Enron just got its sequel.
Steinhoff Holdings International is a South Africa-based company that trades publicly in Germany. It owns several major retail and furniture chains across the world. These include Mattress Firm in the US (for which it paid $3.8B in 2016), Poundland in the UK, and Conforama in Europe.
For a traditional retailer focused on furniture and mattresses, Steinhoff seemed to be doing really well. Except it wasn't.
Turns out its books were basically fiction. The company is now undergoing an Enron-like collapse. The former CEO is being investigated by the police.
The scandal has now reached the US. This week, Mattress Firm's CEO announced he would resign amid the accounting scandal at Steinhoff.
Meanwhile, the internet is rife with conspiracy theories about why exactly there are 3,900 Mattress Firm locations in the US. Were they laundering money for Steinhoff? The image below shows Mattress Firm locations in Austin, TX.
The outgoing CEO has actually responded to these rumors saying, "Our CEO transition has nothing to do with money laundering jokes or serious news facing our parent company."
Ok. Let's just say that when your CEO actually goes on the record to deny Reddit rumors, your company is definitely in deep trouble. In fact, Mattress Firm plans to close hundreds of stores in the coming year.
The damage continues. In earnings calls, banks including Citigroup, JPMorgan, Bank of America, Nomura, and others had to mention nine-digit losses on loans to Steinhoff. JPMorgan alone lost over $270M. Ouch.
This scandal also threatens ~100,000 retail jobs globally not to mention the value of a massive investment into Steinhoff from the South African government's main employee pension fund. Serious news indeed.
Looks to me like the retail apocalypse we've been studying is having its mushroom cloud moment.
Have a great weekend.
P.S. Join us for our 2018 tech trends briefing on February 8. Sign up here.
This week in data:
- 150: Corporate venture capital (CVC) funding to AI companies reached $3.8B across 198 deals in 2017, with backing from nearly 150 global CVCs. Intel Capital was the most active CVC by far, financing over 15 unique AI companies last year. Read about this and more in our 2017 Global CVC Report.
- Top 20: We sifted through 101 startup post-mortems to identify the trends behind why startups go belly up. From running out of cash, to ignoring customers, to pivots gone awry, here are the top 20 most frequently cited reasons startups fail.
- 0: Yesterday, Apple announced plans to reduce its net cash balance to “approximately zero,” following a new US law that will allow it to repatriate its overseas profits at a lower tax rate. The move could mean increased dividend payouts for shareholders, as well as a potentially large uptick in Apple’s acquisitions activity. We previously mapped Apple’s biggest acquisitions to date, including its $3B purchase of Beats Electronics.
- 36%: Today is Groundhog Day, but you may not want to put your money on Punxsutawney Phil’s forecast. Checking his predictions against actual weather outcomes since 1969, Phil’s accuracy rate is only about 36%. This morning, the world’s most famous marmot saw his shadow, predicting six more weeks of winter. Across state lines in New Jersey, Milltown Mel predicted an early spring, though Potomac Phil in DC — who’s denied rumors of collusion with his Punxsutawney counterpart — also predicted 6 more weeks of winter (plus 6 more months of political gridlock).
- $21B: Specialty coffee maker Keurig Green Mountain announced its acquisition of Dr Pepper Snapple Group. Valued at up to $21B, it is the largest soft drink deal ever. In 2016, Keurig was the target of an acquisition by Luxembourg-based holding group JAB Holding, meaning Dr Pepper Snapple is the latest on JAB’s long list of beverage acquisitions.
- -12%: eBay has signed on Dutch company Adyen as its new primary payments processor, replacing PayPal. With the news, PayPal shares fell as much as 12% earlier this week. eBay — which accounts for roughly 13% of PayPal’s processed payments — says shoppers will still be able to use PayPal as a payment option until at least 2023.
- $13.1M: Microsoft acquired cloud-based gaming platform PlayFab. The company raised $13.1M in total disclosed funding from investors including Startup Capital Ventures, Madrona Venture Group, and Benchmark. All of Microsoft’s acquisitions are featured on CB Insights' real-time Microsoft Acquisitions Tracker.
- $6.1B: Japan’s Fujifilm Holdings is slated to acquire Xerox Corp in a deal worth $6.1B, according to Reuters. The two have been cooperating since 1962. The new combined company, which will become a subsidiary of Fujifilm, will be known as Fuji Xerox and will be “expected to deliver a total of USD $1.7 billion in total annual cost savings by 2022.” We previously dug into Xerox’s investment history in our History of Corporate Venture Capital Report, which looks at the rise and fall of the company’s CVC program, Xerox Technology Ventures.
- 25 years: Samsung is now the world’s largest chipmaker by revenue, dethroning Intel for the first time in over 25 years. (Interestingly, Samsung was created by Intel in the 1960s.) This week, Samsung reported chip sales of $69B while Intel reported $63B. We previously looked at the how chip giants are in investing in private markets. While Samsung has surpassed Intel on the revenue front, Intel is by far the most active corporate investor in the space since 2015.
- $300M: On-demand dog-walking app Wag raised $300M from SoftBank Vision Fund, bringing the company’s total disclosed funding to $321M. We previously featured Wag in our pet tech market map, which highlights startups from dog walker apps to subscription food services.
- -50M: On the company’s earnings call earlier this week, Facebook CEO Mark Zuckerberg announced that changes the company made to its platform last year reduced the time spent by users on its site by 5% — or 50 million hours per day — in Q4’17. Changes driving the drop included showing fewer viral videos and tweaks to Facebook’s content-recommendation software. Our deep dive into Facebook’s hiring data takes a look at other ways the company’s strategy may change in the future.
- 20,000: Last weekend, Elon Musk’s tunneling startup, The Boring Company, started selling flamethrowers. By Monday, the firm had sold over 10,000 units, and by Thursday, Boring Co. had sold its 20,000th (and final) flamethrower. At $500 a pop, the company raked in roughly $10M in 100 hours. We recently dove into 8 industries being disrupted by Elon Musk and his companies, including how The Boring Company is poised to change infrastructure, real estate, and more.
- 1.6M: Hit app HQ Trivia is reportedly in talks to raise $15M from Founders Fund and others, at a $100M valuation. The app hit 1.6M simultaneous users in late January. That may not be a Super Bowl-style audience yet (last year's Super Bowl had over 111M viewers), but some consider the game show app to be the future of entertainment.
- 3: The number of social classes that Facebook’s newly published patent would group users into. According to patent drawings, the method will allow Facebook to determine the probability that a user is in the “middle class,” or one of two other classes not specified. It would use a decision tree to begin grouping people according to age and then other characteristics like homeownership, number of computers owned, and education level, to predict class.