Celsius' Cyanide And Nu's Expansion

Hi friends!

Happy to see you here again after a few weeks in which I had to concentrate on Potential Multibaggers.

Every Sunday, I publish The Overview Of The Week for paid subscribers there and usually, I share a little piece of that here. That’s also what this article is. In the Overview Of The Week, there was also news about Shopify, CrowdStrike, Cloudflare and much more. If you want to check out Potential Multibaggers, there’s a 2-week free trial and you get a 20% discount if you decide to stay if you use this link.

Celsius' Price Drop

Celsius dropped by 15%. Why? Well, a few things happened on the same day.

First, a Morgan Stanley report said Celsius's market share declined sequentially from 10.8% three weeks ago to 10.5% in the latest week.

To be honest, I find this pretty ridiculous. 0.3% is much smaller than the margin of error in such research. Furthermore, it excludes Celsius's biggest distribution channels: Costco and Amazon.

By the way, Morgan Stanley analyst Eric Serotta, who published the diminished sales forecast outlook, has a bad track record. According to stockanalysis (.) com, he ranks #3250 out of 4435 analysts with a success rate of 28.57% and an average return of -19.7%. Tipranks places him as number 8,001 out of 8,878, with an average return of -14%.

Minus 14% per year for 10 years means you only have $2,350 for every $10,000.

There were some other reasons named for the drop as well. For example, that there is cyanide in Celsius. That sounds terrible but look at this.

This is from 2022 from McGill, a scientific site that separates sense from nonsense.

I'm quoting from the article on cyanide in B12:

There are many things in life to worry about but cyanide in vitamin B12 supplements is not one of them.

(...)

Vitamin B12 dosages are measured in micrograms, that is in millionths of a gram. The recommended daily intake is 2-3 micrograms, but supplements can contain up to a couple of thousand because B12 is poorly absorbed from the gut. Even at the highest doses, the amount of cyanide released is about 20-40 micrograms which is far less than the amount of naturally occurring cyanide to which one could be exposed by consuming flax seeds, unpasteurized almond milk, fresh apple juice or apricots.

The oral dose of cyanide below which there is no risk has been determined to be 50 micrograms per kg of body weight. This means that a child weighing 15 kgs who is given a gigantic daily dose of 1000 micrograms of B12, would still be ingesting less than 3% of this safe amount! There is simply no issue here.

How about people who are enticed by smoothies made of raw almonds or flaxseeds, which contain the highest doses of cyanide to which one could reasonably be exposed? A 70 kg adult would have to consume 16 regular-sized smoothies in less than two hours to be poisoned by cyanide!

Bottom line? There is no reason to worry about cyanide in vitamin B12 supplements, but there is reason to worry about self-styled pseudoexperts with a sketchy understanding of science alarming the public, usually with an eye towards monetary gain in some fashion.

Just to be clear, there are 6 micrograms of vitamin B12 in Celsius.

A normal person weighing 70 kilograms would have to drink almost 30,000 cans in a few hours to exceed the risk level.

Celsius also shows this on its site:

So, I think this is a big overreaction.

Nubank Becomes The Most Valuable Bank in Latin America

Earlier this week, there was a news report that Nubank (NU) had passed Itau to become the most valuable bank in Latin America. Itau Unibanco Holding SA (ITUB) closed on Friday, May 31st, with a market cap of $54.1 billion, while Nubank closed on the same day with a market cap of $56.8 billion.

Source: Finchat

(By the way, if you have never tried out Finchat, you should do that right away. It’s the best platform I know and you can try it out for free or get a 15% discount through the link above)

It is really incredible that Nubank has reached the scale and prominence that it has by being a fully digital bank. As of 2022, Itau had 100,600 employees. As of last year, Nubank had 7,686 employees. With less than one-tenth of the number of employees, Nubank has become a more valuable business.

According to the news report, another strong indicator of Nubank’s rise in the region is the results of a JP Morgan survey, which asked Brazilians what their primary bank is. The last time the survey was done was two years ago; at that time, 15% of respondents said Nubank. This time around, 27% of respondents said Nubank. Comparatively, Itau’s results were 16% in the prior survey and now 15% in this year's survey.

These results show that while Itau is staying relatively stagnant, Nubank is making significant headway with its growth efforts. And it won’t stop, as the rest of this article shows.

Nu Goes Into Communications

By Kris

This week, it was discovered that Nu will venture into communications by launching its own mobile phone service. This move has gotten the green light from Anatel, Brazil's telecommunications regulator. A contract between Nubank and Claro was used to get the permit.

The new service will operate as a mobile virtual network operator ('MVNO') under the entity Nucommerce Ltda. While Nucommerce might not be a recognizable name, it’s closely linked to Nubank, with Nubank's CFO, Guilherme Marques do Lago, among the people registering and the address the same as Nu's headquarters.

The agreement with Claro initially included an exclusivity clause, preventing Nubank from partnering with other mobile operators. But the regulator, Anatel, removed this clause, which is, of course, even better for Nu. Now, it can collaborate with other mobile service providers. Anatel removed the exclusivity because Brazilian regulations clearly state that MVNOs can freely choose their network partners.

Claro currently supports only two MVNOs: Maga+ from Magazine Luiza (a big retailer in Brazil) and Deutsche Telekom, which focuses on IoT connectivity. Maga+'s plans are not really competitively priced.

Nubank isn't the first Brazilian financial institution to venture into mobile communication services. Banco Inter operates Inter Cel. It uses Vivo's network, offering appealing plans such as 10 GB of data, unlimited calls, and free access to popular apps for R$30 per month. For comparison, the Maga+ subscription offers 6GB of data for R$44.99 per month. Inter Cel also provides 4% cashback on top-ups.

This is what optionality looks like. Nu has a very strong customer base in Brazil, with about 92 million customers, with just 149 million people in Brazil in the age group of 15 to 64. Customers in Mexico and Colombia are rising fast.

If Nu does what it always does, the new MVNO could introduce competitive and consumer-friendly prices, good customer service, and fast growth.

Nu Launches e-SIM

By Kris

Just a few days after we heard the previous news, Nu announced its first venture into the communications world with the launch of an e-SIM card. An eSIM is a digital SIM that allows you to activate a mobile plan without a physical SIM card. It facilitates easy switching between carriers and is mainly used for traveling.

And the e-SIM is vintage Nu. It gives Nubank customers 10GB of free roaming internet in more than 40 countries, allowing them to stay connected without needing to swap out their physical SIM card or eSIM. I'd like such a service from my own bank, to be honest.

The new eSIM service is part of Nubank's Ultravioleta premium subscription, launched three years ago. Ultravioleta includes benefits such as higher credit limits, cashback, insurance, and family accounts.

The eSIM service is activated through the Nubank app and is powered by Gigs, a platform providing the infrastructure for mobile network services through a single API. Gigs, backed by investors like Gradient Ventures and Uber CEO Dara Khosrowshahi, aims to simplify the process for companies like Nubank to offer mobile phone plans, similar to what Stripe has done for finance.

Gigs' co-founder and CEO Hermann Frank highlights the strategic advantage of bundling mobile plans with banking services:

Bundling mobile plans represents a powerful lever for neobanks to turn irregular users into monthly paying subscribers, encourage upgrades to premium features, and create an ecosystem where banking acts as a hub for multiple value-added services.

(...)

Telecom is a highly regulated industry across all countries, and a key part of Gigs’ end-to-end value proposition is that we abstract away all regulatory complexity for our customers.

To do so, Gigs almost always acts as the licensed carrier of record, which means the burden of compliance falls on Gigs and not with our customers. This allows our customers to launch their own mobile service, without legally becoming a provider in a regulated industry.

Nu Also Enters The Travel Industry

And as if entering the telecom sector was not enough, Nu also enters the travel industry, in two ways.

The first way is closest to its core business. It launches a global account, partnering with the European fintech Wise to offer low-fee international money transfers for Ultravioleta subscribers.

The account allows customers to convert balances from Brazilian reais to dollars and euros within the Nubank app. There are no maintenance fees; the exchange rate is just 0.8%, with a reduced IOF of 1.1%. IOF stands for "Imposto sobre Operações Financeiras," which is a tax on financial transactions in Brazil. It applies to various financial operations, including currency exchanges, credit, insurance, and investments. The IOF rate of 1.1% mentioned here refers to the tax rate on currency exchange transactions. Again, we see very low take rates from NU, making this a very attractive product. Nu takes the lowest rates and then launches additional services to monetize. It's really the software land-and-expand model.

The debit card linked with the Global Account works in more than 200 countries. Ultravioleta customers are exempt from fees for card issuance and the opening and maintenance of their Global Account.

The Nubank Ultravioleta program is very important in this strategy. It costs R$ 49 per month or about $10. However, this fee can be dropped if you spend more than R$ 5,000 on the credit card (a bit under $1,000) within a billing cycle or if you have at least R$ 50,000 (about $10,000) in savings or investments with Nubank or NuInvest.

Ultravioleta offers various benefits, including exclusive customer service, unlimited free withdrawals, access to investment funds, and now, as we saw above, 30 days of 10GB of data in 40 countries. That's renewed annually, so you'll have to pay if you want more than 30 days.

The second way in which Nubank enters the travel sector is more direct.

Nubank Ultravioleta has just launched NuViagens, a platform for customers to plan trips through the Nubank app. According to Nu, NuViagens offers convenience, competitive pricing, and flexible payment options, according to NU.

NuViagens allows users to purchase air tickets and book hotel stays within the app. One of its features is a price guarantee: if a customer finds a lower price for a flight or hotel within 24 hours of purchase, Nubank will refund the difference. Additionally, the platform monitors flight prices and advises users on the best times to buy tickets. If the price drops within 30 days of the purchase, customers can receive up to R$500 ($96) in reimbursement.

For payment, NuViagens offers up to eight interest-free installments via NuPay, a payment method exclusive to Nubank. Users also earn 1% cashback on their purchases. The platform ensures 24-hour travel support through the app’s chat or phone.

NuViagens is a result of a partnership with Hopper Technology Solutions and will be rolled out to Ultravioleta users over the coming months.

NuViagens accentuates Nu's strategy to integrate value-added services into its ecosystem. That gives customers much value. More and more, Nu is becoming a one-stop shop in this way.

I know that some may wonder if this is all not too much too fast. But I don't think so. Nu has a very flexible platform, so these additions are not as if you have set up shops or fulfillment centers. It resembles the modules Crowdstrike rolls out regularly. When I picked the stock about four years ago, Crowdstrike had 11 modules; it now has 22. Nobody asked there if that expansion was not too fast and this resembles the extra modules because everything is on Nu's existing platform. I'm very happy with these changes.

In the meantime, keep growing!