The Best One Yet - African tech IPO Jumia jumps big, Facebook’s board drama, and JP Morgan jumps 5% as it looks into America’s wallet

Episode Date: April 15, 2019

The “Amazon of Africa,” Jumia, surged 75% on its IPO day, but it’s really more of an everything-app for 14 fast-growing African nations. Netflix CEO Reed Hastings is leaving Facebook’s board because things are getting too awkward. And JPMorgan rose 5% as it kicked off earnings season, but we’re more interested in its unique window into your wallet.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. It is Monday, April 15th, Tax Day. And this is the best one yet, right, Jack? Markets rose last week. They inched up about a half percent. We're close to record highs for the S&P 500. Dangerously close. It is earning season, has kicked off. Things are feeling good. And the next two weeks are going to be exciting. We have IPOs from the likes of Pinterest and Zoom among all the other corporate earnings reports. I love it. Now, Jack and I spent all weekend, basically finding three wonderful stories for you guys. Yes, we've been very busy for you. The first one we found was easy to find. Jumia, the first Africa-focused IPO on the New York Stock Exchange. It just happened Friday. And it jumped 75% on day one, which is pretty, pretty, pretty good.

Our second story is very TMZ style. Facebook had some serious boardroom drama. Two famous celebrity board investors are out. Who is going to get Zucks Rose? It is not. It is not. Not Netflix CEO, Reed Hastings. I'll tell you that. No, no, it's not. And the third and final story, big, big, big bank earnings season has kicked off. Friday was J.P. Morgan and Wells Fargo. We're just focusing on J.P. Morgan Chase. I love this because America's biggest bank reveals what's happening in the U.S. economy. Beautiful thing. We have an urgent announcement for all your procrastinators out there. Today, taxes are due. I don't even know. Is it like noon, 5 p.m.? End of Business Day? Let's hope it's midnight. But April 15.

is U.S. Tax Day. And look, you're actually expected on average to get a much smaller refund than previous years. So we want to let you know something to boost your mood a little bit. Yeah, we want to like find some actual discounts here. First one we found for you guys on tax day, pot belly sandwiches is like doing a buy one get one sandwich thing, which I don't like their sandwiches, but I do like two sandwiches. Grimaldi's Pizza, the famous one right underneath the Brooklyn Bridge, pizza is cheaper on tax day. Go check it out. Now, Jack, after that pizza, you probably want to carbolode a little more. I saw Cinebun is doing a discount with its caramel pican buns. And along the unhealthy food trend, McDonald's has a discount. If you buy one

chicken McNuggets, you get a second chicken McNuggets for one cent. Jack, I love loading up on this stuff. All I want is a spa package after all those three things. American taxpayers, treat yourself with a deal on tax day. Do it. Now, before you do, just listen up to these key words. You're tuned in the Snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the Robberhood family. It's all informational just so. You know, we're not recommending any securities. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robberhood Financial, LLC, member FINRA slash SIPC.

For our first story, I love this one. Jumia, the Amazon of Africa, just jumped 75% on its IPO day. This was historic. It is the first Africa-focused tech IPO in the New York Stock Exchange. Now, we dove in and became Snackspurs on the matter. Basically, Jack and I were jumeeing all weekend long. All right. First part of the Snacksperts Wikipedia page for this company we're building.

Jumia means independence in Swahili. But interestingly, it's like history. It's corporate structure is way more. complicated. You want to break this down, Jack? Yeah, I do. We said it is the first Africa-focused tech IPO. That's because this background is so complicated. It was founded in Nigeria in 2012. It's now headquartered, though, in Berlin, Germany. But it's selling goods in like 14 different African countries. The owners are 21% of shares are held by Rocket Internet, a German tech like phenom. And then like the other 30%, which brings us over 50% is owned by a South African

telecom company. So its market is completely Africa, but its family tree is geographically complex. It's very spread out. Now, like I said, all weekend long, Jack and I are zooming our hearts away on this thing. And we noticed that when you're on the website and using Jumia, it's very similar to Chinese technologies because it's a mashup of a lot of U.S. apps. Yeah. These companies that are just being formed now in Africa and China, they can look to the U.S. and see what's happening there. So this is not just the Amazon of Africa. It's also got like kayak. It has seamless delivery. It's Instacart. It's drizzly alcohol. And it's also truly a real estate all in one Franken app. You essentially can buy a Zara dress. You can have your food delivered. You can get some Pepsi showing up at your door,

book a trip to Cairo and then rent a home in Nairobi all on Jumia. One reason investors are excited is the big market of Jumia. We're talking like these are the powerhouse African economies. the 14 that it has access to. Those 14 encompass 74% of African consumer spending. Let that set in. That's like a serious number of spending is happening there. However, there's a huge e-commerce opportunity because only 1%— Jack and I were blown away by this fact. One percent of all African retail spending happens online. That's it. Finally, this one is going to knock you out of your seat. Nigeria is expected. Nigeria is its biggest—Jumia's biggest market in Africa. I didn't expect this. It's expected by 2050 to have the third largest population in the world behind just India and China.

And then the continent itself, Africa's GDP, on average, it's growing at like 6% this year. So Jack, what's the takeaway for our buddies over at Jumia? Jumia operates in emerging markets, and emerging markets have all sorts of new risks. So true. Huge upside here in that there's exposure to a fast-growing emerging market like Nigeria's, and that's why shares pretty much jumped 75% on day one after the Ida. Yeah, everybody wanted a piece of Jumia, but don't forget the downside of working in emerging markets. In general, they're more likely to have political risks, weaker government institutions,

and straight up like weaker laws about who owns what. And you've already seen this with Junia. Get this. 95% of payments in Kenya happen with cash. And Jumia allows cash payment. So it's basically like a super clunky way of connecting its revenues. It's got to get cash into its coffers. And because of that cash acceptance, some Jumia sells. have warehouses where they put cash that they get for their stuff. There was one robbery recently where $565,000 of cash were stolen from a Jumia seller in Kenya. And then get this, delivery verification, huge issue. 14% of the goods that have been sold via Jumia didn't actually make it to their destination because they couldn't verify if that was the order. Emerging markets have

big upside, but don't forget the risky downsides. For our second story, Facebook had a week of corporate drama and revealed some fascinating key details on the company. This is a story about a board of directors, and we want to break down Facebooks for you because it is just all-star celebrity politician VC pact. This is like Jedi Council kind of stuff, right? It really is. There are nine board members for Facebook. Now, the top two, obviously the Yoda and Obi-1 Canobi are Mark Zuckerberg and Cheryl Sandberg. Totally. And then you've got a couple of big deal venture capitalists. You got Peter Thiel and Mark Andresa. Those are the master's, of scale. And then you got Kenneth Chenalte, who's the former CEO of American Express, bringing some

financial know-how. True. And then you've got some interesting political stuff because you have a former Obama administration and consultant guy, and you've got Erskine Bowles, who was a former Clinton administration guy. And rounding it out is Susan Desmond Helman, who's a biotech superstar and also worked for the Gates Foundation, so some philanthropy. And then, last and not least, and this is what we want to focus on, you have got Reed, Hastings. the Netflix CEO and co-founder. Reid Hastings of Bowden College fame is no longer going to be a Facebook board member, and he's been around since 2011.

So this is a big change. Now, I love the way they frame this, Jack. It's not just that he's not going to be a new board member. He is, quote, unquote, not up for re-election. Now, we looked at this, and we also looked at Erskine Bowles, who also won't be up for re-election. And we thought to ourselves, Facebook more than any other company is under the spotlight of politicians.

Right. And Bowles and Hastings are both long time and outspoken Democrats. So in the back of Zuck's mind, he was probably thinking, maybe I'll remove two Democrats to refute conservative claims of bias on the social network. Now, we'll get back to Hastings here. Hastings is stepping down because things are basically just getting too awkward. This is so awkward for Hastings and Facebook. Facebook has original content for video as a big part of its strategy.

It's called Facebook Watch. Now, Facebook Watch was launched in 2017 and then get this number. I had no idea it would be this big. 400 million viewers watch at least one Facebook watch show every month. I am not one of them. Just for the record. Full disclosure. Now, we always talk about Netflix is spending on original content.

Guess what? Facebook is spending a billion dollars this year on original shows with a B. And can we talk about some of these original shows? Jack, as a native New Englander, do you want to opine on your least favorite show? As a New York Giants fan who grew up surrounded by Patriots fans, I have Tom. versus time, which is some like Tom Brady living until he's 200 years old show on Facebook watch. I think 200 will be if bad luck happens. He's on his way to 300. And then on the other end of the spectrum, you've got sacred lies, which is just like about a girl stuck in a cult.

Now, I think most relevant to all of our guilty pleasures is a real world reboot with MTV that's coming to Facebook watch. MTV didn't know you were still around. Love that you're making moose here. Now, Netflix is the number one competitor in video for Facebook. So that's That's why this is so awkward. All those shows we just mentioned feel like Netflix, you know, competitors. So there's an obvious conflict of interest that Reed Hastings has, so he's stepping down. So, Jack, what's the takeaway for our buddies on corporate boards? If you want to know where a company is going, don't look at its products. Look at its people. Exactly. You look at its hiring pages to see what companies are getting into.

And look at its board to see what areas of interest or concern it has. And then look for changes in that board so you can see what its future priorities will be. This is how you see the future. Future, this is how you see. Jack, put on your suit and order some late night seamless. We got to talk about big bank earnings because J.P. Morgan just showed us that it is a window into your life. I'm still working on converting this podcast into a pitch deck for our eye banking audience, but our story today is about J.P. Morgan Chase and Wells Fargo. That's two investment banks down, four to go. We're talking about big banks and profit reports because earning season kicked off last week. Now, as we alluded earlier, we want to focus on J.P. Morgan Chase. And I got to tell you, that is two

different things. J.P. Morgan acquired Chase Manhattan Bank in the year 2000. And like any good marriage, they hyphenated the names and kept both. It was perfect. And Wall Street basically has a bank with J.P. Morgan. And then there is a Main Street bank with J.P. Morgan. Right. The Wall Street Bank is called J.P. Morgan. It's based on Wall Street. And profit in the first quarter of 2019 dropped for its Wall Street business by 6%. And that's basically because of the government shutdown and the trade war with China. Now, Chase, that's the mainstream. Profits rose by 19%. And basically that's because of a strong economy and people like you and us who are just spending more maybe. All right. Add up those two streets. Overall, J.P. Morgan Chase had

a record profit and shares jumped by 5% on Friday. And that was really what kicked off the big bank earnings because this week you've got like this ridiculous lineup goldman city bank of america morgan stanley they're all waiting but j p morgan set the tone that is murderers row right there you're ready for this jack now here's the thing with jp morgan it's chase is a window into the american consumer's soul and it's staring right out yeah really a window into their wallet actually yeah like your e wallet essentially we're talking atm's debit cards credit cards what else So Chase, you know, it's got checkings account and savings accounts. It doesn't have stocks and bonds. This is the stuff that you, me, and Nick all use every day. Now, here's the interesting thing. Chase is also, by chance, the largest U.S. credit card issuer. Turns out, we learned from their earnings report, spending on J.P. Morgan Chase credit cards jumped 10% in the first quarter of 2019. And since interest rates are higher than they've been in like 10 years in this U.S. economy, that was extra good for Chase because they're making all. that interest. So this is good for J.P. Morgan Chase, a little concerning in general that people are

just swiping credit cards left and right, but overall good that people are spending. But CEO Jamie Diamond for J.P. Morgan, he's like literally the guy who's looking into Americans' digital wallets right now. Yeah, yeah, he is. Get this quote. We love this. This is what came out from the earning support. J.P. Morgan's Jamie Diamond said, quote unquote, expansion of the U.S. economy could go on for years. And he said, there is no law that economic expansions need to come to an end. So that's very bullish. If there is anyone who had a good sense of that kind of a thing, it's the guy who knows exactly how much you're spending and splurging on every weekend for that sole cycle. So Jack, what's the takeaway for our buddies over at the banks?

Just like Mom told you, every bank is special. They're not all the same. So true. On Friday, it wasn't just J.P. Morgan reporting earnings. We also had Wells Fargo reporting earnings, too. J.P. Morgan stock rose pretty good, like 5%. And Wells. Fargo sank about 3%. And we know why. It's basically three reasons Wells Fargo is a different kind of bank. First, Wells Fargo is still paying gigantic fines. Like they have had $15 billion in fines since the year 2000. That's according to ViolationTracker.com, which is a great rap sheet for Wells Fargo. When I'm not on Jumia Jack, I'm on ViolationTracker.com every weekend. And remember, J.P. Morgan's played plenty of fines too since 2008, but Wells is still paying for scandals that happened like

ago. And because of those still ongoing scandals, the CEO of Wells Fargo just stepped down. They've only named an interim temporary replacement. So leadership is a big question mark. Exactly. And then the third issue is that as the largest home lender in the country, higher interest rates hurt Wells Fargo's mortgage business, because it's just more expensive free to borrow. And Wells Fargo loves mortgage business. J.P. Morgan is also suffering in that category, but it's much more diversified and makes money in other places. And that's why it's a window into whatever it is you just bought. Jack, can you whip up the takeaways for us to start their week? Yes.

Jumia was a huge winner on IPO day, but don't forget about emerging market risks. Yes, with huge opportunity, comes pretty huge emerging market risk every now and then. Facebook, if you want to know where a company is going, don't look at its products, look at its people. But not like in a creepy way. Don't like, you know, don't do anything wrong here, but check out their corporate website, see who is on their Jedi board. Third and final story, J.P. Morgan Chase and Wells Fargo. Not all banks are the same. Each is different.

Our mom said it, and you know what, the CEOs of these banks would say it too. Jack, time for our snack fact of the day. This one, particularly to tax day, we wanted to hit this. Can we talk about Finland's National Jealousy Day in November? We must. What Finland is doing with their equivalent of tax day is much cooler. So, in Finland, on November 1st, which is their equivalent of tax day, all citizens' income and the taxes they pay become publicly available. for anybody to see. Literally, you have reporters pouring over everything. They know what you made

and how you're getting taxed on it. Naturally, this is referred to as National Jealousy Day because Bob across the street who's got a boat, you could see how much they're making. But interestingly, it actually deters people from committing tax fraud because you can look up Bob's income and their taxes and if it doesn't seem like it lines up with that new boat, you can call the authorities. Shame might be the most powerful weapon on earth. Now, a couple other awesome stories we're going to be covering this week. First of all, just a couple of huge IPOs. You got Pinterest and Zoom coming at.

And then we got the rest of corporate earning seasons seriously kicking into high gear. Check out our Snacks Day of the newsletter and our pod every day. Can't wait for the rest of the week with you guys. Talk to you tomorrow. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial LLC and does not reflect the views of Robin Hood Markets, Inc. or any of its subsidiaries or affiliates.

The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA SIPC.