WeWork gets bailed out. Ex-CEO gets rich
Hey Snackers,
Quick takeaway from Chipotle's earnings: it's running low on carne asada.
Stocks dipped Tuesday as overall earnings reports were mixed. Today, Facebook's Zuck hits up Congress to chat Libra cryptocurrency plans.
WeWork's bailout cuts its valuation by 83% — but ups Adam Neumann's payout to $1.7B
Kombucha taps don't pay for themselves... WeWork loses $219K every hour — and last month's IPO was supposed to hook it up with billions of much-needed funding. Since that didn't happen, WeWork's due to run out of money by November. It needed a bailout, and the WeWork board just got one. Here's the Matrix-style situation it faced:
- Red pill?: A debt bailout from JPMorgan, WeWork's top bank.
- Blue pill?: An equity/debt bailout from SoftBank, the Japanese investment company that already owns 1/3 of WeWork shares.
- The decision: SoftBank. WeWork will receive an additional $6.5B from SoftBank, bringing the total Softbank's invested to $13B.
- The shocking numbers: The $13B SoftBank's invested in WeWork so far is now more than WeWork's total worth — this deal slashes the unicorn's valuation from $47B to $8B.
But the most shocking number is $1.7B... That's how much ex-CEO Adam Neumann is getting paid to walk (further) away from the company he built. He'll step down from the board in exchange for the following $1.7B payday from SoftBank:
- $185M: That's an ambiguous "consulting fee."
- $970M: That's how much of Adam's WeWork stock SoftBank agreed to buy.
- $500M: That's a loan Adam got from JPMorgan that needs to be repaid ASAP — SoftBank is bailing that out, too.
This isn't fair for employees... Adam's walking away a billionaire. But many of its thousands of concerned WeWorkers have been paid in stock options, which are now worth much less since WeWork's valuation plummeted. The WeWork bubble (aka its $47B valuation) popped because Wall Street noticed that Emperor Adam on his Softbank-funded throne had no clothes.
Snapchat got its groove back, but Wall Street focused on a single negative stat
Describe your earnings in 5 words or less... More good stats, less bad. Snap is officially enjoying its 3rd straight quarter of strong numbers that haven't disappeared yet.
- Users: The number of humans snapping daily hit a record 210M, up 13% from last year.
- Revenue: Between your roommate's rando snap and buddy's tailgate story was an ad from State Farm. Revenues like that rose to $446M last quarter, up 50%.
- The net loss: Snap's still asking investors and lenders for money because it loses cash every quarter. But its loss shrank to just $227M, less than the $325M lost the same period last year.
What about ARPU, man?... Silicon Beach-based Snap is at the mercy of that stodgy abbrev each quarter: ARPU (Average Revenue Per User). It made $2.12 off every Snapper on average last quarter, the slowest growth in ARPU since 2017. Shareholders thought it was still mid-growth spurt, so the stock dropped 4% on the early sign that puberty is almost over.
The goal: Be like Twitter... Snap and Twitter are Facebook's only real social media competitors (besides TikTok, which our nephews haven't explained to us yet). And their similar userbases are both a fraction of Facebook's 1.6B who log in daily. Twitter already found sustained profitability, a passionate userbase, and a stock that doubled in the last 2 years. Snap wants in.
McDonald's did more with less last quarter, boosting sales despite fewer diners
We're concerned. But we're impressed... The number of people who went to McDonald's in the US last quarter — aka "foot traffic" — fell. Somehow McDonald's sales still rose 4.8%. Ronald squeezed more money out of each customer, ketchup-pouch style, and here's how:
- Higher prices: You dropped 3% more for a McSomething because McD's upped the menu prices (partly to cover higher paychecks because of city/state minimum wage increases).
- Tech: McD's acquired 3 tech companies in the past year, including one that adjusts the drive-thru menu based on weather. Hot day = McFlurries on 6 of the value meals.
- Promos: 2 for $5 Mix & Match. Buy 1 Big Mac, Get 1 Big Mac for $1. Bargains get your eyes ordering more than your stomach planned.
"Lower foot traffic" isn't part of McD's plan... The chain's huge $2.4B store renovation plan focuses on self-order kiosks and table service. That's meant to boost store traffic — but the opposite happened last quarter, so investors dropped shares 5% Tuesday. Our guess: Viral Popeyes vs. Chick-fil-A chicken sandwich wars temporarily attracted the Big Mac (un)faithfuls.
What else we’re Snackin’
- Combo: Pizza Hut partners with Kellogg's to test its Incogmeato (great name) plant-based meat on veggie pies in Phoenix
- Accelerated: Lyft jumps 7% on word it thinks it'll become profitable by 2021
- Un-fun: Hasbro suffers its worst 1-day drop since 2000 because the trade war's messing with its Made in China toys
- Media-ing: Verizon will give out 1 free year of Disney+ to its Unlimited customers because the streaming wars have engulfed wireless providers
- R&D: Biogen's stock surged on word it's applying for approval of a blockbuster Alzheimer's drug
Wednesday
- Mark Zuckerberg chats with Congress about Facebook's cryptocurrency plans
- Earnings from Tesla, Ford, PayPal, eBay, Microsoft, and Caterpillar
Disclosure: Authors of this Snacks own shares of Tesla.
ID: 990870