☎️ SoftBank's tech yard sale

Tuesday, May 19, 2020 by Snacks
_When you find out 1 company owns your entire sugar/caffeine fix_

When you find out 1 company owns your entire sugar/caffeine fix

Yesterday’s Market Moves
Dow Jones
24,597 (+3.85%)
S&P 500
2,954 (+3.15%)
Nasdaq
9,235 (+2.44%)
Bitcoin
$9,662 (-0.49%)
10-Yr US Treasury
0.722%

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

1. 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%.

THE TAKEAWAY

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

2. 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.

THE TAKEAWAY

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

3. 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.

THE TAKEAWAY

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

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1190844

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