Three Things (3/20)

Nordstrom in talks of going private

Nordstrom’s stock jumped more than 10% following the announcement that the company is looking to go private. Prior to this week, the stock had fallen ~7% due to its weak sales outlook and declining revenue. Although the market reacted positively to the recent news, the Nordstrom family attempted to go private in 2018 and failed. It is possible we see the deal fizzle once again.

This year we have seen Nordstrom’s challenges reflected in the likes of its competitors, such as Macys which plans to dramatically downsize its retail footprint. Department stores have certainly dealt with their fair share of challenges: higher interest rates, declining consumer spending, and the pandemic-boosted transition to online shopping. Some attribute the recent issues to department stores’ failure to evolve with the changing needs of its client base. Budget friendly companies like Walmart and luxury brands like Prada have done well, but Nordstrom and Macy’s sit in the highly competitive space where companies need to innovate in order to keep pace with consumer demand.

Google deploys AI through Fitbit

Google announced plans to deploy artificial intelligence through Fitbit. The team is building a new AI feature, powered by Gemini, that can draw data from Fitbit wristbands and empower users with personal health information. Google acquired Fitbit back in 2019 and came under antitrust scrutiny given the user data it acquired through the transaction. 

The healthcare sector has long been left behind from the innovation cycle seen in other corners of the economy. Google integrating AI into Fitbit is another step towards pushing the boundaries of what’s possible. While many of the biggest competitors in the AI space have used the technology to enhance productivity, we think the market will see value in companies who deploy AI towards ethical causes, as well.

Fisker pauses production

The EV company, Fisker, announced that it will pause production for six weeks to avoid potential bankruptcy. The company reportedly hired restructuring officers and have expressed concerns about not being able to meet obligations to service its debt. They raised an additional $150 million, to seemingly help prevent or delay bankruptcy, through a deal with an existing investor. Prior to the additional capital injection, Fisker reportedly had $273 million in sales last year with more than $1 billion in debt. 

Fisker’s story highlights the struggles of the EV industry in a slowing demand environment. Other Tesla challengers like Rivian and Lucid are feeling the effects too. Inflation has made charging stations and upfront costs associated with EVs less attainable for consumers, leading both manufacturers and dealerships to slash prices. We don’t think the EV industry is going anywhere, and although some major players may struggle, the cost to produce these vehicles should continue to drop as input costs decrease and EV adoption broadens.

Disclosures:

As of writing, GOOGL is a holding in Titan’s Flagship strategy. As of writing, TSLA is a 1.32% holding in the ARK Venture Fund.

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