September 29, 2024 | Read Online

September 29th - The Week Ahead

The Latest on Hurricane Helene, OpenAI Drama, and a big Private Credit Partnership

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The Week Ahead Of Us 🔍

Welcome back and let the show go on! U.S. Futures are up slightly to start the week.

Here's a look at earnings this week. It will be interesting to hear from Nike given their recent leadership shakeup 👀

Monday: Carnival
Tuesday: Nike, Paychex, McCormick & Co., Lamb Weston
Wednesday: RPM International, Conagra Brands
Thursday: Constellation Brands

Here's a look at the economic data expected this week:

Monday: Chicago PMI
Tuesday: US PMI, ISM Manufacturing, Construction Spending, Job Openings
Wednesday: ADP employment
Thursday: Initial Jobless Claims, Sept. ISM Services
Friday: Sept. Payroll, Sept. Unemployment Rate

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This Week's Headlines 🍿

OpenAI continues to be full of drama, with recent executive departures, but the latest twist is that the Company looking to convert from a non-profit to a for-profit company that would reward Sam Altman with a 7% equity stake. Additionally, the losses at OpenAI are massive. Despite expecting $3.7B in revenue this year, OpenAI expects to lose a stunning $5 Billion. While revenue is expected to jump to $11.6B next year, the Company will need to grow into its expected $150B valuation and faces significant competition from new entrants
Hurricane Helene, a Category 4 hurricane is terrorizing the Southeast, with nearly 2.4mm homes in Florida, Georgia, and North Carolina without power and an estimated death toll of 93 people. Around 600 people remain unaccounted for in Buncombe County, North Carolina, with Asheville, NC among the cities dealing with catastrophic damage. The storm is evidence of growing risk of natural disasters to North America as so-called freak storms now occur at 5x their 1970s rate
GDP continues to be robust, but U.S. Percental Income and PCE Price data was weaker than expected. GDP of 3% last quarter beat estimates of 2.9%. Meanwhile, U.S. Personal Income in August was m/m growth of 0.2%, lower than estimates of +0.3%% and compared to last month's read of +0.3%. The U.S. PCE Price Index in August read at 0.1%, in line with estimates and slower than last month's +0.2% levels. With the LTM PCE Price Index reading at 2.2%, we can see that inflation has cooled off, while income growth has slowed, making the case for further rate cuts
Citi and Apollo are teaming up on a $25B private credit push. Backed by the Apollo's insurance arm Athene and the UAE's SWF, the partnership is initially targeting North America. While the firms have previously tried to out-maneuver each other for clients, together the two are blending their deal origination and flexible capital pools to beat out industry rivals
David Tepper's CNBC interview where he laid out his bullishness on China captivated a lot of investors, noting investors may be underestimating the potential of a stimulus driven recovery. Carolina Panther's owner and Appaloosa Management founder declared he would buy "ETFs, I would do futures. Everything"
ESPN Bet is now officially live in New York after buying the license from Wynn for $25mm.
DirecTV and Dish are nearing merger agreement to consolidate the two satellite TV providers. The merger is seen as a necessary step as both companies face declining subscriber bases in the face of increasing competition from streaming services. Plus, Dish is dealing with some near term debt maturities. We'll see if the deal goes through … in 2022 the FTC blocked a similar attempt
The Private Equity owners of Belron, a leader in vehicle glass repair and replacement, is reportedly looking to pay a 4.4 Billion dividend
Don't tell your local West Vilage influencer! L Catterton has agreed to acquire [solidcore], a Pilates studio, from sponsors VMG, Kohlberg, and Peterson. Known for its 50-minute "sweatlana" classes, [solidcore] is now valued at up to $700mm. L Catterton has been a longtime fan of the fitness industry with past investments in Equinox, Tonal, ClassPass, and Peloton
Koch Equity (KED) is looking to acquire Forbes. KED sets aside ~10% of parent Koch Inc.'s profits for independent acquisitions outside manufacturing and technology and has had some success in the media industry including investments in Time Inc. and Getty Images
Existing home sales fell to their lowest level since the start of the pandemic. The National Association of Realtors reported a 2.5% decrease in existing home sales in August compared to July. However, lower mortgage rates and increasing inventory could strengthen potential buyers purchasing power going forward
Major North American ports are on edge as labor negotiations have hit an impasse. Key industry and government officials are urging US dockworkers and their employers to avoid a strike at East and Gulf coast ports this week. Many facilities are already bracing for a shutdown, with the Port Authority of New York and New Jersey coordinating with partners to prepare for potential impacts
Tensions in the aluminum market are resurfacing on the London Metal Exchange. In 2002, the metals industry faced upheaval when a US warehouse owner began charging fees for securing cargo in the London Metal Exchange's storage network. This move resulted in significant additional costs for traders accessing metal backing LME's futures contracts, with some refusing to pay and leaving their metal in storage. Two decades later the same group responsible for the '02 outcry is back in the spotlight, with some accusing the traders of risking major disruptions to the $15T metals market
The U.S. government wants to triple the country's nuclear power production by 2050. The goals? Meet accelerating demand, cut CO2 emissions, and preserve energy security. To do so would require deploying new facilities (potentially by retrofitting closed coal plants) in addition to restarting existing facilities like Three Mile Island
California Governor Gavin Newsom vetoed a controversial AI safety bill
Palantir is joining the S&P 500 tomorrow. CEO Alex Karp has long angled to join the index which will allow his firm entry into associated funds held by major investors. However, S&P legitimacy will likely do little to temper Karp's distaste for Wall Street. Remember what he said about those who bet against his firm, "Almost nothing makes a human happier than taking the lines of cocaine away from these short sellers" 😆
EV sales are stumbling around the world. Although demand remains strong in China (59% of global sales), European and North American consumers are favoring lower cost legacy alternatives. As a result major manufacturers like GM and Mercedes-Benz have pulled back from clean-energy initiatives

Earnings Corner 📜

Costco Wholesale (COST) reported earnings that beat estimates, while missing on revenue. Revenue of $79.7B was up 1% y/y (vs. $80.03B expected), and EPS was $5.15B (vs. $5.08B expected). Comparable sales were up 5.4% (vs. 6.6% growth in Q3), though mgmt. noted that Costco's recent 8.3% membership fee increase won't impact performance until next quarter. The stock was down 1.75% on the day.

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M&A Transactions💭

EuroItalia reached a definitive agreement to acquire The Beauty Business of Moschino for $108.78M.

Doro (STO: Doro), provider of senior mobile solutions, reached a definitive agreement to be acquired for $2.77B by Xplora (OSL: XPLRA).

Corob, manufacturer of tinting, dispensing and mixing equipment and solutions, reached a definitive agreement to be acquired for $288.6M by Graco (NYS: GGG).

Cobee, developer of financial software, was acquired for $188.0M by Pluxee (PAR: PLX).

ARE64L, producer of solar energy, was acquired for $444.0M by TotalEnergies (PAR: TTE).

Featurespace, developer of an adaptive analytics platform, reached a definitive agreement to be acquired for $925.0M by Visa (NYS: V).

Private Placement Transactions💭

Observe, developer of an enterprise SaaS platform, raised $145.0M of Series B venture funding led by Sutter Hill Ventures.

AscenPower, manufacturer of automotive-grade silicon carbide chips, raised $140.97M of series A venture funding led by Utrust Fund and SDIC Venture Capital.

D-Orbit, provider of space logistics and orbital transportation services, raised $166.5M of Series C venture funding led by Marubeni, United Ventures, and European Investment Bank.