🦄 Softbank’s frowning unicorns

Tuesday, August 9, 2022 by Robinhood Snacks |
A frown quarter (STR/JIJI PRESS/AFP via Getty Images)

A frown quarter (STR/JIJI PRESS/AFP via Getty Images)

A frown quarter (STR/JIJI PRESS/AFP via Getty Images)

A frown quarter (STR/JIJI PRESS/AFP via Getty Images)

Yesterday’s Market Moves
Dow Jones
32,833 (+0.09%)
S&P 500
4,140 (-0.12%)
Nasdaq
12,644 (-0.10%)
Bitcoin
$23,788 (+2.63%)

Hey Snackers,

This may be the best summer job yet: British wine retailer Majestic says it’ll pay someone to determine whether wine really tastes better on vacation… by drinking wine… on vacation.

Stocks lost their early gains yesterday after Nvidia’s profit warning, ending the day barely changed. July’s consumer inflation numbers drop tomorrow, and investors have their fingers crossed for signs of deflation, which could calm the Fed’s rate-hiking crusade.

Frown

Never disappoints on the quirky decks... Japanese investment giant Softbank is famous for its simple but poetic earnings decks, which include pictures of unicorns falling into the "Valley of Coronavirus" (slide 50) and a powerful slide that just says "Many Regrets" (11). To understand the mood of Softbank's latest earnings, check out this frown on slide 4.

  • Softbank reported its largest quarterly loss ever. The mind-numbing figure: $23.4B. Softbank's tech-centric Vision Fund alone lost nearly $22B.
  • Blame plunging tech stocks — from DoorDash to WeWork to Uber — which Softbank was heavily invested in. The Vision Fund has lost $50B in gains from its peak (#WeCrashed).
  • Losses were spread across Softbank’s portfolio of 300+ companies, including Klarna, DiDi (the Uber of China), and Singapore’s superapp, Grab.

The decks are still iconic... but Softbank’s investments have soured. Rising interest rates have crushed high-flying valuations, while China’s regulatory crackdown on tech pummeled Softbank’s investments in Asia. Now Softbank is selling to raise cash and soothe losses:

  • Softbank has sold its entire stake in Uber, Slack, Opendoor, Nvidia, and others. It says it made a $1.5B profit by selling its long-held Uber stake.
  • Cutting back: The Vision Fund approved just $600M in investments from April to June, down from a record $20.6B a year earlier, and job cuts could be coming.
THE TAKEAWAY

It can be hard to see the downside… when the upside is so in your face. Softbank was riding high when tech was booming. For 2020, it posted a record $46B profit — the highest for a Japanese company, and $5B more than Google earned that year. CEO Masayoshi Son said he’d become "somewhat delirious" when prices soared, and regrets all the $$ he funneled into startups. Now Softbank is imposing discipline to weather the markets’ ups and downs.

#ads

Forget the aux cord… Soon you’ll be able to control music in Lyft rides without nervously asking your driver — but you’ll have to watch ads. Yesterday, Lyft announced Lyft Media, a new unit focused on advertising. Ride-hailing demand has roared back to life, and Lyft wants to monetize users’ eyeballs:

  • Brands riding shotgun: Lyft is adding tablets to its drivers’ cars so that brands can serve ads on the go. Think: a Vita Coco ad in the app when you book, and another in the car to the supermarket.
  • New features: Riders will be able to choose music and tip drivers through the tablets. Lyft said drivers will make extra $$ from in-car ads.

Wienermobile ETA… Two years ago, Lyft bought Halo Cars, a startup that makes car-top screens. Since then, Lyft has grown its marketing biz by putting ads on car roofs, bike-sharing docks, and in its app. Think: Oscar Mayer Wienermobiles moving on the Lyft map instead of a car. It’s good timing to appeal to advertisers:

  • More rides = more eyes: Lyft’s stock soared 46% last week after it reported its biggest bump in active riders since the pandemic began. But the stock’s still down 55% this year.
THE TAKEAWAY

The route less traveled by may make the difference… While Lyft has stayed narrowly focused on rides, Uber has grown its Eats biz into one of the largest food deliverers (and has expanded to everything-delivery). But now Lyft could capitalize on its strength: riders’ eyeballs. While Uber also sells ads, it hasn’t built an ecosystem like Lyft’s. But this month Uber said it planned to expand its ad biz — and that it could hit $1B in revenue by 2024.

What else we’re Snackin’

  • Doc: Signify Health shares popped 11% on reports that CVS is trying to buy the healthcare platform. This month CVS announced plans to expand into primary care (think: doc appointments).
  • iLexa: Amazon’s buying Roomba maker iRobot for $1.7B. But regulators could stall the vacu-sition over privacy concerns given that the Zon (and Alexa) would get personal data on millions of homes.
  • Bid: YouTuber turned pro boxer Jake Paul raised $50M to grow his influence-fueled sports-betting startup, Betr, which specializes in “micro-betting” (think: betting on a touchdown vs. the final score).
  • Crunch: Shares of chipmaker Nvidia fell 8% after its quarterly sales came in way below Wall Street’s expectations. Nvidia has suffered from slower gaming-console sales and supply shortages.
  • Clog: Home-appliance maker Whirlpool paid $3B to buy waste-disposal biz Insinkerator (which has a 70% share of the sink market). The food-churning deal is a part of Whirlpool's strategy to drive high-growth businesses.

Snack Fact of the Day

Consumer confidence in the housing market has hit its lowest level since 2011

Tuesday

  • Earnings expected from Marriott, Planet Fitness, Lemonade, Coinbase, Hyatt, and IAC

Authors of this Snacks own: shares of Nvidia, CVS, IAC, Uber, Amazon, and Google

Correction: An earlier version of this newsletter misstated that the consumer price index was dropping on August 9, 2022. It was set to drop on August 10.

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