Hey Snackers,
In light of the pain that the US has been facing, we're focusing our SnackFacts this week on racial injustices in economics, business, and the markets. There’s always something new to learn about our history and our present that can inform our perspective.
Stocks ticked up Monday, building on strong April and May gains. Corona-conomy losers like airlines and cruise lines benefited the most — investors are keeping their fingers crossed for a successful economic reopening.
Kylie Cosmetics may be worth much less than the media thought — but is it fraud?
My lipgloss is droppin'... Kylie Jenner was a human unicorn (aka, a billionaire) — she may have lost her horn. In August 2018, Forbes celebrated Kylie with a glossy cover as she neared billionaire status thanks to the success of Kylie Cosmetics. An exclusive distribution deal with Ulta, which sells Kylie's $29 Lip Kits at 1K+ stores, seemed to seal it:
- In March 2019, Forbes confirmed that the then 21-year-old beauty mogul was "The Youngest Self Made Billionaire Ever" (insert sad Zuck).
- In January 2020, Kylie brought home $600M after selling 51% of Kylie Cosmetics to 116-year-old beauty giant Coty.
- The deal was valued at a snatched $1.2B — Kylie still owned 49% of the company, adding around $600M in value to her $600M cash (quick math: billionaire).
The truth is more Matte than Glossy... Forbes just published an article titled "Inside Kylie Jenner's Web of Lies" (big tonal shift here). Financial filings from publicly traded Coty reveal that Kylie’s business is much smaller (and less profitable) than the media was led to believe:
- What the Jenners told the media: Kylie Cosmetics did $307M in 2016 sales, $330M in 2017 sales, and $360M in 2018 sales.
- What Coty revealed: Kylie Cosmetics did $125M in 2018 sales and $177M in 2019 sales.
- If the 2016/2017 numbers are true (the 2018 ones definitely aren't), Coty paid a fortune for a "high growth brand" whose sales shrank from $330M to $125M in one year — instead, Forbes thinks the tax returns it was shown as proof of value were likely forged.
Much more important than Kylie's billionaire status... Is it Securities Fraud? Publicly traded companies like Coty are required by law to report (accurate) financials each quarter to the SEC. Public execs can be criminally charged for lying about company-related things (and misleading public investors like us). Buuut — since Kylie Cosmetics was private, what actually matters is whether the info presented to Coty in the purchase agreement was accurate. And Coty signed it.
Zynga drops $1.8B to acquire Turkey's Peak Games — biggest Turkish startup exit ever
Words With Friends across the Atlantic... Zynga is the social gaming giant behind mobile hits like FarmVille, WWF, and Okey Plus. Okay, if you've never heard of Okey Plus, you probably haven't spent much time in Turkish coffee houses.
- Zynga just dropped a super-charged $1.8B to buy Istanbul-based gaming company, Peak Games — it's the first $1B+ acquisition of a Turkish startup.
- This isn't Zynga's first cruise down the Bosphorus: In 2017, Zynga snatched up Peak's mobile card games division (which includes rummy-style Okey Plus) for $100M.
Spill the Raki... This acquisition is a huge growth opportunity for Zynga and its in-game buying biz (tokens, etc), as well as its smaller advertising biz (those things you accidentally click on mid-game):
- Instant Success: Peak's Toon Blast and Toy Blast titles have more than 12M daily users combined and are among the highest-grossing games in the App Store — Zynga doesn't have to pour time and money into developing a hit-or-miss game (they're already hits).
- Global Reach: Most of Peak's users are outside of Zynga’s home market (the US) — Zynga says cross-selling across Peak's users will boost its total daily users by 60%. Zynga thinks that'll win it a $40M sales boost for the year.
Zynga acquired its way back to relevance... And relevance is all about the "forever franchises" — aka, games that outlive fad-status. After its 2011 IPO, Zynga stock plummeted 80% in its first public year. But the stock has tripled over the past 5 years, because Zynga realized it doesn't have to consistently make popular games to offer popular games. It can buy them — and it's spent nearly $1B on acquisitions since 2017.
What else we’re Snackin’
- Support: Apple, Facebook, Verizon and other tech giants promise millions in donations to groups battling racial injustice.
- Planty: Coca-Cola and Carlsberg back a project to develop plant-based biodegradable bottles (you could be sipping Coke from broccoli).
- Tense: The US may revoke Hong Kong's "special trade status," which exempts it from tariffs imposed on China, after China moved to control Hong Kong's legislature.
- Caffeinate: Peet's Coffee raises $2.5B in its IPO — JAB Holdings-owned JDE Peet's is valued at over $17B after going public.
- Closed: Retailers like Target and Walmart, as well small businesses, have temporarily closed locations after several were damaged and/or looted.
- Incroyable: Impossible Foods forces Nestle to change the name of its plant-based "Incredible Burgers" — new name: "Sensational."
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Tuesday
- Earnings expected from Zoom, Tiffany's, Dicks Sporting Goods, and Groupon
Disclosure: Authors of this Snacks own shares of Luckin and Spotify
ID: 1203306