Talibs Weekly Email - Week 40
🧑🌾 The Indoor Farming Start-up, 📽️ Cinemas in Decline & 🇮🇹 The Rise & Fall of Berlusconi: Bunga Bunga
Good Morning,
Happy Thanksgiving to the Canadian folks. Hope everyone enjoyed their long weekend. I’ve appreciated all the reads and thought invoking discussions from everyone so far. I look forward to sharing more of them soon!
Cheers,
Talib
What I’m listening to as I write this weeks email
Tweet that got me thinking
🇮🇹 The Rise & Fall of Berlusconi: Bunga Bunga
🧑🌾 The Indoor Farming Start-up thats raising some big time $
📽️ Cinemas in Decline
Podcast
You can listen to this on Spotify. Thanks to Akshay for this recommendation. Its been an awesome series so far. Its an 8 episode series and currently 7 are released so far.
TLDR: This is the rise and fall of Silvio Berlusconi who was the charismatic real estate mogul who became the Italian PM and became one of the most powerful men in the world only to be brought down by the “Bunga Bunga”
⚽️Who is Silvio Berlusconi? Berlusconi is an Italian media mogul and former Prime Minister of Italy who owns the largest broadcasting company in that country, Mediaset. He also owned the football club AC Milan for over 30 years. He had a “rock-star” appeal who always surrounded himself with women and lived the glamorous lifestyle.
🇮🇹Forza Italia Party: The saying we always hear at football games “Forza, Italia” (Go, Italy!), is actually from Berlusconi’s party itself. He founded his own political party in 1993 and actually won the general election in 1994. The party's organisation and ideology depended heavily on its leader. Its appeal to voters was based on Berlusconi's personality more than on its ideology or programme.
♟️When was he the PM? He was elected in 1994 and was removed in 1996 after losing support from fellow political parties. Further, he was elected again in 2001 and lost in April 2006 in a general election. The election had to be contended at the supreme court level which confirmed an opposition victory but Berlusconi didn’t concede until May.
⚖️Italian Statute of Limitations: Under Italian Law, defendants are entitled to two appeals which must be resolved before the defendants begin serving their sentences. However, the statute of limitations clock keeps ticking while these appeals are in progress. (It stops in significant parts of the western world) In Berlusconi’s case - the statute of limitations ran out multiple times before a few of his cases made it through the judicial system.
🍾What is Bunga Bunga? This is crazy as it sounds; he was known to have a very lavish playboy lifestyle and the “Bunga Bunga” were actually the “orgies” he held at his mansion that bought him down years after.
💭My Thoughts: This is a super entertaining series and its narrated by Whitney Cummings - the comedian. The Statute of limitations law appears multiple times during the podcast and is the most common theme throughout on helping white collar criminals get away with crimes as they have the funds to prolong court procedures for years.
🧑🌾CNBC: Indoor farming start-up with Martha Stewart on its board joins the SPAC craze to go public
🚚TLDR: AppHarvest is a developer of large-scale tomato greenhouse wis going public via a reverse merger with a SPAC called (NOVSU). The company expects to have an initial valuation of $1 billion.
🧺What is AppHarvest? AppHarvest is a technology company that is focused on sustainable farming through indoor greenhouse technology. They have been an “unicorn” based in one of Americas’s poorest congressional districts. The company expects to employ over 350 people in Morehead by year end and allow its product to each 75% of the continental US within a 1 day drive.
🙃Where is Morehead? Morehead is located in Kentucky and has been one of the poorest congressional districts in America. Morehead: Morehead, Kentucky is in the Appalachian area where the area has suffered economically as the coal industry has declined. Most importantly - 2018 was Kentucky’s wettest recorded year in history and they plan on utilizing climate change to their advantage.
🇲🇽 🇨🇦Their Approach? AppHarvest has said their indoor farming approach uses 90% less water than traditional agriculture and their location provides them with a geographical advantage with shorter transportation to to continental US. Majority of the tomatoes are imported from Canada and Mexico hence they are infused with pesticides to sustain their long shelf life; eliminating this transportation allows the company to provide cleaner tomatoes.
🍅Have they done anything yet? They’ve built a 60 acre greenhouse with a focus on two types of tomatoes. Their first harvest is expected to be Tomatoes, a crop that has seen imports rise to 60%. They expect their first source of revenue commencing in 2021; they expect to utilize the funds raised to create 480 acres of greenhouses projected to supply other vegetables in the US.
⬆️👍I found these in the AppHarvest Investor deck here. It was quite an interesting read where they expect revenues from 25M in 2021 to $375M in 2025. They expect to focus is on tomatoes, leafy greens and cucumbers.
💭My Thoughts: The company is valued at $1billion without earning any revenue at the moment; this is a big bet so far on indoor-farming and self sustaining. I love the fact that this company is located in Morehead, Kentucky and is helping creating jobs in that area. This company is invested by J. D. Vance who wrote Hillbillgy Elegy (an Excellent read to understand the troubling times that people in the Appalachian region have faced recently). As COVID has presented new challenges, the urge for locally produced products has been high as we’ve realized how dependent we are on our trading partners.
🎞️The Economist: As audiences gingerly return, cinemas face a new problem
TLDR: Cinema theatres across the globe have a symbiotic relationship with movie studios and the lack of blockbuster hits coupled with COVID measures makes it a business that currently just strives to survive.
☹️What happened recently? The latest news involves MGM deciding to postpone the heavily anticipated James Bond movie from November to April 2021. This was the final straw for Cineworld as they decided to shut down most of their theatres for the time being.
📽️Cineworld? Cineworld is a British company and is the world's second-largest cinema chain that have over 790 sites across 10 countries. They were recently in talks to acquire Cineplex and since the Pandemic - that deal has gone sour. As of Oct 9, Cineworld decided to shut down 536 theatres in America and 127 in Britain as there appears to be a decline in audience and no blockbuster to look forward to
Declining before Covid?
📉Debt: Attendance at movie theatres was declining well before COVID. Theatres had decided to combat the digital streaming by focusing on quality service by creating large multiplexes with gourmet burgers, reclining seats and providing in-seat service. (Think VIP Treatment) However, all these capital expenditures caused the chains to rack up debt. For Ex. AMC has 6 times the debt than their gross profit last year.
📉Streaming Impact: The average North American Household subscribes to 4 streaming services and the impact that these streaming services have had on ticket sales has forced the theatre chains to think creatively or diversify.
🎥Studio Pressure: film studios are bargaining down the length a movie should be shown exclusively in theatres. AMC recently let Universal put future releases online after just three weekends in Cinemas (This is 21 days; Netflix last year was asking for 45 days for the Irishman but theatres were adamant on the 70 day rule)
⏳Future: Theatre associations have predicted that 7 out of the 10 medium-sized companies will go bust without a substantial bail-out; they’re all currently lobbying for one at this moment. Moodys, the ratings agency believes both AMC and Cineworld are likely to default or file for bankruptcy and could run out of cash by January.
🇨🇦What about Canadian Companies? Cineplex?
Canada’s largest chain, Cineplex, had already been affected by provincial closing in the spring to curb the spread of COVID; further the cancellation of a deal to be acquired by Cineworld hit them hard (they’re both locked in a legal deal over a failed deal). The Cineplex stock was $32.85 on March 2 and had since dropped to $4.83 last week.
👇Year over Year? Since the government relaxed measures for Theatres this past summer , Cineplex announced they had 1.5 million people visit their theatres since July 1; 17.5 million people walked through their days during the same time frame last year.
⌛️What can they do? Cineplex has been currently taking advantage of the CEWS (Canadian Emergency Wage Subsidy) and is re-negotiating leases to help with their costs. However, there is speculation that potentially selling their head office location or the sale of their Signage business could be a potential option to raise cash.
💭My Thoughts: This looks horrible for Cinemas and as mentioned before; I do feel an acquisition coming from the large studios or streaming services. I could see Amazon or Netflix buying these theatres for cheap so they can expand their distribution methods.
Books of 2020
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 (7/10)
American Dirt by Jeannine Cummings (9/10) [fiction]
ReImagining Pakistan - Husain Haqqani (7/10)
If you’re looking for books to get, I would suggest checking out bookdepository.com or thriftbooks.com (both are cheaper than amazon at time