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CBA's historic single-day fall | Xero's US bet backfires | CNN's new weather play · What the Flux

• 0:05
  Speaker 1: This is what the Flux. I'm Brett and I'm Justin
• 0:07
  Speaker 1: and Friday the fifteenth of.
• 0:09
  Speaker 2: Bay does it boy, the age of We'll see team
• 0:11
  Speaker 2: members are giving each other high fives right now because
• 0:13
  Speaker 2: they've just taken Coals down down. Get this one at
• 0:16
  Speaker 2: the Federal court has ruled that Coal's you sham discount
• 0:18
  Speaker 2: offers trip shoppers into believing they were paying less for
• 0:21
  Speaker 2: products when in many cases they're actually paying more. And
• 0:24
  Speaker 2: now Cole's faces the prospect of millions in fines.
• 0:27
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• 0:43
  Speaker 2: Three generous stories today, Juzzy boy, let's do it for
• 0:46
  Speaker 2: our first Combank shares have seen their biggest single day
• 0:49
  Speaker 2: fall in history earlier this week, after wiping thirty billion
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  Speaker 2: bucks from its market value.
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  Speaker 1: Oh how the mightier fallen b man or what is
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  Speaker 1: going on here?
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  Speaker 2: So CommBank or CBA is Australia's biggest bank, with over
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  Speaker 2: sixteen million customers and a.
• 1:00
  Speaker 1: Market cap that until Wednesday sat nicely above two hundred
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  Speaker 1: billion dollars.
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  Speaker 2: Because the boy Combank has now suffered its biggest sell
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  Speaker 2: off since COVID times. We're talking a ten percent fall
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  Speaker 2: or thirty bill and there are two main reasons for
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  Speaker 2: this one.
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  Speaker 1: Its results. Yep, CBA posted a two point seven billion
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  Speaker 1: dollar cash profit for the March quarter, which sounds good,
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  Speaker 1: but it missed investor expectations by two percent. And the
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  Speaker 1: more alarming number was its loan arrears. Yeah, personal loan
• 1:23
  Speaker 1: repayments more than ninety days overdue hit their highest levels
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  Speaker 1: since twenty nineteen.
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  Speaker 2: Then on Tuesday night, the federal budget landed, and let's
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  Speaker 2: just say the banks probably didn't frame it and hang
• 1:32
  Speaker 2: it on the office wall.
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  Speaker 1: No, particularly comebank, Nope.
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  Speaker 2: Negative gearing on existing homes abolished effective immediately.
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  Speaker 1: And suddenly one of the biggest pillars of Australia's property
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  Speaker 1: investing machine looks a little bit whibbly.
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  Speaker 2: And this macro risk has reshaped a big chunk of
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  Speaker 2: Combank's business almost overnight.
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  Speaker 1: So what is the key learning here?
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  Speaker 2: Sometimes the biggest risk to your investments isn't the CEO,
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  Speaker 2: it's the treasurer and prime minister.
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  Speaker 1: Macro risk is the idea that big economic or government
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  Speaker 1: changes outside of company's control can clearly reshape how that
• 2:01
  Speaker 1: business makes money, and CBA is particularly exposed to it.
• 2:03
  Speaker 1: CBA holds a twenty six percent share of the property
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  Speaker 1: investor mortgage market.
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  Speaker 2: The thinking from investors is higher taxes for properit investors
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  Speaker 2: means fewer investor loans.
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  Speaker 1: Fewer investor loans means less profit for the banks.
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  Speaker 2: Less profit means queue the dramatic stock market meltdown.
• 2:17
  Speaker 1: And the man. This kind of policy risk isn't unique
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  Speaker 1: to banks.
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  Speaker 2: I remember twenty ten Josy Boy when the Australian government
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  Speaker 2: introduced a new tax on mining profits.
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  Speaker 1: I remember too, PHP and reading til it lost to
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  Speaker 1: combine twenty bill in market value in just a few days. Well,
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  Speaker 1: this negative gearing change has hit all the banks.
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  Speaker 2: CBA down ten percent, Westpac three percent, Panes add a
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  Speaker 2: NAB down around one and a half percent.
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  Speaker 1: So be man. The political environment that a company operates
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  Speaker 1: in can be just as important as its balance shape.
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  Speaker 1: For our second story.
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  Speaker 2: Zero's revenue jumped thirty one percent, but profits felt twenty
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  Speaker 2: seven percent after its multi billion dollar US acquisition really
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  Speaker 2: hurt its bottom line.
• 2:52
  Speaker 1: Big top line MESSI bottom line. What's going on here?
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  Speaker 2: So Zero is the New Zealand born accounting software company
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  Speaker 2: think invoicing payroll bookkeeping for small businesses and their accountants.
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  Speaker 1: It was founded in two thousand and six and has
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  Speaker 1: grown into one of the asx's most valuable tech companies.
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  Speaker 1: It does boy.
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  Speaker 2: Zero share price has been whacked over the past twelve months.
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  Speaker 2: We're talking a fall of more than fifty seven percent.
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  Speaker 1: In particular because of concerns that its product could be
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  Speaker 1: replicated and potentially replaced by AI.
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  Speaker 2: Zero has dropped its full year results and on the
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  Speaker 2: surface revenue up thirty one percent to two point eight
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  Speaker 2: billion New Zealand dollars, but after.
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  Speaker 1: Tax profit is down twenty seven percent to one hundred
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  Speaker 1: and sixty seven million New Zealand dollars. And there's one
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  Speaker 1: big American reason for that million.
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  Speaker 2: Yes, that's the US bill payment platform that Zero acquired
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  Speaker 2: for three point nine billion dollars and is still lost.
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  Speaker 1: Making and a man. While Zero CEO had a potential
• 3:36
  Speaker 1: pay package of twenty three meal this year, she ended
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  Speaker 1: up with just six million dollars because of the share
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  Speaker 1: price's performance. Just six million dollars. Hmm, So what's the
• 3:44
  Speaker 1: key learning here? When a CEO's pay is largely stock based,
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  Speaker 1: they make most of their money if the share price
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  Speaker 1: rises above the options exercise price.
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  Speaker 2: These options were granted back in December twenty twenty four
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  Speaker 2: at an exercise price of around one hundred and seventy one.
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  Speaker 1: Bucks, roughly what zero share price was at the time.
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  Speaker 2: So if the shares let's say two hundred bucks, she
• 4:01
  Speaker 2: would exercise her options at the one hundred and seventy
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  Speaker 2: one dollars.
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  Speaker 1: And then when she sold the shares, she'd pocket the
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  Speaker 1: twenty nine dollars difference per share.
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  Speaker 2: But at today's price of around seventy five bucks per share,
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  Speaker 2: these options are clearly what we call underwater.
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  Speaker 1: Yeah, because they have no intrinsic value at the current
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  Speaker 1: price and Jesse.
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  Speaker 2: Boy, this pay model is designed to align executive incentives
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  Speaker 2: with shareholders.
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  Speaker 1: If the stock tanks, the CEO feels it too.
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  Speaker 2: For our third and final story, CNN has launched a
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  Speaker 2: standalone weather app three years after its last digital product
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  Speaker 2: collapsed in just twenty nine days. I'm sensing breaking news
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  Speaker 2: here for cnnb Man or weather Up. This is huge,
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  Speaker 2: tell me roll. So CNN was founded in nineteen eighty
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  Speaker 2: as the world's first twenty four hour news channel, which
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  Speaker 2: most people at the time thought was completely insane, and
• 4:44
  Speaker 2: CNN's founder Ted Turner was so committed to CNN surviving
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  Speaker 2: forever he pre recorded a video for CNN to air
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  Speaker 2: when the world ends. It's sitting in a vault right now,
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  Speaker 2: ready to go.
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  Speaker 1: True story.
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  Speaker 2: And now CNN reaches up to one hundred and fifty
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  Speaker 2: million viewers globally across TV and web and streaming each month.
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  Speaker 1: But Bman, as the world becomes more and more digital
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  Speaker 1: and less reliant on cable TV, CNN has struggled to
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  Speaker 1: keep pace. So now CNN has just launched cnn Weather
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  Speaker 1: ground Breaking Alert.
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  Speaker 2: It's a free app that combines live weather data with
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  Speaker 2: climate storytelling and analysis.
• 5:16
  Speaker 1: Let's be honest, this doesn't sound so revolutionary.
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  Speaker 2: Absolutely not, But it is the first part of CNN's
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  Speaker 2: big push to go digital first, and lifestyle products like
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  Speaker 2: this are central to that plan.
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  Speaker 1: So what is the key learning here?
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  Speaker 2: Breaking news has become a commodity. So lifestyle products are
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  Speaker 2: how some media companies are building some competitive advantage.
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  Speaker 1: You Seebman for years, the assumption is that people would
• 5:35
  Speaker 1: pay for journalism, the investigations, the scoop, the hard hitting reporting.
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  Speaker 1: Turns out a.
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  Speaker 2: Lot of people will also happily pay for a daily
• 5:42
  Speaker 2: word game or a recipe app. The New York Times
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  Speaker 2: figured this out early when they launched New York Times
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  Speaker 2: Cooking in twenty fourteen and New York Times Games not long.
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  Speaker 1: After he low Wordle acquisition. And the result over eleven
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  Speaker 1: million digital subscribers for The New York Times, with their
• 5:55
  Speaker 1: lifestyle products driving a massive chunk of that growth.
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  Speaker 2: And CNN wants exactly that a reason for people to
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  Speaker 2: pay beyond the headlines that readers and watchers can get
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  Speaker 2: anywhere for free.
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  Speaker 1: The logic is that each lifestyle product is a new
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  Speaker 1: door into the CNN ecosystem. But just aware, given CNN's
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  Speaker 1: last digital attempt CNN Plus, which launched in twenty twenty
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  Speaker 1: two and then shut down just twenty nine days later,
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  Speaker 1: it won't be hard for this weather we launch to
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  Speaker 1: be more successful than that. Yeah, plus, they have fifty
• 6:20
  Speaker 1: bucks on the line today. If you are the winner
• 6:22
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• 6:26
  Speaker 1: Quick six today. Thanks for listening and we'll see you
• 6:29
  Speaker 1: on Monday.