The Best One Yet - SmileDirectClub’s great pre-IPO (but bad IPO), Under Armour goes anti-athleisure, and General Electric is selling itself to survive

Episode Date: September 13, 2019

SmileDirectClub (uncreative ticker symbol, FYI) falls 28% on its IPO day, but we look at whether it was really a bad IPO when you look at the valuation. Under Armour is going anti-athleisure with its new strategy, but it’s actually copying Lululemon. And General Electric is selling $38B of itself to survive, which highlights its greatest disadvantage: Pensions.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. This is Snacks Daily. It is Friday, September 13th. Where are you feeling right? Nick, is that Sean Brad? Exactly. Is it is? I haven't worn a reason.

You look really sharp. It shines a bit, but I feel like I don't let the shirt wear the shirt. I wear the shirt. Yeah, you got to wear the shirt. Now, Snackers, markets have risen seven days in a row. Good timing, because this is the best snacks daily. We have ever done. It's the best one yet.

First company we're covering, Smile Direct Club. It just IPO. Shares fell 28%. But we're looking at whether this IPO was actually a success, despite the 28% drop. Unless you bought yesterday, in which case, we feel you it wasn't a success. Yeah, that's tough. Second story.

General Electric is selling itself. This is hard to watch. They're like, hey, take my arm. 100 bucks? Can I get you this arm? $200 for my arm. It is actually selling $38 billion of its own toys, and we're looking at its biggest disadvantage. Pension problems.

First time we've covered pensions on this pot. That's very true. Third and final story is Under Armour. It's going anti-Lulu Lemon by publicly saying it hates Applesiore. I basically noticed that this strategy is actually very Lulu Lemon. It's anti-and-pro-Lulul-Lu-Lum. Classic Lul-Lum. Can we talk about some, like, high level of innovation we're seeing right now?

We're not talking NASA, we're not talking going to the moon 50th anniversary. We're talking classic video game-style living room innovation. Take us back to our youth, Mario Luigi, what we got up here right now. Snackers, you've heard of Nintendo Switch. That is the cool, like, Game Boy meets Super Nintendo system. You may even remember Nintendo Wii, which was like the pretty cool moving thing that may just sweat a bit back in 2008. So, Nintendo just unveiled this new thing called RingFit Adventure.

Here's the thing. There's no joystick. You take two halves of the little Nintendo Switch handheld console thing. Pictureing it. And you attach it to workout equipment that you strapped to your body and you play the video game while you work out. Not only do you have this strapped to your leg, Jack's motioning at his thighs right now, which are huge at the point. You're going to get schvitzed by steering and squeezing the steering wheel. They literally, this game, it's focused.

on a steering wheel like object, that kind of like flexes as you bend it. Yeah, you squeeze it really hard. You push it together and you strap another sensor to your leg, so you're literally doing high knees. This is like a Pelton bike meets a Tesla steering wheel situation. Now, the first game coming out is this dragon game. I think it's just called Dragon Game. Yeah, not very creative.

They kind of just went with the first thing they thought of. But you're literally chasing this dragon down and trying to like ring its neck with the ring in your hands. Snackers, if you want sign to talk about today, it is this random Nintendo game with a funky steering wheel that apparently wants to make you sweat. Here 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. Nope. 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 Fenra slash SIPC. For our first story, Jack, do I have a little something in my tea stuff?

That green stuff. One incisor kills me. Smile Direct Club. It just IPOed on NASDAQ. Yes, the shares dropped by 28% on day one. Huge missed opportunity here. The ticker symbol for Smile Direct Club. Can you guess it?

It's SDC. It's S-D-C. Smile Direct Club. Are you kidding us, Smile Direct Club? If we were in charge of this listing. Finally. You want to throw out an idea? How about this as a ticker symbol?

C-H-E-W. Chew. How about Grin? How about Smile, S-M-Y-L? What else you got? I want you to hit this one. Cute. Cute.

Cuts gets. After you smile direct club, you look cute. Do we have any more here? The last one's my favorite. DMPL. Jack, it gets me every time. Dimple. Not exactly related to braces for closing up.

Now, Smile Direct Club is shockingly based in Nashville, Tennessee, not Silicon Valley. By the way, my wife, best dimples east of the Mississippi. By the way, if you're on a bachelorette party in Nashville, like, nine-tenths of our snacks listeners, check out Smile Direct Club. Company H-Q, get your teeth straightened. Boom, forget about doing, like, the song and dance thing down at the bars. No, everybody takes the picture in front of like the, this is Nashville graffiti on the wall. Everyone could instead just go get their teeth riding up like the original

Smile Direct Club. Let's talk about Smile Direct Club. Let's please do that. It's mission statement. Democratize access to a smile you'll love. Implied mission statement. We have a lot of beautiful people in our commercials and on our website. Oh my God. Everybody's got like the best glutes, a six pack. They claim they just fixed the smile, but it looks like they're doing a lot more work over there. Bys and tries. Now in terms of the pricing, if you're usually going to get braces, that's going to cost you like at least $5,000 and be like a two-year commitment. Right. But was Smile Direct Club, if you do it through them, they'll send you these braces that you can update like every month. And it only costs $1.8,000 and it gets done in a year. So about a third of the

price and half the time. So you're wondering how they do this. It's because they have an innovative business model and Jack and I are very curious about how it's offline and online. Let's talk about the online part. That's the key part. And that's the element that helps them keep the cost low. So Smile Direct Club is partly like Hymns. Hymns is the direct-to-consumer online-based hair loss and erectile dysfunction telemedicine company. Right. So the way they interact with you is they do all the consultations online with a doctor who's

remote. Right. They'll even send you this like chomp kit. You bite into this impression thing and then it sends just like a statue or something. You send it back to Nashville and they'll send you the right person. So the orthodontist in this case is someone remote. You're not going to like meet up at some random place in your neighborhood

every two weeks. Okay. So remote. The second part. It's part Casper mattress. Part offline here. And there's the creative thing. They call them the smile shops. They've got 300 of them. Yes, there's 300. There's probably one in Nashville, probably like six in New York City if I had to guess. And you can actually go in here and get moldings done, but also have consultations. So if you're not totally comfortable with like the online model, you can take advantage of this. You also have a beautiful like purple store that you can take the before picture. Exactly. You know you're doing the before and after.

Who wouldn't do that? So Jack, what is the takeaway for our buddies over at Smile Direct? By the way, my teeth are all natural. Full disclosure here. No braces. Yeah, I can't say the same for my Now, yesterday was a failure for SDC stock, but the IPO overall was a huge success. And there are two types of investors you have to think about here. The original and existing investors who've been around forever. We're talking like the venture capitalists here. And then the new ones who just bought stock this week. They were treated differently with this IPO.

The existing shareholders, they've been wanting the valuation to grow. And on August 20th, when we first covered Smile Direct Club on snacks, the valuation was $3.2 billion. Fast forward like a month from then. And then on Wednesday, the IPO priced before it started trading. at a $9 billion valuation. So the real IPO happened over those three weeks between August 20th and September 11th. And that's when the road show happened. Investors were excited, they were thrilled to get their hands on Smileydorat Club stock. Hot ticket. So the price by the time it finally IPOed yesterday was super high, probably a little too high. The stock dropped 28%. So if you were

an investor yesterday, it's tough. IPO days are incredibly volatile. Stocks go up and down. You want to stay for the long term. But for investors who've had the stock for well, Before the IPO, it's a different story. For our second story, General Electric G, it's old and it has a huge disadvantage. And it's selling $38 billion of itself. Now, this company is a fraction of its former self. Remember in high school and your buddy would like do knolls and then come back with a beard and like 30 abs? Yeah, and you have to like turn them sideways to see them.

Where'd you go? You're like, I left it on the whitewater rafting trip. What Nick's getting at here is that GE stock is down 72% in just a couple years. It's a fraction of its former self. But it's still a very big deal. I haven't bought a GE product in like decades. I think I got a microwave going on, maybe. But if you are a gigantic company or if you are a country, you buy GE stuff.

And can we just lay out these numbers here? Because this is wild. People sit down for this. Exhibit A. Talk to me. 70,000 aircraft engines. Get this. Two-thirds of all planes that take off, including Snackers listening on planes right now.

Those engines were made by GE. Two-thirds. Yep. Exhibit B. 7,000 gas turbines. I'm picturing Jack like moving a physical cardboard block. Exhibit B over here. Oh, someone watched Chernobyl.

Exactly. The 7,000 gas turbines are spinning around making wicked electricity. Don't really know what they do. 90% of the world's transmission utilities are powered by GE gas. Emphasis there on world. We're not talking like New England over there. This isn't the upper New England market. We're not talking to upper east side of turbines.

Planet Earth. Exactly. GE still a big deal. So why are we talking about GE? Because it announced yesterday that the stuff is. it's selling will raise a cool $38 billion for the company. It's downsizing. Yeah, basically. It sold its transportation unit, which had a bunch of trains and locomotive for $21 billion. It's sold its oil field services, which makes like... Baker Hughes. Baker Hughes. For almost $3 billion. It's like an apparent

dropping its kids off for college and it's never going to see them again. So it's selling 38 billion worth of stuff overall the CE announced yesterday. And that's not only a big number. It's an even bigger number when you realize how much value GE is actually worth. If you take all of GE stock and put it in a bucket, And see how much that's worth. Doing it right now. AKA the market capitalization, it's 80 billion. So it's selling $38 billion, almost half of itself. And sadly, it's going to use this cash that it's going to raise not to, like, grow the business.

Not to build a factory. It's going to use it to pay back some debt. Not to invent something. It has $105 billion in debts. For those of you keeping track, it has more debt than it's worth, aka it has negative net worth. Positive note here, because we should mention this. It's raised its profit expectations in July for the first time in, like, year. Okay, there you go, G.

It's darkest before the dawn. So, Jack, love the dark night quote. What is the takeaway for our buddies over at G.E.? If you want to see how old GE is, look at its pension program. David Adabro is like, cut the tring and count the rings. You could look at G.E.'s pension. Pension, definition. A regular payment made during a person's retirement that comes from your old employer.

As an older company, GE's got a lot of these for its a lot of retired employees. Must be nice, GE retires. GE pays $1 billion per year. a year as a pensioned. And it owes to all of the former GEers who are still alive, it owes $27 billion worth of future pension payments. Including my lovely Grandma Martel, whose husband, my grandfather, worked at the lovely Schenectady factory making turbines. Skenectady, New York. Beautiful, the city that lights and powers the world. Now, that's, those payments, it's like student debt. You got to pay every month. It drags you down, takes a little bit of your income. And that's a big

difference between GE and younger companies. Younger companies can reinvest their profits in growth. GE has to pay back pensions. Nana's pensions. For our third and final story, Under Armour just turned down athleisure. It's going in the opposite direction. Hey, Jack, you know that huge trend that keeps growing? It's like totally aligned with other trends.

The one that's making fortunes? The one that's definitely not a fat. Yeah. Let's not do that. That's what Under Armour's doing. Basically, they're taking that much. Quick context. Underarmor's like Tiger Woods of retail.

Yep. Used to be legendary. Like where you're going with this. Stock price rose like crazy. I'm with you. had a brutal downfall. Love what you did with this. But won another major.

And he finishes the analogy. Now, this company has lost its way. In the last five years, the stock has lost literally about half its value. But its stock is up recently 16% on hopes of a Tiger Woods-esque rebound. Okay. So before we snack on this and get into Under Armour's new strategy, let's look at the apparel spectrum here. Man, I wish we had a wipe.

On one end, way out there, you got leisure. On our left hand. People are chilling. We're talking like vans and spary shoes. Now, on the opposite end, you got high-end performance gear. We're talking technical stuff, like sweat-wicking, hate sweat, anti-sweet. We're talking like Lance Armstrong. We're talking the buddy who does the 40-R draft and strips down to just compression shots.

And then the shorts see the sweat, they beat it up and don't let it come back again. Now, in the middle is this nice sweet spot. You got Athleisure. You can go to yoga. You can go to brunch. You can get brunch afterwards. Talk to your friends. You can have a smoothie.

Not intimidating. If you sweat, it's not that big a deal. You may be wearing it right now. So, Athleisure is the booming, booming trend that, was talking about that we don't think is a fat. It's an $83 billion industry, and you're even seeing it in the workplace because workplaces like Goldman announced a couple months ago, they're making things a little more casual in a sign of ath leisure. True. And athletic companies are making a tire that actually looks like it could go in the office. So when we've looked at Under Armour,

we've been saying for a while, it's a little too much ath and not enough leisure. Exactly. And apparently they heard us and decided to double down on what they're doing. The CEO, Kevin Plank of Baltimore fame, said yesterday, we are all performance. And then the C-O-O Patrick Frist came in and said, We are becoming a louder brand. So they're going full-on-meet. We want to be extreme to the extreme nearness. They're going after what Nick and Jack used to be.

The old versions of ourselves in college who played lacrosse and football, they could beat up the current versions of ourselves. Yeah, we tried to be as huge as possible in the gym. You wear two Under Armour shirts so you'd sweat a little more, and then a whisk would more sweat away. And now we're looking for all-natural organic osanibals. Well, Under Armour is saying, hey, we want more of that. We don't care with the trend.

They're going for the hardcore performance. So they're anti-Lulu Lemon. So Jack, what is the takeaway for our buddies over at Under Armour? Nick, the strategy feels very anti-Lul-Lum. But part of it is very pro-Lul-Lum. Exactly. Lul-Lum's success wasn't just that it was an athleisure brand. It's a premium brand. It's a premium brand. One thing about Lulu Lemon, it's very hard to find their clothing on sale. Right, it's just like the iPhone. You're only seeing it really at its premium state. You're only paying full price. Now, Underarmie, underhand, it has suffered from cheapening its brand with discounts, a whole lot of discounts. Can I go back to the Exhibit A and Exhibit B situation?

Can you? Please, I'm going to get your cardboard board up over here. Exhibit A, 90% of its locations are outlet stores. Even at Dick's sporting goods, it's selling for 40% off. So another part of its strategy it announced yesterday, it is copying Lulu Lemon a little bit. It's copying Lulu Lemon by doubling its physical locations to 2,500 stores by 2020. Not just any locations. No. Definitely not outlet locations.

No. We're talking full-price stores with no size. that say like blank percent off. It wants to maintain its premium brand just like Lulu Lemon does for the anti-Namastay crowd. This is Nick and both Jack and I own shares of Lulu Lemon.

Jack, can you whip up the takeaways for us over that? Smile Direct Club, ticker symbol, dimple, stock fell 28% on its volatile IPO. But its valuation is almost tripled since its last private fundraising round. General Electric, it's old and it's selling parts of itself

to pay down its debt. And it's slowed down by pension problems. Under Armour announced its anti-athlete mission. It wants to be a louder brand for performance athletes. Trying to be anti-Lululemon, but it's kind of pulling a Lulu Lemon premium move. Snacks. Before we do this snack fact, little shout out to a great snacker, Daniel Byrd. This guy was listening to yesterday's pod, ran out of gas on the road, but finish the pod before calling for help. Incredible, Daniel. We love you for that. Now, our actual snack fact here, let's talk about

Walmart's streaming network. Walmart has a streaming network, first of all. It's called Voodoo. Sounds like Hulu, maybe even Roku. And it has a family plan feature that. We'll let you watch dirty movies, but it'll just skip through the sex scenes. So we're thinking, like, Game of Thrones Season 1 here? You're not seeing anything. Not much to watch that. Titanic? Interesting.

Mommy, he was drawing a picture of what? What was got? Nothing. Boom, end of movie. Snackers, we love being with you this week. We're going to miss you over the weekend over here. Share snacks with a friend. Tell somebody about the pop.

You're going to be at a barbecue. You're going to be doing something. It's still kind of summer vibes out there. Get them to subscribe and we'll love you for it. We'll grow the Snackers. Can't wait to catch you guys Monday. 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.