September 19, 2024 | Read Online

What You Need To Know For September 19th

The Fed Cuts By 50, Here's What the Fed Might Do Next

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The Main Story 🔍

The Fed has cut 50bps, signaling the end of "higher for longer": After intense debate of 50bps vs 25bps, the 25bps crowd (including us) ended up being wrong. The federal fund rate is now 4.75%-5.0%, 0.50% (50 bps) lower than where it was Wednesday morning. The Fed believes that inflation is heading towards 2% and wants to get ahead of a potential rise in unemployment, although the Fed expects the US to end the year with a 4.4% unemployment rate.

Shockingly, there was only one dissent in the 11-1 vote, with Governor Michelle Bowman arguing to cut by only 25bps instead.

Given the size of the current U.S. deficit at a fiscal policy level, plus limited Fed balance sheet offloading, it seems like the Fed's historic monetary policy tool of hiking rates was less impactful than it historically has been. We personally find 50bps to be slightly dovish (unless there's something the Fed knows that we don't). The Fed was likely convinced to go 50bps due to the negative job revisions from the past few months.

From here, the Fed is going to be "data dependent" - which probably equates to 25-50bps of rate cuts per meeting until we get to the ~3% federal fund rates threshold. The Fed's current dot plot has roughly ~50 more bps of cuts contemplated before the year ends.

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More Headlines 🍿

Amazon is leading the charge on Tech companies ending remote work. Amazon shockingly announced that effective January 2025, all eligible employees must move from a 3-day week, hybrid work schedule to 5 days in the office. Amazon's CEO highlighted the importance of in person collaboration in making the decision. He also stressed how there's too much middle management and "meetings about preparing for meetings" that he's looking to strip away a lot of middle management and focus on individual contributors instead. This shift back to remote work is likely to come to the detriment of all the employees they promised remote work too, plus households with children that have leveraged hybrid work to better manage childcare.
Lazard's CEO says junior bankers might actually enjoy the work. Naturally, this caused a bit of a stir given younger Bankers are often working 70-90 hours a week on mind-numbing tasks like moving logos around.

MARK MORAN™️ @itsmarkmoran

Having been told this by him verbatim, I can assure you "the most interesting deal the group is working on right now" is never that interesting

5:18 PM • Sep 17, 2024

124 Likes 0 Retweets

9 Replies

Mr. Beast, KSI, and Jake Paul are launching a competitor to Lunchables called "Lunchly". This new collaboration allows the influencers to further promote their own brands, and to continue to expand from content creators into DTC CPG companies. This new meal will include a make-your-own-pizza, feastables, and a mini prime. While still unhealthy, the influencers have tried touting that there's less fat and carbs in their offering, and more protein and electrolytes, than a comparable lunchable
Alaska Airlines and Hawaiian Airlines have received regulatory approval to complete their merger. The first major airline deal since Alaska's 2016 acquisition of Virgin America allows the company access to a larger fleet and more airports. Though still only the 5^th largest U.S. airline, Alaska management are hoping the move will help them play in the big leagues with giants like American and United
Trump promised to revive the SALT plan, undoing his own tax law. Republicans capped the state and local tax deduction at $10k to counter-balance their 2017 tax cuts. The move upset Americans in high-tax, mostly blue states and the reversal could swing some voters over to Trump who has announced a wave of loosely defined tax cuts while on the campaign trail
Point 72 Founder and Hedge Fund legend Steve Cohen will stop trading, handing over the reins and marking an end of an era. Though he will stay on as CIO of Point72 asset management, the Mets owner is shifting his focus to AUM growth and talent development for the $35B multi-strat fund
Flutter, the owner of FanDuel, has acquired Italian gambling service Snaitech for $2.6B. The world's largest gambling company identified Italy as a relatively nascent market, with just 21% of gross gaming revenue bet online vs. +60% in more mature countries like the United Kingdom. Flutter as been on an M&A heater recently, announcing last Friday its plan to buy a majority stake in Brazilian gambling heavyweight NSX Group
JP Morgan is considering taking over Apple's credit card program from Goldman. In the past year since splitting with GS, Cupertino has shopped around with potential partners including Capital One and Synchrony Financial, but Apple has existing strong ties to the world's largest bank, which offers Chase customers deals when using Apple Pay
Intel stock jumped on a plan to turn foundry business into subsidiary and allow for outside funding. Over the past two years the chipmaker has spent ~$50B on the segment as it watched competitors in the PC, data center, and chip markets seize huge chunks of its market share
Boeing freezes hiring in sweeping cost cuts as it grapples with factory worker strike. Additionally, they've started furloughing tens of thousands of employees (including white collar workers) due to the strike. The first in 16 years at the company, the strike has halted the majority of commercial plane production at Boeing factories, though a South Carolina nonunion facility is continuing production of 787 Dreamliner Jets
Microsoft and BlackRock are teaming up to raise cash for AI related investments. The Global Artificial Intelligence Infrastructure Investment Partnership has set a $30B initial target for data centers but the fundraising could reach $100B to build out the energy infrastructure required for massive AI compute demands
Instagram is making teen accounts private. Facing intense Congressional scrutiny, Zuck is hoping to pre-empt regulatory intervention over concerns of child safety and excessive social media use. As Meta Head of Product explained, "It's addressing the same three concerns we're hearing from parents around unwanted contact, inappropriate contact and time spent."
Trump Media stock closed at a new post merger low on the eve of 'lockup' expiration. Today, Truth Social insiders including Trump can sell their stakes. Markets are nervous that Trump won't stick to his promise last week that he had "absolutely no intention of selling" any of his 57% stake in the company
The Teamsters Union will stay neutral for the first time in almost 3 decades, not endorsing any presidential candidate. The announcement comes after internal polling revealed that 60% members backed Trump while 34% supported Harris. Teamsters have backed Democrats since 1996 and America's other major labor organizations including the American Federation of Teachers and United Auto Workers are following this trend through this November

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M&A Transactions💭

Aeyon, provider of management consulting and data analytics services, was acquired for $400.0M by CGI Group (TSE: GIB.A). Robert W. Baird & Co. advised on the sale.

Coyote Logistics, provider of land-based transportation services, was acquired for $1.25B by RXO, Orbis Investment Management, and MFN Partners Management. J.P. Morgan advised on the sale.

Azure Summit Technology, operator of an RF engineering company, has reached a definitive agreement to be acquired for $1.275B by CACI International (NYS: CACI).

Snaitech, developer of online betting, lottery, and mobile games, has reached a definitive agreement to be acquired for $2.55B by Flutter Entertainment (NYS: FLUT).

Silk Road Medical, a medical device company, was acquired for $1.26B by Boston Scientific (NYS: BSX). Bank of America advised on the sale.

Hawaiian Airlines (NAS: HA), provider of air transportation, was acquired for $1.9B by Alaska Air (NYS: ALK). Barclays advised on the sale.

Merit Medical Systems (NAS: MMSI) has reached a definitive agreement to acquire The Lead Management Portfolio of Cook Medical for $210.0M. Bank of America advised on the sale.

CompoSecure (NAS: CMPO), designer and manufacturer of premium financial cards, was acquired for $372.0M by Resolute. Houlihan Lokey advised on the sale.

Maple Leaf Sports & Entertainment, operator of sports teams and venues, was acquired for $3.47B by Rogers Communications (TSE: RCI.B).

Fleet Complete, developer of software applications intended to help businesses improve safety standards, has reached a definitive agreement to be acquired for $200.0M by PowerFleet (NAS: AIOT). Barclays and Centerview Partners advised on the sale.

Dermavant Sciences, a clinical-stage biopharmaceutical company, has reached a definitive agreement to be acquired for $1.2B by Organon & Co. (NYS: OGN). The company will receive a contingent payout of $950.0M upon achievement of certain commercial milestones. Goldman Sachs advised on the sale.

Private Placement Transactions💭

Vignette Bio, developer of innovative therapies, raised $105.0M of venture funding led by Foresite Capital, Qiming Venture Partners, and Samsara BioCapital.

Brisk Health, developer of a mobile healthcare application, raised $100.0M of venture funding led by undisclosed investors.

Sakana AI, operator of an AI-enabled information platform, raised $137.0M of Series A venture funding led by Lux Capital, Khosla Ventures, and New Enterprise Associates at a pre-money valuation of $975.0M.

Flink, provider of grocery delivery services, raised $150.0M of venture funding led by REWE and BOND Capital at a pre-money valuation of $585.0M.

Pret A Manger, operator of a sandwich shop chain, received $328.21M of financing from undisclosed investors.

Exohood Labs, developer of an AI based blockchain platform, raised $188.13M of Series A venture funding led by Livsquare Capital at a pre-money valuation of $4.67B.

Angel City FC, operator of a professional women's football club, raised $123.07M of venture funding from undisclosed investors.