Meal Delivery the next disruption in Pre IPO

Meal delivery is a simple service that has been garnering a lot of attention from startups including but not limited to Home Chef, GrubHub, Swiggy, Uber Eats, DoorDash, Sun Basket, HelloFresh, and others.  Uber Eats will actually bring McDonalds to your door.  The world is changing so fast those of us who remember the days before the internet are constantly amazed at how the youth have it so easy and convenient.  Soon we may not need to live our city apartments at all, as the entire Maslow pyramid can be delivered to us on a silver platter (for a fee).

In a ranking of meal delivery services it’s possible to compare them such as is done on this site top10.com:

When looking for a meal delivery service, there are a few things to consider beyond just the price per meal. Most meal kit delivery services allow you to pick your meals from a selected group of recipes that changes each week. Make sure that the variety of meals is to your liking, and in particular if you have any dietary issues - such as a gluten sensitivity or if you’re a vegetarian - you’ll want to make sure that the company can provide enough options for it to be worth your time - and money. Also, life can be unpredictable, you’ll want to look for a company that will allow you to skip a week if you’d like, or that makes cancelling your membership painless and simple.

But what’s really interesting is the trend in the launching of these services, especially interesting is the amount of interest in the Venture Capital (VC) community.  For example, at the top of the list is Home Chef, which has received $57 Million USD in funding, according to Crunchbase:

This model is so popular, Home Chef was acquired by Kroger (KR), publicly traded supermarket chain for $200 Million:

Kroger Co., the largest supermarket chain in the U.S., is paying $200 million to acquire Chicago-based meal kit company Home Chef in a deal the companies say will bring the kits to more customers and help redefine shopping habits.  The deal, which is expected to close in about a month, includes future "earn-out" payments of up to $500 million over five years, contingent on achieveing milestones such as meal kit sales growth.

Paying $200 Million for a company that had only $57 Million in investment, plus an earn-out agreement was a great deal, but Kroger (KR) is not stupid, they are obviously betting that they are going to make much more than that on the deal.  This is also a note for Pre IPO Investors, an IPO is not the only exit.  Companies like AirBNB, Palantir, and others are acquisition targets.  Typically publicly traded large companies are not innovative like startups, so instead of being innovators themselves they look to acquire innovators at an early stage.

Food delivery has more than 1,417 names listed on Crunchbase, with a total funding amount of more than $28 Billion USD ($28 B is the funding amount of the top 1,000 names):

Many of these names like GoJek are not known in the west, as GoJek is based in Indonesia and serves mostly the southeast Asian market.  But GoJek isn’t only food delivery, they will deliver just about anything that will fit on a scooter.  It’s an Indonesia thing. 

So what’s the next logical step for companies like GrubHub (GRUB) ?  Soon will they be fixing broken toilets and cleaning out gutters?  There’s no limits to what delivery services may bring.  Amazon (AMZN) is the inventor of delivery, but their Amazon Fresh service is lagging behind it’s peers.

There’s no telling where Food Delivery will go, but we can see clearly that the service-as-delivery is a growing part of the business ecosystem that should be considered. 

The bigger questions are – will this impact infrastructure concerns, such as growing traffic problems and other related bottlenecks?  New York City (NYC) is a great example.  Since the deregulation of the Taxi business NYC streets have been clogged.  One advantage of a regulated Taxi system is NYC could literally control the amount of cars on the road.  Having a huge $50 entry ticket to bring a car into the city isn’t enough.  They have put up roadblocks and rerouted traffic but it remains to be a big mess.  So it’s not necessarily that delivery means less traffic.  As we have seen with Uber (UBER) in the case of NYC it can create unforeseen bottlenecks.

Crediblock is following this growing trend and will keep you tuned in.  To stay informed about investing trends in food delivery, Follow our Blog FREE.

DOJ Accuses JPMorgan's Precious Metals Trading Desk Of Being A Criminal Enterprise

From Zero Hedge 9/16/2019:

Who would have thought that JPMorgan's precious metals trading desk is the functional equivalent of the mafia, and that its one-time leader, Blythe Masters, was the mafia's don? 

Well, almost everyone who didn't mind being designated a conspiracy theorist for years. And now comes vindication, because this has just been confirmed by the DOJ, which accused the PM trading desks at JPMorgan of being deeply involved in what prosecutors described as a "massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants."

In an indictment unsealed on Monday morning, the DoJ charged Michael Nowak, a JPMorgan veteran and former head of its precious metals trading desk and Gregg Smith, another trader on JPM's metals desk, in the probe. (Blythe Masters was somehow omitted).

“Based on the fact that it was conduct that was widespread on the desk, it was engaged in in thousands of episodes over an eight-year period -- that it is precisely the kind of conduct that the RICO statute is meant to punish,” Assistant Attorney General Brian Benczkowski told reporters.

Here's where it gets extra interesting: according to Bloomberg, the unusually aggressive language language embraced by prosecutors reminds legal experts of indictments utilizing the RICO Act - a law allowing prosecutors to take down 'criminal enterprises' like the mafia by charging all members of the organization for any crimes committed by an individual on behalf of the organization.

Prosecutors charged the head of JP Morgan’s global metals trading operation and two other traders with "conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity" - language that is typically used to describe a RICO charge.

This hints at the possibility of a deeper prosecution for JP Morgan. Already, 12 people have been charged in the precious metals market-rigging conspiracy.

"We’re going to follow the facts wherever they lead, whether it’s across desks here or at any other bank or upwards into the financial institution,” Benczkowski said.

It's unclear what the DoJ is planning, but they're clearly keeping their options open.

Circling back to the indictment, both Smith and Nowak were put on leave over the summer as the DoJ's investigation neared its conclusion.

A third trader named in the indictment, Christopher Jordan, traded precious metals at JPM until he left in December 2009. He later traded precious metals at two other banks, Credit Suisse and First New York.

In a press release accompanying the indictment, Assistant Attorney General accused all three men of scheming to manipulate the precious metals market while potentially harming their bank's clients.

"The defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants," said Assistant Attorney General Brian A. Benczkowski. "These charges should leave no doubt that the Department is committed to prosecuting those who undermine the investing public’s trust in the integrity of our commodities markets."

William Sweeney, the Assistant Director in Charge of the FBI's New York Field Office, added that this manipulation likely impacted "correlated markets and the clients of the bank they represented." 

"Smith, Nowak, Jordan, and their co-conspirators allegedly engaged in a complex scheme to trade precious metals in a way that negatively affected the natural balance of supply-and-demand," said FBI Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office. "Not only did their alleged behavior affect the markets for precious metals, but also correlated markets and the clients of the bank they represented. For as long as we continue to see this type of illegal activity in the marketplace, we’ll remain dedicated to investigating and bringing to justice those who perpetrate these crimes."

According to Bloomberg, three other banks - Deutsche Bank, HSBC and UBS - agreed to pay $50 million (in total) to settle civil claims by the CFTC. Two former JPM employees who pleaded guilty and contributed evidence against their former colleagues that was used in the indictment.

"While at JPMorgan I was instructed by supervisors and more senior traders to trade in a certain fashion, namely to place orders that I intended to cancel before execution," said one former trader John Edmonds during an October 2018 hearing after pleading guilty to commodities fraud and conspiracy, BBG reports.

The behavior dates back more than 10 years to 2009, according to chat logs that were shown in the indictment. The conversations exposed in the chat logs show just how blatant the manipulation was, and how little the traders did to conceal it.

One of the traders who participated in the chat shown above was Christian Trunz, who traded precious metals at Bearn Stearns before joining JP Morgan after the crisis. He told a federal judge last month that this type of behavior was openly encouraged on JPM's trading desks for roughly a decade, and that other traders taught him how to do it. He pleaded guilty to federal fraud charges on Aug. 20, BBG reports.

Another trader said during a plea hearing that he was instructed to bid up the price of futures contracts by placing, then cancelling, bid orders (the literal definition of spoofing) that he never intended to fill.

"I was instructed that if a client wished to sell futures I should simultaneously place both bids and offers with the intent of canceling the bids prior to execution," Edmonds said during his plea hearing.

Edmonds said the purpose was to falsely transmit liquidity and price information in order to deceive other market participants about the supply and demand so they would trade against the orders that JPMorgan wanted to execute.

"We created market activity which artificially drove the sale price up and induced other market participants to purchase at an inflated price," he said. Edmonds entered into a cooperation agreement with the CFTC in July.

Since the crisis, regulators around the world have cracked down on manipulation in rates, forex and government bond markets, so it's not exactly a surprise that this type of behavior was also happening in precious metals. But the brazenness with which traders engaged in such manipulation suggests that they didn't know what they were doing was illegal or wrong, which, in at least some cases, is probably true.

The aggressiveness of this manipulation probe is notable given that the government has lost the last two manipulation cases in court. The DoJ is trying to show that it is “undeterred and are becoming more, not less, aggressive” in cracking down on market manipulation."

Read the full indictment below:

u.s. v. Smith - Indictment by Zerohedge on Scribd

Law Crime

Business Finance

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Saudi Oil Attack Is the Big One

From the Wall Street Journal, 9/15/2019:

By 

Spencer Jakab

Updated Sept. 15, 2019 7:28 am ET

Saturday’s attack on a critical Saudi oil facility will almost certainly rock the world energy market in the short term, but it also carries disturbing long-term implications.

Ever since the dual 1970s oil crises, energy security officials have fretted about a deliberate strike on one of the critical choke points of energy production and transport. Sea lanes such as the Strait of Hormuz usually feature in such speculation. The facility in question at Abqaiq is perhaps more critical and vulnerable. The Wall Street Journal reported that 5.7 million barrels a day of output, or some 5% of world supply, had been taken offline as a result.

To illustrate the importance of Abqaiq in the oil market’s consciousness, an unsuccessful terrorist attack in 2006 using explosive-laden vehicles sent oil prices more than $2.00 a barrel higher. Saudi Arabia is known to spend billions of dollars annually protecting ports, pipelines and processing facilities, and it is the only major oil producer to maintain some spare output. Yet the nature of the attack, which Iranian-supported Houthi fighters from Yemen claimed was the result of a drone attack by their forces, shows that protecting such facilities may be far more difficult today. U.S. officials blamed Iran and U.S. and Saudi officials were investigating the possibility that another Iranian-backed group carried out all or part of the attack using cruise missiles launched from Iraq. Iranian officials on Sunday denied responsibility for the attacks.

There are countries that even today see their output ebb and flow as a result of militant activity, most notably Nigeria and Libya. Others, such as Venezuela, are in chronic decline due to political turmoil. Such news affects the oil price at the margin but is hardly shocking.

Deliberate attacks by actual military forces have been far rarer, with the exception of the 1980s “Tanker War” involving Iraq, Iran and the vessels of other regional producers such as Kuwait. When Saddam Hussein’s Iraqi forces invaded Kuwait in 1990, removing its production from the market and putting Saudi Arabia’s massive crude output under threat, prices more than doubled over two months.

Yet Saturday’s attack could be more significant than that. Technology from drones to cyberattacks are available to groups like the Houthis, possibly with support from Saudi Arabia’s regional rival Iran. That major energy producer, facing sanctions but still shipping some oil, has both a political and financial incentive to weaken Saudi Arabia. The fact that the actions ostensibly were taken by a nonstate actor, though, limits the response that the U.S. or Saudi Arabia can take. Attempting to further punish Iran is a double-edged sword, given that pinching its main source of revenue, also oil, would further inflame prices.

While the redundancies in Saudi oil infrastructure mean that output may be restored as soon as Monday, the attack could build in a premium to oil prices that has long been absent due to complacency. Indeed, traders may now need to factor in new risks that threaten to take not hundreds of thousands but millions of barrels off the market at a time. U.S. shale production may have upended the world energy market with nimble output, but the market’s reaction time is several months, not days or weeks, and nowhere near enough to replace several million barrels.

After the smoke clears and markets calm down, the technological sophistication and audacity of Saturday’s attack will linger over the energy market.

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