Disgraced Crypto King SBF Convicted of Fraud & $2B Theme Park Merger

0:26Race the rudders! Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, the SBF saga has come to an end as a jury found guilty on all seven counts of fraud and conspiracy. Then Daylight Savings Times ends this Sunday, but we want to dig into whether it should exist at all. It's Friday, November 3rd. Let's ride.

0:54the morning brew daily team is busy planning for our holiday episodes and for one of them that's focused on entrepreneurship we are looking for your help yes we want you to send us your best business ideas so we can critique them i'm talking about the ones that have been languishing in the notes app for years the good stuff neil and i as well as two special guests will go full shark tank on them to see if you're sitting on a gold mine or not. We've already gotten a couple good ones so far. Here's my favorite. Shazam for plants. Just sit with that one for a sec, Neil. So I take a picture of a plant and tell me what it is?

1:29Neil, we don't need to debate it now, but yes, you're on the right track. Shazam for plants. That might exist. Yeah, it could, but I still like it. Before we get into the news, we have a quick word from our sponsor, Brex. As we head into the weekend, I had an idea. What if I, Toby, had a Brex-like spend management platform, but specifically for my weekend spending habits? Okay, I see where you're going with this. You want to keep yourself in compliance with your weekday self, close the books faster after a night out, and stay on budget in real time. I like it. Yes, give Weekend Me a corporate card managed by Monday through Friday, Toby, powered by Brex's best-in-class spend management platform, and I will be a happy camper.

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2:39with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere tonight on NBC. Let's head to the news. Sam Bankman-Fried went from being a billionaire, hobnobbing with Tom Brady in the Bahamas, to a broke, convicted fraudster who faces maybe a lifetime behind bars. The 31-year-old former CEO of FTX was found guilty by a jury on all seven charges of fraud and conspiracy. The sentencing for these charges, which carry up to 115 years in prison, is scheduled for March 28th, 2024. SBF is expected to appeal. The jury took just over four hours yesterday, including dinner, to conclude that SBF stole$8 billion worth of customer funds from his crypto exchange, FDX, to fund risky investments, political contributions, and luxury real estate.

3:28The conviction ends a five-week trial that saw three of SBF's former top advisors, including his ex-girlfriend, Caroline Ellison, testify that he was the mastermind behind the years-long con. Near the end of the trial, SBF took the stand to paint himself as someone who made mistakes but did not knowingly steal from customers. Apparently, he was not very convincing because he said he couldn't remember details more than 140 times during cross-examination. We've talked about the SBF saga endlessly on this show, so if I had to put a bow on it, it's that we have just witnessed one of the biggest financial frauds on record and the stunning rise and fall of a person who, like many other white-collar criminals before him, convinced the world he built something revolutionary when it was all just a smokescreen to fill his own piggy bank.

4:12It is amazing how badly this trial went for SBF. Taking the stand was just a masterclass of everything that was wrong with SBF from the beginning because he thought he could talk his way out of it. He thought he could portray himself as something that he wasn't, which is kind of the through line throughout this entire process. The prosecution came with receipts. SBF certainly did not. The jury only deliberated for just that couple of hours. And honestly, the sheer amount of couldn't recall that he put out there just was emblematic of everything that was wrong with SBF at an organizational level as well.

4:47Yeah, and before the show, you, I, and the rest of the team were kind of reminiscing about FTX's rise. And it was truly stunning. I mean, he founded this firm in 2019. SBF didn't really know anything about crypto before this. He just saw an opportunity in crypto to make a lot of money, which he did for himself. He became worth$23 billion, which was the fastest. He became the youngest person to reach that amount of wealth since Mark Zuckerberg. And then during the pandemic, when there was all this crypto hype, people were just sitting at home with nothing to do. You started to see FTX everywhere.

5:18I mean, the Miami Heat started playing at FTX Arena. If you would watch an F1 race, there was an FTX ad everywhere. MLB uniform, Empire uniforms had FTX. You saw this guy in commercials with Tom Brady and Larry David. The Super Bowl had FTX commercials. He spent so much money. And at the time, we were all like, wait, what is FTX exactly? And now it's revealed to be a massive fraud. Yeah, it was so conspicuous during that time. Also, just crypto in general would love to put this chapter to rest because, I mean, the industry as a whole has gone to scandal, to scandal over the past few years. They all kind of linked into each other as well.

5:54Remember the Terra debacle, which caused$60 billion of market funds to be wiped out. Then you had the Celsius crypto exchange that also imploded. FTX obviously blew up. And the industry is still facing just a lot of heat from the SEC. It's brought more than two dozen crypto-related cases since FTX has collapsed. So it's pretty recently as well. And a lot of them are looking into the very nature of crypto tokens themselves and whether or not they violate security laws. So there's not as many flashy criminal cases in the pipeline. But a lot of boring, but still existential ones are still facing the industry.

6:28Yeah. I mean, the New York Attorney General just sued Gemini, which is run by the Winklevoss twins for defrauding hundreds of thousands of customers and losing one billion dollars. So there's all these percolating cases that are happening that maybe pose an even more existential crisis to crypto than FTX, which was kind of this big whale that kind of was separate from it. But speaking to SBF, I think the reason that he became such this larger than life figure was because of his aspirations beyond crypto. I mean, he was such a big figure in Washington, D.C. because of his political contributions.

7:00He said he had a five percent chance of being president. And he was this leader of this effective altruism movement, which professed to give away all of your wealth to help out the world. So he just became this larger than life figure, even though he was kind of like a dweeb. I mean, people loved him, but he was kind of a dweeb. And so I think it was just his bigger picture looking and his overall philosophical pinings that kind of made this a little bit bigger than just the crypto industry. It was big. All right, Neil, we are in the thick of earning seasons. And even though you may have caught a headline or two or seen that stock up or this stock down, it can all jumble together at some point.

7:40so we've picked out some of the most important companies as well as one big thing that stood out to us from each one to bring you up to speed on what's going on in the market up first we have a little company called apple apple reported its fiscal fourth quarter earnings yesterday and we got a bit of a mixed bag they beat analysts expectations overall for revenue but sales of its key devices once again slid for the fourth quarter in a row mainly powered by a two and a half percent drop in sales in China. iPhone sales were flat. Wearables like the Apple Watch revenue fell three percent. Revenue from iPads was also down 10 percent.

8:15But the big loser were Mac sales falling nearly 34 percent year over year. The bright spot was services revenue that included things like Apple Fitness and iCloud. The segment is undefeated, Neil. Revenue was up 16 percent to a record$22.3 billion. And a big reason why overall revenue was up, even though device sales were down. But my big takeaway goes back to that Mac sales number. Again, Mac sales were down 34%, but Cook & Co. are bullish on the M3 chip it revealed on Monday, which is the most advanced chip Apple has ever created, hoping it can reignite demand. Some important context is the Mac sales are being compared to an all-time record fourth quarter from last year, when a lot of pent-up demand exploded into higher than normal sales.

8:59But still, my takeaway is that Apple needs the M3 to put max sales on its back. Yeah, my takeaway here is that eventually Apple's going to become a software company because every single hardware business unit declined except the iPhone. Meanwhile, services continue to grow in double digits every single year. And eventually, I mean, what does it do? $22 billion in sales. And I think in total, Apple did 80 or 90 billion in sales this quarter. So eventually you're going to see services growth top iPhone sales. And we're going to be talking about this company as a software company. And they recently jacked up prices as we talked about.

9:36Apple TV Plus went from$6.99 a month to$9.99 a month. And with iPhone sales plateauing, because how many times do you need a new iPhone, which is it's kind of a mature industry. And like we said, all the other segments are kind of languishing like Macs and iPads. I mean, they're just doing a really good job of this pivot to services. I think they mentioned they have over 1 billion subscriptions across its entire portfolio. So it would not be incorrect to call it a software company at this point. I just don't know what's going on with the iPad. You can't figure out what's going on with Max, but they didn't release a new computer.

10:10They didn't also release a new iPad, but iPad's down 10%. This segment brought in 6.44 billion. Do you have an iPad? I actually had one when it first came out i thought it was the coolest thing ever never touched one again i think it's big in schools yeah it's great for smaller personal computing when you don't want to shell out yeah i've just never walked into someone's apartment and see it saw an ipad you're a pixel guy so you don't even count i can still look i have eyes okay moving on live nation is in its villain era and it's loving every minute of it the company that owns the reviled ticket master posted its strongest quarter ever thanks to taylor swift beyonce and all the other bands that went on sold out megatours this summer, the company sold 140 million tickets to its shows so far this year, which is already way more than 121 million it sold last year in total.

10:59So even though it's got the DOJ breathing down its neck after botched the Ares tour ticket release about one year ago, Live Nation only sees better times ahead next year. Coldplay, Metallica, Pink, Bruno Mars, Aerosmith, The Foo Fighters, and Ed Sheeran are all touring, and about half the expected show count for next year is already booked for large venues. My takeaway is people really miss concerts during the pandemic. Oh, this one makes a ton of sense. All we talked about this summer was Taylor Swift and Beyonce and who sells those tickets, Live Nation. What was interesting, though, is a lot of people were kind of saying, all right, well, are your sales going to fall?

11:34Because obviously, Taylor Swift and Beyonce can't be on tour forever. But the CFO said no artist is going to account for more than 1 % of the tickets we sell. So no one or two will ever hurt us year over year. So I did think it was interesting that he was kind of saying, we are more than just Taylor and Beyonce. There are plenty of artists out there and they all contribute to the whole of Live Nation. Yeah. And meanwhile, the DOJ is investigating Live Nation. It says it's not for antitrust concerns because there was that merger between Live Nation and Ticketmaster that a lot of lawmakers have major concerns about.

12:06And they say that Live Nation is a monopoly in the concert space. The Live Nation CEO said it wasn't about this investigation is not about antitrust and is more about its business practices, but we'll see how that plays out. Yeah, it's gonna be a bit of a threat to the company. Up next, Starbucks had an awesome quarter. Let me paint the picture of where it's currently at as a business. First off, the fall season went swimmingly since bringing back its iconic line of pumpkin spice flavored drinks back in August. U.S. and North American same-store sales grew 8 % and the company saw record-breaking average weekly sales overall.

12:41Store traffic is also up 3%. Unlike Apple, China was a bright spot for Starbucks as foot traffic increased 8%, leading to a 5 % bump in same-store sales as well. And now we have the Christmas season on deck. It's a good time to be Starbucks. So what's my big takeaway? Starbucks is going ham in the international markets. Three out of every four new stores over the near term are expected to be open outside the U.S. And eventually it plans to expand to 35 ,000 locations outside of North America by 2030, up from just 20 ,000 right now. Neil, overall, a great quarter for Starbucks as it beat on both earnings and revenue.

13:18And shares are up 9.5%. Yeah, stock was ripping after this report. What was interesting to me was that it's leaning into these fancy drinks because that's where they have the best margins and they're commanding ridiculously high prices. Those sugary syrups, all those things that people customize and you have to wait in line for five minutes behind them. That has been a huge problem for Starbucks, but they're undergoing this revolution behind the scenes to try to speed up that process. but it seems like they're not discouraging their customers from ordering these drinks and only encouraging them to do it more because each time you get another pump on it, it's another dollar in their pocket.

13:53Yeah, and every time they can save a few minutes while serving those drinks, that's another dollar in Starbucks' pocket. So they're like, sure, order them, but we're just going to get better at making them. If you live in another country, expect way more Starbucks. So many Starbucks, yeah. Okay, I want to talk about Novo Nordisk and Eli Lilly, the two pharma companies that are making more money than God thanks to their revolutionary diabetes and weight loss drugs. Their only problem right now, and it's a good one to have, is making sure there's enough supply to fill rabid demand. Yesterday, Denmark-based Novo said revenue grew 29 % from a year ago to$8.4 billion.

14:25Wagovi and Ozempic accounted for more than half of those sales. Eli Lilly's revenue soared 37 % to$9.5 billion thanks to its diabetes drug Manjaro. It's hard to comprehend how big these companies have gotten thanks to this new class of drug known as GLP-1 agonists. Novo Nordisk shares are up more than 50 % this year to become the most valuable company in Europe. And Eli Lilly has quietly become the most valuable pharma company in the world with a market cap of$550 billion. Investors are so hype about these drugs potential and Novo and Lilly are the two dominant players in the space. This is a run for the ages.

15:01Yeah, I think the question now is how do you expand what these drugs treat? Novo is already evaluating how semaglutide, which is the active ingredient in Ozempic, affects conditions from arthritis to alcohol abuse. And remember in October, they ran this kidney failure study that they actually halted early because it was so clearly effective. So there is a lot more room to run here as they apply this technology to new diseases. All right, Neil, finally, we have a company that didn't actually report any earnings, but still had a major stock swing, WeWork. WeWork stock fell 53 % over the past week after news leaked that it plans to file for bankruptcy, potentially as soon as next week.

15:42Neil, I'm sure we'll talk about this a lot more when it does eventually file, but holy moly, the fall from grace is complete. This was a company that was once valued at$47 billion at the peak of the SoftBank era of free money. The current market cap,$59 million. Neil, truly the end or almost the end of an era. Just possibly the worst managed business we've seen in recent years. As of June, WeWork was paying over$2.7 billion a year in rent and interest, which was more than 80 % of its entire revenue. It locked into these long-term leases in 2018 and 2019 when there were low interest rates and the office market was flush.

16:22Now we know that all of those things are different. We're in a new era and WeWork just hasn't been able to dig out of this hole at all. I can't wait to dig further into what a crazy run they were. What a crazy company. All right, before we get lost in the stocks forever, we're going to take a quick break.

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17:36It's Friday, which means it's time for our Stock of the Week, Dog of the Week segment, where we look at one stock that liked the new AI Beatles song, and one stock that clearly has horrible taste in music. But Neil, I know a lot of our listeners must be thinking, wait a second, they just covered five stocks at the beginning of the show. Now we're getting two more? Well, this week we decided to embrace a more liberal definition of the word stock and basically just chose something that we thought had a good or bad week in general. I won the pre-show game of Guess the Movie Soundtrack, so I'm up first, and my modified stock of the week is the iconic Adidas shoe, Sambas.

18:10Neil, this has been the year of the Samba, an absolute classic dating all the way back to 1950. Sambas have seen a resurgence in the post-Kanye West era at Adidas, as everyone from hardcore sneakerheads to celebs have turned to the iconic look to fill the void. Modernizing its historical backlog has typically been something that Adidas struggles with, but for whatever reason, people are once again digging Sambas. And honestly, there's not an exact reason for why they've made a comeback. Retro shoes in general have been having a moment as we've moved away from big, chunky platform shoes to more funky, sporty silhouettes.

18:46Plus, the company also got a boost from the release of its$500 super shoe, that helped Ethiopia's TIGS ASEFA break the women's marathon record in September. But it could just come down to the price. You can still snag a good pair of Sambas for under$100, which is becoming a rarity in today's shoe game. Neil, I love Sambas. Are you a fan? That surprised me. I thought they were$60. Well, they go... Did they used to be$60? They used to be$60. Now they're a little bit more towards$90. I guess I'm not a part of this craze because I looked at the prices and I didn't know that they were around$100. I thought it was kind of the everyman shoe.

19:21You could get it for$60. This was very surprising. I haven't really seen Sambas in the wild. I definitely had a pair when I was a kid. Great shoe. But I really couldn't believe this stat on their growth. I just needed to check it a million times. Apparently, they sold under 1 million pairs of their retro models last year. And this year, they're ramping up production to hit 15 million. They're killing it. It's across not just Sambas. It's across some of the more classic ones. But I do just really think that people have been loving these iconic shoes. And, I mean, you have the Nike Blazers. You have the Nike Cortezes.

19:54Nike's always been really good at kind of going back and mining their heritage. Adidas has always not quite been as good. But I do think that Sambas are just one of those shoes that are so classic. You can release different colorways. And that's a big thing. It's good for collectors. It's been on a bunch of celebrities' feats as well. Rihanna actually was spotted wearing them, even though she has a shoe deal with Puma, which is adidas's big rival over in germany so i do think that sambas are awesome and it's led to a great year for adidas as well adidas shares are up about 30 so far this year lapping nike who's down 14 so again in the post kanye west era a lot of people were nervous what is adidas going to do i guess look back in history okay my dog of the week is hbo and max ceo casey bloys look we were all bored during the pandemic but most of us didn't create fake twitter accounts to attack critics of our TV shows, which is what Blois did.

20:47On Wednesday, a Rolling Stone report revealed that Blois directed a so-called secret army of colleagues to chirp reporters and TV critics on Twitter that said bad things about HBO shows like Perry Mason and Mayor of Easttown. At an HBO event yesterday, Blois owned up to doing it, saying he was working from home and doing an unhealthy amount of scrolling through Twitter, and I came up with a very, very dumb idea to vent my frustration. Big shots creating secret Twitter accounts to defend themselves and express how they really feel is nothing new. But it is a bit surprising coming from Blois since he was a pretty rock solid reputation and is known as an easygoing fella.

21:23Look, of course, this is super embarrassing. But I also don't know how you say anything bad about Mare of Easttown. I know that's a great show. It was a fantastic show. Neil, I want a burner account. Everyone has wished they could just clap back at a person here and there. It's usually a sports thing, too. Remember, Kevin Durant famously had one. But I think there needs to be more in media because you spend all this time putting all this love into a show and then some critic bashes it. What would you do with one? I'm not telling. That's the rule number one of burner accounts. You never give a hint as to what you're going to do with it.

21:56Okay, we have to move on. You must be this tall to listen to this story because it's about an amusement park mega merger. Six Flags and Cedar Fair are getting in the log flume together in a$2 billion deal that will create a summer playground powerhouse. Together, the companies will operate 27 amusement parks, 15 water parks, and nine resort properties in North America. Six Flags, you all know from the Six Flags branded parks across the U.S., including the one five minutes from my house in Massachusetts. Cedar Fair has opted to keep its parks with local branding. Its flagship property is Cedar Point in Ohio, but it also owns Knott's Berry Farm in California.

22:32Dorney Park in Pennsylvania, and many others. The tie-up comes during a rough patch for amusement parks, which are seeing declining attendance, even as Americans flock to other recreational activities like live music and sporting events. Six Flags, for instance, recorded 20.4 million visits last year, a 26 % decline from 2021. At least to me, this feels a little bit like JetBlue and Spirit merging. Two smaller fish hoping that linking up will give them the skill to compete with the big guns like Universal, Disney, and SeaWorld. Yeah, I can see the scale argument here. Their combined attendance over the last 12 months was 48 million, which is a lot of people, Neil.

23:10And so I do see that there could be a better value offering. Say you buy a season pass. Now you have so many different parks that you can have entries to. It's what a lot of the ski resorts have done with the Vail Empire. Right. So even though, yes, they are not that top tier of gold standard of the Disney's, the universals of the world, I think they can make up for it in scale and some of these cost-cutting measures. The intellectual property angle is interesting as well because Six Flags has long used characters from the Looney Tunes and also DC Comics at its parks. And then Cedar Fair has the rights to some Peanuts characters like Snoopy.

23:41So maybe there's some sort of like MCU-like universe where they can get Snoopy and the Looney Tunes all together in one. So I think the IP angle is interesting. All right, amusement parks are just becoming more theme parks these days with the IP-ification of everything. Disney is not building any theme park, right? It's all based on its IP. the Star Wars stuff, the Harry Potter stuff like that. I mean, that's not that's not Disney, but this is the way theme parks are going. And Cedar Fair has long been known for its crazy roller coasters. I won't touch. Oh, you're not. I can't even go on the teacups.