🕵️ Facebook are in Trouble Again

MARKET UPDATE

Good Morning Investor! Shares of Tesla ($TSLA) surged over 9% after the electric vehicle maker reported better-than-expected Q2 deliveries. Meanwhile, shares of First Solar ($FSLR) continued their downward trajectory, and the stock is now down 21% over the past month.

TODAY’S BIG HEADLINES

Facebook are in Trouble Again

SCOTUS Grants Trump Partial Immunity

Why Chinese Stocks are Lagging Behind

MEGA CAPS

Facebook are in Trouble Again🕵️

Dropping the Hammer: The EU has found its latest tech nemesis. After taking on Apple ($AAPL) and Microsoft ($MSFT), the EU is now zeroing in on Meta ($META) over its Facebook ad-free subscription service. Thanks to the new Digital Markets Act (DMA), the European Commission isn't pulling any punches.

• On Monday, the European Commission delivered a preliminary finding that Meta's ad-free subscription violates the DMA. Apparently, allowing Europeans to pay to avoid the never-ending parade of targeted ads is a big no-no.

• Under the DMA regulations, so called “gatekeepers” — the big tech giants, are required to ask user consent before “combining their personal data between designated core platform services and other services.”

Subscription Timeline: Meta launched this paid ad-free service for European users last year, arguing it was giving users the choice to opt out of ads simply by opening their wallets. To sweeten the deal, Meta has even offered to slash the subscription cost by up to 40%, but regulators are still sitting on their hands.

• Currently, European users shell out between €9.99 and €12.99 per month for the ad-free experience, plus €6 to €8 per additional account. For a user with both an Instagram and a Facebook account, that's a whopping €20.99 a month to enjoy a digital life free of ads.

• Meta's latest pitch to the EU involves lowering the base subscription to €5.99 per month, with an extra €4 per additional account, bringing the total to €9.99 per month—a significant drop from the current price of €20.99.

• If Apple's case is any indication (potentially being slapped with a 10% fine on global annual turnover), Meta could be staring down the barrel of a hefty financial hit. The EU's decision could have Meta scrambling for loose change under its digital couch cushions.

ELECTION NEWS

SCOTUS Grants Trump Partial Immunity 👨‍⚖️

Trump’s Magic Shield: Over the weekend, in a plot twist worthy of a legal drama, the Supreme Court of the US has granted Trump limited immunity from criminal prosecution for specific actions during his presidency. In another bombshell, they’ve also struck down the Chevron doctrine, reining in the power of federal agencies to interpret the laws they administer. It's like the legal system’s version of "House of Cards," but with less Kevin Spacey and more judicial surprises.

• This landmark decision has profound implications for Trump’s ongoing legal battles and his company ($DJT).

The Legal Shocker: In a 6-3 ruling that felt like a sequel nobody saw coming, the Supreme Court sided with Donald Trump, granting him limited immunity from criminal prosecution for certain actions during his presidency. This ruling upends a previous federal appeals court decision that had Trump shaking in his gold-plated boots.

• This decision is a game-changer for Trump’s legal playbook, delaying the federal election subversion charges trial and potentially pushing it past the next presidential election. It's the legal equivalent of calling a timeout in the final quarter.

Legal Timeline, The Trump Trials: The former president was hit with charges in August 2023 by Special Counsel Jack Smith, accused of conspiring to overturn his election loss to President Joe Biden, a saga that climaxed in the infamous Jan. 6, 2021, riot at the U.S. Capitol.

• The Supreme Court’s decision comes with a catch: this immunity only covers official acts during Trump’s presidency. It’s like a legal “Get Out of Jail Free” card, but it doesn’t cover unofficial acts, leaving the trial court to sort out which of Trump’s actions get the magic shield treatment.

INTERNATIONAL MARKETS

Why Chinese Stocks are Lagging Behind 🐢

Chinese Woes: I’m sure you’ve seen the doom-and-gloom charts making the rounds on Twitter about how Chinese equities have been taking a nosedive over the past 24 months, with Alibaba ($BABA) as the unfortunate poster child. For context, the stock has plummeted 58% over the past five years and is even down 3% year-to-date, in a year where most international markets are partying like it’s 1999.

Monster Under the Bed: This underperformance isn’t just bad luck; it’s a direct result of the Chinese economy’s struggles. China’s official manufacturing purchasing managers’ index (PMI), which tracks the country’s factory activity, produced a lackluster result for June, coming in at 49.5. For those not fluent in economic jargon, anything below 50 signals contraction. It’s like getting a “needs improvement” on your report card for the second month in a row.

• Even legendary investors like Michael Burry from "The Big Short" fame have been left twiddling their thumbs, waiting for the Chinese recovery that seems as elusive as Bigfoot.

• To make matters worse, measures of non-manufacturing activity in construction and services dipped to 50.5 in June from May’s 51.1 – the lowest since December. This is beginning to put the country’s goal of 5% GDP growth for the year at risk.

The Tariff Troubles, Storm Clouds on the Horizon: Just when you thought things couldn’t get worse, both the US and EU are considering slapping tariffs on China, two of the country’s biggest customers. The MSCI China index ($MCHI) did manage a brief rally, returning 17% leading into June, but has since sold off and is now up a mere 6% year-to-date. It’s a bit like celebrating a touchdown only to realize you’ve been tackled at the one-yard line.

MORE NEWS

Additional market-moving events🌎

Chinese EV deliveries: Chinese EV companies Zeekr ($ZK) and Nio ($NIO) reported record deliveries in June, with Zeekr delivering 20,106 cars and Nio 21,209 cars. Year-to-date, Zeekr leads with 87,870 vehicles, slightly ahead of Nio's 87,426, while Xpeng ($XPEV) delivered 52,028. (CNBC)

Antitrust’s Next Target: Nvidia is set to face antitrust charges from French regulators for allegedly anti-competitive practices. (Reuters)

G7’s Worker Growth: According to the UN, working-age population growth is going to shrink in Europe and Japan and increase in the US, UK, and Canada. (Apollo)

NBA Champs are Up for Sale: The Boston Celtics are now for sale. This comes just weeks after the club won its record 18th championship. (Axios)

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 12th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,103.50 SEK (📉-15.90%)

• Hims & Hers Health: $21.42 (📈+48.03%)

• PayPal: $58.92 (📉-7.07%)

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