Zynga wins at real estate (loses at Farmville)
Hey Snackers,
Just in case you didn't catch the winners of the 2019 "World Beard & Moustache Championships" in Belgium — This is worth your time.
Markets dropped to start the week, with the Dow falling almost 1% as trade war worries continue.
Zynga sells its headquarters (and wins a $372M profit)
Your mid-bathroom procrasti-habit... Zynga owns it. The Farmville creator is still focused on "casual" mobile games like Words With Friends (it even dropped $100M for a digital card game company). But the eGaming pioneer just put on its Mr. Monopoly Man hat and sold its San Francisco HQ for almost triple what it originally paid.
- 2012: Bought "650 Townsend St." for $228M.
- Yesterday: Sold it for ~$600M.
- Bonus: Zynga can stay in the space... but rent is $833K/month.
Zynga is better at real estate than gaming... The location is near CalTrain for commuters, adjacent to Airbnb's HQ, and close enough to fast casual spots to keep employees happy/vegan. Location. Location. Location. Here's how Zynga's gaming game compares to its real estate game since buying the property in '12:
- Zynga's core gaming business lost $660M over 7 years.
- Zynga's real estate investment turned a $372M profit over the same period.
- Zynga's stock has lost half its value (but is on a tear lately).
- FYI: The sale proceeds are going to straight to HR — It's hiring more engineers and game creators to make Farmville2 happen.
Companies invest just like you do... And sometimes those investments strike gold, making the company's core business not core anymore. We're thinking of these two:
- Yahoo was going nowhere in 2005 when it bought 40% of a small Chinese ecommerce company — That $1B investment in Alibaba was worth $26B in 2014 when 'Baba IPO'd.
- eBay dropped $1.5B for a payment-processor in 2002 — That investment grew so fast it was spun-off into its own company, and now PayPal is worth 4-times as much as its old parent.
Alibaba going for its 2nd IPO
Time zones are annoying... So Alibaba's conquering them all. The closest thing to Amazon in China, the ecommerce icon chose the New York Stock Exchange for its record-setting $25B IPO in 2014 (still the biggest IPO ever). And according to Bloomberg, it might issue shares for the first time — again — in Hong Kong.
The more, the merrier... Here's what Alibaba can gain through another public offering
- A fundraise: Alibaba would create new shares to sell to Hong Kong investors in return for $20B in fresh cash. That'll be invested in expanding to become the Amazon of everywhere-outside-the-US.
- More potential investors: Asian investors can buy Alibaba's American-listed shares, but it can expect more local demand if they were listed in Hong Kong, too.
- A trade war insurance policy: If US-China trade tension worsens, Alibaba would be vulnerable if all its stock were linked only to New York.
It's an all-eggs-in-one-basket situation... Alibaba is already the largest ecommerce company (it gets about 2/3 of online retail in China) in the largest consumer market (the 1.5B people there is about 6x the US). This homeward-bound Hong Kong move gives protection from the politics Alibaba can't control.
Fiat Chrysler proposes to Renault — It's about survival
Let's go Dutch... on a station wagon. Fiat Chrysler just proposed a 50-50 merger with Renault that would create the #3 car company behind Toyota and VW. If Renault accepts, 9M cars would roll off this car-glomerate's assembly lines annually, looking like this:
- Fiat-Chrysler: The Italian-American combo-company invested big in its Jeep and Dodge trucks/SUVs.
- Renault: The affordable/adorable French cars don't get bought in 4x4-loving America, but they've got fans across Europe, Russia, and the Middle East.
- Mitsubishi & Nissan: The Japanese carmakers already allied up with Renault, so this merger would expand the open-relationship to include 15M total cars — That's more than any other.
The car industry is hard... Margins (aka the amount of profit companies can squeeze out of each dollar of revenue they earn) are already skinny in the car industry since there's so much competition. And car parts aren't cheap. Now the old guard carmakers are bracing for new tech change:
- Car-sharing and ride-hailing help you not own a car.
- Climate change policies require century-old engines to go electric.
- Self-driving tech could help a 2-car family easily survive on just 1.
This is Westeros-style houses uniting... At its most basic level, the merger would let the companies pool resources so they're stronger together (picture Daenerys + Jon Snow). Here are hookups already happening:
- BMW and Mercedes-owner Daimler are building a Europe-wide charging network together for their e-cars.
- Ford and Volkswagen are trans-Atlantic-ing the race to self-driving car tech.
What else we’re Snackin’
- Varsity: Sports Illustrated is sold for $110M by Meredith Corp (but Meredith will still publish it)
- iFold: Apple snags a patent for a foldable iAnything
- Re-heated: Yum Brands' Pizza Hut changes its pan pizzas for the 1st time in 40 years
- Plugged: General Motors is building thousands of electric charging stations
- Chipper: Advanced Micro Devices jumps 10% after unveiling a fancy new line of microchips to power PCs and servers
- #IPO: Revolve is the social media influencer-powered ecommerce company that's about to IPO
Wednesday
- Earnings from Abercrombie & Fitch, Canada Goose, and Capri (aka Michael Kors)
Disclosure: An author of this Snacks owns shares in Amazon and Volkswagen.