Trading dead horses
Robinhood shoots back, Dell strugglin', and how them autos doing.
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Market summary: 📊
Markets opened rather soft on Monday, as fresh cases keep rising, but cities that went into lockdowns early show rays of hope. US had a weak day, with tech taking a beating.
US:
S&P 500 - down 0.27%
Nasdaq 100 - down 0.44%
India:
Nifty 50 - up 0.021%
Sensex - down 0.13%
What’s brewing hot? ☕
✅ You get a trillion—Biden is set to sign off on a gargantuan spending plan worth $1.8 trillion, prioritizing social programs meant to pull American families out of the pandemic dug economic rut. Since taking office, the Biden admin has announced a total of $6 trillion worth of spending packages, affecting everything from EVs to College tuition to Childcare—all of which will be paid for by raising taxes on the rich. The capitalists aren’t happy, first about higher taxes, and second about all the cash flushed through the pipes spurring inflation downstream.
✅ Sassy Robinhood—Shut it, old Warren, that’s basically what Robinhood told Warren Buffet, after the legendary investor made snide remarks about the company yesterday, calling it an enabler of gambling in the markets. “People are tired of the Warren Buffetts and Charlie Mungers of the world acting like they are the only oracles of investing” reads Robinhood’s rebuttal. Oof… the good ol’ battle between the value guys and the YOLO trading gang, timeless!
Trading dead horses 🤷♀️
Verizon, which purchased Yahoo and AOL for $4.5 billion EACH back in the day, is getting rid of both platforms in a combo package-deal to investment manager Apollo Global for $5 billion total.
For our GenZ readers—so kids, before the era of Google and Facebook, humanity used to peacefully exist in the calm shadows of Yahoo’s mailbox, and AOL’s messenger and search engine. A ping here, and a ting there… it was a happy world.
Then for myriad reasons, including an ad-infested experience that made seamless browsing almost impossible, the hegemony was disrupted by much sleeker, sexier social platforms that followed them. Growth for Yahoo and AOL just couldn't keep up.
Beacon of hope—then came Verizon, which is essentially a telecom company that controls the pipes to the internet—mobile carrier, broadband, and TV, thought of purchasing the old guard (Yahoo and AOL) and using it to spin up its own digital media empire. And if anything, teach “the silicon valley bois” how it's not all won yet.
Well, tough luck. The world was rapidly embracing the mobile era, and both web-first services barely had any purpose left. Moreover, telecom companies are notoriously lethargic, and Verizon clearly overestimated its capacity to mount a strategic assault against the innovation machine of Google, Facebook, and even Apple.
Anyway, It’s oddly surprising that Apollo finds AOL and Yahoo worthy though—but Yahoo has a recognizable brand name, and substantial ad business as well as ad-tech platforms, which churn respectable cash flows still… thanks to grandpa George clicking on every single click bait!
Dell’s quest to a new future 💻
Last month, hardware giant Dell spun off VMWare out of its belly into a new company, pocketing $9 billion for itself, while letting VMWare stand on its two feet and make the most of the cloud computing boom.
Now Dell is doing another lap—selling off its cloud business, Boomi, to private equity giants, Francisco Partners, and TPG, for $4 billion. Don’t kick yourself if you had never heard of Boomi, neither had we.
But apparently Dell purchased the then data and integration management company in 2010, and over the decade, grew it into a sizable entity by directly plugging it into Dell’s wide distribution machine.
Anyway, Boomi basically integrates with a host of cloud platforms and applications, with a bunch of API management and application testing suites, and we’re guessing the PE guys more excited about the 15,000 sticky customer base it serves, more than anything else, which could offer thick synergies and ample room for upselling of other software services in their portfolio.
Bottomline: Dell is going through a rather unpleasant time—the company purchased data storage provider EMC for $68 billion, and since then has basically sucked. Debt load is piling on, and investors are pissed about poor growth.
Emptying its gut is the only way to survive.
Quick look down the automotive lane 🚗
India’s auto industry is going through a tough bind, with extreme choppiness in demand, perhaps unlike ever before. First COVID froze production lines, only for demand to soar in recovery, then came the supply chain shortages, and now again the freeze… phew.
Despite that, the industry was humming along, but then the April numbers reported by giants DO NOT paint a very good picture.
Bajaj sold 30% less vehicles in April vs. March. Exports however rose 48%—obviously because demand elsewhere is rebounding well
Royal Enfield echoed Bajaj’s sentiment, and reported sales down 19% for April
Hero Motocorp saw a 35.4% plunge in volumes for April
In commercial vehicles, Ashok Leyland sales dropped a damning 50%. While Mahindra saw its unit sales grow 9.5%—but that’s because Mahindra had some problems with semiconductor shortages in the previous quarters, and is perhaps seeing backlog demand clear out.
Bottomline: the large companies will get by, we’re sure about that. The worst impact of this choppiness will be borne by suppliers and tiny vendors downstream, who often operate on shoestring margins.
This storm is here to stay 💰
Buffett may have dismissed crypto as a vice, but none of that old-people mindset is going to deter the peeps at VC giant a16z.
After dipping their toes in the crypto waters over the past few years, and in fact funding some outstanding companies, a16z is raising a new $1 billion crypto fund, doubling down the “software is eating money” thesis.
FYI, the VC house booked a $400 million+ homerun on its early investment in Coinbase, when COIN went public last month, so yeah… the fundraise isn’t going to be too hard.
Key takeaway: it's inevitable that more traditional VCs and investment houses follow with similarly dedicated funds in the near future, especially as the push now comes from LP’s and wealthy investors who demand vetted exposure to innovation.
Just look at Wall Street, where literally every big bank including JPM, Goldman, are jumping nose first into the Bitcoin-backed investment product hype.
What else are we snackin’ 🍿
💉 Approval in making - Pfizer has donated $70 million worth meds to India, and the company will also seek expedited vaccine approval here for its COVID-19 vaccine candidate.
💪 Buffett names successor - Greg Abel, the head of Berkshire Hathaway’s non-insurance empire will take over as CEO in case something goes wrong with Warren.
Hit that 💚 if you liked today’s issue.
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