☀️☕️ Existential “Thread” to Twitter

📊 Also: US jobs blowout: Hot hot hot. Hike hike (hike?); Rivian sued for IPO; Alzheimer’s drug approval 🎓️ “Oversubscribed” Initial Public Offerings (IPOs)

Jul 06, 2023

The MFM will be off next Monday (10th July). We’ll see you again on Tuesday!

📈 Market Roundup 07-July-23

US large-cap S&P 500 closed 0.79% DOWN 🔻

Tech-heavy Nasdaq Composite closed 0.82% DOWN 🔻

Pan European STOXX Europe 600 closed 2.42% DOWN 🔻🔻

HK/China's Hang Seng Index closed 3.02% DOWN 🔻🔻🔻

Japan's broad TOPIX closed 1.26% DOWN 🔻

📝 Focus

Existential “Thread” to Twitter

📊 In the Markets

US jobs blowout: Hot hot hot. Hike hike (hike?)
Rivian sued for IPO
Alzheimer’s drug approval

📖 MoneyFitt Explains

🎓️ “Oversubscribed” Initial Public Offerings (IPOs)

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📝 Focus

Existential “Thread” to Twitter

More than 30mn people signed up to Meta’s new Twitter competitor, Threads, in its first 16 hours, showing the power of Meta’s Instagram platform, which boasts 2bn monthly active users, as well as deep individual and business dissatisfaction with Twitter as run by the mercurial Elon Musk since last October (an eternity ago.) And this is leaving out all of Europe, too!

.....▷ The stunning speed and ease of signing up using an existing Instagram account (it’s the same account but on two apps) has helped put Threads on track to be the most rapidly downloaded consumer app at launch, surpassing OpenAI’s ChatGPT, which launched last November (an eternity ago.) ChatGPT took five days to reach 1mn users, Threads took two hours to reach twice that.

“I think there should be a public conversations app with 1 billion+ people on it. Twitter has had the opportunity to do this but hasn’t nailed it. Hopefully, we will.”

Meta CEO Mark Zuckerberg (shortly before Elon Musk deleted his Instagram account)

.....▷ The “network effect” is the phenomenon whereby the value of a social media platform increases as the number of users on the platform increases. This is because the more users there are on a social media platform, the more people there are to connect with, the more content there is to consume, and the more opportunities there are to build relationships and businesses. As a result, social media platforms with a large network effect tend to be more successful than those with a smaller network effect. It’s what earlier Twitter alternatives Mastadon and Blue Sky don’t have, but Instagram’s Threads, using the same account and instantly adding existing followers, has in spades.

.....▷ In a “he would, wouldn’t he” move, Musk is considering legal action, with company lawyers accusing Meta of stealing its trade secrets to create Threads, citing "systemic, wilful, and unlawful misappropriation" of its intellectual property. Twitter alleges that Meta hired former Twitter employees with access to confidential information and directed them to build Threads, violating state and federal laws. (Musk did axe 80% of employees, and Twitter now has fewer than 550 full-time engineers, down from 7,500.) It’s clearly pretty much a straight copy, a Zuckerberg speciality, but backed by the reach of Instagram and the war chest and engineers of Meta.

Twitter fans thinking of life before Elon Musk
- Image credit: The 100 / The CW via Tenor

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📊 In the Markets

Asian and European markets fell apart yesterday as they digested the June Fed minutes showing that “almost all” Fed officials expect more hikes to come (but apparently ignored the strong hints at a possible “soft landing.”)

US markets on Wednesday hadn’t been that fussed, but on Thursday, US stocks and bonds dived and government yields touched a 16-year high as labour market data released (including a blowout ADP figure - see below) that are usually spread out over a few days all got shoved into Thursday by the 4th of July holidays. And the conclusion is that the US labour market remains hot hot hot, and rates are going up up (up).

“If we lose ground in our effort to restore price stability, we will need to do more later to catch up… We have already had a fair amount of time to see the overall effects of monetary tightening.”

Dallas Fed president Lorie Logan, a voting member of the FOMC, calling for an immediate resumption of hikes

.....▷ The private payroll processor ADP showed that the US private sector added 497,000 jobs last month, smashing economists' expectations for 228,000 hires and the May total of 267,000. Most of the gains came from service industries, specifically leisure and hospitality businesses (backed up by strong ISM services data as well) but also from construction and transportation.

.....▷ The big number markets will look for on Friday is the official June non-farm payrolls (employment) report, which experts are expecting to increase by 275,000, the 30th consecutive month of growth (with the unemployment rate unchanged at 3.7%.) May’s was up 339,000, with those same experts having forecast 190,000 at the time. Forecasts are in a wide range (110k to 288k), but the high-end or higher number will fan fears the Federal Reserve will be more aggressive in raising U.S. interest rates.

Rivian sued for IPO: Rivian Automotive must face a lawsuit alleging its defrauded shareholders during its blockbuster oversubscribed IPO🎓 by concealing underpriced electric vehicles and later implementing price hikes due to higher materials costs exceeding retail prices by about $40,000. The judge ruled that shareholders could try to prove that Rivian knew it would have to raise prices on its SUVs and pickup trucks to avoid bigger losses. After then raising prices, Rivian's share price dropped 39% over 10 days. Backed by Amazon, its largest shareholder, Rivian, went public at $78.00 per share in November 2021, raising $12bn in the year's largest IPO. Trading surged the first day and at one point valued the company at over $100bn, making it the second largest US auto company. Even after the sharp rally of the last few days, Rivian is still trading over 3/4 down from those lofty heights.

.....▷ On Tuesday, Amazon announced it will deploy the first 300 vans from a 100,000 vehicle order from Rivian in Germany over the coming weeks as part of long-term plans to electrify its transport network.

FLASH: The FDA granted full approval to lecanemab, now known by the brand name Leqembi, an Alzheimer's drug developed by Eisai and Biogen, allowing American patients to access the treatment. The regulator confirmed the drug's safety and effectiveness, making it the first drug approved to slow the progression of the neurodegenerative disease.

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📖 MoneyFitt Explains

🎓️ Oversubscribed Initial Public Offerings (IPOs)

When an IPO's book is oversubscribed, it means the demand for shares offered in an IPO is more than the number of shares being offered to investors, both the general public and institutional investors.

Here's how it works and what really happens:

1) Institutional investors tell underwriting banks how much they want at a given price in the range. With that info, banks find a price to match demand with supply. (With strong demand, deals can be priced at or above the top of the range, and the deal size may be increased.)

2) Being subscribed several times is a positive signal to markets, which assumes investors who are given less than what they asked for will buy in the open market at higher and higher prices until they get the amount they want.

3) You can guess what then happens: If a deal is "known" to be hot (covered many times), investors tell the banks they want more than they really want, so they get "scaled back" to what they actually want. Yes. And if everyone does that, the book will be covered even more times. And then institutions will bump up their "demand" even more.

4) The banks talk to the press about the book coverage, and then the IPO is offered to the public, who will go bananas. (Usually, a portion of an IPO is set aside for retail investors.)

That's why they all make the big bucks!