With most of the country spending significantly more time at home due to COVID-19, many people seem to have used their idle time by dabbling with (and in some cases diving headlong into) speculative, nontraditional investments. Some of these investment vehicles have made front page headlines as retail investors pile in and then jump out, whipsawing prices. There have been enough of these peculiar events in the last year that it may be fair to say it is not just a fad or coincidence, but rather a trend. Cryptocurrencies, so-called Reddit stocks, and blockchain tokens have all had their turn as the stars of modern tulip-mania.
Bitcoin may have begun this trend even before COVID-19. In 2017, the cryptocurrency was many people’s introduction to nontraditional, digital investment vehicles as it attracted news coverage and popular interest and increased in value at one point by nearly 20 times. While its value fell roughly 75% from its late 2017 high over the following year, it began a recovery in 2020, and bitcoin is now worth about 300% its price in late 2017, or 60 times its value in early 2017. A number of retail investors are now searching for the next Bitcoin and flocking to other cryptocurrencies. Prices of altcoins, such as Ether, litecoin and Bitcoin cash have risen dramatically. Even some cryptocurrencies that are partly a joke, or “meme,” have made a run. Dogecoin, a cryptocurrency with a picture of a dog on it, became popular in late January and early February and increased in value at one point by 16 times. Every dog has its day.
Investors have also piled into Reddit stocks, or shares of publicly traded companies that are pumped by groups of retail investors on specific threads on the social news aggregation and discussion website Reddit.com. GameStop (GME) captured national attention in late January and early February as retail traders communicating on Reddit coordinated to buy up large shares of the company’s stock, forcing a number of hedge funds and other institutional investors to close out short positions, leading to a short squeeze and a temporary spike in the price of GME of roughly 1700%. Reddit traders have tried to replicate this success in other stocks and have attempted the same tactic in shares of movie theatre company AMC, among others. Likewise, Barstool Sports founder Dave Portnoy has launched an ETF called BUZZ, which tracks the top 75 large-cap stocks with heavy social media attention. Mr. Portnoy’s ETF launched on March 4th on the NYSE.
As groups of investors look for the next big, nontraditional thing, blockchain-powered collectibles and tokens have taken off. Non-fungible tokens (NFTs) are digital, blockchain-backed certificates that are tradeable and purchased with cryptocurrencies. One NFT marketplace that has caught on recently is Top Shot, launched by the NBA in 2019. NBA fans can own their favorite highlights by purchasing packs of game clips in various amounts. Retail investors use the Top Shot marketplace to buy and sell highlights with other users – this is the 2021 version of trading basketball and baseball cards with your friends. The recent reaction amongst investors has been overwhelmingly positive. Top Shop buyers have already spent more than $200 million and the largest single purchase was a $200,000 clip of a Lebron James dunk. Looking to capitalize on this momentum in the NFTs space, NFL athlete Rob Gronkowski recently designed a collection of NFT trading cards available for purchase on OpenSea, a digital marketplace for crypto collectibles.
Whether it is cryptocurrencies, Reddit stocks, or blockchain collectibles, retail traders hoping for outsized returns on nontraditional investments are fueling pops in a number of speculative investment vehicles. These eye-catching “investment” fads may slow down as COVID-19 boredom fades or once stimulus checks have all been spent, but it doesn’t seem likely to end in the near term. Spring is just days away. Tulips, anyone?
Headline of the Week
Sentinel Capital Partners, a private equity firm that invests in promising lower midmarket companies, today closed its sale of Pet Supplies Plus (“PSP”), the third largest pet specialty chain in the U.S., to Franchise Group, Inc. The deal is valued at $700 million. Founded in 1988 and headquartered in Livonia, Michigan, PSP is the leading franchisor and operator of pet-specialty stores that provide a customer-centric shopping experience in smaller stores that have a neighborhood feel. Stores have a streamlined design, which makes them easy to navigate, and a wide assortment of proprietary and third-party branded pet foods, hard goods, and pet services. PSP also offers online shopping alternatives with same-day delivery from local stores or curbside pick-up. Today, PSP’s footprint includes 562 stores covering 36 states, up from 448 stores serving 33 states at the time of Sentinel’s acquisition two years ago.
Apparel & Footwear
Tapestry Inc. on Wednesday reiterated its plans to grow Kate Spade to a $2 billion brand. “The Kate Spade brand has tremendous runway and we still have confidence in the brand’s long-term potential,” Joanne Crevoiserat, chief executive officer of Tapestry, said on Wednesday. “The team is making changes in the brand, really crystallizing the brand’s purpose and returning it to the core strength of the brand.” Those changes include updating Kate Spade’s creative team. Earlier this month, the company, which also owns the Coach and Stuart Weitzman brands, said it was revising the structure of its creative organization with two new roles: senior vice president of brand concept and strategy, as well as the job of head of product design, as Kate Spade creative director Nicola Glass makes her exit.
British retailer Next has taken a 25 percent stake in Reiss as it seeks to pump up its online portfolio of fashion, lifestyle and beauty brands. Next said Wednesday that it has acquired the shares in Reiss, which sells men’s and women’s wear at contemporary price points, from existing shareholders. Reiss was valued at 200 million pounds. Next, which operates a chain of physical stores and which has been transforming itself into an online platform for third-party brands in the vein of Amazon, said it will make an equity investment of 33 million pounds, and a debt investment of 10 million, financed from its own cash resources. Under the terms of the agreement, Next has an option to acquire an additional 26 percent interest in Reiss at pre-agreed terms. If exercised the new stake would take its holding to 51 percent. The option falls away after July 2022.
Procuritas Capital Investors VI (Procuritas) has acquired Polarn O Pyret AB, a Swedish children’s clothing brand, for a SEK330 million (EUR33 million) on a cash and debt-free basis. Polarn O Pyret, launched in 1976, is internationally recognised for functional design and engagement for sustainability. Polarn O Pyret is headed by Johan Munck, an experienced CEO and driver of change in retail and digital consumer businesses. “We are excited about having Procuritas as our partner since they share our passion for long-term sustainability,” says Munck. “We have worked hard during the difficult past year to build on our many strengths and increase our focus on e-commerce, and it is testament to the brand’s strength and resilience that we are in a good position to grow.” After the transaction Procuritas will become the majority shareholder, with Jotunfjell Partners and the management team acquiring a minority stake. The current leadership will continue in the day-to-day management of the company with Johan Munck as the CEO. The transaction is subject to approval by the Swedish Competition Authority.
Christopher & Banks president and CEO Keri Jones is leaving the apparel retailer, effective Friday, according to a securities filing. Her resignation comes a little more than two weeks after Christopher & Banks sold its e-commerce business to an affiliate of Hilco Merchant Resources. Hilco has tapped iMedia Brands to run the online version of Christopher & Banks as well as launch a new shopping program on its television network. Christopher & Banks filed for bankruptcy earlier this year with a plan to wind down its brick-and-mortar business and sell its digital unit. iMedia has its own plans for Christopher & Banks. The television retail specialist said in a press release earlier this month it plans to launch a new weekly Christopher & Banks television program on ShopHQ, its flagship TV network. iMedia also plans to promote Christopher & Banks’ website and its only two retail stores (in Missouri and Minnesota) and launch an interactive video platform dubbed “Christopher & Banks Stylists” that features customized wardrobe outfitting by a Christopher & Banks’ stylist.
Athletic & Sporting Goods
German sportswear giant Adidas said it plans to double its eCommerce business over the next five years as it shifts to a direct-to-consumer (D2C)-led strategy focused on 12 global megacities and increased focus on attracting more women while improving its sustainability. In addition to its “Own The Game” strategic plan, Adidas also posted fourth-quarter results that saw revenues fall 5 percent, reflecting the cost of having half its European stores closed through December due to the pandemic. At the same time, Adidas said its D2C revenues rose 14 percent while its eCommerce rose 43 percent for the final three months of 2020.
Hyperlite Mountain Gear Inc., based in Biddeford, ME, has secured an investment from T-street Capital, LLC. Founded in 2010 by brothers Mike and Dan St. Pierre, Hyperlite offers high-tech, ultralight gear including backpacks, tents and accessories. Dale Cheney, general partner at T-street, commented, “We believe that we’ll continue to see strong growth trends within the health & wellness and outdoor industry, and the Hyperlite brand has successfully captured the consumer’s passion for authenticity and high-performance. Hyperlite is well-positioned to benefit from the rising demand for outdoor gear for the avid backcountry adventurer.” Cheney continued,
Cosmetics & Pharmacy
Ulta Beauty continued to feel the impact of the pandemic in the fourth quarter as its profit and sales fell amid a 12% decline in transactions. Looking ahead, the beauty giant, which announced that CEO Mary Dillon will step down in June and be succeeded by president Dave Kimbell, struck a positive note, saying it was encouraged by the momentum it is seeing in in-store traffic trends. Ulta will open approximately 40 new stores this year and remodel or relocate approximately 21 locations. “We continue to be positive about the outlook of physical retail,” said Kimbell on the company’s earnings call. “The 40 stores we are opening we feel good about. We see plenty of growth ahead of us.” Ulta reported net income of $171.5 million, or $3.03 per share, for the quarter ended Feb.1, compared with $222.7 million, or $3.89 per share, in the year-ago period, Excluding items, Ulta earned $3.41 per share, topping the $2.35 per share expected by analysts.
Heyday plans to ramp up its brick-and-mortar expansion via franchising. The skincare and facial treatment company closed a $20 million series B round of funding led by Level 5 Capital Partners (L5), with participation from existing investors Lerer Hippeau and Fifth Wall Ventures. L5 will also become an anchor Heyday franchisee and has committed to opening 40 stores during the next five years. Currently, Heyday operates 10 locations, including seven in New York City. “By expanding Heyday’s physical footprint to hundreds of stores in the next five years, paired with unique expert-led services available virtually, Heyday is poised to become the most trusted company in skincare,” said Chris Kenny, managing partner of Level 5 Capital Partners.
Ushopal, a leading luxury beauty and retail group in China, has completed a $100 million raise to support the growth of Ushopal’s portfolio brands in China and Asia Pacific. Founded in 2017, Ushopal is a brand acceleration group that partners and invests in the next generation of luxury brands in the beauty and wellness space. The business is uniquely positioned to focus on niche, global luxury beauty brands with limited awareness in China. Its portfolio includes brands exclusively sold at high-end retail outlets globally. The company offers unique omni-branding and growth capabilities for portfolio brands with a fleet of more than 2,500 luxury influencers, an in-house content studio, branding team, an omnichannel growth team, Tmall retail operations, global logistics, and Bonnie & Clyde, a chain of multi-brand brick-and-mortar brand stores and experience centers.
Argentinian niche fragrance house Fueguia 1833 has received an equity investment from Ilwaddi WLL, an investor based in the Middle East, WWD has learned. The financial terms of the deal were not disclosed, but the brand’s founder Julian Bedel is to retain ownership of the company. “I’m remaining in control, which is a key aspect of this transaction because I can still continue my vision of research and expansion, this is still my company,” confirmed Bedel when reached for comment Tuesday. Fueguia 1833 plans to use the funds to accelerate the development of the brand’s distribution network globally, both online and offline, in addition to continuing to expand its product range and in-house manufacturing capabilities. Founded in 2010 in Buenos Aires, Fueguia 1833 is vertically integrated and responsible for every step of the manufacturing process, both key aspects in raising the interest of the investor, according to Bedel.
Discounters & Department Stores
In April, Lord & Taylor will be back in business, online only, to be known as “America’s Collective Store,” according to an emailed press release Thursday from new owner The Saadia Group. The investment firm won the intellectual property of the iconic department store and its newish owner, rental site Le Tote, at an October bankruptcy auction with a bid of $12 million. (The Saadia Group didn’t share its plans for Le Tote.)
Target announced on Tuesday that it’s launching Favorite Day, a private label food and beverage line centered on snacks and sweet treats. Shoppers will be able to buy the new brand in stores and online starting April 5. The brand will roll out with more than 700 products across multiple categories, including candy, trail mix, ice cream, bakery and beverage mixers. Some of the selections include Caramel Macchiato Trail Mix, Gourmet Brookie Dough Ice Cream and Mini Everything Bagel Croissants.
Kohl’s on Thursday had a scathing response to activist investors that have recently demanded seats on the company’s board, saying in a press release that their “proposals threaten to disrupt Kohl’s business momentum,” that their focus is “on short-termism and financial engineering at the expense of sustainable operating and financial success” and that some of their suggestions are already “well underway.” The retailer once again defended its board as adequately refreshed and more experienced in retail than the activists’ recommendations, especially at a large, public company like Kohl’s, and better suited to its needs.
Walmart is planning its second shoppable livestream on social video app TikTok, this time to showcase beauty products. The retail chain’s “Spring Shop-Along: Beauty Edition” will let viewers order products directly from Walmart’s TikTok channel starting at 9 p.m. ET on March 11, per a company blog post. L’Oréal’s Maybelline and NYX Cosmetics brands, Bliss, The Lip Bar, Kim Kimble and Marc Jacobs fragrances will be among those demonstrated by creators during the 60-minute interactive tutorial. Creators including Gabby Morrison, who has 3.5 million followers on TikTok, will demonstrate their favorite beauty products from Walmart as they share their skincare, makeup and hair routines and offer tutorials on popular trends.
Emerging Consumer Companies
Porter Road, a Nashville-based direct to consumer meat company, raised $10 million. The round included investments from L37 Ventures, River Park Ventures, Middleland, and FJ Labs, and previous investors MAX Ventures, Tribeca Venture Partners, and Slow Ventures. The company bought its own slaughterhouse back in 2015 and expanded to e-commerce in 2018, and has been shipping selections of lamb, beef, pork, chicken and sausages from local farms to tables across the U.S. The new money will be used to scale the company’s sustainable agriculture and its pasture-raised meat for the direct-to-consumer business, its shop in Nashville, and for wholesale distribution to restaurants around the country.
Ministry of Supply, the Boston-based brand famed for its innovative fabrics and its performance professional apparel, was hit especially hard by COVID and the work-from-home rise. To survive, the company modified products towards leisure, repurposed material, rephotographed all 200 items on its website and rewrote the descriptions, with an eye to “get rid of every pair of high heels, every brown dress shoe, every tightly tucked-in shirt, every mention of office or work-friendly,” while continuing to tout its science-backed approach to clothing and unique fabrics. The company is now built around the notion that remote or hybrid work will continue for years, and office dress codes will permanently loosen.
With the help of key venture capital names like Amazon’s Jeff Bezos, Latin America’s NotCo has been granted a U.S. patent for its proprietary artificial intelligence (AI) technology, known as Giuseppe. The technology breaks down foods into their basic molecular compositions, and then, employing machine-based learning, chooses vegetables that it can combine to imitate that structure, while also working with humans to learn what tastes good. In less than three years, NotCo has become one of the fastest-growing food-tech companies in Latin America. With plant-based products becoming a staple in consumers’ daily routines around the world, NotCo was able to make its United States debut in November 2020 with the launch of NotMilk in Amazon-owned Whole Foods Market stores nationwide. Ingredients in NotMilk include water, pea protein, chicory root fiber, sugar, pineapple juice concentrate, coconut oil, sunflower oil and cabbage juice concentrate. NotCo’s patented technology not only helps protect the process to get to the current products in market — the food tech firm also commercializes NotBurger, NotMayo, NotIceCream and NotMilk in Brazil, Argentina, Chile, Colombia, and soon Mexico and Canada — but it also gives it an edge on future innovation, opening a new era in the global plant-based market.
Grocery & Restaurants
A few weeks after entering into an agreement to divest its Nestle Waters North America (NWNA) business, Nestle SA has acquired Essentia Water, Bothell, Wash. Essentia Water is a processor of ionized alkaline water. The company generated $192 million in sales in 2020, according to Nestle USA. Nestle is in the process of transforming its global waters business. In mid-February, the company announced it was selling NWNA for approximately $4.3 billion to a partnership of the private equity firms One Rock Capital Partners and Metropoulos & Co. The transaction is expected to be completed in the spring. The company retained ownership of its Perrier, S. Pellegrino and Acqua Panna water brands.
Home & Road
Bradshaw Home, the kitchenware and cleaning products company, has acquired Architec Housewares, known for its innovative and eco-friendly kitchenware collections, for an undisclosed sum. “Coming together with Architec Housewares adds another dimension to our portfolio,” said Bradshaw President Rob Michelson. “We now have the opportunity to use our extensive resources to partner with the original ideas that have been the hallmark of this company. We see the possibilities as being endless.” Architec markets five brands: Architec, its flagship line of innovative, colorful food prep products; Ecosmart, housewares made from unique, eco-friendly materials; Homegrown Gourmet, which offers tools to grow and prepare farm-to-table food; the Madeira line of premium giftable housewares that celebrate the love of cooking; and TSP, Totally Sweet Products for the baking and decorating enthusiast. Bradshaw’s kitchenware business is driven by its Good Cook brand. It is also known for its gadgets, cookware and bakeware. Its cleaning division, meanwhile, is driven by licensed brands like Mr. Clean, Dawn and Clorox as well as its own brands, Casabella and Evercare. Architec’s cutting board category complements that of Bradshaw’s, noted Michelson in a video announcement of the acquisition, and combined, makes it a “dominant player in the marketplace.”
Lifetime Brands Inc. reported fourth quarter net income of $15.2 million, compared with a net loss of $14.5 million for the prior period. Consolidated net sales for the quarter were $249.2 million, a 9.8% increase, compared to $226.9 million for Q4 in 2019; that includes 10.7% growth in its core U.S. business. Consolidated net sales for 2020 were $769.2 million, an increase of 4.7%, as compared to consolidated net sales of $734.9 million for 2019. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $33.6 million, or 4.6%, as compared to consolidated net sales in the corresponding period in 2019, the company said. Net loss was $3.0 million in the year ended Dec. 31, 2020, as compared to net loss of $44.4 million in the previous year, it said.
Jewelry & Luxury
Charming Charlie, the affordably priced, mostly jewelry retailer whose original iteration liquidated two years ago, plans to open 14 stores within the coming months. Last September, the chain opened its first new store in two years, in Atlanta. Since then, it’s opened six more brick-and-mortar locations, in Santa Monica, Calif.; Gilbert, Ariz.; Towson, Md.; Columbia, Md.; Ridgeland, Miss.; and Providence, R.I. The 14 new stores, which will open in March and April, will bring the retailer’s current total to 21.
Italian luxury goods group Salvatore Ferragamo said on Tuesday retail sales had grown in the first nine weeks of 2021, after posting its first full-year operating loss since listing in Milan 10 years ago because of the pandemic. Earnings before interests and taxes (EBIT) recorded a €62 million ($73.68 million) loss compared with a €150 million profit in 2019 amid plummeting revenues and impairment charges Ferragamo booked on assets such as property and machineries. Analysts on average had expected a €64 million EBIT loss for 2020, according to a Refinitiv consensus forecast.
Gunderson’s Jewelers, which owns four jewelry stores in the Midwest, is buying JB Hudson Jewelers in Minneapolis from current owner Pohlad Companies. No financial details were disclosed. The sale is set to close on March 31. Gunderson’s Jewelers currently operates stores in Sioux City, Iowa; Omaha, Neb.; Sioux Falls, S.D..; and Fargo, N.D. The change in ownership seems to mean the 135-year-old store will change its name. In a statement, the new owner’s CEO, Brian Gunderson, said he was excited “to bring Gunderson’s to the Twin Cities.”
Italy’s billionaire Agnelli family has snapped up a stake in Christian Louboutin, valuing the French luxury shoe maker, which is known for its signature red soled women’s shoes, at €2.3 billion ($2.7 billion). Exor, the Agnelli’s European holding company, will invest €514 million to buy a 24% stake in the Paris-based brand to become its largest shareholder, the two companies said in a joint statement. Shares in Exor, which have risen almost 6% so far this year, were up 4.05% in early afternoon trading in Milan on Monday. The deal comes at a moment when Christian Louboutin, which is regularly worn by Hollywood film stars, musicians and royalty, is “poised to capture significant new opportunities,” including expanding geographically, with a particular focus on China, said Exor and Louboutin.
Office & Leisure
Shares of GameStop jumped more than 45% after the company announced Monday that it has tapped Chewy co-founder Ryan Cohen to lead its shift to e-commerce. Cohen is serving as chairman of a special committee formed by GameStop’s board to help its transformation. Board members Alan Attal, Chewy’s former top operations executive, and Kurt Wolf, chief investment officer of Hestia Capital Management, also serve on the committee. Cohen invested in GameStop last year to push the video game retailer to focus on online sales and turn away from physical stores. The committee has already appointed a chief technology officer, hired two executives to lead customer services and e-commerce fulfillment, and begun a search for a new chief financial officer with tech or e-commerce experience. GameStop previously announced that current CFO Jim Bell will resign on March 26.
There’s no doubt that the Lego brand has benefited from people spending more time at home during the pandemic, but the company is winning new business in China as well. Lego said Wednesday that its consumer sales jumped 21% last year, the result of a broader product range, e-commerce investments paying off and a surge of growth in China. “It is really a result of a tremendous effort by the entire organization, especially with all the things we’ve had to cope with throughout the year,” CEO Niels Christiansen told CNBC. Due to the pandemic, Lego was forced to close manufacturing sites in Mexico and China, temporarily shutter some retail locations and saw its distribution costs rise as shipping became more expensive. Despite these headwinds, the privately held Danish toymaker reported revenue for the year that topped 43.7 billion Danish krone, or about US$6.99 billion, up 13% compared with 2019.
Party City Holdco Inc. reported a fourth-quarter adjusted profit and revenue that missed expectations, as the COVID-19 pandemic negatively impacted consumer spending for seasonal celebrations. Party City’s net loss narrowed to $96.4 million, or $0.88 a share, in the year ended Dec. 31, from $268.8 million, or $2.88 a share, in the year-ago period. Total revenue fell 11.4% to $648.2 million, below estimates of $659.2 million. Total retail sales decreased 8.3% amid pandemic-related temporary store closures and Party City’s store optimization program. Party’s City digitally enabled sales increased 27.1% during the quarter. Brand comparable sales decreased 5.9% due to the impact of COVID-19, especially on seasonal celebrations. For the full year, total revenues fell 21.2% to $1.851 billion.
Technology & Internet
Stitch Fix reported that second quarter net revenue rose 12% year over year to $504.1 million, as net revenue per active client fell 7% to $467, results that missed its own and some analyst expectations. In the period, the company’s holiday quarter, the number of active clients rose by 408,000 or 12% year over year to nearly 3.9 million, according to a company press release. In part due to shipping delays and higher freight costs, the e-retailer swung to a $21 million net loss from $11.4 million in net income a year ago, with an adjusted EBITDA loss of $8.9 million. Stitch Fix, a direct-to-consumer company that, unlike others, has adamantly resisted including brick-and-mortar in its still-evolving sales model, hasn’t been spared the troubles of the apparel market. The company’s algorithms are fueled by data gleaned from past purchases, style quizzes and customer communications, but haven’t escaped the perennial challenge in fashion of figuring out which styles actually sell. Inventory piled up as a result, with analysts noting a 24% rise year over year.
Shares of South Korean e-commerce giant Coupang surged 40% in its market debut Thursday on the New York Stock Exchange, making it the largest IPO so far this year in the United States. The company’s stock began trading at $63.50 apiece. Shares closed at $49.25, giving the company a market cap of $84.47 billion. The company had priced its shares at $35 apiece, above its target range of $32 to $34 each. Founded in 2010 by Korean-American billionaire Bom Kim, Coupang (pronounced “coo-pong”) made a name for itself through its guaranteed same-day or next-day delivery service. Often compared to Amazon or Alibaba, Coupang has more than 100 fulfillment and logistics centers in more than 30 cities. Coupang nearly doubled its revenue to $12 billion last year, according to its filing to go public. Still, the company reported a net loss of about $475 million in 2020.
Finance & Economy
It’s been a year since the COVID-19 pandemic swept the world and there are signs that the turbulent economy, a side impact of the virus, might be on an upswing. Personal income rose in January, as did consumer savings and spending on food outside of the home, according to the February Personal Income and Outlays Report from the Bureau of Economic Analysis. Compared to December 2020, personal income increased by 10% in January. “This is quite a large change from one month to another, and it primarily reflects the impact of relief payments to households authorized under the Coronavirus Response and Relief Supplemental Appropriations Act, which went into effect two days after Christmas,” economist John Anderson said. “Government social benefits increased by more than 50% in January compared to the prior month.”
According to a study released from WalletHub, Americans collectively got rid of a record $82.9 billion in credit card debt. Though 2020 was a year most people would like to forget, many Americans managed to significantly cut credit card debt. The figure is significant, given that consumers have added an average of $54.2 billion in credit card debt each year for the past decade. Still, the U.S. has a long way to go in paying off the nearly $1 trillion that Americans collectively owe to credit card companies – even though the prospect of reducing the debt down to zero is highly unlikely to ever happen.