Samsung, Huawei, SPACs, Rush Street Interactive and Under Armour

Samsung eyes a 5G market grab, Rush Street Interactive becomes the latest multi-billion SPAC merger and Under Armour faces accounting accusations.
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Samsung Store
Chengdu, Sichuan / China - MARCH 4, 2019: Samsung store near Huawei store in Chengdu downtown. (By B.Zhou)

Good morning! Today’s word count is 1,319 words, or a 9-minute read. Let’s get to it:

Samsung Primed for 5G Foray as U.S., China Brawl Over Huawei

South Korea’s Samsung is staring at a golden opportunity. If the West bars Chinese telecom-equipment giant Huawei Technologies and China retaliates, Samsung could rocket to the top of the space as the world’s premier 5G network provider.

Why It Matters

Even with deep pockets, Samsung has long battled the uphill climb to reach the top of its industry. The company is betting pretty big that telecom operators “will prefer a supplier who sells both the network equipment and all the consumer products that connect to it.” And amid the chaos, the South Korean firm finds itself on unexpected neutral ground. “Samsung also manufactures its network gear entirely in South Korea, lending it cover from the tit-for-tat restrictions that its main competitors lack,” The Wall Street Journal writes.

In 5G, Samsung control roughly a seventh of the market, whereas Huawei has double that. But Huawei’s business could be up for grabs depending on how the conflict with the West plays out. “Wherever there’s an opportunity, we’ll go there with our products,” Samsung executive vice president Kim Woo-june said. The firm has already dialed up its 5G marketing efforts and has signed four new deals to provide 5G network gear in the past eight months. Samsung also owns the largest number of patents granted in the U.S., Europe or the Patent Cooperation Treaty.

Still, Samsung growing its 5G business is a daunting task, one that largely depends on a key player, with a better cost structure, being barred. 

Numbers to Consider

  • $667.90 Billion – The expected size of the 5G market by 2026, according to Valuates Reports.
  • 20 Percent – How much of the 5G market share Samsung had sought to control by 2019, a sizable leap from its approximately 13 percent share today.

Read More: (WALL STREET JOURNAL)

Rush Street Interactive to Go Public as Part of a $1.8 Billion Deal

Chicago-based Rush Street Interactive LP reached a deal to go public by merging with dMY Technology Group, a blank-check company. The agreed-upon price values Rush Street Interactive, an online sports-and-casino betting company at around $1.8 billion, including debt.

Why It Matters

Special Purpose Acquisition Companies (SPAC), or blank-check companies, are all the rage right now. They raise money by going public and then have a set period to find an acquisition target. Any SPAC merger is subject to shareholder approval, according to The Wall Street Journal. Nikola Motors, DraftKings, MultiPlan and Fisker have all gone public or agreed to deals by way of SPACs.

Founded in 2012, Rush Street Interactive has grown into an online-game giant in the past decade. It only operates in legal and regulated markets such as Illinois, New Jersey and Pennsylvania and also has an international gaming presence in Latin America. The company plans to expand into other U.S. markets as states pass legislation for gaming. The pandemic has had a seemingly inverse effect on Rush Street – the company has seen its revenue increase as Covid-19 has pushed consumers online and away from traditional casinos and betting facilities.

“Other companies are sure to follow, as new SPACs are launching at a fast clip. Last week, hedge-fund billionaire William Ackman raised $4 billion in the largest-ever SPAC offering.”

Numbers to Consider

  • $230 Million – dMY’s cash on hand will be used to pay for the Rush Street Interactive deal.
  • $160 Million – Additional money from institutional investors, reportedly including Fidelity Investments, to help fund the deal.
  • $155.49 Billion – The expected value of the sports betting market by 2024, according to Zion Market Research.

Read More: (WALL STREET JOURNAL)

Under Armour Says It Gets ‘Wells Notices’ From SEC

The Securities and Exchanges Commissioned issued a warning to Under Armour, its founder Kevin Plank and its chief financial officer David Bergman, saying the company could have civil-enforcement action related to the sports apparel maker’s past accounting practices.

Why It Matters

It’s already been a tough year for Under Armour, a company that reported its first sub-$1 billion revenue quarter since 2015, according to MacroTrends.com, and watched its share price drop by roughly 50 percent. The alleged inappropriate accounting practices could be a devastating blow to the sports apparel maker’s future.

The SEC is looking into Under Armour’s books from 2015 and 2016 and “pull-forward sales.” In November, the SEC and the Justice Department had already begun an investigation to determine whether the company was shifted sales from quarter to quarter to appear healthier. The Wall Street Journal spoke to several former executives who claimed Under Armour repeatedly used “these and other moves” to help extend a 26-quarter streak of sales growth that ended in 2016. Some of these executives said these tactics are common in the retail space.

The Wells Notice, or the warning issued by the SEC, gives the recipient a chance to argue why they shouldn’t be filed. Under Armour maintains its accounting practices were “appropriate.”

Numbers to Consider

  • $4.60 Billion – Under Armour’s market capitalization Monday morning, according to Yahoo Finance.
  • $930 Million – Under Armour’s Q1 2020 revenue, according to MacroTrends.com.

Read More: (WALL STREET JOURNAL)

A Quick Look

Gold Prices Hit Record as Dollar Drops

  1. The weakening dollar and uncertainty of the world economy drove gold prices up Monday. Future contracts for delivering gold in August rose 2.1 percent to $1,938.10 a troy ounce. The previous intraday peak was $1,923.70 from September 2011.
  2. Gold futures reached an all-time closing high Friday but fell short of the intraday record. Futures for September delivery, the most widespread contracts, increased 6.6 percent to $24.36 an ounce, the highest level in nearly seven years.
  3. Gold prices have risen steadily, gaining 8.9 percent over the last month and 27 percent this year. The metal has been one of the strongest-performing major assets of 2020.

Read More: (WALL STREET JOURNAL)

Worth Your Time

Quit Playing Games With My Heart: Washington Nationals phenom Juan Soto made headlines last week after a positive Covid-19 test pulled him out of Opening Day. MLB’s testing system involves a two-day lag, so there was some question as to whether it should be played. The situation just got a lot more complicated as the Miami Marlins’ home opener against the Baltimore Orioles Monday was canceled. Eight players and two coaches within the Marlins organization have tested positive. The mini outbreak across the league has reached a total of 14 cases and reinforces the concern of whether the 2020 baseball season can be played safely. (CBS SPORTS)

Hard Times: “Federal Reserve officials meet Tuesday and Wednesday facing growing doubts about the prospect for a sustained economic rebound due to the nation’s uneven public-health response to the coronavirus. Officials have warned this month in speeches and interviews that the economy faces a deeper downturn and more difficult recovery if the country doesn’t take more effective action to slow the spread of infection.” (WALL STREET JOURNAL)

The Changing Times: While leading the charge on the Covid-19 vaccine front, AstraZeneca announced it had agreed to pay Japan’s Daiichi Sankyo Co. up to $6 billion to “jointly develop and commercialize” a cancer drug. As the British company continues its push into oncology, it says this could “redefine the way the disease is treated.” (WALL STREET JOURNAL)

Tidbits

Google is pushing back its return to normalcy, choosing to keep employees home until 2021 amid the Covid-19 pandemic.

Surging Covid-19 cases around the world may speed up the process of determining the efficacy of vaccine candidates.

India is taking a hard look at 275 Chinese apps for violation of national security or user privacy laws, which comes shortly after the country banned TikTok and 59 other Chinese apps.

A Couple Cents Content

Justin Oh breaks down Rush Street Interactive, the latest SPAC merger. (POST)

Catch up on Thursday’s Live Show, including the upcoming $1000 giveaway. (YOUTUBE)

Curious what people’s feelings are on returning to live events? Check out my Q&A with L.E.K. Consulting Managing Director Alex Evans (POST)

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