Talibs Weekly Email #78
💸Old Hedgefund battles, 💉Deloitte's $44 million blunder & 🌍African Comics to the rise
Hi Everybody
Hope everyone has a great weekend and Thanks for the great podcast/article/clubhouse? room recommendations. We’ve had a crazy 4 weeks to start the year. My favorite though has been this #robinhood vs Reddit vs Hedgefunds story-line. I love it all!
Would love to hear what you’re listening to right now in the comments!
What I’m listening to
Tweet that made me go hmmm..
💸The Journal: Carl Icahn vs Bill Ackman
💉Tech Review: What went wrong with America’s $44 million vaccine data system
🌍Economist: New Platforms bringing African Comics to a Broader Audience
The Journal: Carl Icahn vs Bill Ackman
💸Who are these folks? Carl Icahn and Bill Ackman are Hedge Fund investors and more primarily - they are activist investors. Both have a certain style where they aggressively buy a % of the company in the open market; obtain control of the board and shuffle the management.
💰What is activist investing? An activist investor is an individual or group that buys a significant stake in a public company in order to influence how the company is run, such as by obtaining seats on its board of directors
So whats the story?
Who are the characters?
💲Carl Icahn: Known as a corporate raider where he would buy into companies, shake things up and then exit with a higher shareholder value. Each time, the billionaire sought to acquire, break up or sell off parts of the company. He’s had positions in Netflix, Nabisco, Texaco, Blockbuster, USX, Marvel Comics, Revlon, Fairmont Hotels, Time Warner, Herbalife, and Motorola
🤑Bill Ackman: Think a younger Carl Icahn, he runs a company called Pershing Square Holdings where he places bets on companies and is notoriously know for short-selling positions in many companies. Ahead of the 2020 stock market crash, Ackman hedged Pershing Square's portfolio, risking $27 million to purchase credit protection, insuring the portfolio against steep market losses that occurred in March. (COVID). The hedge was effective and generated $2.6 billion in less than a month
Herbalife: This is exactly what it sounds like; its the company that sells dietery supplements through a global multi-level marketing plan.
💹2004: Herbalife files to go public and markets themselves as a marketing product rather than something different. They had a unique distribution where you had to know a distributor to get the supplement.
2012: In December 2012, Ackman issued a research report that stated that Herbalife’s multi-level marketing business model was a pyramid scheme, he also disclosed that his hedge fund had sold the company’s shares short in May 2012 causing the Herbalife’s stock price to drop.
The shares were trading around $21 each on Dec. 19, 2012, when CNBC broke the news about Ackman’s bet, which he would detail a day later at the Sohn Conference in New York City.
💰Drama on CNBC: Both these investors called into CNBC and had the most awkward-heated exchange that was live on TB. They both called each others names and clearly outwardly showcased the fact that these two Hedge Fund billionaires did not like each other due to a deal gone wrong in the past. An example of this is here
📈2013 About a month after the battle, Icahn revealed in a filing a huge stake in Herbalife effectively taking the other side of the short, which Ackman defended for months saying the stock would go to zero. Essentially, Icahn played the squeeze and saw the large short position and attempted to increase the losses for Ackman. He attempted to buy and thus push price higher.
👎Government Involvement: The FTC had started an investigation in 2016 after repeated pushing from various short sellers; The FTC had reached a settlement with the company with high fines and a promise by Herbalife to adjust their business model. They had released a press release about the settlement "it's virtually impossible to make money selling Herbalife products”. They stopped short of saying it was a “scam” and hence the stock lived free for another day.
📉2018: Bill Ackman exits: Bill Ackman confirmed that he had exited his short position years ago ending the feud with the company and Icahn. He essentially waved the white flag and had approx. losses north of around $500m.
💹2020: End of a Financial Soap Opera: Carl Icahn sold over half his stake in Herbalife Nutrition and relinquished his seats on the board (he had multiple due his stake); taking a step back from the longtime investment he fiercely defended.
Mr. Icahn has been Herbalife’s largest shareholder since 2013. He stuck with the company through challenges from Mr. Ackman.
My Thoughts: This was a fight between a Hedge Fund vs Hedge Fund with Herbalife caught in between. No matter what you thought of Herbalife; that didn’t matter because both parties were using Herbalife as a pawn for their ultimate move.
This is extremely similar to what is happening now; only this is retail traders vs Hedge Fund with GameStop in the middle. The short squeeze that these retail traders found was essentially the same type of squeeze that Carl Icahn took advantage of; he realized that Ackman had a short position so he bought more of the company to increase the price of the stock thus costing Ackman in high interest + collateral.
To understand the difference; Herbalife shares went up from $21 to $80 and this caused Ackman to lose millions on the trade whereas GameStop literally went up from $12 to $300 plus. The longer it stays at $300 plus - the hedge funds who have these short bets need to put up collateral + interest (high as 29%!) everyday; thus either forcing them to close their position (buying those gamestop shares at $300+).
In the end; this was pure entertainment but probably showed the nasty side of hedge fund investing and the amount of PR campaigns these hedge funds do on a regular basis to bring down certain companies for their bets.
#GME to the moon…or to the ground now?
💉Tech Review: What went wrong with America’s $44 million vaccine data system
TLDR: The Vaccine administrative tool built by Deloitte has caused significant and multiple problems to various states and hindered this vaccine roll-out in the United States.
💻What is VAMS? VAMS is the Vaccine Administration Management System is the tool / website used by the US government for the appropriate vaccine rollout in many states across the nation. This product was built by Deloitte over a $44 million tender offer.
🖱️What was it supposed to be? It was supposed to be a one-stop shop where employers, state officials, clinics and individuals could manage scheduling, inventory and reporting for COVID shots.
🔥Issues? Clinic workers who use it in states such as Connectictut and Virginia have said the system is notorious for randomly canceling appointments, unreliable registration, and problems that lock staff out of the dashboard they’re supposed to use to log records.
😕Has the CDC Acknowledged that there are faults? Yes - the CDC has acknowledged that there are multiple flaws they are working to address although they do attribute some of the problems to user error
👴Online sign-ups are especially challenging for older people (59% of seniors have broadband connections at home; the system did not take into account of this accessibility)
😖Language barriers - There are quite a few non-native English speakers doing high-risk essential work; people in poor urban areas often have limited access to internet. A problem disproportionately affecting the latino communities.
🖥️ Browser Issues: The website doesn’t work on Internet Explorer; the User interface is one dimensional and not appropriately designed to be used on your cell phone
😕Lack of Flexibility: This has been a block for many clinics as clinics want to send specific instructions to patients prior to them coming for their vaccine appointment.
📰How did this get started? Early in the Pandemic, the CDC outlined a need for a system that would handle the mass vaccination campaign and wanted to stream-line the entire process from signups, scheduling, inventory and immunization reporting.
💰Deloitte won the Contract? In May, Deloitte (a huge federal contractor) won the bid with a $16 million no-bid contract to manage the covid-19 vaccine distribution and administration tracking. In December, they added another $28 million for the project again with no competition. The contract specifies that the award could go as high as $32 million, leaving taxpayers with a bill between $44 and $48 million.
💸Deloitte History: VAMS appears to be the latest example of a broken system for building govt technology; Deloitte recently was in the news for charging states and millions of dollars for unemployment websites that did not work. CGI Consulting has gotten $5.6 billion in federal IT Contracts after getting fired from that healthcare.gov debacle in 2014.
📜Procurement Process: This is the root cause of these issues; the procurement process has issues itself. For example; how can deloitte be the only approved source for a product like VAMS despite having no experience in vaccine deployment. They often require a company to have a long history of federal contracts which block smaller or newer companies that might be a better fit for the task.
My Thoughts: This has been an issue in almost all government related tenders; it has been highlighted so significantly because of the importance & faith that the public has had in the government in the roll-out of this vaccine. We as Canadians are not immune to this either; I spent some time in the Canadian Government tender list and although I do appreciate the transparency; there are some questionable tenders with wins at best.
In the case above; going to a private organization that can appropriately plan or mitigate potential issues while developing a program is not only critical but necessary.
Understanding product pain-points, making sure the product is accessible by all and ensuring that the product is adaptable should’ve been highlighted. The fact that there was only 1 tender (Deloitte) is an issue itself; You should have the ability to invite successful organizations in this field to bid and allow them to succeed.
Go where the talent is not where the relationship is.
💡Economist: New Platforms bringing African Comics to a Broader Audience
🎭What is happening: New platforms are bringing African animators to a global audience to showcase the diverse superheros that exist in the African world.
🦹♀️What type of platforms:
Kugali - This was co-founded in 2017; it sells Comics from across the continent and creates their own animations. Recently, they announced a deal with Disney to make a sci-fi series imbued with Yoruba Culture.
AfroComix - an app for reading comics made by Leti Arts; think of it like Webtoons for Africa.
Mama K’s Team 4 became Netflix’s first African made animated series. The series is based in the Zambia
🌍Superhero life: These superheros do not just look different; the origins of African superheros often have a spiritual provenance. A few examples below;
Strike Guard, by Ayodele Elegba, a Nigerian artist, is the story of a murdered student whose body is thrown into the grave of Ajagbeja, a Yoruba (ethnic group primarily from western africa) god, from whom the reincarnated hero gets his strength.
“Kwezi”, a South African comic, features a self-absorbed social-media influencer who reluctantly uses his powers for good.
“Razor-Man” a mechanic-turned-superhero tries to avenge his father’s death amid corruption and repression in Zimbabwe.
〽️Comics also confront difficult subjects
“Lake of Tears”, set in a fishing industry on Lake Volta in Ghana depicts child trafficking
“Zana” set in a future in which Apartheid never ended which confronts race relations currently in South Africa.
Democratization of Content: African comic artists have been sketching for decades but as digital platforms and cheaper software become available; new diverse readers want characters they can relate to rather then the norm superhero/legends. They want characters that come from their ethnic tribe, confront issues that they see in their daily struggle or face their versions of alternative reality.
My Thoughts: This is diversity at its finest and allowing art being experienced globally. We are so used to a western P.O.V of superheros that an African perspective of superhero may not even match our vision but heck! its different and unique. I would think studios/publishers will be heading to Africa more & more once content gets available and democratized to create.
📚Books of 2021
Here are my books to read/finish for the next while
Completed
Educated by Tara Westover (9/10)
Loonshots by Safia Bahchall (8/10)
Range - David Epstein (8/10)
American Dirt by Jeannine Cummings (9/10) [fiction]
We The North - Doug Smith (8/10) - Nice history from a Raptors beat writer
Promised Land - Barack Obama (8/10) - Great perspective; audio book recommended
Tanking to the Top - Yaron Weltzman (7/10) (Philadelphia 76ers “The Process”)
The Color of Money: Black Banks and the Racial Wealth Gap (8/10)
House of Debt - Atif Mian (8/10)
If you’re looking for books to get, I would suggest checking out bookdepository.com or thriftbooks.com (both are cheaper than amazon at times)