A daily market update from FS Insight — what you need to know ahead of opening bell

“Truth is often eclipsed but never extinguished.” — Livy

Over the Weekend

Senior U.S. military leaders observed the next generation of unmanned fighting vehicles and other warfighting technology at a demonstration in California (Semafor)

FAA says laser strikes against planes are growing (Gizmodo)

Running $14.5 billion in model portfolios, the ninth-largest asset manager GSAM seeks to become one of the “top five” largest providers of model portfolios

State Street Corp. has spent more than a year preparing for faster settlement cycle known as T+1, which comes into effect late May

JPMorgan Chase, Cboe Global Markets are at loggerheads over whether the historic boom in options-selling ETFs has been fueling the calmest stock market since 2018

As the appetite for fledgling spot Bitcoin ETFs moderates, the group of 10 funds is on track to record its biggest weekly outflow since the products’ debut in January

India’s markets regulator asked local money managers to stop accepting new subscriptions for products investing in overseas ETFs as their value nears industry limit
Tesla curtails EV production in China (SA)
Alphabet named a Wedbush Best Idea (SA)

Vodafone’s $16.4B deal to combine its U.K. unit with CK Hutchison’s Three faces in-depth antitrust investigation (BBG) 

Robert Bosch, Lennox International, Samsung Electronics among industrial firms competing to acquire $6B+ of heating and ventilation assets from Johnson Controls (RT) 

Ageas will halt pursuit of U.K. insurer Direct Line Insurance Group after two rejected takeover proposals; its last offer valued Direct Line at ~$4.1B (BBG) 

Blackstone held informal talks with advisors over a $1.9B sale of flexible workspace provider The Office Group amid pickup in demand (BBG) 

Anthropic weighing a slate of SWFs to acquire FTX’s ~$1B, 7.84% stake in the AI startup (CNBC) 

Midstream company MPLX will acquire pipeline operator Summit Midstream Partners’ Utica assets for ~$625M cash (RT) 

Qualcomm ends bid to acquire Israeli automobile-focused chipmaker Autotalks due to regulatory hurdles (RT) 

A group of debt arrangers led by Morgan Stanley and JPMorgan priced $6.1B in high-yield bonds and leveraged loans to support Stone Point Capital and CD&R’s acquisition of Truist Financial’s insurance business (BBG) 

Banks and direct lenders are competing to arrange a ~$2B debt package to back the potential LBO of real estate and facility manager Apleona Group owned by PAI Partners (BBG) 

Cerberus-backed Electrical Components International held discussions with private credit firms for a new $1.1B loan to refinance the company’s debt (BBG) 

Swedish real estate group SBB will buy back debt worth $440M at a 60% discount to calm investor nerves (RT)

Senior lenders to  theater chain AMC are weighing options to tackle debt (BBG)

Chime, a fintech firm offering fee-free services, is targeting a 2025 US IPO; the fintech was valued at $25B in 2021 (BBG) 

Galderma soared 21% in its trading debut, giving the skin-care company a $16.7B market cap (BBG) 

$5.3B Hong Kong-listed Samsonite International is keeping the possibility of a take-private deal open as the luggage maker considers a dual listing in the U.S. (BBG) 

LatAm-focused health chain Auna fell 20% in its trading debut after its $360M US IPO, which was priced below a marketed range (BBG) 

Oman’s state energy company OQ picked HSBC for the listing of its exploration and production business and Morgan Stanley for its methanol and LPG unit (BBG) 

Walmart-backed digital marketing firm Ibotta filed for a U.S. IPO (RT)

Shareholders approved Digital World Acquisition Corp’s $5.7B merger with Trump Media & Technology Group (RT) 

Newmont kicked off the sale of its Akyem gold mine in Ghana, which is attracting interest amid soaring gold prices (BBG) 

Goldman’s hedge fund clients are getting active in crypto options (BBG)

Japan PE deals jump in otherwise gloomy year for Asia (BBG)

U.S. investment funds pull $13.3B from BlackRock in anti-ESG campaign (FT)

U.S. firms’ stock purchases via buybacks and M&A will hit 6-year high this year (RT)

Investors pour into U.S. corporate bond funds at record rate (FT)

Thiel, Bezos, Zuckerberg join parade of insiders selling tech stocks (FT)

CRE CLOs face unprecedented stress amid real estate pain (BBG)

Oil execs talk down shift to green energy amid booming profits (FT)

China blocks Intel and AMD chips in government computers (FT)

A banned trader worked ~20 years before regulators caught on (BBG)

Canada will cap number of mortgages to highly indebted borrowers (RT)

China is investigating PwC for role in Evergrande’s $78B fraud (BBG)

A Signa MD is under investigation for fraud (RT)

Cathie Wood’s ARK Invest scooped ~10k Reddit shares (RT)

Activist investor Politan is planning a second proxy fight for two more seats at Masimo (WSJ)

U.K. homes are more cramped than those in NYC (BBG)

Charts of the Day

First news

• Truth Social makes it to the public markets after an arduous uphill climb.

MARKET LEVELS

MORNING INSIGHT

Good morning!

SUPER GRANNIES: 5 Super and 5 Sleeper

Super Grannies (most timely) and Sleeper Grannies are derived from our core stock list of 36 ideas called Granny Shots.

• The rationale is: many clients ask us to narrow this list of 36 names down to a list of “fresh money” ideas.
• We established a criteria of 4 factors to narrow the list to tactical buys:
  – fundamentals using DQM model managed by Tireless Ken
  – IBD momentum rating
  – technical strength measured by Price >20 DMA, 20 DMA vs 200 DMA and combos
  – Mark Newton’s judgement on technical outlook

• We have 5 tactical buys aka Super Grannies
  – Arista Networks (ANET -0.53% ) <– carry over
  – Salesforce Inc (CRM -0.09% ) <– carry over
  – Meta Platforms (META 2.10% )
  – NVIDIA (NVDA -4.33% )
  – Cadence Design Systems (CDNS -0.24% )
• The bottom 5 “Sleeper Grannies” are:
  – Zscaler Inc (ZS -0.36% )
  – Garmin Ltd (GRMN 13.12% ) <– carry over
  – Apple (AAPL -0.60% )
  – Everest Group (EG 0.95% )
  – Palo Alto Networks (PANW -1.42% )

Click HERE for more.

TECHNICAL

Technical Write-ups of Super SMID Granny-shot picks:

• The first stock that deserves mention is Super Micro Computer, which remains on our list despite its minor consolidation over the last couple of weeks. It should be noted that after gains from January, where it started the year in the high 200s, it has moved from levels right near 275 up to over $1,200 in a period of ~2 months time.
• SMCI maintains significant momentum on an intermediate-term basis, and we have not seen any evidence of that ending despite short-term consolidation; intermediate-term momentum remains bullish.
• Near-term technical resistance lies right near prior 3/11/24 lows, i.e. 1025.
• Any ability to get over that level should bring about a push back to new all-time highs, which has initial resistance right near 1229; gains above that level likely would lead up to levels right near 1,300 to 1335.
• Unless we see SMCI get down under 855, I expect to see a push back to new all-time highs happen between now and potentially the middle part of April.

Click HERE for more.

CRYPTO

• Zkasino, a hyperchain rollup for on-chain gaming, closed a Series A round from investors including MEXC, Big Brain Holdings, Pentoshi, and Sisyphus, valuing the company at $350 million. Zkasino is powered by zkSync and EigenDA to allow anyone to build on-chain gaming platforms within minutes with no coding skills. All gaming protocols built on ZKasino will share aggregated liquidity, reducing bootstrapping requirements, and creating a positive gaming experience from day one. ZKasino also announced a $40 million ecosystem grant program for protocols to take advantage of and build on the ZKasino network. 
• Succinct, an infrastructure company aiming to make zk-rollups available for everyone, raised $55 million via a Seed and Series A deal led by Paradigm. Other investors included Robot Ventures, Bankless Ventures, Geometry, and ZKV. Succinct’s SP1 is the first 100% open source zero-knowledge virtual machine performant enough to rival custom ZK circuits. With SP1, developers can integrate ZK proofs into their products using normal programming languages and leveraging existing data libraries. Succinct is also working on its prover network, which will serve as a hosted infrastructure layer for any application looking to outsource proof-generation.
• Morph, a safer and more cost-effective rollup solution for consumer applications, raised $19 million in a seed round led by DragonFly Capital. Other investors included Pantera Capital, Foresight Ventures, The Spartan Group, MEXC, and others. Morph is aiming to create a seamless consumer blockchain with its decentralized sequencer, combination of optimistic and ZK rollup technology, and modular design. Developers building on Morph will have advanced tooling that will support projects through inception to potential token listings. The funding will be used for talent acquisition, increasing developer incentives, and expanding marketing efforts.

Click HERE for more.

FIRST NEWS

The Truth Shall Make You Free. Donald Trump’s Truth Social, a social media platform that had ~860k monthly users at the most recent estimates, is preparing to go public at a $5-plus billion valuation.

After a lengthy and tumultuous process, investors have approved a plan to take Truth Social, the social media platform founded by former President Donald Trump, public. The approximate paper value of Trump’s stake in the social media firm, set to go public this week, trading under the ticker DJT, is $3 billion. Shareholders of blank-check company Digital World Acquisition Corp. had approved a merger with the former president’s platform, the largest institutional shareholder of the former being ByteDance investor Jeff Yass. This move paves the way for Trump to potentially receive a $3 billion windfall, providing financial relief amid his ongoing presidential campaign and legal battles, including a deadline to obtain a bond to guarantee payment of a $454 million judgment against him in a civil fraud case. It remains uncertain whether the potential windfall from Truth Social will aid him in this situation.

Significant Risks 

As in any prospectus, potential investors are being warned about the risks associated with the new company. The merger prospectus outlines numerous potential pitfalls that investors should carefully consider before committing their funds.

1. Mounting losses and uncertain profitability. The company, dubbed Trump Media & Technology Group (TMTG), is currently losing money. In 2023 alone, TMTG recorded a mere 3.3 million in revenue while incurring operating costs of10.6 million. The prospectus candidly states that TMTG expects to incur operating losses for the foreseeable future, raising doubts about its ability to “continue as a going concern.” While the merger with the cash-rich DWAC would provide a temporary financial lifeline of ~$300 million, the new company must swiftly find a sustainable revenue stream.
2. Intense competition and changing landscape. TMTG was founded to counter perceived censorship by Big Tech, but the landscape has shifted. Twitter, now under Elon Musk’s ownership as ‘X,’ may embrace free speech principles, heightening competition for users who prioritize such values. Additionally, other tech platforms could potentially pivot away from their current stances, further intensifying the competitive landscape.
3. Divided attention. While Trump’s presence on Truth Social is a major draw for users, the prospectus acknowledges that his commitment to the platform is not ironclad. Trump is only required to post personal content on Truth Social first, with a six-hour exclusivity window before sharing it elsewhere. Crucially, he has the discretion to classify most of his content as “political,” which would not be subject to the exclusivity clause.
4. Legal troubles, uncertainties. The prospectus candidly addresses Trump’s extensive legal battles, noting that he is “the subject of numerous legal proceedings, the scope and scale of which are unprecedented for a former president of the United States and current candidate for that office.” While TMTG is not directly involved in these cases, adverse legal outcomes for Trump could potentially damage the company’s success, which relies heavily on his “popularity and presence.”
5. Potential conflicts of interest. Despite Truth Social being a public company, with 58.2% of the voting shares, Trump will wield significant control over it. This concentration of power raises concerns about potential conflicts of interest. As the prospectus states: “President Trump may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests.”

The journey to take Truth Social public has been a 30-month saga, marred by charges of insider trading and a fine to settle an SEC investigation. Nonetheless, the platform Trump established after being banned from mainstream sites in 2021 may prove to be his most lucrative investment to date.

The new company will be led by Devin Nunes, a former congressman and now Truth Social’s CEO. The board of directors will include Trump’s son, Donald Trump Jr., as well as notable figures such as Robert Lighthizer, the former U.S. Trade Representative, and Linda McMahon, the co-founder of World Wrestling Entertainment.

The success of the merger is largely attributed to strong support from Trump’s political base, who rallied on social media to buy shares of the SPAC, akin to the meme stock phenomenon during the pandemic. Their collective buying frenzy drove up the share price, incentivizing all parties involved to complete the deal despite initial skepticism from Wall Street analysts.

As Truth Social transitions to the public markets, uncertainty surrounding the stock’s future performance is in the news. While some anticipate volatility and a potential selloff, others remain optimistic about the platform’s prospects, citing Trump’s enduring popularity among his supporters.

Truth Social’s journey toward a public listing underscores the unconventional and polarizing nature of Trump’s business endeavors, as well as the unwavering loyalty of his political base. WSJ, Barron’s, Fortune

Book Nook. In his upcoming book about the end of the world, writer Dorian Lynskey argues that Western culture is increasingly doomerism-happy and obsessed with eschatology. Actually, every generation believes that theirs just might be the world’s last. “We love to talk about the death of this and the fall of that, and to boast that we are there to witness it,” writes Lynskey in an excerpt published by The Guardian. At the same time, the current lineup of apocalypse-related fiction and non-fiction is vast, reflecting a collective angst that surpasses past sentiment in volume and perhaps even anguish. Still, while it’s hard to deny we live in a tumultuous time, Lynskey points to a boon: “We are not inclined to appreciate the bad things that have not happened to us”. Semafor