Underwhelming

MARKETS

• Earnings: We’ll find out whether the retailers reporting earnings this week (Target, Home Depot, Macy’s) can back up the strong consumer data from Friday.
• World: The Iranian government curbed internet access following deadly protests over gas price hikes. And protestors in Hong Kong shot arrows at police during another violent weekend in the city.

SOCIAL MEDIA

TikTok Is Growing Up so Fast

TikTok, the video-focused social media app best known for vaulting teenagers wearing cups on their feet to internet fame, is testing online shopping in the U.S.

If successful, the foray into so-called “social commerce” could 1) diversify TikTok’s revenue beyond ads and 2) catapult TikTok onto the varsity lineup of social media apps.

The details: TikTok is letting a small sample of U.S. users (less than two dozen) add links to their bios and the posts they share on the platform. Early examples appear to let users purchase products directly from the videos themselves, The Verge reports.

• “We’re always experimenting with new ways to improve the app experience,” a TikTok spokeswoman said.

They've done a pretty good job so far. The app has been downloaded by 100+ million Americans and over 1 billion globally—despite the U.S. government launching a national security investigation into its Chinese parent company.

Social commerce is the gif that keeps on gifing

Leading social media sites think the opportunity in e-commerce lies in streamlining the journey from discovery --> purchase.

• Instagram lets users buy some items they see on their feeds without leaving the app.
• Pinterest's Lens tool can identify more than 2.5 billion fashion and home products. It'll then direct you to the retailer's website to check out.
• Even Grandpa Snapchat launched shoppable ads last year.

Big picture: Instagram may have made “link in bio” happen, but TikTok also has the know-how. Its Chinese owner ByteDance added a “Shop Now” feature to the Chinese version of TikTok last year...and one account did $29 million in sales on last year's Singles Day alone.

If TikTok can make it easier for creators to monetize their audiences, you might see more jumping ship for Vine 2.0.

IPO

Aramco Needs a Lesson in Managing Expectations

In an updated prospectus released yesterday, Saudi Arabia’s state-owned oil company Aramco said it expects to list shares at a valuation of $1.6 trillion to $1.7 trillion, short of the $2 trillion it had originally targeted.

The rest of the details are also underwhelming.

• Aramco hopes to sell 1.5% of shares on Saudi Arabia’s stock exchange, the Tadawul. If the listing occurs at the lower end of the price range, the IPO would not top Alibaba’s when it raised $25 billion in 2014.
• To advertise the IPO, the company’s adopting a farmers market attitude. It’s focusing on local wealthy families and the country’s middle class, not international money managers.
  What concerns investors? Questions of demand for oil and geopolitical risks.

What excites investors? Strong cash flow and profits that make you drool. Aramco’s $68 billion profit in the first nine months of 2019 exceeded total 2018 profits for Apple, the most profitable publicly traded company.

Zoom out: Aramco’s IPO is an essential piece of Crown Prince Mohammed bin Salman’s plan to shift the country’s economy away from purely energy.

CANNABIS

Vibe Check: Legal Weed Industry

The rush of bad cannabis industry headlines hit us like a brownie before meeting the inlaws.

Per Bloomberg...

• After a brutal earnings report Thursday, the market cap of Canopy Growth, the world’s largest pot company, withered to C$7.1 billion (it was worth C$24 billion in April).
• MedMen Enterprises, one of the first publicly traded U.S. weed companies, said Friday it’s dismissing 190 employees.
• Aurora Cannabis (No. 2 largest public cannabis firm by sales) logged its worst trading day in 5+ years Friday after disappointing earnings.

Why the bad vibes? Legalization in Canada and California was not the watershed moment many industry boosters promised. Complex regulations and high taxes have cramped growth, while illicit sellers and suburban high schoolers are proving to be tough competition.

Looking ahead...Mary Jane bulls haven’t sworn off the drug yet. Cowen analyst and certified chiller Vivien Azer recently upped her U.S. sales outlook to $85 billion by 2030, and Canopy says it’ll turn a profit in 3–5 years.

SPORTS

Athletes Try to Capitalize on Your Videogame Habit

Tired of putting the team on their backs in Madden, professional athletes are taking steps to make more money from the marketing and licensing of their names and images.

The NFL and MLB players unions are teaming up with a private equity firm to create a company that’ll better leverage the value of athlete likenesses. The venture, called OneTeam Partners, will initially focus on video games...but also trading cards, esports, and youth academies.

The context: Players are making more money than ever from visual portrayals. Per data from the Labor Dept. cited by the WSJ...

• NFL players earned about $200 million in marketing and licensing revenue in the year ended February. The union earned nearly $57 million alone from the Madden video game.
• MLB players made $61 million, up 13% annually.

Bottom line: “After years of watching team owners find new revenue streams through divvying up rights, athletes are more aware of their own collective marketing power and are finding new ways to wield it,” the WSJ writes.

CALENDAR

The Week Ahead

Make sure you ask your boss for a more impressive job title ahead of your class reunion next week.

Monday: Euro Finance Week kicks off; the 27th Annual National Gingerbread House Competition is held in Asheville, NC

Tuesday: Housing starts; e-commerce retail sales; earnings (Home Depot, Urban Outfitters, TJX, Kohl’s)

Wednesday: Minutes from the last Fed meeting; Democratic presidential debate in Atlanta; earnings (Target, Lowe’s, Sonos)

Thursday: Existing home sales; jobless claims; Elon Musk unveils Tesla’s electric pickup truck; deadline for government spending bill; earnings (Gap, Intuit, Macy’s, Nordstrom)

Friday: Kansas City Fed Manufacturing Index

WHAT ELSE IS BREWING

• WeWork is prepping to cut at least 4,000 jobs as soon as this week, reports the NYT.
• HP's board of directors unanimously rejected an acquisition offer from Xerox.
• Airbus’s CCO said the grounding of the Boeing 737 Max fleet was not good for anyone in the industry, including Airbus.
• Lyft is ending its scooter service in six U.S. cities.
• Ford’s rank-and-file voted to ratify the United Auto Workers’s contract with the automaker. Next up for negotiations: Fiat Chrysler.
• The U.S. will reportedly extend licenses allowing companies to do business with China’s Huawei for two weeks.

BEFORE AND AFTER

We’ll give you a clue. You’ll have to translate it into a “before and after”-style phrase.

Ex. Jerome Powell’s shipping company = Chairman of the FedEx

1. A Democratic proposal gets auto insurance
2. Which bank might underwrite a Tesla subsidiary
3. An environmental services company applies for a job at McKinsey
4. The airline a famous soccer club might fly

Breakroom Answers