Needless Markup
Amazon’s $475 million bet on the Saks-Neiman Marcus merger goes to zero in bankruptcy court
This Week In Blunders – Jan. 11-17
There is nothing so useless as doing efficiently that which should not be done at all.” – Peter Drucker
You can always pay more for luxury at Neiman Marcus and one the richest companies in the world wasn’t afraid to do just that.
But now Amazon wants a refund on the $475 million it invested in Saks Global’s $2.7 billion takeover of Neiman Marcus in December 2024.
As expected, Saks Global filed bankruptcy on Wednesday. Within hours, the online retailing giant objected to the financing plan for the Chapter 11 restructuring, saying it would cement its massive loss.
Read More: Sacking Saks (Business Blunders)
“That equity investment is now presumptively worthless,” Amazon’s attorneys wrote in a court filing. “Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners.”
What did Amazon think would happen? That shoppers with too much money would click for a $180,000 Artemest x Kiton Bespoke Trunk? Yeah, just stick one of those in a smiling cardboard box and leave it on the porch.
Saks Global was in the business of strapping together dying department store chains, including Bergdorf Goodman. It merely continued its strategy of taking on debt, selling assets and screwing suppliers with late payments.
Amazon didn’t even get a stitch of collateral. Now it can stand in line behind Saks’ secured creditors. Pretty predictable.
Amazon thought it was getting a cheap entrance into the luxury goods market. Instead it got the ol’ cliche: A Needless Markup.
UnitedHealth is bleeding us, report says
While Luigi Mangione faces the death penalty for allegedly gunning down UnitedHealthcare CEO Brian Thompson in December 2024, the health care giant continues facing investigations into its own actions.
On Sunday, the U.S. Senate Judiciary Committee issued an extensive report claiming that UnitedHealthGroup was “gaming the Medicare Advantage System.”
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“Bloated federal spending to UnitedHealth Group is not only hurting the Medicare Advantage program, it’s harming the American taxpayer,” said Iowa Republican Sen. Chuck Grassley, who chairs the committee. “UnitedHealth Group appears to be gaming the system and abusing the risk adjustment process to turn a steep profit.”
The report, based on more than 50,000 pages of UnitedHealth documents, accuses the company of exaggerating patient diagnoses so it can bill more.
For instance, the report says some patients are diagnosed with dementia without a proper evaluation. Others are declared opioid dependent when they are simply taking prescribed mediations. Some are diagnosed with cataracts, even after they’ve had cataract surgery.
A UnitedHealth spokesman told The Wall Street Journal that the company disagreed with the report, which stops short of declaring wrongdoing.
Separately, the Journal reported in May that UnitedHealth is “under criminal investigation for possible Medicare fraud.”
Perhaps all these mounting troubles explain why UnitedHealth CEO Andrew Witty abandoned ship in May – or in corporate lingo, decided to leave for “personal reasons.”
Dead Reckoning
The day after Bob Weir’s death, notable Deadhead and Chairman of the Federal Reserve Jerome Powell finally stood up to President Donald Trump.
On Sunday, he delivered his defiance in a two-minute video statement following months of harassment and a dubious criminal investigation aimed at destroying the independence of the central bank.
Read More: Our Deadhead Fed Head
Powell hasn’t made all the right moves, but slapping the Fed Chair with a criminal subpoena just because he won’t lower interest rates fast enough for the next election is just plain corrupt.
The world’s central bankers have rallied behind Powell, demonstrating that they’re more free than their counterpart in the so-called land of the free. Even the right-leaning editorial board of The Wall Street Journal called it “Lawfare for Dummies, Monetary Edition”
It’s especially stupid because Powell’s term ends in May and now he may decided to stick around since he can still be on the Fed board until 2028. Additionally, Republican Sen. Thom Tillis, who sits on the Senate Banking Committee, said he would oppose the confirmation of any Trump Fed nominees until the investigation ends.
Nepo baby Bill Pulte, the grandson of PulteGroup founder William J. Pulte and head of the Federal Housing Finance Agency, initiated the Powell investigation, according to WSJ reporting.
What more can a homebuilder wish for but zero interest rates to sell more houses?
And who needs the Fed, and all its pesky research and tedious consensus-building exercises, when we have a “very stable genius” and Nobel Peace Prize recipient to make the call?
Our Dead Head Fed head has finally had enough of this folly, and he can gather strength from Bob Weir’s legacy and insightful lyrics:
“And the rich man in his summer home; Singing just leave well enough alone; But his pants are down, his cover’s blown; And the politicians throwing stones.”
STG Logistics files bankruptcy
Speaking of the Grateful Dead, Dublin, Ohio-based intermodal transportation giant STG Logistics announced Monday that it had filed Chapter 11 bankruptcy.
The company is following the standard blueprint: Borrow recklessly to grow rapidly through acquisitions, hit a rough patch, then unload the debt in bankruptcy court. Its acquisitions included Best Dedicated Solutions, purchased in 2023, and the intermodal segment of XPO Logistics, bought in 2022.
The plan now is to ditch 91% of its debt through the bankruptcy process … and just keep truckin' on.
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The Amazon angle here is almost comical because for a company that built itself on data they somehow missed all the red flags around Saks burning cash. I worked in retail consulting awhile back and the luxury department store model was alredy on life support before the merger, so betting $475 million on it seems less like strategy and more like wishful thinking. What gets me is that they didnt even secure collateral, like nobody learned anything from prvious retail implosions. This whole situation shows how easy it is for big money to chase trends without doing proper due diligence.
My late bf used to call them "Needless Markup". Always made me smile. And I was a huge Deadhead growing up. Bob Weir's death really hurt. RIP.