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That’s so metal

The BeefThe Beef ·

Good morning everyone,

Today we’re discussing President Trump’s change of heart on aluminum and steel tariffs set to be imposed on Canada and Mexico, and why it was good to be in the food delivery business last week.

Enjoy the next 4 minutes and 22 seconds.

Keep raging,
Jeff & Jason


THE MARKETS


THE HEADLINES

That’s so metal

Related image

“Love thy neighbor” – the Donald, probably

The White House announced that it will delay its decision to propose auto tariffs on the European Union and Japan for six months. The announcement comes as the US is in the early stages of trade talks with its supposed friends overseas.

And that’s not all

Later that day, the Donald announced that a deal was made to exempt its neighbors to the north and south (hint: Mexico and Canada) from a 25% tariff on steel and a 10% tariff on aluminum. The art of the deal, indeed.

Members of Congress had indicated that they would not vote for the passage of the United States – Mexico – Canada Agreement (USMCA) without these ‘local’ tariffs removed. It is now the hope of the administration that the deal will pass without issue. Fat chance. Canada and Mexico responded by stating that they would reciprocate within two days of the ink drying.

All of this comes on the heels of trade talks with China all but falling apart and sending markets into a tailspin.

Bottom line: “F*ck you, f*ck you, f*ck you, you’re cool, and f*ck you. – Donald Trump, probably.” – Jason


Too many cooks in the kitchen

Institutional investors and VCs are throwing money at food-delivery startups like well-to-do parents throw money at their troubled children that they sent away to boarding school “to protect the family name.”

Exhibit A

UberEats and Grubhub competitor, DoorDash, is raising $500M at a $13B valuation. Backers of the latest round include Sequoia, Dragoneer and SoftBank’s Vision Fund (… obviously). This comes just 3 months after a $400M round brought its valuation to $7B.

Why is double D attracting so much money?

One word: SoftBank. After struggling to attract investors in 2016, a bet by SoftBank seems to have christened DoorDash the belle of the ball. From March 2018 (when Masa Son made his first investment) to February 2019, DD’s share of total consumer spending on delivery jumped from 15% to 28% making it the market leader in the US.

Exhibit B

Not to be outdone, Jeffrey Commerce made a splash of his own in the food delivery space late last week. Amazon led a $575M round in UK food courier, Deliveroo. The company is currently valued at $3.5B. The creator of Askville (we didn’t forget, Jeff) was joined by T. Rowe Price and Fidelity.

So these companies must be making a ton of money, right?

Not exactly. Food delivery and logistics are costly and massively unprofitable, hence the gobs of cash needed to keep the businesses afloat. In fact, some restaurants, such as Olive Garden have bucked the delivery trend altogether. And shares of GrubHub which IPOed in 2014 has fallen more than 60% since hitting an all-time high last year.

But for investors like Amazon, this is most certainly a long term play that will pay dividends in its quest to disrupt the elusive “last mile” or delivery.

Bottom line: “FOOD IN LOBBY! COME DOWN NOW!” – every DoorDash delivery guy


Zip/Tuck

Zipline, the do-good drone delivery service you probably never heard of just closed a  $190M funding round making it the first in its space to reach a valuation of over $1B.

Rather than focusing on air dropping a cheesy-gordita crunch to a stoned millennial like Google and Amazon aspire to, Zipline focuses on getting medical supplies to patients in underdeveloped areas. The companies two largest operations are currently delivering to Rwanda and Ghana, and it hopes to expand within Africa, the Americas, and parts of Asia aiming to serve 700M people in the next five years.

Technology and e-commerce companies have struggled with the “last-mile” and the same is true for getting basic supplies to hard to reach areas of the world. Zipline is able to deliver up to four pounds of blood, vaccines, and other medications to partnering health clinics and hospitals.

Who’s got your back?

The drone-delivery company has some big backers helping fund its operations, most notably, the appropriately named The Rise Fund. While it is an awesome humanitarian effort, these types of ventures don’t exactly turn a profit. Oh, so just like other “wildly successful” startups?

Bottom line: “I’ve got a warm, fuzzy feeling all over. Is this what faith in humanity feels like?” – Jason


IN OTHER NEWS

  • Uber got the party started early on its IPO day. Employees at its San Francisco headquarters reportedly began drinking at 5:30 AM PT. The parties allegedly led to one employee resigning after a “verbal outburst” and another employee being stopped from driving home. Wonder if they called them an Uber? Celebrations were a bit premature, as the firm’s stock dropped 6.7% on opening day.
  • Elon Musk, the man who builds rockets for fun, is calling for Tesla employees to dial back spending in a “hardcore” way. In a company-wide email, Musk said that the $2B Tesla just raised this month would only keep the company afloat for 10 months if spending isn’t kept under control. In order to help this process along, Tesla’s CFO will be reviewing every page of expense reports, while Musk himself will spot check every 10th page. No, seriously.
  • Nike, which is facing accusations that it had been cutting the pay of female athletes during their pregnancies, announced Friday that it would be including written terms in sponsorship contracts supporting athletes during that time. On May 12th, runner Alysia Montaño published an op-ed accusing Nike of pausing her pay while pregnant.
  • Target’s long-awaited partnership with Vineyard Vines premiered over the weekend, and fans were excited, to say the least. Douchey elitists lined up in their best pastels hours before stores opened, and rushed the store upon opening, in scenes reminiscent of Black Friday. That is, of course, If people with Nantucket houses did that kind of thing. According to some shoppers, the online availability of some of its new clothing only lasted minutes, which undoubtedly resulted in an influx of calls to “speak to the manager.”
  • Google will finally be refunding advertisers for ads purchased that ran on websites with fraudulent traffic, according to Alphabet. The move was sparked by a lawsuit accusing Google of withholding those refund payments. The company withheld about $75M in refunds linked to its products, citing technical difficulties between the different wings of Google’s ad operations department. The old “oh, what? I could have sworn I accepted that Venmo!”

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