General Motors is Cutting Production Volume
Two weeks ago we asked whether there'd be an uptick in auto distress. We didn't really even touch on to what degree ride-sharing will impact car ownership though we did point out GST Autoleather's assertion in its bankruptcy papers that Uber and Lyft have had an affect on OEM production levels. Well, this doesn't bode well for suppliers then. Take this chart for what it is: a bit of marketing, a bit of projection. After all, it is from Lyft directly and, of course, they want to show "up and to the left." Still, just imagine what this means if true.
Notably, General Motors ($GM) reported numbers this past week that surprised to the upside and the stock popped. They did discount heavily, but whatevs. Significantly, GM also noted a 26% decline in production. That, too, to our point, cannot bode well for the players in the auto supply chain. Keep an eye on auto - 3% GDP growth notwithstanding.
P.S. What Happened to Unicorn Homejoy LLC?
Busted Tech? (Long Regulatory Disruption of Disruption). There are, what, 183929 Uber-for-X style companies today offering everything from weed delivery to in-home massages...? Most of these companies - Uber and Lyft included - are built on the 1099-economy where "gig" workers are framed as contractors rather than employees. Given that these companies are struggling to be profitable to begin with, it's especially helpful for these companies to avoid outlays for overtime pay, health insurance, worker's compensation, and other W-2 employee-related expenses. Except now, for the first time, a challenge to this model is seeing its day in court as a GrubHub Inc. ($GRUB) employee is suing for reimbursement of wages. Uber and Lyft have both settled prior (similar) suits out-of-court. Instacart, Caviar and Postmates have also been sued. A similar lawsuit, in part, forced Homejoy LLC into an assignment for the benefit of creditors in August 2015 and Chapter 11 in late-2015.* Which is to say that many companies - of GrubHub's status and otherwise - will be watching this fight closely as it has potentially existential ramifications for the gig economy going forward. Sometimes moving fast and breaking things runs into a regulatory roadblock.
* We thought it made sense to dive a bit deeper into what ultimately happened to Homejoy LLC, which, for the uninitiated, was at one time a Y-Combinator darling valued over $1b (after approximately $64mm of funding). Why? Because more often than not companies are celebrated on the way up and quickly forgotten after they come crashing down. It should be noted what happened to the company, its employees, and its assets after the crash. Here is what we know from the bankruptcy filing and otherwise:
- Per Re/Code, Google hired "around 20 members of Homejoy's product and engineering team." Notably, Google Ventures was one of the largest creditors of Homejoy's bankruptcy estate - to the tune of approximately $18mm.
- Per the company's court filing, the Google hire occurred in July 2015 and the purchase price had to be several million dollars because it subsumed not just the tech team, but enough "consideration" to payoff the company's secured credit facility from Silicon Valley Bank, fund the wind-down AND leave money in the bankruptcy estate for a liquidating trust. See below.
- The company sold its customer list, service provider list, trademarks and domain names to entity called ABAP Holdings Inc. Some may recall that this transfer wasn't without its own controversy. The total purchase price was $100k.
- The company sold its remaining office equipment for $20k.
- The company seemingly tried to sell its source code but apparently was unable to find a buyer as the bankruptcy docket reflects no motion filed with the Bankruptcy Court seeking approval of said sale.
- The company would have managed the wind-down without a chapter 11 filing were it not for the "gig economy" lawsuits. It is unclear whether payments were ever made to the plaintiffs out of the liquidating trust or, if so, for how much.
Clearly this wasn't the ending that Google Ventures, First Round Capital, Andreessen Horowitz and others wanted.
The ubiquitous Uber-for-X designation doesn't seem so ubiquitous anymore. That's because a lot of those companies have failed or are failing. Take Shyp, for instance, an on-demand logistics/shipping service where couriers came to your home, packaged your wares (Ebay anyone?) and shipped them for you. "Came" being the operative word. The company announced that it's retrenching back to SF, abandoning service in Chicago/LA/NYC. Choice quote (after getting $50mm in venture capital from Kleiner Perkins), "'Investors are looking to put capital into businesses that are cash-flow positive." Funny how that works. With so much "tourist capital" (read: sovereign wealth funds, pension funds, Fidelity Investments in the case of Snapchat ($SNAP)) flowing through venture capital, expect a lot more coverage of "busted tech" to come.
Who doesn't like a good dose of Kenny Loggins? Dude is a bada$$. Nothing gets a party going like Footloose. But we digress. Apparently nobody wants to arrive to the party as the "big dog rider" of aHarley Davidson ($HOG) rig anymore. Another victim of Uber and Lyft? US sales were down 3.9% and the company got downgraded this week. We wonder how leather sales are doing.
So Travis Kalanick is out and those of you who actually cared can now switch your corporate accounts back to Uber from Lyft. Congrats. Starwoodspoints! Anyway, ICYMI, mere days after the Amazon/WholeFoods announcement, the CEOs of both Fresh Market and Bi-Lo were replaced. Clearly the Board of Directors at both felt like a shape up was needed for the bloody war to come.
Apparently they've finally gotten the memo on retail (although, as we have well covered, the PE shops seem to be doing okay even while driving their portfolio companies into bankruptcy...but we digress): investments in retail companies are down markedly to 86 globally in 2017 as compared to 300 in each of '15 and '16. Speaking of private equity and retail, gotta love the timing behind the departure of TPG Capital's sole female partner given David Bonderman's ill-timed and inappropriate comments in the Uber boardroom. Notably, one noted potential cause for the separation is that heads needed to roll for the terrible J.Crew investment.
Madoff Comparisons (#DeleteUber aka Short Uber).
Things clearly aren't going your way when, on top of ALL of the other negative news to trickle out on seemingly a daily basis, you're compared to Bernie Madoff and a ponzi scheme.
Bankruptcy Code Section 4:20. Just kidding...the bankruptcy code isn't available for folks who make money off of weed.
Busted Tech. Answers.com takes a stray bullet in this piece about IAC's plans to shut down About.com. The fact that About.com has actually still been running this whole time renders us - yes, even us - speechless. Meanwhile, more busted tech is coming...soon. On the flip side, Quora is now a unicorn so who the hell really knows?
Canada. Housing is looking like an oncoming disaster - particularly in Toronto - and blood is appearing in the water.
Casual Dining. Quietly, a NYC mainstay is disappearing.
Dead Malls/Investing. David Simon's optimism notwithstanding (see above), everyone is all over the "short the malls" thesis - now even extending it to the "A Malls" that, prior to recently, were generally considered to be impervious to this retail malaise (note: there's over $1b of short interest on SPG currently). And this guy from Alder Hill Management LP is the poster child. (Let us know if you want his report: PETITION has it.) Some are throwing shade all over this hype. Finally, according to this, maybe we should all be doing a better job to ensure that algorithmic shopping doesn't gain more ground and malls actually DO survive.
Oil & Gas. Nothing like a good old corruption allegation that embroils multiple law firms and a private equity shop to help push a company (here, Cobalt International Energy) closer to bankruptcy (paywall).
Oil & Gas II. Wait. So now we're at an oil and gas deficit?!
Retail II (Jamming like a Boss). While Gibson Brands was able to refinance its debt and push out issues, Guitar Center is looking increasingly troubled. Given that the company is private equity-owned, undoubtedly there is an over-leverage story here (like with all other PE-owned retail), but we wonder whether the show-room trend is particularly applicable to this kind of business. We asked our artsy friends and one of them openly admitted to strapping in at the local GC and then purchasing on Amazon. The pricing was the same and he didn't have to worry about lugging it home. We find the in-store lessons narrative dubious as well. There are countless online resources for learning guitar - YouTube, most notably. Meanwhile, we enjoyed this decidedly millennial take on the death of retail.
Retail (Canadian Lumber Edition). Kidding, more like Canadian cashmere. Washable cashmere company Kit and Ace is restructuring in an additional acknowledgement that brick-and-mortar retail is tough - even if you're a VERY proven founder of successful apparel companies (in this case, Lululemon). Choice quote within: "Really it was just another store." Something tells us "Just another store" won't be part of the restructured company's marketing strategy.
Solar. SunEdison. Sungevity. Suniva. Verengo. SolarCity. Okay, just kidding about the last one but who knows what would've happened sans Elon Musk's Tesla/Solarcity merger shenanigans. Now Heliopower. We know many of you know the solar story: too much subsidy, too much debt, flooded supply from China pressuring margins, yadda yadda yadda. But we wonder if any of you have a notion with respect to a potential successful business model. We're serious: we're crowdsourcing your view here...
Taxis. Calling for a bailout.
The Profit. That's what Marcus Lemonis calls his CNBC show and now we'll get to see whether he can make some with the Camping World-led purchase of select portions of the Gander Mountain business in bankruptcy.
Fast Forward (Beauty). Uh oh. We noted last week that beauty category has been largely e-commerce resistant. Well, maybe not.
Rewind I (Bueller, Bueller). Get on with it already. Takata has become the new Westinghouse. Lots of noise. Just a matter of when. And, shocker! iHeartMedia's proposed subscription service with Napster - YES, NAPSTER - hasn't helped generate enough revenue to counteract $20b of debt.
Rewind II (Literally): We are as guilty as anyone hyping up the potential of autonomous cars but if anything is indicative of the wholesale difficulty to achieve 100% adoption, it's this piece about surviving Blockbuster franchises. Suffice it to say, there won't be driverless cars rocking the streets of Alaska anytime soon.
Rewind III (Shipping): We all know that the shipping industry hasn't been immune to its fair share of troubles the past year or so. Notably, Hanjin, Toisa, Daewoo, Ezra, and International Shipholding have all seen themselves in bankruptcy court. And, of course, Algeco Scotsman restructured as did Modular Space Corporation, as container companies, naturally, have also felt the effects. So, we thought this use case for surplus modular containers was interesting and we're dying for one of our readers in, say, Texas, to get one of these and report back.
Rewind IV (Apologies...More on the Retail Apocalypse): Last week we highlighted Jeff Jordan's early 2014 call on retail. Subsequently, he dove into the mall scene: you can read it here. The below excerpt should be particularly interesting to PETITION readers as we've been saying for some time that restructuring pros who continue to claim that Bonobos and Warby Parker will fill the retail void are, quite plainly, making a$$es out of themselves. As are, quite notably, REIT CEOs. Nothing has changed since JJ wrote this...
A lot of ink has been spilled on how difficult it is for American companies (like Uber) to infiltrate China. Well, it appears that difficulty runs both ways. To point, LeEco sounds like an absolute horror show.
- International Retail. Hey! Not to be defensive or anything but there's absolutely nothing "usual" about this newsletter, Baker McKenzie! In fact, ya'll didn't need to fly abroad to INSOL to know that "technology disrupters" are impacting things: you just have to read us every week! What you miss is that all of the examples you site - Uber, Alibaba and Facebook - are "platforms" matching end users with service/product providers, see, also eBay, Amazon. We highly recommend you read "Modern Monopolies" by Alex Moazed and Nicholas L. Johnson to understand more on this topic. You can get it here. See also the second chart above.
- Jevic. Whoa. The Supreme Court decision is in. Now open the firm marketing floodgates: Willkie Farr & Gallagher LLP's Marc Abrams, Matthew Feldman, Joseph Minias and Paul Shalhoub were among the first to provide a fulsome summary of the decision. As were Weil's David Griffiths and Vincent Yiu here. And Squire Patton Boggs LLP's Kate Thomas here.
- Commercial Real Estate Backed Loans. Looks like J.C. Penney store closures could impair $30b of loans.
- European Elections & CDS. Investors perceive greater redenomination risk in France and Germany.
- European Retail. It seems the bloody retail phenomenon isn't exclusive to US retailers. Jack Wolfskin, a German producer of outdoor wear and equipment, is in the midst of a restructuring of its $365mm of debt. The Blackstone Group is the company's sponsor and PJT Partners is shopping the company. Meanwhile, Jaeger, a UK-based clothier is also on the block, with an administration within the bounds of possibility. AlixPartners is advising the company.
- High Yield. Valeant Pharmaceuticals, Foresight Energy and Community Health Systems all issued new high yield debt this past week and what screams of a massive yield grab. No, we're not joking: this actually happened. And demand was so strong that upsizing took place. We repeat: "demand was so strong that upsizing took place."
- Oil & Gas Fallout. Like we said last week, we're crushing Ramen so it's hard to feel sorry for a man pulling in $2mm and a $50k/month consulting fee, but its interesting to see some of the effects of the energy downturn - here, relating to Energy XXI's former CEO.
- Power. The Westinghouse saga got juicier with Weil and the Japanese Prime Minister basically saying put up or shut up. Meanwhile, FirstEnergy is involved in shenanigans and Exelon is now getting active.
- Private Equity History Lesson. A review of J.Crew's take-private transaction and private equity's affinity for dividends, long-term viability be-damned.
- Puerto Rico. Sh*t is getting real and people are starting to clamor for bankruptcy.
- Television. Netflix is going after unscripted reality TV. Choice quote: "The competition should be scared out of their minds. These guys are monsters — they're coming in to play and play hard."
- Uber. Expansion in India seems to be predicated upon a mountain of driver debt.
- Rewind I: Five weeks ago we reported the following: "The Finish Line Inc. announced its sale of Jack Rabbit Sports this week (66 locations) for undisclosed terms. "Undisclosed terms" = GU gels and a jock-strap." Apparently, we were too generous with our characterization of the financial consideration. Something tells us this won't stop Peter J. Soloman from dutifully and opportunistically noting the tombstone on its pitch materials for the next big retail mandate. See, also, this.
- Rewind II: Looks like Avaya Inc. has a potential buyer in publicly-traded Extreme Networks Inc. for its networking business (for $100mm).
- Rewind III: Store closures. Add Staples to the list (70 locations) and Signet Jewelers (165 stores). And here is one report on the failure of BCBG.
- Chart of the Week:
- Chart of the Week II:
- Coal. Post-reorg players like Arch Coal are now trying to take advantage ofgovernment subsidy (which reeks of buyside "value-realization"): query what this means for alternative energy players who already receive such subsidies and are rumored to be under siege by the Trump administration...?
- Environment. We wrote a few months ago about Oklahoma and the apparent correlation between wastewater disposal and an uptick in seismic activity. The seismic-hazard warning for Oklahoma in 2017 is "still significantly elevated."
- Golf & Sexy Time. There's zero correlation: we just thought it was a funny combination. That said, tough times for TaylorMade (owned by Adidas and apparently being shopped by Guggenheim Securities). Meanwhile, Agent Provocateur sold while in UK "administration" to an affiliate of Sports Direct (which also recently surfaced as the stalking horse bidder in Eastern Outfitters). AlixPartners was the administrator.
- Legal Profession. Short big firm junior lawyers.
- Power. This is an odd report on Westinghouse.
- Retail. We're getting a little sick of sounding like a broken record but Best Buy and Target reported numbers this past week and then saw massive stock drops due to weak guidance. And Barnes & Noble got DECIMATED after reporting numbers. The good news is that the coloring fad appears to be over. Meanwhile, the tech barrage shows no signs of abating: GameStop came under pressure this week after Microsoft announced its subscription gaming service. Is GameStop an immediate near term restructuring candidate? No, but part of the value we provide is highlighting for you where future pain points are hiding and without sounding TOO dramatic, this could be the beginning of the end.
- Retail II. We're nerds and so we found this analysis of when to close retail stores interesting. And we're curious to know if any of our advisory readers agree with this...LET US KNOW. Speaking of closing retail stores, Abercrombie will close 60 stores, Crocs will close 160 stores, and looming bankruptcy candidate hhgregg is closing 88 stores (which briefly sent Best Buy's stock north back up, despite earnings). Meanwhile, Neiman Marcus hired Lazard for balance sheet help and Radio Shack 2.0 (aka General Wireless Operations) is rumored to be Radio Shack chapter 22.0.
- Tech. Rough week for Uber. Choice quote: "Before too long, Uber's cash will run out. And if Uber hasn't built a viable self-driving car by then, the results won't be pretty."
- Telecom. Wow, Intelsat, bailed out?
- Fast Forward: Seadrill Ltd. noted the possibility of a bankruptcy filing, sending the stock into a tizzy. Still, John Fredriksen quickly highlighted his history of no default. Related, Pacific Drilling also noted in its earnings call that Chapter 11 is possible.
- Rewind I: A lot of folks have been sleeping on tech bankruptcies, but NJOY was a hardware bankruptcy from last year that now has a resolution: Mudrick Capital seeks to turn the company around, operating it like a PE-owned company rather than a VC-funded company. Speaking of which, Cirque du Soleil got a workover by TPG Capital (and AlixPartners) and now there's this YouTube promotional video to show for it. Speaking of purchases out of bankruptcy, it seems a Canadian retail player made the first move on Wet Seal only to be outflanked by Gordon Brothers.
- Rewind II: Soundcloud looks increasingly like it will be in the busted tech bankruptcy bucket. IP sale?
- Chart of the Week:
- Tweet of the Week: This is great because it doubles as a second chart of the week: we're so creative. Anyway, we hate to say we told you so but, effectively,we told you so: we'd love to know why nearly 200 companies felt the need to reference AI in their earnings reports...
- Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
- Coal. Plants are closing. Looks like some votes from coal country were misplaced.
- Dead Malls. Investing. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
- Exploration & Production. 17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too).
- Nuclear power. Toshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
- Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it? Well, we tried.
- Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
- Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
- Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
- Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption
- Wind. No holding it back.
- Fast Forward: The oil and gas restructuring wave appears to be mostly behind us but the offshore operators remain under duress: case and point, Hornbeck Offshore, which may have various issues heading into 2018.
- Rewind I: A "decades-long garage sale" = Sears.
- Rewind II: Scout Media, a post-mortem.
- Rewind III: Canadian Retail. We previously noted the demise of Shoes.com. Here are some additional thoughts on the state of retail north of the border.
- Chart of the Week:
- Artificial Intelligence. Throw the phrase "AI-based" in front of anything and all of the sudden it's like gold. Including retail. We're pretty sure we'll start seeing established companies start rebranding to curtail further devolution, e.g., neiman-marcus.ai or Macy's.ai. After all, we have MacGuyver back on TV and Luke Skywalker back in the theaters...might as well get nostalgic for .com-style frenzy.
- Boutique IBanking. An interesting review of the stock performance of one of the original public boutique investment banking firms out there: Greenhill & Co.
- Coal. Longview Power CEO Jeff Keffer's assessment of the industry. TL;DR...at least under Trump there's a chance...
- Conflicts. Believe it or not, conflicts DO exist in bankruptcy court. We're just as shocked as you, but in the Transtar bankruptcy cases, Willkie Farr & Gallagher LLP submitted a motion seeking to withdraw from the case after it determined that "in responding to requests by the Examiner in the course of its investigation, WF&G's own interests may conflict with the interests of the Debtors, or create an appearance of such a conflict." Pinch us. Jones Day LLP is apparently taking Willkie's place for the debtors.
- Hedge funds. This about sums it up: "No matter what initial capital you give the hedge fund to start with, the hedge fund will become richer than you since its real talent is transferring your wealth into its coffers..." Indeed, with 2/20, a hedge fund making 10% will make more money than its investors in 17 years.
- Malls. We probably give the impression that we really love to shop given all of the mall talk lately. But, c'mon, you can talk to us until you're blue in the face about A Malls and C Malls but the truth is that A-LL malls are looking increasingly screwed. There are so many experiential possibilities.
- Neiman Marcus as a High Yield Sinkhole. The debt is plummeting: some holders are hitting eject on high yield retailers. And more concerns about liquidity in the bond market.
- Taxis. So, the Uber effect is contagious? Seemingly so. Capital One Financial holds a distressed (and distressing) taxi medallion lending portfolio. Ugly chart here. Clearly the business traveler has embraced non-taxi options.
- Fast Forward: We feature the US Postal Service in this week's "Fast Forward" because the business model is simply unsustainable - as these numbers illustrate.
- Rewind I: Wind. We weren't kidding about wind power going to New York.
- Rewind II: Retail. We've talked about the Amazon Effect. This week Crain's New York Business released an article entitled, "Amazon and High Rents are Killing New York City Retailers." Not just New York City, fellas. Otherwise in Amazon news, it remains to be seen to what degree the Amazon Go concept impacts tradition grocers, if at all. We covered this a few weeks ago. In the face of this new competition, Kroger isn't slowing down or scaling back.
- Rewind III: This doesn't bode well for Dick's Sporting Goods: apparently the alleged low hanging fruit left by The Sports Authority is a bit harder to pick than expected. In other retail trainwreck news, Wet Seal is indeed closing and likely headed towards Chapter 22. Why? Well, private equity, of course.
- Chart of the Week: Good news for natural gas producers as prices are expected to rise in '17 and '18...
WHAT YOU NEED TO KNOW FROM THE PAST THREE WEEKS (PLAYING CATCH-UP EDITION)
- Distressed Investing Hindsight. Avaya. Phone systems? Who would've guessed this could go wrong? Psssst: don't tell anyone but apparently Avaya and Goodman Networks are apparently in 30-day grace periods.
- Fintech. Cracks in P2P lending by way of bankruptcy (Argon Credit).
- Fraud. Theranos announced that it's letting go 41% of its work force - which we believe is a precursor to bankruptcy. Why file? To sell IP. If they actually even have any. And address litigation. Meanwhile, Snapchat, on the heals of a possible IPO, is being sued for misleading investors. Toss in ethical issues around Hampton Creek and others and we may start seeing some fraud-related bankruptcies a la 2001.
- Grocery. Is Kroger's buyout announcement another leading indicator of future distress?
- Media. Ev Williams, founder of Twitter and Medium, acknowledges that the ad-supported media model is broken while significantly cutting headcount. It seems that $150mm VC funding can't help produce a new business model.
- Retail. It looks like the Trump Job Preservation Tour forgot to schedule stops at KMart, Sears and Macy's (meanwhile Sears unloaded Craftsman and JC Penney shed its HQ). Next up: Kohl's? Ugly 20% drop after a nasty comp store sales drop and forecast cut. Apparently, omnichannel customers are the key to the riddle. Meanwhile, Amazon is sniffing around American Apparel (as is Forever 21, reportedly) and Boohoo is focused on Nasty Gal. Gap - mostly due to a 12% comp sales increase at Old Navy - showed positive signs while Neiman Marcus cancelled its IPO, a clear negative.
- Taxi Companies. Uber is the death of traditional taxi companies and new tech companies that support the taxi companies (Karhoo). Which means those companies must really suck since Uber burned $3b in '16.
- Wearables. Pebble. "Acquired." Vinaya. Bankrupt. Does someone want to raise us a Jawbone?
- Fast Forward: With Amazon and Apple in the mix, music streaming services are struggling to make money and Soundcloud may be the closest victim. Restructuring professionals will remember that Rdio already went through bankruptcy and sold to Pandora.
- Fast Forward II: Remember Exco?
- Rewind I: Platinum Partners. It's amazing how funds get away with this nonsense: 17% returns for 13 years.
- Rewind II: Athleisure. Financials-related Uh oh (Finish Line). And bankruptcy-related uh oh (Yogasmoga). But like most things, Amazon gives zero $&%s.
- Rewind III: Coal. Maybe Trump will help the "clean coal" industry after all. And yet solar continues to progress, as does wind (in the UK and elsewhere). Ps, $361 billion is an awfully large number. And now things are progressing on the storage side thanks to Elon Musk.
- Chart of the Week:
Filings down this week so packing in the news...
- Aeropostale. Cascading effect. American Eagle Outfitters blames Aeropostale's going-out-of-business sales for same store sales declines and lowered forward guidance. Seems, however, that the pain is more widespread than that: this week mall retailer Express Inc.'s stock got trounced after reporting YOY net and comp sales declines (silver lining: e-commerce sales were up 15%). E-commerce isn't immune to downtrends either: Bodybuilding.com laid off 90 workers this week with minority owner Ryan DeLuca stating the VERY obvious, "E-commerce is tough and getting tougher with competition from Amazon and thousands of others."
- Salus Capital. The zombie that was once Salus Capital is in the news again as it funds the Chapter 11 wind-down of Hampshire Group.
- Sobey's. Another deadbeat (Canadian) grocer. Apparently the synergies expected from buying Safeway's Canadian stores haven't come to fruition.
- Solar. A synopsis of the industry's convergence with restructuring and challenges that lay ahead.
- Fast Forward: Many are now starting to call Uber's business model into question: an argument made easier by a $1.2b cash burn loss in the first six months of '16.
- Rewind I: Cosi Inc. was unable to find a new buyer, settling, in the end, on a $10mm sale to the original stalking horse bidder (including a credit bid).
- Rewind II: Nasty Gal. If this report is true, there is something strangely disturbing about a company called "Boohoo" buying another called "Nasty Gal."
- Rewind III: Bennu Oil & Gas, LLC filed for Chapter 7 weeks after the involuntary chapter 11 filing against its subsidiary, Bennu Titan. Last week we discussed feasibility and the (seeming) proliferation of Chapter 22s. This story is too brutal to even be a 22.
- Chart of the Week: This International Energy Agency chart forecasts that we've reached peak oil demand. Still, tepid interest in Verengo Inc.'s SoCal solar assets (no bid topping stalking horse: effectively sold for credit bid).
Chart of the Week II: Nike. The sneaker manufacturer announced this week that it would skip conventional wholesale channels like Dicks Sporting Goods, Foot Locker and others and sell its self-tying $720 HyperAdapt sneakers BtoC via its Nike+ app and at the NYC retail store. Clearly, Nike is paying attention to these recent consumer trends:
- Disruption - people throw this term around a lot. But Hertz's earnings report shows disruption, i.e., the Uber-effect, in quantifiable numbers. Query to what degree hotel earnings are affected by decreased (exorbitant) parking fees lost from decreased rental car bookings.
- Retail - Add retail outlets from the likes of Kenneth Cole, Kate Spade and Coach to the list of struggling retail businesses, Nordstrom takes a staggering $197mm write-down on start-up, Trunk Club, and J.C. Penney's total and comp store sales dropped meaningfully. On the flip side, Macy's provides strong guidance (despite an otherwise horrible earnings report) and Nordstrom, Ralph Lauren and Kohl's reported stronger than expected earnings.
- Takata - the future remains subject to debate as precedent of GM looms large (includes input from Pepper Hamilton's Henry Jaffe, Goodwin Proctor's Bill Weintraub, and Brown Rudnick's Ed Weisfelner).
- This was pre-election results:
- Fast Forward: Bonanza Creek, Forbes Energy and Nuverra Environmental all face expirations of grace/forbearance periods this week.
- Fast Forward II: Dynergy and Illinois Power Generating Co. (Genco) launched an exchange offer for Genco with a prepackaged bankruptcy backstop; FirstEnergy bonds plummeted after acknowledging bankruptcy as an option for subsidiary, FirstEnergy Solutions.
- Rewind I: Saudi Arabia. Feeling the pain.
- Rewind II: Oklahoma. Two weeks ago we highlighted the effects of the oil and gas downturn on the educational system in Oklahoma. We acknowledged the environmental issues there too. Well, that story keeps evolving as a 5.0 earthquake roiled through Oklahoma this past week. And this chart is interesting:
- Chart of the Week: US field production of crude oil increased in 2015 for the 7th consecutive year to 9.42mm barrels/day, the highest crude oil production level since 1972. (Source: U.S. Energy Information Administration).