Labor (Long Ramen, BigLaw & Banking, Short Family/Fun?)

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Michael Moritz, a Partner at Sequoia Capital, stirred quite a tizzy this week with his hot take in the Financial Times that Silicon Valley - relative to China - is full of a bunch of whiny snowflakes. And, then, ironically, the whiny snowflakes whined about Mr. Moritz seeming distaste for "work/life balance." His overall message - while delivered in about as insensitive and out-of-touch a manner imaginable - rings true, however, in that China is undeniably a force to be reckoned with; his piece is yet another warning signal that U.S. dominance is being threatened by China's ambitions. 

While fawning over China's work ethic, Mr. Moritz says, "...the pace of work is furious. Here, top managers show up for work at about 8am and frequently don’t leave until 10pm. Most of them will do this six days a week — and there are plenty of examples of people who do this for seven. Engineers have slightly different habits: they will appear about 10am and leave at midnight. Beyond the week-long breaks for Chinese new year and the October national holiday, most will just steal an additional handful of vacation days." To which we reacted, "That's it?" Chinese managers ONLY work from 8am to 10pm? They get a day off every week!? They take a handful of vacation days?! Sh*t. These lionized Chinese engineers would NEVER make it on Wall Street or in BigLaw. 

Or maybe they would. "JPMorgan has changed its pitch to the MBA students it targets for recruitment, focusing more on the quality of the roles available than the generosity of the remuneration package." Indeed, there is now "a stronger emphasis on the quality of life, with guarantees to protect weekend leave and holiday time and the opportunity to swap with counterparts based in offices overseas...." Clearly, Moritz and Jamie Dimon ($JPM) haven't been hanging out. 

Anyway, our favorite reaction to Moritz? This thread by David Heinemeier Hansson: "What a f*cking toad."

Solar Troubles

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Last week we mentioned solar bailouts and blamed, in part, bad business models. Apparently, the numbers are bad too. Employees are now coming out saying that Sunrun's numbers were juiced just prior to its IPO. This doesn't bode well for the Sequoia Capital-backed solar company which is now under SEC investigation. The company allegedly failed to report cancellations which had the effect of jacking up the number of customers and the megawatts booked - two critical metrics for revenue measurement. Meanwhile, SolarWorld USA announced massive layoffs after an affiliate previously filed for administration in Germany.

News for the Week of 2/19/17

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  • Capital Markets. The return of the Holdco PIK Toggle bond - a precursor to the inevitable market collapse. Or so they say.
  • Coal. Plants are closing. Looks like some votes from coal country were misplaced.
  • Dead Malls. Investing. See, e.g., this piece on Macerich. We don't typically cite to Seeking Alpha's collection of vagabonds and yahoos, but we found this particular analysis of A Malls interesting.
  • Exploration & Production. 17 months after filing its prepackaged bankruptcy case(s)...or was it prearranged?...sh*t, it's been so long that we can't even remember, Samson Resources Corporation finally has a confirmed plan of reorganization. We'd be curious to see what the professional fees are as a percentage of debt ($5.6b): perhaps this should be a new in-court ratio for courts to consider as part of 327(a) review. At least we got a new term of art out of it: "the Kirkland Prepack". So, there's that (2x if you consider EFH this week, too). 
  • Nuclear power. Toshiba took a beating on Westinghouse this week. And now there are whispers of bankruptcy.
  • Retail. We have a Billions-style therapist in-house who keeps using bad sex metaphors to inspire us to be more positive about retail. Ok, no we don't: last we checked none of you are paying for this newsletter and so how the hell would we afford THAT?! Still, there are some positive signs for retail: Barron's, for instance, thinks Macy's stock has fallen too far and has upside. Meanwhile, specialty women's retailer J.Jill has filed its S-1 under the JOBS Act for an IPO which either means there's one retailer bucking recent trends or - more likely - TowerBrook Capital Partners LP is looking to dump this thing before Amazon gobbles it up like it has everything else. Damn...that was cynical and negative wasn't it?  Well, we tried. 
  • Retail II. This week we learned that Warren Buffett dumped his entire position of Walmart stock ($900mm) which, as this piece notes, ain't exactly a vote of confidence in retail. Perhaps Buffett would have reconsidered had he known about "Moosejaw Madness." You read that right: this week Walmart spent $51mm to purchase Moosejaw, a Michigan-based online retailer (with about a dozen B-and-M locations). Interestingly, the business is similar to Gander Mountain which, as we covered last week, is staring down the barrel of a liquidation. Oh, and hhgregg isn't exactly instilling confidence either (yes, its publicly traded). But, in an ironic twist, Amazon is upping to 8 B-and-M book stores.
  • Retail III. This won't help mall foot traffic: frustrated by a lack of options, start-ups like Dia&Co. are looking to tackle the plus-size market (with wholly-unoriginal Birchbox-style monthly mailings). And a fresh round of funding from well-known VC Sequoia Capital will aid the effort. Speaking of Birchbox, note that the business - despite being copied by a slew of other start-ups - isn't exactly a shining tower of success; it recently took on venture debt (and rif'd staff) and now it's exploring pricier options to juice revenues.
  • Shipping. A bloodbath in China for the shipbuilders and Hanjin Shipping = toast.
  • Uber. With $500 million of delinquent taxi medallion loans, NY state regulators seized the Melrose Credit Union. #disruption 
  • Wind. No holding it back.