🏡 Company Causing Surging Rents

MARKET UPDATE

Good Morning Investor! Shares of energy drink maker Celsius ($CELH) have continued selling off after further sales data was released by Goldman Sachs ($GS) over the weekend, indicating further depression in the rate at which the sales of the company are growing. Not ideal for a “growth” company.

TODAY’S BIG HEADLINES

The Company Causing Surging Rents

Wegovy Finally Gets Approval for the Chinese Market

The Death of the SPAC

REAL ESTATE

The Company Causing Surging Rents🏡

Software Eats the World: Rent increases are a headache for renters and a bonanza for landlords, and currently, 52% of America’s population gets this unpleasant surprise annually when they renew their leases. Typically, these increases outpace even the rate of inflation. The culprit? Allegedly, it’s not your landlord’s greed, but a piece of software called RealPage that's whispering in their ear.

Rent Raiser Extraordinaire: RealPage is being utilized by many of America’s largest landlords to advise them on just how much to raise their rent prices, leading to a faster-than-expected increase in rents nationwide.

• At present, RealPage has its algorithms tangled in the rent prices of over 16 million rental units, advising landlords to both increase rents and accept higher vacancy rates, all in the name of higher profits.

• Shockingly, this has led to apartment rents rising "between 50-80% over the past seven years in markets where the software is employed." It’s like getting financial advice from a turbo-charged Ebenezer Scrooge.

Under the Microscope: Fortunately, this phenomenon is already under scrutiny by Attorneys General in 10 separate states in the US. There's also at least one class action lawsuit alleging that the software price-fixes rents. Apparently, not everyone is thrilled about their rent being dictated by a spreadsheet.

• RealPage insists landlords accept less than half of its rent recommendations, but that’s like saying a tornado only touches down in half of the town—it’s still not great news.

• To further stoke the flames, the FBI recently raided one of RealPage’s largest clients, seeking information on the software’s use. It appears that RealPage’s rent-hiking days might be numbered.

HEALTHCARE

Wegovy Finally Gets Approval for the Chinese Market💉

China Sheds the Fat: It appears the war on obesity has landed squarely on the Asian continent, with Danish pharmaceutical darling Novo Nordisk ($NVO) being granted approval to sell its Wegovy weight loss drug in China. The real question is whether the company can capitalize on this golden opportunity, given the rising competition and its current inability to meet demand.

• Not Their First Rodeo: China isn’t entirely new territory for Novo Nordisk. Their diabetic treatment Ozempic, which also uses semaglutide as a core active ingredient, has been available in the country since 2021. Sales of the treatment doubled to around $698 million just last year. So, while Novo is no stranger to the Chinese market, Wegovy is entering a whole new weight class.

• The real appeal is the size of the Chinese obesity treatment market, which is the largest in the world. Nearly half of the nation’s 1.4 billion citizens are either overweight or obese. That’s a lot of potential patients, or as Novo likes to call them, "opportunities."

The Rush to China: Novo’s patent for semaglutide in China is set to expire in 2026, opening the door for generic versions that could potentially cost dramatically less. Meanwhile, in Europe and Japan, its patent doesn’t expire until 2031, and it lasts until 2032 in the US. Talk about a ticking clock!

• Additionally, clinical trial records show at least 15 generic versions of the drug are already in development in China. It’s like a pharmaceutical gold rush, but with fewer pickaxes and more petri dishes.

• To make matters worse, back in May, Novo’s largest rival, Eli Lilly ($LLY), gained Chinese regulatory approval for its diabetes drug Mounjaro. With Zepbound likely to receive approval in the near future since it shares the same active ingredient, tirzepatide, the competition is heating up like a wok on high flame.

Wall Street Whispers: In spite of all these concerns, shares of Novo Nordisk are still up on the announcement of the approval. Investors are banking on the company's first-mover advantage to secure a dominant market position. It’s a classic case of “first come, first served,” but in this case, it’s more like “first approved, first prescribed.”

MARKETS & IPOS

The Death of the SPAC ☠️

The SPACcession: Special purpose acquisition companies (SPACs) were once hailed as the darlings of Wall Street, offering a shortcut to the public markets by sidestepping the red tape of a traditional IPO. They became so popular, it seemed like everyone was jumping on the bandwagon, from Palantir ($PLTR) to DraftKings ($DKNG) to even Trump Media ($DJT).

• Between 2020 and 2022, SPACs accounted for half of all new Wall Street entrants. But like all good things, their popularity has plummeted dramatically.

• Last year, a whopping 40% of new SPACs failed to find a target, while at least 21 former SPAC targets went bankrupt, wiping out over $46 billion in shareholder value. SPACs have now become synonymous with retail investor heartbreak.

Sliding Favorability: This year, the decline has continued with a mere 15 SPAC initial public offerings (IPOs) by mid-year, a stark contrast to the 248 and 613 in 2020 and 2021, respectively. Of these 15, only two companies were truly notable: nuclear power firm Oklo ($OKLO) and Lionsgate Studios ($LGF.B).

• The Few and the Proud: Despite the sizable contingent of “Wealth Destroyers” among the SPAC clan, a few names have defied the odds and delivered impressive returns. Construction leader Primoris ($PRIM) and data center firm Vertiv ($VRT) have soared 594% and 762%, respectively.

MORE NEWS

Additional market-moving events🌎

Amazon GPT: Ecommerce giant Amazon ($AMZN) is reportedly working on their own competitor to ChatGPT. The project is reportedly called "Metis". (Quartz)

Green Flight Taxes: Lufthansa will soon begin imposing a green surcharge on passengers of between $5 and $72 in order to meet regulatory requirements. (FT)

Luxury Empire Expands: LVMH’s owner Bernard Arnault has acquired a stake in his biggest rival Richemont ($CFR). (FT)

European Court Rampage: EU lawmakers have now set their targets firmly onto Microsoft, just one day after charging Apple with breaching DMA regulations. (WSJ)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 10th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,103.00 SEK (📉-15.95%)

• Hims & Hers Health: $21.56 (📈+49.00%)

• PayPal: $58.26 (📉-10.05%)

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