Pandora Considers Selling Itself After Weak Earnings And Subscription Rates, Morgan Stanley To Pay A $3.2 Billion Settlement

morning-brew11112

This week’s Brew quiz is live! Reminder: it’s five questions. Get all of them right (and make sure you answer the bonus sixth feedback question), and you could win Brew swag and a shout-out in an issue next week!
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“Unfortunately, the world looks different to what it did in December” — Stefan Ingves, Governor of Sweden’s Central Bank, after cutting Sweden’s main interest rate to negative 0.5%. Yes, another central bank is going even further negative in a last-ditch effort to depress its currency and fuel inflation.

MARKET SNAPSHOT
Big Picture

  • When will the carnage end? Not yesterday—U.S. stocks tanked on Thursday amidst a massive global sell-off, once again led down by financial stocks
  • And we mean global: European markets were down between 2% and 6% across the board to kick off the day (yes, bank stocks were also down), and last night Japanese stocks fell for a tenth straight session by as much as 5%

Alternatives to Watch

  • With stocks in collapse mode everywhere, gold jumped again to reach its highest level in over a year as investors flee the market turmoil

Market Movers

  • Aerospace giant Boeing was hit with its second-biggest price drop ever (7%) after the media reported an accounting probe was launched by regulators

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CORPORATE PRIMER

Morgan Stanley Finally Settles

It may have taken eight years, but Morgan Stanley’s mistakes have finally caught up with it. Thanks to the bank’s role in the 2008 financial crisis, MS announced yesterday that it will pay a $3.2 billion settlement for selling risky mortgage-backed securities, a $600 million increase from its original agreement last year. This agreement leaves Goldman Sachs as the lone Wall Street bank left to finalize its settlement, meaning it’s only a matter of time until we can (hopefully) put the turmoil of 2008 behind us.

Pepsi’s Sobering Celebration Party

The biggest debate in America: Coke or Pepsi? After a fourth quarter report like Pepsi’s (with profits skyrocketing 31%), you might have a clearer answer. Time to celebrate, right? Well, executives are reluctant to try any drastic business innovations. CEO Indra Nooyi believes the dwindling economies in the BRIC nations (Brazil, Russia, India and China) could prove fatal to the U.S. economy and in turn, Pepsi’s business model. Looks like the Joy of Pepsi could turn into angst if Mrs. Nooyi is right.

Sleeping Viant

Remember when Myspace was a thing? It’s still around, and the prehistoric social media website is back in the news. Yesterday, Time Inc. acquired Viant, the owner of Myspace and a broad-based ad tech network. Time is hoping to join the world of modern ad technology in order to compensate for huge losses in publishing. Included in the deal is access to Viant’s ad network consisting of 1.2 billion people. Is it “Time” for Myspace to make a comeback (sorry, we couldn’t resist)?

Pandora Loses Hope

If Pandora were to create a playlist for itself, might the Brew recommend starting with Bad Day? The largest internet radio service is now considering selling itself after weak earnings and even weaker subscription rates. Pandora missed earnings thanks to higher costs and spending. Spending on what? Stiff competition from Spotify and Apple Music has forced Pandora to make expensive acquisitions and attempt internal innovations in order to recoup lost customers—which evidently isn’t paying off.

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OTHER STORIES

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ECONOMIC CALENDAR

LOVE MONEY IS IN THE AIR

This Sunday is February 14, and you know what that means: it’s Valentine’s Day, the most love-filled day of the year—if you have somebody to love, that is (cue Queen). The global economy may not be feeling the love these days, but that isn’t stopping Americans from breaking out their wallets for their special someones. Here’s more:

  • A recent survey by the National Retail Federation revealed that 54.8% of consumers will be celebrating Valentine’s Day, and they’ll spend on average $146.84, slightly higher than last year’s $142.31. Add it all up, and you’ve got $19.7 billion of total spending, a survey record.
  • The most popular item of choice? Candy, of course—50% will be buying some of the sweet stuff, totaling $1.7 billion. Of course, jewelry takes the cake in pure dollar terms at over $4 billion.
  • Don’t have a (human) significant other but still want to spread the love? You probably know where this is going: $681 million will be spent on a different kind of significant other, but one many would argue is just as important—pets.

INTERVIEW QUESTION OF THE DAY

You are given a three-gallon jug and a five-gallon jug. How do you use them to get four gallons of liquid? (Answer)

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BUSINESS TERM OF THE DAY

Knock-Out Option — An option with a built in mechanism to expire worthless, should a specified price level be exceeded. A knock-out option sets a cap to the level an option can reach, in favor of the holder. As knock-out options limit the profit potential for the option buyer, they can be purchased for a smaller premium than an equivalent option without a knock-out stipulation.

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FOOD FOR THOUGHT
It’s literal food for thought time: Panda Express, known for its Americanized Chinese fast food cuisine, is planning on diversifying into other food items by investing in companies ranging from pizza makers to salad. Sounds yummy.

 

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