QUOTE OF THE DAY
Alexa, what are your deals
Everyone, today. Happy Prime Day.
MARKET CORNER
Market Snapshot
- The Nasdaq rose on strong performances from Amazon (+1.81%) and Tesla (+0.91%).
- Snap (-1.11%) shares fell below their IPO price for the first time.
- Gold fell for a third day on strong economic data.
- European stocks finished higher following the G-20 summit.
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Don’t talk trash if you can’t back it up. Just a year ago, Chinese real estate mogul Wang Jianlin was touting a chain of theme parks that planned to make Shanghai Disneyland feel like the world’s saddest merry-go-round.
Now? He’s selling off those 13 parks along with 76 hotels for $9.3 billion in cash.
We’ll get to why—first, some context.
Jianlin isn’t just a pompous businessman. He’s a pompous businessman behind the world’s largest private property developer and owner—Dalian Wanda.
Wanda manages 347 million square feet of property across the globe and has recently made a splash in the film and entertainment industry.
It purchased AMC Entertainment for $2.6 billion in 2012 and Legendary Entertainment for $3.5 billion last year.
And if Wang Jianlin had his way, Wanda would also have its hand in the Golden Globes, AMAs and Billboard Music Awards (compliments of Dick Clark Productions).
Alright, back to it
Property development—it’s a messy business. You take out massive loans and spend years building out properties (like maybe a theme park or a hotel...hmm) all on the belief you’ll be paid (via rent, ticket sales or merch) in the future.
Case in point, Wanda’s property unit, which is projected to rake in $20 billion in 2017 had to accumulate $33 billion in debt to get there.
And there’s no signs of slowing down. In the next year alone, it’ll need $5 billion more just to finish ongoing projects—not pretty.
The solution? Mr. Jianlin’s "asset light" plan
And it starts with this $9.3 billion sale.
Step 1: Use the money to pay down a portion of Wanda’s debt.
Step 2: Make money through managing properties rather than owning them.
Step 3: Expand the film and entertainment business.
Step 4: Apologize to Walt and Mickey.
Reality Bites
Only three years after its $2 billion purchase of Oculus Rift, Facebook (+1.36%) is cutting the price on its VR bundle...again.
The new headset will retail for $399 down from its original price point of $599—and to make matters worse—Rift has sold 520,000 headsets worldwide, while its main competitor (Sony VR) has sold 1.6 million.
The culprit? All signs point to a lack of popular VR gameplay and the rise of augmented reality (a VR alternative).
Either way, Zuckerberg is determined to make VR a reality. Facebook is injecting another $250 million into content, hoping that one of these days it’ll stumble across the next Pokémon Go.
Alexa, Find Me the Nearest Geek
These days, technology is so complicated you might need an assistant for your assistant.
That’s what Amazon’s (+1.81%) betting on as it rolls out a new service—a squad of experts to make the fully-integrated "smart home" a little less intimidating.
A small army of Tony Stark wannabes will provide in-house consultations to help with the installation and customization of hands-free hardware, with a focus on Amazon’s intelligent personal assistant, Alexa.
Best Buy (-6.29%), which pioneered this type of in-home technology service with the Geek Squad, lost $1 billion in market value following Monday’s report. It’s a bitter pill to swallow after posting an 85% run over the past year.
Collars Flopped
Want to know the only thing less sexy than a $54 Abercrombie polo?
Watching your stock tumble 21% to a 17-year low.
Following two months of discussion with private equity groups and strategic buyers (like Express and American Eagle), Abercrombie has pulled the plug on sale talks.
Its decision—be a standalone company in "aggressive pursuit" of its “strategic plan”—one that hinges on 16-year-old Cali punks buying excessively-ripped jeans from Abercrombie-owned Hollister.
Unfortunately, A&F wasn’t the only fast-fashion retailer slapped back to the fifth grade by investors.
The whole sector took a hit (including Gap and Express) with the announcement serving as a not-so-friendly reminder that e-commerce is in and brick-and-mortar is out.
Tell Me More...
- Buffett donated $3.17 billion in Berkshire stock to the Gates Foundation and four other charities.
- J.C. Penny’s (-1.54%) CFO, Edward Record, is stepping down.
- Elliott Management raised the stakes against Berkshire Hathaway, placing an $18.5 million bid for Energy Future.
Economic Calendar
- Monday No events today
- Tuesday Earnings: PepsiCo, Yum!
- Wednesday No events today
- Thursday Earnings: Delta
- Friday Earnings: Citigroup, Wells Fargo
(Amazon Prime Day) By the Numbers
It’s Amazon Prime Day—arguably the Brew Crew’s favorite holiday behind Nonfat Caramel Macchiato Appreciation Day (okay, hands are up...that’s not a thing. But, we’re working on it).
For now, let’s get you pumped up for the big day. Time to let the numbers do the talking…
66 million—Prime members that might be cashing in on deals today.
81.6 million—Amazon site visits on Prime Day.
$2.5 billion—Prime day sales in 2016. Up 40% from 2015.
What sold best?
2 million—Number of toys sold.
1 million—Number of shoes sold.
200,000—Number of Kindle e-readers sold.
90,000—Number of TVs sold.
23,000—Number of iRobot Roombas sold.
Here’s the thing—even with all the Prime Day hubbub, it doesn’t touch Alibaba’s big day. Jack Ma’s e-commerce giant brought in $17.8 billion last year.
Question of the Day
Jenna wrote all the numbers from 300 to 400 on a piece of paper. How many times did she write the digit 3? (Give up?)
Who am I?
I started my own hedge fund, Appaloosa Management, in 1993.
I’m a partial owner of the Pittsburgh Steelers.
I made a killing purchasing distressed debt in Enron in 2003.
My net worth is $11 billion.
Stat of the Day
$27 billion
As of today, that’s how much Buffett’s given to charities. Maybe we could all give a little more...
