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Vested Shorts: $45B China’s gaming industry, $20B Adobe-Figma deal collapse, VIX drops 32%, and Netflix faces competition

by Parth Parikh
December 23, 2023
4 min read
Vested Shorts: $45B China’s gaming industry, $20B Adobe-Figma deal collapse, VIX drops 32%, and Netflix faces competition

In today’s edition

  • China’s gaming industry crackdown
  • Tech giants’ antitrust challenge
  • VIX is at its lowest level since the pandemic
  • Warner Bros. Discovery and Paramount’s potential merger

Market Snapshot

US stock markets concluded Friday with mixed results, yet they extended their weekly gains for the eighth consecutive week. This positive trend is fueled by recent data indicating a slowdown in inflation and robust consumer activity, boosting investor optimism for potential Federal Reserve rate cuts and a smooth economic trajectory in the new year.

At the Friday close, the S&P 500 was up by 0.8% for the week, while the Dow Jones edged down slightly but still posted a 0.2% weekly gain. The Nasdaq Composite saw a weekly increase of 1.2%. The 10-year Treasury note yield experienced a marginal rise, and the CBOE Volatility Index (VIX) fell, indicating reduced market anxiety.

Heading into the end of 2023, US stock markets are set to recover from last year’s losses, with the S&P 500 up nearly 24%, contrasting its 19% drop in 2022. The Dow Jones and Nasdaq Composite are also showing robust gains of 12% and 44% respectively, reversing their previous year’s declines of 9% and 33%. This upturn reflects a resilient market bolstered by positive economic indicators and optimism about easing inflation.

Market closing data for the week from December 18th to 22nd, 2023

News Summaries

The VIX, the stock market’s primary indicator of volatility, has fallen 32% year-over-year, reaching its lowest point since the onset of the pandemic. This reduction in market volatility plays a critical role, as it influences the actions of various market participants including traders, investors, hedge funds, and investment bankers. A lower VIX typically results in heightened market activity, leading to more substantial investments, new bond issuances, and a spike in initial public offerings (IPOs). Bloomberg analysts suggest that this decrease in volatility in the equity market is likely to stimulate a wave of IPOs and other major financial deals in the upcoming year. The current diminished levels of the VIX indicate an increasing confidence within the market, potentially heralding a strong year-end performance and a surge in financial transactions on Wall Street.

In light of the decreased volatility indicated by the VIX, investors seeking diversification could consider Vested Edge, offering access to Peer-to-Peer (P2P) lending. This investment opportunity is notable for its potential to yield up to 11.5% per annum, offering a different risk-return profile compared to traditional equities. With its unique approach, Vested Edge diversifies investments across multiple RBI-regulated P2P platforms, thereby reducing exposure to individual borrowers and enhancing risk management. Vested Edge represents a strategic option for investors looking to capitalize on alternative investment avenues in a stabilizing market environment.

China’s gaming industry, the world’s largest with 650 million users and $45 billion in annual revenues, faced significant market upheaval following new regulatory measures from the National Press and Publication Administration aimed at curbing excessive consumption. The regulations triggered a sharp decline in stock prices for major companies like Tencent, which fell 12.4%, its largest drop in 15 years, and NetEase, down over 24% in Hong Kong. This regulatory move, part of President Xi Jinping’s “common prosperity” campaign, has shifted focus from restricting children’s gaming exposure to limiting adult spending and in-game microtransactions. The impact was immediate, with the Hang Seng Tech index dropping 4.4% and affecting other gaming companies like Krafton in Seoul. Despite reassurances from Tencent, the new rules signify a major shift in China’s approach to regulating its tech giants and the online gaming sector.

Due to regulatory challenges, Adobe and Figma have called off their proposed $20 billion merger, initially announced in September 2022. The decision to abandon the merger, a mix of cash and stock, reflects the increasing intensity of antitrust scrutiny in both the U.S. and internationally. Despite efforts to convince regulators, including detailed discussions about the distinct nature of their businesses and markets, the companies were unable to secure the necessary approvals from key regulatory bodies like the European Commission and the UK Competition and Markets Authority. This termination underscores the heightened vigilance of antitrust regimes globally and their impact on corporate acquisitions, especially in the tech industry.

Warner Bros. Discovery (WBD) and Paramount Global are discussing a potential merger. This merger, valued with WBD at around $29 billion and Paramount just over $10 billion, could significantly reshape the media landscape, creating a formidable competitor to Netflix and Disney+. The discussions, still in early stages, could lead to the merging of key assets like Paramount+ and WBD’s Max streaming services, as well as combining their news and sports broadcasting capabilities. Amid the increasing pressure of cord-cutting and competition from Big Tech, this potential merger, which is yet to be finalized, aims to strategically position both companies in a rapidly evolving media industry.

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