It’s been a bad couple of days for Nike. First, Duke phenom and top NBA prospect Zion Williamson injured his knee when the Nike sneaker he was wearing fell apart while he was playing (ESPN).
Then reports came out that Nike’s self-lacing sneakers have stopped self-lacing for Android users. The sneakers are failing to pair with Nike’s Android app, which is needed to trigger the self-lacing mechanism (Ars Technica).
A star player getting injured because his footwear disintegrated is a bad look for a sneaker giant. So is a college basketball team possibly losing its shot at a national championship because of said sneaker and high-tech sneakers that won’t lace.
It’s an even worse look for a company whose slogan used to be “It’s gotta be the shoes.”
As a result, Nike stock dipped 1% on Thursday (CNN).
Nike’s bad week is an important reminder that it takes more than great vision, technology and execution to be successful. Sometimes, you need a little luck.
If Nike’s sneakers had ripped open when the Fix was playing at the rec center, nobody would care. (And let’s face it, when you manufacture as many shoes as Nike, there are going to be some defective ones.) But since Williamson got hurt after the sneaker fell apart and the entire country was watching, it’s a big news story.
Like Nike, startups need a bit of luck to succeed as well. Sure, they need to have a great team, vision, product and business plan. And they need to execute at an extremely high level. But they also need a little good luck – whether it’s meeting the right person at just the right momen(Et, having their “failures” happen behind closed doors or just avoiding bad luck.
As an investor, you can’t control luck. But you can invest in teams that make their own luck – or know how to respond to a bad break in a smart, positive and ultimately profitable way. That’s why the Early Investing team places such a premium on talking to founders and vetting a startup’s team before recommending it to you as a potential investment.
A truly great team knows how to take advantage of good luck and minimize bad luck. It’s a big part of what we look for in a company. So should you.
Now to the News Fix!
Canopy Growth needs to hire a better Excel jockey. Thanks to a formula error in its spreadsheet, Canopy had originally reported a nine-month adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of CA$69 million. But the loss should have been CA$155.2 million, or $117.8 million (MarketWatch). Whoops. To top it off, Canopy told analysts that the best metric to judge the company by was the nine-month adjusted EBITDA. Double whoops.
Canopy stock fell about 2% after the revised figures were released.
Tilray made a big move into hemp this week when it bought Manitoba Harvest for $318 million. Manitoba Harvest is the world’s largest hemp food company (Business Insider). And as we’ve discussed previously, the 2018 Farm Bill legalized hemp last year (Early Investing).
Extracting oils from marijuana for use in edibles can be dangerous. At least 10 fires or explosions have occurred at extraction facilities in the last five years. And all of those incidents caused serious injuries for the people working in those facilities (Politico).
This is the type of information that comes to light when an industry moves from the black market to a regulated one. And this problem needs to be addressed right away. Hash oil can be safely extracted if done properly. And states need to make sure these facilities are operating safely and workers are protected. This is what regulation is for.
Regulations to protect workers are a good thing. Money grabs by politicians that could kill an industry – not so good. Yet that is exactly what’s being considered in New Jersey.
New Jersey is contemplating taxing recreational marijuana at $42 per ounce (The New York Times). The wholesale price of marijuana in Colorado is around $54.71. That’s almost a 77% tax (never mind the retail markup). Needless to say, we’ll be covering this news closely.
SoftBank is back at it. It’s writing those big checks to startups that Andy Gordon hates so much. This time around, SoftBank’s Vision Fund led a $1 billion funding round for freight-forwarding company Flexport (CNBC) and a $200 million funding round for the storage company Clutter (CNBC).
It looks like podcasts are back. Podcasting company WaitWhat just picked up $4.3 million in a Series A round (TechCrunch). Just last week, Spotify bought a pair of podcasting startups as part of a major push into the podcasting space. Spotify wants to spend $500 million in podcast acquisitions this year (Early Investing).
Six years ago, the major sports leagues were against betting on sports. Now they’re for it – in a big way. Team owners from baseball (baseball!), basketball and hockey have all invested in Peter Chernin’s Action Network. The Action Network distributes news, analysis, information and other content to sports bettors (Bloomberg).
Bitcoin is up this week! As of this writing, it’s trading near the $4,000 mark. It was trading around $3,600 seven days ago.
The Chicago Mercantile Exchange (CME) is seeing record volumes on the trading of bitcoin futures. This could be a sign institutional investors are moving into the market (NewsBTC).
Speaking of institutional investors, the University of Michigan is planning on increasing its investment into one of Andreessen Horowitz’s crypto funds (Cointelegraph).
Pantera Capital’s third crypto venture fund has raised $130 million so far. Its target is $175 million (Cointelegraph).
The Fix likes loves ketchup. In particular, it loves Heinz ketchup. No other ketchup will do. You give the Fix private label mustard, relish or mayo? That’s okay. But ketchup? That’s where the Fix draws the line. And that’s why the Fix is worried this weekend.
As of this writing, Kraft Heinz shares are tanking. They’re down 26.5% after the company posted a $15.4 billion impairment charge on the Kraft and Oscar Mayer brands, slashed its dividend from $0.625 a share to $0.40 a share, and disclosed an SEC probe into its accounting practices. All told, Kraft Heinz posted a net fourth quarter loss of $12.61 billion (CNBC).
It looks like the post-merger synergies between Kraft and Heinz have dried up. And costs are up as well.
It’s not the end of the world – as long as nobody messes around with the ketchup.
And that’s your News Fix.
Have a great weekend!
Senior Managing Editor, Early Investing