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Today's Topics

3 charts for you all today:

  • Michael Jordan found a winning formula with his determination and talent in the game of basketball. Nike found an even simpler one – sign big names for a long time.
  • A biotech company has seen its stock surge after promising results in a coronavirus vaccine trial.
Netflix documentary The Last Dance, following Michael Jordan and the Chicago Bulls through their many championship wins, has become the latest Netflix doc to capture global attention.

It's compelling viewing at a time when live sport has disappeared from our lives. But beyond the basketball there's a business story to be told too – that of Nike and how they've used star-power to become the world's biggest sportswear company.
The First Dance

In 1964 Phil Knight and Bill Bowerman founded a company called Blue Ribbon Sports. 7 years later that company was rebranded as Nike, along with what is probably the best $35 ever spent on designing anything anywhere – which was what student Carolyn Davidson was paid to design the famous swoosh logo.

Of course that logo didn't carry much weight until it became associated with the performances of the very best athletes in the world. Nike's first dance with star-power came when they signed tennis player Ilie Nastase in 1972, who would be the first of many tennis players to join the brand, including John McEnroe, Roger Federer and Serena Williams (and almost every other world-class tennis player you can think of).

Nike being associated with the best players has undoubtedly fueled their tremendous growth. They have to bid competitively with rivals such as adidas to get that talent, but seem willing to do so as it's a strategy that's paid off so well. We managed to dig out Nike's financials all the way back to 1980, and calculated they've grown their revenue on average ~14% a year, for almost 40 years.

Not Many Like Mike

In 1984 Nike signed a sneaker deal with Michael Jordan. As discussed in The Last Dance, Nike's expectation (or hope) for the deal was that by the end of year 4 they would sell $3m worth of Air Jordan's. In year 1 of the deal they sold $126m. In December 2019, on a call with investors, Nike CEO said the Jordan Brand had earned its first ever $1bn quarter.

That may be no surprise given the career Michael Jordan went on to have. We've updated our chart (below) of the top 1000 NBA scorers of all-time, in case anyone needed reminding of how prolific Michael Jordan was at scoring, averaging more than 30 points per game – one of only 2 players to manage that over the course of their entire career (regular season games only). 
The success of Michael Jordan's deal was an anomaly, but it proved to Nike that they could build brands around athletes in team sports, just as well if not better, than players in individual sports.

Nike's strategy is now much like an early stage venture capital fund that makes lots of bets on companies just hoping that one of them hits it big, even if most don't. Indeed, Nike has now signed up an absurd amount of sporting talent to their rosters, across pretty much every sport with a sizeable audience – including most recently Esports.
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A biotechnology company, Moderna, Inc., saw its share price shoot up earlier this week after releasing promising, but extremely early, results for its COVID-19 vaccine.

Did the tests work?

In a press release Moderna announced that their drug "elicited neutralizing antibody titer levels in all eight initial participants". That's a promising start, suggesting that not only did the patients create antibodies, but that they were actually "neutralizing", i.e. they stopped the virus.

Big, big pinch of salt

However, some scientists are sceptical of the results for a few reasons. Firstly this is only a Phase 1 trial, the least rigorous of the many that drugs have to go through before approval and distribution. The company is also yet to publish its results in scientific journals and the entire study was conducted on 45 subjects, but only 8 have so far been confirmed to have produced neutralising antibodies.

Making the most of it

Moderna made the most of demand for their stock, issuing a bunch of new shares to the market, raising total investment of about $1.3bn, most of which will presumably go towards accelerating Moderna's drug towards Phase 2 and Phase 3 trials.

The Moderna story raises another question. If a company does produce the goods on a vaccine, how do we appropriately compensate those involved, while also minimising the cost to the entire world of distributing what will be the most in demand drug of modern times.
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Data Snacks

1) Jacinda Ardern is having quite a moment. The New Zealand PM has become the preferred PM for 59.5% of the NZ population, the highest reading for any NZ prime minister since polling began.

2) Pizza arbitrage. DoorDash wrongly listed the price of a pizza as $16 on their platform, despite paying $24 to the pizzeria owner. Enter the restaurant owner, who started buying pizzas on the app and pocketing $8 a pop.

3) EasyJet has admitted that email addresses and travel details for around 9 million customers were stolen during a sophisticated cyber attack.

4) The UK government has just sold negative yielding bonds (-0.003%) for the first time, meaning that investors are essentially paying for the privilege of lending some money to the UK government. 2020 is so weird.

5) Spotify has signed a licensing deal worth more than $100m with Joe Rogan to bring his podcast exclusively onto their platform. The podcast gets around 190 million downloads a month.

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Thanks for stopping by – see you Friday.
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