#105 - $PENN + theScore = ?, Carvana of Canada, $UBER $40/hr Driver Incentives, and 'South Park' inks $900m Deal
In this week's episode of Reformed Millennials, Broc and Joel discuss investing in some of the most common millennial vices; things like — gambling or sports betting, ubering everywhere, and buying used cars. We start with comparing Penn National versus Draftkings... how Uber and Lyft paying drivers over $40/hr to meet resurging demand is affecting their businesses, and whether the seed stage Carvana of Canada can replicate their success with used-vehicle vending machines.
If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.
👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
Happy Wednesday, y’all.
That secret weapon is JC Parets at @Allstarcharts (twitter)
The S&P 500 and Dow Jones both closed at all-time highs yesterday, $4,436 and $35,264.
Energy was the strongest sector, followed by materials and financials. 💪
The United States Senate approved a $1 trillion infrastructure plan. The package, which contains $550 billion for roads, broadband, and utilities, has bipartisan backing.
There were some high-flying moves made after hours. Check out Coinbase, Fubo, and Upstart’s earnings below. Following the major boom in crypto, many long-duration risky assets are following along.
The cup spillith over. 🚀 🚀
However, the messy market for everything but Google and MRNA continues. Sure, a few stock indexes in the United States have made new highs, but how many stocks in those indexes are doing that? VERY FEW.
This environment continues to remind me of a lot of the “Year 2” of market cycles that we’ve seen before. Take the initial thrust off the 2009 lows for example. Notice the sideways chop in Year 2 of that cycle:
How about 2004 after that initial thrust in 2003?
This first leg higher was sparked after the ultimate low following the tech bubble popping. Look at Year 2. Chop Chop Chop….
We’ve seen it many times before. 1982… 1976…
it’s hard to argue that the past year(2020) wasn’t a classic year 1 of a bull cycle. And it certainly reminds me of 2009.
To me, it’s right in front of us, right in plain sight.
CHOP CHOP CHOP…
🌊 Canadian Companies Mentioned 🇨🇦
Zapper.fi - (Montreal) - Track all your DeFi portfolio from one place. Invest into the latest opportunities in open finance.
Curbie - (Saskatoon) - The better way to buy a car. Buy online | Delivered to your door | 7-Day Test-Own
💸Reformed Millennials - Post of The Week
We’ve had a few friends of the show ask us about the PENN acquisition of Canada's Score app. Below is a bunch of thoughts and opinions from across the web on the acquisition. This move from PENN has changed my opinion on the stock. And when the CEO buys back in, so will I.
I'll be watching the insider buying.
Overall I think this locks in the gambling experience for PENN which they didn't quite have before.
SO, PENN has acquired Score Media for $2B. This is in addition to Barstool Sports last January.
What makes a great gambling experience is the community and culture of the host (think Vegas).
No company has done a better job of building a cult-like culture than Dave Portnose.
But is a satire sports site the best way to get someone to download an app to gamble? Probably not.
Similar to cannabis - only 24 states allow sports betting today, with many of those still banning online betting. We're still in the middle innings of this category. Most Stoolies don't bet on sports, right now.
SO WHY WOULD PENN BUY THEM?
Barstool has started to create scripted and live shows around sports betting.
They're introducing betting to the casual sports fan who knew nothing about betting, but in a way that's still funny and to the ethos of Dave and crew.
As betting becomes legal, Stoolies will make their first bet with the Barstool Sportsbook.
DraftKings' average Life Time Value of a customer is $2,500 with a Customer Acquisition Cost of $370. (think free $ to make a sign up or make your first bet)
$PENN paid $136M for 36% of Barstool.
Take away all the profit from merch/ads & Penn only needs 55K Stoolies to sign up to break even.
WHAT ABOUT SCORE?
There's a lot of passionate sports bettors out there today and most aren't Stoolies, so where do they go for their sports info?
The score is the #1 app in Canada and #3 in the US for sports betting.
It has 475K reviews averaging 4.8/5.
It's where sports bettors live when on their phones.
Now, with Penn's purchase, they'll give that audience the lowest barrier to go from information to action.
It also gives Penn a huge advantage in the mobile space.
Acquiring app downloads is a tough game and buying your way into an audience can work (see Facebook with Instagram).
IF IN 5 YEARS SPORTS BETTING IS LEGAL ONLINE, PENN WILL HAVE THE NETWORK EFFECT TO RUN AWAY AS THE LEADER.
They'll have the top of the funnel to introduce betting to casual sports via Barstool, the utility app for the habitual bettor, and the in-person Casinos.
FWIW, $2B does seem steep.
Doing quick math I think a fair price is closer to $1.3-1.5B, but there's a value in capturing an audience that your competitors can't in a fast-growing category.
In a few years, I think we look back and see this as a steal.
This acquisition changes my opinion on PENN from being a cult stock to something with legit tangible growth opportunity and competitive advantage.
Status Monkeys - From Packy McCormick
from the link attached:
Over the past few weeks, the Metaverse has gone mainstream. Matthew Ball published his 9-part series. Satya Nadella talked about the enterprise Metaverse (sounds fun!). Zuck and Co have said “metaverse” a million times over the past couple weeks. Ben Thompson wrote a piece on the Metaverse.
NFTs will clearly play a role in the Metaverse. When everything is digital, proving that you own something and being able to bring it with you across the internet will be key. But this isn’t a Metaverse piece. It’s a social network piece.
At one point in the Good Time Show conversation, Jarrod Dicker brought up the importance of community and status in web3 and it triggered a high kid thought: NFTs tick a lot of the boxes of a successful social network from Eugene Wei’s Status-as-a-Service.
Before the full Metaverse arrives, there’s already something happening that’s bigger than jpegs. NFTs are starting to feel a lot like a new kind of social network that sits above other social networks and communities -- something of a Superverse -- and there’s no better framework to evaluate a social network than the one Wei put forth in Status-as-a-Service (StaaS).
(If you’ve read and internalized Status-as-a-Service, you can skip this section.)
Eugene Wei, a former product leader at Amazon, Hulu, Flipboard, and Oculus, is one of the best tech essayists on the internet. Practically everything he writes becomes canon, and Status-as-a-Service, which he wrote in February 2019, might be his greatest contribution.
The piece makes Not Boring seem short. It comes in at a whopping 19,825 words. If you haven’t read it, I highly recommend that you do so, but for now, I’ll summarize a few of the main points that are relevant to this piece.
Wei begins with two principles:
People are status-seeking monkeys
People seek out the most efficient path to maximizing social capital
Even though those are uncontroversial statements, Wei argues that we don’t analyze social networks through the dimension of status or social capital. Money is easier -- there are numbers, and what gets measured gets analyzed -- but, he says (emphasis mine):
Social capital is, in many ways, a leading indicator of financial capital, and so its nature bears greater scrutiny. Not only is it good investment or business practice, but analyzing social capital dynamics can help to explain all sorts of online behavior that would otherwise seem irrational.
Less than 1,000 words into his piece and two full years before NFT mania, Wei unknowingly laid the groundwork for analyzing what’s happening. NFTs blur the lines between social and financial capital, and as the media has been quick to point out, buying jpegs for thousands or millions of dollars seems irrational.
The mistake that those who dismiss NFTs make is the same that Wei argued people were making in analyzing social networks: missing the importance of social capital. Traditionally, people have used Metcalfe’s Law to explain the network effects powering social networks: “The value of a telecommunications network is proportional to the square of the number of connected users of the system (n^2).” The more users a social network has, according to Metcalfe’s Law, the more valuable it is to every new user.
The problem was, Metcalfe’s Law didn’t perfectly explain what was happening in the real world. Metcalfe’s Law alone would predict that whichever network got big first would continue to build up an increasingly insurmountable lead by being the most valuable to each new user. But Facebook took down MySpace, and Instagram and Snapchat stole younger users’ attention from Facebook. People’s preferences aren’t captured so cleanly.
🎙️Links Mentioned in the Episode 🎙️
Carvana - Ernie Garcia Disrupting the Auto Buying Experience (Podcast)
Blowback Season 2 - Cuba (Podcast)
Making of the Southpark pandemic special. (Youtube Video)
Toronto housing market cools off (Tweet)
Uber surge pricing example (Tweet)
🌊 Best Links of The Week🔮
New York Governor Andrew Cuomo resigned today. Here’s the WSJ with the deets.
1 Trillion dollar US Infrastructure Bill passes with bipartisan support!
Five Things You Didn’t Know Were in the Infrastructure Bill
SEC v. DeFi - the fight over crypto regulation is going to be about decentralized-finance (DeFi) lending protocols.
Dark kitchens are interesting - if you only do delivery, then you don't need premium retail space, don't need to shape the kitchen around sittings at 7 and 9pm, and can serve multiple menus and brands from the same place.
The Age of Constant Growth is over. What comes next?