WTF is a Carbon-neutral IPO
Quick Hits From GRIT
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*as of 4pm ET, 9/2/21
Home prices 41% higher than peak 2006
Home prices rose 18.6% in June, which topped May’s 16.8% increase. That’s the biggest annual gain since 1987! Supply has been creeping up, but not nearly fast enough to keep up with persistent demand — supply was down 12% in July YoY.
As GRIT subscribers know, numbers like these are a real gut punch to first-time homebuyers. If you missed it, check out my breakdown on the supply & demand levers of the real estate market! Part 1 here & part 2 here.
It’s not just in North America: a poll of over 100 property market experts from 8 important markets (U.S., Canada, Britain, India, Australia, New Zealand, China and Dubai) showed 80% believed housing affordability would get worse or stay the same. They expect that housing inflation will outpace wage gains thanks to continued low interest rates. Plus building material, labour and lumber costs are all more likely to go up than down.
GRIT’S TAKE: Some hopeful news — the White House will soon be releasing a plan that’s meant to encourage construction of entry-level homes and rental properties (read: give first-time homebuyers a fighting chance).
GRIT’S ACTION: Own your home
2. DEALS & IPOs
Carbon-neutral Allbirds’ Sustainable Public Equity Offering
Allbirds, the environmentally conscience direct-to-consumer sneaker maker has filed for an IPO. They’re seeking a $2B valuation, which might be a little rich for a company that has never turned a profit, and doesn’t expect to anytime soon. The business lost $14.5M on $193.7M in sales in 2019, and $25.9M on $215.3M in sales in 2020.
The company prides itself on its sustainability — their sneaker’s carbon footprint is 30% less than the big names like Adidas and Nike, and they’ve been carbon neutral since 2019. This has proved to go a long way with younger shoppers (see sales numbers) who put a lot of emphasis on sustainability. They also happen to be Allbird’s target customer.
So what is a Sustainable Public Equity Offering?
GRIT’S TAKE: Allbirds is a B-Corp, which means that the board is “legally bound to balance profits and purpose” — they are pledging to be transparent and hold themselves accountable for hitting environmental, social, and governance (ESG) targets.
GRIT’S ACTION: Long two Carbon deals. One I am up 15x on, the other about to close a private oversubscribed $15MM financing!
3. STOCK MARKET
Robinhood’s loss = PayPal’s gain?
On Monday, SEC Chariman Gary Gensler said that payment-for-order-flow (PFOF) has “an inherent conflict of interest” and told Barron’s that an outright ban is “on the table.” That sound you just heard was Vlad Tenev shaking in his boots.
PFOF, lest we forget, is how Robinhood makes roughly 75% of its revenue. The rest is from Dogecoin. Shares fell nearly 7% on the news.
As if that weren’t enough bad news for one day for the controversial trading platform, PayPal announced that it was thinking about getting into the stock-trading game itself. They’ve even already created a division, Invest at PayPal, and hired brokerage industry veteran Rich Hagen to steer the ship.
GRIT’S TAKE: It’s safe to say PayPal won’t be using the PFOF playbook for their platform. Their likely to partner with an existing broker, or they could try to get approval as a brokerage firm, but that would be a longer, tougher road.
GRIT’S ACTION: Long Bitcoin and looking for an entry point on Ethereum – please help ; )
The transition to clean energy is dirty
Stop me if you’ve heard this before: demand is drastically outpacing supply. Natural gas has been no stranger to this phenomenon and the outlook isn’t pretty.
European gas rates, for example, reached a record this week, with the costs per megawatt hour nearly tripling from its average in August. Asia is currently seeing all-time highs in demand for this time of year. Worldwide, demand is forecast to jump 7% from pre-COVID levels by 2024, and there are few liquefied natural gas (LGF) projects in the pipeline.
Why? One reason is that end-users are skeptical of committing to long-term supply deals given the macro trend away from emissions. Can you blame them?
GRIT’S TAKE: Net neutral targets are reachable, but natural gas will be the unavoidable resource that powers the global effort to get us to clean energy, so don’t expect prices to come down anytime soon. Quite the opposite, in fact.
GRIT’S ACTION: Carbon is the way. Subscribe to see what I’m investing in (public & private)!
The blockchain is going mainstream
It looks like this crypto and blockchain thing is catching on, eh? Big names across industries (and governments) are on the hunt for young, crypto & blockchain experienced talent.
Amazon and Apple (perhaps you’ve heard of them) have each had job postings in the last 6 months related to cryptocurrencies and alternative payments. JPMorgan began accepting applications for blockchain software engineers, developers, marketers and auditors in July.
Other big names include the Bank of England who had 7 central bank digital currency job postings in April, and Japan’s Ministry of Finance which is thinking about boosting staff to address the inevitable.
GRIT’S TAKE: Jack Dorsey’s favorite company (hint: it’s not Twitter) has even BIGGER plans — to build a decentralized Bitcoin exchange. The ultimate goal is for Square users to be able to fund any Bitcoin wallet using fiat currency, even if the wallet isn’t hosted by a centralized exchange or service.
GRIT’S ACTION: If you still don’t own any, I am sorry, I can’t help you.
Disney seeks to leverage ESPN brand in booming gambling industry
ESPN is synonymous with sports, but the fastest thing growing in sports is betting, and that’s an area the media giant is largely missing out on. So how does a company founded by a family-friendly mouse capitalize on a controversial industry without getting its hands dirty?
$DIS has reportedly met with major sportsbooks like DraftKings and Caesars (both of whom they already have marketing partnerships with) to discuss rights to use the ESPN name for branding purposes and possibly rename their books after the worldwide leader in sports.
Disney is looking to squeeze at least $3B out of a several year deal that would include some caveats — like requiring the lucky suitor to spend X amount of advertising dollars on ESPN’s platforms through an exclusive marketing commitment.
GRIT’S TAKE: Gambling has long been hampered by regulations, but a name like Disney embracing sports-betting might just give the industry the credibility it needs for full mainstream acceptance.
GRIT’S ACTION: Long Disney & DraftKings.