Pickleball Fever

By Weronika Pycek, Shawn O'Malley, and Matthew Gutierrez · June 27, 2023

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At this point, who isn’t playing pickleball????

In all seriousness, my father now plays almost daily. One of our writers here,?Shawn, is reportedly a budding star in his Virginia neighborhood. And leagues are popping up everywhere, from Florida’s retirement communities to New York City’s Central Park.

The game, dubbed “America’s fastest-growing sport,” has caught on nationwide. Pickleballers love its fast-paced, social nature. It’s also slightly more accessible than regular tennis, attracting investments from the likes of Tom Brady and LeBron James.

Our Chart of the Day below shows just how much pickleball has transformed into a booming market and popular hobby.

—Matthew

Here’s the rundown:

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

• The $42 billion high-speed internet push
• Inside the ambitious $1 billion bet that commuters will return
• Why EV-maker Lordstown Motors filed for bankruptcy

All this, and more, in just?5 minutes to read.

POP QUIZ

U.S. stock market volatility, which has been low this year, generally varies based on month. Which month is the most volatile on average? (Scroll to the end to find the answer!)

CHART OF THE DAY

IN THE NEWS

?Inside the $42 Billion High-Speed Internet Plan (WaPo)

President Biden on Monday said more than?$42 billion?in new federal funding would go to expanding?high-speed internet access?nationwide, launching the largest-ever campaign to help about?8.5 million?families and businesses.

That’s $42 billion – with a “b.”

• The money, which states will receive over the next two years, lies at the heart of an ambitious effort to deliver reliable, fast broadband to the entire country by 2030. Even remote, far-flung areas of the U.S. could reap the benefits of the?digital age.
• In an unveiling at the White House, Biden likened the new infrastructure project to the government’s work to electrify the nation’s darkened heartland in the late 1930s, when nearly 90% of farms had no electric power in the face of high costs and prohibitive terrain.
• “It’s the biggest investment in high-speed internet ever, because for today’s economy to work for everyone,?internet access is just as important as electricity or water or other basic services,” Biden said.

The president added that rural areas suffer from the so-called “digital divide,” a gap between families and workers with high-speed internet access and those without it. About?7%?of the U.S. still doesn’t have broadband service that meets the government’s minimum standards, even in an age of artificial intelligence and self-driving cars.

Why it matters:

The announcement this week marks the start of a long journey. It’s a steep?price tag?and involves complicated build-out, including identifying who needs the high-speed access and where.

• “It’s really important we not leave any community behind with this project,” noted the executive director of the Colorado Broadband Office, whose state is set to receive?$826 million. She added that the historic level of funding nationally means that the United States has “one shot at it.”
• The U.S. government has spent billions annually on deploying speedy internet services nationwide. But the U.S. has struggled to ensure the communities most in need of high-speed internet benefit from the funding.

For millions of Americans during the pandemic (and today), the internet offered a safe way to work, attend school, purchase groceries, and stay in touch with loved ones.

But a 2021 survey from the?Pew Research Center?found?60%?of lower-income broadband users said they often or sometimes struggled during the pandemic to use online services due to slow speeds. Nearly half said they also worried at the time about their ability to afford their internet bills.

Said one leader in?West Virginia: “We’re a state that’s trying to recruit remote workers to live in West Virginia. But if they can’t connect, they can’t work here, and that’s been an issue for us.”

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???The $1.2 Billion Bet That Commuters Will Flock to the Office?(WSJ)

Remote work. A pending commercial real estate collapse. High-interest rates.

These reasons all point to?not?betting?$1.2 billion?on commercial office buildings in a major city. Yet one company has set out to do it anyway.

• Vornado Realty Trust?is spending $1.2 billion to overhaul two office buildings near?Manhattan’s Penn Station, the transit hub that serves commutes from several densely-populated areas such as Long Island, New Jersey, and soon, Westchester, N.Y., and Connecticut. The?9-million-square-foot real-estate project?is a bold bet that commuters will return to the office in the years ahead.
• “We think this is the most important development in the city and perhaps way, way beyond the city,” the New York firm’s chairman, Steven Roth, said in an interview with The Wall Street Journal.

Roth told Vornado investors that Friday office work is “dead forever” and “Monday is touch-and-go.” But he said he believes workers will continue to commute a few days a week as long as it is easy. He said train rides to Penn Station are a “one-seat commute” because office employees won’t then need to take the subway to their offices.

Vornado has leased?700,000 square feet?in the building since its recent?$450 million renovation, boosting rents to $100 from $60 a square foot. The building is almost fully leased, and tenants include Samsung Electronics, Cisco Systems, and Hartford Financial Services.

Why it matters:

Vornado is trying to fill tons of office space at a challenging time. The New York City office market is suffering as hybrid work schedules become commonplace, and there’s little sign of a turnaround coming soon. The same could be said nationwide in cities grappling with how to keep their downtown areas vibrant.

• The rate of Manhattan office space available or about to become available hit?17.4%?at the end of May, the highest level since at least?2000, per real-estate firm Colliers.
• But proponents see the investment as a way to make the neighborhoods more attractive. They say local restaurants, hotels, and boutique shops would all benefit from more office-worker presence.

Vornado has plans for a hotel and apartment building near Penn Station, adding to the already?$2.4 billion?it has spent on properties and public improvements.

“It’s such a big bet because this will be single-handedly the biggest growth driver for them going forward,” said the head of U.S. REITs at Morgan Stanley.

MORE HEADLINES

???Walgreens?slashes?earnings guidance due to lower consumer spending.

???Ford to?lay off?at least 1,000 contract, salaried workers.

?? Delta?lifts?profit forecast thanks to strong demand and premium tickets.

?? Lordstown Motors Declares Bankruptcy (Reuters)

Lordstown Motors, the U.S. electric truck maker, filed for?bankruptcy protection?and initiated its sale process due to an unresolved investment dispute?with Taiwanese company?Foxconn.

The Ohio-based company filed for Chapter 11 protection in Delaware while taking legal action against Foxconn. Lordstown accuses Foxconn of fraud and failing to fulfill its commitment to?invest?up to $170 million in the electric vehicle maker.

Under a previous agreement, Foxconn had initially invested about?$52.7 million?in Lordstown, granting them an ownership stake of around?8.4%?in the EV maker.

• But Lordstown alleges that Foxconn has failed to follow through on its commitment to purchase additional shares as agreed upon and has misled them regarding collaboration on vehicle development plans.
• Foxconn, which assembles about 70% of Apple's iPhones, argues that Lordstown breached the investment agreement by falling below?$1 per share?in stock value.

Lordstown Motors' primary offering is the Endurance electric pickup truck made at an ex-General Motors small-car factory in Lordstown, Ohio. The company caters to commercial customers, including local governments. In 2022, Lordstown sold the plant to Foxconn.

Earlier this year, Lordstown temporarily halted production of the Endurance due to?quality concerns with suppliers. Production resumed in April at a reduced pace.

• The company's shares have declined sharply since their 2021 peak. There’s been another rapid decline this year, with?shares cratering from over $22 to under $3.

Why it matters:

Though positioned as the way of the future, the EV market can be challenging. Lordstown's bankruptcy isn’t an outlier; it’s part of a larger trend of EV startup failures.

The culprit:?Substantial costs associated with scaling up production. The barriers to entry are simply too high for many, even after President Biden’s policy shifts to?incentivize?electric vehicles.

• Lordstown Motors also struggled as?access to capital tightened from rising interest rates.?For years, the company also struggled with development setbacks and frequent management changes.
• The company is still planning to find a buyer. It needs an initial offer known as a “stalking horse bidder,” which establishes a minimum price that other potential buyers can surpass in an auction.

If Lordstown fails to secure a rescuer willing to resume full production of the Endurance, it could attract overseas automakers.

TRIVIA ANSWER

On average, the most volatile month for U.S. stocks is?October. The so-called “October Effect” kicks in during the fall, as October has more large swings than any other month on the calendar.

SEE YOU NEXT TIME!

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