Don't Have a Skills Training Program for Your Employees? New Study Shows That's a Big Mistake

Continuous training is critical to setting up your employees for success. Even if you hire the most qualified qualified employee you’ve ever seen, there’s always room for learning and improvement through diverse training opportunities.

And only 18 percent of respondents feel they give employees the ability to actively develop themselves and chart pathways for their careers.

As a result of limited training programs, internal promotions are often driven by tenure, title and internal politics, leaving employees frustrated. To keep employees happy and excited to be working for your team, it’s time to get back to the basics with structured career paths and training programs. Here’s how to get started.

Define Career Paths

The 2018 Deloitte Human Capital Trends Study also found that 72 percent of organizations surveyed do not follow traditional career paths. In other words, specific promotions and career advancement opportunities aren’t as defined as they once were. Not only can the absence of clear career paths make your current employees frustrated, but it can turn off prospective employees when they’re researching your employment brand.

On your career site and in-job descriptions, make sure to highlight what career paths look like across roles. This will get top talent excited to join your team, and help current employees feel valued knowing they can advance in their careers with your team.

Set Measurable Goals

Going hand-in-hand with defined career paths, each employee should be given measurable goals during their first week or two on the job. The specific role and responsibilities should be discussed between each new hire and his or her manager, along with any goals or benchmarks required to get raises or promotions.

For example, in a sales role, your employees might need to reach a certain quota to be eligible for a promotion, whereas in other roles across department, employees will need to master certain skills to get promoted. Having measurable goals in place will keep employees motivated and excited to do great work so they can reach the next level in their careers.

Create Recurring Training Sessions

While you’re likely to offer a variety of training sessions in each new employee’s first week on the job, it’s important to offer continuous training. And training should align with helping employees reach the goals necessary to continue growing in their careers.

Training can include shadowing fellow employees, attending lunch and learn sessions, taking skills assessments, reading books related to their career paths, watching structured training videos and just about anything else that might be a fit based on your specific business goals. .

Reimburse for Additional Training and Certification

In addition to any formal, recurring training programs you have in place, your top engaged employees will likely approach you with their own ideas for training or outside certifications. A member of your HR team might want to become certified by the Society of Human Resources Management (SHRM), or a marketing team member might be interested in Google Analytics, HubSpot or related certification.

Some training and certification options don’t have any cost associated with them, but consider setting aside budget to support continued training for your most proactive employees. Such training can help your employees improve in their roles and be more productive, and your employees will feel empowered to continue advancing in their careers.

Many businesses today don’t have career paths or training programs that are clearly defined. To attract top talent in today’s competitive employment market, make sure your team is doing everything possible to attract quality employees and help them continue to grow.

The 25 Most In-Demand Job Skills Right Now, According to LinkedIn

A whopping 94% of recruiters actively use LinkedIn to vet candidates.

Professionals use LinkedIn when looking for new jobs and to showcase a career and stand out to recruiters.

Does your profile have what it takes stand out from the masses?

If you have any of the following skills, make sure to highlight them on your LinkedIn profile.

Discover all 25 skills, plus key jobs that use those skills and the salary (national average) of a U.S. professional in that industry according to Glassdoor.

Cloud and Distributed Computing Skills

Jobs in this field:

  • Platform Engineer: $104,000

  • Cloud Architect: $142,000

Statistical Analysis and Data Mining Skills

Jobs in this field:

Middleware and Integration Software Skills

Jobs in this field:

Web Architecture and Development Framework Skills

Jobs in this field:

User Interface Design Skills

Jobs in this field:

  • UX Designer: $97,000

  • UI Designer: $82,000

Software Revision Control Systems Skills

Jobs in this field:

Data Presentation Skills

Jobs in this field:

SEO/SEM Marketing Skills

Jobs in this field:

  • SEO Analyst: $53,000

  • SEM Manager: $68,000

Mobile Development Skills

Jobs in this field:

  • Mobile Engineer: $103,000

  • Mobile Application Developer: $91,000

Network and Information Security Skills

Jobs in this field:

  • Information Security Specialist: $86,000

  • Cyber Security Specialist: $58,000

Marketing Campaign Management Skills

Jobs in this field:

  • Online Marketing Manager: $71,000

  • Digital Marketing Specialist: $67,000

Data Engineering and Data Warehousing Skills

Jobs in this field:

  • Software Engineer: $104,000

  • Database Developer: $86,000

Psst! My future unicorn software startup MobileMonkey, world’s best Facebook Messenger marketing platform, is hiring unicorn engineers!

Storage Systems and Management Skills

Jobs in this field:

  • Database Administrator: $77,000

  • System Administrator: $73,000

Electronic and Electrical Engineering Skills

Jobs in this field:

  • Electrical Engineer: $83,000

  • Electronic Engineer: $85,000

Algorithm Design Skills

Jobs in this field:

Perl, Python, and Ruby Skills

Jobs in this field:

Shell Scripting Languages Skills

Jobs in this field:

  • System Engineer: $84,000

  • Java Developer: $72,000

Mac, Linux, and Unix Systems

Jobs in this field:

  • Linux System Administrator: $73,000

  • Unix Administrator: $79,000

Java Development Skills

Jobs in this field:

Business Intelligence Skills

Jobs in this field:

  • Business Intelligence Analyst: $80,000

  • Forecast Analyst: $60,000

Software QA and User Testing Skills

Jobs in this field:

  • User Experience Engineer: $138,000

  • Software Test Engineer: $82,000

Virtualization Skills

Jobs in this field:

  • Network Engineer: $77,000

  • Network Administration: $61,000

Automotive Services, Parts and Design Skills

Jobs in this field:

Economics Skills

Jobs in this field:

  • Business Development Manager: $74,000

  • Research Analyst: $66,000

Database Management and Software Skills

Jobs in this field:

  • Database Specialist: $74,000

  • Database Administrator: $77,000

Take Charge. Another Boring Net Lease REIT

In a recent Seeking Alpha article, I explained that “as a REIT analyst, it’s critical to understand the benefits of fragmentation and consolidation. I have found that over the years, many investors seem to get confused by the concept and, more importantly, the benefits to building a competitive scale advantage”.

While many REITs struggle to move the needle by growing externally, the Net Lease REITs are unique because they can seek new properties in practically any market. As I went on to explain:

“More specifically, within the $4 trillion REIT universe, we have witnessed a growing evolution of companies that have built powerful scale advantages by utilizing low cost of capital, acquisitions, development, and dispositions.”

When I was a new lease developer (over 15 years ago), there were just a handful of Net Lease REITs, and today the list is growing in size, with each company hoping to carve out a differentiated slice of the market share.

Some REITs, like Realty Income (NYSE:O), utilize their size and cost of capital advantages, while others, like EPR Properties (NYSE:EPR), seek to carve an “experiential” niche focusing on theaters, waterparks, golf entertainment, and charter schools.

I like to compare Net Lease REITs to banks, remembering that there are super regional banks, regional banks, and community banks. All provide a valuable service based on scale, cost of capital, customer service, and location.

Similarly, the bank industry blossomed in the early ’80s as intrastate banking restrictions were lifted, allowing new players to enter new markets. Many banks shifted funds to commercial real estate lending (during the ’80s). When total real estate loans of banks more than tripled, commercial real estate loans nearly quadrupled.

In my backyard (South Carolina), I witnessed the “merger mania” whereby many southeastern banks were acquired by each other (hoping to keep the New York and West Coast banks out), and eventually, they were acquired by the gorillas: Wells Fargo (NYSE:WFC) and NationsBank.

And as I reflect on history, it seems that the Net Lease REITs are becoming the modern-day banks for corporately-owned real estate. The sale/leaseback business model gives corporations the enhanced ability to monetize real estate assets, allowing capital to be utilized more efficiently, thus generating more attractive returns.

Thanks to the time-tested REIT laws, the Net Lease REITs have become an important property sector in which highly predictable rent checks are turned into highly sustainable dividends.

Today, I plan to provide readers with a new name to the Net Lease REIT sector and one in which we are initiating coverage (in our Intelligent REIT Lab). Excerpts from this article first appeared in the August edition of the Forbes Real Estate Investor.

(Photo Source)

Introducing Essential Properties

Essential Properties Realty Trust (NYSE:EPRT) began trading on June 21st and will join Realty Income, STORE Capital (NYSE:STOR), EPR Properties and others within our Net Lease coverage universe. I have known the company’s president and CEO, Pete Mavoides, for a few years (when he was at Spirit Realty Capital (NYSE:SRC)), and I decided to provide subscribers with an exclusive interview.

Bio: Pete previously served as President and COO at Spirit Realty Capital from 2011 until 2015. During his time at Spirit, he helped transition the company from a privately held $3.2 billion company to a publicly traded $9.1 billion enterprise. Prior to joining SRC, Pete was the president and CEO of Sovereign Investment Company, a private equity firm that focused on investment opportunities relating to long-term, single-tenant, sale-leaseback opportunities. Before Sovereign, Pete worked as an investment banker for five years, helping corporations monetize their real estate assets. He graduated from the United States Military Academy (West Point), served as an officer in the army and received an M.B.A. from the University of Michigan.

Brad Thomas (BT): How is EPRT different from the other peers?

Pete Mavoides (PM): First and foremost, our CEO and COO have over 43 years of collective experience investing and managing net lease assets over multiple credit cycles. As a result, the majority of our annualized base rent (ABR) was acquired from parties who had previously engaged in one or more transactions that involved a member of our senior management team.

In addition, we have deliberately concentrated on smaller-scale, fungible properties that are leased to service-oriented and experience-based tenants, which represent approximately 88% of our ABR as of March 31, 2018.

Furthermore, given our focus on sale-leaseback transactions with middle-market companies, approximately 65% of our ABR as of March 31, 2018, comes from properties subject to master leases, while over 97% of our ABR as of the same date is required to provide us with unit-level financial reporting.

PM: We believe the following points further highlight our differences relative to our peers:

Management is comprised of experienced net lease investment professionals -Essential’s CEO, Pete Mavoides, and COO, Gregg Seibert, have over 43 years of collective experience investing in net lease real estate, which includes purchasing and managing several billions of assets through multiple credit cycles during their careers.

Highly e-commerce resistant portfolio – With 87.6% of our annualized base rent (ABR) being derived from service-oriented and experience-based tenants as of March 31, 2018, we believe we have one of the most e-commerce resistant portfolios in the net lease REIT sector. Customers must come to our tenants’ locations in order to receive a service and/or have an experience, which we believe insulates us from e-commerce pressures.

Focused approach to investing in industry verticals – Essential has chosen a focused approach towards investing in net lease properties as our top seven industries: quick-service restaurants, car washes, casual dining, medical/dental, convenience stores, early childhood education, and automotive service; [these] collectively represent approximately 72% of our ABR as of March 31, 2018.

Smaller-scale, granular properties – As of March 31, 2018, our average investment per property was $1.9M, which is indicative of: 1.) the less specialized nature of our real estate, 2.) our general lack of exposure to Big Box retail assets, and 3.) the highly fungible nature of our properties, which we believe are easier to sell and re-lease in comparison to larger retail boxes.

Strong weighted average four-wall EBITDAR coverage of 2.9x and high portfolio transparency, with over 97% of our tenants (by ABR) reporting unit-level financials to us – As of March, 31, 2018, we received unit-level financials from 97.4% of our tenants as a percentage of ABR, and our weighted average four-wall EBITDAR coverage for those same tenants was 2.9x.

Long-weighted average lease term of 13.8 years – We have no exposure to pharmacy, apparel, general merchandise, electronics, sporting goods, and other soft goods retailers.

BT: Given your background at Spirit Realty, do you believe EPRT will be most comparable with SRC?

PM: Spirit is a large-cap diversified net lease REIT with a portfolio that has been assembled by multiple management teams over the past 15 years. Spirit also generates a portion of its revenues from asset management fees and preferred dividends. Conversely, Essential has a purpose-built portfolio of smaller-scale net lease properties that have been assembled by the same management team over the last 24 months.

BT: What are EPRT target credit metrics, and do you expect to achieve investment grade ratings in the near term? Also, can you tell us about your cost of capital?

PM: Our stated objective is to manage our net debt / EBITDA under 6.0x, which we believe is a balance sheet statistic that is consistent with investment grade issuers in the REIT industry. As such, we would expect to become an investment grade issuer over time.

We recognize that maintaining an attractive cost of capital is critical for any REIT that is external growth-focused. Our recent IPO and private placement give us ample investable capital to execute our growth plan over the near term.

BT: On the sourcing side, how does EPRT expect to grow – one-off deals, portfolios, or a combination thereof?

PM: Similar to our past deal flow, we would anticipate using our long-standing industry relationships to generate the bulk of our external growth from sale-leaseback transactions with middle-market tenants.

BT: What are EPRT’s favored categories? Do you expect to own casual dining properties?

PM: As of March 31, 2018, our largest industry exposure was quick-service restaurants at 18% of ABR, followed by car washes, casual dining, medical/dental, convenience stores, early childhood education, and automotive service. Collectively, these seven industries represent approximately 72% of our ABR as of March 31, 2018, with casual dining being our third-largest industry exposure at approximately 11% of ABR.

BT: Does EPRT plan to become a developer or provide developer funding? If so, how will you mitigate these risks?

PM: We have no intention of becoming a developer. However, we will agree to fund new development for existing tenants that we know and trust. We believe we mitigate risk by investing with relationship tenants that have a proven track record of operating performance.

BT: How about sale/leasebacks? Will EPRT be competitive in that arena?

PM: Most of our acquisitions since inception have come from internally originated sale-leaseback transactions with middle-market tenants. The vast majority of these deals were acquired from or through parties that had previously engaged in one or more transactions that involved a member of our senior management team. As such, we would anticipate the bulk of our future external growth to come from sale-leaseback transactions with middle-market tenants and relationship-based deals.

BT: AMC is listed as a top tenant. How do you mitigate the risks within the theatre business?

PM: As of March 31, 2018, we owned five theaters that represented 4.6% of our ABR. We mitigate risk by focusing on newly renovated and highly profitable movie theaters that are leased to the top theater operators in the U.S.

BT: Finally, what is your targeted AFFO payout ratio? Why?

PM: Our new Board of Directors will decide our future dividend policy and the resulting AFFO payout ratio. We would anticipate our policy on both matters to be generally consistent with our peer group.

Earnings Update

In Q2-18, EPRT’s total revenue increased 63% to $21.7 million, as compared to $13.3 million for the same quarter in 2017. Total revenue for the six months ended June 30, 2018, increased 79% to $41.9 million, as compared to $23.4 million for the same period in 2017.

The company’s net income increased 71% to $3.5 million, as compared to $2.0 million for the same quarter in 2017. Net income for the six months ended June 30, 2018, increased 75% to $4.6 million, as compared to $2.6 million for the same period in 2017.

Its FFO increased 81% to $9.6 million, as compared to $5.3 million for the same quarter in 2017. FFO for the six months ended June 30, 2018, increased 87% to $17.8 million, as compared to $9.5 million for the same period in 2017.

EPRT’s AFFO increased 68% to $8.5 million, as compared to $5.0 million for the same quarter in 2017. AFFO for the six months ended June 30, 2018, increased 79% to $15.9 million, as compared to $8.9 million for the same period in 2017.

The REIT’s Net Debt-to-Annualized Adjusted EBITDAre was 4.4x times, while Pro Forma Net Debt-to-Annualized Adjusted EBITDAre was 3.9x (i.e., adjusted for the receipt of net proceeds resulting from the underwriters’ partial exercise of an option to purchase additional shares).

It has a $300 million unsecured credit facility with no amounts outstanding as of August 7, 2018. The credit facility includes an accordion feature to increase, subject to certain conditions, the maximum availability of the facility by up to $200 million. In addition, we had approximately $151 million of cash and cash equivalents and restricted cash as of August 7, 2018.

Peer Comps

EPRT hasn’t declared a dividend yet; however, the company provided the below commentary on the Q2-18 conference call as it pertains to a potential dividend. The CEO said:

“Our objective is to maximize shareholder value by generating attractive risk-adjusted returns through owning, managing and growing a diverse portfolio of assets leased to tenants operating in service-oriented and experience-based industries. These returns will come from a combination of growing our cash available for distribution and paying a current dividend. To that end, as we disclosed in our S-11 filing, we anticipate paying an $0.84 per share initial annual dividend. I would anticipate our board to review that dividend policy and make a declaration for the third quarter and the five-day stub period very shortly.”

Note: $.84/$13.90 share price = 6.0% (estimated)

EPRT’sconsensus AFFO/share in 2019 for the eight analysts that cover the company is $1.09. Using analyst estimates, we arrive at EPRT’s projected AFFO payout ratio:

Again, based on analyst estimates, we arrive at our P/AFFO multiple for EPRT of 12.8x.

Summary

EPRT has all of the ingredients to become the next Realty Income. Keeping in mind that the way that O was able to become a premium brand is because of the company’s size and cost of capital advantages. As noted, it is becoming increasingly evident that M&A is likely in the Net Lease sector, and it is only a matter of time before consolidation transforms the top players into the next Wells Fargo and Bank of America in the Net Lease sector.

Source: Yahoo Finance

Source: F.A.S.T. Graphs and EPRT Investor Presentation.

Note: Brad Thomas is a Wall Street writer, and that means he is not always right with his predictions or recommendations. That also applies to his grammar. Please excuse any typos, and be assured that he will do his best to correct any errors, if they are overlooked.

Finally, this article is free, and the sole purpose for writing it is to assist with research, while also providing a forum for second-level thinking. If you have not followed him, please take five seconds and click his name above (top of the page).

Peers: O, National Retail Properties (NYSE:NNN), W.P. Carey (NYSE:WPC), Agree Realty Corp. (NYSE:ADC), Four Corners Property Trust (NYSE:FCPT), Getty Realty Corp. (NYSE:GTY), STOR, EPR, VEREIT, Inc. (NYSE:VER), SRC, Global Net Lease, Inc. (NYSE:GNL), and Lexington Realty Trust (NYSE:LXP).

Disclosure: I am/we are long ACC, AVB, BHR, BPY, BRX, BXMT, CCI, CHCT, CIO, CLDT, CONE, CORR, CTRE, CXP, CUBE, DEA, DLR, DOC, EPR, EQIX, ESS, EXR, FRT, GEO, GMRE, GPT, HASI, HT, HTA, INN, IRET, IRM, JCAP, KIM, KREF, KRG, LADR, LAND, LMRK, LTC, MNR, NNN, NXRT, O, OFC, OHI, OUT, PEB, PEI, PK, PSB, PTTTS, QTS, REG, RHP, ROIC, SBRA, SKT, SPG, SRC, STAG, STOR, TCO, TRTX, UBA, UMH, UNIT, VER, VICI, VNO, VNQ, VTR, WPC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

SEC scrutiny of Tesla grows as Goldman hints at adviser role

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission has sent subpoenas to Tesla Inc (TSLA.O) regarding Chief Executive Elon Musk’s plan to take the company private and his statement that funding was “secured,” Fox Business Network reported on Wednesday, citing sources.

The electric carmaker’s shares fell as much as 4 percent but cut their losses after Goldman Sachs Group Inc (GS.N) said it was dropping equity coverage of Tesla because it is acting as a financial adviser on a matter related to the automaker.

Investors viewed the Goldman statement as confirming a tweet from Elon Musk on Monday about working with Goldman, even as the reported subpoenas indicated the SEC has opened a formal investigation into a matter.

The latest news extended the roller-coaster ride for Tesla investors in recent days, adding to uncertainty about the future course of the company and whether a deal can be done amid growing regulatory complications.

Tesla and the SEC declined to comment.

Musk stunned investors and sent Tesla’s shares soaring 11 percent when he tweeted early last week that he was considering taking Tesla private at $420 per share and that he had secured funding for the potential deal.

FILE PHOTO: A Tesla sales and service center is shown in Costa Mesa, California, U.S., June 28, 2018. REUTERS/Mike Blake/File Photo

The shares fell 2.6 percent to $338.69 on Wednesday, below $341.99, their closing price the day before Musk tweeted his plan to take Tesla private.

The Tesla CEO provided no details of his funding until Monday, when he said in a blog on Tesla’s website that he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers but that financing was not yet nailed down.

Musk also tweeted late Monday night he was working with Goldman Sachs and private equity firm Silver Lake as financial advisers. However, as of Tuesday, Goldman was still negotiating its terms of engagement with Musk, according to a person familiar with the matter.

The 47-year old billionaire’s tweet about secured funding may have violated U.S. securities law if he misled investors. On Monday, lawyers told Reuters Musk’s statement indicated he had good reason to believe he had funding but seemed to have overstated its status by saying it was secured.

The SEC has opened an inquiry into Musk’s tweets, according to one person with direct knowledge of the matter. Reuters was not immediately able to ascertain if this had escalated into a full-blown investigation on Wednesday.

This source said Tesla’s independent board members had hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to help handle the SEC inquiry and other fiduciary duties with respect to a potential deal.

The Wall Street Journal said the SEC was seeking information from each Tesla director.

Reporting by Sonam Rai, Michelle Price and Supantha Mukherjee; Editing by Anil D’Silva, Nick Zieminski and Cynthia Osterman

Tinder founders sue parent IAC, saying it undervalued company

NEW YORK (Reuters) – A group of founders, executives and early employees of Tinder on Tuesday sued IAC/InterActiveCorp (IAC.O), claiming the parent company deliberately undervalued the dating app to avoid paying them billions of dollars and deprived some employees of stock options.

Job seekers and recruiters at the Tinder table gather at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

The lawsuit filed in state Supreme Court in Manhattan stated that IAC and its subsidiary Match Group Inc (MTCH.O) deliberately prevented the plaintiffs from cashing in stock options they could exercise and sell to IAC. They are seeking damages of not less than $2 billion.

“The defendants made contractual promises to recruit and retain the men and women who built Tinder,” Orin Snyder, a lawyer for the plaintiffs, said in a statement.

“The evidence is overwhelming that when it came time to pay the Tinder employees what they rightfully earned, the defendants lied, bullied, and violated their contractual duties, stealing billions of dollars,” he said.

IAC and Match did not immediately respond to requests for comment.

The plaintiffs, including Tinder founders Sean Rad, Justin Mateen and Jonathan Badeen and several executives and employees were given stock options in Tinder as part of their compensation in 2014, according to the lawsuit. Because Tinder is a private company, they were not able to exercise their options and then sell stock on the open market.

Instead, they were allowed to exercise their options and sell only to IAC and Match on four specific dates, in 2017, 2018, 2020 and 2021, on which the stock options would be independently valued, according to the lawsuit.

Match and IAC, which owns 80 percent of Tinder-owner Match, appointed Greg Blatt, Match’s then chairman and chief executive, as interim CEO of Tinder in 2016. The plaintiffs said this allowed the two companies to “control the valuation of Tinder.”

The plaintiffs claimed that IAC and Match engaged in a “disinformation campaign” to obtain a “bogus” $3 billion valuation for the 2017 date. Some plaintiffs who had left the company were contractually forced to exercise their options using that valuation, according to the lawsuit, while other plaintiffs kept their options.

However, IAC and Match then merged Tinder into Match without the consent of Tinder’s board of directors and canceled the future dates for exercising options, the lawsuit said.

IAC shares dipped 0.5 percent to $190.25.

Reporting By Brendan Pierson in New York; Editing by Jeffrey Benkoe and Susan Thomas

Kroger to sell private label products in China through Alibaba

(Reuters) – Alibaba Group Holding Ltd has partnered with Kroger Co to sell the grocer’s private label products on its Tmall platform in China, an Alibaba spokesperson told Reuters on Tuesday.

The Kroger supermarket chain’s headquarters is shown in Cincinnati, Ohio, U.S., June 28, 2018. REUTERS/Lisa Baertlein/File Photo

Kroger will sell its Simple Truth products in China, marking the U.S. grocer’s first foray overseas.

Krogers’s shares rose 2.6 percent in afternoon trading.

Reporting by Uday Sampath in Bengaluru, Lisa Baertlein in Los Angeles; Editing by Anil D’Silva

Musk says talking to Saudi fund, others on Tesla buyout

(Reuters) – Tesla Inc (TSLA.O) Chief Executive Elon Musk said on Monday he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers of his plan to take the electric car-maker private, but said financing was not yet nailed down.

Musk’s disclosure, made in a blog post on Tesla’s website, comes six days after the Silicon Valley billionaire shocked investors with a post on Twitter saying he was considering taking Tesla private at $420 a share and that funding was “secured.”

Tesla shares fell 1.2 percent after opening sharply higher.

Musk’s tweet last Tuesday is under investigation by the U.S. Securities and Exchange Commission, according to the Wall Street Journal, and is the subject of lawsuits brought against him by investors.

Wall Street has voiced doubts about Musk’s ability to pull off what could be the largest-ever go-private transaction, valued at as much as $72 billion.

Musk said on Monday he expects two-thirds of existing Tesla shareholders would roll over into a private company, but said he was in talks with major shareholders about his proposal.

He added that most capital for the deal would come from equity and it would not be “wise” to burden the company with added debt. Discussing full details on the plan, including the source and nature of the funding, would be “premature” now, he said.

FILE PHOTO: Tesla CEO Elon Musk at a press conference at the Kennedy Space Center in Cape Canaveral, Florida, U.S., February 6, 2018. REUTERS/Joe Skipper/File Photo

“I left the July 31st meeting (with the Saudi fund) with no question that a deal with the Saudi sovereign fund could be closed, and that it was just a matter of getting the process moving,” Musk said.

“This is why I referred to ‘funding secured’ in the August 7th announcement.”

He said that since his Twitter posts on the possibility of a deal the managing director of the Saudi fund had expressed support for proceeding subject to financial and other due diligence.

“I continue to have discussions with the Saudi fund, and I also am having discussions with a number of other investors, which is something that I always planned to do since I would like for Tesla to continue to have a broad investor base,” Musk wrote.

Saudi Arabia’s Public Investment Fund (PIF) is known for its technology investments, including the $45 billion it has spent in SoftBank Group Corp’s (9984.T) Vision Fund.

Yasir Othman al-Rumayyan, managing director of the PIF, when contacted, referred Reuters to the corporate communications team.

PIF officials have said in the past that decisions at the sovereign wealth fund are made with care, emphasizing corporate governance. The PIF board is headed by the Crown Prince Mohammed bin Salman.

Tesla declined to comment further beyond Musk’s blog post.

Moody’s Investor Services on Friday had said Musk’s consideration to take Tesla private was credit negative, noting the company’s negative cash flow in the second quarter and maturities of $1.2 billion in convertible debt through March 2019.

Reporting by Supantha Mukherjee in Bengaluru; editing by Patrick Graham and Bill Rigby

Reiterating $2 Price Target After Rite Aid Cancels Albertsons Merger

On the eve of the Rite Aid (RAD) tallying votes for its merger with Albertsons, the drug store scuttled the deal. The news, along with downgrades and warnings from Moody’s, sent the stock down nearly 20 percent on the week. Is the selling overdone?

Rite Aid

These bearish reports against Rite Aid do not recognize that the future value on the RAD-Albertsons firm would have been worth even less. The combined firms would have had competition from multiple fronts: from supermarkets like Walmart (WMT) and Kroger (KR) to drug stores like Walgreens (WBA) and Amazon.com (AMZN), through the latter’s online ambitions. Now that Rite Aid is on its own again, what will it take for the stock to get to my fair value of $2.00 a share, a forecast that assumed shareholders would reject the deal.

Removing management

Rite Aid’s management will re-visit its options in October, a full two months from now. The current management and oversight committee (board of directors) still have only two things on their mind: selling the company and finding a grocery chain partner to turn the business around. Rite Aid needs new, fresh leadership. It needs a leadership team that will revitalize the store sales, organically. Accelerating the expansion of RediClinics at all stores would do just that. The reason is simple: it is upselling services to existing customers.

Customers always need support for minor illnesses, preventive care, and travel health services. These offerings are available at competing stores but Rite Aid already has the real estate locations and staff to grow this offering. Amazon.com cannot in any way offer the same level of care for customers: the online giant may only compete on price. Conversely, Rite Aid would become a one-stop shop for the three above-mentioned services.

As SA user Catalyst7 wrote in the comments, naturopathic products like minerals, vitamins, and supplements may have higher profitability than prescriptions. Besides, CVS (CVS) and Walgreens could compete effectively against Rite Aid in this space. Although it is a stretch, Nutrisystem (NTRI) is the kind of approach Rite Aid could approach in improving the lives of its customers. Nutrisystem sells eating plans at a daily rate of between $10.18-$13.93 a day to that help customers lose weight.

The sooner Rite Aid identifies its niche in the drug store space, the faster it will reverse EBITDA deterioration. If the company had a “Plan B” that prepared for the merger not going through, it would not have lowered its adjusted EBITDA from the $615 million-$675 million range down to the $540 million-$590 million range.

Below: NTRI stock on the rebound since April.

Chart

NTRI data by YCharts

Rite Aid’s stock is down 24.9 percent while CVS and Walgreens are down by less.

Chart

RAD data by YCharts

Valuation

Walgreens completed the purchase of 1,932 stores for around $2.2 million a store. Albertsons would have acquired the 2,500 stores left at Rite Aid for under $1 million. At the midpoint of $1.6 million, Rite Aid’s stores would be worth $4 billion, compared to its $1.62 billion market cap (at $1.48 a share). With markets valuing the stores at a considerable discount, management has a low bar to clear for realizing profitability from each and every store.

Simply Wall St., which may not have updated its financial model with the lowered EBITDA forecast, believes RAD’s stock is worth $3.98 based on future cash flow:

Source: Simply Wall St.

Thanks to the sale of drug stores to Walgreens, Rite Aid substantially cut its debt by more than half:

Source: Simply Wall St.

Moody’s warning on a negative default credit is unusually timed. The drug store is better off without Albertsons and has a better debt profile on its own. It now needs to grow operating cash flow to service and to reduce the debt levels.

Buy More RAD Shares?

Investors deep underwater on Rite Aid could double-down on RAD’s stock to lower the average cost, but this could prove risky. Unless the company demonstrates it is turning around the business in the next 2-3 quarters, the stock could move nowhere or worse, fall to the $1.00 level predicted by bearish analysts. Other analysts have not yet updated their view on the stock. The average price target, based on two analysts, is $2.05 a share, implying upside of $38.51. Here is the full position call from six analysts:

Source: tipranks

Your Takeaway

Investors who held the stock to vote against the deal have little to lose at this point. A management shuffle and strategic change in the company’s direction could bring the stock back to the $2.00 level and above.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

How To Retire Comfortably By 62 With A Million

Let’s say you and your spouse both are 50-years old right now. You have saved about $200,000 in retirement savings in addition to some equity in the house. It is not bad at all. In a short 12 years from now, you will be 62. You may or may not retire at 62, but you decide to at least make plans to retire at 62. You also plan to accumulate retirement assets worth $1 million.

To help with an illustration of this journey, we take the help of our hypothetical couple, John and Lisa.

Why Retire at 62?

We admit it is just a number and so many people, continue to work beyond 62 years of age. However, it is significant in many ways. At 62, you become eligible to draw on your social-security benefits even though your benefits are lower than if you were to wait until the full retirement age between 66 and 67. After you are 59 and a half, you can withdraw money from your retirement saving vehicles like IRA and 401K without any penalty. However, please note that one does not qualify for Medicare until the age of 65. So, if one does decide to retire at 62, he/she would have to buy their own medical insurance for the intervening period (from 62 to 65).

Another reason 62 is a good number from a planning perspective. Even if you continue to work beyond 62, it is better to plan for early to cover any exigency.

Is $1 Million Enough To Retire?

Until the early 2000s, there used to be a consensus amongst the financial planners that one million dollars were sufficient to have a very comfortable retirement. However, not everyone agrees to this milestone anymore. Obviously, one million dollars are not the same as it used to be 20 years ago. Even though the inflation has been low in the last 20 years, one million in the year 2000 would be the same as $1.45 million in 2018 due to inflation. A one million dollar mark does not guarantee a rich retirement, but with some prudent planning and strategies, one million dollar worth of savings can go a long way to fund a comfortable retirement for a couple provided we believe that the other pillars of retirement security like Social Security and Medicare will remain viable.

On the other side of the fence, there is an argument to be made that it is too high a target for so many folks, who may have done everything right but invariably run into the tough times due to corporate layoffs, constant shift in the job market and age discrimination in later years. This is why it is so important to have an emergency reserve of one year worth of living expenses.

Start Saving Early Is Critical:

Still, we believe, the most important factor that determines how rich you are going to be later in life has to do with how soon you are willing to start saving paying yourself first, in other words, start saving for retirement. The table below shows how the early savings can impact the quality of life in later years. Mark starts contributing $6000 a year ($500 a month) at age 29 and increases it by 3% every year until 62. However, Steve waits for another 10 years but starts saving the same amount as Mark at age 39. Assuming they both get 8% return annually, Mark ends up almost double what Steve could accumulate.

Table: Power of saving early in life.

Age

Contribution

Net balance

Contribution

Net Balance

30

6000

6,480

0

0

31

6180

13,673

0

0

32

6365

21,641

0

0

33

6556

30,453

0

0

34

6753

40,183

0

0

35

6956

50,910

0

0

36

7164

62,720

0

0

37

7379

75,707

0

0

38

7601

89,972

0

0

39

7829

105,625

0

0

40

8063

122,784

8063

8,708

41

8305

141,576

8305

18,374

42

8555

162,141

8554

29,082

43

8811

184,629

8811

40,924

44

9076

209,201

9075

53,999

45

9348

236,032

9347

68,414

46

9628

265,313

9628

84,285

47

9917

297,249

9916

101,738

48

10215

332,060

10214

120,908

49

10521

369,988

10520

141,943

50

10837

411,291

10836

165,001

51

11162

456,249

11161

190,255

52

11497

505,165

11496

217,891

53

11842

558,367

11841

248,110

54

12197

616,209

12196

281,131

55

12563

679,073

12562

317,188

56

12940

747,374

12939

356,537

57

13328

821,558

13327

399,453

58

13728

902,108

13727

446,234

59

14139

989,547

14139

497,202

60

14564

1,084,440

14563

552,706

61

15000

1,187,395

15000

613,122

62

15450

1,299,073

15450

678,857

You are 50 and have saved $200,000:

According to the Economic Policy Institute, the national average of retirement savings for 45-49 years olds is $81,000 and $124,000 for 50-54-year-olds. So, 50 being right in the middle would be about $100,000. Considering that for a couple, it should be twice of that figure, let’s assume that you have saved $200,000. Obviously, it is not enough. Once you get to the retirement planning process, suddenly the seriousness of the matter downs upon you. You realize you cannot delay it any further. Sure, you may have other pressing needs such as saving and paying for kid’s college tuition fees. As a good parent, you want to fund the college for the kids, but there are other ways to meet these needs like tuition loans at least partially. Also, kids can work part-time to fund their own education partly. At this stage, retirement savings have to become the priority number one.

Let’s bring in our hypothetical couple: John and Lisa

In the past, we have taken help of our hypothetical couple John & Lisa for our retirement case studies. This time is no different, and we will seek their help.

This is where John & Lisa stand today. Both of them are 50 years old. Their combined annual salary is modest at $125,000. They have $200,000 in their retirement accounts. John and Lisa decide to take their retirement planning to the next level. After all if not now, when will it be? They only have about 12 years left for retirement. Sure they can work longer, but that may not always be their choice.

  • John and Lisa decide to save 16% of their salary towards their 401Ks. These savings will be tax-deferred and reduce their tax liabilities. Until now they have been saving only 6% of their incomes.
  • Their employers, on average, match 80% of the first 6% of the contributions.
  • They have had no IRAs until now. They will put away $10,000 ($5,000 each) towards IRAs. Since they qualify for tax-deductible IRAs, they will use this option instead of Roth IRAs. This will also help bring down their taxes.
  • They will also open a college education fund for their kid and deposit $5,000 every year. However, this will be after-tax, but the qualified tuition withdrawals including the growth will be tax-free.
  • Their target is to reach one million in retirement savings, excluding the primary house.

With the above decisions, and after accounting for the tax-savings (due to pre-tax contributions), their take-home income will reduce by $1,500, even though they will be saving an extra $1,980 every month.

Where to find an extra $1,500 a month?

There are several ways that they can cut down their monthly budget to save this extra $1,500. They are going to look at the several options and choose the ones that are appropriate for them. Some of the options that they are going to look for are:

  • They could cut their spending budget drastically from every expense item and save $1,500 a month. Though doable, but seems difficult to achieve.
  • Alternatively, sell the current house and move to a smaller but newer house, and keep the same standard of living

Their house is worth about $350,000. They still have a mortgage balance of $150,000. After mortgage payout and commissions, they can get about $190,000 net. If they move a little further out in the suburbs and buy a smaller house, they could get a new house for $250,000. If all that works out, they can take only about $100,000 new mortgage on a 15-year term, put 150,000 cash down on the house, put $25,000 away as an emergency fund, and still will be left with $15,000. They will use this $15,000 towards paying off one of the cars. Their monthly mortgage would be about $775. After property taxes, insurance, etc. their monthly expense would be approximately $1,500.

They save about $500 a month in house payments, plus they will immediately save $400 in car payments. Also, the house is new and smaller, so they would save about $150 a month in utilities; however, that will be a washout partially since Lisa will spend more fuel on the car for office commute.

They realize that they spend an unbudgeted amount of about $1,500 a month on things that are wants and mostly not essentials. They can easily cut $600 a month without too much sacrifice.

With the budgeted savings of about $1,500, they can fund the college savings as well as fund the 16% pre-tax contributions to 401K and $5,000 each to the IRAs.

Retirement Planning Part-II: Investing Successfully

The first very important part of the retirement planning is to save enough and save regularly. It is best achieved when it is done on auto-pilot. Being on auto-pilot means you always get paid first before you get money into your checking account to spend on things that essential, and non-essentials.

The second part of the retirement planning is the Investment Planning. This is equally important if not more because after all, you cannot get rich by just sitting on cash. You have to protect your cash from inflation. You also need to compound it over time. After all, Albert Einstein famously called “Compound interest being the eighth wonder of the world.”

John & Lisa decide to take charge of their investments and implement the following strategy:

John’s 401K:

John decides to deploy a risk-adjusted strategy to ensure that he gets most of the gains of the market, but at the same time, he will hedge the risks in case of this bull market turns into a bear market. This strategy is discussed in the later section.

Lisa’s 401K:

Lisa’s company provides a set of funds that she can choose from. Lisa decides the following combination of funds. Once this has been set-up, rest would really be on auto-pilot. Every pay-check, her contributions will be invested in the proportions as selected by her. Since this portfolio is very balanced, she hopes to get growth of about 8% annual for the next 12 years.

  • 20% in S&P500 fund
  • 20% in the equal-weighted S&P500 fund
  • 20% in the Developed International fund
  • 5% in Emerging Markets fund
  • 20% in Bonds
  • 10% in Treasury funds.

IRAs:

Since both John and Lisa will be funding their IRAs every year to the extent of $5,000 each, they will self-manage these funds.

Lisa is a fan of DGI (Dividend Growth Investing) stocks and decides to implement a DGI Portfolio (described in the later section).

John decides to be a little aggressive and will like to implement an income-oriented strategy for his IRA. He will implement a “ High-Income portfolio,” which would aim to generate about 8% income. John does not need income today, so all of the distributions/income will get re-invested. Also, since they are going to contribute the funds gradually for many years, they will be taking advantage of dollar-cost-average while building this portfolio. Since this portfolio is a bit high-risk, the staggered buying approach will reduce the risks as he will be buying high as well as low.

Investment Portfolios:

Lisa’s DGI Portfolio:

This is the portfolio that Lisa will be building for her IRA. She decides to build a portfolio of about 20-30 blue-chip stocks, which in theory she could hold for the next 10-20 years. Obviously, things will change over time, and occasionally she may have to make changes. All the stocks will generally meet the following conditions, however, exceptions can be made sometimes:

  • Market cap > 20 Billion
  • The company has paid dividends in the last 10 years and never cut the dividend.
  • It has increased the dividend payout at least 5 times during the last 10 years.
  • The yield at the time of buying is at least 2%, but preferably more.
  • The price is at least 10% below the 52-week high.

Keeping these rules in mind, she shortlists the following 20 stocks to start with:

Company Name

Ticker

in Billions

Div. Yield %

5 Yr Hist. Div. Growth %

Industry

52-week high

The Kraft Heinz Company

(KHC)

74.8

4.08

4.78

Consumer Staples

-29.53%

Philip Morris International Inc.

(PM)

133.0

5.33

3.29

Tobacco

-28.08%

PPL Corporation

(PPL)

20.2

5.67

2.13

Utility

-27.34%

AbbVie Inc.

(ABBV)

149.3

4.08

16.02

Healthcare/Biotech

-23.66%

UBS Group AG

(UBS)

61.6

4.32

29.25

Financial- Wealth Mgmt.

-23.50%

General Mills, Inc.

(GIS)

27.6

4.22

6.23

Consumer Staples

-22.79%

Broadcom Limited

(AVGO)

95.1

3.18

53.31

Technology

-22.60%

CVS Health Corporation

(CVS)

66.5

3.06

19.97

Healthcare/Retail

-21.74%

Anheuser-Busch InBev SA/NV

(BUD)

170.6

3.68

9.95

Beverages

-20.05%

3M Company

(MMM)

122.3

2.61

14.13

Industrial

-19.36%

Lam Research Corporation

(LRCX)

30.5

2.37

42.31

Technology

-18.69%

Walmart Inc.

(WMT)

265.9

2.32

2.07

Retail

-18.06%

AT&T Inc.

(T)

198.9

6.17

2.18

Telecom/Media

-18.00%

MetLife, Inc.

(MET)

46.8

3.65

8.10

Insurance

-17.37%

Dominion Energy Inc.

(D)

46.5

4.7

8.39

Utility

-16.30%

Ventas, Inc.

(VTR)

20.8

5.41

2.73

REIT – Healthcare

-15.93%

Starbucks Corporation

(SBUX)

70.2

2.3

23.93

Beverages/Restaurants

-15.59%

Enbridge Inc

(ENB)

61.5

5.81

13.10

Energy

-14.53%

Lockheed Martin Corporation

(LMT)

90.4

2.52

11.09

Defense

-12.07%

Johnson & Johnson

(JNJ)

352.7

2.74

6.40

Healthcare/Drugs

-11.26%

Average

105.3

3.91%

13.97%

-19.82%

John’s High Income Portfolio:

John’s IRAs will be used to implement this strategy. This basket will consist of high-income securities to generate roughly 8% income.

The funds will be divided into three types of securities:

Realty Income Corp. (O), Omega Healthcare Investors (OHI), STAG Industrial (STAG), STORE Capital Corporation (STOR), Ventas, Inc. (VTR).

  • BDCs/ mREITS:

Ares Capital Corporation (ARCC), Main Street Capital Corporation (MAIN), Annaly Capital Management, Inc.(NLY), Golub Capital BDC (GBDC), New Residential Investment Corp. (NRZ).

Cohen & Steers Tot Ret Realty (RFI), Cohen & Steers Infrastructure (UTF), BlackRock Taxable Municipal Bond (BBN), Kayne Anderson MLP (KYN), Tekla Healthcare Investors (HQH), PIMCO Dynamic Credit Income (PCI), Columbia Seligman Premium Tech (STK).

John’s Risk-Hedged Strategy (for 401K):

Since John is implementing this strategy within his 401K, the strategy needs to be simple and implantable. Most 401K accounts offer a limited number of funds that one has to choose from. John decides to implement one such strategy which rotates on a monthly basis. This strategy may not be most efficient or provide the most return, but it is simple and easy to implement.

The strategy will be invested in one of the following 3 securities (or equivalent funds), which are:

  • Vanguard 500 Index Investor (VFINX)
  • Vanguard Total Intl Stock Index Inv (VGTSX)
  • Vanguard Total Bond Market Inv (VBMFX)

VBMFX is the hedging asset and will be used only when the other two main securities are not performing well. By deploying this strategy, since 1997, the worst year return was -7.86% in 2015. In the year 2008, it was down only -5.50% compared to -37% for S&P500.

Equivalent ETFs for the above mutual funds:

VFINX

SPY

VGTSX

VTI

VBMFX

TLT

Every month, the strategy will check the performance of the three assets for the previous six months and select the best performing asset. The portfolio will be invested in the top performing asset for the next month. The process will be repeated every month. Below is the back-testing results since 1997 and performance comparison with S&P500. The model portfolio accumulated more than double of the S&P500, mainly because of smaller drawdowns during the bear markets of 2001-2003 and 2008-2009.

Portfolios Values at 62 years:

Lisa’s Returns:

Assumed annual growth for Lisa’s 401K: 8%

Assumed annual growth for Lisa’s IRA: 9.5%

Lisa’s

401K

IRA

Total

Starting capital

Contribution

Ending Capital

Starting capital

Contribution

Ending Capital

(401K+IRA)

Growth %

100,000

8.0%

9.5%

Year 2019

100000

12340

$120,340

0

5000

$5,000

$125,340

2020

120340

12340

$142,307

5000

5000

$10,475

$152,782

2021

142307

12340

$166,032

10475

5000

$16,470

$182,502

2022

166032

12340

$191,654

16470

5000

$23,035

$214,689

2023

191654

12340

$219,327

23035

5000

$30,223

$249,550

2024

219327

12340

$249,213

30223

5000

$38,094

$287,307

2025

249213

12340

$281,490

38094

5000

$46,713

$328,203

2026

281490

12340

$316,349

46713

5000

$56,151

$372,500

2027

316349

12340

$353,997

56151

5000

$66,485

$420,482

2028

353997

12340

$394,657

66485

5000

$77,801

$472,458

2029

394657

12340

$438,569

77801

5000

$90,193

$528,762

Year 2030

438569

12340

$485,995

90193

5000

$103,761

$589,756

John’s Returns:

Assumed annual growth for John’s 401K: 9.5%

Assumed annual growth for John’s IRA: 9.0%

John’s

401K

IRA

Total

Starting

Contribution

Ending Capital

Starting

Contribution

Ending Capital

(401K+IRA)

Capital

Capital

Growth %

100000

9.5%

9.0%

Year 2019

100000

12340

$121,840

0

5000

$5,000

$126,840

2020

121840

12340

$145,755

5000

5000

$10,450

$156,205

2021

145755

12340

$171,942

10450

5000

$16,391

$188,332

2022

171942

12340

$200,616

16391

5000

$22,866

$223,482

2023

200616

12340

$232,014

22866

5000

$29,924

$261,938

2024

232014

12340

$266,396

29924

5000

$37,617

$304,013

2025

266396

12340

$304,043

37617

5000

$46,002

$350,046

2026

304043

12340

$345,268

46002

5000

$55,142

$400,410

2027

345268

12340

$390,408

55142

5000

$65,105

$455,513

2028

390408

12340

$439,837

65105

5000

$75,965

$515,801

2029

439837

12340

$493,961

75965

5000

$87,801

$581,763

Year 2030

493961

12340

$553,228

87801

5000

$100,704

$653,931

Total Savings for both Lisa and John at 62 years of age:

Lisa:$589,700

John:$653,900

Total:$1,243,600

Conclusion:

As you would observe, in the above model, John and Lisa actually exceeded their targets. Some would question the constant rate of return in the above portfolios. It is almost guaranteed that some years, they would have negative returns but then high returns in some other years. So, we do expect them to balance out. We particularly feel confident of the long-term performance of the DGI portfolio and the Rotational Portfolio using SPY/VTI/TLT. The idea here is that John and Lisa are not only diversifying in various stocks, but also in the form of various strategies and assets.

Also, another important message this exercise is trying to send is the importance of a high rate of savings. Out of the final total $1.25 million, their own contributions were nearly 50% at $616,000, besides $627,000 from growth. Savings and Investing wisely are the two legs of the three-legged retirement stool, the third being the Social security.

Disclaimer: The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Please always do further research and do your own due diligence before making any investments. Every effort has been made to present the data/information accurately; however, the author does not claim 100% accuracy. Any stock portfolio or strategy presented here is only for demonstration purposes.

Disclosure: I am/we are long ABT, ABBV, JNJ, PFE, NVS, NVO, CL, CLX, GIS, UL, NSRGY, PG, ADM, MO, PM, KO, PEP, D, DEA, DEO, ENB, MCD, WMT, WBA, CVS, LOW, CSCO, MSFT, INTC, T, VZ, VOD, VTR, CVX, XOM, ABB, VLO, MMM, HCP, O, OHI, NNN, STAG, WPC, MAIN, NLY, ARCC, DNP, GOF, PCI, PDI, PFF, RFI, RNP, STK, UTF, EVT, FFC, HQH, KYN, NMZ, NBB, JPS, JPC, JRI, TLT.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Spotify Is Testing Letting Free Users Skip All the Ads They Want

A big change might be coming to Spotify’s free tier.

The music streaming service is running a test in Australia that allows users to skip as many ads as they like, regardless of the ad, according to Ad Age.

The move would bring another upgrade to Spotify’s free tier, which the company has said sees a good deal of engagement and typically leads to paying subscribers. Spotify recently brought a number of changes to its app for free users.

Under the new system Spotify is testing called “Active Media,” advertisers also wouldn’t have to pay for ads that are skipped.

“Our hypothesis is if we can use this to fuel our streaming intelligence, and deliver a more personalized experience and a more engaging audience to our advertisers, it will improve the outcomes that we can deliver for brands. Just as we create these personalized experiences like Discover Weekly, and the magic that brings to our consumers, we want to inject that concept into the advertising experience,” Danielle Lee, Spotify’s global head of partner solutions, told Ad Age.

Lee added that Spotify hopes to move beyond Australia and bring Active Media global, Ad Age reported.