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Markets

On Thursday, stocks surged once more, propelling the major indexes to unprecedented heights, buoyed by the outperformance of tech firms and sustained positive sentiment following this week's Federal Reserve meeting. It marked an impressive inaugural performance for Reddit, which skyrocketed by nearly 50% on its first day of trading as a public company.

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Finance

A year after Credit Suisse's fall, UBS is lined with temptation

Those who come into sudden wealth, such as lottery winners, often face the challenge of managing their newfound riches wisely. This is a risk that UBS must consider as it commemorates the anniversary of its acquisition of Credit Suisse.

A year ago on Tuesday, UBS announced its acquisition of its struggling rival, facilitated by Swiss regulators aiming to stabilize the banking sector. UBS paid $3.6 billion in stock for a bank with an estimated tangible book value of $33 billion, despite anticipated write-downs, litigation costs, and accounting adjustments. Despite any lingering concerns, this acquisition is likely to be remembered as a standout deal of the decade, with UBS shares rising by 62% since.

However, a significant question remains: How will this merger impact UBS moving forward? Prior to the acquisition, UBS had a strategy that resonated well with the market, particularly its focus on wealth management

In today's regulatory landscape, investors view this business as the ultimate prize. It demands minimal capital investment to yield substantial returns, and its fee structures typically exhibit less volatility compared to income from investment banking activities. Morgan Stanley has ascended to the position of the highest-valued major bank globally, largely due to the fact that 48% of its revenue in 2023 originated from wealth management services.

Tech

Apple’s business model getting hit from all sides

Apple, already facing challenges, has encountered further trouble as of late. The Justice Department filed a lawsuit against the tech giant on Thursday, alleging monopolistic practices in its management of the iPhone business. Attorney General Merrick Garland stated, "We allege that Apple has employed a strategy that relies on exclusionary, anticompetitive conduct that hurts both consumers and developers."

Simultaneously, European authorities are intensifying scrutiny on various aspects of Apple's App Store operations, while the company is witnessing a decline in its market share in China due to heightened competition and reports of government disfavor. Additionally, Apple is grappling with near-term obstacles such as a sluggish iPhone cycle, with hardware revenue projected to dip 1% in the current fiscal year after a 6% decline in the previous year.

These challenges have exerted downward pressure on Apple's stock. Following the announcement of the Justice Department's lawsuit, shares fell 4% on Thursday, contributing to a total decline of nearly 12% since the beginning of the year. This performance starkly contrasts with other trillion-dollar tech giants such as Microsoft, Nvidia, Amazon, and the parent companies of Google and Facebook, which have collectively posted an impressive average gain of 36% year-to-date. Apple's modest 12-month gain of less than 8% significantly lags behind the Dow and S&P 500 during the same period. JP Morgan analyst Samik Chatterjee aptly summarized the situation, stating, "When it rains, it pours."

Politics

Trump Makes a New Fortune with public listing of Truth Social

Investors have given the green light to a plan to bring Donald Trump's struggling social media company to the public market, bringing him closer to a potential windfall of approximately $3 billion. This influx of capital could alleviate financial pressures that have been impacting his presidential aspirations.

Truth Social, despite having few users and generating minimal revenue, is anticipated to commence trading on the stock market next week, boasting a remarkable valuation of approximately $5 billion. This valuation has been driven by fervent purchasing activity from Trump supporters, who have been buying shares of the shell company that merged with the former president's social media platform.

With Trump holding an estimated 60% stake, valued at roughly $3 billion depending on the stock's performance, the venture marks a significant financial opportunity for him.

When Truth Social officially debuts as a new public entity under its parent company's name, Trump Media & Technology Group, the stock ticker will be changed to DJT, reflecting Trump's initials.

The approval of this plan concludes a 2 ½-year journey to take Truth Social public, which included allegations of insider trading and a settlement with the Securities and Exchange Commission. This move positions the nascent platform, which Trump established after being banned from mainstream sites in 2021, as potentially his most lucrative investment to date.

Crypto

Can the biggest bet in bitcoin hold up?

Forget about earnings per share, or EPS. Perhaps companies should be evaluated based on BPS: Bitcoin per share.

BPS could also represent brilliance per share, according to admirers of Michael Saylor, the executive chairman of MicroStrategy. This software company has transformed into the world’s largest corporate holder of bitcoin.

Many investors are convinced that paying a premium for MicroStrategy’s stock, beyond the value of its bitcoin holdings, is justified because of Saylor's perceived genius.

They believe Saylor has created a perpetual-motion money machine. However, I suspect that one day, this machine will cease to function.

Saylor, who is intelligent, driven, and charismatic, is one of bitcoin’s most passionate advocates. Under his leadership, MicroStrategy has invested approximately $7.5 billion into bitcoin since 2020.

Saylor and MicroStrategy did not respond to requests for comment. This week, MicroStrategy successfully raised $592 million in convertible debt, utilizing all proceeds to acquire additional bitcoin.

As of March 18, the company disclosed holding 214,246 bitcoin. At the average price of approximately $65,000 per bitcoin this week, MicroStrategy's holdings are valued at nearly $14 billion.

Taking into account debt and convertible options, the company's stock boasts a total market capitalization of around $33 billion. This figure surpasses twice the combined value of MicroStrategy's remaining software business and its bitcoin holdings.

Some argue that this valuation reflects the entry fee for what might be one of the most significant investment spectacles in history.

According to one theory, under Saylor's leadership, MicroStrategy will effectively dominate the crypto market. Continuous bitcoin acquisitions by the company, coupled with readily available capital from investors, are expected to propel both bitcoin's and MicroStrategy's market prices to new heights.

"Saylor Forever!" exclaimed one Reddit user. "The possibilities are endless for what they can achieve." Another enthusiast speculated that MicroStrategy's market capitalization could soon exceed $2 trillion.