🍪 The OREO cookie scandal

Good morning Investor. "The fact is that the greatest crimes are caused by excess and not by necessity."

— Aristotle, Ancient Greek philosopher

MARKET UPDATE

Airline stocks rallied off the back of United Airlines Q1 earnings & the Biden administration’s latest measures (more on this below).

TODAY’S BIG HEADLINES

• The OREO cookie scandal

• Big Tech is ditching the office

• The DOJ targets Ticketmaster

• Mexican Peso is on fire

CONSUMER STAPLES

The OREO cookie scandal🍪

Sweet Justice: On a fine Tuesday morning, the EU decided to give Mondelez (MDLZ), the proud parents of the world’s favourite cookie, Oreos, a taste of their own medicine. The confectionery giant is facing a nine-figure fine for playing cookie monster by limiting cross-border sales, leaving consumers with a bitter aftertaste in the form of increased prices. The EU’s oven timer for this finely-baked fine is set to ding as early as next month.

Cookie Jar: Mondelez, having sniffed out the impending fine, had already stashed away $361 million in their cookie jar, as revealed in a regulatory filing back in January. But there’s a chance that even this hefty sum might crumble under the weight of the actual costs.

Crumbs From The Past: The cookie was always going to crumble this way. Mondelez found itself in the EU’s crosshairs back in 2021 over antitrust concerns. The fear was that they were baking a monopoly by restricting cross-border trading. Fast forward to now, and it seems the EU’s investigation has left Mondelez with more than just a burnt batch.

Market Munchies: Mondelez’s shares have been on a diet this year, shedding over 10% since January. Investors are left craving a sweeter performance.

sources: (Reuters), (FinancialTimes), (Quartz)

REAL ESTATE

Big Tech is ditching the office🏦

Home Sweet Home: Once upon a time, big tech was the apple of commercial real estate landlords’ eyes. But it seems those days are as outdated as dial-up internet. With the rise of remote work, big tech is slimming down its office footprint faster than a tech bro on a juice cleanse.

Space Savers: Big tech tenants are now playing musical chairs with their leases, letting them expire and even subleasing space in their office locations across major cities. This trend is like a bad Wi-Fi connection for commercial landlords, exacerbating the high vacancy rates and plummeting property valuations they’ve been grappling with since the pandemic.

Tech Detour: While cities like NYC are witnessing an 80% return to office rate, thanks to its banking and finance sectors, big tech is charting its own course, powered by remote working and significant layoffs in the sector.

Pink Slip Parade: As if scripted by a dystopian novel, around 1,200 tech companies handed pink slips to about 263,000 employees in 2023, with a further 74,000 workers joining the ranks in 2024.

Shrinking Footprint: In Q4 2023, tech companies were leasing a mere 7.4 million square feet of office space, a steep decline from the sprawling 10.5 million square feet rented in 2021.

Blame The Blueprint: The Wall Street Journal reports that the real villain of this piece is outdated buildings that no longer fit tenants’ needs. In response, landlords are playing real-life SimCity, converting their commercial buildings into housing units. NYC is leading the charge with 55,300 units already scheduled for conversion.

sources: (WSJ)

ANTITRUST

The DOJ targets Ticketmaster🎫

Ticket Turmoil: Just as StubHub is preparing to take a bow with its $11 billion IPO later this year, one of its biggest competitors, LiveNation (LYV), is facing the music. The DoJ’s antitrust unit is tuning up to file a lawsuit against LiveNation as soon as next month, accusing them of hitting a sour note with outrageous ticket prices, poor customer service, and anticompetitive practices.

Fan Fiasco: Ticketmaster faced the music after its handling of Taylor Swift’s “Eras” tour back in 2022. The platform crashed under the weight of millions of Swifties trying to secure Eras Tour tickets, leaving fans feeling anything but ‘Fearless’. Adding insult to injury, fans who bought tickets for a Bad Bunny concert in Mexico had their perfectly valid tickets rejected as fakes due to glitches in the scanning machines. The result? A sold-out stadium that was half-empty all night.

Ticket Tyranny: Ticketmaster currently controls over 80% of the market for primary ticket sales in America’s largest venues, while also boasting exclusive deals with many arenas and stadiums around the country. It seems the company is holding the industry’s golden ticket.

Unraveling Union: Once upon a time, in the far-off year of 2010, LiveNation and Ticketmaster decided to tie the knot, with the former acquiring the latter. But it seems the honeymoon period is over. Regulators are now playing the role of relationship counselors, suggesting that this corporate marriage might need an undo button. For LiveNation, this could be the equivalent of a heartbreak ballad.

sources: (VOX), (WSJ), (Reuters)

CURRENCIES

Mexican Peso is on fire🥵

Peso Power: The Mexican Peso has been flexing its muscles this year, standing tall as the only major currency to gain weight and appreciate in value against the dollar. Looking back, it’s been on a fitness regime since the end of 2016, bulking up by almost 25%. In 2023, it sprinted ahead with a 15% surge against the dollar, representing the best performance of any currency, and its not even close.

Bull Run Rodeo: Hedge funds have been riding the Peso bull trend like cowboys at a rodeo, pushing the currency to new heights. It seems everyone wants a piece of this bullish fiesta.

Trade Tango: The Peso’s dance card has been full thanks to the shifting landscape of international trade. The US has been leading Mexico around the dance floor, moving its imports away from China. This has left Mexico as the belle of the ball, becoming the largest exporter of goods to the US. And this dance doesn’t look like it’s ending anytime soon.

Homecoming: Another trend fueling the Peso’s party has been the “Nearshoring” shift. Countries like the US and Canada are bringing their manufacturing facilities back from Asia and closer to home. This has sparked a fiesta of GDP growth for Mexico, which is set to outpace even the US in 2024.

Interest Intrigue: Finally, Mexico’s central bank (Banxico) has been playing hard to get, keeping rates significantly higher than their peers. With rates currently sitting at a lofty 11.25%, there’s plenty of room for a rate cut down the line. But for now, the allure of higher yields has increased the demand for Mexican debt.

sources: (Bloomberg), (BNN), (Mexperience)

MORE NEWS

Additional market-moving events🌎

• Middle-East Update: David Cameron, the UK’s foreign minister said during his visit to Israel that Israel has “clearly decided“ to retaliate against Iran for the missile and drone attacks over the weekend. (The Guardian)

• ASML Disappionts: ASML reported quarterly earnings with mixed results. The company topped profit estimates, however bookings came in shy, reporting €3.6 billion in bookings vs €5.4 billion expected. Management maintained full year guidance. (Reuters)

• Buying Up AI Real Estate: Microsoft Invests $1.5 Billion in UAE AI Firm G42. The two firms will also collaborate to bring advanced AI and digital infrastructure to nations in the Middle East, Central Asia and Africa. (PYMNTS)

• Adidas Is Back: Adidas raises yearly outlook after better-than-expected first quarter. (Reuters)

• Airlines Rally: United Airlines reported Q1 earnings which sent shares up over 17% sparking a rally across all airline stocks, after reporting strong demand for travel and a rebound in business travel. Additionally, Biden announced enforcement of consumer protection laws on airline travelers. (Quartz)

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