21st January 2023 – 27th January 2023 | Another week in the markets
| S&P 500 | Nasdaq | VIX | DJIA | Russell 1000 | NYSE |
| 4,070.56 | 11,621.71 | 18.51 | 33,978.08 | 2,240.66 | 15,962.58 |
| 2.47% | 4.32% | -6.75% | 1.81% | 2.56% | 1.17% |
| Nifty 50 | Gold | Silver | Brent crude | USD-INR | EUR-INR |
| 17,604.35 | $1,927.60 | $23.73 | $86.21 | 81.51 | 88.62 |
| -2.78% | -0.01% | -1.39% | -1.65% | 0.67% | 0.81% |
Source: MarketWatch
Hello Saturday,
This week Asia’s richest man Gautam Adani loses over $21 billion in a day, Tesla’s stock bounces back, and Google faces another antitrust suit.
- Adani Group takes a hit after Hinderburg Research publishes a 106-page report accusing the conglomerate of accounting fraud, offshoring money in tax havens, and mounting debt
- Elliot Management Corp, an activist investor hedge fund, takes a stake in Salesforce; plans to nominate several director candidates and make changes in company operations
- Tesla’s fourth-quarter earnings report shows better-than-expected earnings and revenue to push up stock by over 20% this week; the stock is still down over 40% over a year
- US Department of Justice files a second antitrust case against Google for monopolising online advertising and aims to break up the company’s advertising business
- Stripe announces that it will make a decision to go public or not within the next year – one of the most anticipated IPOs in the tech industry in recent times
Taking stock | Ada-kneed in the groin | Salesforcing Salesforce | Voila-tile TSLA | DOJball | StriIPO dilemma | Invest wisely
Taking stock
All major indices posted a positive week and are on track for a month of gains. S&P 500 added 2.47%, while the Dow gained 1.81%. The tech-heavy Nasdaq jumped 4.32%, fueled by Tesla’s better-than-expected quarterly earnings. Economic data this week showed that inflation is slowing – the Personal Consumption Expenditure (PCE) price index, the Fed’s preferred measure of inflation, slowed to 5% in December from 5.5% in November. Investors took this as a positive sign ahead of the Fed’s policy meeting next week.
Ada-kneed in the groin
On January 25, a day before India celebrated her Republic Day, US short seller, Hindenburg Research, published a scathing report on Adani Enterprises. The 106-page report accused the conglomerate of accounting fraud and improper use of offshore tax havens. It also cited concerns about its debt levels. According to the report, Adani Group’s “7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.”
The report triggered a sell-off, and seven listed companies of the conglomerate have since lost a combined $48 billion in market capitalisation. Gautam Adani lost about $21.9 billion of his net worth in a single day, and five out of 10 Adani group stocks lost over 15% each. In the span of just two days, investors have lost about ₹4 lakh crore. Analysts have raised questions about the timing of the report as it came right before the group’s $2.45 billion Follow-on Public Offering (FPO), the biggest FPO in India, on Friday.
Salesforcing Salesforce
Activist investor Elliot Management Corp. has made a multi-billion dollar investment in Salesforce, one of the leading cloud-based software companies in the world. An activist investor is typically a hedge fund that acquires a stake in a public company that is significant enough to change how the company is run. Activist investors don’t typically acquire a full or majority stake but a minority stake that is just enough to influence company management or elect a new board of directors to meet their vision.
At this point, it is unclear what Elliot Management, one of the most prolific activist investors, is looking to change at Salesforce. But Elliot is known to acquire tech companies and push for board representation and changes in sales and operations. Salesforce has had a turbulent few months, and on news of Elliot Management taking a stake in the company, stocks gained more than 5% in premarket trading on Monday.
Voila-tile TSLA
While the overall stock market has been quite volatile since 2022, Tesla’s stock has been violently so. Let’s look at some figures:
- Stock is down about 37% over the last year
- Stock is up over 44% over the last month
- Stock is up over 33% this week
What is happening? Tesla stock kept sinking throughout 2022, and investors primarily blame Elon Musk’s Twitter purchase for that. Add to that reduced capacity at its Shanghai factory, longer-than-expected turnaround times for new products such as Tesla Cybertruck and Tesla Semi, and an economic downturn. Due to all of this, the company suffered a market value decline of $703.12 billion and ended up on S&P’s list of 10 worst-performing stocks of 2022.
But since 2023 began, the stock has been bouncing back primarily due to Musk’s reassurance about demand and Tesla’s ability to navigate a potential upcoming recession. This Thursday, the stock rallied by over 11% after the company’s fourth-quarter earnings showed record profit. Both earnings per share and revenue came in higher than expected at $1.19 vs $1.13 and $24.32 billion vs $24.16 billion, respectively.
DOJball
This week, the US Department of Justice (DOJ) filed an antitrust suit against Google, accusing it of running a monopoly in the online advertising business. This is the second antitrust lawsuit by the DOJ; the first was filed in October 2020 under the Trump administration, accusing Google of trying to cut internet search competition and is expected to go to trial this September. This new antitrust aims to make Google divest parts of its advertising business so that it no longer controls all sides of the market – buying, selling, and serving as an ad exchange network.
Eight of the US states have joined the DOJ in this lawsuit, including New York, California, Colorado, and Virginia. Advertising is Google’s primary revenue machine – it generated $54.5 billion in the quarter that ended September 30.
Google’s advertising revenue in the US:
Source: Statista
If the DOJ ends up winning the case, this could critically impact Google’s ad revenue and overall revenue projections for the next few years. However, this lawsuit could take years to play out.
StriIPO dilemma
This Thursday, the fintech company Stripe told its employees that it would decide on its plan to go public within the next year. Since 2021, the tech Initial Public Offering (IPO) market has been frozen, and Stripe’s IPO is one of the most anticipated IPOs of 2023. The company, founded in 2000, was valued at $95 billion by private market investors in 2021. Stripe has hired Goldman Sachs and JPMorgan to advise on either making a direct listing or a private market transaction. If the company does launch its IPO, it will be one of the biggest fintech IPOs and one you should definitely watch out for.
Invest wisely
Nifty 50 and Sensex both closed the volatile week at a three-month low. As opposed to this, the major US stock market indices gained over 2% each. This is why experts recommend having international exposure in your investment portfolio because domestic and international markets are not perfectly synced. Since different economic factors impact India and other countries differently, you can hedge losses in the domestic market by having investments in an international market like the US. And accessing the US market has never been easier!
However, be a touch cautious of the app you choose. Some wealth-tech apps have had trouble this week with forex transactions. Not Appreciate though. You can access high-performing US stocks and exchange-traded funds in just a few clicks, as always. Download the Appreciate app today!
Warm regards,
Another week
in the markets
