Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.

This week’s readout came at -.7 vs. the average economist expectation of .249. The discrepancy in expectations vs. reality was caused by continued lengthening of delivery times, increased unfilled orders, and continued price increases in both inputs and selling prices. These headwinds in December were likely caused, or at least exacerbated by the Omicron wave. On the other hand, firms remained relatively optimistic for the 6-month outlook with higher technology and capital expenditures.

In summary, the previous month was cause for concern for many New York based manufacturers, but they are hopeful that conditions will improve over the next 6 months.

Riding Stationary Bikes Downhill

Peloton Interactive suffered a major price crash this week after a series of unfortunate news bites were released against the company. The week began with a leak that Peloton had hired McKinsey & Co., a corporate consulting firm, to advise on potential job cuts and store closures. Two days later, Peloton announced that it would halt production of its workout equipment. Although management is trying to fight against the rumors, it has been a difficult year for investors to find solace in PTON. For more, see the full article below.

Microsoft Doubles Down on It’s Gaming Business

On Tuesday, the second largest company in the world by market value announced its intent to acquire gaming software company Activision Blizzard Inc. (ATVI) for a total consideration of $68.7 billion. The acquisition will add more than 50% in revenue to Microsoft’s gaming segment. For more details on the deal see the full article below.

Thank you Blue Room Analyst Ian Carter.

Microsoft’s new deal adds exciting titles to its gaming library such as Overwatch, Diablo, Call of Duty, World of Warcraft, Candy Crush, and Starcraft. The acquisition also gives Microsoft ownership of a number of game developers including Treyarch, Raven, High Moon, Beenox, Sledge Hammer Games, Infinity Ward, Demonware, Toys For Bob, Activision Shanghai Studio, and Solid State Studios.

On January 18, 2022, Microsoft (MSFT) announced its acquisition of Activision Blizzard (ATVI) for $95.00 per share (including Activision Blizzard’s net cash), in an all-cash transaction valued at $68.7 billion after adjusting for Activision’s net cash ($75 billion before adjustments). With this acquisition, Microsoft now becomes the third-largest gaming company by revenue behind only Tencent (TCEHY) and Sony (SONY). Microsoft adds big titles such as Overwatch, Call of Duty, World of Warcraft, and Hearthstone to its gaming library. Upon the news, ATVI opened at $86.77, a 32.7% jump from the previous market day close of $65.39. MSFT opened at $304.07, a 1.98% drop from the previous market day close of $310.20.

The news reversed the steady decline of Blizzard’s stock since its all-time high of $104.53 in February 2021. Perhaps Microsoft executives see this drop as a buying opportunity (buying the dip). Prior to this announcement, Blizzard stock has been hammered with reports of sexual-harassment in the workplace and gender-pay disparities, prompting California regulators to file a lawsuit against the company in July. These workplace-related issues that Blizzard currently faces will complicate the merger. The gaming industry as a whole has had a history of gender-based discrimination with a recent flurry of scandals being grouped under the term “GamerGate”. For example, Tencent-owned Riot Games, developer of popular games such as League of Legends and Valorant paid $100 million in a gender discrimination case in late 2021. It will be interesting to see what steps Microsoft will take to address these issues in the gaming industry.

K = Capital 

L = Labor 

What I learned was that clerks currently get paid $12.71 per hour while temporary workers are brought in at $18 per hour. The worker I spoke to felt this was extremely unfair to the loyal employees who still work under unsafe conditions. The Denver Post reported that the Kroger was offering escalating raises to $21 per hour for experienced cashiers, but even working full time, that level of wage makes it really tough to make ends meet. Is it wrong for Kroger to do more now to create some breathing room for the 80% of workers who say they are food insecure? 

Management may fear that “shareholders will punish us” for reducing Earnings Per Share, but I think that if the company were to invest in their employees (Costco is the prime example), the Price to Earnings multiple (PE) can only go up over time. 

This week, Denver-based Rule Gallery graciously invited the Blue Room team to visit the Z-Space installation, a collection of works created by the late Clark Richert.

As Blue Room Newsletter fans may know, our firm was named after one of Clark’s works, Blue Room (above) as a nod to his ethos of appreciation for art, math, beauty and science.

Clark was surrounded by a family of scientists and mathematicians, and was later inspired by the work of Buckminster Fuller, who popularized the geodesic dome. 

Clark experimented a lot with the use of zones, sets of parallel lines that, when combined, begin to form dimensions. A cube, for example, has 3 zones, while a square only has one. In Clark’s S-Quanta, 10 zones are derived from the sets of parallel lines that appear in the shadow cast by the enneacontahedron, itself a shadow from the 10th dimension.   

Clark’s experimentation led him to the quasicrystal, a molecular structure with imperfect pentagonal symmetry. Quasicrystals fit into a pattern that doesn’t perfectly repeat itself, and the idea was thought to be impossible until a scientist named Daniel Shechtman discovered this type of crystal through a microscope in 1982 and won a Nobel Prize for it.

BLUE ROOM Art
with Adam Lipsius
Uptown 6 Productions

Tuesday
December 8, 2020
2:30 PM

Clark's home
__________ __________

Life, Death and Consciousness

DNA

The Golden Proportion

Business models amongst companies are variable, but the primary operating models are owned and operated, charging as a service and ad supported charging. Participants of the call generally supported owned and operated and charging as a service, although. Owned and operated is beneficial because it allows for more price control. Charging as a service was beneficial because it allows for recurring revenues via subscription and may be more effective in the fleet service and potentially retail, CaaS isn’t practical for the “average Joe”.

Corporate Profile:

CHANGING LIVES, TOGETHER

Getting ahead of cancer is crucial no matter where people are in their cancer journey. From earlier cancer detection to treatment guidance and monitoring, we are helping people get the answers they need to make more informed decisions across the cancer continuum.

With a leading portfolio of products for earlier detection and treatment guidance, we help people face the most challenging decisions with confidence.

Our dedication to taking on the impossible fuels everything we do. We are continuously innovating, combining scientific rigor with an open-minded approach to deliver the next big thing.

OUR PURPOSE: We strive to change lives through earlier, smarter answers across the cancer journey.

OUR PROMISE: We relentlessly pursue life-changing answers in cancer that give people the clarity they need to take action, earlier.

OUR PRINCIPLES

• Earlier Answers

• Advanced Science & Technology

• Human Spirit

• Visionary Collaborations

• Rooted in Communities

Corporate Profile:

THE PELOTON DIFFERENCE

Peloton is the largest interactive fitness platform in the world, with a loyal community of more than 6.2 million members. We pioneered connected, technology-enabled fitness and the streaming of immersive, instructor-led boutique classes to our members anytime, anywhere. Peloton makes fitness entertaining, approachable, effective, and convenient, while fostering social connections that encourage our members to be the best versions of themselves. Our world-class instructors teach classes across a variety of fitness and wellness disciplines, including indoor cycling, indoor/outdoor running and walking, bootcamp, yoga, strength training, stretching, and meditation.

Unlimited motivation, delivered daily:

Whether you use the Bike, Tread or App, a Peloton Membership is your pass to classes that range in length and intensity level. You'll ride, run, flex and tone, and keep coming back for more.

• SWEAT WITH THE BEST — Our diverse team of instructors guide every step of your workout, making each class challenging and fun.

• BETTER EVERY DAY — We keep things fresh with frequent updates to our classes and software features. You can choose something new to sweat to every time.

• SURPASS YOUR GOALS — Track your progress with in-depth metrics, climb the live leaderboard and push to new bests together.

MOVE TO THE MUSIC — From hip hop to classic rock, our instructor-curated playlists will keep you motivated and engaged.

Company Profile: Polygon was formerly called Matic Network.

Polygon (MATIC) is an Ethereum token that powers the Polygon Network, a scaling solution for

Ethereum. Polygon aims to provide faster and cheaper transactions on Ethereum using Layer 2

sidechains, which are blockchains that run alongside the Ethereum main chain. Users can

deposit Ethereum tokens to a Polygon smart contract, interact with them within Polygon, and

then later withdraw them back to the Ethereum main chain. The MATIC token is used to pay

transaction fees and participate in proof-of-stake consensus.

Company Profile: Netflix, Inc. provides entertainment services. It offers TV series, documentaries, and feature films across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It also provides DVDs-by-mail membership services. The company has approximately 209 million paid members in 190 countries. Netflix, Inc. was founded in 1997 and is headquartered in Los Gatos, California.

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BLUE ROOM
MEETING

#77
__________

Friday
December 17, 2021
8 AM Hanoi, Vietnam
__________

Thursday
December 16, 2021
6 PM Denver, Colorado
__________ __________

Business Updates

I. Blue Room Investing: Emily + Jim

II. Blue Room Impact:

+ Dry Storage

+ Twin Peaks

+ Blue Room Housing / Liminal Space

+ Madelon

+ Blue Room Art / Studio Sarabia

Icebreaker Questions:

choose one, or more

+ What is the hardest choice you have ever had to make?

+ What is your favorite story of an underdog?

+ When was the last time you did something for the first time?

__________

I
N
Q
U
I
R
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10% OF ALL BLUE ROOM REVENUES GO DIRECTLY TO FUND OUR NON PROFIT TOGETHERISM.
WE CAN ACCOMPLISH ANYTHING TOGETHER.