🤑 The Largest Tech Merger of All Time

MARKET UPDATE

Good Morning Investor! On Friday, shares of biopharmaceutical company Biohaven ($BHVN) rose 16% after announcing promising results from a pivotal study on troriluzole in treating Spinocerebellar Ataxia (SCA) — the absence of voluntary muscle coordination that affects gait stability, eye movement, and speech, showing a significant delay in disease progression by 50-70% compared to untreated patients.

In other news, The investment group run by US billionaire Dan Friedkin on Monday agreed to buy Everton FC, potentially ending years of uncertainty for the struggling English Premier League soccer club.

TODAY’S BIG HEADLINES

FedEx Signals Economic Alert as Profits Collapse

FTC Sues CVS, Cigna, and UnitedHealth for Jacking Up Insulin Prices

The Largest Tech Merger of All Time

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LOGISTICS

FedEx Signals Economic Alert as Profits Collapse📦

When Packages Speak Louder Than Words: FedEx ($FDX) decided to play Santa Claus and make Christmas come early, dropping off a package of quarterly earnings that left a taste in shareholders' mouths sourer than a lemon wrapped in a pickle soaked in vinegar. After this unwanted delivery, shares of the logistics powerhouse plummeted 15% on Friday, thanks to a steep profit drop and slashed its outlook, making its financials look much like a package marked "fragile" being tossed onto a truck.

• Quarterly profit fell over 24% from last year, a drop steeper than a cliff FedEx might use to "accidentally" lose your uninsured parcel. Revenue slipped by 0.5% — with the major force in global commerce also cutting its annual median earnings forecast by ~4.42%, lowering it from an average of $19.25 to $18.40 per share.

• Beyond the shift to less-profitable packages, FedEx is being squeezed by higher transportation and labor costs while contending with a surge in shipments from offshore retailers like Temu and Shein. Fortunately, Temu and Shein look set to have their unrelenting flooding of the American market curtailed by the Biden Administration. Because nothing says "free market" like government intervention, right?

Greenspan’s Indicator Flashes: Customers are opting for slower, cheaper shipping options, and this isn’t just a problem for the key player in global logistics — it’s a red flag for the broader economy. Believe it or not, FedEx was previously used as a key economic indicator by none other than former chairman of the Federal reserve, Alan Greenspan. Greenspan believed that changes in the number of packages FedEx shipped gave a good indication of the overall state of the economy.

When Even the Delivery Guy is Worried: The move to slower and cheaper shipping hints at widespread cost-cutting. CEO Raj Subramaniam also pointed out that “the magnitude of the Fed rate cuts ... signals the weakness of the current environment,” underscoring broader concerns. FedEx’s earnings may have arrived with next-day delivery, but they’ve left investors with some heavy concerns to unpack.

LAWSUITS & HEALTHCARE

FTC Sues CVS, Cigna, and UnitedHealth for Jacking Up Insulin Prices💉

FTC Swings at Pharmacy Benefit Managers: On Friday, the Federal Trade Commission (FTC) decided to play whack-a-mole with the three largest pharmacy benefit managers (PBMs). The unlucky contestants? CVS Health's Caremark Rx, Cigna's Express Scripts, and United Health Group's OptumRx. These middlemen, who've been playing a high-stakes game of monkey-in-the-middle between patients, drug companies, and pharmacies, are now accused of inflating insulin prices 1,200% over the past two decades. Shares of CVS ($CVS), United Health ($UNH), and Cigna ($CI) have all remained flatter than a pancake, despite this development. It seems Wall Street has a stronger stomach for controversy than most.

• Millions of people with diabetes need insulin to survive, much like how politicians need votes or cats need cardboard boxes. For years, many patients have been forced to pay arm-and-a-leg prices for a product that's cheaper to make than a bad cup of coffee. While out-of-pocket costs have recently gone down to $35 a month for many, questions linger like a bad smell about how the drug became so expensive in the first place. If the suit is successful, it could further drive down costs for patients at the pharmacy counter.

Masters of Smoke, Mirrors, and Price Hikes: PBMs are supposedly responsible for reducing drug prices, but the process is more complex than a Rubik's Cube in a blender, and critics say they're actually driving prices up for patients. The FTC claims a big issue is that PBMs' revenue is tied to rebates and fees, which are based on a percentage of a drug's list price. In other words, when it comes to insulin, higher prices mean fatter wallets for PBMs. It's like giving a fox the keys to the henhouse and expecting him to go vegan.

• According to the suit, while insulin became as unaffordable as beachfront property in Malibu, the PBMs collected billions of dollars in rebates and fees. The three PBMs named in the suit are the primary suspects given the fact that combined they control 80% of the market.

• In 2019, one in four insulin patients couldn't afford their medication, leading to some tragic outcomes.

A Symphony of Corporate Spin: A United Health OptumRx spokesperson, presumably with a straight face, said the FTC suit "demonstrates a profound misunderstanding of how drug pricing works," One might argue that's precisely the problem - nobody seems to understand how this pricing works, least of all the patients. Meanwhile, Cigna Group Chief Legal Officer Andrea Nelson described the suit as “unsubstantiated and ideologically-driven attacks” against PBMs, saying the FTC failed to consider the role of "the entire prescription drug supply chain."

SEMICONDUCTORS & HEDGE FUNDS

The Largest Tech Merger of All Time 🤑

Intel's Mid-Life Crisis: Intel ($INTC), a technological dinosaur, was founded way back in 1968 when computers were the size of small houses. At its peak during the dot-com bubble in August 2000, this silicon sugar daddy was the third-largest U.S. company, with a market cap of over $500 billion during the dot-com bubble in August 2000. Given its historical clout and longevity, you'd think this chip-making behemoth would've been first in line at the AI buffet, ready to gobble up the boom in demand.

• Instead, the stock is down 54% year-to-date, as the company has struggled to adapt to shifts in the chip market with the grace of a bull in a china shop. Intel's challenges began before the AI boom, but the company failed to anticipate market shifts that have favored rivals like Nvidia, now valued at a whopping $2.85 trillion.

Dreams are Made of... Takeovers?: It's not all doom and gloom in Silicon Valley. Last week, rumors spread that chip maker Qualcomm ($QCOM) was in preliminary discussions over a potential takeover bid for Intel. If this corporate marriage goes through, it would be the largest tech merger of all time, making other mergers look like small potatoes in comparison. Qualcomm's market cap is around $188 billion, and Intel's is around $93 billion - and got a small boost on the news. The largest tech merger to date was Microsoft's $69 billion acquisition of Activision Blizzard.

• Whether this corporate courtship would even be allowed is as uncertain as a weather forecast. Both companies are massive and strategically important, and given the strong antitrust landscape in Washington, this deal—one of the largest ever—won't proceed without a fight.

Wall Street's Favorite Blood Sport: Qualcomm won't be able to waltz away with Intel unchallenged. On Monday, news emerged that one of Wall Street's biggest and most notorious firms — Apollo, is considering a multi-billion dollar investment in Intel, likely around $5 billion, signaling their support for Intel's turnaround strategy. Intel, being a major recipient of capital commitments from the CHIPS Act, isn't going anywhere faster than a sloth on vacation. But it's clear that what was once the largest and arguably most historic American chipmaker needs some help to unlock its potential, regardless of who it comes from.

MORE NEWS

Additional market-moving events🌎

Japan’s IPO Market Heats Up: Tokyo Metro and Rigaku Holdings plan to raise over $3 billion in October IPOs. Tokyo Metro is aiming for $2.2 billion, potentially becoming Japan’s largest IPO this year, amid a strong Nikkei Stock Average. (WSJ)

UAE Chip Mega-Factories: TSMC ($TSM) and Samsung ($SSNLF) are in talks to build semiconductor mega-factories in the UAE, with potential investments exceeding $100B, though obstacles remain. (Reuters)

LinkedIn Scrapes Data for LLMs: LinkedIn — the job-finding platform-turned-social network where people bare their souls and tenuously link their personal lives to B2B sales — has been quietly opting its users in to data scraping so it can train its large language models. (TechCrunch)

Disney Ditches Slack After Data Breach: Disney ($DIS) will phase out Slack by year-end after a hack exposed over one terabyte of data. The move is intended to streamline collaboration tools and reinforce work-related communication policies. (WSJ)

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