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You can’t spell “NCAA” without CA…

California Governor Gavin Newsom signed a bill yesterday allowing collegiate athletes to get paid for endorsement deals, including use of their name, image, and likeness. The Fair Pay to Play Act gained additional steam after LeBron James got behind the cause. Ironically, Lebron didn’t go to college.

In support of his decision, Governor Newsom pointed out that colleges and universities make billions of dollars from student-athletes’ sacrifices but block them from earning a single dollar, calling that structure a “bankrupt model.”

“But athletes get free dinner!” – a guy who got cut from JV football

This is a big win for athletes who have raised concerns about the current system. The most outspoken proponents of “play to play” were the Northwestern University football team which attempted to form a union of players back in 2015. That attempt was rejected by the National Labor Relations Board. F*cking nerds.

Keyword: national

The NCAA’s biggest bone to pick with California implementing the law is that it will create a disadvantage for states not named California. The NCAA fears that straight cash homie will make Cali schools more attractive to prospective students.

In a statement, the Collegiate Association noted that it would likely prevent California schools from competing if the bill should pass. Sounds like Vince McMahon might have a new project on his hands … the CCAA!

The bottom line…

There are literally billions of dollars to be made (or lost) depending on how the Fair Pay to Play Act shakes out. It’s unclear how other states will react but we do know that the NCAA is mad as hell. In the interim, college coaches and universities will continue to make it rain.

 

PARENTS OF THE YEAR

Define daddy issues: founders of the doomed fast-fashion retailer, Forever 21, Jin Sook and Do Won Chang borrowed $5M from each of their daughter’s trust funds to help keep the company afloat in 2015.

Fast-forward four years and Jin Sook and Do Won Chang’s two daughters are unsecured creditors of their parent’s business following a bankruptcy filing over the weekend. Thanksgiving is going to be awkward this year.

What went wrong?

The preferred retailer of sorority girls and cougars alike with nearly 800 locations worldwide (541 in the US) began a rapid brick and mortar expansion post-financial crisis … just as e-commerce started to take off. What’s worse is that during the expansion, Forever 21 grew the size of its store and often times struggled to fill the space.

Plus its aggressive international expansion didn’t exactly go as planned. F21 stores and fashion were about as well-received as a Tekashi69 at a 9 Trey house party overseas.

Forever 21 also cited declining mall traffic as a reason for its bankruptcy. Don’t drag Orange Julius into this.

Of course, it probably doesn’t help that Forever had just $19M left in its coffers over the weekend, meaning it couldn’t make payroll, let alone pay its hundreds of vendors. JPMorgan has graciously extended a $275M bankruptcy package that will allow the company to get its affairs in order.

What’s next?

Your side chick’s favorite store will close most of its locations in Europe, Asia, and Canada and scale back non-core markets in the US. Altogether it will close approximately 350 outlets. F21 says that its filing will allow the company to focus on profitable parts of its biz.

The bottom line …

Forever 21 joins Payless, Gymboree and Charlotte Russe which have all found themselves in the retail graveyard in 2019. How Hot Topic is still kicking, no one knows.

The bankruptcy could send ripple effects through mall operator and other real estate companies’ performance. Exhibit A: in its latest report mall operator, Simon indicated that Forever 21 was its seventh-largest tenant in terms of rent, with 99 stores at its properties.

 

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IN OTHER NEWS

• Facebook announced that it won’t be running opinion pieces or satire through its new fact-checking program. Great news if you love ill-informed political commentary from the Onion. Another big change is the ability for publishers found to have shared falsehoods to appeal to the Almighty Zuck, in the hopes that the article won’t be flagged. Politicians will still be exempt from fact checks, as long as their comments are deemed newsworthy. Because what harm could that do?

 

• Apple has broken the $1T valuation mark again, after an analyst prediction that iPhone 11 sales will push share prices up as much as 20%. Shares rose 2.35% on the news. An analyst at JPMorgan set AAPL’s price target to $265, up from $243, while predicting a jump in 2019 and 2020 sales of the company’s flagship device. Finally, Tim Cook catches a break.

 

• Saudi Aramco is gunning for Prince Mohammed bin Salman’s target valuation of $2T for the company’s IPO. The firm announced that it will hike dividend payments, amounting to a payout of more than $75B in 2020, which equates to a 3.75% yield, if the firm hits its $2T goal. While that payout ain’t too shabby if you’re an investor, it’s still behind the industry-leading 6.22% Shell pays.

 

• WeWork’s planned IPO has gone the way of former CEO Adam Neumann. The coworking company withdrew its prospectus, giving the new regime more wiggle room without having to air as much dirty laundry with the public. Given its track record, I’m sure none of its turnaround plans will be shady whatsoever. Now, WeWork is going to have to light a fire under its proverbial ass. The firm is currently working on a $6B loan deal with banks that was contingent on a share sale of at least $3B. Those funds will be critical for future growth opportunities, as analysts believe the company will continue to burn through cash like a Smokey the Bear smear campaign.

 

• What started as a side hustle for Samuel Barnett is ending in fraud charges. The SEC says that Barnett, the CEO of SBB Research, a hedge fund he started in his dorm room in 2010, used inflated valuations to invest money raised from outside investors in structured notes. The windbreakers allege that Barnett and his Chief Compliance Officer Matthew Aven overcharged investors by more than $1.4M in fees.  

 

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