Jawbone Won't Be the First/Last in Busted Tech

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Busted Tech. We're not in the business of saying "told you so," but, well...yeah, we told you so. We noted last year that Jawbone was likely effed. Sadly, we were right. Hardware is tough stuff. And so is the music streaming business: after taking on $70mm in venture debt back in March, Soundcloud is answering to its investor overlords - including Ares Capital - and slashing costs. It'll be toast soon. 

News for the Week of 01/15/17

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  • Canada. Predicting lots of doom and gloom.
  • Covenants. Some developments in the capital markets thanks to recent activity with makewhole provisions - including "the end of covenants?". 
  • Fees. It was only a matter of time before there was a new chapter in the always inevitable vilification of restructuring professionals due to fees. Instead of a front page story about Lehman or TXU in the WSJ, here the Houston Chronicle highlights oil and gas cases.
  • Fund Performance. Bloomberg does IR work for Brigade Capital Management, highlighting the asset management company's purported big '16. And for Mudrick Capital, noting the fund's turnaround after a period of high profile poor performance.
  • Let's Get Technical. For you geeks who love worrying about CDS, high yield bonds and liquidity, this report is for you.
  • Municipal Trouble: we've talked about Dallas in the past and now Providenceis in the crosshairs.
  • North Dakota: In a shocking development, the state's forecasts did not account for the upheaval in the energy space: just a mere billion short.
  • Radio. Pros focused on radio-based media situations ought to take note of what is happening in Norway, which is now the first country to completely switch off its FM radio network and convert entirely to digital. Meanwhile, in the streaming music space, Soundcloud bankruptcy rumors continue to increase (we called it).
  • Sears. We're tempted to run a pool to gauge when this sucker FINALLY files for bankruptcy but like the villain in Die Hard, Lampert will probably find a way to keep the thing coming back.
  • Rewind I: Garden Fresh Restaurant has sold to Cerberus Capital Management in bankruptcy. Sun Capital's pain is Cerberus' gain. Speaking of Sun Capital, it seems they made out okay with their Limited investment thanks to distributions and dividends. To summarize, they made 1.8x their initial $50mm investment. And 4000 people are losing jobs.
  • Rewind II: Gilden Activewear Inc. will acquire American Apparel for $88mm, a premium to the original stalking horse bid. Meanwhile, Nasty Gal received approval to sell its brand and customer information for $20mm. Wet Seal, meanwhile, looks headed towards a Chapter 22 at best and a liquidation at worst - not long after Versa Capital bought it out of bankruptcy for $7.5mm.
  • Rewind III: Jawbone continues to struggle as the wearables space continues to consolidate.
  • Chart of the Week: 
  • Tweet of the Week: 

News for the Week of 01/08/17

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WHAT YOU NEED TO KNOW FROM THE PAST THREE WEEKS (PLAYING CATCH-UP EDITION)

  • Distressed Investing Hindsight. Avaya. Phone systems? Who would've guessed this could go wrong? Psssst: don't tell anyone but apparently Avaya and Goodman Networks are apparently in 30-day grace periods.
  • Fintech. Cracks in P2P lending by way of bankruptcy (Argon Credit).
  • Fraud. Theranos announced that it's letting go 41% of its work force - which we believe is a precursor to bankruptcy. Why file? To sell IP. If they actually even have any. And address litigation. Meanwhile, Snapchat, on the heals of a possible IPO, is being sued for misleading investors. Toss in ethical issues around Hampton Creek and others and we may start seeing some fraud-related bankruptcies a la 2001.
  • Grocery. Is Kroger's buyout announcement another leading indicator of future distress?
  • Media. Ev Williams, founder of Twitter and Medium, acknowledges that the ad-supported media model is broken while significantly cutting headcount. It seems that $150mm VC funding can't help produce a new business model. 
  • Retail. It looks like the Trump Job Preservation Tour forgot to schedule stops at KMart, Sears and Macy's (meanwhile Sears unloaded Craftsman and JC Penney shed its HQ). Next up: Kohl's? Ugly 20% drop after a nasty comp store sales drop and forecast cut. Apparently, omnichannel customers are the key to the riddle. Meanwhile, Amazon is sniffing around American Apparel (as is Forever 21, reportedly) and Boohoo is focused on Nasty Gal. Gap - mostly due to a 12% comp sales increase at Old Navy - showed positive signs while Neiman Marcus cancelled its IPO, a clear negative.
  • Taxi Companies. Uber is the death of traditional taxi companies and new tech companies that support the taxi companies (Karhoo). Which means those companies must really suck since Uber burned $3b in '16.
  • Wearables. Pebble. "Acquired." Vinaya. Bankrupt. Does someone want to raise us a Jawbone?
  • Fast Forward: With Amazon and Apple in the mix, music streaming services are struggling to make money and Soundcloud may be the closest victim. Restructuring professionals will remember that Rdio already went through bankruptcy and sold to Pandora.
  • Fast Forward II: Remember Exco?
  • Rewind I: Platinum Partners. It's amazing how funds get away with this nonsense: 17% returns for 13 years.
  • Rewind II: Athleisure. Financials-related Uh oh (Finish Line). And bankruptcy-related uh oh (Yogasmoga). But like most things, Amazon gives zero $&%s.
  • Rewind III: Coal. Maybe Trump will help the "clean coal" industry after all. And yet solar continues to progress, as does wind (in the UK and elsewhere). Ps, $361 billion is an awfully large number. And now things are progressing on the storage side thanks to Elon Musk.
  • Chart of the Week: