Buffalo Wild Wings Shakes Things Up By Ousting Their CEO, Plus Toyota And Tesla Part Ways

by 6 months ago

morning brew

Here’s your hand-crafted Brew for June 5th.

QUOTE OF THE DAY

“Me, I make money studying natural stupidity.”

The twitter bio of billionaire investor Carl Icahn…more below on Carl’s study of stupidity.

Market Snapshot

  • Tech companies paved the way on Friday, driving U.S. stock indexes to record highs
  • U.S. unemployment hit a 16-year low, despite job growth slowing and wage growth remaining stagnant
  • The 10-year Treasury yield fell to its lowest level since October, as the greenback dropped against its global peers

Game of Thrones

…and wings.

Shareholders met Friday to vote on the fate of America’s favorite wing shop, Buffalo Wild Wings (+1.74%). Longtime CEO Sally Smith has been givin’ the boot, while a new board of franchised-focused pioneers will see her to the door.

And investors took it in stride, sending the stock up as much as 5.3% on the announcement.

This story started long before Friday––let’s rewind.

Over the past year, $1.5 billion hedge fund, Marcato Capital Management, has been locked in a fight for board control—here’s the breakdown:

May to October 2016: Marcato Capital takes a 5% stake in Buffalo Wild Wings and urges CEO Sally Smith to boost franchising from 50% to 90% of B-Dubs’ stores.

How come? More franchises = less capital investment = higher ROIC per store = happy investors.

But Sally wasn’t buyin’ it.

 

February 2017: BWW thinks they can win over Marcato by offering a board seat, but Marcato fires back saying “make it four”…and throw in some spicy garlic while you’re at it.

 

April 2017: Marcato slams B-Dubs execs for neglecting shareholders’ interests in this epic slide-deck:

Exhibit 1: Execs have only made one open-market purchase of stock in 13+ years

Exhibit 2: They’ve sold off 92% of all stock granted since the IPO

 

May 2017: B-Dubs turns up the heat on Marcato, bashing its analysis and the way in which the pesky hedge fund compares the wing king to its fast-food cousins.

 

May 2017 cont: Marcato raises its stake to 9.9% and waits for the annual shareholders meeting—cue the vote for board control.

So what’s in store for B-Dubs?

McGuire, CEO of Marcato, and the two new board members will look to franchise up to 90% of all Wild Wings’ stores, while shifting to smaller locations that focus on takeout and delivery.

All in the hopes of lowering costs, boosting per store revenue and reviving a stock that has taken a beating this year.

One thing’s for sure—wings, beer and sports are here to stay.

Crypto-Craziness

$4.4 million. That’s about how much you’d have if you invested $5 in Bitcoin seven years ago. And what’s with all the recent investor brouhaha? The cryptocurrency is up 125% since the beginning of 2017 and 340% YTD.

Yep, that’ll do it. San Francisco-based Bitcoin exchange, Coinbase, is on the verge of securing $100 million in funding, placing your “virtual wallet” for Bitcoin at a $1 billion valuation.

This valuation (the largest of its kind) could mark a turning point for a currency notoriously used for “black market” transactions to one that is viewed as a legitimate payment method by corporations and governments alike.

A trend we already see taking shape

It’s Not You, It’s Me

Toyota (+0.89%) said “sayonara” to its partnership with Tesla (-0.15%) this weekend. The Japanese automaker sold its $480 million stake in its U.S.-based peer after six years of teamwork.

Back in Tesla’s baby days, when it was IPOing and valued at an adorable $1.33 billion, its pacific compadre injected a $50 million stake into the electric automaker.

In return, Tesla produced electric batteries for its flagship SUV, the RAV4. Now though? The RAV4 is a thing of the past and Toyota looks to build an electric vehicle of its own.

Hopefully not a “goodbye”, just a “see you later.”

Icahn’s Joy Ride

Wall Street bruiser (and Bill Ackman’s big brother), Carl Icahn is putting the pedal to the metal with the $35 million acquisition of auto service company, Precision Auto Care.

Precision is just part of Icahn Automotive Group’s strategy to create a finely-tuned and nationwide auto-service engine. The company now owns 1,250 shops (including Precision’s 250), and several portfolio investments (most notably AutoPlus, Lyft and Hertz).

So, how does the corporate raider plan to capitalize on “natural stupidity” this time (see @Carl_C_Icahn’s quote up top)?

Icahn says the services market is ripe for growth as cars become increasingly complex, driver maintenance know-how continues to fall and the number of vehicles on the road sits at an all-time high.

Carl’s on the road ladies and gents. Buckle up and beware of road rage.

What Else is Happening…

  • Workers’ advocacy groups are accusing Wal-Mart of punishing workers for sick days.
  • Gymboree missed its interest payment for June 1st. Is a bankruptcy in sight for the popular children’s clothing brand?
  • SpaceX successfully launched its Dragon spacecraft into orbit using recycled parts from the first launch. It’s a huge step forward in lowering equipment costs for space transport.
  • United Airlines will suspend all flights to Venezuela starting July 1st.

Economic Calendar

  • Friday (June 2): May Jobs Report (-)
  • Monday: Dave & Buster’s Earnings; Factory Orders, Productivity
  • Tuesday: Michaels Earnings; Job Openings
  • Wednesday: Consumer Credit
  • Thursday: Cloudera, Dell Technologies Earnings
  • Friday: Straight Path Communications Earnings

Water Cooler

From the Crew

Let’s keep the coffee coming, Brewers!

From the Crew, our newest segment, is your chance to connect with our team, while loading up some of the very best digital diamonds in the rough.

Quick housekeeping––each member of the Crew is going to share their coolest find of the week. And guess what…they want to talk to you about it. Whether you love it, you hate it or are downright confused by it, click on the Crewmember’s name of your choosing and get the convo going!

 

From Michael: Crazy Cat Lady

“The most absurd story I read yesterday was about a cat-focused ETF (which I imagine was started by a crew of women named Ethel) that has returned 850,000% to investors since 2015. That’s right, if you hadn’t dropped that $1,000 on your little pal snowball and invested it in this ETF, you’d have about $8.5 million right now.”

Then you could buy all the damn cats you want.

 

From Austin: Rolls Baby Rolls

“Rolls-Royce just unveiled its newest whip, specially made for an undisclosed male collector of “distinctive, one-off items.” While we aren’t sure who its owner is, we know he’s going to be driving around a $13 million bad*ss Rolls with a champagne chiller in the center console.”

Check it out, and try not to drool

 

From Alex: Your MC, Mark Z

“I’m a sucker for good storytelling, so have to hand it to Zuckerberg––he crushed it with his address to Harvard’s Class of 2017. Tough to make a bunch of 21-year olds truly connect with a mega-billionaire, but the dude pulled it off with one clear focus––purpose.

Watch it, save it, bookmark it––worth your time and attention.

 

From Will: Ear Candy

“I’ve recently been captivated by this podcast called Exponent, which features tech and business strategy guru, Ben Thompson. The podcast covers tech news in a quippy and digestible way (like the Brew)!”

Listen here.


The Breakroom

Question of the Day

There are three playing cards lying face up, side by side. A five is just to the right of a two. A five is just to the left of a two. A spade is just to the left of a club, and a spade is just to the right of a spade.

What are the three cards?

(Stumped?)

Who Am I?

    1. I was named Time magazine’s Person of The Year in 1999 and Fortune’s Businessperson of the Year in 2012.

 

    1. I bought the Washington Post for $250 million in 2013.

 

    1. I had a cameo as an alien in Star Trek Beyond.

 

    1. I jumped from number fifteen on the Forbes list of world billionaires to number three in just two years.

 

  1. I now have a net worth of $72.8 billion.

(Have you guessed yet?)

Stat of the Day

$12-15 per month.

We want to emphasize MONTH. That’s how much Alibaba’s CEO, Jack Ma, made with his first salary as an English teacher. Now he’s worth about $31.4 billion. Gotta start somewhere, folks.


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