SBUX is in financial distress (bankrupt/insolvent) and cannot fund acquisitions without dilution; bearish on SBUX stock.

Well, a ridiculous idea has made headlines, with the Financial Times front page suggesting that Starbucks is now considering acquiring Chipotle. This is perhaps one of the most foolish forms of despair I can imagine, but I say if it happens, it is likely to be very and quickly useful to one of these two stocks.

I think Starbucks is in a bit of despair right now. Starbucks is partly desperate because its growth has been lateral due to its failed experiment in China. During the COVID period, they tried to significantly expand their presence in the Chinese market.

The stock did perform very well at the beginning of 2021 based on the idea that everything was reopening, China was reopening , and things were going to be fine. Then it turned out that the Chinese would not spend five dollars on a cup of damn coffee. So, what a surprise.

Starbucks decided that we had made a terrible mistake. We cannot sell American coffee in China when the Chinese want to buy cheaper coffee that looks more fortunate, like "Luckin Coffee".

And now Starbucks— you can't make this up—has decided to form a divestment group to get rid of their Chinese operations. Now, they are desperate to find another area of operations.

I'm not joking with you. In the first quarter of fiscal year 2026, the company announced an agreement to form a joint venture with Boyu Capital to operate Starbucks stores in China, known as the "Disposal Group".

This is on file with the Securities and Exchange Commission. They called it the disposal group. It's that bad. It's a real disaster.

So I wondered, well, how much money does Starbucks even have to try to acquire Chipotle and how will that affect the stock? A word of warning: they have no money. They are bankrupt.

Starbucks is bankrupt. They ruined experiment number one and now they are completely bankrupt. I have $8.1 billion in invoices and that's after adding their store card commitments, okay?

So I have $8.1 billion in bills. I don't know what happened here, but if you look up here, there isn't much criticism. I have $3.4 billion in invoices and accounts receivable worth $ 1.3 billion.

I will ignore the inventories because we will need them to cover those obligations here. So I'll consider it a tie, okay? This only gives me $4.7 billion. Even if I were generous and added all the stock, I still wouldn't have enough money to pay my bills.

So, for the next twelve months, Starbucks doesn't have enough money to pay its bills , and that's crazy.

Yes, they have a free cash flow of about $3 billion a year, and that's what they rely on. They say: Well, if we add up our free cash flow over the next year, we'll have enough money.

Good. This may be true, but it doesn't give you enough money to buy Chipotle because you're broke. This is a problem.

Now if you look at their income statement, their total revenue has decreased by 1.4% year-on-year . Their operating expenses decreased by nearly 2%, which is actually a good thing.

This means they have become slightly more efficient . So they are trying to achieve stability. I see that. But frankly, for a company with 10% profit margins and trading at a P/E ratio of 1.8 and a P/E ratio of 35, this is not a good deal. It's not a good deal.

Both companies are in a very mature stage of the business cycle, having both grown a lot. Starbucks suffered a setback and failed in China, and now they have a range of assets to get rid of.

The idea now seems to be that if you take a mature company, Starbucks, and merge it with another mature company , we will somehow get a better business.

For example, I really don't think we'll ever see Chipotle queues at Starbucks. I mean, maybe you can see some Starbucks-branded drip coffee in Chipotle. It might not be a bad idea if they could sell you drip coffee with a high profit margin for $5, but I don't think you'll be getting your own gourmet latte at Chipotle anytime soon.

However, I think it could be positive for Chipotle stock. The reason I believe it might be positive for Chipotle stock is that to convince shareholders to do something as ridiculous as merging Chipotle and Starbucks, you would have to pay a tempting premium for Chipotle.

Now, Starbucks will have to borrow a lot of debt to do this because they are bankrupt. Therefore, they will have to sell shares and issue debt. So, pessimistic about Starbucks , optimistic about Chipotle, and pessimistic about the whole thing combined.

Now, the CEO of Starbucks, and here's where it gets interesting, is actually the former CEO of Chipotle. So, it seems he misses Chipotle so much that he wants to do something incredible after their failure in China, which he was hired for, you know, to help get them out of.

He needs to try to do something and I think he's bored, so they think this is a good idea in a way . Let's just take over the company I used to work for .

Meanwhile, Starbucks is literally paying for this guy's commute to his Seattle office by plane, and I'm pretty sure it's a Gulfstream. I'm not joking with you. The man lives at a good standard, and is somewhat helpful at Chipotle's headquarters in Newport Beach, California.

A beautiful area, by the way. It's a great place to live. Newport Beach, Irvine, is very beautiful. You just have to deal with communist foreign policy, but even so , these regions remain fascinating.

Ah, and then there's Starbucks in Seattle. So , while they built an executive office for him when he was first hired, the man was essentially commuting back and forth to the Starbucks offices via his Gulfstream jet. Anyway, it's kind of crazy.

Okay, there's a point to note here. Starbucks has removed the $250,000 annual cap on the CEO's use of the aircraft for personal and non-commercial purposes. He became obligated to use private aviation for all his flights after a security review.

In other words, previously the CEO had to compensate Starbucks for the use of the personal aircraft, which exceeded $250,000 annually. But now they said, "No, no, no, man." "You know what?

Because of the threats against CEOs these days, you can use this plane however you like, even for your personal purposes." "So if you want to go to Hawaii , you can do that."