June 18, 2020

what is keeping us on the edge of our seats

June 18, 2020 • Estimated Reading Time: 7 minutes

empowering you with insights and information from the edge of today’s headlines

Business

One of the most basic rules of investing used to be — buy something of value. The market, however, seems to have taken on this rule as a personal challenge in the past week when it comes to Hertz.

Hertz, the car rental company, filed for Chapter 11 bankruptcy protection in March as the pandemic caused a dramatic decline in travel. When a company files for bankruptcy, the business attempts to restructure its financial obligations, and usually, the last people to get their money out are the common stockholders.

So why then, in June, did Hertz’ stock price trade from less than one dollar to over $5 (jumping close to 1000% in value) in under a week? The speculation seems to be that somehow Hertz got on the radar of the retail traders who have been day trading on fee-free apps (like Robinhood) using the market as a substitute for sports and gambling.

Hertz’s shares should have negative value when we take into consideration the bankruptcy and the value of their debt, but alas, what is a bored home trader to do?

Hertz decided to get into the action as well, and filed to issue up to $1B in new shares. The prospectus even states that the shares are effectively worthless, but if you can find a sucker to pay something for nothing, why not?

Fortunately, the SEC stepped in and questioned the sale, and Hertz cancelled its offering. The market may feel like a casino these days, but remember the house always wins.

What to watch: The stock market has recovered since the beginning of the pandemic-induced shutdown, and we expect to see positive economic indicators in the short-term as the economy reopens. Watch to see a new class of companies which prospered in the stay-at-home economy tap the market through IPOs — Robinhood, Postmates, and Lemonade, for instance. Airbnb, which had planned to go public pre-pandemic, has revamped its business model and may come back as well. Watch the SEC and investors’ reactions to public filings, especially following the WeWork fiasco.

Go Deeper:

Technology

On our radar: AWS and Slack announced a new collaboration earlier this month that allows for deeper integration of Amazon’s cloud services and Slack’s communication tool for enterprise customers. This agreement seems like a win-win for enterprise users and for both companies, as they attempt to gain more market share from Microsoft on both platforms.

Watch to see if the US House of Representatives questions Jeff Bezos regarding its enterprise platforms (or potential spin-off of AWS) at the antitrust oversight hearings. Will the Slack integration be another means for Amazon to suck in third party data or grow to monopolize the enterprise offerings?

Go Deeper:

Media

With the onset of the 24 hour news cycle (or are we down to 10 seconds), news has become indistinguishable from entertainment. The American media landscape has become extremely polarized, and one consequence is the rapid decline in freedom of the press.

Last week, we witnessed meltdowns from cancel culture in the newsrooms of the Philadelphia Inquirer, the NY Times and even Bon Apetit. What should be causing some concern, however, is the fact that a Steve Bannon associate was recently appointed as head of the US Agency for Global Media (USAGM). This change led to the firing of the heads of several Radio Free organizations and the resignation of high profile professionals at Voice of America. The USAGM was created with editorial independence from the White House. However, keep your eyes and ears out to see how the US is positioned overseas and if the agency becomes a state-sponsored propaganda tool around the US election.

Overseas, freedom of the press is also getting tested — in the Philippines, an activist, journalist and frequent critic of Duterte administration, Maria Ressa, was convicted of cyberlibel and sentenced to up to six years in prison.

Raising our eyebrows: An attorney representing Fox News stated yesterday in front of a US District Court, that “Tucker Carlson has absolutely no obligation to investigate the truth of any statements before he makes them on his show, and his audience does not expect him to report facts.”

News is becoming entertainment as we have more outlets to grab our attention. Fact checking is becoming impossible and irrelevant as we welcome “alternative facts.” Watch for extremes to rise up around the US election, and potentially a business model pivot from media organizations as they attempt to survive the post-pandemic and post-truth landscape.

International

While most of us have been head down in pandemic news and US politics, tensions are heating up in Asia.

  • North Korea literally blew up the building it uses as liaison office with South Korea. We suspect this show of raw power was meant to remind the world that North Korea doesn’t take kindly to bad press, has been building up its nuclear stockpile and wants in to the world economy.

  • India and China had a small but deadly border skirmish over disputed territory in the Himalayas. Tensions are rising within both countries and we hope negotiations can lead to de-escalation. If the tensions rise, the fall-out from this conflict could be extremely severe as both countries have strong, nuclear militaries, economic might and leaders who like to tout their manhood.

Culture

Twitter released a new feature yesterday allowing some users to record 140 second voice tweets. Personally, I’d rather leave my audio listening to podcasts and Spotify, but I guess those who are too lazy to type or too visually-challenged for TikTok, might prefer this method of engagement. As Vice points out, voice memos are harder to moderate, so Twitter may have opened up a new can of worms when it comes to online harassment.

What to watch: Maybe the voice tweets will help Twitter become more of an inter-personal platform like WhatsApp or iMessage, although you can’t reply with a voice tweet yet. Or maybe this new functionality will be a goldmine for Sarah Cooper.

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