Splitting up
End of an era for a corporate behemoth
Good morning, friends. This is your Stock Market Rundown for November 22nd, 2024. If you notice a few tweaks around here, that’s because I’ve moved to a shiny new email platform.
So that I can be sure I didn’t screw anything up, I’m asking you for a favor: if you received this email, could you please hit reply and say “Got it”? My deepest thanks, and just so you know—you’re awesome. Now, let’s get into it:
TODAY’S TOP STORY: SPRAWL STRUGGLES
Just as lumbering wooly mammoths once roamed the plains, there was an era when conglomerates ruled the American economy. In the 1980s, names like ITT, Textron, and RJR Nabisco were some of the top stocks on the NYSE.
But just as the mammoths were hunted to extinction by wily human hunters, the conglomerates were dismantled when investors realized there were really no synergies in running an airline, a tobacco company, an insurance business, and a steel mill under the same corporate umbrella.
Only one conglomerate survived: Honeywell—the last of its species. The $147-billion public company houses a vast array of industrial businesses, building everything from flight control systems to portable fans. But now, top activist investor Elliott Investment Management is hunting for a mammoth hide.
First, Elliott quietly accumulated a $5 billion stake in Honeywell. Then, earlier this month, Elliott published an open letter to the board arguing that Honeywell, with 100,000 employees and 12 business lines, has become too sprawling and complex to manage.
The answer: corporate divorce. Chop Honeywell in two, turning the aerospace and automation units into separate public companies.
Elliott, led by billionaire Paul Singer, is a veteran fighter of hundreds of activist campaigns, and has seen many a stunning victory over stubborn entrenched boards. So there’s got to be some sweating around the boardroom table at Honeywell HQ, because this couldn’t come at a worse time.
Honeywell’s business has been plagued by supply-chain disruptions, and its industrial automation business is struggling. Result: blown quarters, pissed-off investors, and a stock that’s lagging its industrial peers.
Now, Honeywell’s leaders have to respond to the spear Elliott has just thrown. And if they can’t come to some compromise, the board could be facing an extinction-level event.
SO WHAT ELSE IS GOING ON?
Sweltering heat is perfect for a sauna… not so great for a data center. Media reports claim Nvidia’s new AI chips are overheating. Who needs a hairdryer when you can just stand by the server rack?
Netflix says 60 million households worldwide turned in for the Jake Paul-Mike Tyson boxing match. Judging by the stream quality, 59 million of them must have been on the same Wi-Fi network. I felt like I was watching Mike Tyson’s Punch-Out on my childhood Nintendo.
Amazon’s employees are “appalled” by the company’s demand that they return to the office. Sorry, tech workers—no more afternoon naps and day drinking between Zoom calls while raking in six figures.
How about a pepperoni slice with that Coca-Cola? Billionaire Warren Buffett’s holding company, Berkshire Hathaway, just disclosed a stake in Domino’s Pizza. The stock’s boasted a 18% compound annual growth rate over the past decade—plus, you get free garlic knots with every extra-large.
That’s all I’ve got for today, amigos. As always, have yourselves a fantastic weekend, and I look forward to circling back next week. Yours in capitalism, The Axe