Today’s Brew was written while planning a 35-city vacation via Hyperloop. Until that actually happens, here’s your hand-crafted and carbon-neutral Brew for April 12th.
QUOTE OF THE DAY
“Parking is, like, one of my biggest nightmares—like, where do we park everyone?” — Tesla CEO Elon Musk, discussing his concerns for the upcoming year. If employee parking is one of Tesla’s top concerns, Musk must be doing just fine.
Market Snapshot
- Safe haven assets like gold and the yen soared to five-month highs on Tuesday, as U.S. treasury yields reached their lowest levels in months over rising geopolitical risk
- Similarly, U.S. stocks closed slightly lower as investors tried to steer clear of risky assets. Real estate was the only sector to close strong
How Nuclear Power Ruined an Electronics Giant
Oh, no. What happened this time?
Tokyo-based Toshiba said Tuesday that its entire existence could be in doubt after a decade of missteps. Sounds heavy…because it is. Toshiba has been a staple of the Japanese economy for decades, but that could soon change as the company tries to navigate a recent $4.8 billion loss, risk of delisting from the Tokyo Stock Exchange and an insolvent nuclear division.
Did you say a nuclear division?
Last time we checked, Toshiba was an electronics maker. Not only. The 142-year-old conglomerate is actually a jack-of-all-trades: it’s got a hand in everything from TVs to hairdryers. And in 2006, the bright-eyed and bushy-tailed tech giant added to its arsenal, buying nuclear reactor maker Westinghouse Electric for $5.4 billion. Citing renewed global interest in nuclear energy, Toshiba appeared to have it all thought out.
Until it didn’t…its dream of building 45 new reactors didn’t work out so well thanks to design missteps, delays and a rough period for nuclear energy. Westinghouse filed for bankruptcy last month, with $508 million owed to creditors.
So, here we are.
Toshiba is in a world of pain and the desperation has officially set in. The company’s crown jewel, its massive computer chip (and guac?) portfolio, is being put on the market with interest from competitors like Foxconn.
But let’s be clear––Toshiba’s new low is not normal for a Japanese company. None of the 4,000 publicly-listed Japanese companies declared bankruptcy in the last 12 months. Sounds like a great stat––but think again. Easy credit may be keeping otherwise-doomed companies alive, but it’s also worsening Japan’s labor shortage and stifling new businesses’ abilities to grow. Although it’s a devastating time for Toshiba, perhaps this is the wakeup call Japan needs to re-enter reality.
RetailMeNot Strikes A Deal
Consumer insights firm Harland Clarke Holdings just got the green light to acquire e-commerce coupon site RetailMeNot (+48.39%) for $630 million—a hefty 50% premium over Friday’s closing price. Not too shabby.
RetailMeNot knows the drill by now. It was acquired back in 2010 before going public in 2013. After this deal goes through, RetailMeNot will be private yet again. RetailMeNot’s growth certainly hasn’t been the most conventional, but hey, whatever floats your boat.
Hyperloop Might Actually Happen
Hyperloop One—one of the companies vying to turn Elon Musk’s vision of travel through vacuum tubes into reality—announced plans to connect 35 U.S. cities through 11 routes. In case you missed it, Hyperloop could make travel faster than planes by shooting levitating pods through enclosed tubes using air pressure.
The concept could have major implications for the economy. Just think: quick and easy travel could allow companies to access a much larger labor pool. Given the…let’s just say poor state of American infrastructure, this could be huge. Of course, Hyperloop One will have to convince politicians, transportation officials and landowners that it’s the real deal. All eyes will be on Hyperloop’s test in Nevada later this year. You can bet we’ll be watching.
Not Even the Kids Are Safe Anymore
Another retailer bites the dust: San Francisco-based Gymboree, once a mall staple for children’s clothing, is reportedly preparing to file for Chapter 11 bankruptcy ahead of a June 1 interest payment on its debt. The 1300-store chain was acquired by Bain Capital in 2010 for $1.8 billion but hasn’t posted a profit since 2014. This bankruptcy is only the latest in a spate of retail closings that has already swallowed up nine companies this year, including Payless ShoeSource, RadioShack and Gander Mountain.
What Else Is Happening…
- Lyft’s massive $7.5 billion valuation is official after a $600 million funding round including investment from private equity megafund KKR
- GoPro will buy your older generation GoPro as part of its new trade up program
- Facebook Messenger will now let you split bar tabs with group payments
- Payment startup Stripe has acquired popular entrepreneurship forum Indie Hackers
Economic Calendar
- Monday: Labor Market Conditions Index (-); Janet Yellen Speaks
- Tuesday: NFIB Small Business Optimism Index (-); 10-Year Treasury Auction
- Wednesday: Delta Earnings; Import/Export Prices
- Thursday: JPMorgan, Citigroup, Wells Fargo Earnings; Weekly Jobless Claims; Consumer Sentiment
- Friday: Consumer Price Index; Retail Sales
A Creative Approach to College Affordability
Graduation is swiftly approaching, and right behind it: student loan bills. Student debt broke another record last year, with students owing a collective $1.31 trillion. Still, the numbers show that a college degree can lead to a much higher salary down the road. With Congress possibly overturning Obama-era student debt relief, students and universities are getting creative with college affordability:
- Purdue University launched a pilot “income sharing” program last spring, which allows students to pay a percentage of their post-graduation salary towards their tuition. This can be much cheaper than a federal loan in the long run—the lower the salary, the lower the payments.
- It’s not a new phenomenon, either: economist Milton Friedman introduced the concept in 1955. Yale University tried a similar program in the 1970s, but it crashed and burned due to “design flaws.”
- Purdue provides a calculator to see which payback method would be a better option. For example, the Brew Crew’s fictional student studying mathematics is expected to earn a $32,000 salary, with monthly payments increasing from $428 to $600 a month. In total, this is about $8,000 less than a federal loan.
Question of the Day
1 + 4 = 5
2 + 5 = 12
3 + 6 = 21
8 + 11 = ?
(Answer)
Stat of the Day
$2 billion: That’s how much bitcoin miners have successfully made since the digital currency was invented in 2008. What exactly is bitcoin mining? Good question. Bitcoin transactions are all logged as part of a massive blockchain. Miners solve short cryptographic puzzles to verify each block’s authenticity—and to sniff out scams. For each one, they receive a small bitcoin payment. Currently the reward is 12.5 bitcoins, or roughly $15,350.
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