The Biggest Short

Plus: For Super Bowl ads, it’s out with crypto in with Doritos. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 7, 2023

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Good morning.

How can American farmers make hay this year? More corn, less beef.

Thanks to surging demand, lower fertilizer prices, and Russia’s invasion cutting off Ukrainian corn from the global market, US farm owners will be devoting much more of their acreage to those golden stalks this year. The news is different for ranchers though, with Tyson Foods telling investors on its Monday earnings call that it has lowered guidance on beef sales this year thanks to plummeting consumer interest in red meat, reflected in demand for cattle feed falling to its lowest level since 1962.

Morning Brief

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Adani is still stuck in crisis mode.

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Are you ready for some commercials?

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All that is gold does not glitter, not all those who spin out are lost.

International

Adani Continues to Reel From Damning Short-Seller Report

The blast radius from Hindenburg Research’s report alleging stock manipulation and money laundering at India’s most powerful conglomerate is expanding beyond the empire of Asia’s no-longer richest man and threatens the entire Indian economy, the world’s fifth largest.

Amid an ongoing share price freefall that has erased 50% (or roughly $100 billion) of value from its network of seven publicly-listed companies, the Adani Group announced Monday it is hoping to quell some of the fires by prepaying a $1.1 billion loan backed by shares in three of its other companies. But with founder Gautam Adani’s close business ties with India’s ruling party increasingly called into question, the firm may have much larger problems on its hands.

Mr. Anderson, Welcome Back

As a short-seller, Hindenburg founder Nathan Anderson literally expects his firm’s explosive investigative report to result in some fallout. But while the aftermath of Hindenburg’s previous exploits has resulted in relatively small-scale consequences — a notice from the SEC here, the criminal conviction of a blatantly hucksterific EV CEO there — by targeting Adani, Hindenburg isn’t just going after small-scale corporate malfeasance. Instead, Anderson is taking on a massive corporation that underpins the infrastructure of one of the biggest countries in the world.

That means lots of government ties and connections, which means quite a messy fallout. While the loan prepayment — completed well ahead of its maturity in September 2024 — may comfort some shareholders, it’s not likely to settle the corporation’s larger problems. Last week, Adani made a dramatic u-turn, calling off a $2.5 billion share sale amid a volatile market. Now, it could be facing investigations from India’s opposition party:

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Protests erupted in India on Monday, with opposition leaders calling for an investigation into investments from state-backed entities, the Life Insurance Corporation (LIC), and the State Bank of India (SBI), into various Adani companies. Gautam Adani and Prime Minister Narendra Modi hail from the same region and have long been viewed as allies.

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LIC owns roughly a 4% stake in Adani Enterprises, 6% in Adani Total Gas, and 9% in Adani Ports. Meanwhile, SBI has an exposure of around $3.3 billion to Adani Group, worth roughly 1% of its total loan book.

Hindenburg is now getting namechecked in the Indian Parliament, with many politicians using Anderson’s report to press Modi for answers on what his relationship is with Adani. “The pride of India is not the wealth of one industrialist,” Mahua Moitra, an opposition MP, told the Financial Times on Friday. “There are huge issues flagged now that may affect millions of retail investors in this country.”

Out of Stock: India’s stock exchanges, desperate to prevent any broader contagion of Adani’s sharp sell-offs, have instituted new measures to reduce the amount the stocks can move in a single day. Adani Transmission, Adani Green Energy, and Adani Total Gas had their circuit limits reduced from 20% to 10% a week ago, while the latter two had caps imposed again to 5% to start this week. Traders, however, continue to hit the limit — proving the invisible hand of the market will always exert its influence, handcuffs be damned.

– Brian Boyle

Advertising

Crypto Absent from Super Bowl Ads

One year after the Crypto Bowl, it’s out with the new and in with the booze for Super Bowl commercials.

Fox, which has broadcasting rights this year, has sold all of its advertising airtime for Super Bowl LVII, sticking with the old reliables of beer and snacks, with crypto nowhere to be found.

I Think I’ll Have Myself a Beer

Roughly 100 million viewers tune into the Super Bowl each year. People who don’t even like football will often watch just to see the bevy of star-studded commercials and wild halftime shows. Not everyone is rooting for Philly or KC, but everyone is rooting for Doritos and Rihanna, so those commercials can run companies more than $7 million just for 30 seconds of air time.

Yes, we all remember the now doubly ironic Larry David commercial from last year’s Super Bowl where he gives his whole “Ehhh, I don’t think so” schtick to someone trying to sell him on crypto exchange FTX. But also airing between touchdowns and Dr. Dre-led performances were ads for Coinbase, Crypto.com, and eToro.

But like the 1986 Chicago Bears compared to the 2022 Chicago Bears (humble burn), oh, how the mighty have fallen:

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Mark Evans, executive vice president of ad sales for Fox Sports, told the Associated Press that at least three crypto companies were interested in buying advertising this year, but once FTX imploded in November, they all started to back out of the deals. “There’s zero representation in that category on the day at all,” he said.

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Beer has always been at the forefront of Super Bowl advertising, but for the last three decades, it’s exclusively been the stomping ground of Budweiser and its iconic Clydesdales. This year, parent company Anheuser-Busch has forfeited that exclusivity, opening up the field to new players including Heineken, Diageo, Remy Martin, and Molson Coors, the last of which is offering a pool of $500,000 to those who successfully guess what will happen in its commercial.

May the Force Be With You: You know what’s weird? The fact that some advertisers will actually debut Super Bowl ads online before the big game. Already we can watch Alicia Silverstone reprise her Clueless role of Cher Horowitz in an ad for Rakuten, or Tony Romo do his “best” Bill Murray impression in this Michelob Ultra ad. Why not just save it for the actual day? Well, in 2011 Volkswagen debuted its Star Wars-infused ad. The commercial reached 8 million views on YouTube in the week before game day, so other advertisers followed suit. As the Mandalorian would say, this is the way.

-Griffin Kelly

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Mining

World’s Biggest Gold Miner Makes $17 Billion Acquisition Bid

(Photo Credit: Bullion Vault/Flickr)

There’s gold in them there… mergers and acquisitions.

Newmont, the world’s largest gold miner by output, announced Monday it’s making an offer for Australia’s biggest miner, Newcrest, valuing it at $17 billion. Gold M&A has been steadily gaining traction over the past few years, and if the deal is successful it could effectively result in a duopoly between Newmont and rival miner Barrick.

Reunited And It Feels So Gold

Up until 2020, the value of gold had spent about a decade in the doldrums thanks in large part to plunging demand. But then 2020 rolled around and sudden global uncertainty (we’ll give you three guesses what caused that) juiced the price of the shiny yellow metal, which in turn led to a rash of M&A in 2021 totaling $21.3 billion — which gives you some idea of just how big Newmont’s play for Newcrest is.

The deal is subject to approval by both Newcrest’s board and Australia’s government, but if passed it would represent a reunion. Newcrest began life in the 1960s as Newmont’s Australian division and was spun out in 1990. It’s already been a rumored acquisition target for both Newmont and Barrick in the past, and last year it started to look particularly appetizing to bigger companies hungry for more consolidation:

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Newcrest’s stock fell just shy of 50% between April and September 2022 and its CEO stepped down in December. It has managed to make up some ground since October, however, and is currently trading above its stock price this time last year.

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The proposed merger would also list Newmont on the Australian stock exchange, with Newmont shareholders controlling 70% of the new company.

Not everyone is happy with the proposed deal. “Newcrest is very cheap. There is dilution risk,” Simon Mawhinney, chief investment officer of Newcrest’s largest shareholder Allan Gray, told the Financial Times.

Dagnabbit, Shareholders Won’t be Hornswoggled!: Newmont’s $17 billion offer represents a 21% premium on Newcrest’s stock, lower than a typical M&A premium. Mawhinney added the merger ratio was “too cute by half.” There is also the chance that Barrick or other large firms could swoop in and start a bidding war, so —like old-timey prospectors fightin’ for a plot— investor relations could get even spicier.

– Isobel Asher Hamilton

Extra Upside

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Don’t want to crane your neck? It’ll cost you: AMC says it will charge theater tickets differently depending on seat choice.

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Spill the Tea: The controversial gossip tabloid The National Enquirer is being sold.

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