🍋 Straight Cash Homie

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Short Squeez
January 19, 2022

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"The crisis of today is the joke of tomorrow." — H.G. Wells

Good morning! Good news for Wall Street bankers has meant bad news for Wall Street stocks. Banks such as Goldman, JPM and Citi spent billions more in compensation in the 4th quarter dragging down profits, and stocks took a hit. Goldman's comp expenses were up 33% in 2021 as it gave out an additional $4.4 billion, sending the bank to its only quarterly profit decline of the year. Flights are getting canceled left and right these days but another bizarre reason for the cancellations has emerged: 5G (lmao). A number of international airlines cut flights to the US, and Emirates even suspended travel indefinitely to some American cities, citing concerns over AT&T and Verizon's 5G rollout on Wednesday.

If you are looking to invest your money in a start-up, check out today's sponsor, Monogram that is revolutionizing the $19.6 billion joint replacement market, with their robotically inserted orthopedic implants. Final day to invest is January 27. 

1. Story of the Day: Straight Cash Homie

What do you do when you have $130 billion of cash just sitting in the bank? Well, you buy a video-gaming company for $69 billion in straight cash, homie. Yesterday, Microsoft announced that it has agreed to acquire Activision Blizzard for $95.00 per Activision share.

It’s the largest tech deal ever, overtaking Dell’s $67 billion deal to buy EMC in 2015. The rationale here is that it will strengthen Microsoft’s video gaming operation with additions of popular games such as Call of Duty and World of Warcraft to Microsoft's Xbox business and its own games such as Minecraft. The deal has also hyped up metaverse advocates as a sign of Microsoft’s support for the movement.

Microsoft CEO, Satya Nadella seems to be quite bullish on the gaming sector. Since becoming CEO in 2014 he has spent more than $10 billion on buying more than a dozen gaming studios. Microsoft’s strategy is to increase subscribers to its Game Pass (basically a Netflix for games), which will get an additional 7 million subscribers from the acquisition to bring the total to 25 million.

Activision’s CEO, Bobby Kotick, is expected to leave once the deal goes through. He has been in the news for all the wrong reasons lately and Microsoft will have to address allegations that Activision underpaid women and allowed sexual harassment to go unpunished.

Short Squeez Takeaway: Whether the transaction closes still remains a big doubt. The anti-trust worry is that Microsoft can give preferential treatment to its Xboxes when releasing hit games such as Call of Duty. Activision’s shares closed at $82.31 on Tuesday, well below Microsoft’s offer of $95 per share. According to Cowen analysts, the market appears to be pricing in a 1 in 3 probability that the deal gets blocked. Rival, Sony's stock (-7%) was down bad yesterday and it's widely expected to sue in an attempt to block the transaction.

Source: WSJ, Marketwatch

2. Markets Rundown

Stocks ended sharply lower Tuesday, kicking off the shortened week on a down note as Treasury yields jumped to 2-year highs.

Movers & Shakers

  • (+) Activision Blizzard ($ATVI) +26% after it announced Microsoft will buy it in a $69 billion all-cash deal.

  • (+) Citrix Systems ($CTXS) +5% following a report that Elliott Investment Management and Vista Equity Partners are in advanced talks to buy it.

  • (–) Goldman Sachs ($GS) -7% following disappointing quarterly results.

3. Top Reads

  • Crypto.com platform halts withdrawals after suspicious account activity (WSJ)

  • We humans are bad at decision making (MRB)

  • Rising interest rates could keep a choke hold on tech and growth stocks (CNBC)

  • Britney Spears fights father’s fee claim, alleging financial misconduct (NYT)

  • SoFi stock soars after clearing final regulatory hurdle to become a bank (CNBC)

  • Music Tribe weighs stake sale at $2 billion valuation (BB)

  • Peloton hires McKinsey to review cost structure; may cut jobs, close stores (CNBC)

  • Sony slides on Microsoft-Activision Blizzard tie-up plan (BBC)

  • Chamath faces backlash for Uyghur comments (BBC)

A Message from Monogram: Final Weeks to Invest in the Company Revolutionizing Joint Replacement

The joint reconstruction market currently sits at $19.6B. But up to one third of total-knee arthroplasty recipients still experience chronic pain post-operatively. 

Monogram understands that precision implants and precision insertion are the future of orthopedics, so they designed a workflow for unwavering efficiency and accuracy. 

Their key competitive advantage will be their ability to rapidly produce custom, robotically inserted orthopedic implants at scale. 

And seeing that the company has already raised $13M, now’s a pivotal time to join them in the future of orthopedics.

The final day to invest is January 27. Get in right here.

4. Book of the Day: The Generation Myth: Why When You're Born Matters Less Than You Think

Boomers are narcissists. Millennials are spoiled. Gen Zers are lazy. We assume people born around the same time have basically the same values. It makes for good headlines, but is it true?

Bobby Duffy has spent years studying generational distinctions. In The Generation Myth, he argues that our generational identities are not fixed but fluid, reforming throughout our lives. Based on an analysis of what over three million people really think about homeownership, sex, well-being, and more, Duffy offers a new model for understanding how generations form, how they shape societies, and why generational differences aren’t as sharp as we think.

The Generation Myth is a vital rejoinder to alarmist worries about generational warfare and social decline. The kids are all right, it turns out. Their parents are too.

“The attitudes, beliefs, and behaviors of a society can change in a consistent way across all age groups. These period effects often occur in a response to a major event that affects everyone, whether directly or indirectly.”

5. Short Squeez Picks

6. Daily Visual: China Builds Movie Empire

Global box office revenue by territory

Source: Axios

7. Daily Acumen: Environment Guides Behavior

"By choosing who you spend time with you are also choosing who you want to be. This is the environmental force at work on your subconscious and your biological instincts.

Here are three lessons you can take from this:

1. Curate your information diet to be rich and diverse. Follow people who think differently than you. Read old books. Remember that what you put into your mind today is the raw material you have to work with tomorrow.

2. Surround yourself with people whose default behavior is your desired behavior. If you want to run more, join a group that runs every day. Spend less time with people whose default behavior isn't your desired behavior.

3. Design your environment knowing it will influence your future self. You can easily make undesired behaviors harder and desired behaviors easier.

Understanding the invisible influence of your environment allows you to turn your desired behaviors into your default behaviors."

Source: FS Blog

8. Crypto Corner

9. Memes of the Day

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