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Here’s five things you need to know this week in <5 minutes:
Google hit with Antitrust Lawsuit
Intel’s Earnings Disaster
Citadel fined in South Korea
Hindenburg vs Adani
Bankman-Fried family is not cooperating
Google Accused of Illegal Monopoly
Google was sued by the Justice Department and a consortium of eight states on Tuesday. It’s Alphabet’s fifth antitrust lawsuit since 2020, and the first by the DOJ against a tech company under the Biden administration.
Google is accused of abusing its control over online advertising and suppressing competition. The suit claimed the tech giant had “corrupted legitimate competition by engaging in a systematic campaign to seize control of the wide swath of high-tech tools.” It demands that Google be forced to sell off its suite of ad technology products, such as its marketplace and software for buying and selling ad space online.
Google has previously been sued over claims that it operated a predatory monopoly in online searches and its app store. A spokesman for Google described the suits as “unfounded.” Historically, federal courts have only prosecuted monopolies when there is clear evidence that they raise prices for consumers. So it’s unlikely that this latest lawsuit will lead to the breakup of Alphabet, but it does signal a legal and political environment that is increasingly hostile to America’s biggest tech companies.
Alphabet shares briefly dropped by about 3%, before recovering on the broader tech rally to end the week up 1.5%.
OUR TAKE: Don’t expect much to come of this lawsuit except a hefty fee for a whole squadron of lawyers.
Intel Reports Earnings
America’s largest microchip manufacturer reported earnings this week, and it wasn’t pretty.
Intel reported 10 cents adjusted EPS against 20 cents expected, from revenue of $14.04 billion against $14.45 billion expected, a 32% y/y drop for the same period. The company blamed its quarterly $664 million net loss on the weakening market for personal computers. Shares slumped 9% on the news.
Even worse, CEO Pat Gelsinger was unable to provide a full year forecast, citing “uncertainty” in the market.
Analysts at Bernstein described it as the “worst earnings report in our history of covering this company.” Lead analyst Rasgon described Intel’s 39% non-GAAP gross margin as “astonishingly bad”, and slashed Intel’s price target to $20, representing a further 40% decline. On Twitter, Intel’s performance was described as a “sh*t-storm of bad decisions & execution,” and a “crime scene.”
OUR TAKE: It looks like Biden’s bill to save the American semiconductor industry is off to a bad start.
Citadel fined in Asian securities case
Ken Griffin’s trading firm Citadel Securities has been fined 11.88 billion won ($9.66 million) by South Korea regulators. The American firm was accused of artificially distorting the local stock market using high-frequency algorithm trading, including inflating prices using "immediate or cancel" orders.
The trades in question date from Oct. 2017 to May 2018, when Citadel traded an average of 1,422 stocks per day on the South Korean stock exchange (KOPSI). This was the first fine imposed on a high-frequency trader in South Korea, where trading is far less automated than in the U.S and Europe, and most liquidity is provided by retail investors.
A statement from Citadel maintained that the company had followed all rules, and said they would appeal the decision.
OUR TAKE: In 2022, Citadel earned $16 billion in profits for its investors, making it the best performing hedge fund ever. To Ken Griffin, a $9 million fine is a parking ticket.
“The Biggest Scam In History”
Hindenburg Research – a leading U.S-based short-side investment research firm – has released a scathing report about Adani Group, the Indian industrial conglomerate founded by Asia’s richest man.
Hindenberg described Adani Group, which operates in industries including commodities trading, port management and electric power generation and transmission, as “the biggest scam in corporate history,” citing debt and accounting concerns. Hindenburg alleged that its 2 year long investigation into Adani revealed “engaged in a brazen stock manipulation and accounting fraud scheme.” It shared a list of 89 questions, to which Adani has responded dismissively.
Hindenburg also announced that it was shorting Adani through US traded bonds and non-Indian-traded derivatives. The report triggered a sharp sell-off, with Adani companies losing more than $50 billion in market value.
OUR TAKE: Hindenburg was the firm responsible for exposing the fraud at Nikola. So either they’ve done it again, or they’re just trying to generate hype around their short trade.
The FTX Saga Continues
Lawyers employed by bankrupt crypto firm FTX say that the mother and brother of founder Sam Bankman-Fried are not cooperating with their investigations.
In a legal filing this week, the company’s lawyers said that SBF’s family were his “advisors” and should be subpoenaed to aid in the search for billions in missing funds.
Prosecutors have also asked a judge to prevent SBF from using encrypted messaging apps to contact his former colleagues, as there are fears he could attempt to influence witnesses ahead of his fraud trial.
Meanwhile, SBF’s lawyers are arguing that he should be allowed to access his personal assets held by FTX.
OUR TAKE: Send all the crypto fraudsters to prison!
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