The Best One Yet - 🦐 “Finance killed the Fish” — Red Lobster’s Bankruptcy: Part II. Nuclear power… for AI. Chewy’s pet adoption rebound.

Episode Date: May 31, 2024

Get our Saturday Newsletter: tboypod.com/newsletter  Last week we told you about Red Lobster’s all-you-can-eat shrimp-tastrophy that killed the chain — But now we’ll tell you about the Private Equity real estate deal that put it in critical condition.Oklo is making mini nuclear power plants that look like ski chalets… but for tech companies — Because the more we use Artificial Intelligence, the more we need nuclear power.And Chewy’s online petstore stock just surged 30% for its best day ever— Because for the first time in 2 years, more Americans are adopting pets than returning them.Plus, last night was the final of the Scripps National Spelling Bee — And we discovered that the hardest word was also the shortest word…$OKLO $CHWY $MSFTWatch us on YouTubeTheGet the Saturday Newsletter: tboypod.com/newsletter  Submit Facts & Shoutouts: hereShoutout Requests Submit The Best Fact YetSocial: Follow us: on Instagram, TikTok, And connect with us on Nick’s LinkedIn & Jack’s LinkedInAbout Us: The daily pop-biz news show making today’s top stories your business. 15 minutes on the 3 biz stories you need, with fresh takes you can pretend you came up with — Pairs perfectly with your morning oatmeal ritual. Hosted by Jack Crivici-Kramer & Nick Martell. Hosted on Acast. See acast.com/privacy for more information.

This is Nick, this is Jack. It's Friday, the real Friday, May 31st. And today's pod, it is the best one yet. This is a T-boy Jack. The top three pop business news stories you need to know today. But first, Jackals, whip out the calendars here last day in May. What a May it has been, my friend. Stocks rose 4% in May.

What do you say? Not too shabé. Why don't I just go eat some hay, make things out of clay, lay down by the bay? I just may, what do you say? Jack, three stories for today's show. What do we got, man? For our first story, Chewy, the online pet store surged 30% this week on one wild stat. After a sad two years of puppy returns, more Americans are adopting puppies again. For our second story, a company that builds many nuclear power plants just went public on the stock market. Because Yetis, the more you use, Chad Sheep-T, the more you need nuclear power.

and final story. Last week, Nick and I covered the bankruptcy of Red Lobster, but this story demands a part two. Part one was about the endless shrimp shimp-shrimptastrophe. Part two is about the finance industry. Because finance killed the fish. Finance killed the fish. But yeties, before we hit that wonderful mix of stories. What a mix before a weekend. That's how you're going through a weekend, man. This weekend, don't forget to celebrate the W-I-N-S. And celebrate the W-I-N-S. And celebrate the wins. W-Y-N-S, you gotta celebrate the wins. Because last night was the finals of the 96th annual Scripps National Spelling Bee.

The Spelling Bee, Yeti's the biggest day for spelling since the invention of the vowel. It's the hardest day of spelling since I before E except after C. Conjunction, Junction, what's your function? Yeties, as of this recording, we do not have the name of the winner quite yet. It's one of eight lucky kids who are in the finals.

But we did see the toughest round ever in the Scripps National Spelling Bee, didn't we, Jack? Because on Wednesday, in one round of competition, over half of the participants were eliminated. D-O-N-E-D-D-D. What kind of numbers are we talking about, Jack? On Wednesday, 140 of these bright kids were done because of Wednesday's spelling doozy. 140 kids got conjugated in one single round.

Because at this point in the tournament, these words are all hard. Yeah, H-A-D-D, Jack. Double-R? You're out, by the way. If you know, you know, trick question. Yeties last year, the toughest word in the spelling bee was Clafutie. Clafutie. It's a medieval term for a baked pastry.

But the toughest word in this year's national spelling bee is kind of funny. Yeah, it's kind of funny because the toughest word in this year's spelling bee was the shortest word in this year's spelling bee. Jack, do you know how to spell the word oral? O-R-A-L. Sorry, Jack, you are incorrect on the word oral. It's not oral? Can you say it again, please? Yeah, the word is pronounced.

Oral. Can you please share the origin of this word? Oral, a 16th century term from French Latin. Can you please use it in a sentence? Oral. That knight in shining armor has beautiful oral. Okay, I'm very confused, but I'm going to give it another shot. You ready? Oral. O-R-Y-L? Jack, I'm sorry, but the correct spelling of the word oral is O-R-L-E, my friend. That word knocked out a bunch of America's youth this week in the spelling.

Yes, it did, Jack. Thank you for playing. Now let's hit our three stories. And congratulations to whatever youngster took home the trophy and the $50,000 cash prize. And Miriam Webster, let's hit our three stores. Fifteen years before this song, two boys from the Northeast met in the dorm. They had an idea that caused a cultural storm. It's the best one yet, but the best is a norm. It's 50%.

That's a fat tip. Tea Boy City on your at list. If you know, you know, because we're ready to go. We can't wait no more. So just start the show. Start the show. First, a quick word from our sponsor. Our first story.

Chewy, its stock just had its best day ever, because the online pet supply company jumped 30% in one day. And the reason? For the first time in two years, more people are adopting pets than returning them. Oh, Jack, someone needs to give that chewy CEO a little peanut butter treat, don't they, man? Who's a good boy?

Give that guy a belly round. Oh, don't go boy. Because yet he's chewy stock. 30% so far this week, not too shabby. The stock went off leash for the first time in like two years. Someone needs to roll the Chewy CEO over and just like scrub his belly, rub it up a little bit. No, look, Chewy stock is still down 80% from the pandemic all-time high when e-commerce and puppy adoption dominated everything. But in the meantime, investors think Chewy is turning around like a well-trained Labradoodle baby. Because Chewy just announced that profits tripled in the first quarter to $67 million.

and the revenue they made per customer jumped by 10% compared to last year. Well, besties, even in this economy, P-U-P-P-P-Y, people ultimately prioritize puppies. Yeah. But yeties, here's what Jack and I found fascinating about this story. The real reason that Chewy is smiling like lassie, what is a Jack? It's a way bigger macro issue that they mentioned in their earnings call. Besties, we're talking about the pet return ratio. The pet return ratio is apparently returning to normal.

The pet return ratio. It's the balance between people adopting pets and sadly relinquishing them. Yeah, to sprinkle on more context for the first time in two years, more Americans adopted pets last quarter than returned pets last quarter. You heard that right, Yeti's.

Following the pandemic puppy trend where everyone was adopting a puppy, we actually got two years of the opposite. Yeah, for two years, people were turning pets like they were VHS tapes. Starting in 2022, Americans returned more dogs to pet adoption centers than adopted the pets. For some, the reason to return their puppy was financial. Owning a pet cost more than they realized.

For others, it was the return to office. You may have had to return back to the city from your countryside pandemic retreat. For others, it was simply a mistake. Not everyone is cut out to be applauded. I mean, Jack, have you seen the movie Beethoven, number one and number two? I mean, I've been on a couple of bachelorette parties where, I don't know why I said that. I haven't been. But I've heard of them where they rent the puppy at the beginning.

I have not heard of that. Wait, people are renting puppies for bachelorette parties? I don't think we've been on the same bachelorette parties, Jack. Either way, yet is, the balance has finally been restored to the pet galaxy. More families are celebrating the joy of a pet coming into the home than the sadness of going back to the shelter with a tail between their legs. The pet return ratio has reached a Shiba-inu equilibrium. Yes, it has.

But Jack, what's the takeaway for all our buddies over at Chewing? It's actually reached a schnauzer surplus. Yes, it has. So now, Jack, what's the takeaway for our buddies over at Chewing? Nothing saves a narrative like a hero stat. Yet, it's a funny thing. Jack and I actually withheld one crucial data point. Chewy sales only rose 3% last quarter. That's not much. And yet the stock surged by 30% on the news. That's a lot.

And it's all because of that. pet return ratio that we happened to mention early. Here's the wild part. That wasn't even Chewy's data. No, it wasn't. The CEO referred to data that they collected from pet shelters across the country. So what Jack and I are saying here is that the stock of Chewy had its best day ever, but not because of Chewy's performance,

but because of external data from something that had nothing to do with Chewy. Which Chewy CEO highlighted over and over in the earnings call with investors. So that was what was so interesting. Investors saw that shelter data as a signal. leading indicator for future Chewy sales. A positive leading indicator that future sales will be strong. Because HeroStats are a man's best friend, even if they're not from your own company. For our second story, ACHLO is a brand new publicly traded company that does one thing and one

thing only. They build tiny nuclear power plants for tech companies. Because AI will make the internet 10 times more energy intensive. So, Jack, how about we kick off this podcast with two wild related statistics that just kind of work? Okay, first, according to the Electric Power Research Institute, it requires 10 times more electricity to compute an AI query than to compute a normal Google search. Jack, we get a translation on that stat. Using AI is 10 times more energy intensive than using regular online search. All right, yeah, for example, if you Google how to make a pineapple smoothie, it's going to use sun. energy. But if you ask chat cheap tea how to make a pineapple smoothie, it's going to use 10 times more

energy. And it's not a 10 times better smoothie. It's just 10 times more energy in telling you how to make that smoothie, right, Jack? All right, here's the second wild statistic that is related. The International Energy Agency predicts that by 2026, just two years away, AI will use the same amount of electricity globally as Japan. AI will use the same amount of electricity as Japan. Hey, Bitcoin, Hold my beer. Japan's like the fourth largest economy in the world. AI is going to be equivalent to that in energy use. Fasties, what Jack and I are saying is that AI doesn't breathe air like us.

AI breathes electricity and it breathes a lot of it. So, if you're a tech company that pledged to become carbon neutral, this is a huge bummer. Oh, this is a huge bummer, Jack. For example, what about our buddies over at Microsoft, man? Microsoft pledged in 2020 that they would be carbon net. by the year 2030. Oh, but funny thing, Yeties, because of Microsoft's huge AI push,

they've actually gone in the opposite direction of that pledge. Instead of reducing their carbon footprint towards their goal, Microsoft has increased their carbon footprint by 30% since 2020. And it's all because of AI data centers and you asking chat GPT about how to make that pineapple smoothie. But all of that leads to the news

that Nick and I are really excited about. Here's the news. Earlier this month, Auclo went public on the stock market at a $1 billion valuation. And check, who exactly is Acklo? Acklo is a startup based in California that has one goal. Give tech companies the best of both worlds. They give the tech companies the energy that they need for AI, but with a carbon-free energy source.

And how do they do it? Nukes. Yeah. Mini-nukes. Tiny nukes. Like tiny mini-nukes. In Spanish, they call it a nukeita. But yet he's here's what Jack and I found fascinating about this company, making many nuclear

reactors for tech companies. Acklo designs their nuclear power plants to look like some kind of a Swedish ski chalet that you want to spend a weekend at. Yeti's Acklo is the only nuclear power plant we've ever seen that was featured in architectural digest, literally. They're beautiful. The buildings are massive A-frames with modern interiors, and they're splitting the atom in there. It's like the Frank Lloyd Wright of nuclear reactors,

Here's the insight. If tech companies want to show off their beautiful mini nukes, then other tech companies will get jealous and want one for their own tech campus. They've made the nuclear architecture part of the marketing strategy. Oh, and by the way, guess who happens to be behind ACHLO's beautiful, tiny nuclear power for artificial intelligence? You know the answer. Yeah, you do. Sam Altman. He's one of the big investors. He's the chairman of the board. So, Jack, what's the takeaway for our nuclear buddies over at Auclo? The surprise side effect of the AI revolution is a nuclear revolution. Yeties, for 40 years, the world built nuclear power plants on the excitement for nuclear.

But for 40 years after that, the world stopped building nuclear on the fear of nuclear. We had three-mile island, Chernobyl, Fukushima, these were huge nuclear bombers. But today, the urgency of climate change, plus the profit motive of pursuing AI, is pushing investors to embrace nuclear again. After all, nuclear is the biggest, most reliable source of carbon-free energy that human beings have ever invented. And the more we demand artificial intelligence, the more we need nuclear. The surprise side effect of the AI revolution is a nuclear revolution. Now a quick word from our sponsor. For our third and final story before the weekend, Yeties, last week, Jack and I told you about the red lobster bankruptcy.

But new information demands that we cover this. story again. So this is the Red Lobster Bankruptcy Part 2. The Seafood Seafood. The Seafood Sequel. Because finance killed the fish. Yeties. The Red Lobster saga has gotten so bad, so bad, that the outgoing CEO says he's never going to eat lobster again. This is a real quote from the Red Lobster CEO. Other people stop eating beef. I will stop eating lobster. Yeties. Last week, we told you that Red Lobster had filed for bankruptcy, and we blamed the endless shrimp deal. Yeah, because last year, Red Lobster offered an all-you-can-eat-all-you-can-eat-chimp deal for 1999, and Jack, what were the financial results of that deal?

That price was way too low. It was way too good a deal. Way too many people said yes to that deal, and it resulted in an $11 million loss for the Red Lobster. An $11 million loss. It was a shrimp catastrophe. Jack, did you hear the record number of shrimp eating by one man for free at a Red Lobster? Oh, like, he got his picture up on the wall for eating the most fish.

800 shrimp consumed by one man in one meal for $8.99. That will brank your business model. I hope they weren't jumbo shrimp. That bad business decision pushed the company to bankruptcy. But here's the fascinating thing, Yetis. It turns out those shrimp were just the final straw that broke the lobsters back. There was a much more fundamental issue with red lobster, and it wasn't seafood. It was land.

Yes, it was. And a bunch of Yetis DM'd us about this? We jumped in T-boy style, and this gets wild. It turns out a sneaky private equity real estate scheme set Red Lobster up to fail. Yes, it did. Jack, let's travel back in time 10 years ago to 2014. What is going on with Red Lobster? A private equity firm, a P.E. firm called Golden Gate Capital, acquired the Red Lobster from Darden, which owns the Olive Garden, for $2.1 billion.

And to immediately raise cash for that deal, that private equity firm sold the land underneath every single Red Lobster location. They raised $1.5 billion by selling off like 700 parcels of land where red lobsters were, immediately turning a huge cash gain to that PE firm. So they acquired the lobster for $2 billion, and then they immediately brought in $1.5 billion by selling all the land. Like most private equity deals, Golden Gate Capital took on $2 billion in debt to acquire Red Lobster

and then quickly made $1.5 billion with a snap of a finger. But Yeties, here's the shocker about that real estate deal. The restaurants didn't own the land anymore, so they needed to start paying rent. And the new landlords of Red Lobster were renting back the land to those restaurants at an above market price. So Red Lobster went from owning to renting, all 700 locations, and they had to pay more rent than their neighbors did. The rent was too darn high. And it's not like they could move the restaurant to another piece of land. Like the building has the Red Lobster on it and all the shrimp cooking machines.

Beyonce may not come back to that Red Lobster. that Red Lobster gets moved to another location. They had no choice but to pay the higher rent from the new landlord because of the P.E. deal. And then six years later, Golden Gate Capital packaged up Red Lobster into a little takeout box and sold it to a Thai fish company. It's a classic catch-and-release deal

that left Red Lobster with a ton of debt and no land. Yeties, this wasn't a little mermaid deal. This was an Ursula deal. Endless shrimp killed Red Lobster, but this private equity real estate deal put it in critical condition. Finance, killed the fish. So Jack, what's the takeaway for our shellfish buddies over at Red Lobster?

P.E. isn't inherently good or bad. It depends how it's used. Now, yaddies, private equity firms, they're focused on one thing and one thing only. They're focused on turning a profit. Sometimes their profit benefits a lot of people. Other times, their profit benefits just themselves. So, Jack, how about we whip up a good example of a private equity firm that did good for all their stakeholders? Canada Goose, the luxury jacket company. Yeah, Canada Goose Yeties. They were a company wasting away up in Canada, and they just weren't selling enough jackets. They weren't going anywhere. But a PE firm acquired Canada Goose, fixed up the company, expanded its manufacturing, marketed the hell out of those jackets, and then eventually, I peeled

the company onto the public stock markets at a profit for themselves. Boom, every mom on the Upper East side is wearing Canada Goose and employees, customers, investors, they all bedded it from private equities takeover of that brand. So that's an example of PE being used for a good profit. On the other hand, you get private equity with Red Lobster. A bad private equity deal. Yeah, private equity firms stripped the company and most of their valuable assets, the land, and left them with tons of debt. Private equity profited while the company eventually went under. So Yeti's added all up and a good private equity firm buys a company, fixes it up, and eventually sells it for a higher price to the benefit of most. But a bad private equity firm,

profits themselves while leaving the public with a whole bunch of losses to deal with. Not a little mermaid deal. Sometimes it's an Ursula deal. Jack, can you whip up the takeaways for us for the Real Friday? Chewy stock had its best day ever on news that more families are adopting pets than returning them. It's the pet return ratio because one hero stat can change the narrative. For our second story, Aklow makes small nuclear power facilities and then sells carbon-free electricity to tech coverage. Because the surprise side effect of the AI revolution is a nuclear revolution.

And our third and final story, Red Lobster's endless shrimp deal killed it, but its previous PE owner left it in critical condition. Private equity. It isn't inherently good or bad. It depends on how you use it. But Yeties, this pod's not over yet. Here's what else you need to know today. First, former President Donald Trump was convicted yesterday of all 34 criminal counts of falsifying business records related to hush money payments to a porn star. It's the first criminal conviction

of a sitting or past president in American history. Now, with some context, if even one juror had voted not guilty, he would not have been convicted. All 12 members of the jury decided that Donald Trump was guilty of all 34 charges against him. And second, Google confirmed yesterday

that 2,500 pages of documents were leaked from the company onto the web. What documents? documents that contained the secrets to Google's search algorithm. Oh, Basis, if you wondered how Google decides what websites show up and you're at Google search like for that pineapple smoothie recipe, a leak just told us how. This is incredibly valuable information to anyone who works in the SEO industry.

Google does not want you Googling it. And finally, Sony is in talks to buy Queens' entire song catalog for $1 billion. One billion dollars for a Bohemian Rhapsody, underpity, under pressure, and bicycle. Bicycle. Sony already acquired the libraries of Michael Jackson and Bob Dylan's songs, but Queen's $1 billion is more than both of those combined.

Now, time for the best fact yet. This one whipped up by Jack and me after watching the National Spelling Bee. We told you that the toughest word in this year's spelling bee was also a very short word. Yeah, it was a four-letter word. Oral, it's the word that crushed the contestants out there, O-R-L-E.

So what is the definition of oral anyway? Well, Jack, oral is actually a particular section of a shield. It's basically the edge of a shield, like the border of the shield that's kind of decorated a little bit. If you're looking like a coat of arms or like a shield on Game of Thrones, the edge of that seal, that is an oral. Circles have perimeters. Shields have orals.

Just like we said, that knight in shining armor has a beautiful oral. He has no personality, but boy, have you seen his oral? Yeah, it is, you look fantastic today. Have a fantastic weekend, celebrate the wins. And remember, if you want to check out our list of Destination Dupes, subscribe to our Saturday newsletter right now. The links in the episode description, or just go to t-boypod.com slash newsletter.

And if you're hanging with some buddies this weekend, maybe with an adopted doggy, remember to share the pod with them, H-Y-H-T-B-O-I. Have you had the best one yet? That's how we grow the show, celebrate the wins, and Jack and I will see you Monday. And before we go, congratulations to Carrie and Jack Seuss from Commonwealth, Connecticut. They've got a new baby, Jack the third, has entered the world.

Jack the third. I like the ring of it. And Sarah Leung in Medford, Massachusetts, has got a 10-year work anniversary celebrating with a vacation far outside Boston. Happy anniversary to Juan and Melinda Lee of Santa Cruz, California. They met when they were roommates during COVID, and the rest is history. And Jack, I met them at the Fort Mason Art Show in San Francisco, a couple of lovely eddies.

We had a great conversation. Love those two. You and I met when we were roommates, and the rest was history as well. Except our future. That's true. That's true. We had a big future. And Lauren, Caroline, and Celia and Merritt in Williamstown, Massachusetts are graduating from

Williams College, where they are on the women's volleyball team with two consultants. consecutive NCAA tournament firsts, not too shabby. Congratulations to Anika and a Wise Roy of Sacramento, California, who are celebrating a wedding anniversary and the launching of a new coaching business. And Jack Ashley down in Houston, Texas is having a baby. Congratulations, Ashley. Congratulations to Lillianna Vujic of Chicago, Illinois, who just got into DePaul University.

Oh, our dad is going to miss listening to T-boy with her every day on the way to high school, Jack. Congratulations to Austin Bell Hensley, who just got a PhD in biomedical engineering and is moving to Durham, North Carolina. And Ayushishish Mishra and Jayashi Miglani in Toronto, Canada, have a one-month wedding anniversary. Congrats on the first month, guys. And a huge shout-out to Adrian, Ivan, Diego, and Daniela, who are headed out to an epic family vacation over at Disneyland. Jack, they're driving from Texas to California for 16 hours. It is a long ride, but it is worth. It's worth it.

I think it's more than 16 actually. It's 70 million. And a happy birthday to Alex Jossendal in Rockford, Illinois at the Cubs game celebrating with a foul ball. And happy birthday to Archite Sanjay Guy Quad of Valencia, California. And finally, a personal one for me. Katrina Goldberg, thank you for consuming an entire strawberry stem and fruit in your yogurt this morning.

That is how you get your breakfast greens. She ate the whole thing in one bite, right? one bite, right? It's fruits and vegetables in one bite. It's financially responsible. It's sustainable. It saves your time. And Dagnapp at Jack, it's just the right thing to do. And to anyone else, celebrating something today, making a tea boy. Eat the whole strawberry. This is Jack. Nick and I both own ETFs of the S&P 500.