No More Fed Hikes?

The Fed raised rates by 25 bps, Meta’s ad business rebounded, investors are dumping Chinese stocks for other emerging markets, the BOJ is keeping ultra-low rates, the EU agreed to create a real-time consolidated record of securities deals, thousands of users have tried Amazon’s AI service, and the PGA tour is making concessions to players concerned about LIV’s Saudi ties.

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Litquidity Capital
July 27, 2023

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Good Morning,

The Fed raised rates by 25 bps, Meta’s ad business rebounded, investors are dumping Chinese stocks for other emerging markets, the BOJ is keeping ultra-low rates, the EU agreed to create a real-time consolidated record of securities deals, thousands of users have tried Amazon’s AI service, and the PGA tour is making concessions to players concerned about LIV’s Saudi ties.

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Let’s dive in.

Before The Bell

As of 7/26/2023 market close.

Markets

  • Stocks finished the day mixed as investors digested corporate earnings and an interest rate increase from the Fed

    • The Dow's thirteen-day win streak is its best since 1987

  • The NYSE FANG+ index is up 75% YTD on AI optimism and hopes of a dovish Fed

  • The Fed raised rates by 25 bps for its eleventh increase since March 2022

Earnings

  • Meta beat Q2 expectations with its first double-digit revenue growth since Q4 2021 thanks to a rebound in the digital ad market; CEO Mark Zuckerberg also provided an upbeat forecast that highlighted Llama 2, Threads, Reels, and new AI products as points of interest. The stock jumped 7% AH (CNBC)

  • Coca-Cola beat Q2 revenue and profit estimates as supply chain pressures eased, but management was cautious that commodity prices could put pressure on the company’s profit margins in coming quarters (CNBC)

  • Boeing beat Q2 estimates thanks to an uptick in commercial aircraft deliveries as the manufacturer increased production, but losses in its defense and space businesses prevented them from turning a profit. The stock was up 8% on the day (CNBC)

  • AT&T beat Q2 estimates for free cash flow as efforts to lower costs and attract wireless monthly paying subscribers with cheaper plans paid off (CNBC)

  • Chipotle missed Q2 sales and operating margin estimates as wage inflation drove up costs, the stock was down 9% AH (YF)

  • What we're watching this week:

    • Today: Mastercard, McDonald’s, Comcast, Ford Motor, Intel

    • Friday: ExxonMobil, P&G, Chevron

  • Full calendar here

Headline Roundup

  • Fed raised rates by 25 bps to a 22-year high (CNBC)

  • A post-Fed Wall Street buckles up for high-stakes economic data (BBG)

  • Investors shun US consumer stocks over recession fears (FT)

  • Demand for corporate loans among eurozone companies fell to lowest level since 2003 (BRN)

  • Investors dumping China load up on other emerging markets (RT)

  • Meta sees ad business rebound (WSJ)

  • BOJ to keep ultra-low rates, may debate fine-tuning yield cap (RT)

  • Billionaire Joe Lewis faces biggest fight on insider trading probe (BBG)

  • EU agreed to a deal to create real-time consolidated records of securities deals (FT)

  • Mastercard moves to ban cannabis purchases on its debit cards (RT)

  • Amazon has drawn thousands to try its AI service, competing with Microsoft, Google (RT)

  • PGA Tour makes concessions to players upset over pact with LIV’s Saudi backers (WSJ)

  • Lockheed gets US defense contract to develop nuclear-powered spacecraft (RT)

  • Evercore hires veteran investment banker Bergstein from Morgan Stanley (RT)

  • Delta’s new JFK SkyClub is designed to avoid overcrowding (BBG)

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Deal Flow

M&A / Investments

  • The FTC will not block aerospace and defense company L3Harris Technologies’ $4.7B acquisition of Aerojet Rocketdyne (RT)

  • The PE owners of Foundation Consumer Healthcare, which include Kelso and Juggernaut Capital Partners, are weighing a sale of the $4B Plan B pill maker (BBG)

  • PE firm Warburg Pincus is among suitors for telecom Vodafone Group’s Spanish unit, which could sell for as much as $4B (BBG)

  • Chip company MaxLinear terminated its pending $3.8B cash-and-stock acquisition of flash controller company Silicon Motion hours after Chinese market regulators gave conditional approval (BBG)

  • JPMorgan Chase is buying ~$1.8B worth of single-family residential mortgages at a discount from PacWest Bancorp (BBG)

  • Spanish telecom company Cellnex is exploring a sale of a minority stake in its Nordic operations, which could value the unit at $1.1B (RT)

  • Qatar’s sovereign wealth fund QIA is in early discussions to take a $1B stake in Indian billionaire Mukesh Ambani’s rapidly expanding Reliance Retail unit (BBG)

  • An investment group led by PE firm Haveli Investments agreed to buy business software vendor Certinia in a ~$1B deal, including debt (RT)

  • German automaker Volkswagen agreed to invest $700M in China’s Xpeng and will jointly develop EVs in China with the EV maker (BBG)

  • Nissan agreed to invest $663M in Renault’s EV unit Ampere after the automakers finalized terms of their renewed partnership (RT)

  • Abu Dhabi renewable energy company Masdar bought a 49% stake in an offshore German windfarm from Spanish utility Iberdrola for $415M (RT)

  • India plans to sell a 5.4% stake in state-owned Indian central railway company Rail Vikas Nigam in a $162M deal (RT)

VC

  • Nexo Therapeutics, a chemical biology startup focused on oncology, raised a $60M Series A led by Versant Ventures (BW)

  • Protect AI, a startup building tools to protect AI systems, raised a $35M Series A led by Evolution Equity Partners (TC)

  • Collaborative Robotics, a startup developing ‘novel cobot’ hardware, raised a $30M Series A led by Sequoia Capital (TC)

  • Payments fraud prevention tech startup Trustmi raised a $17M Series A led by Cyberstarts (TC)

  • Dioxycle, a startup working on a process to produce ethylene at scale using recycled carbon emissions, raised a $17M round led by Breakthrough Energy Ventures and Lowercarbon Capital (TC)

  • Ennabl, a provider of an insurtech data analytics platform, raised an $8M Series A led by Brewer Lane Ventures (FN)

  • ETCH, a decarbonization company, raised a $7.5M seed round from Emerald Development Managers (FN)

  • Exponential Exchange, a DC-based financial innovation platform, raised a $7.4M seed round led by MaC Venture Capital (FN)

  • Cybersecurity search platform Cyclops raised a $6.4M seed round led by Merlin Ventures, Insight Partners, and Tal Ventures (FN)

  • AI-powered digital asset manager ScorePlay raised a $5M seed round led by Seven Seven Six (FN)

IPO / Direct Listings / Issuances / Block Trades

  • Electric aviation company Surf Air Mobility’s shares were issued a reference price of $20 by the NYSE for its direct listing (BBG)

Debt

  • OTPP-owned HomeEquity Bank, Canada’s largest provider of reverse mortgages, is seeking to sell Canadian dollar senior bonds in a first-of-its-kind issuance for the bank (BBG)

Bankruptcy / Restructuring

  • Mallinckrodt, one of America’s largest manufacturers of opioids, is looking to cede control of the business to a group of hedge fund creditors including Silver Point Capital through bankruptcy to avoid the ~$1B it owes to addiction victims (WSJ)

  • Blackstone-owned Center for Autism and Related Disorders, an operator of 130 US treatment centers, received bankruptcy court approval to sell itself back to its founder for $49M (RT)

  • Trucking company Yellow is preparing to file for bankruptcy (WSJ)

Fundraising

  • NB Capital Solutions, a unit of Neuberger Berman, raised $2.5B to make minority equity investments in private companies (BBG)

  • PE firm Harbourvest Partners is raising a second private credit fund with a $1.5B target (WSJ)

  • Goodwater, a consumer tech VC, closed on $1B in capital commitments for its fifth early-stage fund and third opportunity-style fund (TC)

  • Australian VC Main Sequence hit its first close of ~$303M for fund III (TC)

  • VC Prime Movers Lab raised $245M to back startups working on an unconventional range of technologies (BBG)

Crypto Corner

  • Binance withdrew its application for a crypto license in Germany (RT)

  • The House Financial Services Committee advanced a bipartisan bill to provide a regulatory framework for crypto (RT)

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