The Week in Cheek: business news that might just Snap

The company formerly known as Snapchat (please call it Snap) will be having its IPO coming out party in the spring of 2017. This week it signed papers with the SEC formally expressing its desire to leave the enchanted land of the unicorn and enter the real world. The real world is where people demand to know exactly how you spend your money, how many active users you have and how much you will make in the next quarter and in quarters beyond your ability to predict.

Snap's IPO is one of the most anticipated stock offerings in years. The “entertainment company” (as Snap CEO Evan Spiegel calls it) with disappearing messages, wearable Spectacles camera and cool yellow pop-up vending machines is expected to be valued at between $20 and 25 billion. Snap could potentially snap up more than all 103 IPOs so far this year (a combined $21.8 billion) and roughly one-third the value of Facebook's IPO ($81.2 billion).

Some worry about the inexperienced management team that, like the Snap product itself, is prone to appear then vanish.

“ Once you start asking public investors for 30x earnings, the tolerance for mistakes, misadventures and learning on the job goes down.” ~ Max Wolff (don't call him Wolff of Wall Street) Market Strategist, 55 Capital

This week in white-collar misadventures, ex-Valeant and ex-Philodor executives Gary Tanner and Andrew Davenport were arrested for allegedly masterminding a kickback scheme in which Valeant would buy an option to acquire Philidor and the two men would pocket millions. Mr Davenport wrote in an email to Mr Tanner that he could picture the two of them on a “Butch and Sundance ride into the sunset.”

Obviously Mr Davenport hadn't seen the movie...

Phew. For a moment there I thought they were in trouble. Fortunately the Justice Department doesn't use a firing squad so Tanner and Davenport won't meet a Butch and Sundance end.

Nor will JPMorgan, the investment bank that was fined a piddly $264 million (JPMorgan's personal best record for a fine is $13 billion) for hiring princelings--the friends and family of Chinese leaders--to win business in China. Not only did JPMorgan have to pay a fine for bribery, but they were saddled with employees with “napping problems” “attitude issues” and “photocopier productivity” (actually, photocopier productivity sounds pretty good) who were “immature irresponsible and unreliable” (now that's definitely bad). Fortunately there was a spreadsheet to keep a tally of deals attributable to the “Sons and Daughters” so that JPMorgan could assess whether the pain was worth the gain.

Speaking of pain, after being burnt by an investment in US Airways (according to Buffett being burnt means breaking even), Warren Buffett once joked he had set up a toll-free number to call counsellors who would talk him down if he ever had the urge to buy airline stocks again.

“ My name is Warren and I’m an aeroholic.” ~ Warren Buffett

This week Warren fell off the wagon and into over a billion dollars of investment in American, Delta, Southwest and United Continental. Why would he change his mind? How about reduced oil prices, increased fares and investors like Berkshire Hathaway that own a stake in the industry rather than an individual company making price competition among airlines look like a stupid move? Berkshire also cut its investment in Walmart by 70% because unions with apps, pivots into e-commerce and a higher minimum wage aren't good for the bottom line.

Trolls aren't good for Twitter's bottom line and it has responded to its bully-tweet problem with a mute feature. Some say this doesn't go far enough, that the harassment will continue to exist, but if a troll is muted in a conversation stream and nobody is there to see it, did the harassment really happen?

Cheekily Briefily:

• The Tesla-SolarCity merger that some call a bail out of SolarCity and its $3.1 billion-debt was approved by 85% of shareholders who used the vote as an expression of unconditional love for Elon Musk. Famed short seller and professional sceptic Jim Chanos, citing faulty business models, called the incestuous marriage between Tesla and SolarCity “absurd” and “ridiculous”. Obviously Mr Chanos missed Musk's recent demo of solar tiles on the set of Desperate Housewives, and the new SolarCity ad campaign.

• Fan Duel and Draft Kings hate each other, but not enough to stop them from merging to increase their odds of survival.
• Canadian company Gildan who makes t-shirts Canadian men wear to bed in the winter is purchasing the American Apparel brand for $66 million which is kinda like Fruit of the Loom buying Victoria's Secret.
• JPMorgan CEO Jamie Dimon has reportedly been offered the job of Treasury Secretary of the United States but has declined, saying he feels he's not suited to the position and adding, “That's why I'm richer than you”.

Finally, Walgreens is suing Theranos for $140 million, alleging breach of contract. Although it's hard to muster up much sympathy for a company who believed the stories of a needle-phobic CEO with a pinprick blood test called Edison. Hello! She called it Edison. That's your cue for a lightbulb to go off. But perhaps Walgreens was under some kind of spell...

Quote of the Week:

“I fell in love with her vision” ~ Tyler Schultz describes why he changed his degree from mechanical engineering to biology and joined Theranos

Unlike Walgreens, it's easy to muster sympathy for whistleblower and former Theranos employee Tyler Schultz, grandson of Theranos board member and former Secretary of State George Schulz. When he questioned the accuracy of Theranos's blood tests in an email to CEO Elizabeth Holmes, Tyler Schultz was accused of being arrogant and patronizing and making reckless comments. Much to his grandfather's dismay he quit his job, but later saw Theranos Elizabeth Holmes when she appeared at the Schultz family Thanksgiving table, giving thanks for Theranos's newly installed bulletproof glass windows.

Throughout Tyler Schultz's ordeal that included threats of lawsuits and other acts of intimidation, the elder Schultz, has inexplicably sided with Elizabeth Holmes over his own grandson. Perhaps George Schultz is under some kind of spell...

Meanwhile Tim Draper, an early investor in Theranos and former neighbour of CEO Elizabeth Holmes, insists on supporting the company and its founder in spite of all evidence to the contrary. He believes that Holmes as a feminist hero who is being persecuted because she's a woman.

“ People don't want vampires taking gallons of their blood every time they get tested. There is a great opportunity to do a finger-prick blood test, and I think it's fabulous what they've done.”~ Tim Draper

A traditional blood test is like vampires taking gallons of blood? It's fabulous what they've done even though it's been discredited and they're not doing it anymore? Clearly someone has cast a spell on Tim Draper.

Hope your weekend is positively spellbinding.

Recommended Reading/Listening/Viewing

Exercise treats SAD--stress, anxiety and depression--the three biggest mental health scourges in the workplace.

Makers of EGM (electronic gaming machines) have got the gambling addict's number.

Lawyers, investment bankers profit from mega-mergers, but so do economists for hire who make millions for expert testimony that backs up any conclusion.

Inspired by Walt Disney, Airbnb is about to offer tourists magical Trips.

Snapchat could have been Picaboo. Twitter could have been Twitch. A Tronc by any other name would have been an improvement. The New Yorker tells us what's in a brand name.

Of course he came up with the idea in the shower. Tinder co-founder Jonathan Badeen explains the origins of the swipe.

Facebook is under fire for creating echo chambers within its Hotel California into which it pipes fake democracy-threatening news. “Our team will continue to closely vet all prospective publishers and monitor existing ones to ensure compliance” says Facebook, but this short NPR podcast won't give you much faith in its news-vetting expertise.

Spike Jonze's Kenzo perfume ad starring Margaret Qualley won an Epica Grand Prix, the only creative prize awarded by journalists working for marketing and communications magazines around the world. I know I've featured this video before, but it's worth viewing again and again. Brilliant, sexy and fun.