MARKETS

Hindenburg Says It's Okay to Be Short

If Hindenburg Research mentions you in a report, you're probably not going to want to Google yourself after. 

Yesterday, the short seller claimed that healthcare software maker Clover Health has not disclosed to investors that it's under investigation by the DOJ over its business model and software product. 

• News outlets were not able to confirm Hindenburg's allegations. Still, Clover Health stock fell over 12% on the day. 

There are two interesting angles to this story

1. The SPAC angle. Clover recently went public by merging with a special-purpose acquisition company (SPAC) backed by Chamath Palihapitiya, the second-most famous billionaire on Twitter. Chamath has been at the forefront of the SPAC boom, helping take companies, including Virgin Galactic, public via this previously unconventional method.

• Hindenburg alleges that Chamath, Clover's "Wall Street celebrity promoter," misled investors in the run-up to going public.
• Just this week, Chamath acknowledged SPACs weren't all fun and games: "SPACs may be easy to raise...but they are hard to execute and success isn't guaranteed. Good luck to all the players," he tweeted.

2. The GameStop angle. Unlike its other targets, such as the EV startup Nikola, Hindenburg doesn't have a short position in Clover, meaning it doesn't stand to gain financially from a fall in Clover's share price. 

So why did it release the report? It comes back to the meme stock frenzy of the last few weeks. One of the main reasons why the Reddit army tried to push up GameStop stock was to cause hedge funds that had shorted the retailer to lose money. 

Hindenburg published this report as a defense of short sellers, arguing they play a critical role in exposing fraud and protecting investors against corporate shenanigans. As evidence, Hindenburg alludes to some major short-seller takedowns of the past, including Enron, Lehman Brothers, and Luckin Coffee. 

Zoom out: With short sellers, retail traders, and market manipulation under the microscope, Treasury Secretary Janet Yellen convened the most powerful financial regulators in the land yesterday—including the heads of the SEC and the Fed—to discuss whether action is needed to protect the stock market's integrity.

C-SUITE

CNN, Merck Execs Follow Bezos to the Exit

Yesterday, CNN President Jeff Zucker told staffers he plans to step down at the end of the year. 

Zucker is as much a cable news mainstay as Rachel Maddow's wayfarers. His career included various stints in NBC's news and entertainment divisions (where he oversaw the disastrous Conan/Leno swap). In 2013, he took a cab across Midtown to CNN. 

• Zucker was laser-focused on ratings...and this announcement comes as CNN's reached all-time highs. 
• But CNN's future is uncertain, as parent company AT&T confronts a growing horde of cable-cutting consumers. 

Merck CEO Ken Frazier will jump ship sooner

He said on an earnings call yesterday that he plans to retire on June 30, when current CFO Rob Davis will take over. 

Roll the tape: Frazier became CEO in 2011 after nearly two decades of working his way up the pharmaceutical company's corporate ladder. Frazier's time at Merck was marked by the growing success of its crown jewel, Keytruda, which is now the world's No. 1 cancer immunotherapy drug

• Frazier spoke out against former President Trump in 2017, when Trump failed to condemn the white supremacists who marched in Charlottesville, VA, that year. 

Zoom out: Frazier is currently one of just four Black CEOs leading a Fortune 500 company. 

PHARMA

McKinsey's Gonna Need More Than a Spoonful of Sugar

Prominent consulting shop McKinsey & Co. has agreed to pay DC and most US states and territories $573 million for its role in the opioid epidemic—the first such nationwide settlement. 

The allegations: In 2013, when the impacts of opioids and addiction were already well-documented, the firm advised OxyContin manufacturer Purdue Pharma on how to "supercharge" sales by $100 million, including by targeting doctors who might have overprescribed opioids and by switching patients to more powerful doses. 

• Under the settlement, McKinsey admits no wrongdoing. 

Most of the settlement money will head to treatment and rehab programs in areas hit hard by the epidemic, which has killed 400,000+ Americans. $15 million will be used to reimburse the National Association of Attorneys General for investigation costs. 

• The payout is larger than revenues the firm brought in advising opioid clients (a practice it stopped in 2019).  

Zoom out: A wave of litigation that started in 2017 against companies linked to the opioid crisis is seeing results. Some pharma companies have reached settlements with individual states; Purdue Pharma agreed to pay the DOJ $8.3 billion; and Johnson & Johnson and three drug distributors are in negotiations for another multistate settlement worth $26 billion.

SPONSORED BY CALIBER

Investing Money in a Company That Makes People Money Sounds Pretty Money

We’ll give you a second to recover from the immense strain that headline put on your brain.

Okay, back to some hard-hitting intellectualism. Caliber is a company that is very good at making people money, and you can invest in Caliber until February 26.

Meaning you can invest your money in a money-growing company. No brainer, we know.

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ECONOMY

Cheaper by the Dozen: Stimulus Could Include Child Payments

If Steve Martin's character in the 2003 comedy a) wasn't fictional and b) had 12 kids in 2021, he'd be in for a major windfall under a proposal raised by Sen. Mitt Romney yesterday. 

• Romney proposed an amendment to Democrats' $1.9 trillion stimulus package that would give Americans $3,000 per child ages 6–17 per year and $4,200 per child under the age of 6.

Zoom out: Momentum is growing for expanding child benefits—Democrats' current stimulus draft offers the same payment structure, but only $3,600 per child under age 6. Both Romney and fellow Utah Sen. Mike Lee, also a Republican, have expressed concern about high levels of child poverty in the US, indicating potential bipartisan action on the issue. 

A speedbump ahead: Romney would pay for the expanded child benefits by scrapping federal tax credits and the welfare program Temporary Assistance for Needy Families. Many Democrats would balk at cutting those programs. 

FOOD & BEV

And Now, a Palate-Cleanser

Culture creator Chobani is considering an IPO later this year, the WSJ reports. If the company hits its valuation target of $7–$10 billion, it'll be an exciting day for the 2,000 employees its CEO promised a 10% stake in 2016.

Chobani was founded in 2007 and has made Greek yogurt a staple on American grocery shelves. As yogurt sales slowed in recent years, Chobani expanded into plant-based milk and yogurt, coffee creamers, and cold brew. It brings in about $2 billion in revenue annually.

Pop quiz: What does the word "chobani" mean in Turkish and Greek? Answer at the bottom of this newsletter. 

QUIZ

Six More Weeks of Winter Quizzes

The feeling of getting a 5/5 on the Brew's Weekly News Quiz has been compared to tetris-ing three more bowls into a seemingly full dishwasher.

It's that satisfying. Ace the quiz.

WHAT ELSE IS BREWING

• 23andMe SPAC'd with Richard Branson's VG Acquisition Corp in a deal that values the consumer genetics company at $3.5 billion.
• Peloton's sales grew an astonishing 128% last quarter. But because it's struggling to deliver products to customers on time, it's pouring money into supply chain capabilities...meaning less meaty profits.
• Vale, the Brazilian mining company, will pay $7 billion to the families and communities of the 270 people killed in a 2019 mining disaster. 
• Voting tech company Smartmatic filed a $2.7 billion lawsuit against Fox News and attorneys Rudy Giuliani and Sidney Powell over an alleged "disinformation campaign" to convince the public the election was stolen from former President Trump.
• Ford is slowing production of its F-150 because of the—everyone together now—global chip shortage. In other news, it's pledging to spend $29 billion on electric and autonomous vehicles through 2025.

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BREW'S BETS

Super Bowl content: We're practically overflowing with it. Check out our recipe guide, a game you can play virtually with friends, and two deep dive articles on the NFL.

More Super Bowl content? If you like spoilers, here are all of the SB ads that have been released so far.

Follow Friday: Get excited, visual learners, because this section is all graph, chart, and map accounts today. Check out 1) I [bleeping] Love Maps 2) Simon Kuestenmacher 3) Matt Shirley 4) Google Trends 5) r/dataisbeautiful 6) chartcrew and 7) Tokboard

GAMES

Friday Puzzle

Ready for your brain to hurt?   

Only for Genius on YouTube

ANSWER

Friday puzzle: 19

Chobani pop quiz: The company's name means "shepherd" (its founder and CEO, Hamdi Ulukaya, is a Turkish immigrant).

** A Note From Caliber

Caliber is offering securities through the use of an Offering Statement that has been qualified by the Securities and Exchange Commission under Tier II of Regulation A. A copy of the Final Offering Circular that forms a part of the Offering Statement may be obtained from: Caliber: https://www.seedinvest.com/calibercos