- U.S. markets: Hedge fund icon Ray Dalio’s take on the coronavirus? “I think the most likely outcome is that this virus will be a larger version of SARS that will have a significant temporary effect but won’t have a big long term influence.” Markets bounced yesterday.
- Bonds: Greece’s 10-year bond yield dropped below 1% for the first time ever, which is remarkable considering yields were nearly 45% during the financial crisis. Even more remarkable is that Greece’s borrowing rates are some of the highest in the 19-country eurozone. It’s a low interest rate world, we’re just living in it.
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BP the Change You Wish to See in the World
Big picture before we dive in: This is arguably the biggest strategic change at BP in its 111-year history, but with big oil 1) at the center of a climate crisis and 2) struggling to appease green-minded investors, generational shifts in ideology feel right for 2020.
Now to the diving in
BP isn’t the first big oil company to outline climate-friendlier goals, but its plan has one major distinction: BP aims to become a net zero carbon emitter in its own production plus cut the CO2 its customers create as they use that energy.
- Most of the energy sector’s emissions come from people and businesses using their products. At BP, 55 million metric tons of carbon equivalent per year come from operations, while 360 million/year come from its oil + gas being operationalized.
So how does an oil and gas company solve a problem like CO2 pollution? BP will have to shift to cleaner energy sources while developing new tech to offset unavoidable emissions, aka yank CO2 from the atmosphere to make up for what it tosses up there.
““It’s not the destination, it’s the journey” —Wayne Gretzky” —BP CEO Bernard Looney.
Looney, who started last week, was heavy on “eye to the future” vibes announcing the plans but light on details like timing and costs. And the 30 years between now and 2050, as the WSJ puts it, “provides plenty of wiggle room.”
- What might need some wiggling: BP allocated 3.2% of its budget last year to investing in renewable energy (the industry average is 7.4%).
In the coming years, BP says it will reorganize to invest more in “low carbon businesses” and invest less in oil and gas. It’s unclear how that vision becomes reality, but we know this: BP’s new strategy could put pressure on U.S. oil majors who’ve mostly been silent on climate issues.
MWC2020 Is Canceled
What had been a celebratory week for the smartphone world—Samsung’s event, the T-Mobile/Sprint merger—quickly turned dark. The industry’s largest trade show, Mobile World Congress, was canceled by organizers because of the coronavirus outbreak. It had been scheduled to take place later this month in Barcelona.
Mobile World Congress (MWC) is a huge deal, which means canceling it is a huge deal.
- Over 100,000 people from 200 countries head to Catalonia each year to network about networks. The show generates 14,100 part-time jobs.
- Wireless carriers and, recently, manufacturers and Big Tech firms are all mainstays.
But MWC was no match for the coronavirus, which has stymied travel to and from China, a global hub for the smartphone industry. Roughly 5,000–6,000 people from China typically attend MWC.
Bottom line: Organizers had to decide between canceling the event and fielding the practice squad. Some of the biggest players including Ericsson, Nokia, Amazon, LG, and Sony pulled out in recent weeks.
Vest Side Story: Wall Street Rumbles With Bernie
On Tuesday, (Bronx-born) Blankfein tweeted that (Brooklyn native) Sanders would “ruin our economy.” He also said Sanders “doesn’t care about our military” and “is just as polarizing as [President] Trump.”
- For good measure, he suggested that Sanders was such a weak candidate, Russians seeking to throw the U.S. election would be wise to support him.
Sanders, whose platform includes taxing the rich and establishing a Hunger Games for hedge fund managers, won Tuesday’s New Hampshire Democratic primary. His hard-left policies are causing much concern among current Wall Streeters and its retiree community.
Zoom out: This isn’t a new show, just the latest episode. A year ago, Blankfein and Sanders Twitter-sparred over stock buybacks. And in 2012, Sanders called Blankfein “the face of class warfare” from the Senate floor.
Headspace Takes a Big Inhale
- Headspace ushers users through guided meditations...and its numbers are approaching transcendence. The app has over 62 million downloads and more than 2 million paid subscribers.
The details: The $93 million fundraise has two parts—$53 million in equity and $40 million in debt. Blisce led the equity round and Pacific Western Bank provided the debt.
The play: has three acts.
- Headspace Health, the startup’s effort to integrate mindfulness into healthcare. The medical community hasn’t signed off on meditation as official medicine, so Headspace is investing in clinical research.
- Headspace’s enterprise arm, Headspace for Work. H4W supports people at 600+ employers, and revenue has doubled in each of the past two years.
- International expansion. Headspace tapped a former Apple exec to peddle its French and German iterations across the pond.
Bottom line: Headspace is making moves, but it still has to contend with Calm, a rival app that reached unicorn status ($1+ billion valuation) last February.
Valentine’s Day Not an Aphrodisiac for Restaurants
According to Womply, Valentine’s Day 2019—a Thursday—ranked 94th in the year for consumer spending at local restaurants in the U.S., below even Cinco de Mayo.
We should caveat: Restaurants, particularly the dimly lit ones, do very well on Valentine’s Day, reporting a 30%–40% revenue increase from a typical day.
- But, as Bloomberg reports, any old Saturday night is "invariably better" for local restaurants than a weekday Valentine’s. Average Saturdays generate 19.9% of weekly revenue and Fridays 18.9%.
- And on the most elaborate and well-executed corporate scam in history Valentine’s Day, restaurants struggle to accommodate almost all two-tops that tend to linger longer than usual.
So what holiday takes the cake? Unsurprisingly, Mother’s Day weekend, which accounts for the No. 1 and No. 2 top-grossing days of the year for local restaurants.
How a Merger Actually Works
Not. So. Fast. Is your merger all-cash? What about all-stock? Perhaps it’s a combo? Is a shell company involved? Is what we perceive reality or just a construct of our minds?
To answer those questions and more, we leave you in the capable hands of the Brew’s Alex Hickey, who walks you through how a merger actually works
WHAT ELSE IS BREWING
- Shopify shares hit a record high after the company posted upbeat news on the past quarter and the year ahead.
- The U.K. is empowering its telecom watchdog to fine social media companies that host harmful material.
- Google, meanwhile, began its appeal of a $2.6 billion fine from the European Commission over its alleged abuse of power.
- Jeff Bezos bought David Geffen's Warner Estate for $165 million, reports the WSJ. The property has its own nine-hole golf course.
- Kering, the European luxury conglomerate that owns Gucci, has closed half of its stores in all-important mainland China due to the coronavirus. Sales will take a hit.
GUESS THE SKYLINE: MERGER WEEK EDITION
Truist Financial was formed from the 2019 merger of SunTrust and BB&T, the largest U.S. bank tie-up since the financial crisis. Truist wasted no time finding a home, buying the Hearst Tower and renaming it the Truist Center. In what U.S. city is the Truist Center located? This picture is your hint.
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GUESS THE SKYLINE ANSWER