Investing in Change - Colin + Collectors Universe (CLCT)

I wanted to start off with an acknowledgement that we hopefully call rally around, the simple fact that Black Lives Matter.  I knew it mattered decades ago when I first developed this blog. Urban Economics - the intersection of what it means to be black and the development (over the years) of a toolkit to survive in a harsh landscape that is not welcoming to people that look like me. Urban was used to describe the music I listen to (Grammy: Best Urban Contemporary), the neighborhood I live in, and even the way my people spoke. So it was clear to me even then that BLM I just couldn't scream it to the rooftops because we all knew about the that thing lurking around the corner called "systemic racism". Today's post is not about the many times I've been singled out by the police, those articles will come but the "FEAR" of entering the corporate world and trying to survive for your family. The fear that being too outspoken can get you singled out. How do I know --- we've seen it happen too many times especially to the good ones. Muhammad Ali, Martin Luther King Jr., and yes Colin Kaepernick.  I saw that young brotha's wings get clipped too early and we all knew the unfortunate price he would pay.  

How do businesses deal with this issue, well there is a term and strategy I learned in the corporate world used to prevent them from getting singled out.  During the financial crisis it was invoked because there was a fear in the air and everyday people were taking matters into their own hands. They ran, literally into banks, and withdrew all of their money fearing one bank failure meant their bank would be up NEXT. There is a reason why the call it "A Run on The Banks"...look it up.  So during the financial crisis (feel free to read about it on my blog from 2008-2010), the people in charge (Ben Bernanke, Tim Geithner, Hank Paulson) devised a plan to help the banks survive being "singled-out" for taking funds from the government. Think of it from my perspective as an investor: if my bank is taking money --- they must be in BIG trouble! If I see this I sell my stock and further I pull my money out of that bank --- hence a run on that bank begins or continues. The plan that was devised was for EVERY bank to take the bailout money (the bitter medicine even if you didn't need it) for the greater good of the banking system and the country. They call that "ring-fencing". If everyone is doing it, I can't single out one why one actor is doing it.

Fast forward to what Urbanomics has always been about. A place for all people, but in particular my People of Color to learn from each other and not be singled out in Corporate America as too ambitious, driven, or looking out for your own personal or family's best interest. My issue with the NFL, the players, and the owners is they didn't realize this simple fact when we all watched Colin Kaepernick do what was right. No one ring-fenced the young man and I was irate then and still am. Like Lebron James said...the NFL owes Colin Kaepernick an apology and I agree. If everyone would have knelt....yes you Drew Brees maybe we all could have focused on the real issue at hand and maybe just maybe he would still be playing.

So if you are new, read this blog to empower yourself. Those of us that have read over the years realize what I am saying isn't anything new --- we are uniting as a collective unit to be great parents, workers, investors, and agents of change as there is strength in numbers. And I also believe that in a capitalist society, money talks. Because when you're are a collective unit, you have strength or as I like to call it leverage and you can negotiate what's in the best interest of you and yours.

I'm sharing the best performing stock in my portfolio in hopes that the NFL and teams do right by Kaep. In hopes that we ring fence and invest in our futures together --- strength in numbers. You can read my many posts over the years on Collectors Universe (CLCT). I bought this stock when I was a young pup and it holds true to my pillars. Build a strong core, work hard, and prioritize what's most important to you. To me it's family, so my portfolio of investments simply means I prioritize time and relationships in this short beautiful life. 

Thank you #Kaepernick, yes #BlackLivesMatter, and I remind you #ifnotnowthenwhen

If you need a disclosure, yes I own CLCT and have since at least 2007. Buy low and hold on to great investments. CLCT pays a dividend and most of your investments (real estate, business, stocks, etc.) should be providing you some type of return because it's a valuable asset. Be humble and surround yourself with people smarter than you. Take but manage risks very well.

Reader Question -- Groupon (GRPN) + Reverse Stock Split

So I am grateful for anyone that takes time to read my posts because to me I hope these posts light a fire under you. If Not Now Then When? When would you like to live in a world that breaks the chain of class systems and systemic racism. When do you plan to wake up and realize that you are responsible for looking out for your family and love one's best interests (a stimulus check isn't enough to get it done). If that means studying, working out, enlightening yourself, legitimate hustling, making a plan to exit the rat race --- are you ready to put in that type of work. The work I used to put in gym, on the field not knowing if it meant I was even going to make the team, have a starting position, or succeed at life. You have to plant that seed early and work at it every single day.

I always joke the best class I ever took in college was Probability/Statistics. When you learn about decision trees, life becomes so much easier. When you learn how to apply that to risk management, hard decisions are not so tough. I spend most of my time assessing risk to help make sound decisions. When I got this question from a reader, I welcomed their trust in my thought process but I also challenged them to do a risk assessment. Because these assessments are life assessments --- calculations we all make everyday which turn into investments. And we much invest our time wisely as we only get one chance to be great.

Reader Question: "Good stuff man - I would love to hear your thoughts on Groupon's reverse stock split 1-20"

https://www.businesswire.com/news/home/20200610005139/en/Groupon-Announces-1-for-20-Reverse-Stock-Split

Company Description:

Groupon (NASDAQ: GRPN) is an experiences marketplace that brings people more ways to get the most out of their city or wherever they may be. By enabling real-time mobile commerce across local businesses, live events and travel destinations, Groupon helps people find and discover experiences––big and small, new and familiar––that make for a full, fun and rewarding life. Groupon helps local businesses grow and strengthen customer relationships––resulting in strong, vibrant communities. 

Groupon (GRPN) Risk Assessment 

I don't do risk assessments much on paper anymore but when I do I really enjoy the process. It reminds me of when I would hear people describe the habits of great rappers --- and they would say "You Know Biggie didn't write down any of his raps". A quick nod to the greatest rapper of all time, the Notorious BIG. I guess risk assessments start with personal questions...do you work here, why risk assess it now, have you risk assessed it before, what's changed since then. So here goes my GRPN Risk Assessment:

Geopolitical (Country) Risk: GRPN is not being purchased by a foreign entity but I do think it's important to highlight this risk. While the USA is viewed as safe, I recall sparring with a colleague over whether US companies should consider geopolitical risk in their equation. The greatest country in the world has no risk I was told and I quickly reminded him about 2008 and the fact that if it was NOT for TARP and massive bailouts we would have seen the financial system implode. So quickly, I think that GRPN and every US company faces country risk as the divide in US wealth, health, and resource gap grows deeper. The erosion of the middle class IMO means the pie of strong local businesses GRPN is trying to grow and stregthen is shrinking. We haven't even talked about COVID-19 but shocks like this to the US system seem to be taking a huge toll on the economy (i.e., every time we have a crisis...it's NOW the greatest crisis since the Great Depression). 

Operational Risk: I looked back and realized I've written about GRPN roughly around 5 times. You can use the search bar to see my previous posts. What shocked me is how NOT much has changed in the 7-10 years since I last wrote about them. See here: https://urbanomics.blogspot.com/2013/07/same-companiesnew-tricks-mcdonalds-best.html

In the 2013 post provided above, I wrote about the fact that I didn't have an account and the company hadn't won me over in needing to do so. Some of their tactics felt like tricks, gimmicks --- which weren't working. I look at their company description and I struggle with what it means to find experiences. Do they use AI and know I like sports, so they will find me tickets to the Superbowl at the best possible prices? Are they a travel company -- because Expedia, Travelocity, and even Airbnb talk about experiences? Clearly the operational execution isn't clear because I don't understand what they do. I thought they still provided discounted offers for merchants who wanted to increase foot traffic. A great idea I would say if you GRPN were to sell themselves to Uber or Lyft or Match. I like discounted restaurants and experiences when I'm dating, in a car, in a hotel or Airbnb. As a standalone company, I'm not sure it makes sense...as an extension of a big data company OR a swipe right dating company or a ride hailing company --- damn that would seems like a good fit.

Financial Risk: The stock price says it all. Most companies only do a reverse stock split for one of 2 reasons: a) Unable to meet stock market listing requirements (i.e, the stock must be above $2 a share or you get the boot) or b) you want to "trick" investors by having a nice round number above $20 bucks so investors take you seriously. have I seen this yes -- take Citigroup during the 2008 financial crisis they did a reverse 10-1 stock split as the stock remained in the low single digits. Full disclosure, I've done no research but I would say the stock is saying something as it struggles to GROW organically through earnings.

Summary: At this point, I can not invest in GRPN unless it's purely a binary investment --- heads they put themselves up for sale, tails they go bust. Using poker language, you would be getting great odds IF you thought they were going to strategically look for a buyer. The economic toll of COVID-19 doesn't help because IF they were to have bought another company (Pinterest, Lyft, Yelp, Angie's List, Match) it might have gotten done with greedy bankers looking to finance everything just a year ago (when money was flowing). GRPN needs to fine tune the strategy because the value lies in knowing what I like and getting it to me quickly and possibly through another 2nd choice/off-brand competitor IF the discount is nice enough. Funny this was my rationale for GrubHub (GRUB) as well --- it's pure binary AND at least they delivery it too me. They were burning through CASH left and right and were NOT at risk in the future in a very competitive environment. They are not a delivery company, direct travel and experience board, DIY board, or dating site --- so at this point the RISK vs REWARD is just not there.

Hookup Alert - Caesars Entertainment (CZR) + El Dorado Resorts (ERI)

If at first you don't succeed (first you don't succeed),
Dust yourself off, and try again
You can dust it off and try again, try again

Artist: Aaliyah

Song: Try Again

Rest in Peace to the Great Aaliyah. Gone to soon but your music lives on in our hearts.  So I gave you a story about another one of my good friend’s Tilman Fertitta, who is the owner of the Houston Rockets, The Golden Nugget, and Landry’s Restaurant chains, etc. I saw him on TV the other day still sounding a little cautious, however; with things re-opening I’m sure his worst case fears are dissipating. See here for my risk breakdown of how Tilman danced with debt and got very lucky: https://urbanomics.blogspot.com/2020/03/a-house-of-cards-pt-2-debt-gift-curse.html

Cue the music: a billi a billi --- he’s an old money billionaire, so there's a few things to learn. Thanks Lil Wayne I’ll take it from here. I wanted to highlight a trade my buddy Tilman brought to my attention a little less than two years ago. It’s no secret I like diamonds in the rough and Caesars Entertainment (yeah home to Caesars Palace in Las Vegas) was one of those gems I started looking at a few years ago. An iconic venue in Las Vegas, Caesars (CZR) is known worldwide and I’ve partied many a times there myself. But Caesars  over the years had taken on a lot of debt and hadn’t really done much.  So when Tilman and his Golden Nugget company made a play for Caesars I decided then was the time to strike.  This is a quick lesson for those just starting out in investing. Look for investments within your life that give you OPTIONALITY. Does it have a good MOAT --  that wide body of water surrounding castles like in Game of Thrones were there for a reason…to keep would be attackers at bay. Caesars brand is like that MOAT -- an iconic branded designed to keep people coming back to their properties. While I like good management, I like the right price even more. I followed CZR as it dropped into the $5-7 dollar range back in 2018 and apparently I wasn’t the only one watching. Pretty soon my boy Tilman and his Golden Nugget company were trying to slide into CZR’s DM. The stock shot up and I decided to pick some shares up as I was a little bit late to the party but believed it had more room to run up. After eight months of Golden Nugget trying to hook up, CZR ghosted on them.

My next lesson is stay clear headed. I got nervous and sold my position which ended in a loss. I should have stayed the course but I took the loss. Likely a result of listening to NOISE --- like being inundated with posts on Facebook and one of the reasons I don’t logon to the platform much. If you listen to NOISE you tend to move with the herd…and I am no sheep. I prefer going against the grain. Sheep will tell you to be patient for change when you clearly see systemic issues right in front of your eyes. I’m not having any of that.

But I am human; I panicked and sold my position for a loss. See below, the “L” I took back in 2018:

The nice thing about investing is it’s just you and a market of 10K+ stocks. If you’re right, you had the guts to make the call. If you’re wrong…it’s on you. All people want in life is a fair shot…the game not to be rigged…the knee taken off of our necks.  My "I told you so moment" was just 3 months later when rumor had it Caesars was now flirting with Eldorado Resorts (ERI).  Not happy about the “L” I took just a few months ago I felt a bit vindicated in CZR as an investment. I jumped back in as the two confirmed they were hooking up. My position was in the GREEN and I was on to the next trade. My 2019 positions for CZR:

Then COVID-19 happened and I watched the closure of casinos and gathering spaces to halt the spread of the virus. CZR cratered and fell as low as $3.52 on March 18^th. I held strong this time…not following the herd…knowing CZR’s worth (in the stock market we call this intrinsic value). That’s what makes some of us different. I know my worth, which then helps me evaluate the worth of everything in life. CZR intrinsic value is iconic, trust I have the pictures to prove it.

My last lesson - do your own deals…own your own masters. It helps to be good in math but stop giving your dough to someone else if you can’t quantify that value they are bringing to the table. It’s not personal, it’s your independence and I treat it as such.

As you see above, I even opened a new stake in CZR yesterday because I have conviction the deal gets done. I’ve already been sent the follow merger terms to review and on May 12th things became clearer as Eldorado Resorts provided a timeline to close the $17.3 Billion acquisition of CZR that's not too far off. There are approvals pending from the states of Indiana, New Jersey and Nevada and then it will be sent to the Federal Trade Commission. The math is this: ERI is paying Caesars shareholders the sum of $8.40 plus an amount equal to $0.003333 (the “Ticking Fee”) for each day from March 25, 2020 until the closing date of the Merger (the “Closing Date”), multiplied by (ii) a number of shares of Caesars common stock (the “Aggregate Caesars Share Amount”) equal to (A) 682,161,838 plus (B) the number of shares of Caesars common stock issued after June 24, 2019 and prior to the Effective Time pursuant to the exercise of certain equity awards issued under Caesars stock plans or conversion of Caesars’ outstanding convertible notes (the “Aggregate Cash Amount”). Subject to the proration procedures set forth in the Merger Agreement.

The Truth is all that legal language above don’t mean much. Keep Life Simple, Treat People Fair:

At $8.40 a share in cash plus shares in the new company, I break it down like this:

-             If you bought below $8.40 à You’re getting all your cash back, some profits, and shares in a New Company ERI ( a free roll as my       gamblers call it)

-           If you bought above $8.40 below $10 à I’m no gambler but any returns on your investment 80% and above is close to a playing with the house’s money. If you add in the free shares you’re receiving in the new company that = getting Optionality (most of my money back to move on to new investment plus free shares in a new company

I started this blog many years ago because I’ve witnessed system racism all my life. Early on I knew I needed an exit plan because Corporate America wasn’t thinking about diversifying its ranks. No mentors, I was one of the fastest rising African American’s to make the senior management ranks because I worked harder and longer than most. I could probably count the number of African American director’s at my company (which is the next level) on 2 hands in a company that boasts over 15K people so I knew that glass ceiling was real. I look forward to change but until these institutions are dismantled you’ll see me here diversifying myself for those moments when someone brings terms to me that aren’t equitable for me or my family…I always have the OPTIONALITY to say no. Sadly there is no strategy for racism, bad policing, and hate. I only know to do what my late African father taught me to do. Know My History, Know Where I’ve Come From, Treat Others with Respect, and to be the King I was meant to be…all while still not taking shit from anyone. I put love out into the world and expect it back. That’s all I ask for. 

Peace and Love ✌

Full Disclosure: I am long CZR option contracts. Fancy BS for I think the stock will go up

GRUBHUB (GRUB) + JUST EAT TAKEAWAY HOOKUP ALERT

If Not Now, Then When. This is the question I ask this great nation if we cannot come together and finally rid this world of systemic racism. No one's life should be snuffed out at the hands of another person -- especially the at the hands of the police who we are supposed to trust. Corporate boards, companies, universities, city-councils, police departments, when will you open your doors and diversify your ranks? I will continue to pound the table for justice and talk about the Pillars which are a guiding light for for balance and strength in this world. I am financially independent and educationally skilled Urban Economics professional --- that negotiates my on terms for work. I try to be spiritually balanced and physically and mentally fit so that I can take care of my growing family. But all this hard work is for nothing if at the end of the day, when I leave my house everything can be taken away from me in the blink of an eye OR worse 8 minutes and 46 seconds. #blacklivesmatter #justiceforGeorgeFloyd #nojusticenopeace

I have NOT been wanting to post anything but I owe it to you all and myself to stay the course. The system isn't designed for some of us to rise up even when you do everything right. My vision here at Urbanomics all those years ago was to be bridge for those of you that strive for independence or what I dub OPTIONALITY. Freedom to do what you want and still live an amazing life -- on your own terms. So my work continues:

I love speaking to people about OPTIONALITY and Grubhub is one of my young players on my investment roster exuding those qualities. OPTIONALITY lends itself to --- Heads I like the outcome, tails is just as nice of an outcome as well. The last time I wrote you UBER was making me an offer to take Grubhub off of my Junior Varsity team. I say JV because while Grubhub is young, risky, and shows lots of potential I don't trust them enough with a starting position on my investment roster. So they play a small but important role. Since the UBER everywhere skrt skrt offer, other teams have jumped into the fray. Yes, international teams are interested in this high flyer like LaMelo Ball hooping in Australia. 

I still like this Grubhub position and I still implore you to take risks even in an injust world. Together we can lift each other up. Here are the new details I just learned today about Grubhub from my dog, David Faber over at CNBC:

1) Grubhub and Uber are having issues. Like a young player not wanting to be traded over playing time in the future, Grubhub is nervous that US regulators won't like how big Uber will be in the food delivery business and nix the deal. So they are asking for big time dough if the deal falls apart. skrt skrt

2) Grubhub is evaluating a takeover offer from Just Eat Takeaway.com a food delivery company based out of the Netherlands.

Grubhub is looking like it's days on my roster are coming to an end. With multiple suitors, I was glad I took a small risk that paid off.

See my previous post about Uber's offer and a snapshot of my purchase price:

https://urbanomics.blogspot.com/2020/05/grubhub-grub-uber-uber-hookup-alert.html

It's Time for us all to eat...and Grub is just the beginning.