Everything You Need To Know About Uber’s Busy Week, Plus Pepsi Fizzles Out

by 2 weeks ago

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Quote of the Day

“This is a company that has taken every punch possible and is still standing.”

Early Twitter investor Chris Sacca back in 2015 when Jack Dorsey returned as CEO. Twitter’s stock is down 40% since he retook the reins.

S&P
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NASDAQ
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+2.91
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DJIA
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+19.97
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10-Year
2.326%
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GOLD
1,277.80
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OIL
49.84
-0.51
-1.01%
*As of market close

Market Snapshot

U.S. indexes finished higher…again…
Office Depot dropped 18% after lowering 2017 profit expectations.
Spain’s IBEX continued to fall under political uncertainty.
Oil fell after concerns of oversupply.

This Week On: Uber

If you forgot to DVR Tuesday’s episode, here’s the commercial-free recap:

Voting rights: The board decided to nix super-voting rights, assigning just one vote per share. The move will dilute Travis Kalanick’s voting power (currently at 16%). Two big Uber investors, Shervin Pishevar and Steve Russell, are pursuing legal action.

The board: Last Friday, Kalanick rallied the troops, appointing two new board members, ex-Xerox CEO Ursula Burns and former CIT Group CEO John Thain. In response, the board voted to add six more seats, potentially bringing it to a staggering 17 members. Another blow to Kalanick’s control.

SoftBank: Uber embraced SoftBank’s $1 billion investment—a number that could reach $10 billion. Masayoshi Son, along with a posse of investors, would take at least a 14% stake. The deal, however, is still being ironed out.

Benchmark Capital: The OG Uber investor (13% ownership) will likely drop its lawsuit against Kalanick when the SoftBank deal goes through. It sued Kalanick over the two board seats he was withholding (now occupied by Ursula and John) and was active in limiting the ex-CEO’s control.

Other speed bumps: With all the hooplah back home, Dara Khosrowshahi was trying to make peace with the commissioner of London’s transportation authority. Two weeks ago, Uber’s operating license was stripped in a city that accounts for 5% of its regular riders. Meanwhile, the Uber-Waymo trial over stolen trade secrets was pushed back to December.

As Uber drives towards it 2019 IPO, even Kalanick is putting things into perspective: “the board came together collaboratively and took a major step forward in Uber’s journey to becoming a world class public company.”

Magician Donald J. Blaine

President Trump sent Puerto Rican bonds ducking for cover when he suggested he might “wipe out” the U.S. territory’s $73 billion in debt. And while that would alleviate the devastated island’s battered balance sheet, this would spell trouble for its investors.

No surprise that prices on PR’s 2035 general obligation (GO) bonds slid to a record low of 30.25 cents on the dollar from 44 cents the day before.

Two questions we have about Trump’s remarks: 1) If he is serious, could he do this? and 2) What are the chances it’ll happen?

1) Trump can’t wave his hand and make over $70 billion in debt disappear…he’ll need help from bankruptcy courts.

2) Mick Mulvaney, head of the Office of Management and Budget, said not to take Trump literally: “I won’t take it word for word with that.”

Apparently no one told that to the bond gods.

Pepsi Fizzles Out

With any good sugar high there’s always a crash—PepsiCo’s (+0.19%) North America business reported quarterly sales ($5.3 billion) down 3% and profit down 10%. The reason? It didn’t spend nearly enough time (or $$) promoting Pepsi and Mountain Dew.

That’s because Pepsi’s been chasing consumers’ preferences for healthier options. The dynamic low-sugar duo of its LIFEWTR and sparkling lemonade brands took center stage over the company’s flagship sodas.

And it wasn’t wrong to make the switch—U.S. soda demand has fallen about 1% each of the last three years. But this quarter’s poor performance reminded Pepsi: don’t neglect brands that account for 12% of your revenue.

CEO Indra Nooyi called it merely a “toe stub,” pointing to net income up 8% for Pepsi’s global business, topping expectations. CFO Hugh Johnston said: “Hey, at least we’re not RC Cola.”

…okay he didn’t say that.

Pixel Me! Pixel Me!

On the heels of Amazon and Apple’s product extravaganzas, Google unveiled new hardware of its own. We’ve got the highlights:

Smart Speakers
Introducing the Home Max, with improved sound quality and, yes, it’s bigger than the original. Of course, it runs on the voice-activated Assistant platform (Google’s clever name for its home assistant).

But if you’re into something more byte-sized, check out the new Home Mini, a competitor to Amazon’s Echo Dot. Expect more product differentiation from Google as it tries to claw away at Amazon’s huge lead in the smart speaker market (75-80% market share).

Smartphones
Following up on last year’s introduction of the OG Pixel, Google showcased the Pixel 2 and Pixel 2 XL, a beefed-up response to the iPhone X. Our favorite feature? An insane dual-pixel camera. We’re talking crystal-clear selfies.

With Google’s recent $1.1 billion acquisition of HTC’s smartphone business, it now has 2,000 gizmo gurus making sure Google doesn’t go soft(ware) in its transition to hardware.

Here’s the full suite of hardware products Google introduced at its event.

What Else Is Happening…

  • Goldman Sachs (-0.54%) distanced itself from Surefire, whose high-capacity mags were used in the Las Vegas attack.
  • The EU slapped Amazon with a $300 million bill in back taxes.
  • Former Equifax CEO continued his D.C. apology tour in front of the Senate Banking Committee.
  • Sonos launched its first smart speaker—powered by Amazon’s Alexa.

Economic Calendar

Monday Earnings: Cal-Maine Foods (-)
Economic Events: PMI Manufacturing Index (+/-), ISM Manufacturing Index (+), Construction Spending (+)
Tuesday Earnings: Paychex (+)
Economic Events: Motor Vehicle Sales (+)
Wednesday Earnings: PepsiCo (+)
Economic Events: ADP Employment Report (-), ISM Non-Manufacturing Index (+), Petroleum Status (-)
Thursday Earnings: Costco
Economic Events: International Trade, Jobless Claims, Factory Orders
Friday Earnings: No Events
Economic Events: Employment Situation, Wholesale Trade, Consumer Credit
+ ACTUAL > ESTIMATE
ACTUAL < ESTIMATE

The Backburner

Up in Smoke

As soon as next month, TV screens will light up with ads that state the obvious: cigarettes are “intentionally designed” to be addictive. But this isn’t your typical PSA. Large tobacco companies like Altria and British American Tobacco will be behind the campaigns.

No, the guerrilla marketing tactics of Big Tobacco haven’t stooped to “reverse psychology”…yet. The ads are mandated as part of a two-decades-old DOJ lawsuit, which took aim at tobacco companies for misleading advertising.

And now, they’re paying up.

The 30-to-45 second ads will run five days a week, for a full year, across networks like ABC, CBS, and NBC…and the full campaigns could cost Altria and British American up to $31 million each (talk about a self-inflicted wound).

Good thing these companies have just the thing to take the edge off.

Disclaimer #1: Cigarettes are intentionally designed to be addictive.

Disclaimer #2: Neither Altria nor British American paid for this article.

The Breakroom

Rank by Market Cap

Citigroup, Boeing, Nike, UPS.

Stat of the Day

40–That’s how many different languages Google’s new Pixel Buds (a competitor to the AirPods) can translate in real time.

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