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Vested Shorts: $34B ad business, Luckin overtakes Starbucks, 75% decline in lithium price, and crisis at Binance

by Parth Parikh
November 25, 2023
3 min read
Vested Shorts: $34B ad business, Luckin overtakes Starbucks, 75% decline in lithium price, and crisis at Binance

In today’s edition

  • Binance is paying a hefty $4.3 billion
  • Luckin vs. Starbucks
  • Amazon’s innovative strategy: 13 million viewers tuned in
  • Klarna’s success
  • Lithium’s market downturn

Market Snapshot

In a shortened session, US stocks showed mixed results, with the S&P 500 and Nasdaq Composite recording their fourth consecutive week of gains. Expectations of a pause in Federal Reserve rate hikes and potential robust holiday shopping buoyed investor optimism.

The S&P 500 rose, ending the week up by 1%, while the Dow Jones gained 1.3%. The Nasdaq, however, dipped marginally on Friday but still managed a 0.9% gain for the week. Retail stocks like Target and Walmart performed strongly, reflecting hopes for a strong shopping season.

Looking ahead, the market focus is on the Black Friday weekend sales, with major retailers in the spotlight. Upcoming earnings reports from companies like Dollar Tree, Salesforce, and Dell Technologies are also anticipated, offering further market insights.

Market closing data for the week from November 20th to 24th, 2023

News Summaries

Binance, the world’s leading cryptocurrency exchange, has confessed to breaching anti-money laundering norms and violating US sanctions. This comes amid intensified scrutiny in the crypto sector, highlighted by the recent conviction of Sam Bankman-Fried for fraud and conspiracy. Investigations revealed that Binance facilitated nearly $900 million in transactions between American and Iranian users and was used for illegal activities, including terrorism and cybercrime. As a consequence, Binance faces a hefty $4.3 billion fine, with its CEO Chengpeng Zhao (CZ) personally fined $50 million and required to resign. This development reflects the growing regulatory pressures on crypto exchanges, as evidenced by the SEC’s recent lawsuit against Kraken, another major player in the space.

Luckin Coffee has surpassed Starbucks to become China’s largest coffee chain, boasting 10,829 locations compared to Starbucks’ 6,480 as of September 2023. This rapid expansion, averaging 16.5 new stores daily, is attributed to its aggressive growth strategies, affordable pricing, and innovative approaches, like smaller store formats and app-based ordering. Despite a past accounting scandal and a $180 million SEC penalty, Luckin rebounded with successful restructuring and collaboration strategies, such as introducing popular local flavors and partnerships with traditional Chinese brands. Starbucks’ pioneering role in introducing coffee culture to China ultimately paved the way for Luckin’s swift market capture and dominance, showcasing a significant shift in consumer preferences in a traditionally tea-drinking nation.

Amazon is redefining Black Friday traditions by streaming a football game on Prime Video, blending live sports with interactive shopping. This initiative is part of Amazon’s strategy to expand its $34 billion advertising sector, allowing viewers to purchase products directly during the game. With an average viewership of 13 million per game, up 25% from last year, the event is set to capitalize on the high traffic of Black Friday, where US online spending is projected to hit $10 billion. Amazon’s venture into “content-to-commerce” marks a significant shift in digital advertising, targeting the vast TV advertising market and adapting to the shift of younger audiences from cable to streaming.

Klarna Bank AB, a leading fintech company, has received approval from the UK’s Financial Conduct Authority (FCA) to offer various credit and payment products, except its flagship buy-now-pay-later loans, in the UK market. This authorization, crucial for its operations, especially as Brexit-related temporary approval nears expiration, allows the Stockholm-based company, through its UK entity Klarna Financial Services UK, to continue offering term loans, card products, and open banking-based payment services. This development comes as Klarna reports its first quarterly operating profit in four years and prepares for an IPO, serving approximately 150 million global customers. The FCA’s approval emphasizes the company’s compliance with regulatory standards, including responsible lending and support for vulnerable customers, positioning Klarna on a stable regulatory foundation in the UK’s financial market.

Lithium, a crucial component in electric vehicle batteries, has witnessed a significant decline, dropping 75% in 2023 due to a supply glut following its price surge in previous years. Chinese prices for lithium carbonate fell 2.3% recently, marking a continuous drop since October. Benchmark Mineral Intelligence forecasts the global lithium market will not experience a deficit until 2028, attributing the current oversupply to elevated interest rates and resulting uncertainty in EV demand. Industry leaders like SQM and Albemarle Corp. have noted the persistent downward trend, leading some producers to scale back operations as prices fall below sustainable levels for reinvestment, indicating a challenging period ahead for the lithium industry.

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