Seafood struggle
Red Lobster goes under
Good morning, crustacean connoisseurs. This is your Stock Market Rundown for May 22nd, 2024. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: ENDLESS SHRIMP, ENDLESS PROBLEMS
Hold onto your Cheddar Bay biscuits, people. Red Lobster, after years of turmoil in the business, has just filed for Chapter 11 bankruptcy.
Don’t worry—this doesn’t mean you’ve eaten your last Admiral’s Feast. Chapter 11 bankruptcy isn’t a liquidation. Instead, it gives the restaurant chain flexibility to exit long-term contracts, renegotiate its leases, and try to salvage the floundering business.
Headlines about the bankruptcy led to pundits claiming Red Lobster’s famous Endless Shrimp promotion doomed the chain. Yes, doling out unlimited portions for twenty bucks cost the company millions, but the missteps went beyond oceans of cut-rate shrimp.
The lobster trap was first laid when a previous private-equity owner of Red Lobster sold off its real estate. Restaurant locations went from owning the land they were built on, to being forced to pay rent—with lease terms at above-market rates.
Red Lobster’s finances got even more swamped when its owner since 2020—a Thai seafood conglomerate—made itself the chain’s exclusive shrimp vendor, and then overcharged it for the shrimp.
Things got so bad, five different CEOs in the past five years couldn’t turn things around. Now, with the bankruptcy filing official, it’s up to Red Lobster’s lenders to bail out this this sinking trawler.
SO WHAT ELSE IS GOING ON?
Bankrupt crypto exchange Genesis is paying back its depositors, but due to limited assets, they’re only getting three-quarters of their money back. I guess three-quarters of an apology is better than nothing.
It’s the dance-off nobody asked for: TikTok is suing to reverse the US government’s ban of the social media platform, arguing it violates the First Amendment. Who knew the Chinese social media app’s operators were such constitutional experts?
Speaking of China, its economy is roaring like a fire-breathing dragon, with data showing Chinese industrial output is accelerating.
It’s like the financial world’s version of New Year’s Eve lately, with the Dow at a record level of 40,000, and the S&P 500 and Nasdaq hitting new highs too. This bull-market party can't last forever… but while it does, champagne for everyone.
That's all for today, valued colleagues; let’s reconvene tomorrow morning, at the usual time. Yours in capitalism, The Axe
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