Morning Cents: June 11, 2020

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June 11, 2020 – The rise of Tulsa’s startup economy, Nikola’s long road ahead and Facebook making an effort to provide goodwill.

We’re trying things a bit differently today! New name and slightly altered format. Be sure to let us know what you think! Today’s newsletter is 1,169 words, a 7-minute read. Let’s get to it:

Tulsa is Trying to Build a Startup Ecosystem from Scratch

San Francisco. Seattle. Los Angeles. Austin. And now…Tulsa?

It’s strange to say at first. But that’s precisely what community leaders are working to build in Oklahoma’s second-largest city – a revitalized Tulsa economy fostering a startup ecosystem. And as the movement progresses, many different organizations, from philanthropy to venture capital, have invested their efforts in building a more economically vibrant Tulsa.

Why It Matters

It’s a path to raising Tulsa’s standard of living. According to Glassdoor, the median household income of San Francisco is more than double Tulsa’s. The Bay’s $1.1 million median home prices dwarf Tulsa by nearly eight times over. And in the process of closing that game, inviting in new, high-tech workers will completely transform the city and build a more dynamic and energetic economy.

Numbers to Consider

  • 650,000 – The number of people living in Tulsa.
  • $53,902 – The median household income of Tulsa, less than 50 percent of San Francisco’s.
  • $10,000 – What the city is offering to remote workers as an incentive to relocate to Tulsa.


The Tesla of Trucking Has a Long Road Ahead

Can Nikola live up to the hype? It’s a question we’re all asking after its market value has skyrocketed since reverse merger brought the company public. The auto-tech company, founded by an Elon Musk-type figure, Trevor Milton, has grand plans to disrupt the road-haulage business. And it’s not about only rolling out the electric trucks. Just as Tesla bet on electric vehicles, Milton and Nikola’s success hinges on rolling out its own recharging infrastructure.

Why It Matters

“The staggering stock-market performance that has, for now, transformed an interesting business plan into a stalwart of the U.S. auto sector only makes sense if Nikola really is another Tesla Inc. Its market value is now roughly seven times the revenue the company hopes to make in distant 2024. It isn’t impossible that Nikola will eventually grow into this valuation, but it will require far more even than the successful execution of its current, ambitious plan,” The Wall Street Journal writes.

As part of his business model, Milton wants to package trucks and fuel together. And to whoever can lower fuel costs for truck buyers goes the spoils. The only caveat is the entire business will hinge on the value of green hydrogen, which Nikola plans to produce. It’s an energy-intensive process, so the question becomes, how cheaply can Nikola source green energy? Success or failure will hinge on that.

Numbers to Consider

  • June 4 – The date Nikola joined Nasdaq as part of a reverse merger.
  • 130,780 – How many individual holders NKLA has on the Robinhood trading platform, just behind Netflix, according to Robintrack.
  • $23.5 Billion – Nikola’s market value, a number not far behind Ford.


Facebook Tries to Friend Small Businesses Crippled by Coronavirus

With small businesses facing severe economic consequences resulting from the pandemic, Facebook is stepping in to provide help. The tech company has integrated tools into its platform to aid mom-and-pop shops, artists, entrepreneurs and others marred by Covid-19. The e-commerce tools will draw from its existing marketplace and collect, organize and offer new data to help users develop new markets.

Why It Matters

Facebook has moved cautiously on entering the world of e-commerce. This particular move seems more of a goodwill effort to aid struggling businesses rather than further its corporate agenda, and boy does Facebook need positive press right now. Even still, there’s the benefit of fueling new growth in Facebook’s core advertising business. But the impactful tools available could drive businesses to be more dependent on the company’s platform.

“Do the artists want to have Facebook in the middle of their money? The answer’s probably ‘no,’” said Travis Laurendine, a New Orleans-based tech entrepreneur and manager for 15 musicians, according to The Wall Street Journal. “But you have to go where your customers are. I’m here for it.”

Numbers to Consider

  • $9,000 – One example of how much a business-operator drew in digital sales in a month after fully pivoting to Facebook. He says it was about a fifth of his monthly earnings before coronavirus.
  • 60 – The number of small business owners Facebook is consulting with about its product offering on an unpaid basis.


A Quick Look

U.S. Unemployment Numbers (FULL STORY – WALL STREET JOURNAL)

  1. According to the U.S. Department of Labor, initial unemployment claims fell to 1.5 million, and workers receiving benefits fell to 20.9 million in the latest week.
  2. Employment is still down by nearly 20 million jobs since February, but the jobless rate in May dropped to 13.3 percent, and employers added 2.5 million jobs that month.

PG&E’s Hunt for Bankruptcy Exit (FULL STORY – WALL STREET JOURNAL)

  1. Pacific Gas & Electric is trying to go to market to sell $20 billion worth of new debt and equity as it awaits its chapter 11 ruling.
  2. The company, California’s largest utility, needs cash to absorb 25.5 billion worth of wildfire damage claims it has agreed to pay.
  3. PG&E expects to search the public debt markets for $10.9 billion of bond financing and is also looking to line up buyers for $5.75 billion worth of shares.

Worth Your Time

The New Gold Capital: New York is in the middle of a gold rush. After the pandemic threw precious-metal markets into chaos, traders scrambled to cut their losses. The equivalent of the weight of nine, fully loaded Boeing 737-700 airplanes has arrived in New York in the past three months. (LINK – WALL STREET JOURNAL)

Baseball’s Big Whiff: Even though WSJ’s Jared Diamond wrote on the subject earlier this week, Jason Gay’s impassioned plea evokes an emotional response about just how convoluted MLB’s situation is. Gay writes: “No matter what side you lean toward, the optics are terrible. It’s millionaires vs. billionaires in a nation with double-digit unemployment.” (LINK — WALL STREET JOURNAL)

Tech VCs Talk Space: Space has been a niche area of tech investing, but its future could open the door for broader success. Nine top investors in the sector got together and discussed their thoughts on what’s going on in the space industry – red flags and opportunities for the future. (LINK – TECH CRUNCH)

What We’re Writing About

I wrote about Boeing and the four factors to consider when evaluating its future.

Justin Oh shared his analysis on Nikola warrants.

I looked at the marriage of Penn National Gaming and Barstool Sports and whether it could be a trendsetting deal.

A Couple Cents on Social

Watch Justin Oh discuss the consequences of a second wave of Covid-19 infections and pitch a REIT stock idea. (LINK – YOUTUBE)

Deep dive into Justin Oh’s tutorial on how to build a Tesla valuation model from scratch. It’s a long, detailed process, so carve out some time for this one. (LINK – YOUTUBE)

Follow up on Nikola and its crazy performance over the last few days. (LINK 1 – TIK TOK) (LINK 2 – TIK TOK)


See you tomorrow!

— Justin Birnbaum

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