An Amazon Wannabe Wobbles

Plus: Need an elite NFL QB? Got $50 million? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

May 5, 2023

Read in Browser

TOGETHER WITH

Good morning and happy Friday.

You may not be having 1929 flashbacks anymore, but we’re not out of the woods yet. This is a banking crisis, after all, and midsized and regional banks are still feeling the worst of it.

After PacWest let it be known that it is “exploring strategic options”, the California-based bank saw its shares plummet by just over 50%. Meanwhile, Western Alliance’s own share price evaporated by some 38%, while Comerica and Zions Bancorp both suffered double-digit skids. It’s almost beginning to look like Jamie Dimon’s assurances last week that “this part of the crisis is over” only applied to his acquisition of First Republic.

Morning Brief

•

Shopify came at the king, missed.

•

China’s e-commerce heavyweights go international.

•

The cost of doing sports business.

E-Commerce

Layoffs Hit Shopify as it Rethinks Logistics Strategy

Shopify may have overstuffed its cart.

On its quarterly earnings call on Thursday, the once-upon-a-time e-commerce darling announced a mass layoff of 20% of its staff, as well as the sale of its logistics division and warehouse robotics operation. It’s a delayed but no less severe hangover from the company’s pandemic glory days.

Vertical Disintegration

Let’s tip our hat: Shopify dared to come right at the king — but it never made it across the moat. In February of 2022, amid slowing growth thanks to waning covid cases and shoppers returning to actual stores, company president Harley Finkelstein announced plans to Amazon-ify its business. He laid out an ambitious goal to become an all-in-one e-commerce colossus by building out a sophisticated fulfillment network that could make deliveries to the vast majority of Americans with Prime-like efficiency.

The strategy culminated in the $2.1 billion acquisition of logistics specialist Deliverr almost exactly one year ago. But one trip around the old Gregorian later, and it’s clear that competing with Amazon and its massive, decades-old logistics network is easier said than done. In a blog post announcing the moves Thursday, CEO Tobias Lütke likened the once-hyped logistics venture as a mere “side quest” for the e-commerce platform. Make that one expensive side quest:

•

The logistics business is being sold to Flexsport, a decade-old freight and logistics startup with over $2 billion in funding; Shopify is receiving a 13% stake in Flexport, most recently valued at around $8 billion, as part of the deal. It’s also selling its warehouse robotics operation, which largely came from a $450 million acquisition of 6 River Systems in 2019, to British grocery fulfillment company Ocado Group.

•

Thursday’s layoffs, which amount to roughly 2,000 employees, marks the second major headcount culling for the company in the past 10 months after another 1,000 or so jobs roles were slashed late last summer. It’s a snapback after the company tripled its workforce during the pandemic.

Shopify’s share price jumped nearly 24% on the news, with Baird analyst Colin Sebastian writing in a note, “We applaud management for making difficult decisions that set the company up better for long-term success, although this is a significant pivot.”

On Second Thought…: Flexport has a much more, shall we say, realistic vision of how it stacks up against Amazon, even when you add in the roughly 50 warehouse and package sorting centers it just scooped up. Instead of being a competitor of the e-commerce kings, CEO Dave Clark, himself a storied Amazon veteran, told The Wall Street Journal that Flexport will be best positioned as “an extension” of the Bezos operation. Beats being an afterthought. Pandemic optimism, meet post-pandemic pragmatism.

– Brian Boyle

E-Commerce

China’s Online Shopping Giants Look Westward

The “short-term headwinds” Amazon CEO Andy Jassy has expressed concerns about are blowing harder.

PDD Holdings, the company behind the discount shopping app Pinduoduo, has moved its headquarters from Shanghai to Dublin, signaling a major push into international e-commerce. Simultaneously the online commerce wing of Alibaba is mulling a US IPO, sources told Bloomberg. Perhaps SoftBank’s public listing of chipmaker Arm just gave them a bad case of IPO FOMO.

The Irish Entrance

Pinduoduo is one of the biggest e-commerce operations in China, a market that has long been able to subsist largely off itself. But China’s economy is no longer the unstoppable growth juggernaut it used to be. So, inspired by the huge success that discount online fashion retailer Shein has found overseas, PDD Holdings launched a new international shopping app called Temu in 2022. According to market research firm YipitData, there was $387 million traded on Temu’s platform in March alone.

Having germinated in the US, Temu arrived in several European markets last month, and will now solidify that presence with its new Dublin HQ. Ireland has long been the preferred EU base for US tech companies, due to its extremely inviting corporate tax structure. PDD Holdings setting up camp lets the company pursue its international ambitions, and brings a few other advantages:

•

A European HQ gives PDD Holdings a modicum of geopolitical cover as US-China relations steadily deteriorate.

•

Settling in Dublin may also allow PDD Holdings to list Temu separately from its core business overseas, Shanghai-based attorney Eugene Weng told the Financial Times.

Temu’s success may well hinge on just how far it can distance itself from Pinduoduo, which was suspended from the Google Play Store in March. Google said it had booted the app after finding malware on some versions of the app outside of the Play Store itself. For China-based tech companies, even a soupçon of suspicious code is a big political problem, just ask Huawei or TikTok.

Who Needs Forty Thieves When You Have IPOs: Alibaba, a goliath of Chinese e-commerce, hexsected itself (no, that’s not a real word but what the heck, it’s Friday) in March, dividing into six privately-run entities. The e-commerce entity that spun out as a result of that split is the one reportedly considering a US IPO as a way of tapping into international funds. But even if Softbank’s Arm does go public, which is by no means certain, that still may not be enough to defrost an ice-cold IPO market.

– Isobel Asher Hamilton

SPONSORED BY CALIBER

Bank Your Gains, Nix the Pain

If you’ve sold a major asset like a business, real estate, or even a meaty slice of stocks, you know the dreaded capital gains tax can pour a bucket of ice water on what would otherwise be a thrilling windfall.

Luckily, Caliber can show you how to defer taxes on recent capital gains until 2027 – and earn a return on those deferred taxes in the process.

Even if you’ve already filed your 2022 taxes, there are still opportunities to defer and enjoy the benefits of tax incentives on your gains from that year. Plus, if you grab Caliber’s investor guide now, you’ll also get a no-cost Investor Strategy call from one of their experts.

The deadlines to reduce your tax bill are expiring soon, so access the guide and connect with Caliber now!

Sports

NFL Teams Pay Outrageous Salaries in an Era of Mega Deals

(Photo Credit: All-Pro Reels/Flickr)

What does an NFL QB with an elite arm have in common with a 17th-century tulip? Both are emblematic of an economic mania.

With America’s favorite sports league seeing its bottom line rise consistently it’s becoming commonplace for the upper echelon of NFL quarterbacks to receive contracts that pay out more than $50 million a year, The Wall Street Journal reported.

Big Pay Day

Jalen Hurts and the Philadelphia Eagles couldn’t clinch the brass ring from the Kansas City Chiefs at this year’s Super Bowl, but the Houston-born QB is still one of the most prized players in the league. Just last month, the Eagles offered him a five-year, $255 million contract, the biggest in NFL history. Only two weeks later that record was shattered when the Baltimore Ravens gave Lamar Jackson a $260 million deal for five years. And that record isn’t likely to last long either, the WSJ’s Andrew Beaton argues.

“The Cincinnati Bengals’ Joe Burrow and the Los Angeles Chargers’ Justin Herbert are both eligible for extensions this off-season. It wouldn’t be surprising if not one but both of them break the record,” he wrote.

And it’s not just the NFL. Whether it’s players or entire teams, mega-deals are on the rise all over sports:

•

Aaron Judge just re-signed with the Yankees for nine years at $40 million per season. The Washington Commanders, who came in last place in the NFC East in 2022, are being sold for $6 billion. The UFC offered former heavyweight champ Franci Ngannou $8 million for one fight, and he still walked away from it.

•

Many expensive offers these days are propped up by increased revenue thanks to lucrative broadcasting deals. At the end of last year, the NFL and YouTube signed a multi-year streaming deal for the league’s Sunday Ticket package at $2 billion a year.

Thrifty Boys: Some sports team owners remain frugal, though, like actors Ryan Reynolds and Rob McElhenney, who bought Wales’ Wrexham soccer club in 2021 for just $2.5 million. Granted, Wrexham is no Manchester United, which is expected to sell for billions in the near future. At the time, Wrexham competed in the fifth tier of the English soccer league and brought in about $2 million in revenue each season. The pair reinvigorated the team, which won the National League championship and secured promotion into the fourth tier EFL League Two, and a €450,000 award this season. Where others saw a money pit, the Deadpool and It’s Always Sunny in Philadelphia stars saw a fixer-upper.

– Griffin Kelly

Extra Upside

•

Let’s get it on: Ed Sheeran didn’t steal from Marvin Gay, jury rules.

•

Lock it up tight: Nearly half of America is worried about their money in banks, poll says.

•

If there was a tool that could show you where every stock is headed the next 1–3 days, would you try it? We’ve all heard ChatGPT predicted past market moves (you know, the A.I. that’s making all the buzz.) But their neural network capabilities can’t touch those of VantagePoint’s A.I. Why wait for the future, when forecasting trends with up to 87.4% proven accuracy is at your fingertips right now? See the A.I. in action [free] right here.*

*Partner.

Just For Fun

Taking it easy.

That’s normal, right?

Have a great weekend!

ADVERTISE // CAREERS

No longer want to receive these emails? Unsubscribe here.

//campaignmonitornewsletter.everestengagement.com/ea/BntD2QJCyg/?e=postie@btcnews.com.au’ width=’1′ height=’1′ style=”margin-top:0 !important;margin-bottom:0 !important;margin-right:0 !important;margin-left:0 !important;padding-top:0 !important;padding-bottom:0 !important;padding-right:0 !important;padding-left:0 !important;border-width:0 !important;height:1px !important;width:1px !important;-ms-interpolation-mode:bicubic;” />