The Best One Yet - Budweiser cancels biggest IPO of 2019, France passes a US tech tax, and Bird’s profitability drama

Episode Date: July 15, 2019

Earth’s biggest brew-glomerate, Budweiser-owner AB InBev, was planning the biggest IPO of the year by spinning off its Asia unit — that was suddenly canceled before the weekend. France unveiled a “tech tax,” but it really looks like a tariff on Silicon Valley. And scooter icon Bird is our “dramatic unicorn of the day” for a debate raging on its profitability problems.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 track. This is snacks. Daily, it is Monday. Kicking off your week, July 15th. Checking off your week with a T-boy. This is the best one yet. It's a lot better than Friday. So what have we got? Markets. All three stock market indexes in the U.S. hit record highs again. Full hat trick for the week. The Dow hit 27,000 points. Nice round number. The S&P 500 hit 3,000 points. Really nice round number. Combined, that's 30,000 stock market points. NASDAX out like an arbitrary number here. We're not even going to get into it. But we got three great stories for you. First, Budweiser owner, AB, A.B, N. imbev was supposed to spin off its Asia business with a fresh new IPO in Hong Kong. That was supposed to be Friday. But Friday it canceled it.

The whole thing, this comes down to Budweiser's debt problems. Second story is international eco-politics. France just passed the first ever tech tax, and it is throwing international shade at Google, Facebook and Amazon. We looked into this one and it basically is one thing. A tariff. Not a tax. It's a tariff.

Third and final story. Bird, which is like the Uber for e-scooters. Literally. taking over the world, it's having its mid-unicorn crisis, and we are going to cover that hard. First, our report came out that it's got chronic unprofitability problems. And then the CEO came out with a tweet saying it's all wrong. We looked into it. We're going to let you know our opinion. But first, we want to commemorate the 50th anniversary of human beings first walking on the moon. We think this is a worthy accomplishment to talk about this week. Apollo 11. It took off July 16th,

1969. I remember because July 16th is my brother's birthday. Tuck, you're not 50 years old exactly, but you're getting there. So a few days later, they landed on the moon. They called it one small step for man. One giant leap for the movie industry. That really was a big plus for the movie industry. They've been crushing these things. What? We got sequels on Apollo 13 coming out. So there's a lot of space stuff going on recently. India is trying to land a probe on the moon. Not too shabby. Which would make it the fourth country to put a human or probe on the moon. Welcome to the club. What are the other three? True. Question for you, Nick. All right. I got you. Based on the movies I've seen, I'm just going to go with the flags I've seen in those movies. So I'm going U.S., Russia, and China.

There's no Russian flag on the moon. There is a Soviet Union flag on the moon. This sounds like a ridiculous technicality. All right, I got one for you. You ready? Here we go. How many people, out of the 7 billion in the world right now and a lot of live before, have actually been into space?

Give or take, 571. Jack's on my notes on this one. There's actually a website that keeps track of the human beings in outer space. Yeah, it actually is literally 571. Don't forget the dog, the Soviet dog named Lyca. Incredibly impressive. You should have been named Pluto. That dog's 350.

in dog care. Now let's listen to these keywords and then we'll know our stories. You're tuned in to snacks daily. We spoke to the lawyers and we got to get something legal out the way. It snacks about to hear rain 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. Right. Snacks is digestible. Business news for you.

Robahood Financial, LLC, member Fenra. For our first story, Budweiser was going to have the biggest IPO of 2019. It was scheduled for Friday. Everyone was excited. It was going to be in Hong Kong. We know it was going to be on tap. It was going to be beautiful. It was really gorgeous.

They hired a band. I got to save the date. And then suddenly they canceled it. The whole thing. Friday. IPO canceled. Now, this particular IPO for Budweiser was a spinoff of its Asia unit and it was for one purpose. To pay down debt.

It needed money to pay down its massive pile of debt. Basically, they were going to raise 10. billion dollars spin off this Asia unit and do it on the Hong Kong stock market. And by spin off the Asia unit, we mean Budweiser has like a ton of business in Asia. It made it a separate company. It was getting ready to sell it. Now, when they canceled, they cited one specific thing. They claimed it was because of quote unquote market conditions. Yeah, which is basically the dog ate my homework of the business world when you want to call off. If you're supposed to have dinner with your friend who's an investment banking, just tell them you had to cancel because of

market conditions. They'll understand. The reality was investors in Hong Kong weren't as interested in Budweiser's Asia unit and weren't willing to pay that much. This is like if you happen to have a boat, very nice, good for you, and you're trying to sell the boat and you don't get any decent offers, you end up keeping the boat. Budweiser kept the boat because no one was willing to pay enough money. Now, what we thought was fascinating about this story is it shows that A.B. InBev, aka Budweiser, has a huge debt problem. That's what we want to highlight here.

And I have a freaky fact to help illustrate the debt problem that AB&B. It has. Laid on us. One fourth, 25% of the beer drank on planet Earth. earth is brood and sold by ABMBeth. Now, Jack, I've got a freakier fact for you. $105 billion in debt is what Budweiser's racked up to make all the acquisitions that made your freaky fact possible.

105 billion dollars in debt. And get this. You know how when you forget to pay your credit card statement or you can't, you get a little interest charge at the end of the month? Budweiser's interest charge at the end of last year was $4 billion. It paid $4 billion on its corporate credit card for that $100. $105 billion in debt. Jack, I think this is the moment where we should like, everyone should hold hands and take a stroll down merger lane.

Okay, A.B. Inbev. That's the name of the company that owns Budweiser. Nice name. A.B. stands for Anheuser-Busch. It gets a little confusing here. Based in St. Louis, Missouri, it was America's beer giant. For a while. Historic company. Very true. Got acquired by Inbev. Inbev itself stands for Interbrew plus Ambe. Terrible. Where were the marketing guys on this?

Inbev is the product of two mergers. A.B. Inbev is the product of two mergers. A. is the product of like eight mergers. Jack, Jack made A.B.N. Bev, spitting a cup, send it to 23 and me and send us the results just to get that information. We need a DNA sample from these guys. There's even more. It spent $100 billion a couple years ago to acquire SAB Miller.

And guess what? There was no room in the corporate name for SAB Miller. Right. Because SAB Miller stands for South Africa brewers. They're the product of a bunch of mergers, too. It's insane in incestrials. They ran out of hyphens and couldn't add that to the name. We were looking at it.

We're like, we're trying to find how many companies Budweiser's acquired, A.B. InBev's acquired. What we could find was there's basically, at least or almost 50 companies just in the last five years. So, like, every time they acquired a company, they took on more and more debt and racked up more and more credit card charges. So, Jack, what's the takeaway for our buddies over at AB InBeb. Budweiser. Budweiser just got the valuation wrong on this IPO. Now, they tried to sell shares of their Asia unit at $6 per share. And that would have made Budweiser, InBev, Asia, worth $64 million.

Which for those keeping track at home is about three and a half lifts. Then we found out there were reports that investors were only willing to pay $5 a share, not the $6. Budweiser was hoping for. Yeah, that's what the Wall Street Journal said. $5 per share is what people were willing to spend. So Bud could have done the IPO on Friday. They could have sold their entire Asia business, but they would have got less money than they hoped for.

So not only was the deal called off, but A.B. InBev's actual shares dropped 3% on the news. That's because its Asia business isn't worth what it thought. And so I guess they're waiting for a better time to sell off its business. Yeah, it's all about market conditions and then maybe after the trade war. For our second story, this is a first. France just passed into law its first ever tech tax on Thursday. This is a global first. And it's targeting one country. The United States of America. Pretty much. Now, France is celebrating Bastille Day this week. Very nice. Which is something about the French Revolution. This is revolutionary. This is powerful. So we've never seen this. It is a 3% tax in France on any

revenues coming from digital services going to French people. If you think your company's affected, here are the two checkboxes. One, do you have at least $845 million in sales globally. And two is $30 million of that en France. So that qualifies about two dozen companies total. So it's only big companies, not small ones. Most of those are in the U.S. Most of those are our tech giants. Some exceptions are like Spotify, which is technically based in Sweden. Which is based in Sweden. True. So France is basically pulling in America here. They're slapping a country it feels is ripping it off with brand new tariffs. And that's what we think this is. This is essentially a tariff. Yeah, they're calling it a tax and most tariffs are for physical

goods coming through like shipping ports. This is digital goods coming through Wi-Fi ports. Right. You got to kind of rewire your mind. It's almost like the internet is the new harbor. Yeah. And America is exporting tech internet stuff to the rest of the world. So with some context here, we've got to figure out why France is doing this. And it basically comes down to how United States Tech Silicon Valley has transformed. French towns. Not in a good way. In two big complaints.

So the two big complaints here are, one, it's taking business. Imagine you're walking through some French town. Jack's got an adorable town. Jack's got his pan de cotton right on his shirt. Yeah, you walk into the bookstore and you want to give your little baby Claudette a beautiful little children's book. So you walk in and you get the little prince. We're thinking about that one.

Which is a French book. After that, you're romantic. Of course, you want to give your husband something nice. You stop into the pharmacy. You get some nice French. perfume. You're going to settle down. You've got to put butter on that bread, so you're going to pick up Le Mans so you can read the paper while you're buttering the bread. Now, that book, that perfume, and the newspaper, they've pretty much been replaced entirely by Amazon, Google, and Facebook.

Now, the second complaint is that these U.S. tech companies, like Amazon, Google, and Facebook, aren't paying taxes. A traditional company that's, like, actually based in a French town, is paying, on average, 23% tax rate in the European Union overall. U.S. tech companies on the other hand, are paying about nine and a half percent taxes by picking the lowest tax country in the EU, like Ireland, and claiming that that's where you are. So basically we're seeing like an interesting analogy here, which is that U.S. politicians have been blaming China for killing jobs and crushing local economies. And France is doing the same thing, but they're not blaming China. They're blaming U.S. tech companies. So, Jack, what's the takeaway for our buddies who are legislating

over in France? This is the new normal, global economic protectionism. The governments of the U.S., of China and of Europe. Recently, they've been punishing foreign companies in order to protect their companies at home. It used to be a consensus. The international trade was good for everybody. Economists loved it and trade thrived. Now that consensus is pretty much dead. You've got China, which began breaking the rules first when it came to trade. And then you had all this trade happening, but the goods of those trades, like the profits, it was all just going to the wealthy. And then the U.S. came along to start trade wars with a lot of these countries just a couple years ago. So we have this anti-trade trend, it's continuing, and it'll be a growing problem for companies selling abroad.

For our third and final story, we just learned that Byrd, the e-scooter icon, is deeply unprofitable and has some serious problems. But then the CEO of the company went on Twitter and denied the whole thing. So we got off our scooters. So Snacks is going to get off our scooters and investigate this thing for it. Basically, we did a little background here on Bird. Bird is based in Santa Monica, California. Very nice. It's just over two years old. It's already raised $700 million from venture. It did that like ASAP. It's become the fastest startup to ever hit the $1 billion unicorn status. And now it's going through like a mid-unicorn crisis. It went from zero to a billion dollar valuation faster than any e-scoater ever.

All right. So let's talk about what the initial thing that set this whole drama into motion was. It was from the information, which is a tech-focused journalist mallet. Yeah, it's based in San Francisco. It's actually a great source for tech news. And they highlighted that, according to their reporting, Bird had a $100 million loss just in the first quarter of 2019. They also said it's running out of money and that it needs money real fast. And this is a fast-growing startup. Suddenly its revenue shrank to $15 million, which was also a shocker. Yeah, a company like Bird, which is supposed to be in hyper-growth mode,

the fact that its revenue was shrinking, that was a real shock. Highly concerning. So they had a few reasons why. One of them being, you know what, when people are outdoor scootering in winter, it's not as much fun. So outdoor scootering tends to dip that time. But that doesn't explain why revenues dropped. The real reason is probably because the company stopped issuing coupon codes to get people to try out their first rise. So if you're over at Byrd

and you're working there, you're seeing how these things are playing out. For example, Byrd ended up firing 5% of its staff last year. It paused service, quote unquote, in half its markets, and it's making users like preload money into the app because they really need that money ASAP. Now, a key issue, the information highlighted, that caused the $100 million loss, is that the company miscalculated how long these scooters would last before you need to replace them. Right. This $100 million loss was like what they're calling a one-time write-off to reevaluate, you know, how they're dealing with old scooters. So then the CEO of Byrd reads all this reporting by the information, and apparently he's pissed. Yeah. And not only is he pissed, he's on his way back from Paris, all right? He's on the flight. He sees this report come out. So he says, you know what? I guess he had Wi-Fi on the whole flight.

Yeah, he got the Delta. What's the Delta Wi-Fi call? We got to upgrade to the international package on that one. You're in Delta Comfort. So he humble brags in his very first tweet. He's like, on a flight back business class from Paris. Must be nice. And I'm catching up on quote unquote fake news about Byrd's financials. And then he issues a bunch of new information about Bird, which we're happy to see.

So we jumped into that five tweet sequence of emotional just letting yourself out there. And he said, first of all, the information is using old data. If they had used updated data, they'd see that revenues are actually growing four to five times per year, not shrinking like the information set. Right. So great impact of this story coming out. Is it caused a private company that we know like very little about to actually share some of its really interesting information with the public? Which is pretty good. And then the CEO actually showed us some numbers and said that each ride on a bird scooter makes the company a dollar and 27 cents in profit. And that's including all the costs. We're talking repairs, insurance,

engineers, people marketing the thing. That's all included. So these five tweets from the CEO really point out the importance of the actual hardware in the situation, the actual scooters. Right, because we're not talking about birds' old scooters now. The kicker here, the key is that we're talking about bird's new bird zero scooter. Yeah, these new and improved scooters, which are designed by the company, actually go 600 rides before they need replacement. That's actually not that many rides. It's only about six months life for each scooter. Assuming like three a day.

But apparently that's a lot better than the old scooters, which were driving the hugely unprofitability of the company. Right. So Bird decided to design these super optimized perfect for sharing scooters, and now they're about 75% of the fleet, and they're planning on rolling those up. So Jack, what's the takeaway for our buddies birding over at Bird. No matter what's true, whether it's the CEO or the information, the one thing that's definitely true is venture capital is subsidizing your rides. And this isn't just true of Bert. This is true of any other fast-growing, highly funded, ridiculously well-branded, transportation company. That's a unicorn. We're talking Uber, lift, bird, lime, dash, scoot, skip. If you've got the app and they get you from A to B, they're included. There's a great tweet from a reporter at the New York Times. He said, every time I ride a scooter, I thank the gods of venture capital for subsidizing 90% of my ride.

So the playbook for these companies is raised millions and millions of dollars from venture capital. Then offer your rides at an artificially low price to the public so you can gain market share fast. So the result for us, humans, is that we get an artificially reimbly. ridiculously low price to jump on a scooter, and it's the venture capitalists who are funding all that. But don't be surprised in the future when promotions end, prices increase. And for like Uber and Lyft, maybe they cut out the human driver. Jack, can you whip up the takeaways force to start the week? Budweiser canceled its Asia IPO because the price wasn't right. Remember, if you're trying to get out of something,

just say it was because of market conditions and you're probably in the clear. France is placing a tariff on U.S. tech services, and we forgot to mention President Trump is already threatening retaliation. Remember, taxes can act like tariffs, too. It happens. Third and final story, Bird has upgraded its scooters, and that might upgrade the company from unsustainable losses to maybe profitability sometime, maybe soon. So the next time you see a venture capitalist, take off your Patagonia fleece and thank them for giving you a cheap scooter ride. Now, our snack factor of the day comes from a Malaysian snacker named Jin.

This is a great one. Malaysia's prime minister, Mahatir bin Mohammed, is 94 years old. That makes him the oldest sitting human world leader on the planet right now. Thank you. What about the queen? Yeah. The Queen of England is 93 years old. Apparently she's been a year behind him for like 93 years. It's true.

Brutal. Snackers, thank you for tuning in with us Monday morning. We love starting the week with you guys. We'll be back with you tomorrow and every day this week. I'm looking forward to it. Let's do it. The Robin Hood Snacks podcast you just heard reflects the opinions of only the host who are associated persons of Robin Hood Financial LLC and does not reflect the

use of Robin Hood Markets, Inc. or any of its subsidiaries or affiliates. The podcast is for informational purposes only and 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.