Morning Brews: Houston, we have a problem


[We’re] not able to secure a business environment"

Uber on suspending operations in Macau (southern China). CEO-less and Macau-less. Keep on keeping on, Uber.


Market Snapshot

  • U.S. indexes finished largely unchanged as investors wait on earnings reports.
  • The sterling tumbled as round two of Brexit talks begin in Brussels.
  • China markets closed lower despite beating Q2 GDP expectations.
  • Toronto home sales fell to a seven-year low.
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Out With the Old

After a late night watching Thrones, hedge fund manager Nelson Peltz declared himself the rightful heir to a single board seat at Procter & Gamble.

Peltz makes the list of hands-on fund managers, who take positions in companies and then look to influence them in one way or another (remember Mick McGuire and Buffalo Wild Wings or Daniel Loeb and Nestle? C’mon, we told you about these guys).

In this case, the position is $3.3 billion and the company is P&G—the $223 billion consumer-goods giant.

Recently, Peltz has watched lower-priced competitors (think Dollar Shave Club & Harry’s) shave down P&G’s market share for flagship brands like Gillette.

Peltz points to culture and leadership as the culprits, taking issue with the fact that 90% of execs are "career P&G employees." He worries that said lifers have little perspective into the innovative businesses chipping away at their brands.

His solution (or at least one of them)? Keep that number hovering closer to 70%...oh yeah and give him board seat.

P&G will be the largest company ever to hold a proxy vote. Shareholders...the ball’s in your court.

Too Much Chill

After yesterday’s news, Netflix could probably care less that your Uncle has been mooching off of the family account (everyone has that token moocher) for the last three-and-a-half years.

The video-streaming giant (+10.51%) delivered a smash hit to investors, beating expectations on second quarter revenue and subscriber forecasts. Top line grew 32% year-over-year (to $2.79 billion), but subscriber growth was the real star.

Netflix added 5.2 million new customers (vs. 3.2 million forecasted), yet another accomplishment since hitting the 100 million mark in April.

What explains the jump? Original content. Lots and lots of it.

Netflix put out a TON of quality content this quarter (ranging from Orange is the New Black to 13 Reasons Why) and it has 92 Emmy nominations to show for it.

We can all agree that it’s about time CEO Reed Hastings rewarded himself.

And what better way than to sit pretty on a $70 billion company, TV remote in hand, popcorn in lap and all set to binge on Stranger Things...from his niece’s account.

You be the Chef

Just like the 14oz T-bone sitting in its $60 kit, Blue Apron’s newly-issued public shares have been sliced every which way—today, Bezos is the chef holding the knife.

Blue Apron dismissed rumors that Amazon (+0.82%) had plans to enter the meal kit delivery market, but a newly-released Amazon patent promises "prepared food kits composed of meat, poultry, fish, seafood, fruit and/or vegetables...ready for cooking and assembly as a meal."

We’re no Gordon Ramsey, but that patent sure sounds like a meal kit.

And investors seemed to agree. The stock fell as much as 12% on the news to a low of $6.51...that’s 35% below its IPO price of $10 a share (and remember, it was originally eyeing an IPO at $16 a share).

The food seems to be the only thing still fresh about Blue Apron right about now.

Houston, We Have a Problem

Word of advice: If someone tells you to invest their dollar, don’t go back to them with a penny in hand.

Energy-centric private equity firm EnerVest did just that. The only difference—EnerVest wasn’t given $1. It was given $2 billion.

EnerVest put all of its eggs into one basket back when oil was approaching $100 a barrel. Seemed like a pretty good investment at the time, but three years can change a lot.

Oil is now down to $46 a barrel (even hitting the mid-$20s at one point). As for EnerVest’s fund? Poof. Gone (taking the pension, endowment and charity funds with it).

We’d love to cheer you up and tell you everything is okay, but there’s no silver lining here. It’s extremely rare for private equity funds of over $1 billion to lose any money whatsoever, never mind the whole damn thing.

So dip those pens in ink and repeat after us, EnerVest: "Dear Investor, we’re sorry…"

Good, now write about 100 more.

Tell Me More…

  • Chinese banks are limiting funding to Dalian Wanda for overseas acquisitions.
  • Disney (-0.27%) announced it is opening an immersive Star Wars hotel experience.
  • WeWork is gearing up to launch in Japan with the help of SoftBank.
  • The Houston Rockets are up for sale at a price tag of $1.65 billion.
Economic Calendar

  • Friday        Earnings: JPMorgan (+), Citigroup (+), Wells Fargo (+)
  • Monday    Earnings: BlackRock (+), Netflix (+)
  •                   Economic data: Empire State Manufacturing Survey (-)

  • Tuesday   Earnings: Bank of America, Goldman Sachs, Harley-Davidson, Johnson & Johnson
  •                  Economic data: Housing Market Index

  • Wednesday   Earnings: American Express, M&T Bank, Morgan Stanley, Qualcomm Inc, T-Mobile
  •                     Economic data: Housing Starts

  • Thursday  Earnings: American Airlines, Capital One, E*TRADE, Microsoft Corp, Ruby Tuesday, Visa, eBay
  •                   Economic data: Jobless Claims

  • Friday      Earnings: General Electric
  •                  Economic data: Baker-Hughes Rig Count

(Chipotle) By the Numbers

If you can believe it, we wrote this piece right after lunch. Inspiration can be found everywhere...

2,250—Chipotle locations.

750,000—customers served per day.

$1.8 million—average annual sales per restaurant.

Now, let’s get to the meat of it

19 million—pounds of black beans sourced from its supplier (2015).

5 million—pounds of cilantro sourced from its supplier (2015).

30 million—pounds of local produce.

Just to put that into perspective: that’s about 3,500 elephants we’re consuming a year in burritos.

So, although Chipotle might be struggling in the aftermath of the E. coli outbreak, they’re still selling a metric elephant-load of burritos.

Question of the Day

In a class of 78 students, 41 are taking French and 22 are taking German. Of the students taking French or German, 9 are taking both courses. How many students are not enrolled in either course?

(Give up?)

Who Am I?

I opened the brand’s first store in 1975, now there are over 2,000 worldwide.

My clothing brand has become synonymous with the term "fast fashion."

My net worth is $82.3 billion.

I was even the richest man for a few hours when my company IPO’d in 2015.

(Got an guesses?)

Stat of the Day

$820 billion

That’s how much the private equity industry has in uninvested capital as of December 31st. That’s about ten Warren Buffetts.

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  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

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  • JPMorgan Chase 10 98.9%
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Professional Growth Opportunities

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  • JPMorgan Chase 05 97.1%

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May 2024 Investment Banking

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