The Best One Yet - “The most unprofitable company on Earth” — Softbank’s garage sale. Peet’s $2.2B re-IPO. Detroit’s Big 3 return.

Episode Date: May 19, 2020

Even though IPOs are basically not happening, Peet’s Coffee is about to do one because… coffee — they think it’s recession-proof. Startup-obsessed Softbank is the least profitable company in the world right now (cough, WeWork/Uber, cough), so it’s having a tech garage sale. And Detroit’s Big 3 carmakers have re-opened factories, so we’re looking at why that’s the most milestone-y moment of the corona-conomy (FYI, 3M Americans work in auto).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 Tuesday, May 19. Great day for markets yesterday. The Dow rose by a thousand points on news that a company might have a COVID-19 vaccine. We're talking four digits here. Haven't seen those kind of numbers since, uh, hands across America? Hands across America. Also, a positive COVID-19 vaccine trial. In other words, Vinnie's doing the movie. Not doing the movie. We're doing the movie now. There's probably going to be news tomorrow that the vaccine trial wasn't as good or there was some caveat we forgot. to pay attention to. In the meantime, we decided to make this snacks daily our best snacks. This is the best one yet. But first, coffee. We like our coffee like. We like our stocks. No bubbles. The biggest IPO of 2020 could be Pete's, the Berkeley, California-based coffee company. Snackers, the best milk to go with your coffee? Recession milk. Recession proof recession milk.

For a second story. SoftBank has invested $81 billion into 88 startups and lost $800 million. Sounds like a band, SoftBank and the hateful aides. We're talking SoftBank, the biggest and most unprofitable venture capital fund in the whole wide world. Now it's selling tech companies in San Mateo like it's having a garage sale. Our third story is brought to you by iron, steel, and rubber. We're talking Detroit's big three, their back baby. The trio of America's largest car companies reopened factories yesterday.

Can we please just start calling him a tricep? Yes, there's three big muscles. We're looking at why that's particularly milestone. for the U.S. economy. Snackers, every day on this podcast is the best one yet, which is why we like celebrating T-B-O-Y-T-T-A-K-A-K-A-T-B-O-Y Tuesday, A-K-K-Boy-T-A-T-B-T-A-T-Boy-T-T-A. T-Boy Tuesdays, and Jack and I know it's a little theme going on with the American economy. More. More is the cardinal value of American capitalism. We're talking more revenue, more profit. More products, more services. More size, more power. More bells, more bells.

To be honest, though, Nick and I have noticed that some companies, you just need to do a little less. You got to do less. Do less. Take Amazon Alexa, for instance. I just heard an ad they're trying to get Alexa to do my taxes. 90% of Alexa users, we just want to have the weather and some music. Taco Bell, they're like, try sticking our chalupas and caseo-wrapped gorditas. What? They're triple wrap into gorditas when all we need is some beef, some cheese, some salsa, and a simple shell. That's all we asked for. Any combination of beef, cheese, salsa, and a shell, that's all we want to talk about. The latest thing, Jack and I noticed, a Wi-Fi-connected Fabrize Air freshener that connects to the app on your phone. Give me a break. It's an air freshener. The next thing we're expecting to see is a smart paperweight.

The worst offender, though, of a company trying to do more is all those cars with those ridiculously complex infotainment system. We're talking like they got 42 knobs on your Volkswagen just to adjust the other knobs. There was something about mid-2000s luxury vehicles. The more buttons in there, the more it was perceived to be like high end. Lexus whipped up something. They didn't even, they'd probably call it like the Adventure Series technology navigation CS-4500. And you know the cars with their nav systems, they all stink. You just want to connect your iPhone.

It's a way better experience. Do less car companies. Just create a great phone dock done. That's all we need a phone doc. Our T-Boy Tuesday question of the day. What products should just be doing less? Snackers, who should be doing less? Tweet us at Robin and Snacks with your best idea.

T-Boy Tuesday, hashtag do less. That's at Robin Hood Snacks. Let's hit our three stories. You're tuned in to 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 is air candy.

They don't reflect the views of the Robberhood family. It's all informational just so. 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. Robahood Financial.

LLC, member Fenbara slash SIPC. For our first story, Jack, almond, soy, wrote, I'm a dairy guy half and half unless we ran out, in which case I take whatever alternative my wife has. I was going to say trick question. You just end up going to decath. Which brings us to our first story, Pete's coffee, which is a company that's going to IPO for an expected $2.2 billion.

This could be the biggest IPO, not just of coffee companies. Oh, yeah. Of any company in 2020. That's right, Snackers. We just said three letters. that we have not seen together in a while. I, P, and O. Last year, we were reading S-1 documents, which is what every company must do to IPO, like every single week. That's when initial public offerings were a thing. Your aunt was like ringing the bell in the New York Stock Exchange

launched that company. This year, though, IPOs are a treat. I think it's like the second one we've covered in 2020. We're talking a rare and elusive beast. Like, what's your favorite leopard jack? The Himalayan Snow Leopard. It's incredible, beautiful. Never actually seen one. Like a 2020 IPO. Pete's, meanwhile, is the charming coffee chain that, was founded in 1966 by a Dutch immigrant named Alfred Pete in Berkeley, California. I checked out a Pete's on Chestnut Street in San Francisco once. I was there for an hour. Felt I needed a bray just to fit in.

If you're going to write the next American novel, you go to Pete's and you stay there for 14 hours a day and three years. Nick was just bragging to me that they got something better than Arabica beans that you're finding at Starbucks. It's called the old solo Assisi Colosa Bean, and you go with the 50-50 blend. And if you have to ask how expensive it is, you can't afford it. They have these cute retail shops with their 90s font putting Pets right up on the top.

But the key to Pets is their 15,000 grocery stores that sell Pete's coffee. That's right. Pete's differentiator is that 80% of their sales come from at home consumption, buying their beans at a grocery store. Exactly. You could pay four bucks at a coffee shop for Pete's coffee, or for $10 by an entire pound bag, ground, or hole. The other interesting thing about Pets is that it used to be a publicly traded company, but then a few years ago, a German holding company obsessed with coffee, decided to swoop up and buy it. And that company is called JAB, which has a thing for coffee.

It's kind of insane. They're a little obnoxious about it. And they've been buying up chains over the last decade. JAB owns all the big chains. Crispy Cream, Curie Green Mountain, Panera bread, Pret-Amage, Einstein bagels. Meanwhile, they also happen to own all the like Williamsburg artisan spots that have like labs in the coffee shop instead of just coffee making going on. Stumptown is like Willy Wonka, but for obnoxious coffee. And then Intelligentee is a place. you go where you buy the coffee, then you go, kind of nutty, complex and nutty. So Jab has like 15 different coffee companies that's acquired over the past five years,

but its era of buying companies seems to be over. Now they want to sell them like Pete's for a profit. So that's why we noticed yesterday that JAB is creating its own blend of stock. Pete's will be one of the first stocks we've ever seen that is a 100% coffee stock. And that's because JAB is mixing the Pete's company that it owns with a bunch of other random European coffee brands that it also owns. If you've studied abroad, you've probably heard of Jacobs, Sensio, Tasimo, or Makon. And if you haven't studied abroad, you'd definitely have a friend who's told you it's definitely a better espresso on Makana.

Oh, by the way, I definitely mispronounced at least three of those brand names. And by the way, the sales for this expected new Pete's inspired company is going to be $7.5 billion a year. I'm hoping their ticker symbol is going to be DCAF, ironically, decaf. So Jack, what's the takeaway for our buddies over at Pete's? Why is Pete's going for an IPO right now? Because they think their core product is COVID-proof. Snackers, this is just like Vroom last week, which thought online used car sales were perfect in this moment.

So is coffee. Both companies are trying to IPO. People talk about consumer staples like food and beverages. Those are selling well during COVID-19. Because you need them to survive. But coffee is like the stapliest of the consumer staples. So when there's an economic recession, and people don't drink less coffee.

No, snackers, get this, they don't drink less, they just drink cheaper coffee. And entering a recession like we are right now, Piz, a stock 100% focused on coffee. Not coffee shops like Starbucks and Duncan. We're talking just coffee beans. Pete's coffee bean stock could be unique. For our second story,

the Detroit big three automakers, talking the triceps, just reopened for business. By the way, Tesla is the number four American car maker, but it's not in Detroit. It was found at 100, years after the big three. And ironically, it's worth a lot more than big three. This is more like a four pack of abs for the American economy. Yes, it is. Now, this is a big milestone for the reopening of the American economy. Snackers, we're talking 133,000 Americans are working at Ford,

GM, and Chrysler heading back to the plants yesterday. Now, the normal speed limit at these plants is 65 cruising. The plants, though, they're only going 30. A little more relaxed. We're like a driver's ed situation. And in a month, if things improve, they'll double the speed, double the employment to hit full capacity at these plants. And Snackers, if you've been listening to this pod for the last couple months, then you know they may be doing it. They are doing it the Learway. Everyone's wearing masks. There's one-way traffic only in the hallways. And even their break tables where you got like your 15-minute break every four hours, they're divided by plexiglass. Feels like, you know, a casual prison conjugal visit. Now, early data from China show that people are

buying cars again now that COVID-19 has like come under control there. We hope it's the same here. But if there is a spiking COVID infections at these factories, they could just shut down all the way like every pork producer right now. Okay, so the stakes are high. The plants could get shut down again in like a week. So they're focusing on their profit puppies, the trucks and the SUVs. Which means Jack and I whipped out some abacuses and did some back of the abacus math over here on some whiteboards. We're going to compare two great and totally opposite American profit puppies. Trucks and iPhones. We'll kick it off with iPhones. Every iPhone sold makes about $500 in profit for Apple. Every pickup in SUV sold makes about $5,000 in profit for the carmakers.

All right, so that's the money. Now let's look at the quantity. Americans buy about 70 million iPhones every year. They're also buying about 11 million pickups in SUVs per year, so about one-seventh as many iPhones. So that means iPhones are making less profit per an iPhone, but we're selling a lot more. And trucks are making way more profit per truck, but selling less than iPhones. So that means trucks and SUVs are selling more than 10 times. the profit per unit, but just one seventh the number of units. Snackers, trust us, we did the math here. It turns out trucks and SUVs, if you multiply that $5,000 profit times 11 million pickups in SUVs, that's more profit per year than the iPhone. So Jack, what's the takeaway for our buddies

over at the big three? This is about so much more than the big three. It's also about their friend. Snackers, according to the U.S. Bureau of Labor and Statistics, three million Americans work in the auto industry. All right, you got one million at the car companies, both in the factories and in their skyscrapers for their desk jobs. We're talking for GM Chrysler and Tesla. They're commuting in cars, not the subway. Then you got a million more working at dealerships like Auto Nation, a publicly traded stock, or my local Roundtree Ford, which blasts the radio with ads. Get on down to round three. We're driving off lots with 0% APR, double down financing, no returns, no money, no problem. That is every roundtree commercial in America. And then they've got

those balloon floating things like, uh, uh, uh, all right, so we got a million working at the car companies, a million working at car dealerships, and then another million working at the supply companies for the cars. We're talking companies like Lear that we mentioned before who's making the seats to all those cars. And the tires, and the air vents and the transmissions, the mufflers, the seatbelts. You got different companies making each of those. Feels like a small world after all ride at Disney. Finally, this is also big news for the states of the United States. Also, the state of Michigan needs some tax revenues coming in. They need people employed. If Michigan needs to continue paying unemployment checks like right now, they might have to sell Lake Huron. People in

Chicago, you may be living on Lake Bezos pretty soon. Shoot, I forgot to announce before the last story, turn around. If you're on a Snacks Challenge, we are over halfway through. While you're sprinting back, we'll get to our third and final story, which is SoftBank, aka the least profitable company on planet Earth right now. It's so broke, it's having a tech garage sale. What's a garage? Nick, you're from a city, you don't get it. Never mind.

Better question. What is SoftBank? Basically, this used to be a tech company in Japan that used to sell software. Yeah, it has a cocktail party name drop. Oh, my first big win, a tiny investment in a little company called Alibaba. You might have heard of it? Amazon of China, now that investment's worth $100 billion. I'll have more shrimp cocktail, please.

The guy who gets to make those brags, his name is Masayoshi-San, and he is a visionary investor of Japan. Oprah gives away cars, Netflix gives out shows, and this guy gives out checks if you've got the Uber for blank. That's right. Today, SoftBank is both a wireless telecom company like AT&T or Verizon and a tech venture capital fund. Sounds fancy and its old wireless business, it's doing just fine. Last year, profits for its wireless business rose 7%, so things sound pretty good. But we were really curious about its latest earnings for the last 12 months because there's a lot of meaty stuff in there. The first 11 slides of this deck, which looked like it was created by a middle schooler, by the way. The first 11 slides were all about, it's not our fault.

We jumped in snack style. It was basically just PowerPoint. And they just kept repeating the words unprecedented crisis and worse since great depression. Chart after chart of red arrows pointing down. Someone at Bain is going to sue them for taking all those things. They had 11 slides about everything coronavirus has ruined and how much they've ruined them by. They spent about a third of their budget just on the stock photos of people frowning. They have a chef who's leaning on his counter with nothing to cook looking very sad. Then once the excuses in this deck were done, we got to see how badly SoftBanks venture investments have been doing. Right. So remember, the wireless business is doing fine. Profits rose by 7%. The venture capital business

has invested in 88 different companies, mostly pre-IPO over the last three years. We're talking like fanatics or get around or like a bunch of others that are kind of out there. 26 of those investments have grown in value. 47 of them have fallen. And you've heard of the ones that have fallen. For example, biggest fallers, we work. It went to almost zero. And then there's brandless.

It went to zero. And then there's Uber. Things I've got so bad recently. Uber just announced another 3,000 layoffs yesterday, bringing the one month total to almost 7,000 people getting laid off. Jack, add that all up, carry the two, add a nine. And that means the total loss. last year for SoftBank, the company on its investments, was $18 billion.

That is three lifts worth of losses for SoftBank. That is $18 billion in unadjusted losses. That is a very, very bad result. Wish it could have been adjusted. So, Jack, what's the takeaway for our buddies over at SoftBank? When you're broke, you might want to sell some of your things. Companies do that too. Snackers, you go to Craigslist.

Companies go to investment banks. And one of SoftBank's best assets to sell right now is Sprint. It owns Sprint. And now that Sprint is merged with T-Mobile, it's secured as one of the big three wireless companies that's worth a lot. So SoftBank's trying to sell its 24% ownership of T-Mobile because it needs the cash now. Also, it's called T-Mobile now. They drop the name Sprint.

Kind of embarrassing. SoftBank doesn't care. They just need the money. J.G. Wentworth didn't call them back. And once this sales done, SoftBank will be looking for a lot more gems in their portfolio to add to the garage sale. Because they just need cash. Or is it a tag sale?

What is a garage? Jack, can you whip up the takeaways for us in that slam and salmon shirt? Pete's coffee is ipowing, despite the current crisis slash recession. It thinks cheaper coffee is simply COVID-proof. The Detroit Big Three automakers have reopened their factories. We're talking the triceps and car companies, the dealerships, the suppliers. That's three million American workers. For a third and final story, SoftBank is part profitable telecom company, part horribly

unprofitable VC fund. And it needs cash now, so it's selling off investments in a tech-style garage sale. Now, time for our snack fact of the day. This one sent in by our friend Jake Levy in Milwaukee, Wisconsin. Jake, by the way, went to UMisch undergrad Go Blue and went to University of Pennsylvania, Wharton, go Benjamin Franklin. Basically, Jake is a Venn diagram of Jackson my LinkedIn pages. So Jake points out that America's 10th president is a guy named John Tyler, who was born in 1790. time ago, really long time ago, except for this wild statistic. He has two grandchildren who are still alive and breathing today. That means President John Tyler had a kid when he was like 80, and his kid had a kid when he was like 80, and now that last kid is like over 80. Pretty wild. By the way, it's like, yeah,

my grandfather fought in the war. No, not World War II. No, not World War I. The War of 1812. Oh, and by the way, happy birthday, Natalie. Natalie has a great snack story. She was lost in a Costa Rican jungle with her husband Charles. And that's when she introduced to Charles Snacks Daily. They were literally stuck in the jungle like a Jurassic Park movie. Her husband Charles is like, yeah, we should turn on Google Maps. She's like, no, we got to finish episode three of this week. What are you listening with Dr. Grant from JP?

Snackers, have a fantastic Tuesday. And remember, we grow when you share snacks. Ask your buddies, H-Y-H-Y-S-D. Have you had your snacks daily? We'll see you tomorrow. If you know, you know. By the way, this is Nick, and I own shares of Alibaba, the Amazon of China, and Jack owned shares of Amazon, the Alibaba of the United States.

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.