🔐Paramount Secures the Merger

Good afternoon! An ancient treasure chest has been unlocked—in crypto. Mt. Gox, once the largest Bitcoin exchange, is repaying $9B to creditors after its 2014 collapse. The payout includes 140K Bitcoin, recovered from the 950K hacked a decade ago. Back then, Bitcoin traded at $600; now, it's ~$60K—a 10,000% return. Ironically, getting locked in bankruptcy was a blessing for these investors. Can't say the same for FTX users, who missed a 270% $BTC rally and are only getting interest on their original balances.

MARKETS

• The S&P 500 reached its 35th all-time high of the year today after a volatile trading session. The Nasdaq also climbed throughout the afternoon, achieving a new all-time high, while the Dow slipped from positive to negative territory mid-session and did not recover. -

• Bond yields fluctuated as investors anticipated Thursday's CPI report to gauge if inflation has cooled enough for the Fed to consider rate cuts.

• Oil prices dropped amid talks of a cease-fire between Israel and Hamas starting this weekend.

• Bitcoin hit a four-month low following the German government's liquidation of $900 million in cryptocurrency today.

STOCK
Winners & Losers

What’s up 📈

• Morphic Holding soared 75.06% following the announcement that Eli Lilly will acquire the drugmaker for $3.2 billion in cash.

• Corning jumped 11.98% as management raised earnings guidance for the next quarter due to increased demand driven by the AI boom.

• SolarEdge increased 9.26% after Bank of America analysts upgraded the stock from “underperform” to “neutral,” citing significant upside potential and minimal downside risks.

• Lucid climbed 7.85% after reporting a 70% rise in deliveries for the second quarter.

• Intel surged 6.15% after a Melius Research analyst predicted the company could be a major AI winner in the second half of the year.

What’s down 📉

• Greenbrier Companies sank 9.10% after missing Wall Street’s earnings expectations.

• ServiceNow dipped 5.04% following a downgrade to “sell” by Guggenheim analysts, who cited growing risks in the second half of the year.

• Devon Energy fell 1.11% on news of its $5 billion cash and stock acquisition of portions of Grayson Mill Energy.

AIRLINES
Boeing's Sky-High Crisis

Boeing has agreed to plead guilty to a conspiracy fraud charge related to the fatal 737 Max crashes, which brands the U.S. aerospace giant as a felon but spares it from a trial. The company will pay a $243.6 million fine and install a third-party monitor to oversee compliance. This deal aims to help Boeing move past its safety and manufacturing crises as it works to regain trust and stability in the market.

Under the plea agreement, Boeing faces a fine of up to $487.2 million, though the Justice Department recommended crediting Boeing with half that amount due to a previous settlement. An independent compliance monitor will be installed for three years, and Boeing is required to invest at least $455 million in compliance and safety programs. The company's board will also meet with crash victims' family members.

The plea deal stems from allegations that Boeing misled regulators about a flight-control system on the Max, implicated in the two crashes—Lion Air in October 2018 and Ethiopian Airlines in March 2019—that killed 346 people. The Justice Department unveiled the deal months after prosecutors claimed Boeing violated a 2021 settlement that protected it from prosecution for three years.

Despite the plea deal, family members of the crash victims oppose it, arguing it unfairly benefits Boeing and fails to hold the company fully accountable. They have urged the judge to reject the deal and proceed to a public trial to expose all facts.

Meanwhile, the airline industry faces its own set of challenges. Despite having the busiest week in months, airlines struggle to turn a profit due to high labor costs and fuel supply chain disruptions. The NYSE Arca Airline Index is down nearly 16% year-to-date. Budget airlines like Spirit Airlines and Frontier Group Holdings have also been downgraded due to turbulence ahead, including shifting consumer preferences and slower international travel.

However, there are bright spots. Southwest Airlines rose 1.50% after activist investor Elliott Investment Management engaged with company leadership. Delta Airlines is expected to report strong earnings on Thursday, with analysts forecasting $2.37 earnings per share, a significant increase from the previous quarter. Delta's performance could provide insights into how airlines are navigating current industry headwinds.

NEWS
Market Movements

• Meta’s Twitter Clone, Threads, has 175 million monthly users since launching a year ago, says CEO Mark Zuckerberg

• Only 18.2% of fund managers outperformed the market in the first half of this year, a decline from H1 2023

• Saks Fifth Avenue owner HBC is acquiring Neiman Marcus for $2.65B. The deal will merge the two department stores — along with Saks Off Sth and Bergdorf Goodman — into the new Saks Global

• The FTC blocked Tempur Sealy’s $4B acquisition of Mattress Firm, claiming it would compress competition and raise mattress prices for millions of customers

• Eli Lilly to acquire Biotech firm Morphic in $3.2 Billion deal

• Peter Thiel’s pro-doping Olympics alternative called the “Enhanced Games” wants to raise $300 million

• The world's largest amusement park operator has emerged as Six Flags finalizes its $8 billion merger with Cedar Fair

MEDIA
Paramount Begins a New Chapter

Paramount Global has agreed to merge with Skydance, concluding months of negotiations and ending the Redstone family's control over the storied movie studio and CBS network. The deal, approved by Paramount's special committee, appoints Skydance founder David Ellison as CEO and former NBCUniversal CEO Jeff Shell as president.

The buying consortium, including RedBird Capital Partners and KKR, will invest over $8 billion into Paramount and acquire National Amusements, valuing it at $2.4 billion. Paramount's Class A shareholders will receive $23 per share, while Class B shareholders get $15 per share, totaling $4.5 billion for public shareholders. Skydance will also add $1.5 billion to Paramount's balance sheet.

"This marks a new era for Paramount," said Jeff Shell on a call with investors.

The merger, subject to regulatory approval and expected to close in Q3 2025, includes a 45-day "go-shop period" for Paramount to seek other offers. Shari Redstone, chairman of National Amusements, stated the merger will "fortify Paramount for the future."

Despite the merger, Paramount faces challenges with a weak advertising market, declining cable TV subscriptions, and an unprofitable streaming platform, Paramount+. Paramount stock fell about 5% following the announcement.

David Ellison aims to revitalize Paramount+ and restructure the company, but with three CEOs currently in place, the future remains uncertain. UBS analyst John C. Hodulik maintains a "sell" rating on the stock, citing limited visibility on M&A and ongoing pressures in TV and streaming.

Investors should adopt a "wait and see" approach, given the many uncertainties surrounding Paramount's future profitability and management structure.

Calendar
On The Horizon

This Week

Let's explore the crucial events and trends that might influence the market this week:

1. An abundance of macro data 

• A slew of economic reports are set to be released this week, including the key Consumer Price Index (CPI) and Producer Price Index (PPI).

• FED Chair Powell's testimony: Scheduled for Tuesday, he’s due to talk about the ‘Semi-Annual Monetary Policy Report’ in front of the Senate Banking Committee in D.C.

• OPEC monthly report: Dropping on Wednesday, this report includes data on oil production, demand forecasts, and economic outlooks.

• CPI Data: Out on Thursday, this measures the changes in the price level of a basket of consumer goods and services.

• PPI Data: Dropping on Friday, this tracks the changes in prices from the perspective of the producer (seller of goods).

2.  Earnings season frenzy

Major companies are releasing their Q2 quarterly earnings this week, including heavyweights like PepsiCo, Delta, and Citibank.

Here’s the lineup:

• Tuesday: Helen of Troy, Smart Global Holdings

• Wednesday: WD-40, PriceSmart, Manchester United

• Thursday: PepsiCo, Delta, Conagra

• Friday: JPMorgan Chase, Wells Fargo, Citibank