The next big antitrust war begins
Ministry of Justice plans to sue Block JetBlue’s deal to buy low-cost carrier Spirit Airways for $3.8 billion, JetBlue admitted Monday. News of the lawsuit – which could arrive as soon as Tuesday – sent Spirit’s stock down nearly 9%.
Prosecutors will argue that the deal, which would create the fifth-largest airline in the US, would create an unacceptable level of consolidation in an industry already under scrutiny for its lack of delays, hidden fees and travel disruptions. And, they will say, there is no sensible way to avoid that except to block the transaction.
Merging the two would create a new giant airline, doubled JetBlue’s market share to 10 percent. JetBlue argued The deal is good for consumers, pointing to the so-called “JetBlue effect,” where entry into the market leads to lower fares across the board. It supposed that adding Spirit’s ability would amplify that phenomenon.
Furthermore, JetBlue plans to remake the popular Spirit flying experience at a low cost, no frills by eliminating seats, increasing legroom and improving the economics of each flight.
But the Justice Department disagreed. It plans to argue that there is also a Morale effect, where the existence of the airline helps lead to lower fares. Regulators will also say that by removing seats from Spirit flights, the combined airline will not be able to increase revenue per passenger without raising prices – a huge financial hit for those passengers tend to fly airlines.
Eliminating airport locations and routes, a standard concession in airline mergers, may not be enough. The bureau estimates that airlines have dozens of overlapping routes; JetBlue said it plans to forgo its Spirit holdings in markets including Boston, Fort Lauderdale and New York.
But antitrust officials believe the loss of Independent Spirit would be a major market disruption. Other airlines, which have a different business model from Spirit, may not be willing to buy slots that JetBlue might have for sale. And critics of airline consolidation have questioned whether reselling locations and routes in other carrier arrangements would be enough to remove competition concerns.
Other regulators may also consider it. The Department of Transport has reviewed the agreement and reserves the right to block or require conditions if it thinks the combination would unfairly reduce competition.
THIS IS WHAT’S HAPPENING
Meta is expected to cut more work. The social media giant will lay off thousands of employees as soon as this week, according to Bloomberg, this will be the second cut since November. Airbnb and software developers Atlassian are also cutting jobs.
Moody’s will warn Congress about the debt limit. Mark Zandi, the credit rating agency’s chief economist, plans to testify that America could lose a million jobs and into a recession if House Republicans do not agree to raise the federal borrowing limit.
White House considers requesting more authority to deal with TikTok. Biden administration officials are weighing Do you support bipartisan legislation? that would give them more authority over police apps that could jeopardize Americans’ data security, The Times reported.
Twitter is broken, again. For a few hours on Monday, the majority of social media is offline, greets the user with a cryptic error message. Elon Musk later said it was caused by internal coding work, which Platformer reports was done by the only engineer working on a particular project. Twitter’s declining ratings mean such problems could happen again.
Powell is back in the hot seat
Can the Fed cool down hot inflation without pushing the US economy into recession? Jay Powell, the central bank’s chairman, is likely to face questions about that and more when he testifies before Congress on Tuesday and Wednesday – and investors will be watching closely. He scrutinized his every word for clues as to how high interest rates could be.
Powell’s testimony kicks off a period of consequential tension for markets. On Friday, the Bureau of Labor Statistics will release its February jobs report, and on March 14, investors will receive the latest Consumer Price Index data. Powell will likely raise questions about how the strong labor market and persistently high inflation are affecting the Fed’s thinking on interest rates.
It is expected that Powell will be hawkish on inflation. He is likely to reiterate that the central bank has not finished raising rates and it is too early to begin contemplating a cut. Bill Adams, Comerica Bank’s chief economist, told DealBook he expects interest rates to stay high “until 2024.”
The prospect of additional rate hikes has made the market more volatile in recent weeks. Featured characters – including Mary Daly, president of the San Francisco Fed; Christopher Waller, Fed governor; and Jamie Dimon, CEO of JPMorgan Chase – have said in recent days that Central banks may need to do more to fight inflation.
Recession fears are growing, even as employers continue to hire. Economists expect Friday’s jobs data to be strong and that could force the Fed to stay aggressive in raising rates.
Multiple Tests of Bitcoin Trading Giants
Grayscale Investments, an asset management firm, is suing the SEC for the right to convert Bitcoin Trust, a $14 billion crypto fund that was once popular with retail investors, into an exchange-traded fund. exchange, the main type of investment product favored by Wall Street.
But Grayscale faces its own legal battle. The company and its parent company, Digital Currency Group, were sued on Monday by Alameda Research, the trading arm of the bankrupt cryptocurrency exchange FTX. The lawsuit, filed in the Delaware Prime Minister’s Court, accusation of Grayscale about charging exorbitant management fees and preventing shareholders from redeeming their shares in Bitcoin and Ether trusts.
Alameda argued that if Grayscale allowed the buyback, it would “unlock a total of $9 billion or more to shareholders and a quarter of a billion dollars” to FTX, which is trying to recover funds for investors. investment after the crash in November.
Grayscale said the SEC was at the root of the problem. The company argued that if Grayscale were allowed to convert its Bitcoin fund into an ETF, it could reduce fees and allow more shareholders to buy back. But some shareholders say that Grayscale no need to wait for SEC to reduce fees or redemptions.
The SEC’s argument: The agency believes that the Bitcoin market is too volatile to allow an ETF conversion. It approved Bitcoin future The ETFs are under the supervision of the Chicago Mercantile Exchange, but have rejected ETF applications for funds such as Grayscale’s Bitcoin Trust, which trades “spot” prices for cryptocurrency.
Grayscale will argue on Tuesday that such distinction is arbitrary and violates the Administrative Procedure Act by treating similar products in different ways. If their argument before the DC Circuit Court of Appeals fails, the company said it would be willing to take the matter to the Supreme Court.
Risks of doing business in Hong Kong
Hong Kong has faced a series of challenges over the past three years — from strict pandemic restrictions to Beijing’s tightening grip — that have eroded Asia’s status as a financial hub.
DealBook gets a first look at a New report for Atlantic Council think tank, in which Logan Wright of the Rhodium Group outlines how difficult it is for international businesses to continue operating there. His prognosis of success is far from certain.
Big challenges: The pandemic containment measures that have driven so many foreign executives and local professionals out of Hong Kong have taken a toll on the city’s economy. However, according to Mr. Wright, the biggest hurdle is the myriad of ways in which Beijing can assert more control, including:
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The National Security Law was enacted in 2020, meaning access to trusted information was restricted, company executives could be detained, and customer data could be compromised. Chinese government seized.
There are several steps companies can take, According to Wright, including lobbying the Hong Kong and Chinese authorities on the importance of maintaining the territory’s special status to maintain its attractiveness for global business.
But other steps are more about mitigating risk, including contingency plans to deal with sanctioned customers and potentially seized data.
Ken Griffin in the lead
show record 16 billion USD that investment giant Citadel earned last year, there is no doubt who will top the Rich List, the Investment Foundation’s closely watched ranking of fund magnates’ performance. protection.
Ken Griffin, founder of the Citadel, will almost certainly lead this year’s list. But many of his rivals also have multibillion-dollar pay-outs, when their industries beat major bond and stock indexes in 2022.
Top 25 managers made $21.6 billion last year, even as markets were rattled by investor anxiety about central banks raising interest rates to combat inflation. The Hedge Fund Research HFRI 500 index, which tracks most of the world’s largest hedge funds, is down 4.25% last year, while the S&P 500 is down 19%.
Here are the top earners, according to Institutional Investor:
The notable absence from this year’s top 25 is the CEO of cross-technology funds, such as Coatue Management, Tiger Global Management and Viking Global Investors, who have long been mainstays. Their companies have profited from investing in fast-growing tech startups, but the decline in the value of early-stage companies has hit backers hard their hedge fund.
READING SPEED
endow
Policy
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Senator Bernie Sanders, independent of Vermont, has a plan Howard Schultz subpoena, to force the Starbucks CEO to testify about anti-union efforts. (NYT)
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Oil companies protest President Biden’s climate law; now they are seek subsidies from it. (FT)
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