The Superbowl of Finance
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SIX things you need to know this week in <5 minutes:
Global leadership change(s)
Canopy gets a head start into US market
The Superbowl of Finance
European LNG shitshow
More regulation, please
Private equity loves sports
1. MACROGlobal leadership change(s)
Former Goldman Sachs analyst and "hedge fund guy" Rishi Sunak became the UK's youngest Prime Minister in 2 centuries this week.
His confirmation comes after his repeated warnings against Liz Truss's economic plans came to fruition, resulting in her resignation and distinction as the country's shortest-serving Prime Minister.
Meanwhile, roughly 6,000 miles to the east in China, President Xi Jinping gave himself another 5 years of power while simultaneously ousting economic officials in favor of Yes Men and Women.
Investors hated it: Hong Kong stocks had their worst day since the global financial crisis in 2008.
GRIT'S TAKE: Foreign investors sold $2.5 billion in mainland shares on Monday, the highest on record (going back to 2016).
GRIT'S ACTION: China’s Zero-Covid policy just got even stricter.
Under the Radar
FOUR NEW ICONIC BRANDS ACQUIRED. People don't just want to drive from point A to point B - they want to have fun driving. EV Technology Group acquires beloved brands—like it did the iconic MOKE—and electrifies them. It now has its next set of brands to electrify: Brewster & Co. Fantuzzi, Marazzi, and Office Stampaggi Industriali.*
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2. DEALSCanopy gets a heads start into US market
Though the US cannabis market is expected to more than 3x to $50 billion by 2026, there's still one major obstacle in the way: it's federally illegal.
Over the past few years, Canada-based Canopy Growth has positioned itself for the inevitable by way of innovative call options that give it the right to acquire US companies upon legalization.
This week, the company decided waiting was for suckers and made moves to consolidate its US assets into a newly formed American company, Canopy USA.
Already in listing talks with TSX (Toronto Stock Exchange) and Nasdaq, the new entity will exercise options to acquire 100% of three US companies it hopes will give it a head start on the competition.
GRIT'S TAKE: The company says it will consolidate earnings from its US assets into its Canopy Growth financial numbers, a point Nasdaq has contested.
GRIT'S ACTION: Sector worth keeping an eye on.
3. STOCK MARKETThe Superbowl of Finance
"Kickoff" at 4 pm on Tuesday featured top and bottom line misses for Alphabet whose revenue growth plummeted from 41% a year ago to 6% in the quarter. Shares had their worst days since March 2020.
Microsoft posted its weakest revenue growth in 5 years while taking a 14% haircut on net income. The company squeaked by (weak) estimates, but it wasn't enough for investors.
With Reality Labs' $9 billion in YTD losses leading Meta to its second straight quarterly decline, multiple downgrades were issued as shares dropped 24% and Jim Cramer cried tears on national TV.
Amazon missed both earnings and revenue estimates and provided a disappointing sales forecast for Q4. Despite accounting for all profits, Amazon Web Services posted its slowest growth since 2014.
Finally, despite missing sales expectations on iPhones, iPads, and services, Apple managed to top estimates. Revenues increased 8% during the quarter.
GRIT'S TAKE: In a season where companies that miss are getting punished more than ever, Apple effectively tore the cover off the ball in Q3—relatively speaking.
GRIT'S ACTION: Upgrade your subscription for this month's deep dive into Big Tech earnings!
4. COMMODITIES European LNG shitshow
The liquified natural gas (LNG) situation in Europe has done a complete 180.
Whereas just a month or two ago the entire continent was on the verge of freezing over in the winter, onshore terminals are now being forced to turn away ships attempting to deliver what was recently considered precious cargo.
With reserves practically overflowing, over 50 ships and floating barges are hanging out around Europe's coastal waters waiting for supply to deplete so they can unload.
This week, the oversupply upended the spot market, even causing natural gas prices to go negative (chart above)!
GRIT'S TAKE: US natural gas prices have also come down considerably, which should provide some relief on the inflation front.
GRIT'S ACTION: Reserves don’t last forever and the current supply will barely be enough for winter…
5. CRYPTOMore regulation, please
According to two separate surveys, the next catalyst for crypto adoption could come from…more regulation?
Nearly 60% of respondents to a Bloomberg survey view the recent fury in regulatory action in the industry as a positive for the asset class.
Meanwhile, in a survey commissioned by the Crypto Council for Innovation, 52% would like to see more regulation compared to just 7% wanting less.
The sentiment is shared between retail and professional investors alike but appears to be more forceful among the former.
The one thing everyone is split on? Who they want to lead the charge on said regulation: 41% favor Democrats while 42% prefer Republicans.
GRIT'S TAKE: This tells me that retail investors are begging for reasons to adopt.
GRIT'S ACTION: Long and strong Bitcoin and Ethereum.
6. ENTERTAINMENTPrivate equity loves sports
The X Games—short for "extreme" games, for the uninitiated—are about to get even more extreme.
DIS 0.00 Disney's ESPN has sold the majority of its stake in the business to New York-based private equity firm MSP Sports Capital.
The firm has plans to revive the 27-year-old games (that makes me feel old) with innovation.
MSP, which holds stakes in soccer teams across Europe as well as an investment in F1's McLaren Racing, is installing a former Twitch executive to head its new vision for the games, which could possibly include expanding beyond its biannual (summer + winter) events.
The firm will also look to leverage an enhanced streaming offering (with lessons learned from Twitch) to deliver a more interactive experience.
GRIT'S TAKE: Private equity firms have done over 70 deals totaling $12.5 billion in sports since the start of 2021, including $6.2 billion so far this year.
GRIT'S ACTION: Next week, on GritALTS, we dive into this trend to find out what all the fuss is about. Subscribe here (it’s free!).
*SOURCES
1. CNN, Bloomberg
2. Bloomberg
3. CNBC, WSJ, CNBC, CNBC, CNBC
4. Yahoo Finance
5. Bloomberg, CNBC
6. Bloomberg
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