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- [00:03]
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The curtain falls on Fox Corporation. Succession drama, what this means for news, insider sales, why it matters and when it doesn't. And waving goodbye to Potbelly stock, a small sign of big change in equities. We break it down for Thursday, September 11th. It's blue markets Daily and I'm Ann Berry. More market details to come. But first, it's a big week for new companies joining joining the public markets. Klarna debuted on the New York Stock Exchange, StubHubs launched its IPO roadshow and Gemini Space Station is expected to list tomorrow. But it's also a week where tucked away in the news have been examples of something else that's trended in the public equity markets and that's high quality companies leaving them. So here's what caught my eye. Potbelly, the 440 location fast casual dining chain is leaving the Nasdaq and that's because it's being bought by convenience store operator Race Track, which is privately owned by a family. Now pot belly stockholders are making money from the deal. Racetrack is paying $17.12 in cash per share. So let's pull up the six month share price chart for those of you who can see it now on video. You can see that this is a big premium to the 12 to $13 that Potbelly has traded at over the summer and an even bigger premium to the under $8 range it stumbled around in only six months ago. So pretty recently. Nevertheless, I can't help feeling this is one person's view that it's a shame that investors who want a restaurant stock in their portfolios all lose access to this one because in the latest quarter Potbelly reported same store sales growth which is the golden metric for restaurants at 3.2% and that's compared to a 1% decline for industry wide traffic in the U.S. now it also fared much better than Sweetgreen and Carver, both of which have struggled with the same urban lunch crowd. I recently had a chance to speak with Bob Wright, Potbelly CEO and that was part of my research for our sister podcast after earnings. And I have to say I was really impressed with his focus on execution. Potbelly has been moving on an aggressive plan to increase the number of stores to 2000 using new franchise agreements, which means asset light in South Carolina, Georgia, Louisiana and Texas, which are markets really ripe for expansion. And there's been a laser focus on digitization, whether that's in marketing, to embedding new features into loyalty program. Now Wright's execution has led to about a 300 recovery in Potbelly share price since the pandemic he joined about five years ago. So that was even before this deal announced. We saw that uptick in the share price. It was very meaningful. And that compared very favorably with sweet green share price in comparison. Dropping like a rock. Well, it makes sense that Racetrack is paying up for all the potential of Potbelly now. Whereas as public shareholders, we would need to wait for the growth and therefore wait for future stock moves to come emerging over time of the operating Results. With its 2000 locations of its own and an existing team, Racetrack should be able to get real synergies pretty quickly from having Potbelly under its wings. But this is just another, albeit small data point on what's been happening since the 1990s. There are about 7,000 public companies in the US in 1996, and today there's only about 4,000. And the drop's been driven by a couple of things. Number one is consolidation amongst public companies. So publicly traded businesses buying other ones like Capital One bought Discover Financial in May of this year. It's also been driven by private equity acquisitions, just as we saw, Walgreens was bought by the fund Sycamore last month. And then you've got private companies like Racetrack today buying assets. Or here's another example again from this week, private Italian conglomerate bending spoons buying NASDAQ listed Vimeo. Now, those companies that are private now are also thinking of staying private for longer. And that has been another trend that we've seen lots of public companies. Eventually we've seen businesses come to fruition like Stripe gearing up to go public. But it has stayed private for a lot longer than people previously would have expected. Life in the public eye simply isn't easy. So we're going to keep watching the growing importance of private companies. And by the way, you've got brokerages like Robinhood increasingly trying to figure out ways to give retail investors access to private companies. And we're also launching Merger Moment where we're going to unpack deals that catch our eye, like this one. So reach out with those deals that catch yours and we can unpack them together. Coming up, media giant Fox Corporation resolves its succession drama, what that means for news and media stocks. And insider sales at Nvidia and Apple are up. What, if anything, does that bode? But First Brew Markets Daily is sponsored by Public for folks ready to take investing seriously. And before the show today, our producer John mentioned a feature he recently found on Public.
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That's right. Of course, you can build your own investment plan on Public, which consists of up to 20 assets, but you can also choose from themes in their marketplace as a healthcare cybersecurity, any energy transformation really helpful ways to discover new investment ideas. With either an investment plan you create yourself or one of their pre made ones, you can automatically contribute to those assets on a recurring basis.
- [05:30]
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And if you have questions about your investments, Public has Alpha, an AI powered research assistant that can help you find the answers you're looking for. Alpha will not only tell you that a stock is moving, but why it's moving. So get started at public.com brewmarkets that's public.com BrewMarkets paid for by Public Investing.
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Full Disclosures and Podcast Description the Murdoch.
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Family'S epic succession battle reached a multibillion dollar conclusion this week. Now, for decades, the children of Rupert Murdoch, who is now 94 years old, have been facing off over who will control the family media empire when their father dies. That's Fox Corporation and News Corp. At the heart of the conflict was a family trust that dissolved and a settlement's been reached in its place and that involves Murdoch's son Lachlan taking control. So John, take us through the lay of the land, walk us through the empire, map the empire for us, and also take us through the family tree.
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All right, well the empire starts with Rupert when he founds a single newspaper in Australia and then he makes that into a powerful global media empire. And it's two companies in that there's Fox and that includes Fox News, Fox Sports, generally broadcasting, and then News Corp. Which is the New York Post, the Wall Street Journal, HarperCollins, that's generally publishing. And so four of Rupert's six children, Prue, Liz Laughlin and James, they were all part of a family trust that had equal financial stakes and votes in determining the future of Fox. But the problem is the four of them didn't see the same for the future of the company. Lachlan's vision closely aligned with his father, while the other three children did not have the same politics. So that was the issue. The four of them did not agree they had equal stakes.
- [07:12]
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Okay, so just to give this a little bit of size as well, when we talk about the money at stake here, it is real money. The market cap of Fox around $25 billion. John the market cap of News Corp. Around $17 billion. So the issue of who gets control is massive one when it comes to the sheer scale of the reach of these public companies. Now Lachlan Murdoch is the CEO of Fox Corporation he has been since 2019. And just to give you a sense for how he must have been feeling around this, let's talk about this trust that has just been replaced. Until today. The trust that had been in place was set to expire in 2030. And here's what would happen if Rupert Murdoch, aged 94 today, it's amazing to think that he's Warren Buffett's contemporary, right? If he died before 2030, then Lachlan Murdoch, CEO of Fox Cor's three siblings, Pure PR, Liz and James, could have formed a block to oppose his leadership. And then either way, in 2030, all of the siblings would have been free to sell their shares and so the family would have lost control of the business. So there were really two issues at stake here. Number one, how could the Murdoch family, someone with the name Murdoch, keep control? And number two, which member of the family was going to keep control, given that there are separate views within the family or on what Fox and News Corps should be doing, especially around the political perspective? Now, the background here, folks, is fascinating. This is literally the drama that succession the TV series was based on. It's a fantastic TV show. Check it out. If you haven't, let us, let us know what you think. But there's been years of maneuvering to get around this issue of dissonance within the family and how to try and resolve the discord and get control concentrated. There have been offers to buy out those three dissenting siblings. They've rejected them. Don't forget. They had leverage. They could just wait out the clock and get to 2030. There have been court trials, one involving over 50 lawyers. And so this week, here's the deal that was reached. Lachlan will remain as his father's successor. He will keep control of these companies until at least 2050. The percentage of control comes down a bit, but essentially there's control. And the other siblings will get cashed out and get over a billion dollars for their shares in the empire, leaving themselves free to go enjoy their money and distance, distance themselves from any of the editorial politics that they don't agree with. Now, here is why, from a market perspective, we decided to dig into this one. John, set the stage for us. Tell us what it's like if folks have been shareholders in Fox. This is not a political statement, but if folks have elected to buy shares in Fox, talk to us about how those shares have been doing so far.
- [09:54]
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Well, in the last 12 months, shares in Fox have been up 40%. And remember that Lachlan has been the CEO since 2019. So a lot of this has been under his leadership. And so in fiscal 2025, Fox had $3.62 billion in profit. And Fox News is so well watched that as a cable network, it had higher average viewership in primetime than the broadcast TV networks, than NBC or cbs. And then building for the future, they recently launched Fox One, the streaming service. And so these wins are sending the share price up. And that's who's been in charge is Lachlan.
- [10:33]
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Right. And so something that we've talked a lot about on this show is how markets and shareholders generally don't like uncertainty. When they have seen a formula that doesn't work, they're often slow to bring about change. When they see a formula that has worked, they get very nervous when they see change coming up. And at the grand age of 94, having this unresolved before Rupert Murdoch, you know, fully retires or passes away is a level of uncertainty that shareholders have been very nervous about. So the resolution that has landed today, whether folks like it politically or not, from a pure shareholder perspective, now the idea that you've got the same CEO who does not risk at this point getting sued by siblings for control again, and there is visibility into what the vision for the company is, which is consistent with what it has been before, means that shareholders now have line of sight to what the future of the business may look like. But here, here is the real reason that this really captured our imagination, folks. This issue of control and how founding individuals or founding families will go to great lengths to keep it has been a recurring theme on the show. We talked recently about Elon Musk, right here. He is one of the wealthiest men in the world, and his compensation package is focused on making sure that he gets the control he feels he wants. He even said it's not about the money. I want to make sure that I get to stay in my seat without being threatened by external factors. This drama here now with the Murdochs is a version of that. Making sure there is resolution before 2030 and the family risk losing control. And just a checklist here of other companies where we have concentrated control, but maybe haven't thought about it so much. Mark Zuckerberg has control over Meta. The Ford family has had voting control over the auto maker for literally generations. The founding family of the New York Times is in his, in its sixth generation of control over the board. And CEOs report to the board. The doordash founders have voting control. So that's even a newer tech business. So whether it's from a sixth generation business to a company like StubHub, which is IPOing imminently where the founder has retained voting control. This issue of founders maintaining control even when public, when even when their companies go public is going to be a recurring theme. And so here's a question for you all. When you go and buy a share and you invest in a company, how much do you care about whether the CEO you're backing will keep control over the business? If it's a question you haven't asked yourself, it's definitely one worth asking because this is going to keep coming up. Let's take a quick break. When we come back, we go inside insider sales. John, we have a question from the audience.
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That's right, Marco and Charlotte wrote in hey, Ann, I've been hearing that Nvidia CEO has been selling shares of the company. Are these kind of insider sales red flags is gentle and Wong losing confidence?
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Well, thank you for the question, Marco. When you hear the term insider sales, it may sound unsavory. It's almost as though it sounds like executives are secretly dumping stock before bad news hits. But the phrase has a much more specific meaning when it comes to the markets. And there's a lot of misperceptions around this one. So I'm very grateful that you sent this question in. Now, insiders are the people who know a company best, their executives, directors, anyone holding more than 10% of the stock. And when they buy or sell shares, they have to report those trades to the regulator, to the sec, so the information becomes public. And investors do look at this information as one data point, and I emphasize this only one among many data points, for signs of insider confidence or caution about the business. So if a CEO buys shares, that's often read as a strong vote of confidence. And that's because public company CEOs receive stock as part of their compensation. They're already getting a ton of exposure to share price performance. So when those CEOs or executives take cash out of their pockets to go buy more, it's usually seen as a sign they believe the stock is undervalued. Now, here's a recent example. Bear in mind that the markets move very quickly. So even though it's recent, it's already outdated. Last month, the Eli Lilly chief financial officer, the chief scientific officer and a couple of other executives bought just under $3 million of the company's stock after the share price dropped on the news of disappointing trial results for one of its weight loss drugs. So there you see insiders buying because they think that the share price is too low. Now, on the flip side, if insiders sell, it can raise questions. Now, analysts look for patterns. They don't just focus on a single sale. And let's go back to the Nvidia example. Well, over the past 12 months, several insiders at Nvidia have collectively sold more than a billion dollars worth of shares. But here's the catch in all this. Not all insider sales are a red flag. As I mentioned, executives receive stock as part of their compensation. So selling can simply be a way to get hold of cash. They just need to pay their bills, pay their taxes, diversify their portfolio, go buy a home. That is very different as a motivation from selling because they think the business is in trouble. And the problem is from the outside in, you can't tell which motivation it actually is. Now, many of these stock sales happen through something called a Rule 10b51 trading plan. And by the way, this is our how Jensen Huang has been selling. So here's how it works. Because insiders, again, executives and directors know things about their company that the public at large doesn't. Timing for new products, financial results, upcoming deals, it's imperative that they avoid accusations of unfair insider trading. So they set up one of these plans in advance. And the plan spells out when and how much stock they'll buy or sell long before any of that new information actually comes to light. Now, once the plan's in place, the trades happen automatically on a preset schedule. So that means a CEO might sell shares every month or once a quarter without making making any active trading decision at that point in time. Now, Jensen Huang, the Nvidia CEO, set up this 10B51 plan all the way back in March of this year to allow for the sale of up to 6 million of his shares all the way through the end of 2025. So a nine month Runway that he set up to sell. He seems to be taking some chips off the table after Nvidia stock has rocketed in recent years. But he will still own a massive amount of shares even after these sales, keeping him aligned with Nvidia's continued push for success. Now, other recent insider sales that have been noted include the chair of Apple's board selling 90,000 shares on Aug. 28 for more than $20 million, cashing in on a big profit. By the way, the CEO of Celsius sold about $7 million of shares recently, although again under a pre arranged plan. And it's not unusual for founders who may not have had liquidity while their company was private to go get some cash by selling shares. Cash in a bit when it goes public. All of which is to say insider sales are a signal worth watching. But they are only one of many signals and are at best mixed in their usefulness.
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And if you have a question for Ann, send an email or Voice memo to brewmarketshoworningbrew.com It's 4pm on the east Coast.
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The markets have closed. There was the bell signaling that it's wrapping up. We don't have a ticker tape, so let's throw it over to our human ticker, our producer John.
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It's another day of record highs on Wall Street. The S&P 500 was up over 8.10of a percent today. The NASDAQ finished up 7.10of a percent and the Dow was up over 11 1/3% today. Here are some market headlines. Shares in Opendoor were up nearly 80% on news that the company has hired Shopify COO as the real estate platform's new CEO. The company also named co founder Keith Raboy as the chairman of the board and reappointed co founder Eric Wu to the board. For context to these headlines, check out Ann's in depth conversation with activist investor Eric Jackson from Tuesday's show where they discuss whether or not open is a meme stock. And what a week for the Ellison family. Yesterday, Larry Ellison, the founder of Oracle, became the world's wealthiest person. And now today there's reporting that the Ellison family media company Paramount Skydance, which is run by Larry's son David, is preparing a majority cash bid for Warner Bros. Discovery. Shares in Paramount Skydance were up nearly 9% and shares in Warner Discovery were up over 35% on the story.
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So great rundown by John on the market. And just to reiterate something here, the Dow closed up 600 points, setting a record. And I just wanted to give a little bit of macro flavor as to why. And we said at the beginning of this week that there was going to be a lot of focus on the macro data. Consumer Price Index data has come in and it showed that the annual inflation rate is still right up towards that 3% level, far above the Fed. Fed's 2% target annual inflation rate coming in in the latest data at 2.9%. So inflation running hotter than the Fed would like. Now normally that would point to a rate cut not coming, but here is some other data that came out. The Labor Department reported a surprise increase in weekly unemployment filings. More data suggesting the labor market is perhaps weaker than had been previously anticipated. And so there's the Fed. And don't forget, the Fed has a dual mandate to control inflation and also to try to ensure that the labor market is as strong as possible. Now, in that recent Jackson Hole speech given by Jay Powell, the Fed chair, he really did emphasize the importance of a strong labor market for the American economy. So the reason we think that the market finishing up at new record highs today is despite that strong inflation number, the market's still very much expecting a Fed rate cut on the docket for next week. Big, big week next week. Meanwhile, that's it, folks, for today's Brew Markets Daily.
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Brew Markets Daily is hosted by Anne Barry and produced by John Croteau, Tarkab Delatif and Emily Milian. Our technical director is Uchenawa Ogu. Jacob Schmidt runs audio and the president of Morning Brew, Inc. Is Devin Emery.
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Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. See you back here tomorrow, same time, same place, Facebook.