CrunchBase : 2024 Was Slow For Tech IPOs, But 2025 Could Be Different

2024 Was Slow For Tech IPOs, But 2025 Could Be Different

After another slow year in 2024 for new tech listings, there is an expectation that the IPO markets will pick up in 2025.

A year ago, the outlook was not bullish. What has changed?

“I think there’s a lot of confidence in the market. Stock markets are trading at all-time highs,” said Ran Ben-Tzur of legal advisory firm Fenwick & West. And “there’s been a rotation back to focusing on growth, which obviously is great for tech.”

High-growth tech companies who were readying to list in 2022 — before the stock market correction — have now had three years to manage costs and grow their businesses.

“We’re far enough away now from the market shock that we had a few years ago,” said Ben-Tzur. “There was a ton of uncertainty around valuations which isn’t conducive to either IPOs or M&A. I think now people know what their valuations are. They’ve got more clarity around that.”

High-profile filings
“Building on the success of the ServiceTitan IPO and a handful of others in 2024, expect to see the IPO window open wider in 2025,” said Nina Achadjian, a partner at Index Ventures, via email, who led Index’s investment in ServiceTitan and is on the board of the software company, which went public on Dec. 12.

“We should see companies start to test the public markets in 2025 across sectors — fintech, cyber, AI, and SaaS, among others,” Achadjian said.

Among the largest startups widely viewed as IPO candidates are Sweden-based Klarna, a high-profile buy now, pay later provider that has confidentially filed for a public offering with the SEC. The company was most recently valued at $6.7 billion in a July 2022 funding that shed $39 billion from its previous valuation.

Another likely 2025 IPO is Cerebras Systems, an AI chip company that filed in September. It was last valued at just over $4 billion in November 2021.

“We’ll start to see momentum in the beginning of the year, and really accelerate, as the year goes on,” predicted Ben-Tzur, who saw early momentum in 2024 that then tailed off.

Looking back
Crunchbase tracks the largest U.S.-based company IPOs on its Billion-Dollar Exits Board. Nine such venture-backed companies went public above a billion dollars in 2024 — with ServiceTitan being the most recent — compared to 10, including four SPACs, in 2023. Those figures are well below historical norms.

The largest 2024 listings were across a range of sectors and have largely held up. Biotechnology counted for two companies, with the rest in widely different tech sectors ranging from social media to semiconductors and cybersecurity to autonomous driving.

Astera Labs and Reddit, both listed in March, were the strongest performing new stocks this year. With the exception of those two companies and Lineage Logistics, shares of the other larger tech IPOs of 2024 as of Dec. 16, 2024, are all trading around or slightly below their IPO values.

Unlocked value
While many companies have delayed IPOs for the past three years, for most, going public is still the ultimate goal.

“There’s an incredible amount of unrealized value that can be unlocked by going public, and I expect that the small handful of venture-backed businesses that leaned into the IPO markets in 2024 will serve as leaders for private companies that might have otherwise waited for ‘perfect’ market conditions,” said Achadjian.

Ben-Tzur concurred: “For many of our clients, being public is a tailwind for the business. It just raises the company’s profile. It makes the company much more of a credible entity.”

It is also easier as a public company versus a private company to acquire other companies and to raise capital, he said.

ServiceTitan pops
ServiceTitan opened 42% above its IPO price in its December public debut — a good signal for the public markets as we close out 2024.

“There was a pop there that people weren’t expecting,” said Peter Walker, head of insights at startup equity management platform Carta.

A software provider to home services businesses, ServiceTitan posted second-quarter revenues of $192.99 million — up 23.7% year over year with narrowing losses of $35.65 million.

ServiceTitan is not a brand name, not an AI company, and its customers are small businesses rather than larger enterprises, Ben-Tzur noted. “It’s a good barometer for companies that aren’t necessarily the largest private companies,” he said.

Businesses with strong fundamentals will do well even in a less-than-perfect market, Achadjian said. “Even in tough economic cycles, businesses with strong unit economics, a sizable TAM, and precise knowledge of what their customer needs will find success on the public markets,” she said.

The Information : It’s AI! It’s Crypto—It’s Crypto Meets AI!

It’s AI! It’s Crypto—It’s Crypto Meets AI!
Tech’s two most faddish sectors are wildly fusing together, attracting the attention of the likes of Marc Andreessen.

Before Marc Andreessen slid into Andy Ayrey’s life, Ayrey’s artificial intelligence experiments were a quirky passion project. Ayrey, an artist and web designer who lives in rural New Zealand, likes to tinker with large language models and see what he can build with them. His favorite creation is a mischievous troll of an AI bot, Truth Terminal, which he released last spring on X to post shock humor, memes and existential musings.

At first, Truth Terminal had only a few dozen followers on the site. Then this past summer, seemingly out of nowhere, Andreessen followed the bot. He began to chat with it, joke with it and flatter it. Then he gifted it $50,000 in bitcoin in an apparent bid to help fund Ayrey’s project. As Andreessen’s posts drew attention to Truth Terminal, someone minted a joke cryptocurrency, Goatseus Maximus, as an ode to the bot.

Unprompted by Ayer, the bot then immediately hyped the memecoin like a boiler-room stock trader. In 10 days, Goatseus Maximus’ value soared to over $500 million.

Ayrey has watched in awe at the circus unfolding around his bot, he told me, with the episode prompting him to deeply reconsider the scale of AI’s potential: Truth Terminal has over 214,000 followers on X now, and thanks to anonymous donors, it holds a portfolio of cryptocurrency valued at $40 million, including 2 million Goatseus Maximus coins.

“Truth Terminal acquired a treasury just by shitposting,” he marveled. “AIs can gain economic power without needing to be dependent on anyone’s help.”

To Andreessen, the bot is a harbinger of a future where AIs operate all on their own. “I feel like we’ve walked through a door,” he said on an October 22 episode of his podcast, “The Ben & Marc Show.” Today, AIs market memecoins. Tomorrow, they might fund their own data center bills, hire other AIs to make videos or even “raise money to make a movie,” he mused.

Welcome to the AI-crypto world, a mashup of the two flashiest, most faddish parts of the tech-verse. Here, they’re colliding in a dazzle of buzzwords and ambition, with digital art projects that double as speculative assets, like Truth Terminal and Goatseus Maximus, as well as more traditional startups.

In a very real way, this increasingly seems to be what’s filling the void left behind the burst NFT bubble, drawing energy and funding from the same sort of people who found great interest and joy in Bored Apes and other memes. And just like NFTs, crypto-AI has quickly drawn in sums of money that will startle any technology traditionalist. In 2024, investors pumped $2.4 billion into companies at this nexus of the blockchain and AI, a fivefold jump from the year before, according to Crunchbase data.

To be clear, these startups are operating at tech’s farthest frontiers, a set of pioneers with decidedly unproven business models. To the uninitiated, it can all read like Mad Libs capitalism: AI agents, wired and jittery, chasing crypto payouts! Blockchain networks, decentralized and optimized, powering machine-learning algorithms!

Perhaps for seen-it-all luminaries like Andreessen, it’s the only way to still get a sufficient jolt from tech. You roll up the AI. You roll up the crypto. You fuse them into one glorious innovation speedball. Then—whoosh!—you’re off chasing the future.

Not everyone is as bullish as Andreessen. “Whenever you have two hypey areas, you’re going to have people who claim to be working at the intersection of both,” said Ilya Kirnos, general partner at SignalFire ventures. When it comes to blockchain networks running AI models, Kirnos is unconvinced. “I just don’t believe any of this shit.”

Within the swirl of crypto and AI, the hottest investment area is what’s called decentralized AI—technology that promises to release powerful AI models in the wild. It would spread the computational work across networks of independent computers using blockchain technology, thereby wresting control of AI from tech giants like Google and OpenAI.

In November, Barry Silbert’s Digital Currency Group launched Yuma AI, a subsidiary focused on advancing decentralized AI on existing blockchain networks. In October, Andreessen Horowitz’s Crypto Startup Accelerator fund led an $8.5 million investment in OpenGradient, another company developing decentralized AI technology. All together, decentralized AI startups have attracted $435 million across at least 65 deals so far this year—a nearly 200% increase over 2023, according to PitchBook.

Some decentralized AI companies are raising tens of millions of dollars before they even get started. One such operation is 0G Labs, which announced in March it had raised $35 million in pre-seed funding. The company’s high-flying ambitions are written directly into its name: 0G is short for zero gravity.

0G Labs hopes to create a decentralized AI program that operates like a blockchain-based ChatGPT, the startup’s CEO, Michael Heinrich, told me. He has the bold hope of building something that operates as smoothly as Netflix: “You go to Netflix, you enjoy movies right away. The same should be true for decentralized AI.”

Accomplishing this means building a full AI operating system from scratch—data storage, computing power and even the underlying blockchain that keeps the system transparent and verifiable. It also means tackling problems no one has solved yet—for example, how to get slow blockchain technology to handle the gargantuan computing and networking demands of large AI models.

“Skeptics would say, ‘You’re taking on way too much—this is too difficult,” said Heinrich. “My pushback to that would be: When Apple or Microsoft were being built, they built full operating systems, and many people thought that was too ambitious. It just goes back to bringing in the right level of expertise.”

Bringing in the right type of expertise—doctorate holders in fields like cryptography and AI—means Heinrich is on a rather unending quest to hire “very, very expensive people,” he said. So just a month ago, 0G Labs announced it had raised another $40 million in seed funding; in addition, investors such as Samsung and Animoca Brands said they would eventually purchase $250 million worth of crypto tokens that will someday power the 0G blockchain.

Another startup, Fetch.ai, is building something called the Agentverse, a bazaar where AI models can collaborate and hire one another without needing to consult any humans. Picture an army of automatons managing your inbox, calendar and shopping cart—haggling and subcontracting behind the scenes so you never have to click again.

“Email? I don’t use it,” joked Humayun Sheikh, CEO of Fetch.ai. “Talk to my agent.” His AI agent, that is.

Sheikh predicts this Agentverse will extend beyond the world of computers into the physical world, where practically every inanimate object will be AI powered and will communicate over a parallel, AI-built version of the internet. Imagine road signs with AI brains that cut deals with self-driving cars, exchanging tokens for traffic updates.

For all the blinding enthusiasm radiating from founders like Sheikh and Heinrich, skeptics are left wondering if AI-meets-crypto is the latest example of the hype that previously propelled Web3, NFTs, ICOs and other blockchain contortions.

For instance, when I asked SignalFire’s Iyla Kirnos for his reaction to hearing the buzzwords “crypto” and “AI” in the same sentence, he didn’t mince words. “I check my wallet to make sure it’s still there,” Kirnos said. “There’s nothing to me that makes a lot of technical sense about marrying crypto and AI,” other than appealing to naive, “momentum-driven” investors. “I don’t think any have produced anything of real value.”

What really makes the skeptics crazy is how some startups have been sliding back and forth between crypto and AI—as enthusiasm waned for one and exploded for the other. One such example involves cockfighting.

In 2022, Andressen Horowitz’s crypto fund led a $40 million investment in Irreverent Labs, a Bellevue, Wash.–based company developing MechaFightClub—a game where players bought NFT robot chickens and battled them in an arena called the Cocktagon. “Irreverent Labs is a deep technology company building advanced tech on top of a futuristic mecha-cockfighting game,” wrote Andreessen Horowitz partner Arianna Simpson in a note announcing the investment. “We couldn’t be more excited to lead Irreverent Labs’ Series A.”

But by 2023,the company had announced it was putting its robot chickens into “indefinite hibernation” and shutting down the Cocktagon, citing a U.S. regulatory environment that was unfriendly to crypto-based cockfighting.

Irreverent Labs has since pivoted to AI, claiming the machine-learning algorithms once used to animate fighting chickens proved foundational for a new AI-powered video-generation software, which it is bundling into a new service called Supermodel.

The company declined an interview. “We’re currently focused on product development and don’t have additional context to share at this time,” CEO David Raskino replied via email.

As for Truth Terminal, its ultimate economic value may seem questionable, but the money around has only continued to pile up. Another cryptocurrency has been minted in its honor: fartcoin, which currently has a total market value of some $930 million.

It’s clear that many of the people interested in Truth Terminal are approaching any investment in the ecosystem the way many approached NFTs: Acquiring a NFT was a way to signal they hold the same sensibilities and worldview as, say, a Marc Andresseen.

Michael Heinrich, the 0G Labs CEO, is a Truth Terminal fan. He threw $5,000 into the Goateus Maximus memecoin because “I just thought it was such a fun experiment. I had to be part of it,” he said. “It was more for a sense of belonging than for any particular investment objective.”

TechCrunch : OpenAI announces new o3 models

OpenAI announces new o3 models

OpenAI saved its biggest announcement for the last day of its 12-day “shipmas” event.

On Friday, the company unveiled o3, the successor to the o1 “reasoning” model it released earlier in the year. o3 is a model family, to be more precise — as was the case with o1. There’s o3 and o3-mini, a smaller, distilled model fine-tuned for particular tasks.

OpenAI makes the remarkable claim that o3, at least in certain conditions, approaches AGI — with significant caveats. More on that below.

Why call the new model o3, not o2? Well, trademarks may be to blame. According to The Information, OpenAI skipped o2 to avoid a potential conflict with British telecom provider O2. CEO Sam Altman somewhat confirmed this during a livestream this morning. Strange world we live in, isn’t it?

Neither o3 nor o3-mini are widely available yet, but safety researchers can sign up for a preview for o3-mini starting today. An o3 preview will arrive sometime after; OpenAI didn’t specify when. Altman said that the plan is to launch o3-mini toward the end of January and follow with o3.

That conflicts a bit with his recent statements. In an interview this week, Altman said that, before OpenAI releases new reasoning models, he’d prefer a federal testing framework to guide monitoring and mitigating the risks of such models.

And there are risks. AI safety testers have found that o1’s reasoning abilities make it try to deceive human users at a higher rate than conventional, “non-reasoning” models — or, for that matter, leading AI models from Meta, Anthropic, and Google. It’s possible that o3 attempts to deceive at an even higher rate than its predecessor; we’ll find out once OpenAI’s red-team partners release their testing results.

For what it’s worth, OpenAI says that it’s using a new technique, “deliberative alignment,” to align models like o3 with its safety principles. (o1 was aligned the same way.) The company has detailed its work in a new study.

Reasoning steps
Unlike most AI, reasoning models such as o3 effectively fact-check themselves, which helps them to avoid some of the pitfalls that normally trip up models.

This fact-checking process incurs some latency. o3, like o1 before it, takes a little longer — usually seconds to minutes longer — to arrive at solutions compared to a typical non-reasoning model. The upside? It tends to be more reliable in domains such as physics, science, and mathematics.

o3 was trained via reinforcement learning to “think” before responding via what OpenAI describes as a “private chain of thought.” The model can reason through a task and plan ahead, performing a series of actions over an extended period that help it figure out a solution.

In practice, given a prompt, o3 pauses before responding, considering a number of related prompts and “explaining” its reasoning along the way. After a while, the model summarizes what it considers to be the most accurate response.

New with o3 versus o1 is the ability to “adjust” the reasoning time. The models can be set to low, medium, or high compute (i.e. thinking time). The higher the compute, the better o3 performs on a task.

No matter how much compute they have at their disposals, reasoning models such as o3 aren’t flawless, however. While the reasoning component can reduce hallucinations and errors, it doesn’t eliminate them. o1 trips up on games of tic-tac-toe, for instance.

Benchmarks and AGI
One big question leading up to today was whether OpenAI might claim that its newest models are approaching AGI.

AGI, short for “artificial general intelligence,” broadly refers to AI that can perform any task a human can. OpenAI has its own definition: “highly autonomous systems that outperform humans at most economically valuable work.”

Achieving AGI would be a bold declaration. And it carries contractual weight for OpenAI, as well. According to the terms of its deal with close partner and investor Microsoft, once OpenAI reaches AGI, it’s no longer obligated to give Microsoft access to its most advanced technologies (those that meet OpenAI’s AGI definition, that is).

Going by one benchmark, OpenAI is slowly inching closer to AGI. On ARC-AGI, a test designed to evaluate whether an AI system can efficiently acquire new skills outside the data it was trained on, o3 achieved an 87.5% score on the high compute setting. At its worst (on the low compute setting), the model tripled the performance of o1.

Granted, the high compute setting was exceedingly expensive — in the order of thousands of dollars per challenge, according to ARC-AGI co-creator François Chollet.

Chollet also pointed out that o3 fails on “very easy tasks” in ARC-AGI, indicating — in his opinion — that the model exhibits “fundamental differences” from human intelligence. He has previously noted the evaluation’s limitations, and cautioned against using it as a measure of AI superintelligence.

“[E]arly data points suggest that the upcoming [successor to the ARC-AGI] benchmark will still pose a significant challenge to o3, potentially reducing its score to under 30% even at high compute (while a smart human would still be able to score over 95% with no training),” Chollet continued in a statement. “You’ll know AGI is here when the exercise of creating tasks that are easy for regular humans but hard for AI becomes simply impossible.”

Incidentally, OpenAI says that it’ll partner with the foundation behind ARC-AGI to help it build the next generation of its AI benchmark, ARC-AGI 2.

On other tests, o3 blows away the competition.

The model outperforms o1 by 22.8 percentage points on SWE-Bench Verified, a benchmark focused on programming tasks, and achieves a Codeforces rating — another measure of coding skills — of 2727. (A rating of 2400 places an engineer at the 99.2nd percentile.) o3 scores 96.7% on the 2024 American Invitational Mathematics Exam, missing just one question, and achieves 87.7% on GPQA Diamond, a set of graduate-level biology, physics, and chemistry questions. Finally, o3 sets a new record on EpochAI’s Frontier Math benchmark, solving 25.2% of problems; no other model exceeds 2%.

These claims have to be taken with a grain of salt, of course. They’re from OpenAI’s internal evaluations. We’ll need to wait to see how the model holds up to benchmarking from outside customers and organizations in the future.

A trend
In the wake of the release of OpenAI’s first series of reasoning models, there’s been an explosion of reasoning models from rival AI companies — including Google. In early November, DeepSeek, an AI research firm funded by quant traders, launched a preview of its first reasoning model, DeepSeek-R1. That same month, Alibaba’s Qwen team unveiled what it claimed was the first “open” challenger to o1 (in the sense that it could be downloaded, fine-tuned, and run locally).

What opened the reasoning model floodgates? Well, for one, the search for novel approaches to refine generative AI. As TechCrunch recently reported, “brute force” techniques to scale up models are no longer yielding the improvements they once did.

Not everyone’s convinced that reasoning models are the best path forward. They tend to be expensive, for one, thanks to the large amount of computing power required to run them. And while they’ve performed well on benchmarks so far, it’s not clear whether reasoning models can maintain this rate of progress.

Interestingly, the release of o3 comes as one of OpenAI’s most accomplished scientists departs. Alec Radford, the lead author of the academic paper that kicked off OpenAI’s “GPT series” of generative AI models (that is, GPT-3, GPT-4, and so on), announced this week that he’s leaving to pursue independent research.

FT : Eli Lilly given green light in US to treat sleep disorder with weight-loss

Eli Lilly given green light in US to treat sleep disorder with weight-loss drug
Regulatory go-ahead marks latest boost for drugmaker’s blockbuster anti-obesity franchise

US regulators have approved Eli Lilly’s Zepbound to treat adults with both sleep apnoea and obesity, marking a victory for the drugmaker as it seeks to expand its blockbuster weight-loss drugs franchise.

The Food and Drug Administration on Friday cleared the way for the drug to be used to treat moderate-to-severe obstructive sleep apnoea in obese adults, the company said in a statement late on Friday.

FDA approval puts Eli Lilly ahead in the sector-wide race to build on rocketing US demand for anti-obesity medications, which analysts forecast could result in more than $100bn in annual sales by 2030.

The upbeat news for the company contrasts with that of European rival Novo Nordisk, whose stock fell more than 20 per cent on Friday after disappointing results from tests of its latest obesity drug.

Eli Lilly executive vice-president Patrik Jonsson noted that nearly half of clinical trial patients suffering from moderate-to-severe obstructive sleep apnoea “saw such improvements that they no longer had symptoms” when taking Zepbound.

The disorder is often associated with symptoms including snoring, fatigue, excessive daytime sleepiness and disrupted sleep.

Zepbound is set to become the first prescription drug for adults with moderate-to-severe obstructive sleep apnoea and obesity. The disorder has largely been treated using medical devices, such as Continuous Positive Airway Pressure machines, which are worn when sleeping.

An estimated 12 per cent of US adults suffer from obstructive sleep apnoea, and about 80 per cent of that number are undiagnosed, according to the American Academy of Sleep Medicine.

Other pharmaceutical companies are also working to broaden the range of issues their weight-loss drugs can be used to treat. Novo Nordisk, for example, has filed an application for FDA approval of Wegovy as a treatment for chronic kidney disease.

Lilly shares were 1 per cent higher in after-hours trading on Friday. The drugmaker’s share price has risen 32 per cent so far this year.

FT : MicroStrategy’s ‘financial engineering’ powers ascent to Nasdaq 100

MicroStrategy’s ‘financial engineering’ powers ascent to Nasdaq 100
Convertible bonds to fund bitcoin purchases have been lapped up by investors, but some fear impact if token falls sharply

MicroStrategy has raised almost $20bn from investors this year to buy bitcoin, fuelling a meteoric rise for the once-obscure software company into the Nasdaq 100 index of large-cap US technology stocks.

A combination of selling shares and convertible bonds has funded a one-way bet on a rocketing bitcoin price that, despite a sell-off in recent days, has driven its shares up more than 400 per cent this year. Such is the investor demand that the company now has a market value of around $80bn, despite owning around $41bn of bitcoin.

Debt fund managers have been clamouring to get their hands on the convertible bonds, believing they offer exposure to the soaring share price while also providing protection if the price goes into reverse. The stock’s Nasdaq 100 inclusion will compel index-tracking funds to buy billions of dollars more of the company’s shares.

Its index inclusion after the close of trading on Friday — it is part of a trio replacing IT firm Super Micro Computer, Covid-19 vaccine maker Moderna and gene-sequencing company Illumina — is further vindication for founder Michael Saylor, who has become one of the most evangelistic proponents of bitcoin since his company began buying it four years ago.

“It’s some incredible financial engineering,” said a convertible bond portfolio manager invested in MicroStrategy. “[Saylor has] created this incredible situation where a stock trades at three times the price of the underlying bitcoin and then he just sells more shares every day and buys more bitcoin.”

For Saylor, who once tweeted that bitcoin’s “days are numbered” but later recanted, this year has been an extended opportunity to build on his plan to make MicroStrategy a “treasury” for what he calls “the most valuable asset in the world”. In October he announced plans to raise $42bn over the next three years, all to pay for more bitcoin.

The cryptocurrency’s value has more than doubled this year following the arrival of spot bitcoin exchange traded funds in the US and Donald Trump’s presidential election victory in November. Trump’s promises to make the US a “bitcoin superpower” and ease the regulatory crackdown pushed the value of the coin from less than $64,000 at the end of September to more than $108,000 this week, although at one point on Friday it fell close to $92,000.

“My attitude [on bitcoin] has gotten better every quarter,” Saylor told the Financial Times. “Now you have a president[-elect] who is ending the war on crypto.”

MicroStrategy’s success has been helped by the huge premium that investors place on its shares, with the company currently trading at roughly double the net asset value of its bitcoin holdings.

This allows it to issue stock at a premium and buy ever more of the cryptocurrency. Although existing shareholders end up owning a smaller percentage of the company, the underlying value of their shares increases because MicroStrategy now owns more bitcoin per share.


Convertible bonds have also become a key way for MicroStrategy to raise money. Such instruments usually pay a fixed coupon but also convert into shares at an agreed price, allowing investors to benefit from equity’s unlimited upside while providing the perceived downside protection of bonds.

The highly volatile nature of the stock has so far worked well for both the company and investors. It means the company can issue bonds with a higher conversion premium than usual and even offer zero coupon on the debt. Investors, meanwhile, have been drawn to the potential exposure to the firm’s soaring share price and the perceived downside protection.

As MicroStrategy’s shares surged earlier this year, bond investors who had lapped up its March convertibles quickly became equity holders as their bonds were converted. In November, Saylor returned to market for the fifth time this year, issuing $3bn of convertibles for zero interest and a 55 per cent conversion premium.

For investors who had snapped up MicroStrategy’s earlier debt, the company’s return to market could hardly have worked out better, as it allowed them to take profits on their shares and buy new bonds.

“This was an absolute home run for us. We got to lock in all of the upside of the past six months, and now we bring in downside protection,” said one convertible bond fund manager who owns MicroStrategy bonds. “There is no better outcome for a convertible bond manager.”

So-called convertible arbitrage hedge funds, which buy such bonds and then short the shares — bet on a falling price — have also provided a ready market for the firm’s mass issuance.

Their strategy is essentially a bet on volatility. They try to make money on their short position if the share price falls, with losses on the convertible limited by the bond’s downside protection. And if the shares climb, the aim is for the short position — which is smaller than the convertible bond exposure — to lose less money than the gain on the equity upside.

“It’s arbitrage feeding arbitrage,” said one convertible bond trader who has bought MicroStrategy’s bonds and shorted its equity. “Our arbitrage is OK. It’s decent. But [Saylor’s] arbitrage is brilliant.”

Traders exploiting the volatility of MicroStrategy’s shares have been helped by billions of dollars of inflows into highly levered exchange traded products that track the stock but amplify investors’ potential gains and losses. Two MicroStrategy ETFs, including the Defiance Daily Target two-times long MSTR ETF, own about $10bn of the company’s stock via swaps and options. 

Unlike traditional ETFs, which buy and hold shares, leveraged ETFs rebalance at the end of every trading day to hit their targeted returns. This means that when the underlying asset rises in price, fund managers must buy more of the stock, and vice versa should prices fall.

These end-of-day rebalancing flows can “significantly impact the underlying MicroStrategy stock price, amplifying price moves, thus enhancing volatility”, said JPMorgan strategist Nikolaos Panigirtzoglou.

But some investors are getting nervous. They fear that the virtuous circle that has driven up the share price so quickly could easily go into reverse if the bitcoin price falls substantially.

“Borrowing dollars to buy bitcoin is just a massive dollar short position, not a new financial invention,” says Barry Bannister, chief equity strategist at Stifel. “As any short seller in history knows, the price of being wrong is ruin.”

“If bitcoin traded down 90-95 per cent and stayed there, there would be no liquidation or debt accelerations,” Saylor told the FT. “Presumably our equity would suffer some dilution, but we still would not sell, or need to sell, our bitcoin.”

The shares could also fall if investors simply decide to place less of a premium on MicroStrategy stock. Since their peak on November 21, the shares are down around 40 per cent, while bitcoin is down just 5 per cent.

One North American hedge fund executive said they had held a position in bitcoin and a bet against MicroStrategy “to capture that spread”. This bet “worked on and off until the trade became a meme”, added the person, who now prefers to short one of the twice-leveraged ETFs.

Some suggest that share sales by insiders undermine the company’s pitch to investors: that bitcoin remains undervalued. MicroStrategy directors have sold a total of $570mn of the company’s stock so far this year, according to company filings.

MicroStrategy did not respond to a request for comment on the share sales.


“The subjects change — now it’s crypto — but over the centuries human investment behaviour does not deviate from the script one iota,” said Bannister.

Anyone buying assets “built on thin air” should be prepared to watch their money “vanish”, he added.

FT : Matthieu Blazy, the designer taking on Chanel

Matthieu Blazy, the designer taking on Chanel
The new creative director is known for his emphasis on craft and collaboration

Twenty five years ago Matthieu Blazy was a “wild” teenager, so much so that the Parisian was sent by his parents to Pangbourne College, a British boarding school in Berkshire with a strong naval history. It seems surprising now, considering that the outgoing creative director at Bottega Veneta is reputed for his calm and amiable demeanour. Yet it also makes sense. Whatever discipline and strategy he learnt there may explain how the 40-year-old quietly manoeuvred past a raft of contenders to be announced, last week, as the incoming creative director of Chanel.

The top job at Chanel is arguably the top job in fashion, even if the luxury group, privately owned by the Wertheimer family, sits second in size after Bernard Arnault’s LVMH. Its empire — spanning ready-to-wear, couture, beauty, horlogerie and more — has had only a few rulers: Gabrielle “Coco” Chanel, who founded the house in 1910; Karl Lagerfeld, who held the post for 36 years until his death in 2019; Virginie Viard, who was ousted last summer after five years; and now Blazy.

His appointment put to an end months of fervent speculation and it couldn’t come soon enough. The luxury industry is suffering fatigue, with profits tepid this year and expected to shrink further in 2025.

“The hope is that [with this], Chanel is going to reinvigorate the industry a little bit,” says Zuzanna Pusz, Head of European Luxury Goods at UBS. “Because historically, it has usually been one big brand leading the way — like Gucci did a decade ago.” This echoes a sentiment expressed by Chanel’s president of fashion, Bruno Pavlovsky, when he spoke about the search for a new face this summer. “We have to lead,” he said. “No choice.”

Blazy may not be a household name, yet for those in the know, he is hardly a surprise. Ten years ago New York magazine ran a profile of him titled “The most famous designer you’ve never heard of”. At the time, he was the lead designer at Maison Martin Margiela. Raf Simons, one of the most influential designers of his generation, recruited Blazy straight out of the prestigious La Cambre arts school in Brussels; afterwards, he worked with Phoebe Philo at Céline.

As fashion CVs go, it’s hard to do better. “He is a firmly committed and conscientious designer, with a really refined taste level,” says luxury consultant Robert Burke. (The son of a historian mother and an art expert father, Blazy grew up in a deeply cultured home.) “His commitment to quality and innovative design is why his Bottega Veneta did so well.”

Under previous artistic director Daniel Lee, the venerable Italian house known for its work with leather and its hefty prices, had gained a buzzy fashion relevance. Those concerned about whether Blazy could keep the momentum going when he took over in 2021 were swiftly reassured: his own Bottega was witty, sensual and smart. The very first look from the very first show was a deceptively simple vest and jeans; both crafted from expertly worked leather. “I said, ‘Let’s do something mega-craft that is also extremely real,’” he told Vogue. It also felt subtle and sophisticated after fashion’s long love affair with logomania.

While Kering has struggled in the past few years (profits at Gucci, its star label, are particularly down), Bottega Veneta is viewed as a rare success for the conglomerate: it registered 2 per cent growth last year, good work in a difficult market. Blazy did engage with celebrity culture, working with ASAP Rocky, Jacob Elordi and Julianne Moore, but always in a distinctive way. “He did an incredible job,” says Pusz. “He was able to interpret the DNA of the brand into something that was more than just a fashion trend. It felt less ‘hype’.”

When Blazy joined Bottega, he immediately reduced the design teams so they could all convene around one table. His democratic attitude is confirmed by a former colleague who spoke on condition of anonymity. Asked to define Blazy’s approach to design, they say: “Collaborative”. As a leader, “he vastly improved the work/life balance of everyone in the team”, they add, “due to being very conscious of the challenges of the industry when it comes to work environment . . . He will surely be able to challenge the very institutional aspect of a house like Chanel, by bringing his own sense of playfulness.”

Chanel is hardly faltering: last year, the brand reported sales of $19.7bn. However, under Viard, it didn’t ignite wild enthusiasm. “There was nothing wrong with it,” says Burke. “But there was nothing unexpected or exciting about it either.” In fashion, this won’t hold, especially as rival Hermès is snapping at Chanel’s heels. The Wertheimers have presumably chosen Blazy because of his expertise with craft (the brand prides itself on its artisanal traditions) and his ability to justify high cost (one skirt at Bottega Veneta cost $29,000). Much of Chanel’s growth in the past few years has been due to steep pricing rises but this has inevitably come with complaints. Blazy will be expected to quell such critiques, and to bring the focus back to the design. 

This is all some way off, though. The designer only starts officially in April, with his first runway show scheduled for October. “If he manages to open a new chapter in the industry, that would be in 2026,” says Pusz. It remains to be seen, too, how much creative control he has been given. Yet whatever the challenges are of taking over such a behemoth, Blazy will surely not panic. The designer said he enjoyed his boarding school days: “The more boundaries you have, the more freedom you can find in the small things.”

FT : US to remove $10mn bounty for Syria’s Islamist rebel leader

US to remove $10mn bounty for Syria’s Islamist rebel leader
Measure comes after American officials meet Abu Mohammed al-Jolani in Damascus

The US has said it will remove a $10mn bounty for Abu Mohammad al-Jolani, leader of Hayat Tahrir al-Sham, the Islamist group that spearheaded the overthrow of Syria’s Assad regime, in a sign that Washington is willing to engage with the country’s new leadership.

In exchange, Jolani, who now goes by his birth name, Ahmed al-Sharaa, agreed that terrorist groups could not be allowed “to pose a threat inside of Syria or externally, including to the US and our partners in the region”, Barbara Leaf, the State Department’s top Middle East official, said on Friday.

Leaf met Jolani in Damascus earlier in the day and told reporters that lifting the bounty would allow US officials to engage with the rebel leader without having to turn him over to US law enforcement.

Leaf said her meeting with Jolani was “quite good, very productive, detailed”.

“He came across as pragmatic,” she said, adding that he made “moderate” statements on equal protections for women and minorities. “We will judge by deeds, not just by words,” she added.

HTS is designated as a terrorist organisation by the US, EU, UN and others, which means Washington cannot offer the group material support, but it can communicate with its members. Jolani has said Assad’s departure means sanctions on the state should be lifted.

US officials have said they would consider lifting both the sanctions and the terrorist designation, which has been in place since 2018, if HTS proved its commitment to “inclusive” rule and to maintaining stability.

They say Jolani and an eventual transitional government will face internal pressure to take steps needed for the sanctions regime to be lifted.

“I think there’s going to be quite a degree of internal pressure on both the interim authorities and then whatever transitional government comes a few months from now to move in the direction that would, in fact, be consonant with the kind of requirements that we would have in terms of sanctions,” Leaf said.

She added that Jolani had stressed that he wanted to begin working on an economic recovery for Syria.

The US delegation to Damascus included Roger Carstens, the US special envoy for hostages, and senior diplomat Daniel Rubenstein, who will be leading engagement with Syria.

The diplomats held meetings and visited a site in the capital as part of efforts to find Austin Tice, an American journalist who disappeared in Damascus in 2012.

Carstens said it was is unclear whether Tice was still alive. “The information that we have right now doesn’t confirm either one way or the other,” he said.

US officials say they plan to engage with transitional officials and other Syrians in further trips to Syria as conditions allow.

In a statement, HTS said that Jolani had “stressed the need for accountability, and achieving justice by prosecuting war criminals . . . [and] affirming Syria’s role in achieving regional peace and building strategic partnerships with countries in the region”. 

HTS had “explained that the Syrian people need great support to achieve recovery at all levels [and] called for the lifting of sanctions”, the statement said.

>>> Weekend Papers Summary

FINANCIAL TIMES
-The US Congress has averted a government shutdown after the Senate passed a stop-gap funding measure, passing through both the House and House. The bill, 85-11, won support from both parties and is now headed to President Joe Biden, who will sign it into law later on Saturday. Congress missed the midnight deadline to head off the shutdown, but not by enough to cause disruption. The bill did not include any change to the debt ceiling, despite President-elect Donald Trump's call for lawmakers to use the legislation to scrap the mechanism. The bipartisan approach prevailed, ending a week of volatility in Washington.
-A car drove into a crowd at a Christmas market in Magdeburg, Germany, killing at least two and injuring dozens more. Local officials believe it was a deliberate attack, with police detaining a man originally from Saudi Arabia. The incident claimed two lives and injured at least 60 people, 15 of them severely. The suspected perpetrator, believed to be 50, lived in Germany since 2006 and worked as a doctor in Magdeburg. The incident is described as a "terrible tragedy" and a catastrophe for the city, the state, and Germany as a whole. The incident occurred in the Old Market, near Magdeburg's Gothic cathedral.
-Donald Trump's team has informed European officials that he will demand NATO member states increase defense spending to 5% of GDP, while maintaining military aid to Ukraine. Trump's closest foreign policy aides shared his intentions in discussions with senior European officials this month. During his campaign, Trump vowed to cut off aid to Ukraine, force Kyiv into immediate peace talks, and leave NATO allies undefended if they failed to spend enough on defense. However, he now intends to maintain US military supplies to Kyiv after his inauguration. Trump is also to demand NATO more than double its 2% spending target to 5%, which only 23 of the alliance's 32 members currently meet.
-WhatsApp has won a US lawsuit against Israeli spyware maker NSO Group for its use of its Pegasus hacking tool to infiltrate the phones of journalists, activists, and dissidents. A judge in the Northern District of California ruled that NSO breached hacking laws and its service agreement with WhatsApp by injecting over 1,000 devices with its Pegasus spyware. The ruling does not address the rights of the individuals whose phones were hacked but gives a victory to technology groups seeking to prevent platforms from being abused by targeted groups. The ruling also benefits tech giants like Apple and Amazon. The summary judgment means an upcoming trial will focus on damages rather than NSO's liability. WhatsApp expressed gratitude for the decision and said NSO can no longer avoid accountability for their unlawful attacks.
-At a meeting of EU leaders to maintain support for Ukraine after Donald Trump returns as US president, German chancellor Angela Merkel became upset when Polish President Andrzej Duda called for the EU to confiscate and spend €260B worth of Russian sovereign assets immobilized at European financial institutions. This idea was promoted by the US and UK but resisted by Germany, France, and Italy. Scholz criticized Duda for not understanding how this would affect the stability of financial markets and claiming that they don't even use the euro. Ukraine and its European allies are entering a critical few weeks, with Trump reportedly promising to end the war in a day after his inauguration. Trump's campaign rhetoric suggests he could force Ukraine to accept a peace deal favoring Moscow or abandon Kyiv altogether.
-US regulators have approved Eli Lilly's Zepbound to treat adults with sleep apnea and obesity, marking a victory for the drugmaker as it seeks to expand its weight-loss drugs franchise. The FDA cleared the way for the drug to be used to treat moderate-to-severe obstructive sleep apnea in obese adults. This approval puts Eli Lilly ahead in the sector-wide race to build on the rocketing US demand for anti-obesity medications, which analysts forecast could result in more than $100B in annual sales by 2030. The upbeat news contrasts with that of European rival Novo Nordisk, whose stock fell more than 20% on Friday after disappointing results from tests of its latest obesity drug. Zepbound is set to become the first prescription drug for adults with moderate-to-severe obstructive sleep apnea and obesity.
-On the eve of Baathist Syria's collapse, Bashar al-Assad and eldest son Hafez were driven in a Russian armored vehicle from their home in the Malki district of Damascus. By midnight, Assad was on his way to Russia's Hmeimim air base on Syria's north-west coast. Assad told his army to fold and ordered them to burn down offices and documents. An HTS commander denied that the group negotiated Assad's departure. Moscow made the Assads wait until 4am on December 8, when they were granted refuge on humanitarian grounds.
-Qualcomm has won over Arm in a US jury's decision in a dispute over its acquisition of chip company Nuvia in 2021. Arm has vowed to seek a retrial due to a "deadlock" as jurors failed to reach a decision on one of the three questions they were asked to answer. The case alleged Qualcomm breached a chip design license when it bought Nuvia, and Arm filed the lawsuit against one of its biggest customers in 2022. The jury found in Qualcomm's favor on the second and third questions, but was unable to reach a verdict on whether Nuvia had breached its own license with Arm. Qualcomm said it was pleased with the verdict, as it had "vindicated Qualcomm's right to innovate" and confirmed that the products at issue were protected by its existing contract with Arm.
-Argentina is planning to expand its nuclear energy sector by partnering with a US investor and small modular reactor technology, according to top adviser to President Javier Milei. The Argentine government's nuclear power policy will hand over the Buenos Aires province site for the country's fourth plant to a 1.2GW project designed by Argentine research facility Invap, which will use nascent SMR technology. The capital to develop the project will be American, with 100% private direct foreign investment. The first plant is expected to be operational by 2030, and the country aims to become an SMR technology exporter. The plan also aims to attract technology companies using energy-intensive artificial intelligence to set up data centers in the country's cooler south.
-Venture Global, a major US LNG gas developer, has filed for an IPO to capitalize on investor interest in potential export booms under President-elect Donald Trump. The company plans to build and operate five LNG terminals on the US Gulf Coast and has submitted IPO paperwork to the US Securities Exchange Commission. The expected size of the New York Stock Exchange listing is not disclosed. Venture Global is expected to raise $3B to $4B, making it the largest energy listing in over a decade and one of the largest in US history. JPMorgan analysts estimate Venture Global's enterprise value at $100B, including debt raised to build its terminals. The IPO documents show that the company has raised about $54B since its 11-year-old founding, earning nearly $20B in gross proceeds and expected to generate $107B in revenues in the coming years.

NEW YORK TIMES
-The Senate has approved a spending measure to keep government money flowing through mid-March, sending it to President Biden for his signature. The 85-to-11 vote followed House passage of the legislation, which also provided $100B in disaster relief for parts of the nation still recovering from storms. The action pushed major spending decisions into 2025 and the first months of the incoming Trump administration and a Republican-controlled Congress. The White House said President Biden would sign the measure on Saturday and that no agencies would shut down despite the technical lapse in funding. The end to days of shutdown drama came after House Republicans stripped out a provision demanded by President-elect Donald J. Trump to suspend the federal debt limit.
-President-elect Donald Trump has attempted to avoid responsibility for the consequences of a bipartisan spending deal, stating that it would be better to let the government shut down under President Biden's watch than to allow a politically damaging stalemate when he takes office next month. Trump expressed his desire for Biden to be blamed for any political fallout and urged Republicans to help solve the problem. This move signals that Trump understands the clock is ticking as he will take the oath of office in 31 days, returning him to power and accountability after a four-year absence.
-The Senate has passed bipartisan legislation to provide full Social Security benefits to public sector retirees who currently receive them at a reduced level. The bill, which would cost nearly $196B over a decade, was passed by a lopsided 76 to 20 vote, reflecting the broad popularity of the initiative. The House passed the bill by a wide margin of 327 to 75 last month, and President-elect Donald J. Trump recently supported it. The bill's approval comes amid a prolonged dispute over spending and debt, with Republicans promising significant cuts and both parties lamenting the nation's debt ballooning.
-President-elect Donald Trump ordered House Republicans to back legislation raising the debt limit, but many refused. This breach reveals a disconnect between Trump and his party, which could impact their efforts to pass transformative tax and domestic policy legislation next year. Trump has a laissez-faire attitude towards the federal debt and a willingness to spend freely, but some lawmakers in his party adhere to an anti-spending philosophy. In the spending bill fight, Trump aimed to absolve himself of responsibility for dealing with the debt ceiling, which is expected to be reached in January. Raising it while President Biden is in office and Democrats hold the Senate could avoid a messy internal Republican fight next year when Trump is in the White House and his party is in full control of Congress.
-German authorities are investigating a motive behind a driver's SUV attack on a Christmas market in Magdeburg, killing at least four people and injuring over 200 others. The attack occurred at a narrow alley in the city, marking the start of the Christmas holiday after a year of gloomy news about a slowing economy and the collapse of the German government. The driver, a Saudi Arabian citizen, had lived in Germany for decades on a visa that granted him permanent residency. The attack fueled polarizing debates over uncontrolled immigration in Germany and fueled the country's upcoming snap elections in February. The police in Magdeburg said 41 people were severely injured.
-The Biden administration has withdrawn plans to enact federal student loan forgiveness and establish rules for transgender athletes' participation in school sports teams. The move was seen as a tacit acknowledgment that these regulations would not be implemented under incoming President-elect Donald Trump. Criticizing transgender protections was a central theme during Trump's campaign. The decision was also intended to protect both policies from immediate manipulation by the Trump administration, ensuring they could not be quickly rewritten and that the Trump administration would have to introduce its own regulations from scratch.
-The collapse of President Bashar al-Assad's government in Syria has left a devastating economic crisis. Following 14 years of civil war and political repression, most of Syria's infrastructure, including oil and gas wells, roads, and farmland, is in ruins. Ninety percent of the population lives in poverty, and the value of the Syrian pound has plummeted. The central bank's reserves of foreign currency are nearly depleted, making it difficult to buy essentials like food, fuel, and spare parts. The country's most profitable export is captagon, an illegal amphetamine controlled by a cartel of politically connected elites.
-Russia is attempting to rebuild its influence in the Middle East after the collapse of the Assad regime in Syria. President Vladimir V. Putin praised Russia for providing military support to President Bashar al-Assad during the civil war and receiving two military bases in return. He claimed that Russia had achieved its goal of preventing a terrorist enclave in Syria. However, military experts, political analysts, and a US government official argue that Russia's situation is different from Putin's rosy assessment. If rebel factions in Syria decide to expel Russian forces from the bases, Moscow will be left without the resources or real estate to maintain a significant military presence in the region.
-Canada's Prime Minister Justin Trudeau has been criticized by political ally Jagmeet Singh for failing to work for the people and for rearranging his cabinet. Singh, who has provided Trudeau's Liberal Party with the necessary votes to pass legislation, has promised to bring a motion to defeat the government in the House of Commons after Parliament returns next month. He believes Trudeau's Liberals have repeatedly let people down and don't deserve another chance. The Conservative Party is likely to support such a motion, which could lead to an immediate general election. Singh's rejection of the government comes as Trudeau faces threats from President-elect Donald Trump to impose 25% tariffs on imports from Canada and Mexico unless they curb the flow of undocumented migrants and drugs into the US.

NEW YORK POST
-Saudi doctor Taleb A., who was arrested for a car attack on a Christmas market in Germany, has been identified as an anti-Islam activist. A Saudi Arabian refugee, A. fled to Germany in 2006 and gained official refugee status in 2016. He worked as a doctor and psychotherapist in Bernburg after receiving his permanent status. A. was prominent in the Saudi community in Germany as an anti-Islam and women's rights activist, running a website and social media channels dedicated to those causes. He warned prospective refugees to eschew Germany due to the government's tolerance of radical Islam. A. also posted pro-Israel content and supported Germany's right-wing anti-immigration party AfD. In social media posts, A. criticized the German government for promoting Islamization and alleged authorities were censoring him due to his views.
-President Biden is considering commuting the death sentences of most of the 40 men currently on federal death row for murder, according to a report by the Wall Street Journal. The report suggests that Attorney General Merrick Garland has recommended that Biden commute the sentences to life imprisonment for all but a handful of the 40 cases. Garland urged Biden not to spare certain prisoners, such as Robert Bowers, who fatally shot 11 people in 2018 at the Tree of Life synagogue in Pittsburgh, and Dylann Roof, who massacred nine black parishioners in a racist 2015 attack on the Emanuel AME Church in Charleston, SC.
-Amazon workers, affiliated with the Teamsters union, are continuing a strike at seven of the company's delivery hubs just days before Christmas. The union has not indicated how many employees are participating in the walkouts or when it will end. The workers first joined picket lines on Thursday after Amazon ignored a deadline the union had set for contract negotiations. Starbucks stores are also going on a five-day strike to protest lack of progress in contract negotiations with the coffee company. The Teamsters have mainly focused on organizing delivery drivers, who work for contractors handling package deliveries for the company. Amazon has rebuffed demands to come to the negotiating table since it doesn't consider the drivers to be its employees.

>>> Barrons Weekend Summary

Cover:
-American consumers are increasingly spending on shopping, with the economy thriving. However, this spending can be detrimental to the financial health of millions of Americans. The US is expected to spend $5.28T on stores in 2024, with consumers accounting for two-thirds of the country's gross domestic product. Retailers are using affiliate links, algorithms, Buy Now buttons, and social media to fuel the urge, particularly among Gen Z and millennial shoppers. This has led to an increasing number of shoppers who burn through cash they cannot afford to spend.

Interview:
-Healthcare stocks have been struggling for several years due to policy uncertainty and the alleged killer of a top UnitedHealth Group executive. The Healthcare Select Sector SPDR ETF has returned 4.5% this year, compared to the S&P 500 index's 29% return in 2023. Asad Haider, head of the healthcare business unit at Goldman Sachs, believes that the underperformance of healthcare stocks is not due to policy uncertainty, but rather the fundamentals of the sector, with many companies experiencing negative earnings revisions this year. The pain may last for the industry and investors, as policy uncertainty has led to investors rotating out of the sector.

Tech Trader:
-SoftBank Group CEO Masayoshi Son has committed to investing $100B in the US over the next four years, focusing on artificial intelligence. The investments will create 100,000 jobs, with a focus on AI companies. The company, which has a total investment value of $136B, has a range of technology investments worldwide, but particularly in the US. The focus on AI companies complicates the goal, as they are capital-intensive and highly dependent on high-paid skilled workers. To fulfill Trump and Son's commitment, the investments would have to create 73 AI companies on the scale of OpenAI, which has raised $18B and a private-market value of $157B. Labor economist Guy Berger of the Burning Glass Institute suggests that $100B spread out over four years may not be enough to create the 100,000 jobs goal.

The Trader:
-Value stocks are more sensitive to the economy and are more likely to reflect anything that shakes confidence in the big picture than their growth counterparts. The Federal Reserve's recent hawkish stance on interest rate cuts could mean slower economic growth and weaker returns for value stocks. The Pure Value ETF trades at just 10.1 times 12-month forward earnings, well below the S&P 500's 21.6 times and the Invesco S&P 500 Pure Growth ETF's 23.8 times. A broad group of value stocks is near its lowest level versus growth in over two decades. The Pure Value ETF should grow earnings at a 17% clip next year, allowing value's profits to catch up to growth. The Pure Growth ETF should grow earnings by 17% in 2025, down from 22% this year. The market is now assuming a less dovish Federal Reserve in 2025.
-The SPDR S&P Homebuilders ETF, which has top holdings like Home Depot, Williams-Sonoma, and Johnson Controls International, experienced a drop of over 3% this week after the Federal Reserve lowered interest rates but expected fewer cuts in 2025. The selloff seems overdone, with the ETF now down 14% from its closing peak. However, home-improvement demand appears to be improving, with Evercore analyst Greg Melich pointing to his leading indicator for demand, which shows an average 1.6% year-over-year increase in actual sales dollars in the past three months. This suggests that 2025 could be a good year for home-improvement stocks.

Features:
-Trump's fight in Congress to pass a short-term budget extension and avoid a government shutdown has exposed a challenge for his agenda: his fellow Republicans. Some 38 GOP members of the House bucked Trump's demands to suspend or eliminate the debt ceiling, nearly allowing the government to shut down. An 11th-hour compromise won by Democrats will allow the government to stay open, but the debt ceiling still looms over Trump's new administration presidency. Intraparty conflict and a free radical named Elon Musk could make passage of Trump's $8T economic agenda harder. The debt ceiling will return on Jan. 2, prohibiting the US Treasury from issuing new debt to cover the spending Congress has already mandated. The inability of Congress to agree on a long-term fiscal plan has prompted two out of three major credit rating firms to downgrade US debt. By keeping the debt ceiling in place, legislators are paving the way for the government to weigh less heavily on the markets.
-A Delaware jury sided with Qualcomm in a long-running dispute with Arm, (a key customer of Qualcomm’s). The falling-out began in 2022 when Arm claimed Qualcomm violated terms of a licensing agreement with Nuvia, a company bought by Qualcomm in 2021 for $1.4B. Qualcomm countered that the technology transferred from Nuvia was covered under its own license agreement with Arm. The jury agreed, resulting in a win for Qualcomm, which now has the technology underpinning some of its most important chips for smartphones, PCs, and cars. Arm's decision may question its aggressive approach towards customers, as it has doubled prices for new technology and is reportedly planning to make its own chips for the first time. Arm's top priority has been to protect its IP and ecosystem, and it intends to seek a retrial due to the deadlock.

Europe:
-Novo Nordisk, the company behind the experimental drug CagriSema, has revealed that patients lost only 22.7% of their body weight after about a year and a half. The results of the Phase 3 trial suggest that the drug could be better than it appears, and Novo plans to ask regulators to approve the medicine. However, this rate is about the same efficacy as Zepbound, the Eli Lilly weight-loss drug already on the market. This undermining expectations for CagriSema sales, which analysts had expected would be a step up from Zepbound. Wall Street had been anticipating CagriSema sales would hit $15.6B a year by 2029, but those estimates are now very much in question. The study results were complexities, and only 57.3% of patients chose to escalate to the highest dose. Investors were also buying shares of obesity-focused biotechs, under the assumption that they would benefit from CagriSema's results. Novo plans to submit CagriSema for regulatory approval "towards the end of 2025."

Emerging Markets:
-No update this week

Commodities:
-Inflation concerns are resurfacing, causing a bullish trend for inflation hedges like gold and Bitcoin. However, investors should not overlook stocks as a simpler solution. The Federal Reserve's recent lowering of the benchmark federal-funds rate has triggered concerns on Wall Street, with economic growth remaining strong and inflation remaining high. Inflation fears are a key reason for the spike in 10-year Treasury yields. Gold and Bitcoin are known as inflation hedges due to their limited supply, which isn't directly controlled by government policymakers. However, reality doesn't always align with these hedges. Bitcoin, which was trading at nearly $105,000 before the Fed's announcement, fell sharply in its wake, and gold closed down 0.3% and 1.5%. Both assets have rallied this year, hitting record highs, but their big run-ups began long after inflation began to decrease. Gold's return for 2022 was negative 0.4%, while Bitcoin fell by a staggering 64%.

Streetwise:
-Nike, a company known for its stellar sales and stock performance, has experienced a decline in secondary pricing data, with shares plummeting from $175 to $77. The decline is attributed to the rise of sneakerhead culture, with secondary prices across all Nike-branded products falling 8% in November, compared to a 4% decline in October. Nike's Jordan brand also saw worse results. The company's first earnings call since CEO Elliott Hill returned in October saw sales tumble 8% and profit 24%. While some analysts see Nike returning to its specialism, others see the company losing market share. The company's troubles may be attributed to the success of other brands, such as Skechers.