AT&T’s Daunting Disconnect

Plus: Italian gasmen won’t let their PM gaslight them ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

January 26, 2023

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TOGETHER WITH

Good morning.

The blue bird’s feathers are coated in so much debt it resembles a seabird after an oil spill.

With $13 billion worth of debt still hanging over his purchase of Twitter, Elon Musk is looking to raise $3 billion in equity capital, according to WSJ. Musk is reportedly telling potential investors that he can make the social media company break even on a cash flow basis by the end of 2023 thanks to massive job cuts and controversial new products like Twitter Blue. Fundraising efforts might be stepped up now that Musk is finally done testifying in his own actual trial over Tesla… and funding — provided of course he can pull himself away from his own social media platform long enough to do so.

Morning Brief

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Hindenburg Research strikes at a new target.

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Landlines are strangling AT&T.

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Italy wages war on gas pumps.

Corporate Governance

Adani Sinks on Big Short-Seller Bet

Oh the humanity! And all the shareholders are screaming around here!

Investors searching online for Hindenburg yesterday may have come across that immortal newsreel narration of the 1937 zeppelin explosion. It’s too soon, however, to tell if disaster awaits the various businesses of Indian conglomerate Adani Enterprises, owned by Asia’s richest man, Gautam Adani, after they were targeted by famed short-seller Hindenburg Research. (As an ironic sidenote, Adani recently announced a new venture in the hydrogen fuel space.)

All the President’s Shell Companies

Hindenburg founder Nathan Anderson has made a name for himself as the extremely measured sworn enemy of deception, fraud, and overly-lofty promises designed to boost shareholder sentiment. Most notably, his firm was among the first to point out that upstart EV truck maker Nikola, once valued on the public market at $20 billion, was built upon an “ocean of lies” masking that its cars could barely even, you know, drive. A high-profile short-sell on Nikola’s stock, coupled with the release of a highly-detailed investigative report detailing Nikola’s shady practices, was soon followed by the conviction of its founder Travis Milton on charges of securities fraud. Nikola’s stock tanked, and Hindenburg, in turn, made a small killing.

Now Hindenburg is placing its biggest bet since Nikola’s crash on the seven different listed companies in the Adani empire, complete with yet another report sure to make Woodward and Bernstein blush. Hindenburg alleges that Adani, which has seen its flagship Enterprise company’s share price spike nearly 1,400% in the past three years and has its business tendrils in everything from energy to ports to data to defense, is “Pulling The Largest Con In Corporate History.” The report claims a long list of shady practices that paint the conglomerate as a house of cards:

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Hindenburg alleges that through Gautam Adani’s older brother Vinod, the company relies on a shadowy network of at least 38 shell companies headquartered in the Caribbean, Cypress, the UAE, and elsewhere to facilitate stock parking and stock manipulation as well as money laundering designed to bolster the balance sheets of its publicly listed companies.

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Anderson and co. also expressed concerns that key shareholders and promoters in Adani’s listed companies have placed a high proportion of equity as pledges for loans.

30 for 30: Since 2020, Hindenburg has bet against roughly 30 companies, Bloomberg reports. Collectively, the targets average a next-day loss of 15%, and a six-month loss of 26%, the outlet calculates. Adani’s listed companies dropped an average of 5% immediately following Hindenburg’s announcement, wiping out some $10 billion in value.

On Balance: Fraud allegations aside, Hindenburg argues Adani’s “key listed companies have 85 per cent downside purely on a fundamental basis owing to sky-high valuations.” Oh, the red ink!

– Brian Boyle

Telecommunications

AT&T Has a Lot of Useless Landlines Worth $25 Billion

(Photo Credit: Annie Spratt/Unsplash)

Is America’s biggest telecom getting clotheslined by the kitchen phone chord?

AT&T has seen healthy gains in its cellular and broadband arms, but it’s also become a victim of its landline infrastructure. You remember landlines, right? They’re like phones but with buttons, buttons you can actually touch.

OBSOLETE!

Using a landline today is like catching the game on TV with a pair of rabbit ears or shopping for a car with an 8-track player. It’s fairly outdated. Today, roughly 70% of American adults live in households that just use cell phones, according to data from the Centers for Disease Control and Prevention. That percentage has been steadily trending upward for more than a decade while houses with landlines have been plummeting.

On Wednesday, AT&T reported that it raked in $120.7 billion in revenue in 2022 and added 3 million new wireless customers. But it’s also sitting on a growingly useless landline operation that AT&T has valued at a $25 billion markdown. Ma Bell is likely hoping all that copper wire will fetch a pretty penny someday:

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By 2017, 20 states had given AT&T the go-ahead to cut landline services, and just last year, the company announced it will reduce its copper footprint by half by 2025 to beef up its fiber optic and 5g networks. It’s not like AT&T and other major communication providers are doing away with home phones entirely. Instead, they’re transitioning to setting up phones through an internet connection as opposed to a separate landline.

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In certain parts of Africa, landline development was so behind that many regions essentially leapfrogged the analog era and jumped straight into the cellphone age. In a 2015 survey, Pew Research found that roughly two-thirds of Sub-Saharan Africans owned cell phones but almost none had access to a landline.

Hang on, We Won’t Transfer Your Call: Back in the 1970s, there were 420,000 phone operators, but in 2021, that number was down to just 4,000, according to the Bureau of Labor Statistics. Starting this month, AT&T ditched 411 services for digital phone line users, leaving millions without directory assistance. Traditional landlines still have access to it, though. In a notice on its website, AT&T told customers looking for a phone number to Google it instead. “Nearly all of these customers have internet access to look up this information,” a spokesperson told CNN. Sure, we all use the internet, but the good part about 411 was that someone else did all the work.

– Griffin Kelly

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Policy

Italian Gas Station Owners Strike

If you are going to pick on Italian gas station owners, just make sure you drive an EV.

Gas station owners in Italy went on strike in protest against the government, which they say is scapegoating them for high gas prices.

Fiscal Comedown

Italy, like many nations affected by the upheaval caused by Putin’s invasion of Ukraine and the resultant skyrocketing of fuel prices, brought in subsidies to insulate its citizens from the worst of the economic fallout. Former prime minister Mario Draghi temporarily cut fuel taxes to keep the country’s Vespas and Fiats chugging along — but now there’s a new sheriff in town.

Prime Minister Giorgia Meloni took over from Draghi in October, and her fiscal policy to nearly no one’s surprise is a touch more bombastic. Her government not only decided to discontinue the tax cut in December, it also accused gas stations of speculative pricing to boot:

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Gas station owners instated strikes starting from 7 p.m. Tuesday lasting between 24 and 48 hours. Some stations put up signs to alert disgruntled, possibly stranded motorists, saying the strike was a “protest against the shameful, defamatory campaign” by the government.

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The strike has not majorly disrupted Italy’s roads, according to Bloomberg, as the spat between Meloni and the gas station owners’ unions has been noisy enough that drivers filled up on gas ahead of time.

Streikzeit! Italians weren’t the only Europeans hit by transportation-related strikes this week. Berlin’s Brandenburg airport canceled every flight due to take off or land there on Wednesday — around 300 in total — after airport employees and ground staff went on strike. Meanwhile, in the UK, where transportation and healthcare walkouts have abounded, Amazon workers went on strike for the first time ever in the country. What’s the European equivalent of a Mexican wave?

– Isobel Asher Hamilton

Extra Upside

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Butterfinger, Twix, and Oh My: Japanese whale meat vending machines spark outrage.

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Timed Bathroom Breaks: First UK Amazon strike exposes rough working conditions.

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