Episode 110: Xero Bets the Business, Woolworths MyDeal Disaster, Moral Hazard on Planes, EV Road Test and Woodfrog
The guys question Xero's massive $4B bet on Melio, Woolworths blows $500M on its MyDeal disaster, how do you reduce moral hazard on planes, Adir test drives an EV and chats the growth of Woodfrog.
The Contrarians catchup
Adir details how he prepares for a board meeting and his approach to dissecting a 300-page board report, especially leading up to a company’s acquisition.
Adam explains how he prepares his CEO report for a Luxury Escapes board meeting, and how they run their meetings like a public company in case the company ever IPOs so they don’t have to change anything dramatically.
Some board advice from Adir: “The best directors will look at what's going on in the business and in a very positive, productive way, challenge the CEO and CFO and say, maybe you want to look at this metric as well, because it will provide some insight into how the business is going. Or maybe you want to think about the strategy slightly differently in this kind of way.”
Adam’s most important touch point when travelling internationally is the seat for a night flight, and the lounge for a connecting flight.
Adam asks if someone has to de-board a plane, should the person have to pay a penalty? Adam says yes, Adir says not if it’s a medical incident.
Adir’s advice for international travel: “I think one of the things that has been lost as air travel has become more common, is that we go through life assuming that things are stable and they'll turn out efficiently. When I travel, I've come to accept that it's a very complicated process and actually, we probably shouldn't be flying through the air at 60,000ft at 800km an hour. Basically, I should just accept that it's not going to be smooth, there are going to be delays. And this is just how travel is.”
Woodfrog Bakery’s new leadership bet
Former Daniel’s Donuts executive, Dima Bensky, has joined Woodfrog Bakery as CEO after leading growth across retail, wholesale, and manufacturing. Following a short break, he began his new role in March, aiming to expand Woodfrog’s 16 retail sites and wholesale operations. The move marks a new chapter for the popular bakery brand.
Adir: “Dima is the guy that has been running and building Daniel’s Donuts for the last four years, so I reckon we might have a bit of ‘watch this space’ if he does the same to Woodfrog that he did to Daniel's Donuts. Woodfrog might become a nationally known brand over the next few years.”
The Chinese tech brand selling out cars
Beijing electronics giant Xiaomi received 289,000 pre-orders for its first electric vehicles within an hour of launch. Xiaomi, sometimes referred to as China's Apple, is the world's second-largest smartphone manufacturer.
The pre-orders were for the company's five-seater YU7, priced from 253,500 yuan (about $54K). It is Xiaomi's second vehicle and one that undercuts Tesla's Model Y in price by nearly $45K.
Adam: “The premium European brands are producing great EVs now. And you've got BYD and Polestar and 50 other Chinese competitors coming up from the bottom. Tesla's getting absolutely squeezed.”
Woolworths MyDeal disaster
Woolworths will close the MyDeal website by 30 September, shifting focus to BIG W Market and Everyday Market to boost profitability. The move aims to cut MarketPlus losses while using MyDeal’s tech and seller relationships. Closure costs will total $90–$100M plus a $45M asset impairment.
Woolworths paid $243M three years ago for MyDeal under previous chief executive Brad Banducci, in a deal that was widely disliked by shareholders and analysts, given the fierce competition in online marketplaces.
Adir: “I do think this was the one of the most predictable possible outcomes at the time of transaction. Woolworths has to pull some rabbits out of the hat because this is bad, but this is pretty minor to the overall business.”
Xero bets the business
Xero CEO Sukhinder Singh Cassidy announced a $3.9B acquisition of US platform Melio Payments to finally break into the American market after years of failed attempts. The deal, Xero’s biggest, will nearly triple North American revenue.
To fund it, Xero will raise $1.85B through an institutional placement, with additional cash, credit, and shares covering the rest. Founded in 2018, Melio provides accounting software for small businesses and offers scale Xero couldn’t build alone.
This move, alongside WiseTech’s recent $3.2B US acquisition, signals a shift as ASX-listed software firms expand aggressively rather than being acquired by global rivals.
Adir: “The reason I say this might be moral hazard is because her down side in this going terribly seems to be pretty limited and her upside seems to be, well, it's not unlimited, but it's astronomical, right?”
Adir: “What are the odds that this could be amazing for Xero? And what are the odds that this could damage Xero so badly that it might half, or worse, their valuation?”
Adam: “In terms of this this acquisition working, this is the chance I'll give it: zero. It's going to cost at least $1B more to get to profitable and they spent $5B on this dog that might never make money. If I think Xero is worth $8B, I think they’ve just blown half that real valuation on this stupid acquisition.”
Five other stories worth following:
Nike shares surged 15% Friday after beating earnings expectations and outlining a stronger comeback strategy, making it the S&P 500’s best performer that day. Despite recent struggles, including a 30% China import duty and North American sales declines, analysts welcomed delayed product launches and raised price targets, boosting confidence in Nike’s rebound.
The S&P 500 hit a record high Friday despite President Trump halting trade talks with Canada. Investors shrugged off tariff fears, betting on strong economic fundamentals, a likely big spending bill, and deregulation. Analysts say the market now looks past headline volatility, focusing instead on earnings momentum and future pro-business policy catalysts.
Brad Pitt’s “F1 The Movie” gave Apple its biggest theatrical opening ever, debuting at No. 1 with $56M in North America and $144M globally. The $200–$300M racing drama needs sustained ticket sales to break even. Pitt plays a retired driver returning to mentor a rookie teammate.
Meta has hired four top AI researchers from OpenAI, following earlier hires of three more, plus industry heavyweights Daniel Gross and Nat Friedman. Meta denied offering $100M bonuses but confirmed its aggressive talent push. CEO Mark Zuckerberg aims to dominate AI by poaching key talent with big pay packages.
Google’s new experimental app Doppl uses AI to let users virtually try on clothes. By uploading a photo, users see an AI-generated image (or video) of themselves in chosen outfits. Early glitches include unintentional slimming and new AI-generated feet. Despite quirks, Doppl hints at a future of digital dressing rooms and could replace morning mirror fit selfies.