Philly special

MARKETS

• Trade: When the U.S. and China resume trade talks on October 10, China’s top trade negotiator Liu He will be in attendance. That’s a good sign, because...
• U.S. economy: The trade war is hurting U.S. manufacturers. We’ll find out the damage with the release of fresh economic data this week.

SPACE

Elon’s Got a Big, Shiny Rocket

It's been a while since we talked Elon Musk, so let's check in on our eccentric billionaire and his high-tech exploits. On Saturday, standing in front of SpaceX's new Starship rocket, Musk updated the public on his ambitious space plans.

The new hardware: A stainless steel prototype that looks like your leftover corn on the cob hastily wrapped in aluminum foil.

65,000 feet in the air. In the next six months, take it to orbit...then fly people next year.

Because Elon loves to assign group projects, teams in Boca Chica, TX, and near Cape Canaveral, FL, are competing to build the rockets. Space R&D usually progresses on a timeline of decades, but Elon's thrown out the playbook. After approving the design, SpaceX took just five months to build Mark 1.

That sounds simple compared to local politics. SpaceX wants to buy out residents of the small Texas village where it's building and testing. As more residents decline the offer, fears of eminent domain grow.

Back on Earth...

...Musk thinks Tesla "has a shot" at a record 100k deliveries in Q3, according to a recent leaked email. Analysts expect 98k (which, granted, would be a 16% increase from last year).

Investors are nervous. Shares plunged after Tesla reported a $408 million net loss in Q2. On the top line, Tesla is projected to post its first annual revenue drop since 2012.

• The reason? Higher-priced models are less popular than the cheaper Model 3, which is expected to account for over 80% of deliveries this quarter.

More bad news...on Friday, a U.S. judge found Tesla guilty of labor violations that interfered with union organization attempts by employees in 2017 and 2018. Among unlawful actions was a threatening tweet by Musk, who must now hold a meeting with California assembly plant workers explaining the decision and affirming their rights.

GAMING

Overwatch Calls the Philly Special

Yesterday, Philadelphia took the day off from complaining about Eagles wide receivers to host the finals of the Overwatch League, a professional esports competition for Blizzard Entertainment’s Overwatch video game. The San Francisco Shock took down the Vancouver Titans to claim the title.

• The match was streamed on Twitch, televised nationally on ABC, and sold out the Wells Fargo Center.
• The Shock earned $1.1 million, while the Titans brought home $600,000.
• The Overwatch League (OWL) is the fastest-growing U.S. sports league in the key 18–34 demo, according to Nielsen.

More growth is ahead

Last Wednesday, Comcast Spectacor and the Philadelphia Fusion OWL team broke ground on a $50 million esports facility in South Philly. It’s the first ground-up, purpose-built esports arena in the U.S. and a symbol of the big changes in store for OWL's Season 3.

In 2020, OWL will become the first esports league to implement a traditional “home-and-away” format, where teams will host games in their own cities like in the NFL or NBA. Right now, most games take place at Blizzard Arena in Burbank, CA.

BANKING

Credit Suisse Takes Neighborhood Feuds to the International Stage

Credit Suisse is dealing with the kind of corporate espionage drama typically reserved for Sunday nights on HBO.

Some background: At a party in January, CEO Tidjane Thiam had a falling out with Iqbal Khan, the head of wealth management. What were they fighting about? Among other things...trees on their neighboring properties.

This gets weirder. Khan left Credit Suisse and was tapped by archrival UBS. Then…

• Credit Suisse had PIs follow Khan to see if he was poaching former clients and colleagues. Khan noticed guys wearing sunglasses at night and, at one point, got into an altercation with them.
• He filed a police report earlier this month, people were arrested, and it became a full-blown scandal “that has shaken Swiss banking.”

Credit Suisse wants you to know that while it got caught, it’s not the only one. There’s an entire “banker-surveillance state,” per Bloomberg. In the last decade, banks including Deutsche Bank, HSBC, and BBVA were investigated for spying on employees.

Looking ahead: On Sunday, the FT reported Credit Suisse directors will present a unified front around Thiam.

REAL ESTATE

A WeWork-Sized Hole in New York and London

We’ve discussed WeWork’s troubles in relation to the IPO market...but the effects on real estate could be even worse.

WeWork is the largest private-sector tenant in London and New York. And following Adam Neumann’s departure as CEO, the company said it plans to slow down the expansion of its real estate footprint in pursuit of “more strategic growth.”

But who’s breaking up with who? “The vast majority of New York City landlords have little interest in taking on WeWork as a new tenant” during this rough patch, the WSJ reports.

That would be a major U-turn from the past several years, when landlords leaned on WeWork and its coworking peers to occupy office space.

• Since 2017, the flexible office sector has made up 20%–25% of leasing in London, the Savills head of commercial research told Bloomberg.
• WeWork alone accounted for about one in 20 sq. ft. leased in Manhattan in the first eight months of 2019.

All that square footage is expensive. WeWork still has $47 billion in lease obligations it needs to pay.

CALENDAR

The Week Ahead

This week we’ll begin the final quarter of the decade. What were you doing in January 2010?

Monday: International Podcast Day (shameless plug for ours)

Tuesday: Motor vehicle sales; PMI Manufacturing Index; earnings (Stitch Fix); Q4 begins; 70th anniversary of the founding of Communist China; National Breast Cancer Awareness Month begins

Wednesday: Earnings (Bed Bath & Beyond, Lennar Corp.); TechCrunch Disrupt begins and runs through Friday (we’ll be there...if you will be too drop us a line)

Thursday: Factory orders; earnings (PepsiCo, Costco, Ascena Retail Group, Constellation Brands)

Friday: September jobs report; international trade data; Austin City Limits starts

WHAT ELSE IS BREWING

• Fiat Chrysler will pay a $40 million settlement to the U.S. over charges it overstated sales numbers from 2012 to 2016.
• Hong Kong police and protestors clashed ahead of the 70th anniversary of the People’s Republic of China.
• Nasdaq is trying to slow down and limit IPOs of small Chinese companies, Reuters reports.
• Dozens of supercars were auctioned in Geneva yesterday. They were seized from the son of Equatorial Guinea’s president in a money-laundering investigation.

BREAKROOM

Choose the Bigger Number: Elon Musk Edition

1. Market cap: Tesla // Ford
2. Age: Elon Musk // Jeff Bezos
3. Twitter followers: Elon Musk // Donald Trump
4. Square footage: Tesla’s Fremont factory // Vatican City

Breakroom Answers

Choose the Bigger Number: Elon Musk Edition
1. Tesla has the bigger market cap, $43.4 billion to $36.1 billion
2. Musk is 48, Bezos is 55
3. Trump has Musk beat, 65 million to 28.5 million
4. Tesla’s Fremont factory is actually bigger, 122 acres to 109 acres