ITC’s villains
WeWork IPO, oldies love BTC, and stuff from the week before.
Hi 👋, Tanvi here.
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Market summary: 📊
Brutal couple of weeks overall, but Friday ended on a high note in India. US markets turned around too, with traditional companies treading in green. High-growth companies however were selectively given a heavy beating.
US:
S&P 500 - up 1.66%
Nasdaq 100 - up 1.55%
India:
Nifty 50 - up 1.27%
Sensex - up 1.17%
What’s brewing hot? ☕
✅ Hoping for a turnaround—WeWork, which had gotten its butt kicked trying to launch an IPO a couple years ago is coming back for round 2—this time, via a SPAC. The deal will value WeWork at about $9 billion, and give the company $1.3 billion in additional cash to figure out survival. The pandemic obviously killed whatever little business they had going on, with occupancy tanking from 75%+ levels pre pandemic to 45% by end of 2020, but as vaccinations begin, and people get bored of working from their kitchen tables, the coworking giants are hoping for foot traffic to spike.
✅ Everybody loves NFTs—the New York Times managed to sell an NFT of a digital copy of an article for as much as $580K! The article titled “Buy This Column on the Blockchain!” does nothing more than extend an invitation for purchase and then explain how NFTs tend to work, joining a list of bizarre things that have sold for insane amounts of money so far. Most intriguing part though is the company’s willingness to give NFTs a legit shot, given just how rarely old media shows any enthusiasm for emerging technology without finding a way for criticism.
Smugglers are feasting on ITC’s lunch 🚬
Cigarette smugglers had a ball this year, thanks to the pandemic jolting supply chains, cutting off product deliveries, and offering those plying their trade outside the law a once in a lifetime opportunity.
This past year until Feb 2021, nearly ₹1,772 crores worth of illegal smokes were seized by the authorities in India, imported illegally across borders or sold locally without any tax records. That’s a jump 10x jump from what was caught the year before. Nobody has a clue how much has probably gotten through and escaped detection.
Another reason for the explosion in smuggling volumes is heavy taxation on tobacco products by GOI. Illegal cigs form about 6-7% of the total market here in India, and if you’re looking for reasons why the damned ITC ticker won’t show any life, here’s one….
Closing out—Fidelity dives into Bitcoin 🤯
For the longest time, the Warren Buffets and the Jamie Dimons of the world called Bitcoin the worst kinda scam. Retail investors however wouldn’t hear any of it, and thanks to their conviction, we’re suddenly sitting on a trillion dollar asset class. Now the oldies can’t resist not being part of the game.
Fidelity Investments, one of the largest passive investors and retirement money manager in the world, is applying to launch its own Bitcoin ETF, essentially an exchange traded fund that’ll give its old-school risk-averse investor base steady access to investing in the currency. You can’t expect big funds, or uncle Jack who’s retired with a million bucks in the bank to go buy Bitcoin on Kraken, and then forget his passwords by next Thursday now do you…
What matters: big money buyers can’t afford to stay away from Bitcoin anymore, and their entry solidifies a bull case for the currency as a legit store of value, likely even helping the currency reduce volatility and become a lot more stable.
Lastly, entry of the traditionalists and big money buyers could undeniably even force regulators to build a soft tone around ownership of the new digital gold, as processes for tracking, monitoring, risk management get built around this.
That’s pretty much all the brain food we had for today. Y’alls chill with that cup of coffee, and enjoy your Saturday...
Quick look at the hottest stuff from last week...
🚗 Tesla in hot water—China threw Musk a surprise by restricting Teslas from entering government or military facilities, and discouraging military and government officials from owning the cars. Tesla is, equipped with cameras and all kinds of fancy sensing, routinely capturing data about surroundings to feed its autopilot systems, which is making the Chinese concerned about snooping, but the move was very likely a retaliation against bilateral talks with the US going sour about a week ago. About 12% of Tesla’s revenues comes from China, which could make this a big problem if not contained in time.
😷D2C on fire—Online cosmetic platform Purplle raised $45 million for its Series D round from Sequoia, doubling valuation to over $300 million. Verlinvest, Blume, and a bunch of others pitched in, while early backers like IvyCap made bank on an exit. The $6 billion cosmetics space in India is still largely digitally underpenetrated, throwing a huge runway ahead of these leading platforms. Purplle has so far managed to scale to 7 million monthly active users, growing GMV by 90% in 2020, but expect growth to further accelerate as the economy opens up.
🍱 The buffet spread—Barbeque Nation IPO opened to much fanfare and was oversubscribed nearly 6x on the last day of bidding. Investors seemed pretty upbeat about prospects of the business which runs nearly 150 locations across the country, which brought in ₹850 crores in revenues last year. Losses stood at ₹30 crores, but that’s due to heavy spending on expansion. Proceeds from the IPO will go to pay off ₹150 crores of debt, with the rest put to building more restaurants. Given India’s ever expanding consumer class, and emerging middle class’s taste for all things luxury, BN’s strategy should continue to outshine—at least that’s what investors are counting on.
🙄 Dispo bet lands in water—weeks after Spark Capital won a bidding war to lead a $20 million round at a record $200 million valuation in YouTuber and GenZ influencer David Dobrik’s much-hyped photo app Dispo, Business Insider broke news that one of the close members of David’s vlogging show had sexually assaulted a woman. Brands denounced David, canceled sponsorships with him, and then came the statement that Spark will be cutting all ties with Dispo as well. The investment was a landmark moment for the creator economy, and the outcome of this case will likely set the tone for deals like this happening in the future.
👎 Gamestop falls on its face—Gamestop had its first quarterly earnings since Reddit-coup episode and the company disappointed big time. Revenues dropped 3.2% YoY, while profits again lagged estimates. u/DeepFuckingValue and his friends were holding out for hints of promised digital transformation, but those hopes were brutally crushed when the company hastily wrapped up a 20 min call without taking questions. Only bright spot that evening—GameStop grew e-commerce sales by 175% YoY in the holiday quarter. But then the stock was up 50% the next day because when it comes to legit fundamentals....
📱 Gaming heat—Fantasy sports gaming platform Dream11 raised $400 million in a fresh round led by TCV, bringing valuation to a record $5 billion. Dream11 basically runs a platform where users can make their own virtual team, follow the real game, and then earn points based on how the real-life players perform. Cricket fever in the country + a flawless IPL marketing campaign helped the company scale to 100 million users in no time. Fantasy gaming is still banned in a few Indian states, so the road ahead is quite long, with long term opportunity encapsulating sports betting and even online gambling.
🔥 The cloud game is still piping hot—Adobe had a cracker of a quarter this week, with revenues up 26.5% to $3.91 billion while the digital media segment booked run-rates of $10 billion+ for the first time. CEO Shantanu Narayen seemed pretty upbeat about demand holding up as the world slowly begins to recover, which is a good signal for all SaaS and cloud companies across the board.
🎮 Finally, Gamers gonna game— Microsoft is in final talks to acquire Discord, a chat platform popular among gamers, for as much as $10 billion. This would be Satya Nadella’s 4th acquisition of above $5 billion since he took control 7 years ago. In under 6 years, Discord has scaled to 140 million users, making most of its money through a paid tier and an independent game store (kinda like Play Store) where developers distribute games. For Microsoft, its gaming ambitions needed a robust communications and social platform, as global gamers increasingly look to broadcast and socially engage around game play. Could be a huge win!
Hit that 💚 if you liked today’s issue.
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