Good morning.
In the immortal words of Black Flag lead singer Henry Rollins, “Get in the van.” We think he meant “vanguard,” but whatever.
Uber has a new deal for those in NYC who need to catch a flight but don’t want to spring for an expensive trip from Manhattan to LaGuardia. Its solution: share a van with 13 other passengers, for just $18. Imagine an entire city running on something like that. Oh, wait — the M60 bus from uptown Manhattan goes directly to the airport, and the E, F, M, R, and 7 subways all lead to a LaGuardia shuttle bus. And at $2.90, that ain’t bad.
Hindenburg Shorts Roblox, Claiming It Inflates User Numbers and Puts Children at Risk
Short-selling firm Hindenburg Research’s latest target is a blocky one.
On Tuesday, it published a report claiming that Roblox Corporation, the $26 billion maker of the eponymous free online video game platform, has been exaggerating its user base, losing money, and putting growth ahead of child safety. The San Mateo, California-based developer rejected the claims as baseless. “We firmly believe that Roblox is a safe and secure platform and in the financial metrics we report,” a Roblox spokesperson said in a statement. Hindenburg did not respond to requests for comment.
Roblox’s stock was down just over 2% by market close Tuesday. Year-to-date, it’s down 11.4%.
Playtime is Over
For those unfamiliar with Roblox, imagine kids making up random games in the schoolyard. Now put all that chaotic imagination into an online video game, add a dose of monetization, and you’ve got the idea.
Because of its Lego-like aesthetic, you would think Roblox is for children, and it mostly is. However, 41% of its users are 17 or older, according to its 2023 annual filing, and the game can venture into disturbing territory that Hindenburg described in detail. In many instances, child predators have used Roblox as a means to communicate with, kidnap, and assault children, according to news stories Hindenburg cited. While playing Roblox, Hindenburg investigators said they witnessed real-life pornography, visited an area that resembled an adults-only nightclub, and played a game — which had no age restrictions — where users buy guns and go on a shooting rampage in a hospital.
Additionally, Hindenburg said:
- Roblox is lying to investors, regulators, and advertisers about the number of actual users on its platform, inflating the metric by 25-42%+. It also inflated engagement hours by an estimated 100%+.
- The company isn’t profitable, and insiders have cashed out $1.7 billion in stock since Roblox went public in 2021. In the last 12 months, insiders have sold roughly $150 million in stock (that includes about $115 million in stock sold by CEO David Baszucki).
A Roblox spokesperson said Hindenburg deliberately omitted some of the company’s better financials, like bookings growing more than 22% over the past four quarters to $955.2 million in Q2 2024. “The author made no attempt to highlight any of that because the positive facts simply don’t support their agenda,” Roblox said.
The Short Game: Hindenburg’s MO is simple: Short a stock and release a lengthy, critical report of the company, strengthening the probability Hindenburg’s bet will pay off. And lately, it’s been on the warpath, going after the likes of iLearningEngines, Super Micro Computer, Axos Financial, Equinix, Temenos, Renovaro BioSciences, and LifeStance. And that’s just this year.
Amazon’s Ex-Logistics Boss Takes on Supply Chain’s ‘Franken-Software’ Monster
If your resume included creating Amazon’s mammoth, world-leading logistics network, you’d probably bet on yourself too.
Dave Clark, who spent 23 years at the online retail giant doing just that until he stepped down in 2022, announced in a LinkedIn post Tuesday that he’s starting his own venture. The “operating system” for global supply chains, dubbed Auger, aims to replace the patchwork of “Franken-software” that governments and companies have come to rely on for moving things around.
Burn in Excel
Last September, Clark was forced to resign as CEO of freight giant Flexport after just a year — it was amid a heated struggle with founder Ryan Petersen, who alleged he was overspending. CNBC, however, reported on internal documents that showed Petersen supporting and helping implement the very things he was being critical of.
Clark emerged Tuesday not with a new gig at a major firm worthy of his CV, but with his own startup and — because it doesn’t hurt — $100 million in backing from venture capital firm Oak HC/FT. Auger’s pitch to customers is straightforward:
- Lots of Fortune 500 companies pull data throughout their supply chain systems from a raft of different providers, which can leave the companies struggling to stitch it all together. For example, a 2022 Zencargo survey of 200 UK and European supply chain decision-makers in the retail sector found that just 4% trusted their data.
- Clark said in his LinkedIn post that there is “a shocking amount of the world’s supply chain running on Excel” and that “companies still rely on fragmented ‘franken-software’ — disjointed systems patched together from incompatible technologies that lead to inefficient workarounds.”
Walk the Talk: One thing that’s missing from the view of public scrutiny: Auger’s actual platform or product. Clark’s silver bullet for supply chain software — a.k.a. his company’s “product roadmap and key milestones” — will be revealed in “the coming months,” he said.
Honeywell Will Spin Off Advanced Materials Unit to Focus on ‘Megatrends’
We’re seeing a trend here.
Honeywell, the North Carolina-based $134 billion multinational conglomerate, said Tuesday that it plans to spin off its advanced materials unit as a publicly listed company so it can prioritize the ambitious “megatrends” driving its C-suite.
Keep It Simple(r)
Honeywell CEO Vimal Kapur took over last year with a focused ambition: to concentrate the behemoth firm on “three compelling megatrends: automation, the future of aviation, and energy transition.” Honeywell went on an acquisition spree in the ensuing months, buying Carrier’s digital security business for $5 billion, aerospace and defense firm CAES Systems for $2 billion, and Air Products‘ Liquefied Natural Gas tech business for $1.8 billion to better align with Kapur’s vision. Honeywell has committed to put $25 billion “toward high-return capital expenditures, dividends, opportunistic share purchases and accretive acquisitions,” and says $9 billion of that has gone toward acquisitions this year.
But this has left the advanced materials division the odd unit out, and also given rise to concerns that it will be a drag on Honeywell’s valuation when its focus is elsewhere. The spinoff aims to give Honeywell and the new company more flexibility:
- Honeywell’s advanced materials division makes everything from industrial solvents to medical-grade bio fiber for orthopedic devices to ballistic composites for military body armor. Barclays valued the division at $11 billion, according to Reuters, while The Wall Street Journal spoke to sources who said it could be worth over $10 billion as a publicly traded company — in other words, a not insignificant business.
- Honeywell said the division is expected to have fiscal 2024 revenue between $3.7 billion and $3.9 billion, with an EBITDA margin above 25%. As a standalone firm, it would be able to pursue acquisitions that align with it, or even become a takeover target.
Not Yet: The spinoff is expected to be completed by late 2025 or early 2026. Honeywell shares rose around 2% on Tuesday, though they are still down about 1% this year. The company slashed its fiscal 2024 earnings guidance in July, offsetting second-quarter sales and profit numbers that beat expectations.
Extra Upside
- Paying the Jackpot: Mega Millions lottery ticket price to more than double to $5.
- Not Peckish: PepsiCo cuts revenue outlook as consumers cut down on snacking.
- Time’s Up: More than a dozen states sue TikTok, saying it’s addicting to children.