Feb 14, 2022
The Weekly Scan February 14, 2022
Find out what’s happening in the world of business this week
Welcome to the Weekly Scan. Here’s what we’re following for the week of February 14, 2022.
And just like that. Fitness equipment company Peloton announced last week that it would lay off 2,800 employees, and remove its CEO and founder John Foley in response to the company’s recent performance problems. Foley will become the company’s executive chairman, and will be replaced by former Spotify CEO Barry McCarthy. The president of Peloton, William Lynch, will also step down from his position. Foley founded Peloton in 2013, and is being removed in response to criticism from activist investor Blackwells Capital, which owns a 5% stake in Peloton. Plans to build a factory in Ohio have also been abandoned. Peloton’s restructuring is expected to reduce the company’s annual costs by $800 million. Blackwells is also pushing for the sale of the company.
- The takeaway: Peloton was an early winner during the pandemic, with people spending on at-home fitness bikes and treadmills in response to stay-at-home orders preventing people from going to the gym. But the tide has turned as people have returned to gyms, and Peloton has confronted a few different issues. In May 2021, Peloton recalled its Tread and Tread+ products after several children were injured, and one was killed, while the products were in use. And in December, Peloton’s reputation came under the microscope after a character on Sex and the City reboot died after using a Peloton bike. In recent weeks, Peloton’s share price has tanked in response to falling demand for products, which has caused Peloton to pause production of certain items.
Crypto crackdown. The U.S. Department of Justice seized more than $3.6 billion in stolen cryptocurrency from a New York couple Ilya Lichtenstein and his wife Heather Morgan, in the largest financial seizure in the department’s history. Liechtenstein and Morgan reportedly presented themselves as an entrepreneurial couple well-versed in technology and cryptocurrency. The couple reportedly laundered approximately 120,000 bitcoin, which has been stolen in a 2016 hack of the cryptocurrency exchange Bitfinex. A hacker had initiated more than 2,000 unauthorized transactions on the platform, and some of the funds from the hack went to accounts associated with Lichtenstein and Morgan. At the time of the hack, the amount of stolen bitcoin was valued at $70 million. The price of Bitcoin, however, has surged since the 2016 attack, resulting in the $3.6 billion seizure by the Justice Department. The total value of the stolen bitcoin is estimated at $4.6 billion, but not all of it has been recovered.
- The takeaway: The Justice Department cited the Bitcoin seizure as an example of the government’s crackdown on the use of cryptocurrency for criminal activity. Cryptocurrency has been used in a variety of different cyber attacks in recent years. In October 2021, the Justice Department created the National Cryptocurrency Enforcement Team to root out crime in cryptocurrency. The government was able to take back roughly $2.3 million worth of bitcoin that had been paid by Colonial Pipeline Company to a Russian ransomware gang after it attacked the pipeline, forcing it to shut down for several days.
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Prime time. Amazon announced last week that it will increase the cost of its yearly Prime membership by 17%, raising the price to $139 from $119. The monthly Prime membership price will jump to $14.99 from its current $12.99. Amazon last increased its annual membership cost to $119 from $99 in 2018. New Prime customers will pay the higher Prime price starting on February 18, 2022, while existing Prime customers will see prices increase on March 25. Amazon cited expanded Prime membership benefits, including more Prime Video content and expanded free same-day shipping, as one reason for higher prices. The company also said that higher labor costs contributed to the price hikes. Over the last two years, Amazon has doubled its workforce to 1.6 million people, and increased wages for thousands of workers. The company has 200 million Prime customers.
- The takeaway: Amazon reported that its profits doubled during the quarter ending December 2021 to $14.3 billion, higher than analyst forecasts. The large profit increase is reportedly due in part to Amazon’s accounting for its investment in electric vehicle company Rivian Automotive, which went public in November of last year. Amazon’s biggest source of profit, Amazon Web Services, saw a 49% jump in operating income to $5.3 billion.
Charge it. The Biden Administration will require states to submit plans to put electric vehicle chargers along highways to provide better support for the U.S. electric vehicle industry. The requirement is part of a $1 trillion infrastructure bill passed by Congress in November 2021, which includes $5 billion over five years for the construction of these stations. All 50 states must submit their plans to install charging stations along or near major highways. Those stations need to be no more than 50 miles apart. The federal government will issue a final approval of plans by the end of September. The government plans to spend $615 million in a first wave, followed by another $2.5 billion in rural areas.
- The takeaway: Electric vehicles are seen as an important way for the U.S. to reduce greenhouse gas emissions, and combat climate change. Electric vehicles have increased in popularity, making up 9% of total new car sales last year. But better infrastructure to charge electric vehicles is necessary to see greater adoption of electric cars, particularly in the U.S. The U.S. reportedly falls behind Europe when it comes to charging locations. The money allotted in the infrastructure bill reportedly won’t be enough to build the necessary charging network, but government officials reportedly hopei state plans will spur private companies to help with the build out.
Here’s what we covered last week in the Scan:
- The nation’s total debt reached a record $30 trillion in February.
- AT&T announced February that it plans to spin off its WarnerMedia unit and combine it with Discovery.
- Google parent company Alphabet announced that it will conduct a 20-for-1 stock split.
- Starbucks said last week that it plans to raise prices again, after hiking them in January, and in October 2021.