Fireworks

By?Matthew Gutierrez,?Shawn O'Malley, and?Weronika Pycek?· July 03, 2023

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?????Who’s ready to celebrate Independence Day with fireworks, grilling, and parades? There’s something about mid-week holidays that hit differently.

Wherever this finds you, we wish you a wonderful Fourth of July. After grillin’ and chillin’ all day Tuesday, we’ll be right back in your inboxes on Wednesday with all things markets.

—?Weronika & Matthew

Here’s the rundown:

Today, we'll discuss the?two biggest stories in markets:

• Work-from-home insider trading
• Tesla and BYD hit record sales on EV demand surge

All this, and more, in just?4 minutes to read.

POP QUIZ

How much do Americans spend on fireworks every year? (Scroll to the bottom to see the answer!)

CHART(S) OF THE DAY

IN THE NEWS

??? Insider Trading Is Better at Home (Bloomberg)

Work-from-home has drastically changed office (and some financial) dynamics forever. One sliver of financial-related crime that might have benefited:?insider trading.

For couples living together, one person might be in a deal-making Zoom meeting or conference call. You walk by and overhear your partner, which gives you the information you could trade on, notes Bloomberg’s Matt Levine.

• The?Securities and Exchange Commission?recently?announced?insider trading charges against?Jordan Meadow, a rep for a New York-based broker-dealer, and?Steven Teixeira, the chief compliance officer of an international payment processing company.
• The SEC’s complaint alleges that they traded on nonpublic information that Teixeira obtained from his girlfriend’s laptop while she was working from home during the pandemic.

The complaint also alleges that Teixeria used his girlfriend’s information on possible upcoming mergers and acquisitions of public companies to purchase call options.

He tipped the info to his friends, too, earning him about?$28,600?in profit, while Meadow made more than?$730,000. Per the complaint, Meadow then recommended trades to his brokerage customers, resulting in?millions of dollars?in profits for them and?hundreds of thousands of dollars?in commissions for himself.

Why it matters:

A quick buck:?“Our complaint alleges brazen betrayals of trust by Teixeira, who misappropriated information from his girlfriend’s laptop to make a quick buck, and by industry-veteran Meadow, who was all too eager to use the information to line his pockets,” said the Associate Regional Director of the SEC’s Philadelphia Regional Office.

• “We will continue to pursue and?prosecute insider trading?where appropriate to?hold people accountable?for their actions.”

Insider trading is nothing new, though it’s notoriously hard to prove and prevent. One study estimated that only about?15%?of insider trading in the U.S. is detected and prosecuted. The issue has come to light in recent years amid increased enforcement, but it’s still challenging to catch.

Not all insider trading is illegal:?When company insiders buy or sell shares in their company in accordance with laws, then file their trades with the SEC, they’re usually OK. What makes it illegal is when someone possesses material and nonpublic information.

• You might recall that high-profile individuals such as?Martha Stewart?and former McKinsey global head?Rajat Gupta?served time behind bars for insider trading.
• The SEC uses sophisticated tools to detect illegal insider trading, particularly around important events, earnings reports, key corporate developments, or large stock price swings. They also rely on tips and complaints from investors on the wrong side of the trades.

But hey, maybe artificial intelligence could one day find a way to stamp out the practice altogether. Regulators aren’t ruling that out.

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???Tesla and China’s BYD Hit Record Sales?(Reuters)

Tesla?and Chinese?BYD?have achieved record?sales milestones?in the second quarter, solidifying their positions as the?world's leading?electric car manufacturers. Tesla’s stock soared about 7% Monday in a shortened trading day, continuing its remarkable 159% YTD rise in 2023.

Tesla?delivered a total of?466,140 vehicles?worldwide, surpassing expectations, partly thanks to its price cuts. Meanwhile,?BYD, the top-selling car brand in China, recorded its best-ever quarter with?700,244 units?of fully electric and plug-in hybrids.

• Tesla remains committed to prioritizing?volume?over profitability, intensifying the competition for traditional automakers that have lagged in the EV space.
• Volkswagen?appointed new leadership for its?Audi?brand, aiming to catch up to Tesla after trailing behind in the first quarter. The move underscores the mounting pressure on legacy carmakers to accelerate their EV efforts.

Why it matters:

While Tesla dominates the EV market in the U.S., it faces competition globally from companies with more recent EV offerings. Tesla’s latest addition to its lineup, the Model Y, debuted in 2020.

• To maintain its market share, Tesla must update its product portfolio to stay competitive against rivals.

In China, Tesla's second-largest market, the?Elon Musk-led company has faced competition from BYD.

• Tesla recently announced a?price reduction?of over 4.5% on its premium car models nationwide. Tesla also has implemented a?cash subsidy program?for certain buyers of its Model 3 sedan, aiming to increase its competitiveness and attract more customers in China.

BYD?made progress in full EV sales, nearly doubling its deliveries compared to the previous year, reaching?352,163 units?in the second quarter. The company, headquartered in Shenzhen, saw a 98% surge in total sales year-on-year, marking its strongest quarter to date.

• BYD also sold a record?251,685?new EVs?in June alone, indicating that the global shift from combustion vehicles to EVs is upon us.

MORE HEADLINES

?? Record number of travelers?expected?this July 4

?? Why this might be the?least-affordable?car market in history

? Saudi Arabia + Russia?curb?oil production yet again to try to boost prices

TRIVIA ANSWER

Total?spending?in the U.S. on consumer fireworks is roughly?$2.3 billion.

SEE YOU NEXT TIME!

That's it for today on?We Study Markets!?

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