Musk Paid $23B to Focus on Tesla & Is ‘Athleisure’ Dead?

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0:30Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Tesla found a new way to keep Elon Musk focused on work, a whole lot of money. Then American Eagle's share soared after Trump endorsed Sidney Sweeney's controversial ad. It's Tuesday, August 5th. Let's ride.

0:50Good morning and happy Tuesday. I want to quickly take us out west where the government has been deploying some creative methods to combat a spike in gray wolf attacks against livestock. The problem they're facing is that the wolf population has surged since being reintroduced to Yellowstone in 1995, leaving ranchers defenseless to protect their cattle and sheep. The latest solution, according to the Wall Street Journal, is to use drones to scare off the wolves by blasting the predators with haunting audio clips from the drone speakers. And by haunting audio clips, the recordings include ACDC's Thunderstruck and, this is true, a clip of the fight between Scarlett Johansson and Adam Driver in the movie A Marriage Story.

1:32Toby, nothing more terrifying than ScarJo and Driver hurling barbs at each other. I'd absolutely run the other way. Well, now I'm sitting here thinking about other things a drone could play that would have an animal sprinting the other direction. And the first thing that came to mind, unfortunately, was good morning, Rude Alesia. Just kidding. That would have the wolves sitting at rapt attention. No, I feel like maybe playing Benson Boone would have them scurrying away or doing flips off of a piano. Don't do my boy like that. Yeah, one of the two. My favorite part of this story, though, is the nominative determinism that's at play here.

2:05The USDA district supervisor who is piloting this drone program is named Paul Wolf. And now a word from our sponsor, LinkedIn Ads. Toby, have you ever wasted something? Yeah, I wasted an invite to my birthday party on an ungrateful coworker who apparently didn't even wanna be there. Well, I think you're also wasting energy still being mad about this. Just like brands waste marketing spend. They waste time, money, resources, and effort. The list goes on. LinkedIn ads can help reduce all that waste. LinkedIn ads lets you target by job title, industry, company, and more. With over 130 million decision makers, 10 million plus C-suite executives, aka you're gonna reach the people you need for your business and who appreciate you.

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3:30And it's all about making sure he doesn't lose focus on Tesla for the next couple of years. In a note to shareholders, the board wrote that retaining Elon is more important than ever before. While we recognize Elon's business ventures, interests and other potential demands on his time and attention are extensive and wide ranging, we are confident that this award will incentivize Elon to remain at Tesla. The reason the board needs to incentivize Elon to remain at Tesla is because his previous pay package remains in legal limbo. Remember this drama? Back in 2018, Musk was handed the biggest award in U.S.

4:03corporate history worth$56 billion. But last year, a Delaware judge struck it down, saying that the process was compromised by Musk's influence over the board and the directors weren't acting independently when they approved it. While Tesla is currently appealing that ruling, the lack of certainty led the board to create an interim pay structure it described as a first step good faith payment aimed at keeping the world's richest person engaged at his job. So Toby, instead of booting Musk for being too distracted, the board is doubling down on their guy and investors like the move sending Tesla stock up 2 % on the day.

4:36You know what, Neil, I'm feeling a little distracted as well maybe i could use a little something to focus my attention again but yes this bonus does not necessarily follow the structure of other bonus packages you would expect to see out of corporate america because executive bonuses are meant to reward good behavior incentivize more of that behavior but this bonus package doesn't really fit that pattern it's more like throwing stuff at a wall and just hoping it will stick hoping maybe musk will change ways and divert more of his attention back to their company. But it does seem like they are coming from a position of weak leverage, saying like, please take this money, take all these billions and billions of dollars, just focus on us again, please.

5:20But they kind of have their back against the wall because without Elon, Tesla does not have a true path forward, their move into robotics or move into autonomous driving, that takes a massive hit. So they need Elon, and it's clear by the fact that they're throwing all this money at him. Yeah, I thought some of their reasoning was really interesting. They obviously think that Elon is their North Star. He is the company. But they also said that, to be clear, losing Elon would not only mean the loss of his talent, so his talents, but also the loss of a leader who is a magnet for hiring and retaining talent at Tesla.

5:53They said this was key against the backdrop of the ever-intensifying AI talent war and Tesla's position at a critical inflection point. We've talked so much about Mark Zuckerberg, Bloomberg's very personal and intense push to recruit these AI researchers who are dime a dozen. They think that Elon Musk plays that similar role for Tesla at a time when the competition is heating up to retain all this talent that pushes this automaker into the AI realm. Also, Texas plays a big role in this as well because this new pay package after the debacle that happened with Delaware, Elon moved the company's headquarters from being incorporated in Delaware to being incorporated in Texas.

6:34And Texas is basically immune from suits similar to the one that Delaware brought because to sue in the state, shareholders must own at least 3 % of a company. Tesla is a massive, massive company that has a very high threshold to meet. So basically this next pay package is much more insulated from the type of suit that torpedoed his last gigantic pay package. So bottom line here, Elon Musk will probably be the CEO of Tesla for the next couple of years. and he's got a big turnaround job ahead of him. Tesla stock is down 18 % year to date. They just had their worst earnings report for a quarter in recent memory.

7:10He's got a lot of work ahead and he will be paid handsomely for it. Remember Outdoor Voices, the millennial-coded brand that had everyone donning a doing-things hat and rocking yoga pants on their coffee runs? Well, it's ousted founder Ty Haney, once dubbed the queen of athleisure, is back at the helm once more, ushering Outdoor Voices into a new generation with a new collection dropping today. Founded in 2013 amidst the rise of Lululemon, OV rode mono-colored leggings and the idea that people should wear workout clothes not just to the gym, but everywhere to a$110 million valuation in 2018. But after reaching the highest of highs, it all came tumbling down in 2020 amidst backlash against Haney.

7:51With the company kneecapped, Outdoor Voices closed all its doors and was snapped up by a PE firm, Consortium Brand Partners, to avoid bankruptcy. The big turnaround plan quietly asked Haney to come back home and try and right the ship setting up today's triumphant return. So what does Outdoor Voices 2.0 look like? In a recent interview with Texas Monthly, Haney admitted that despite helping mainstream it, she actually always hated the word athleisure and instead used terms like fashion forward and sexy to describe Outdoor Voices' new drop. It's a much different fashion landscape now, too. We've moved way past the our leggings pants debate.

8:29Clearly the world has already decided yes. And at this point, athleisure isn't just a category. It's just clothes. And it's into that landscape that Outdoor Voices hopes to regain its cultural cachet, Neil. I'm getting flashbacks to 2018, Toby. I don't know if I can do this early. But back then, this brand was everywhere. Ty Haney was one of those so-called girl boss CEOs who was on magazine covers on panels. She was everywhere. and so was this brand. But then like so many other D2C companies, I'm thinking Casper and Allbirds, that became huge via cheap Instagram and Facebook ads, it all came tumbling down.

9:07And since Tahini left, this company has been essentially a zombie company, not really updating any of its products on its website, closing all of its stores. Will be very interesting to see if she can capture some of the magic that she had back from 2013 to 2020 when this brand was truly everywhere all around New York City and they had a big community of engaged customers willing to go out and be brand ambassadors for it. I see the logic behind trying again because if I'm consortium partners, I'm looking at the athleisure market. It's absolutely exploded. It's projected to reach$716 billion by 2032, according to Fortune.

9:45But then I also look at rival brands that have emerged in the post-outdoor voices landscape. Brands like Viore, who basically is like Lulu slash Outdoor Voices for guys, was valued at$5.5 billion last year. And then, of course, you still have Athleta, Lulu. Aloe Yoga is another big one that's been making waves. So it's worth a shot, at least, to try to cash in on whatever cachet this brand has left, whatever name recognition it has left, and try to run it back with Haney at the helm. So I definitely see the boardroom conversation here that led to this relaunching. Moving on, in news that would make absolutely zero sense to someone in 2015, American Eagle's stock soared after President Trump weighed in on the brand's controversial Sidney Sweeney ad campaign.

10:31In a long post on Truth Social, Trump called the Sweeney spot the hottest ad out there and added that American Eagle jeans are flying off the shelves. Whether or not that's true, investors tried to manifest it, sending shares of the shopping mall legend up nearly 24 % on the day to their highest close since May. And now with Trump's post, it is official. Every single person in the United States has offered their take on the Sidney Sweeney American Eagle brand deal. To catch you up, last month, American Eagle launched its most expensive partnership ever, a jeans promotion featuring the actress of the moment, Sidney Sweeney.

11:05But it's generated loads of controversy because of the messaging. The campaign's tagline is Sidney Sweeney has great jeans, which is meant to be a play on words with the denim pants and the basic units of heredity. In some of the ads, the blonde, white, very attractive Sweeney leans into the DNA angle of it all, saying genes are passed down from parents to offspring, often determining traits like hair color, personality, and even eye color. My genes are blue. Some on the left blasted the ads as tacitly embracing eugenics, being overly sexualized, and targeting men when American Eagle is ostensibly trying to get women to buy these genes.

11:40The backlash prompted a backlash of its own, with others calling the ads critics too woke and humorless. In the middle of the crossfire is American Eagle. While the stock has soared since the campaign was launched, its reputation is in a more precarious place. Yeah, this certainly worked in the financial markets. American Eagle has been kind of stuck in neutral over the first half of the year. Its stock is actually down 20 % still, even after this multiple rises that have come from these Sidney Sweeney ad outrage cycles. But Trump's comments doesn't introduce any new information about the company, doesn't change anything about the fundamentals of its business.

12:18It is just drawing investors into the hype cycle. So the real question is whether this ad campaign is actually going to convince shoppers to buy the company's apparel. And that is still to be determined. A lot of analysts who cover the stock say, we don't really care that much about the noise. A lot of that is bringing new investors into the company. We're actually looking at the back to school season right now and seeing if people are actually going to start buying these jeans. So I'm very curious to see in a couple of months when, you know, the financials come out, if this did have any meaningful impact on the business.

12:48So we'll see. Sydney Sweeney is a brand ambassador for at least a half a dozen brands. She is everywhere. And we could look at some other brand deals that she's worked with to see if she does move the needle. It looks like in some cases, perhaps she is a spokesperson for Hey Dude, which is a loafer company owned by Crocs. In the latest earnings report cox ceo came out and said that the uh working with sydney sweeney to reach uh gen z consumers has been quote performing really well she also has worked with dr squatch which makes soap that was recently acquired by unilever for 1.5 billion dollars in june well so it looks like she does push sales upwards in brands that she works with we don't know yet whether that's happening with american eagle we do know that people are interested in american eagle for perhaps the first time in a few decades.

13:36Google trend data shows that interest for American Eagle is at its highest level in more than 20 years. So people are searching for it, at least. A lot of fashion talk on this show. We're going back to 2018 with Outdoor Voices, even further with American Eagle. We'll see how our fashion takes age as we progress in the year. Up next, it's Tuesday, which means we have Toby's Trends. ServiceNow puts AI agents to work for people. That's why this was written and read by a real person and not AI. Creative work like writing and performing, that's the good stuff. You know, the work people actually want to do.

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15:51Welcome back to another edition of Toby's Trends, the segment where I spelunk deep into the internet to emerge with a trend you should keep your eye on. And today's trend is restaurants going all in on spicy foods. Restaurant trains have been tripling down on hot foods that younger customers love. Chipotle rolled out its spicy adobo ranch last quarter, and May Taco Bell debuted its Mike's Hot Honey Diablo sauce on the heels of launching its Caliente Catina chicken menu the month before. Not to be left behind, Wendy's released a Takis Fuego meal, while the usually mild Mediterranean chain Kava launched a hot Harissa pita chips in April.

16:28In total, U.S. restaurant chains launched 76 new spicy menu items from March to June, bringing the total number of restaurants that offer at least one spicy item on their menu to 95%, according to an analysis by Data Central. Of course, spicy foods aren't new, but they are particularly popular with eaters under the age of 30 who prefer bolder flavors. A study from Sprite, who itself has been trying to emphasize its own tangy mouthfeel, found that nearly 50 % of Gen Z consumers eat at least one spicy meal a week. In general, Data Central found that mentions the word spicy online tend to spike, too, when new spicy items are introduced to menus.

17:08So, Neil, if you want to create buzz both online and in customers' mouths, the best way to make that new hot food item is to make that food item hot. We're all just trying to feel something, Toby. One reason why restaurants are leaning into this trend so much and one reason why they're so happy that consumers want spicy food is that it's pretty easy to make and it offers a low cost, high return option. Imagine if Gen Z consumers were like, we love lamb and goat. And they're like, well, we don't really have the supply chain to get all these new proteins in our menus. But to make a spicy food, all you need is some peppers and maybe some creativity in the kitchen.

17:45So they are loving this and they are going all in on spicy, at least for the time being. We know that Gen Z consumers are pretty mercurial and they change their taste very quickly. Sweet and spicy was big. Swicey was big last year. Nashville Hot was big a few years ago. Now you don't see any of those on menus. So Gen Z is quick to change their tastes. So we'll see how long this spicy trend lasts. But at least for now, restaurants are trying to cash in. I do think that this does have a compelling case for enduring because of social media. Spicy foods and social media go together extremely well because there's something about watching people suffer or, you know, just have that really red mouth while they're eating a ghost pepper chip or something like that.

18:30There is something inherently compelling about watching that sort of entertainment. And the other aspect, too, is mukbangs have produced a lot of viral spicy items. These are these live stream broadcasts of people just eating very large amounts of food. And large amounts of spicy foods are often more compelling and more stark and red than watching someone eat pudding or something like that. So I do think the fact that companies want to make a buzz on social media, people who are scrolling social media, want to watch people eating spicy things. That's a match made in heaven and it's going to continue to, you know, power this hype in spice cycle.

19:05All right, I want to get your take on this one final spicy release. So Doritos thinks it has a new cool ranch level flavor, one of its mega flavors that it's coming out with that will have the popularity. It's calling it golden sriracha, which plays on this trend. Golden sriracha, I do like, I don't understand the golden aspect. Maybe it's just because you can see it better, but I do love the idea of golden sriracha. Oh, you got to separate it from the normal cheesy color of Doritos. So golden sriracha, I'm all in on that. Yeah, they say that younger consumers use sriracha as much as ketchup. All right, let's sprint to the finish with some final headlines.

19:45Boeing's impressive turnaround has hit a roadblock. 3 ,200 machinists building fighter jets in the St. Louis area went on strike yesterday after rejecting a four-year contract with the company. The strike is the second walkout in less than a year for Boeing after 33 ,000 workers in the Northwest hit the picket line for seven weeks. CEO Kelly Ortberg, the mastermind behind Boeing's improving finances, downplayed the impact, telling investors last week, I wouldn't worry too much about the implications of the strike. We'll manage our way through that. But the striking workers are hoping to make them sweat.

20:17Yeah, Boeing does have a little leverage in this situation, though, because it operates non-union plants in the area as well. So again, the general manager of the St. Louis site said, we are prepared for a strike and we have fully implemented our contingency plan to ensure our non-striking workforce can continue supporting our customers. So this is much different than the much larger machinist strike earlier in the year or last year, excuse me. This is a smaller part of their business. It's still a meaningful part of their business. It's still a part of their business that's actually lost a lot of money of late.

20:50It's lost nearly$11 billion, dating back to 2021. But it has made some strides. It was on pace to be profitable again this year. But now you throw a strike into the mix. Not as bad again as the big one from a few months ago, but still kind of annoying if you are Boeing. Palantir was the best performing stock in the S &P 500 last year, gaining over 500%. And this year, it's also the best performing stock in the S &P 500 and just had an earnings report where it topped Wall Street's already sky-high expectations. The AI and defense software provider passed$1 billion in quarterly revenue for the first time ever and boosted its full-year guidance.

21:32Its CEO, Alex Karp, was nearly giddy with the results. In a letter to shareholders, he wrote, the skeptics are admittedly fewer now, having been defanged and bent into a kind of submission. He also kicked off the earnings call yesterday by saying, as usual, I've been cautioned to be a little modest about our bombastic numbers, but there's no authentic way to have anything other than enormous pride and gratefulness for these extraordinary figures. A big reason for his optimism is Uncle Sam's checkbook. Palantir's U.S. government revenues were up 53 % from a year ago. Neil, Palantir is on an insane run right now and is now one of the 20 most valuable public companies in the U.S.

22:11after another 4 % gain yesterday. This guy is going full Muhammad Ali. I mean, he is riding high. And another thing that he said, and Alex Karp said in the earnings call that I thought was interesting points to a broader trend here, is he said, we're planning to grow revenue while decreasing our number of people. So he said the goal is to get 10x revenue and have 3 ,600 people working for Palantir. We now have 4 ,100. There's been certainly a growing movement of CEOs being unabashedly telling investors that we want to reduce our headcount. years ago, for entire corporate history, more people meant bigger company.

22:51And now with AI and other software coming into play, coming into the workforce and streamlining operations, you can do more with less. And companies like Palantir are just openly bragging about that now. Moving on, my name is Toby, but switch a letter and you get Joby, an electric air taxi company that is making big moves. Yesterday, Joby announced plans to buy out a portion of Blade's business, the helicopter taxi service, for$125 million. Blade made a name for itself by allowing people to LARP as big shots, taking short-distance helicopter rides to and from mainly airports in New York and Southern Europe.

23:27It's those short-distance routes that Joby has its eyes on. Its flying taxis are designed to hold up to four people plus a pilot and fly around 100 miles before stopping for a recharge. For a long time, its air taxis have felt more like a pipe dream than a real mobility solution. But when you share three letters of a name with me, anything is possible. And thanks to an executive order signed in June aimed at accelerating the use of air taxis, it looks like it might have its regulatory certification ducks in a row sooner rather than later. Neil, both Blade and Joby are publicly listed companies, and both dollar stocks jumped about 18 % yesterday.

24:03Maybe next time you fly out of JFK, you'll be riding in a Toby. I mean, a Joby. You tried to make it happen. I appreciate that. Yeah, it's very odd to see both companies' stocks surge so much like that after an M &A deal. Usually the acquiree is the stock shoots up and the company that's doing the buying goes down. But clearly investors think this is a great move for both companies as we perhaps get electric air taxis coming. I know we've been promised this for years. One potential benefit for consumers for this particular deal is that Blade CEO said that pricing could go down as they use Joby's electric air taxis.