, which also operates nuclear plants, isn’t far behind. Bloomberg reports that CEO of power distributor Exelon — which spun off Constellation in 2022 — says in the Chicago area alone, AI could drive a 900% jump in demand for energy from data centers.

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China makes Apple remove WhatsApp, Threads, Signal and Telegram from app store

In its latest move to restrict foreign tech, Beijing has ordered Apple to remove a number of popular messaging apps from its app store there, including WhatsApp, Threads, Signal and Telegram.

These apps had only been available through VPNs but were popular nonetheless, according to the Wall Street Journal.

Apple said the Chinese government asked them to remove the apps in the iPhone maker’s second biggest market over “national security concerns.” Last week, China told its state-owned telecoms to phase out the use of US chips by 2027.

Exclusive | China Orders Apple to Remove Popular Messaging Apps

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Tesla's recall reveals just how bad Cybertruck delivery numbers have been

Thanks to a recall of Tesla’s Cybertrucks, we now know how many of them have actually been delivered: 3,878 since the EV company began releasing them to customers in November.

In its third and fourth quarter earnings report, Tesla said that its current Cybertruck production capacity was greater than 125,000 a year. Musk had previously said he expected to produce 250,000 Cybertrucks a year by 2025.

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

The recall is over an issue with the gas pedal pad that, the National Highway Traffic Safety Administration says when pressed, “may dislodge, which may cause the pedal to become trapped in the interior trim above the pedal.” The cause of the issue: “unapproved” soap that the manufacturer used to aid in getting the pad on the pedal.

A Cybertruck customer this week posted a TikTok about a terrifying incident in which this happened and “held the accelerator down 100%” in his 6,000+ pound vehicle. Thanks to some quick thinking where he held down the brake and put it in park, he wasn’t injured.

This is the long-awaited Cybertruck’s second recall since it came out five months ago.

Tesla recalls the Cybertruck for faulty accelerator pedals that can get stuck | TechCrunch

Either way, that’s a lot more than the roughly 775 it’s delivered each month so far.

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Cocoa hits $11,000

Cocoa prices are breaking records on an almost daily basis — with cocoa futures closing at (another) all-time high of $11,020 per metric ton yesterday.

That’s up 158% since the start of the year, and over 4x on the typical prices seen in 2022 — as crop production continues to fall short of demand.

Major cocoa-producing nations like the Ivory Coast and Ghana, which between them grow about two-thirds of the world’s cocoa, have seen excessive tree failure due to disease, changing weather patterns, and hot, dry conditions causing devastating droughts.

As such, consumers are starting to see the effects of the largest cocoa supply deficit in over 60 years: “shrinkflation” and reduced-cocoa recipes might soon hit your favorite chocolate bars, and Hershey stock was recently downgraded. Unfortunately, the worst may still be yet to come: the International Cocoa Organization expects production to lag behind demand by 374,000 tons for the 2023-24 season.

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World out of balance: It costs the US 3¢ to make 1 penny

The cost of producing the US penny rose 13% in fiscal 2023 to 3.07 cents. Yes, that means that Uncle Sam loses more than two cents for every cent it produces. (And no, you can’t make it up on volume.)

For the record, that’s the 18th-straight year the penny’s face value has been below production costs, fueling calls for abolishing the lowest value denomination coin. Canada started to phase out the penny in 2013, joining Australia, Brazil, Finland, New Zealand, Norway, and Israel, according to Smithsonian Magazine.

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Netflix is going to stop sharing subscriber numbers

After posting subscriber numbers that beat expectations today, Netflix says it’s no longer going to share those numbers starting in the first quarter of 2025. That’s a big deal since subscriber numbers have long been one of the main metrics that investors have looked at.

“In our early days, when we had little revenue or profit, membership growth was a strong indicator of our future potential,” its shareholders letter read. “But now we’re generating very substantial profit and free cash flow.” The company said that it will focus on revenue and operating margin as its main financial metrics, while it will look at time spent on the platform to gauge customer satisfaction.

Another way to read this? They’ve hit market saturation and just aren’t going to be growing that much anymore, and they thought they’d end on a good note. Going forward they’re focusing on how to get more money out of the customers they do have.

They’re doing so by cracking down on password sharing and charging for extra members. They’re also pushing people to ad tiers, which are more profitable than non-ad tiers.

“Scaling ads to become a more meaningful contributor to our business in ‘25 and beyond,” Netflix said.

Netflix’s ads membership grew another 65% in Q1 over the previous one, after rising 70% the quarter before, and 40% of signups in ad markets continue to be for those ad plans.

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