Instacart Checks Out the IPO Market & Why Everyone is Leaving Scooter Braun

0:00Stocks? ETFs? Or what about mutual funds? Choosing your investments is easier with Fidelity. Our step-by-step experience can help you pick out the right investments for you. Plus, with recurring investments, you can decide how much and how often to invest. Lastly, there's 24-7 help if and when you need it. To find your next investment, head to fidelity.com slash trading. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSC SIPC. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. On today's pod, we'll talk about why auto workers are hitting up Michaels for poster supplies, and the French wine industry needs you to drink more wine, because apparently no one is anymore.

0:44Then we finally have a big venture-backed tech company going public after months of a shriveled up IPO market. Plus, why is everyone in the music industry ditching Scooter Braun? And could Justin Bieber be next? It's Monday, August 28th. Let's ride.

1:04Neil, Bob Barker, the host of The Price is Right for over 35 years, passed away over the weekend at 99 years old. Unbelievably iconic guy who lived a heck of a life. What do you remember most about him? The thing I remember most is obviously he's the guy who keeps you company when you're home sick because I never usually watch TV at 11 a.m. And the off chance I did when I was sick from school. I think this is a universal feeling shared by many. We turn on the TV and watch Little Prices Right at 11 a.m. on CBS. But diving into Bob Barker through all these obituaries, I learned so much more about him.

1:42And he was apparently a very famous animal rights activist. And he ended every show. I did not know this by saying, help control the pet population. Have your pet spayed or neutered. And the PETA office in Los Angeles is actually named the Bob Barker Building. I truly did not know any of this, too, before reading up over him on the weekend. And it also makes me reconsider how we end our show. So we have more of a... If you care about that cause. Right, absolutely. I mean, we say let's run it back. So maybe we start brainstorming a little bit. Also, I do think that a lot of people from kind of the younger generation know Bob Barker more from Happy Gilmore than for his actual role as the host of Price is Right.

2:26That's certainly where I know him of, just like that iconic fight scene between the two. And then also, of course, you had a lot of jokes on Twitter about he got his just just as close to 100 just as close to a dollar without going over since he passed away at 99 so really just a great guy and uh yeah the world will miss him did you know that bob barker was a black belt so he was a black belt and guess who he trained with chuck norris who was his neighbor so he probably could actually beat up adam sandler in real life that is probably where the scene came from. That makes sense now. Very cool.

3:02All right, Neil, let's jump into our top story of the day. The IPO market has been stuck somewhere between Siberia and Meryl Streep's character in Devil Wears Prada. That's how icy it's been. But we're finally seeing some signs of thawing as Instacart, the grocery store delivery company, filed paperwork for its public offering just before the weekend. This is a big deal for a few reasons. One, it'll give us an inside look. into how Instacart is doing as a business after it's had to lower its private valuation multiple times over the past few years. And two, Instacart's debut will be the first IPO for a major venture-backed company since 2021, assuming no one beats it to the punch.

3:43And beyond just venture-backed companies, the number of IPOs over the past 18 months was lower than for any 12-month period since 2016. So Neil, I, for one, am excited to have a new company to talk about. All we've had so far this year in terms of fun IPOs was Kava, which was great. Yeah, it was very fun. No, in the early days of Morning Brew, there were so many IPOs from the likes of Uber and I think Snapchat was in 2017 that we used to go tailgate these IPOs in front of the New York Stock Exchange. It was so fun. The private markets were so frothy. Everyone was going public. So it's really exciting to have this Instacart IPO.

4:21The biggest question for Instacart is that it has its core grocery delivery service, which grew a ton over the pandemic. From 2019 to 2020, revenues grew 590 % because everyone was ordering grocery delivery. That revenue has kind of stagnated for that core business as a pandemic has kind of winded down and people have gone out more. So it grew, you know, I think orders grew 18 % into 2022. But then over the first half of the year, they've been pretty flat. So the question for, you know, potential Instacart investors and for the company itself is, can it squeeze any more money out of this core grocery delivery service?

5:02And if not, what are the new avenues of growth that it's going to tap into, which it has been doing recently? Yeah, it was definitely one of those pandemic darlings that just massively accelerated its its growth timeline and has, it was valued at$39 billion in its last private round in early 2021. Since then, it's repeatedly dropped its internal valuation, which is a little different from what it raises money at. It's most recently internally valued itself at$13 billion. So pretty big discrepancy between those two. And then one thing that stood out to me about Instacart though, is it's profitable.

5:37It generated$428 million in profit last year, which I just didn't expect. They did say that there's a little asterisk because they had a one-time tax benefit that helped its 2022 numbers. But that was a surprising – I just assumed it just had that profile of like a venture-backed tech company. But it is profitable. It's got a lot of users too, 7.7 million monthly active users. And then another interesting wrinkle to me is that economists are kind of excited for this public debut because it gives them a treasure trove of data about the shopping habits of different cohorts of people. Because Instacart claims that it works with more than 80 % of physical grocery stores.

6:18So now that it's public, economists get to pick through that data, see what people's spending habits are. So I do think it's a very interesting company to go public right now. And this is another tidbit that stood out to me. Almost 30 % of its revenues are advertising. Right. So at the end of the day, this has been a joke on Twitter for a long time, that at the end of the day, every company, no matter what it is, always rolls out an advertising business line and it becomes a big part of their business. Apple is doing it. Amazon is doing it. Instacart is doing it. Every time you open Uber now, you see it.

6:52And then to zoom out to the broader IPO market, there's a couple coming down the pipeline finally. Arm is the big one, which is the chip manufacturer. It's probably going to be in the$60 to$70 billion range. Kava went public. Klaviyo is this email-sending platform that is also venture-backed that is also filed within hours of Instacart to go public. It was last valued at$9.5 billion. It is weird, though, because we have lived through such a drought since we started this podcast, basically. I mean, even 2021 was a huge year. We had Lucid, Rivian, Coinbase, and Robinhood. Some of those direct listed, but a lot of companies were going public.

7:30So I'm just happy we have someone to talk about. I feel great. Maybe we'll head back there for another tailgate in the morning. Live pod. Okay. I want everyone to circle September 14th on your calendar because that is the date that about 146 ,000 members of the United Auto Workers Union could go on strike. Freezing production at the big three Detroit automakers, Ford, Stellantis, and GM. Last week, the union voted to authorize a strike if labor leaders and the companies can't agree to a new four year contract because the current one expires on the 14th. And if a strike happens, get ready for economic pain.

8:04In just the first 10 days of the strike, economic losses could total$10 billion, according to a new analysis. UAW President Sean Fain is really seizing the momentum from other labor wins that we've seen this summer at UPS and airlines to wrestle as many concessions from the big three as possible. Among other things, this is pretty wild. He wants a 46 percent wage increase that would boost labor costs to more than one hundred and fifty dollars an hour from the current sixty four dollars. He's also pushing for a 32 hour work week. As he likes to say, record profits mean record contracts. It is those demands were hefty, but I do think that this is one of the more powerful unions left in America, just because the sheer amount of economic kind of destruction that happens if they go on strike is staggering.

8:51And then I also think that it's a bit of an interesting spot that the union finds itself in because the union could organize kind of more targeted work stoppages at certain plants, or they could call for a mass strike from all three of the big three automakers. But that would be the most impactful, but also the most expensive to the union. So they have this big old strike fund with$825 million in it. But assuming all 150 ,000 or so UAW members go on strike, it would cost the union about$75 million per week to pay out of that strike fund. So it could last right around 11 or 12 weeks. So it is, if you go big, it's very expensive to the union itself, but it's also the most impactful.

9:34So it's going to be interesting to see which way they kind of tackle it. I see a union boss in your future. And just to take a look at the bigger picture here, like there is a thread between a lot of the labor action this year, especially Hollywood writers and actors. Because just like them, the United Auto Workers is framing this as kind of an existential crisis for their jobs. For Hollywood, the threat is AI. And for auto workers, the threat is electric vehicles. Automakers have pivoted hard to producing electric vehicles. And that requires a whole different type of assembly than internal combustion engines.

10:11And it means they need just fewer workers. So the union sees the writing on the wall and they want to secure good paying jobs in those electric vehicle and battery plants that may just require fewer workers going forward. So they're just like, all right, we need to get out ahead of this. Very similar to what the Hollywood workers are doing with advances in technology and the way the industry is going. Yeah, it does feel like a lot of this kind of union summer we've been talking about has stemmed from the pandemic, too, because a lot of what the UAW union is saying is that we were essential to you guys during the COVID-19 pandemic.

10:46We were still on the front lines risking our health. You called us essential then. Are you going to pay us now? So it has been interesting. You can kind of trace this big kind of labor movement back to the pandemic. I wonder if we'll get similar memes to what we got with UPS. Because UPS drivers secured a huge gain, and every labor union leader is looking to that model to say, like, okay, if UPS workers could do it, and they really, like, you know, they kind of did a really good job of getting a lot of concessions from the company, then, you know, we can do it, too. So that's kind of driven the momentum here.

11:24Okay, Neil, let's move on to our next story. What if I told you that retailers leaving San Francisco isn't the only exodus that people are talking about recently? Scooter Braun, the man famous for discovering Justin Bieber and holding Taylor Swift's Masters hostage, is facing an exodus of his own recently. Demi Lovato, Carly Rae Jepsen, Asher Roth, Idina Menzel, and Jay Balvin have all cut ties with Braun's management company at some point in the last year. and rumor has it that Ariana Grande and yes, even Justin Bieber could be on their way out. But despite the salacious nature of those big name moves, the actual team may be less piping hot than we wish.

12:04Braun sold his management company to the conglomerate behind K-pop band BTS last year, where he also became CEO of their US arm. So these moves might have more to do with him moving into an executive role and away from his management role than any internal drama. Neil, I for one was shocked to find out that Scooter managed all these people. I truly thought he was still just kind of riding Justin Bieber's coattails. But he's got a huge management company. Well, I think all anybody knew about him or most people outside of the music industry was this fiasco with Taylor Swift where he sold her masters to this private equity firm.

12:41And Taylor Swift did not like that and claimed that he was bullying her. And he fought back. And then, you know, Taylor Swift, her fans all got on Scooter Braun's case. And everyone, I think, in the broader population thinks of this guy, if they know of him at all, as, you know, maybe the guy who bullied Taylor Swift into recording all six of her albums again, which she doesn't have the masters to. But it turns out this guy is like a huge power broker in the music world. When he sold his company to the Korean company, it was a billion dollar deal. Billion dollars. Like that new entity that he's now the CEO of America, Hybe, is one of the biggest music companies in the world.

13:22So this guy is really he's been pulling the strings on a lot of music deals on some of the biggest artists that we know. So this is not really I mean, it is like a music industry story, but he's kind of one of the biggest players in the space that everyone knows. Absolutely. It does. People started digging into all these names leaving. And like Idina Menzel left nine months ago. Carly Rae and J Balvin also said that they haven't been managed in months by him. So people are trying to connect the dots between all these departures. Although the Ariana Grande rumors are a little more surprising because she's been with Scooter since 2013.

13:56She's right in the middle of promoting a re-release of one of her albums. And literally minutes before news of her departure leaked online, Scooter's management company was promoting the album on social media. So people are like, none of this is making sense. So it is interesting. And of course, if Justin Bieber leaves, then that's the big news because they found he found Bieber when Bieber was 13 on YouTube. Right. And and convinced he and his mom to move from Ontario, Canada, where they were, to the United States to pursue a to me usher in Atlanta. So, I mean, discovering Justin Bieber is a pretty cool thing to have in your resume.

14:35Changed the course of history. All right, Neil, before we jump into the next story, we're going to take a quick break.

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15:44Okay, pour one out for France's wine industry, which is going through some rough times. We'll actually pour out 80 million gallons, which is how much surplus wine France is about to destroy. That's enough liquid to fill more than 100 Olympic-sized swimming pools. So why is France bidding adieu to all this wine? Because it just hasn't become profitable to sell it anymore. Combine increased costs from inflation and climate change with plunging demand for vino, and winemakers can't price it high enough to make a profit. So the French government is paying farmers$216 million to destroy it. Okay, they're actually not destroying it.

16:22Winemakers are going to use the money to turn the wine into pure alcohol that can be made into other products like cleaning supplies and perfume. Still, this is a major wake-up call moment for a proud industry that may need to make structural changes to keep up with the times. Climate change is causing harvesting chaos with all the extreme weather it fuels. And an analysis by a French publication found that never has there been so little wine drunk in France. The average French citizen now drinks about 40 liters of wine per year compared to 136 liters in 1926. And I looked this up just because I was curious.

16:55The average American drinks only 11 liters per year. The crazy stat from that is that they used to drink that many liters of wine. That is truly an insane amount. But yeah, this is not a new trend by any means. Wine consumption is just falling. It's fallen 32 % in France over the last 10 years. Of course, the things that are taking its place are rosé, beer, and even non-alcoholic options. So it's a story that we've been seeing in America, but it's even more stark in France as well. um it's also just crazy to me that that you can salvage pure alcohol from wine that was an interesting part to me and it's used in stuff like hand sanitizer perfume and other industries so it's kind of like a reverse jesus moment where they're turning wine into pure alcohol so it went from water to wine to pure alcohol so that's that's the the way the world is right now yeah i mean this is a big deal for france though because it's not the wine industry is not just like any other industry in France.

17:56It's their seventh biggest export. They export, you know, tens of billions of dollars of wine a year, more so than even perfume and cosmetics. So this is a big deal. But this also at telling farmers to destroy wine is nothing new. The government has been doing this since the 19th century because agriculture is kind of a weird production mechanism where you want to produce enough to keep prices high, but not too much to the point where you have a surplus where prices crater, which is happening now. So, but you can't just tell farmers to not grow vineyards. So, because that's just their livelihood.

18:28So they're paying them not just to destroy wine, but there's a separate government initiative to convert their vineyards to make grapes to other stuff like, you know, trees and other uses that may actually make them more money. Yeah, it was literally they're paying them to convert the land into woods or to just leave it fallow. Around a thousand farmers in one region have already applied for the aid, which represents around 8 % of the total growing area in the region. So it's not a small amount where wine farmers are probably just thinking might as well get something for the land rather than have to just destroy the surplus.

19:02But yeah, definitely a crazy, it was crazy to see that this much wine is destroyed. It's 400 million bottles. I know you use the Olympic swimming pool analogy, but I'm going to take it back to the bottle. That's a lot of bottles of wine. Yeah. Okay, Neil, let's move on. It's Monday, which means it's time for our winners of the weekend segment where you and I both pick someone or something that had an especially lovely weekend. I won the pre-show Battle of Wits, so I'll go first. And my winner of the weekend is Cameo. Now, Cameo for the uninitiated is an app where you can pay famous people like athletes, actors, etc.

19:38to record a message of your choosing. It became a huge hit, especially with Hollywood stars during the pandemic, as they all sat at home with nothing to do after the industry shut down. Well, Cameo just had its biggest influx of signups since the pandemic after the SAG-AFTRA strike once again has shut down the entire industry. So since the strike began, more than 2 ,400 performers have joined or reactivated their Cameo accounts, an increase of 137%. and it's the biggest batch of signups since the pandemic began. And get this, Neil, even Fran Drescher, the president of SAG-AFTRA, reactivated her account this past week, and she's charging$1 ,500 for a video.

20:22So my winner is Cameo, Neil, and now I'm wondering if we should get on there. They've been gutted, right? I don't have the exact numbers on me, but Cameo had to lay off a bunch of staff and was definitely one of those pandemic darlings that kind of cratered after the fact that, you know everyone started going out and could get actual gifts rather than a cameo but did you have you ever gotten a cameo i have not i almost got mia ham to wish my girlfriend a happy birthday because i i was just shocked to see some of the how big some of the names are on there and that yeah mia ham like you could get her next week talking to us if we if we wanted i think i got a brian dawkins one which is pretty cool you received one yeah i received a brian dawkins one that's a good one but my favorite cameo story i have to bring this up is the pricing strategy of the actors who play the Salamanca twins on Breaking Bad.

21:09They're identical twins, but one of them has a price of$500 and the other has a price of just$99. So people have been trying to figure out why, and they think it's that you'll be manipulated into thinking the$99 one is a good deal, given the cost of the other twins' cameo. Buy that one. Then they split performing the cameos in half because you can't tell the difference. And then they split the earnings. So it's a very Saul Goodman type ploy. I think it's like price anchoring is the psychology behind that. That's super interesting, actually. I've never seen Breaking Bad, but that, I'll trust you.

21:44Picture any twins. Yes, yeah, exactly. All right, let's go to my winner of the weekend, which is Central New Jersey. So for decades, Central New Jersey residents have languished in this liminal space between the used guys of South Jersey and the strip mall bagel joints of North Jersey. And a debate raged over whether it was a region at all. But now the state is finally telling its neglected middle child, we see you, you exist. Last week, New Jersey Governor Phil Murphy literally put Central Jersey on the map by ordering the state's tourism department to redraw its map to include the region and promote it in all marketing campaigns.

22:17And as someone who's worked and spent a lot of time in Central Jersey, I'm glad that it's finally getting the recognition it deserves. It's quite beautiful. There are quaint towns like Princeton, cool canal system that a lot of people don't know about, huge company headquarters, like tons of pharma. and a bunch of revolutionary war sites. Because did you know that more revolutionary battles were fought in New Jersey than any other state? Maybe more people will find that out if they go. I knew that this story could not be more squarely in your real house. Like, you are a big Jersey guy. I also was just shocked at the tourism numbers coming out of Jersey.

22:52In all, nearly 115 million tourists visited New Jersey in 2022, spending more than$45 billion during their trips. that felt really high to me or is that just okay so uh like the atlantic uh wait what's it called jersey shore jersey shore it could be that but another thing that i was just thinking of is do you get counted if you fly into newark yeah is that economic i wonder if you also think about where the stadiums are metlife is in uh metlife is in east rutherford new jersey where the giants and jets play so i could also factor in okay interesting i was not that there's any there's other stuff to do in New Jersey, but I was thinking about the big guys, Newark, the shore and MetLife.

23:32I feel like are a big part of it. Okay. Cause yeah, that 115 million number felt high to me, but I don't have any context for it. First of all, like, I don't know whether that's a lot or a little in the context of other things, but yes, the revolutionary, they love the revolutionary war in the middle of New Jersey. And you know, it's, it's a good place. I still think they need to do a little, it's, it's, it's okay. It's not amazing. All right. Uh, let's go to our week ahead where Toby and I preview what you can look out for this week. We got a tropical storm, Idalia, which is growing and it could hit Florida's Gulf Coast as a powerful hurricane as soon as Wednesday.

24:09It looks like this one's going to be a big one because it could land as a category two hurricane. But we've been talking about how hot the ocean temps in the Gulf of Mexico are and it could fuel Idalia. I hope I'm pronouncing that right to become a much more powerful hurricane. It's going to slam into the west coast of Florida, kind of where you grew up. Yeah. My whole family is actually out of town right now. So they're, but we, they did not board up the house. So we are definitely keeping an eye on if how powerful it's going to become. The Atlantic hurricane season has been actually very active this year.

24:41It's not just Los Angeles getting hit by hurricanes, but there've been 10 storms about a month earlier than typical, according to the hurricane center. Let's go to our own backyard, New York City, where the U.S. Open begins today. by far one of my favorite events of the year. This is tennis, by the way, not golf. Serena Williams and Roger Federer are now retired, so the rivalry between Carlos Alcaraz and Novak Djokovic has become the most gripping storyline in the sport. And then on the women's side, Coco Gauff, the American, is playing lights out. So this should be super fun. I need to get tickets ASAP.