Implosions

Summary

Slate Money: Implosions (September 28, 2019)

Episode Overview

In this high-energy episode titled "Implosions," host Felix Salmon (Axios), with co-hosts Emily Peck (HuffPost) and Anna Shymansky (Breaking Views), tackle one of the wildest weeks in recent financial history. The conversation revolves around three major corporate implosions or crises: the shaking IPO market (with WeWork, Peloton, and SmileDirectClub in the spotlight), the Juul vaping controversy, and the abrupt collapse of Thomas Cook. The hosts analyze what these ‘implosions’ reveal about broader trends—questioning investor psychology, regulatory gaps, and the evolving shape of markets.

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The Imploding IPO Market

Main Takeaways:

• 2019 has been a notoriously bad year for high-profile IPOs. Many companies are trading below their listing prices, defying the usual model where IPO stocks climb on their debut.
• Featured cases include WeWork pulling its IPO, Peloton’s disappointing launch, and SmileDirectClub's rapid stock drop.

Key Discussion Points:

• [00:39] IPOs are underperforming: “48% of the companies that went public this year are trading below their IPO price...This is incredibly unprecedented and rare.” — Felix Salmon
• [02:12] Not just 'duds': Uber, Lyft, Peloton, and SmileDirectClub all debuted badly.
• [03:12] Investors did buy these IPOs at high prices, only for stocks to drop. “They raised equity capital at a premium to the market price. And you’re like, wow, you managed to sell your stock higher than anyone was really willing...” — Felix Salmon
• [04:01] Is it a problem with public markets or with venture (private) valuations? Discussion focuses on how companies have stayed private too long and built up unrealistic valuations.

Notable Quotes:

• "Peloton... dropped 11% on its opening day is still worth $7 billion or something, which is more than the $4 billion it was worth in the last private round." — Felix Salmon [04:35]
• “These companies captured a lot of the value you would normally capture in the public market, in the private market.” — Emily Peck [04:56]
• “It used to be that companies were going to go public at a much more immature stage ... [so] public investors ... had much, much more upside.” — Anna Shymansky [05:00]

On WeWork’s Debacle:

• [05:28] WeWork’s CEO Adam Neumann is ousted; the private jet sold; IPO canceled despite heavy investment bank pushing.
• [06:14] JP Morgan's culpability: “They were positioning themselves as Silicon Valley’s startup go-to shop... they helped [Neumann] finance those buildings.” — Anna Shymansky
• “Incompetence layered on stupidity layered on following procedures.” — Emily Peck [07:28]
• [07:53] “If you are a sober-sided international banker ... those are the people you don’t want to encourage. And yet that is exactly the guy that he encouraged.” — Felix Salmon

Why Go Public Now?

• [09:39] Many IPOs are driven by companies' need for cash, or by investor pressure to 'cash out'.
• [10:47] Growing sense that private markets are losing their appetite for late-stage 'unicorns' at high prices.
• [12:08] The hosts discuss the 'man-child' CEO archetype in SV, hoping WeWork’s saga will end that era—“I’m hoping that with WeWork and Adam Neumann, the bad boy CEO goes away forever.” — Emily Peck

Interesting Moment:

• [13:32] Market psychology is “schizoid.” For every failed IPO (Lyft), there’s also a soaring one (Beyond Meat, Zoom).

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Juul: From Darling to Disaster

Main Takeaways:

• Juul Labs, once valued at $35 billion after Altria’s $12.5 billion investment, now faces regulatory storms over vaping's health impacts and growing youth addiction.

Discussion Points:

• [19:30] Altria invested at peak valuation, but “that $12.5 billion investment — how much do you think it’s worth today?” “Zero.” — Felix & Anna [20:05]
• [20:23] Mysterious lung illness (over 800 cases, at least 13 deaths) tied to vaping, though often linked to black market THC cartridges, not Juul directly.
• [21:11] Regulatory panic: Massachusetts bans vaping for four months; Walmart restricts advertising; the FDA is reacting, not anticipating.

Regulatory & Ethical Failure:

• [23:16] Juul claimed vaping was 99% safer than smoking, a claim not authorized by the FDA—"By making that claim very loudly and very publicly, they were breaking the law." — Felix Salmon
• [24:11] Massive increase in youth vaping: “In 2017, 12% of teens were vaping. In 2019, it’s 28%.” — Emily Peck
• [24:55] “They’ve hooked a whole new generation on this addictive product. And then vaping goes away, and everyone’s back to smoking. It’s like a nightmare.” — Emily Peck

Industry Fallout:

• [26:51] Juul’s founder ousted; replaced by a “tobacco CEO” who understands regulation: “Tobacco CEOs understand that they are working in a regulated industry and they need to follow the law.” — Felix Salmon

Altria’s Strategic Blunder:

• [28:06] "Altria could have got all of the benefits to Juul imploding without putting $12 billion into Juul." — Felix Salmon

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The Collapse of Thomas Cook

Overview:

• Thomas Cook, the 178-year-old British travel giant, suddenly liquidated, stranding hundreds of thousands of travelers and threatening associated industries across Europe.

Key Segments:

• [28:16] “It fell apart, Felix.” — Emily Peck
• [29:15] Not standard bankruptcy — “This is complete liquidation...Travel agency is a very asset light business.” — Felix Salmon & Anna Shymansky
• [29:55] Cause of collapse: excessive debt, not just changing travel habits. One-third of cash flow went to servicing debt.
• [31:02] Airline failures are uniquely disruptive in Europe due to lack of consumer recourse compared to US ticket-buyers, who rely on credit card protections.
• [34:44] Beyond travelers: The ripple effects on hotels in Turkey, Spain, Greece — “There were stories of hotels literally not letting guests check out until they paid their bill because they hadn’t been paid by Thomas Cook.” — Felix Salmon

Cultural Shifts:

• [36:15] The demise of the in-person travel agency model: “I can’t believe it still existed. A huge Travel agency in 2019, like who is going to the high street and booking a trip.” — Emily Peck

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Notable Quotes & Memorable Moments

• “[WeWork] was incompetence layered on stupidity layered on following procedures.” — Emily Peck [07:28]
• “The bad boy CEO goes away forever. I don’t know. It’s just a hope. Please continue.” — Emily Peck [12:05]
• “In 2017, 12% of teens were vaping. In 2019, it’s 28%.” — Emily Peck [24:25]
• “Altria could have got all of the benefits to Juul imploding without putting $12 billion into Juul.” — Felix Salmon [28:06]
• “There were stories of hotels literally not letting guests check out until they paid their bill because they hadn’t been paid by Thomas Cook.” — Felix Salmon [35:46]

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Numbers Round ([37:59])

• Anna: 12% — The coupon rate Aston Martin had to pay on its new bond, reflecting its financial distress and high borrowing costs.
• Felix: 80 — The number of Google contractors in Pittsburgh who successfully unionized with United Steel Workers.
• Emily: 54% — The increase in average family health care premiums over the past 10 years, now totaling over $20,000 per year per family.

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Conclusion

The episode masterfully ties together the theme of “implosions” as the hosts examine tectonic shifts in finance, tech, consumer behavior, and corporate governance. Whether discussing IPO crashes, the vaping industry’s rapid reversal, or the collapse of an iconic travel brand, the podcast underscores the forces upending traditional business narratives.

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Key Segments by Timestamp:

• IPO market implosions: [00:39]–[18:18]
• Juul and vaping industry crisis: [19:28]–[28:08]
• Thomas Cook’s collapse: [28:16]–[37:55]
• Numbers Round: [37:59]–[42:33]

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This detailed summary covers the episode’s main arguments, notable quotes, and key segments with timestamps—giving listeners a clear, engaging sense of what was discussed and why it matters.

Transcript

[A]

Hello, and welcome to the Implosions edition of Slate Money, your guide to the business and finance news of what a week this was. This was a crazy pants week. We have so much to talk about, and we are not going to mention the impeachment word at all. Yay, us.

[B]

Yay.

[A]

I am Felix Salmon of Axios. I'm here with Emily Peck of HuffPost.

[B]

Hello.

[A]

And also Anna Shymansky of Breaking Views.

[C]

Yes, hello.

[A]

We are going to talk about what happened in the IPO or what is happening in the IPO market. WeWork is not going public. Endeavor is not going public. Peloton went public and imploded. This is crazy pants. This isn't what normally happens with IPOs. So we're going to talk about that. We're going to talk about juul, the formerly $35 billion vaping company, which Anna Shymansky now considers to be worth zero. We are going to talk about Thomas Cook, which apparently travel agents are still a thing. Who knew? In any case, all of that is coming up on Slate Money. So I just saw a statistic saying that 48% of the companies that went public this year are trading below their IPO price. Now, this is a random statistic. And it's like, oh, that's a random statistic. But this is incredibly unprecedented and rare. Like, the whole point about IPOs is that a company deliberately underprices its stock. It sells its stock at a discount to what the market is willing to pay so that everyone will jump in and buy the stock, and then it rises on the first day, and then it, you know, with any luck, keeps on rising. And this standard thing for IPOs for as long as there's been IPOs seems to have gone out the window this year. And this year it seems that if you just do that standard IPO investing thing where you just take a thousand bucks and buy a thousand bucks of stock every time a company IPOs, you are hating your life.

[C]

Yes, you are.

[B]

So we're talking about really underperforming, talking about Uber. We're talking about Lyft. This week, we're talking about Peloton.

[A]

Peloton. Oh, yeah. We're talking about Smile Direct Club, which went public just a couple weeks ago at $23 a share and is now at $13 a share.

[B]

What is SmileDirectClub?

[A]

It's like a teeth straightening thing, right? It's like. It's like you can get your teeth straightened without going to the dentist. You do it all at home over the Internet.

[B]

Shocked that that didn't perform as well as thought.

[C]

Sounds fantastic. Yeah. I mean, it. It seems like we're kind of meeting this juncture where market psychology is just has changed. I mean, I feel like clearly in the last, especially, I'd say in the last, like, two months, but like the last six months. Market psychology is turning, but investment banker psychology hasn't quite. So I think what's happening is we're still getting a lot of these IPOs priced in a way that you can probably maybe justify with a model, but investors are no longer buying it. If some of these same companies had gone public I think, a year ago, I don't think we would see this happen.

[A]

So. But literally, the investors are buying it. This is the thing which I don't understand. All of these IPOs, like Peloton sold all of the stock it was trying to sell at $29. Smile Direct Club sold all the stock it was trying to sell at $23. Lyft. I mean, Uber sold all of the stock it was trying to sell it $43 or whatever it was at. And then they all just sort of fall off the glyph. Lyft. The same thing. The only one which didn't manage to sell the stock that it wanted to sell at the price that it wants it to sell it at was we work. Everyone else actually did this thing, which is kind of amazing and on some level, really impressive, which is that they raised equity capital at a premium to the market price. And you're like, wow, you managed to sell your stock higher than anyone was really willing the market was willing to pay.

[B]

That's kind of what I've been wondering. Is this a problem with the public markets or really a problem with venture capital? And the fact that we sort of had this unprecedented situation where these companies stayed private for maybe too long and, you know, they got these overinflated values and there was all this money sloshing around. And the problem isn't what's happening now, actually. It's the problem with what happened for the past, you know, eight, ten years or so.

[C]

Yeah, I think there are a few different things going on here, because on the one hand, yes, you certainly had so much private money that allowed valuations that even now we can look back and say, like, okay, clearly these made no sense.

[A]

But then, although, like, there aren't that many companies which are trading at a discount to their last private valuation. Uber, obviously, is Wework. If it went public, would be. But even Peloton, which. That fell off a cliff and dropped 11% on its opening day is still trading. You know, it's still worth $7 billion or something, which is more than the 4 billion it was worth in the last private round.

[B]

But these companies captured a lot of the value would normally capture in the public market. In the private market.

[C]

And that actually. And that definitely is true. Yes. And I actually think that's a very good point that, you know, because obviously it used to be that companies were going to go public at a much more immature stage. So public investors, Amazon, three years, exactly. Had a much, much more upside.

[B]

Another thing that we was interesting, and this may be tangential, but Matt Levine, I think in his newsletter Yesterday, talked about WeWork and was just saying, when.

[A]

Does Matt Levine not talk about WeWork?

[B]

I mean, when do we not talk about We Work?

[C]

When everyone not talk about WeWork?

[B]

Everyone's talking about.

[A]

There's so many things we're talking about. WeWork now has two CEOs. It defenestrated the guy who controlled the entire company, which was kind of impressive. They just kicked him out. They fired all of his friends. They.

[B]

They're selling the private jet.

[A]

They're selling the private jet. They're trying to pretend that they're a normal company. And most germane to this discussion, they canceled the IPO that Jamie Dimon and others had been really pushing on them for years.

[B]

Oh, and let's talk. So before I talk about Matt Levine's column, let's talk about Jamie Dimon and his role in the We Work ipo. And also, not to mention.

[A]

And also Smile Direct and also Peloton.

[B]

Yeah.

[A]

JP Morgan, like, no one is exactly covered in glory in the IPO markets these days, but JP Morgan looks like they are the worst.

[C]

Well, they were really trying to position themselves as like the Silicon Val Kelly's startup, go to shop. Like they would really court a lot of these guys when they were a lot of these startups when they were developing with the idea that then they would be able to take the lead and taking them public. And with We Work in particular, you're seeing just a lot of kind of intertwined interests between Chase and We Work and Adam Newman. I mean, there were so many. There were hundreds of millions of dollars in private loans to Adam Newman that were coming from Chase. And I think the issue here, sometimes people are asking is clearly Chase knew how bad the finances were.

[A]

Right?

[C]

So, you know, and, and yet at.

[A]

The same time, they were going up to Adam Neumann and WeWork and saying, we can take you public at a capitalization of 65 billion or something crazy like that.

[B]

I mean, they literally helped him. I mean, one of the big knocks on Newman was the self dealing. The fact that, you know, he trademarked the word we and the fact that he himself bought buildings and then leased them through WeWork and JP Morgan helped him finance those buildings. So they not only knew about the self dealing, they helped with it and then weirdly encouraged WeWork and Newman to put the self dealing in the IPO, in the, in the filings.

[C]

Right.

[B]

I mean, leading to like the whole thing falling apart. So I feel like it's like incompetence layered on stupidity layered on following procedures.

[C]

What, what's interesting here though, I think is because I think it's easy to which we have many times attack Adam Newman for being like this kind of childish, you know, figure. But I think here's an instance where it's both the children and these supposed adults in the room who are all behaving poorly.

[B]

Yeah, children tried. They were trying to court his favor.

[A]

Right. I mean, what you find is there is always going to be one guy who will take, take, take, read as much as he possibly can. And if you are a sober sided international banker lender like Jamie Dimon, those are the people you don't want to encourage. And yet that is exactly the guy that he encouraged more than anyone else. And you can make exactly the same criticism of Massasone as well softbank even more so, I'd say he's literally throwing billions of dollars at a guy who loves nothing more than to incinerate billions of dollars. And how does that make sense? But given all that, the thing which I'm trying to understand is why are all of these companies going public right now? Because we had this conversation for years on this show like saying, you know, these private companies never seem to go public. They can raise however much they need on the private markets. And there's all of these problems like Airbnb right now is going through problems that it's 10 year stock option contracts are expiring while they're still a private company and people are getting stock and, or people's stock is expiring worthless just because they haven't gone public 10 years after they got their options. And you know, this is all unprecedented territory. But, but there Was this big 2019 was really the year of companies going public whether or not they had an ipo. Slack went public, Uber and Lyft went public. All of these big. And now we have all of these other ones, peloton and smarter. They're all Going public. Why now and how are they still doing this? Wework accepted in the face of clear skepticism on the public markets.

[C]

I mean, I think for a lot of them, I mean, even though we work obviously hadn't. I mean, they really need to, because they need the cash. I mean, they were only going to be able to raise more debt if they could go public.

[A]

That's we work. But why, why would, like, you know, why would Peloton go public again?

[C]

They need cash. And yes, you can potentially keep trying to raise more debt in the private markets or through loans and more equity.

[A]

In the private markets, because that's where that's.

[C]

Well, debt or equity in the private market, you're getting private loans as well as.

[A]

Right. But historically, over the past few years, when, when companies looked at going public, they. They kind of shrugged and said, why would I go public for? I can raise that much money quite easily privately in like a series G or series H or something. And I don't need to worry about filing S1s and being transparent about all of my self dealing. And it's much more, much happier for all of us. And you have these companies like Palantir, which have been private forever and they keep on kind of maybe sniffing around, possibly ipo, but they never do it. Stripe is another one. Airbnb is another one. There are still lots of these companies which are losing lots of money and don't seem to see any urgency to go public.

[B]

Is it the investors? Are they pushing these companies? They want their payouts, they want to cash out, they want to cash in, cash out?

[A]

Yeah, it could be the investors.

[C]

I think that's definitely a big part.

[B]

I mean, after a while you're like, okay, it's been 10 years, TikTok, let's get all that money, like 10x or whatever they say.

[C]

Exactly, which is why you might get something like a. Although I do think it's also because they need cash and they're not finding it as easily in the private market.

[A]

So that's, I guess, the question which I was asking. Are you seeing evidence that the private markets are more skeptical now and less willing to fund companies at these multibillion dollar valuations? I think so, because, I mean, we just saw the latest strike round was at what, $35 billion valuation or something? It doesn't seem to be that difficult.

[B]

My hope is that the obsession with the man child has finally been laid to rest. With Adam Newman like we had, you know, everyone wanted to be the next Mark Zuckerberg or whatever. And then the Snap guy. Evan, what's the. Thank you. And this like, obsession with throwing money at very young, inexperienced male founders because of their so called brilliance or their unconventional ways and overlooking just like all their misdeeds and misbehavior. I guess Travis Kalanick was a little older, but that kind of like the, the bad boy CEO. I'm, I'm hoping that with we work and Adam Newman, the bad boy CEO goes away forever. I don't know. It's just a, it's just a hope. Please continue.

[C]

Yeah, now I was just saying, like, sadly, I don't think that that is going to go away. I think so, unfortunately.

[A]

So I'm going to ask the question, like, what's going to happen with Palantir? Is, is Alex Karp going to remain the CEO of Palantir through an ipo?

[C]

History would suggest, most likely, but, you know, it's hard to say.

[A]

I mean, I do think, I mean, he's bazonkers.

[B]

Is he. Say more.

[A]

He's like, I mean, like, he's, you know, he kind of jets around the world quoting German philosophers and, you know, another one of those companies which never seems to have worried about having to make a profit.

[B]

Right.

[A]

And has gone, you know, what, well over a decade now without ever having made a penny.

[B]

I mean, I, I feel like the time, it's not the time to IPO right now, I think. I'm not, I don't run a company. But you could, you could see what the climate is and you would, any normal sane person would say, let me wait it out a little bit and see what happens.

[C]

Yeah. And I would say it's interesting because there, it does to me just seem like we're seeing market psychology changing a little bit. And of course, we have no way to know this, but like, if, if some of these companies a year or two ago had gone public, would they be having these same issues? And part of me feels like, no, I do think that's part of this is psychology. But then there's also the argument to maybe the issue is really just these are not being valued properly in the private markets. And whenever they came to the public markets, they were, we were going to start to see this type of reaction.

[A]

Except for like, the markets are weirdly schizoid about this. For every lift which just falls off a cliff, there's a beyond meat or a zoom which just goes way, way up. And everyone's like, holy moly. Like, the stock market is insane.

[C]

It's a lot of short interest in that.

[B]

So what Matt Levine basically said is the reason you take a company public is on its potential. No one expects a company that's just ipoing to be, you know, fully mature and you're betting on sort of what it is going to, going to be able to do in the future and all of this wonderful things. And with someone like an Adam Newman, you, you want him to be a little crazy and be a real visionary and la la, la. But weirdly with we work, everyone was into that. They gave him all the money and then as soon as he's about to IPO it's, and everyone knows he's not making any money or turning a profit. And then all of a sudden the IPO comes out, you know, he's about to go public and all the bankers are like, oh my God, he's not making any money. Forget it, burn it all down. Like there's been, it's like a psychological shift like you were saying, but it's like this abrupt off a cliff psychological shift that maybe makes no sense.

[C]

It's just weird to me too because like, try, like if you had talked to people in the last like year, try to find a weworkable like you couldn't find one. Like everyone was like, this company makes no sense. This business model makes no sense.

[A]

Well, massive.

[C]

That doesn't, he doesn't count the person who's giving them.

[A]

No, but I think that's, I think that's the point, right? Is that the whole idea of private markets being the place to grow these unicorns, you know, what, what Matt calls the Enchanted Forest, you know that, that you are, you are not subject to the whims and the strictures of the public markets. And if you are Masterson and you have a 300 year time horizon and you're like, I, I want, you know, I can incubate you in my enchanted Forest for as long as it takes. And then eventually you will reach the point at which the public markets, even the public markets will see the value and will be and will be able to go public at a, at a, at a high valuation. Clearly, I think what we're seeing right now is that the public markets have not reached that point and that the, the private true believers are saying, well, we might need to stay private a bit longer. But the length of time that these companies have to stay private in order to wait for the public markets to get around to seeing the value is just getting longer and longer and longer to the point at which, you know, it's hard for me to see, I Mean, okay, I do believe that if Stripe went public tomorrow, they would be able to reach that $35 billion valuation that they saw in the private markets. You know, payments companies in the public markets are super hot right now. So I'm not saying this isn't a hard and fast rule, but there is some feeling, at least I have some feeling, that maybe the stock market in general is less greedy than it was just a few months ago and more fearful, and that these formerly private unicorns are the riskiest kind of stocks, and those are the kind of ones which fall. And if they had been public, if Anna's right, you know, if they had gone public maybe 18 months ago and their stocks had gone up for the first year, maybe now they would be going down.

[C]

Right.

[A]

I like that.

[B]

The idea of the stock market not being able to absorb all that uncertainty right now in this moment, because it does seem like it is a quite uncertain moment. And yeah, we have like, constitutional crises all over the place. Like, no one really knows what's going to happen. There's like a broader meta crisis and like negativity and uncertainty.

[A]

Right. And plus, combine that with super frothy valuations. If these companies were going public at remotely sensible valuations, then you would see something different.

[B]

Right.

[A]

But although, you know, the other thing I need to just worry about, and I don't understand at all, is we're not just talking about what happens in the first day or the first week. You know, if you look at what happened to Slack, which raised no money at all when it went public, it's just been grinding lower for like the entire time it's been public. And it's not clear to me what that mechanism is.

[C]

Yeah, I mean, we're all just looking.

[B]

At Felix like, yeah, we don't know.

[A]

But the lesson of this story is.

[C]

People think it's worth less than it was worth previously.

[B]

But I use it a lot. I use Slack a lot.

[A]

There are good times to IPO and there are bad times to ipo, and now it seems to be a bad time to ipo. So that is an indication that the only companies going forward who are going to ipo, they're going to be the ones who really desperately need to. If you're a company who has the choice and can remain private, like endeavor you will you pull your IPO and you say, you know, nevermind.

[B]

But if you're not a profitable company and you have to stay private, like, it's going to turn sour for you, is it not?

[C]

Right. I mean, because. And maybe this, this will be the last thing I'll say because it's been a long segment, but yeah, because I mean, you do have this issue where clearly, which we've talked about many times, you have a tremendous amount of money, of private money, of capital needing to be invested, wanting to make a return. And that has been really behind a lot of these insane valuations. And it's not as though like that isn't the case now. You know, it's not like it wasn't. It was the case two weeks ago and it's not now. But I think even in those private markets you are starting to get a little bit more worry, a little bit more concern about a lot of these unicorns, about these companies, that their path to profitability doesn't make a tremendous amount of sense.

[A]

Yeah, I think the next shoe to drop will be what happens. Maybe what we start seeing is some down rounds in the private markets. Instead of companies going public, they just raise money privately at a lower valuation than they had previously done, which is not the end of the world. It can be done.

[B]

Speaking of fast growing companies that fall off a cliff.

[A]

Well, speaking of ridiculous private valuations, there's almost no more ridiculous private valuation than Altria injecting 12 and a half billion dollars into Juul Labs at a $35 billion valuation on a company which had revenues of not much. Just based on the idea that vaping.

[C]

Was the future and not pricing in the regulatory risk that everybody knew existed.

[A]

And now, I mean, you tell me, anna, but that 12 and a half billion dollar investment, how much do you think it's worth today?

[C]

0.

[A]

0.

[C]

I think if you look at right now the way, I think if you look right now the way that the markets are valuing Altria, I would say zero.

[A]

So Juul is worth zero.

[C]

I think right now that could change. But right now. No, I, I don't think. No, I'm just saying, like quite literally, if you're looking at the numbers, it appears that the market is valuing Juul at a essentially zero.

[B]

So we're talking about Juul because there is a mysterious lung illness sweeping, I don't know, sweeping the country. There's like 805 reported cases of these lung injuries that people are getting from vacant.

[A]

And at least nine people have died, possibly 12.

[B]

Now 13, 13 people dead from this.

[A]

And, and just let's be very clear about this because we care about, you know, libel laws here on.

[B]

I was about to say, none of.

[A]

These have been directly linked to jewelry.

[B]

Right. And a lot of money are linked to like black market, like thc, marijuana vaping, that kind of thing. But it sort of puts a damper on the whole vaping industry. And it's sort of like ignited basically a pat. Almost like a panic from regulators. Massachusetts has banned vaping temporarily for four months. The FDA is coming out and saying.

[C]

Walmart'S not selling advertising. You can't. Yeah, it's. And it is definitely possible that things will calm down and they'll discover that, okay, actually, certain products are safer than others. We can figure out a way to regulate and tax them, and then it'll be fine.

[A]

It's really hard to regulate illegal things, though. And this is the problem with the vapes is that most of the vapes are illegal. And because they have marijuana in them and marijuana is still illegal in most of the places that people are doing this vaping. And for all that we don't know that Jules have been causing this illness, we do know that Jules have been at the forefront of making vaping a socially acceptable thing to do and of basically replacing smoking with vaping. And because Juul and others have been done a very good job of selling the idea that vaping is safer than smoking, the people who used to smoke joints are now vaping thc. And maybe that wasn't such a smart move.

[C]

Well, and I think there are two things here. Like on the one hand, if we were talking about adult smokers switching from that from cigarettes to vaping, I think it's hard to make the argument that that isn't a better switch.

[A]

Let me ask you the parallel question, though. If we're talking about adult marijuana smokers switching from smoking a joint to using one of these black market THC vape things, that's not clearly safer, but actually.

[B]

Some are sold at these dispensary states where it's. Where it's legal.

[C]

And I 100% agree with that.

[A]

And are those safe or no?

[B]

No.

[C]

Right. No. And that. That's totally correct. But I'm saying that the target market originally and for specifically Jewel products, well, was smokers with the idea that you can switch from. From cigarettes, which I think there is no evidence that would suggest that vaping is worse for you than smoking cigarettes. However, I think the bigger issue that we haven't brought up yet is the fact that they were also clearly targeting kids. And I really think that that's a enormous part of this.

[A]

There are two issues here which I want to separate. Number one is the claim that Jewel made that vaping using a juul is significantly Safer. And they actually said 99% safer than. Than smoking a cigarette. Now, I have to say that I just empirically am inclined to agree with Anna that it's probably true that Juuls are safer than cigarettes. But that was a claim that needed FDA approval before you could make that claim. And they never got that FDA approval. So by making that claim very loudly and very publicly, they were breaking the law. Then. The second issue, as Anna says, is that they were marketing these things to kids, which is just unconscionable because they have got an entire generation of kids hooked on tobacco. When we thought. When we thought that we had actually managed to finally reach the point at which we were not hooking new people on nicotine.

[C]

Yeah. So can I actually say just one statistic? I saw it was something like a quarter of American 12th graders use. Juul. I'm not sure if that is accurate, but I think I saw it in either the journal or the Times. I was like, are you kidding me? I mean, that's enormous.

[B]

Yeah. So listen, so in 2017, 12% of teens were vaping. In 2019, it's 28%. So the danger now is people freak out and they ban vaping, and they make it harder for kids to do this. These kids are hooked on nicotine. And I can tell you that nicotine is extremely addictive. Like, yeah, vaping might be safer than cigarettes, but what's safer than vaping is not doing any of this. Like, it's very addictive. So now.

[A]

And it's particularly addictive for teens, right?

[B]

Yeah, particularly when their brains are still developing. You develop receptors for nicotine. And I'm telling you, people, they do not go away. So, yeah, so the danger now is you crack down on vaping, and you. You have created this company, Juul, which Altria owns what, like 35% of. And they know what they're doing. They know. They know how to market to kids, hook people on an addictive product. They've hooked a whole new generation on this addictive product. And then vaping goes away, and everyone's back to smoking. It's like a nightmare.

[A]

Yeah.

[B]

And where was the fda?

[A]

It's like the opioids. People start on. On vaccine.

[B]

Exactly.

[A]

You know, opioids. And then they wind up on heroin. Because.

[C]

And.

[B]

And the FDA really, I think, fell down on this, because from what I've been reading, they. They did look at, you know, is this cancerous in the way that smoking is? But they didn't look at this lung stuff. They really have. Are not prepared this is apparently these. The lung illness thing has been going on for like a decade. There have been reported instances here and there, and no one put, you know, put it all together.

[C]

Yeah, no, I mean, the FDA still.

[B]

Has only very lightly regulated vaping, you know, before this even started.

[A]

I mean, just in terms of like the fact that this entire thing grew up in sort of the shadows of the law is shown by the fact that Juul was spun out of this company called pax. PAX was a marijuana vaping company. The company was formed to sell THC vapes. And then they were like, well, if we're doing THC vapes, we may as well do nicotine vapes, right? So they create this, like, subsidiary called Juul to do nicotine vapes. Then it turns out the subsidiary winds up being even bigger than the parents. So they spin out the subsidiaries, sell, you know, 35% of it to Algier for $12 billion. But, like, none of this was ever really legal. It was always kind of shadow gray market, you know, U.S. forgiveness rather than permission. Kind of like very Travis Kalanick style.

[B]

Move fast and break things.

[A]

Move fast and break things. And now the chickens are coming home to roost. And the CEO just got fired and has been replaced by like a tobacco CEO. Which kind of makes sense because tobacco CEOs understand that they are working in a regulated industry and they need to follow the law. Because it seems to me that no one at PAX or Juul was that interested in dotting the regulatory, you know, I's and crossing the T's.

[B]

But to go back to where we started with, it was a mistake for Altria to do this. Was it a mistake? Because first of all, if they really crack down on vaping, like I just said, more people are going to want to smoke cigarettes. Good for Altria. And it would be good for Altria.

[A]

Even if they hadn't. Right?

[B]

That's all. Altria is apparently now working on its own E cigarette brand or whatever. So if Juul, you know, if their reputation is demolished in all this, then maybe the big tobacco brands emerge triumphant with some, like, better regulated kind of.

[C]

No, I mean, Altria is going to have to take a big write down and there was that idea of there was going to be the merger between PMI and Altria, which the market hated.

[A]

Philip Morris. Yeah. One of them is like the international Marlborough and one is domestic Marlborough. But yeah, I mean, I think the answer to your question, Emily, is Altria could have got all of the benefits to Jewel imploding without putting $12 billion into Jewel.

[B]

Okay, fair, fair, fair. Yeah, fine.

[A]

But they'll still come out on top talking about implosions. What the hell happened to Thomas Cook?

[B]

It fell apart. Felix, does anyone know? Any listener know what Thomas Cook is? At least one guy on Twitter knows.

[A]

So I was. I put out my email on Thursday describing Thomas Cook as an airline, because it struck me that the most salient part of Thomas Cook was Thomas Cook Airlines, where people had a bunch of plane tickets and they'd gone to Greece on holiday, and then the airline collapsed and they couldn't get back. And all of these, you know, European regulators had to rustle up a bunch of other planes to get them back home. But the fact is, you're right, that Thomas Cook is way more than just an airline. It was this massive travel conglomerate, 178 years old. And.

[C]

And it kind of began the, like, package tour.

[A]

Right.

[C]

Market. And this is. I mean, you're talking about having, you know, thousands and thousands of people who were stranded, and now hundreds of thousands, hundreds of thousands. And also.

[B]

Wait, should we back up and just be clear?

[C]

So Thomas Cook has filed for bankruptcy?

[A]

Not just bankruptcy. This isn't the standard bankruptcy where, like, you keep on operating and get converted to equity. No, this is complete liquidation.

[C]

And actually, this is actually kind of really complete liquidation. Because if they're looking at, like, the claims that a lot of the creditors have, they're going to get back almost nothing because Thomas Cook's assets are crap.

[A]

That's basically. It's a very asset. Travel agency is a very asset light business. Right. You lease your airplanes. Except for, weirdly, Thomas Cook didn't. Anyway, you lease your.

[C]

You.

[A]

You book people hotel rooms beyond own the hotel rooms. You know, it's just. And somehow they managed to rack up £2 billion of debt.

[C]

And that's actually the big issue here. Well, one, it's a big issue that I think it's something like people think they're gonna be able to squeeze out about 150 million for those people who loaned, you know, 2 billion. But that 2 billion is actually the reason that they went under, is that they have just taken on way too much debt. Yes, this is a story of how the travel industry has changed. Yes, they were hurt because of problems that happened in Tunisia and weather issues and all of that other stuff. But at the end of the day, the big issue here is that they simply took on too much debt. And so it was something like a third of the money that was coming in they were using to service their debt. And that's just unsustainable. And there. There was going to be a restructuring or like, there was basically a rescue plan with kind of Foson, who's like this Chinese conglomerate. But then that fell apart at the end of the day because the creditors said they wanted Fosan to put in, I think, another, like, 200 million. And they said, well, we're not going to do that. Thomas Cook needs to come up with the money, which of course, they can't. And they went under.

[B]

I just can't believe just reading about this. When does this ever happen? So this company goes bankrupt and leaves thousands, hundreds of thousands of people stranded. Like, it's just so abrupt. It seems to me like companies like airline.

[A]

Airline failures are the worst kind of failures because you buy the ticket before you use it, right. And so you spend the money and you've got nothing for it until you get on the plane, and then the airline fails, and then you're stuck. And it's especially bad in Europe because Americans generally buy their airline tickets with credit cards, and the credit cards will generally refund you and make, you know, if the airline goes first. Europeans generally buy their tickets with bank transfers or debit cards or cash or something like that. And so they have no recourse. And the only recourse they have is to hope that the European regulators will find a way to get them back. But we've had more than one European airline failure, while you will recall, was the Icelandic airline, which went bust a couple months ago, and that has decimated Icelandic tourism. You know, that one airline going bust can have major macroeconomic effects on entire countries.

[B]

Where are the regulators? I'm just trying to imagine this happening in the United States.

[A]

Exactly. They're not regulated in the way that banks are, even though the harm that they can do if they go, if they just collapse overnight can be, you know, similar. And in the United States, yeah, normally what happens is the airlines go through some kind of a Chapter 11 bankruptcy proceeding, and they come out the other end with the same flights and the same timetables and, you know, a bunch of debt for equity and a new ownership structure. But you don't have airlines just collapse.

[C]

Well, that's. I mean, right, because that's like, that's what they were trying to do here and Because, I mean, like, in 2011, they almost went under, and then, like, they kind of recovered in 2014. And so I think really, just no one expected this would happen. But as you've said, it does raise a question of kind of moving Forward, whether it makes sense to have. Because you have so many of these low. I mean, Thomas Cooks obviously a little different from here because it's been around for so long, but you do have so many of these airlines popping up, these low cost airlines and just especially in Europe kind of proliferating and there isn't a tremendous amount of.

[A]

Because. Because the thing about Europe, the big difference between European air travel and US air travel is, I don't know, it's just there are many, many more airlines. There's a lot of these low cost airlines where people are like, I'm only going to be on the plane for an hour. I don't actually care if it's a kind of shitty plane because all I care is just give me a cheap fare and they can somehow make it work by flying from second tier airports to other second tier airports. And it's a great way of keeping Europe mobile. Every so often people wonder like, why can't America have low cost airlines? And Southwest has come close, but a lot of the time you wind up with a JetBlue situation where the airline launches as a low cost airline, but then becomes a high cost airline very quickly because they realize they can make more money that way. There just isn't that much price competition in the US Is it?

[B]

Because we have regulations so that if a airline runs out of money, people don't get all stranded all over the place. Is that part of the price?

[A]

I think it's more that there's just a higher barrier to entry and there's a. Right now, at least, there seems to be a kind of implicit cartel. There are three big airlines and they all kind of have this not in the wing kind of agreement that none of them are going to compete on price.

[C]

Hmm. Just to kind of go back to Thomas Cook a little bit here, like, this is, you know, it's not just the people who are stranded. It's also. And it's not even just the workers, which is also like, you know, again, thousands of people, but you're also talking about like all of the people who are running the establishments in Turkey, in Spain.

[A]

Oh my God, the Greek hotel.

[C]

Exactly. This is after the high season. They're not getting paid, you know, I.

[A]

Mean, like, so this is. So what happens is that a Greek hotel will sell, you know, 100,000 room nights to Thomas Cook, you know, for a fixed amount of money, and then Thomas Cook will turn around and sell them one at a time to individual travelers. And that's great for the Greek hotel because they get Guaranteed income. And they can cover all of their operating costs just with that one deal, basically. And then all the travelers come and they stay in the hotel and everyone's happy. But then the Greek hotel keeps on waiting for that Thomas Cook check to clear and it doesn't clear. And then, you know, they can go bust very easily if they don't. If they don't get paid by Thomas Cook. And there were these stories of hotels literally not letting guests check out until they paid their bill because they hadn't been paid by Thomas Cook. But of course the guests had already paid Thomas Cook. It was. They didn't want to pay twice. They should not have to pay twice.

[B]

Is this going to have any. I mean, that's awful for the hotel and the people who own the hotels and the workers. Is it going to ripple out in any unforeseen ways?

[A]

I mean, anything bad that can happen to the Greek economy probably will happen to the Greek economy. Like that seems to be the rule.

[C]

Turkey as well.

[A]

And Turkey. Yeah. No, I mean tourism is a big part of the Turkish economy. It's one of the main ways that it gets, you know, euros. And so there are definitely going to be ripple effects, macro ripple effects.

[B]

I can't believe that this company still. I had never heard of it. Cheap and Cheerful Vacations is how my British colleague explained it to me. But I can't believe it still existed. A huge Travel agency in 2019, like who is going to the, to the high street and booking a trip.

[A]

That's the other thing they literally had. They kept on buying like retail outlets for people to walk into a store and buy their, their tickets. In the US we have massive travel agencies like, you know, Expedia, Priceline, right online. But they, they're all digital now. Like the idea like that we have a. I see a couple of tiny little travel agencies, like little walk in storefronts which mainly cater to, to like specific immigrant communities. But like nothing like Thomas Kirk.

[B]

It's unbelievable that it made it to 2019 just in the.

[C]

What?

[B]

I'm shocked.

[A]

Well, Americans also don't do package holidays. Like package holidays were really a really big thing in.

[B]

I don't even really know what a package. I assume it means you buy everything all together. Yeah, yeah, but like no one calls it that.

[C]

Well, also Americans don't travel the exact same way that you're. You know what I mean? Yeah.

[A]

Disney does them. Disney, you're right. Cruises are a thing and like, but you buy like a trip to Disney and you get your park pass. And you get your flight and you get your hotel, and it's all like one big thing.

[B]

Package.

[A]

One package. But, like, beyond those kind of very branded package, you don't have, you know, high street operators doing deals with airlines and hotels and packaging things together like that.

[B]

It's just. I don't want to have that now. Sounds. Doesn't turn out very well.

[A]

Okay, let's have a numbers round. Anna, what's your number?

[C]

My number is 12%. That was the coupon on the Aston Martin bond that they put out, so. 2022 bond. This just kind of jumped out at me this week, and I actually wrote something about it. Just because you don't freak now that you're a journalist. Exactly. Now, that debut column, it was. It was indeed. So I have to talk about it. No, but it's. It was interesting, particularly because when they came out, they were rated like B minus, which, if you look at where yields were for other, like, kind of credits in that area, it was around, like, 6%. Right. And so now, of course, after they issued this ridiculously expensive debt, then they were downgraded, but this is. And the reason they're doing it is because, well, one, they desperately need cash, and two, they're trying to come out with this luxury suv, and they kind of have this plan that, like, look, this is just cash. They know it's expensive, but it's just going to get them through this rollout and then everything will be fine. I think that that's suspect, but. And this also. Sorry, last thing. This also just had my. One of my favorite things, which is actually a pick toggle.

[A]

Oh, the pick toggles. Right. So, you know, like, this is P I K Pick.

[C]

Okay.

[A]

It stands for payment in kind.

[C]

Okay.

[A]

And so if Aston Martin can't afford to pay its 12% coupon on this bond, it can pay with more bonds.

[C]

Well, yeah.

[B]

And only.

[C]

Well, half of it. Yeah. So, like, it's a. It's a 50%. Basically, they have the option of. Exactly. And they also have the option of issuing another 100 million debt, which would be at 15%, similarly with a pick toggle.

[A]

But I feel like what we really need here is. Is an SUV toggle. Like, you can just. You can just get your payment in this luxury suv, which apparently is going to be amazing, and solve all of the problems. Problems of Aston Martin, which is not a troubled carmaker at all.

[B]

People like SUVs. That's true.

[A]

My. I have a. I have a number. My number is 80. We were talking last week about kickstarter and the way that tech companies aren't unionized. Well, 80 is the number of Google contractors who managed to unionize in Pittsburgh. There's this Google contractor called hcl. And these people effectively work full time for Google, but they're employed by a company called HCL rather than directly by Google. And they joined, I love this, the United Steel Workers. So now these, these contractors who work for the Google, there are 80 of them, they're unionized, and they're members of the United Steelworkers. And I was talking to this friend of mine about, like, how pretty soon we're going to have like, steel workers coding and encoders, like smelting. And it's just going to be awesome.

[B]

Sounds beautiful. My number is 54%. That is how much average health care premiums, family premiums, have risen in the past 10 years. They're now at $20,000 and $20,756. A lot of that is paid by employers. Six thousand of that is paid by workers. And that's a lot of an increase. It's crazy.

[A]

54.

[B]

54 increase in the past 10 years. 10 years in how much health care costs.

[A]

And is that real or no?

[B]

No, I think it's real. That's a big increase and it goes up a little bit. And one thing that really struck me in Jeff Young's write above this Kaiser report in HuffPost was that the increase in a family plan for 2018 was 5%. That's how much the cost of the health insurance went up just 2018. And the average earnings increase in that year was 3.4%. So in other words, your health care costs are rising faster than healthcare costs.

[A]

Have been rising faster than inflation for decades.

[B]

And so in other words, we're all losing money every, every second we sit here. Because healthcare, except for those that have.

[A]

So much money for hospitals, apparently those guys are doing great.

[B]

I just. And because sometimes I watch these Democratic debates because they make me at work.

[A]

And they literally put you, they strap.

[B]

You into a chair in my eyeballs and I have to watch. And they spend like 60% of the time talking about health care. And this usually annoys me. But then when I read this news about the Kaiser survey, I was like, well, hell yeah, they should talk about this for 60% of the time. Like, we're literally losing money to this every minute of the day, and it's time to fix it. It's crazy.

[A]

$20,000 a year is a lot of.

[B]

It's a lot of money.

[A]

Or insurance, which is normally shit.

[B]

Insurance companies are paying a lot of the increase and that means they're not giving us the raises that we should be getting.

[A]

Just think how much more money we could be earning if our company wasn't spending $20,000 a year on our health care.

[B]

I mean, we all know that money goes straight to the CEO, but okay, but maybe not. Maybe we could get raises higher than 2% every year.

[A]

Maybe.

[B]

Maybe.

[A]

I think that's it for this week. Thank you so much for listening to Slate Money. Thank you so much to Jessamy and Molly for producing. And we're going to have A plus plus plus.

[B]

What if we talked about how Wall street hates Elizabeth Warren?

[A]

Let's do a Slate plus on Wall street hating Elizabeth Warren and whether this is good for Elizabeth Warren or bad for Elizabeth Warren. We'll talk about about that on Slate Plus. And other than that, we'll talk to you next week on Slate Money.