“Dear Lisa: Get ready to yodel” — How Yahoo opened its 2014 employment offer letter to its Chief Revenue Officer, Lisa Utzschneider, a document that was publicly filed with the SEC yesterday. Despite Yahoo’s troubles—now including a fresh $64-$78 million restructuring charge—at least it hasn’t lost its sense of humor.
MARKET SNAPSHOT
Big Picture
- U.S. stocks closed lower on Monday, marking a fitting end to the month: February was the third straight month of losses for the S&P and NASDAQ
Alternatives to Watch
- Oil staged a nice rally after Saudi Arabia publicly stated that it wanted to reduce volatility in the oil market—of course, we’ve heard that before
Market Movers
- Auto supplier Federal-Mogul skyrocketed 37% after billionaire investor Carl Icahn made an enticing bid to acquire the company
- Kurdistan-centered oil company Genel Energy’s shares burned 40% lower after a revaluation showed its largest oil field was worth $1 billion less
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WORLD MACRO
China’s Big Plans
In an effort to keep its head above water, China is making more big changes. First off, the ailing superpower is lowering its required reserve ratio by 0.5%, down to 17%. What’s the effect? Basically, Chinese banks now need less cash in the bank at all times, which theoretically allows more lending—and more economic growth. Here’s the kicker: China is also expected to lay off 1.8 million coal and steel workers, totaling approximately 15% of the workforce, in order to reduce industrial overcapacity. Bold strategy, Cotton.
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CORPORATE PRIMER
Valeant’s Brutal Day
Staying out of the limelight isn’t Valeant’s strong suit. Its chief executive, Michael Pearson, announced his return to the pharmaceutical company as CEO, but his homecoming couldn’t stop a brutal day for the company, which remains under fire for its shady (and possibly illegal) pricing tactics. Executives cancelled an earnings conference call, withdrew 2016 guidance and confirmed that the company is under another SEC investigation. All told, shares collapsed over 18% yesterday. Hopefully Mr. Pearson can save the day, because 2016 isn’t looking promising for Valeant.
GoPro’s Shopping Spree
70%. That’s how much GoPro’s stock price has dropped year-over-year. The reasons are numerous, but a big one has been a poor user experience. Yesterday, GoPro announced that it’s tackling this problem by deploying $105 million (20% of its cash on hand) to acquire two video-editing startups, Stupeflix and Vemory. GoPro excels at hardware—that much is clear—but it has struggled to create robust video editing software on mobile and desktop. These two acquisitions mark a visible effort on GoPro’s end to turn the company around—but as is always the question with acquisitions: will it work?
Deep in the Woods
Lumber Liquidators has steadily declined since a 60 Minutes special last March stated its laminate from China contains dangerous levels of formaldehyde (which is linked to, you guessed it, cancer). Due to the report and other legal issues, customer demand is way (way) down, and 2016 isn’t looking too great either, as executives won’t even release a financial forecast for the year after reporting a massive drop in sales last quarter, sending shares down 10%. The retailer may be up a creek if action isn’t taken right away.
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OTHER STORIES
- Google says it bears “some responsibility” after self-driving car hits bus
- Judge sides with Apple over feds in New York
- Argentina reaches deal with hedge funds over $4.65 billion debt by 2017
- Subway to roll out its first antibiotic-free sub
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ECONOMIC CALENDAR
- Monday: AMC Entertainment (+), Crocs (-), Lumber Liquidators (-) Earnings; Pending Home Sales (-)
- Tuesday: AutoZone, Dick’s Sporting Goods, Dollar Tree, Glencore, Kate Spade, Progressive, Ross Stores, TiVo Earnings; Existing Home Sales; Consumer Confidence; ISM Manufacturing Index; Construction Spending; Motor Vehicle Sales
- Wednesday: Abercrombie & Fitch, American Eagle, Costco Earnings; EIA Petroleum Status Report; Private Employment Report
- Thursday: Barnes & Noble, H&R Block Earnings; Weekly Jobless Claims; ISM Non-Manufacturing Index
- Friday: Staples, Big Lots Earnings; February Jobs Report; U.S. Trade Deficit
BEST PICTURE, WORST RETURN
The Oscars are finally over—yes, Leo finally got one—and quite a few movies took home some golden statues. But the “best” movie—Spotlight—didn’t win at the box office. The film grossed a mere $62 million, only 3% of what Star Wars brought in. Here’s more on the surprisingly-typical Oscar pattern:
- On average, ticket sales for Best Picture winners in the past decade have equaled just 19% of box-office receipts of the most lucrative films.
- However, winning the most Oscars means your film at least did pretty well: Mad Max won the most statues, and also grossed $378 million.
- On average, the film that wins the most Oscars grosses around one-third what the most successful film recorded that year. With Star Wars raking in a record-shattering $926 million, that pattern actually held true this year.
INTERVIEW QUESTION OF THE DAY
How can you throw a ball as hard as you can and have it come back to you, even if it doesn’t bounce off anything? There is nothing attached to it, and no one else catches or throws it back to you. (Answer)
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BUSINESS TERM OF THE DAY
Shareholder — Any person, company or other institution that owns at least one share of a company’s stock. Shareholders are a company’s owners. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly.
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FOOD FOR THOUGHT
Spoiler alert: Warren Buffett’s March Madness pool is bigger than yours. The legendary investor and head of Berkshire Hathaway will award any Berkshire employee who perfectly predicts the first two rounds of the NCAA Tournament a cool $1 million—every year for life. It may not be the $1 billion that Buffett promised to anyone who could pick a perfect bracket back in 2014, but we doubt Berkshire employees are complaining.
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Congrats to Manan M., a student at the University of Texas at Austin, for winning last week’s Morning Brew quiz prize! This Friday’s issue will include a new quiz, which means another chance for you to win Brew swag and an exclusive shout-out!
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