The Saturday - 5/8/21 Edition
Volume 2, Issue 17
Good morning!
With all due respect to Michael Jordan and the great work done by the folks over at ESPN for The Last Dance documentary, Tiger King was robbed of the 2020 Emmy for Best Documentary.
Joe Exotic was entertainment at its best and, without going into the merits of the case, his 22-year prison sentence was a difficult blow to those of us who are yearning for more Tiger King content. We can’t get enough.
Anyways, here’s some Tiger King content we could’ve done without:
[Carole Baskin is] launching her own cryptocurrency called $CAT. […]
$CAT “is not a currency for investment, but rather is a purr-ency of our fans to show their love for the cats. Future plans include a big cat metaverse for virtual visits with the cats … and NFTs, which are launching in about two weeks,” said Baskin.
C’mon!
We already have a dog-inspired meme coin with a greater market cap than General Motors… who ever asked for a purr-ency?? Per Baskin:
“I’m investigating cryptocurrencies because I am concerned about the volume of US dollars that are being printed and distributed with nothing to back them up. I like the idea of putting the power of money in the hands of the people, rather than banks and governments.”
Yeah. Better to have that power in the hands of the woman who (may or may not have) put her first husband in a meat grinder!
*sigh*
It’s Saturday May 8, 2021.
Vegas Baby
Caesars Entertainment Inc. - who operates Caesar’s Palace, Bally’s Las Vegas, Circus Circus, Paris Las Vegas, Planet Hollywood, and many, many more casinos - reported earnings on Wednesday. Analysts expected the casino group to report 2021Q1 losses of $356M, but the losses ended up being larger than expected: $423M.
That’s only half the story though.
After posting 85% weekend occupancy rates in Q1, Caesars now expects to achieve 97%-98% weekend occupancy in Q2.
As for weeknights? Those were down significantly due to conferences being cancelled. Well, conferences are back:
Group and convention room night bookings for the second half of the year are pacing up about 20 percent compared with 2019 bookings, and 2022 group revenue on the books is pacing up about 15 percent.
Investors are wagering that the worst is behind; Caesars finished the week up 16% from its Tuesday, pre-earnings low.
Digital Yuan
Ant Financial is a frequent subject of discussion in The Saturday and rarely for good reasons: cancelled IPOs, a disappearing CEO, etc., etc. We have a different story this week.
Despite China’s size and its economic dominance, its currency (the yuan) remains fairly unpopular globally. In 2020, for example, the yuan accounted for only 2% of global foreign reserves, behind the Dollar, the Euro, the Yen, and the Pound.
In a bid to drum up demand for its currency and to spearhead a “de-dollarization” effort, China is turning a popular tool: the blockchain.
Since 2014, China has been developing a digital Yuan, e-CNY. By moving away from traditional currencies and going digital, the country hopes to maintain better monitoring of transactions, inflows and outflows of Yuan, and to bypass the international settlement system dominated by the dollar.
On Sunday, Ant Financial announced that it had been partnering with the People's Bank of China to help implement and roll out e-CNY.
For Ant Financial, this brings about some good press after months of trials and tribulations.
For China, Ant is a strategic partner that can provide e-CNY tremendous reach upon launch, thanks to its more than 750M customers. Ant alone controls 54% of the country’s e-payments market and Tencent controls 40%, so e-CNY could get adopted very quickly by signing up the two tech giants.
In fact, trials have already begun.
JD.com, the Chinese $100B+ e-commerce behemoth, recently began accepting e-CNY for certain goods and has also been paying some employees in the state-controlled and minted digital currency.
Elsewhere, on Wednesday, the IMF reported that the US dollar’s share of global reserves dropped to a 25-year low. Take that as you will.
A new age currency war may be on the horizon.
Pull Forward
In 2019, reports came out that the Securities and Exchange Commission and the Department of Justice were investigating apparel company Under Armour for aggressive accounting practices.
On Monday, Under Armour finally shook off the regulatory overhang, by agreeing to pay a $9M fine, in a settlement that did not require it to admit wrongdoing. So what exactly did they do?
Basically, Under Armour (allegedly) engaged in yearslong efforts to pull forward future quarters’ sales to current quarters’ income statements, in a bid to boost revenues.
It did this in two ways.
In some instances, clients would order next season’s inventory to be delivered in a few months, but Under Armour would book that revenue to the present billing period.
In other, more overt instances, the company expressly asked clients for help in meeting quarterly sales goals, offering steep discounts in return. According to the settlement order:
In one case, in September 2016, a company that was asked to commit to buying more goods replied: “We just brought a bunch of your goods in early to help out your quarter…Now you want more…More..More..more.. 30% [price discount] please.”
Under Armour gave the company a 25% discount and an extra month to pay, the SEC said in the order.
Not a great look.
But also… $9M? That’s not even 200 Bitcoins!
Prison Time
Speaking of emails that don’t look great, we previously discussed a classic private equity vs. hedge fund fight centering around MyTheresa, the former Neiman Marcus subsidiary that IPO’d in January.
Here’s a recap, from Institutional Investor:
In May 2020, the luxury retail chain Nieman Marcus filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. [Dan] Kamensky […] applied and was appointed to be a member of the retailer’s unsecured creditors’ committee at the onset of the bankruptcy.
During the bankruptcy process, the creditors’ committee negotiated with the owners of Neiman Marcus to obtain certain securities, known as MyTheresa Series B Shares[…].
In July 2020, Kamenksy negotiated with the committee to offer 20 cents per share — on behalf of Marble Ridge — to purchase MYT securities from “any unsecured creditor who preferred to receive cash, rather than MYT securities,” according to the statement. Then, on July 21, 2020, Kamensky “composed a six-word Bloomberg chat message that ruined his life.”
So Kamensky was a member of the creditor’s committee, a gig that comes with some fiduciary duties to other creditors.
Shortly after he offered 20 cents to buy MyTheresa securities, however, Kamensky got wind that Jeffries was ready to offer as much as 30 cents. As a member of the creditor’s committee, that’s good news. As a rival bidder, it’s not so good.
Threatening to cut-off his own relationship with Jeffries, Kamensky sent the bank the following message:
Stand DOWN. DO NOT SEND IN A BID.
And followed it with:
They’re going to say that I abused my position as a fiduciary, which I probably did, right? Maybe I should go to jail. But I’m asking you not to put me in jail.
Well…
Kamensky was right about one thing: yesterday, he was sentenced to six months in prison for bankruptcy fraud.
Some DMs are better left unsent.
Have a great weekend!