🦢 Black Swan Street Weekly Stock Market Summary (August 7th - August 11th 2023)

Welcome, Finance aficionados!

Dave Portnoy pulls off the deal of the decade, investors moving capital to money market funds, AMC and Disney earnings, WeWork done for, and the crazy recent bond sales.

Black Swan Street’s got a new format, and we know you’ll love it.

That being said…

Let’s roll ↓

Here’s what we got for you to wrap up the week:

• Penn Entertainment’s Wild Week 🤝

• Where is the Money Going? 💸

• Earnings Summary 💰

• Headline Roundup 🗞

• Fixed Income Corner 💵

Read time: 5 minutes

Penn Entertainment’s Wild Week 🤝

Penn Entertainment’s about to etch its name in history: “Craziest Week for a public company.”

This week, Penn Entertainment:

1. Announced a $1.5 billion partnership with Disney’s ESPN

2. Sold ‘Barstool Sports’ back to Dave Portnoy for $1, after buying it for $551 million

I told you, crazy.

So let’s talk about it.

1. Penn Entertainment and ESPNs $1.5 billion deal

Penn will be rebranding its current sportbook as ‘ESPN Bet’.

Under this deal, Penn agreed to pay ESPN $1.5 billion in cash over 10 years, as well as grant ESPN $500 million of warrants to purchase ~31.8 million common shares of PENN stock.

Penn will operate ESPN Bet, and ESPN will use its massive network to promote the sportsbook across its many platforms, aka a licensing deal.

2. Penn sells Barstool back to Dave Portnoy for $1

In February 2020, Penn Entertainment bought a 36% stake in Barstool Sports for $161 million.

This year, Penn bought the rest for $388 million.

This week, Penn sold 100% of the outstanding shares of Barstool Sports back to Dave Portnoy for $1.

Love or hate him, Portnoy might have just pulled off the best business deal of the last decade.

Penn says it expects ‘a pre-tax non-cash loss’ of between $800 million and $850 million resulting from the deal.

Even though Penn lost a sh*t ton on the Barstool deal, some new agreements are in place that are worthwhile.

Such as:

• Penn gets 50% of gross proceeds in the event of a future sale or monetization event in Barstool Sports

• Barstool can’t advertise any sportsbooks

• Barstool can’t launch its own sportsbook

It looks like Penn is trying to offload Barstool Sports and the regulatory headache it is while simultaneously going all in on the ESPN deal.

Where is the Money Going? 💸

United States Equity Funds Record Biggest Weekly Outflow in Seven Weeks:

As you can see U.S. equity funds saw heavy outflows in the seven days leading up to August 9th. Likely a result of investors being cautious leading up to the inflation data (CPI & PPI - discussed later) and the credit rating downgrade the United States received last week.

According to Refinitiv Lipper data, investors withdrew ~$15 billion from the U.S. equity funds throughout the week. The biggest week of net selling since June 21st.

Global Money Market Funds Draw Biggest Weekly Inflow in Nearly 5 Months:

Investors plunged roughly ~$73 billion into money market funds in the largest weekly net purchases since March 22nd.

Takeaway: This data shows investors are moving away from riskier investments (equity funds) and moving to safer investments (money market funds).

Earnings Summary 💰

In-Depth Earnings Dive:

Palantir (PLTR)

• Adj. EPS $0.05 inline with $0.05 estimate

• Sales $533.32M misses $533.88M estimate

• Announces $1 billion buyback

United Parcel Service (UPS)

• Adj. EPS $2.54 beats $2.50 estimate

• Sales $22.10B misses $23.11B estimate

• Sees FY23 Revenue ~$93B vs $96.77B estimate

Fox (FOX)

• Adj. EPS $0.88 beats $0.71 estimate

• Sales $3.03B beats $3.02B estimate

• Authorizes $7 billion stock repurchase program

• Raises quarterly dividend to $0.26 per share, from $0.25

AMC (AMC)

• Adj. EPS $0.00 beats ($0.04) estimate

• Sales $1.35B beats $1.29B estimate

• Attendance up 12.2% YoY

• $643.4M in available liquidity

Eli Lilly (LLY)

• Adj. EPS $2.11 beats $1.99 estimate

• Sales $8.31B beats $7.58B estimate

• Raises FY23 Adj. EPS Outlook to $9.70-$9.90 from $8.65-$8.85

• Raises FY23 Revenue Guidance to $33.4B-$33.9B from $31.2B-$31.7B

Roblox (RBLX)

• Adj. EPS ($0.46) miss ($0.45) estimate

• Adj. Sales $780.66M miss $784.86M estimate

• Daily active users 65.6M, up 25% YoY

• Net loss of $282.8 million for the quarter

Disney (DIS)

• Adj. EPS $1.03 beats $0.97 estimate

• Adj. Sales $22.33B miss $22.48B estimate

• Disney to raise prices on Ad-free Disney+ to $13.99/month starting October 12th

• Streaming losses were $512 million for the quarter

• Disney+ subscribers came in at 146.1M, below 154.8M expectation

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Headline Roundup 🗞

• Tesla CFO, Zachary Kirkhorn, steps down after 4 years in role - FB

• PayPal will launch its own stablecoin - MW

• Campbell Soup buys Rao’s sauce maker for $2.7 billion - FB

• Paramount agrees to sell Simon and Schuster to KKR - NYT

• Dish to buy Echostar in $4 billion all-stock deal - BBG

• U.S. Wholesale Inventories MoM: -0.5%, from previous -0.4%, and below -0.3% forecast

• Credit card debt hits $1 trillion for the first time ever - FB

• WeWork cites ‘substantial doubt’ that it can stay in business - NYT

• Tapestry, Coach owner, to acquire Capri Holdings, Versace & Michael Kors parent, in $8.5 billion deal - BNW

• U.S. Consumer Price Index (CPI) YoY: 3.2%, from previous 3.0%, and below 3.3% forecast - What is the CPI?

• U.S. Producer Price Index (PPI) YoY: 0.8%, from previous 0.2%, and above 0.7% forecast

• Adlai Nortye sets IPO terms: Three million American despository shares at an estimated price of $22 to $26 per share, and will be under the ticker symbol “ANL”

• Brazil unveils $350 billion investment plan to boost economy - BBG

Fixed Income Corner 💵

💰 Goldman Sachs sells $2.75 billion of bonds to raise capital

💰 ConocoPhillips sells $2.7 billion of notes to help fund its acquisition of the remaining interest in the Surmont oil-sands field

💰 McDonald’s Corp sold $2 billion of bonds to repay debt ahead of a batch of maturities due next year

🏠 Mortgage rates reach 9-month high after U.S. debt downgrade: On Wednesday, the Mortgage Bankers Association reported the average rate on the 30-year loan reached 7.09% from 6.93% last week.

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The Wrap-Up 🔄

Big News…

We’re going Bi-Weekly!!!

Be on the the lookout Monday for another edition of Black Swan Street.

As you just know since you just read the newsletter, we switched the format up. We would love your honest opinions ↓

Black Swan Street Review of the Week ❤️