No Growth, Please, We’re British

Plus: Why Manuka Honey is no longer in the money. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 1, 2023

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TOGETHER WITH

Good morning.

You’d think with the economy in the shape it’s in, investors might shy away from blue-sky research projects. Not so for the backers of biotech company Colossal, who have pumped $150 million into its latest chimera: bringing the dodo back to life.

Colossal started out in 2021 promising to de-extinct the woolly mammoth, then last year it threw the thylacine in with the deal. Now it’s going for a 3-for-1 with dodos, although it has not yet managed to resurrect any of its current projects. Feels a bit like the company may have a case of George R. R. Martinitis…

Morning Brief

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The UK sinks as everyone else swims.

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Wall Street eyes Italian soccer.

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Honey, I Shrunk The Market.

Macroeconomics

UK Company Insolvencies Hit 13-Year High

Local companies in the United Kingdom are going from “Brexiting the European Union” to “exiting the economy.”

While a strong earnings season has lifted much of the world to an unexpectedly bubbly headspace this week despite persistently uncertain economic times, the UK was slapped with an absolutely dire report from its government’s Insolvency Service on Tuesday. The headline? Domestic companies are closing at a faster rate than at any point since the 2008 financial crisis.

A Tale of Two Economic Blocs

The bulls are running in Spain. And France. And Germany. And, well, the rest of the eurozone. Heck, they’re even running on Wall Street. But they’re nowhere to be found in London. Europe’s shared currency economic bloc mildly shocked analysts and economists on Tuesday when Eurostat published new data showing the region’s economy grew by 0.1% in the final quarter of 2022. Experts had expected a downturn, but now hope remains that the region could avoid a recession altogether. Instead, a warmer-than-projected winter, falling gas prices, and generous government aid coalesced to ease the economic burden on the region’s populace. In all, the eurozone grew each quarter of 2022, for a 3.5% boost through the year overall — enough to outpace growth in both China and the US.

But stateside, the outlook is almost just as rosy. Tuesday’s earnings report from construction giant Caterpillar looked slightly mixed on the surface due to rising costs and slowing demand in China eating into profit margins, but equipment sales in North America remain quite strong. And when the demand for building new things is strong, the logic of finance junkies tends to go, so too is the health of the economy. Case in point: the Nasdaq 100 just wrapped its best month since July, while the S&P 500 scored its best January in 4 years.

And yet, the UK remains stranded on not just a literal island, but a metaphorical — albeit quite tangible — economic one:

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Unlike the US, flailing consumer confidence in the UK has blasted the construction industry; last year, 4,143 UK construction companies folded into insolvency, the highest of any industry, according to the report.

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Overall, the total number of company insolvencies registered in 2022 hit 22,109 — a 57% year-over-year jump, and the highest rate since 2009. Now, the IMF is projecting the UK to be the only G-7 nation to face a recession in 2023.

Luck of the Irish: Certainly stinging the Brits even more is the success of their neighbors to the west. Ireland posted a region-best 3.5% GDP growth rate in the fourth quarter of 2022. Without it, the eurozone would not have grown overall. Bugger.

– Brian Boyle

Sports

Serie A Hopes Wall Street Can Get Help it Out of the B-Tier

This Italian football league needs an assist from American lenders.

It’s no secret that soccer is the most popular sport in the world, but now Wall Street’s hunger for football is so great that major banks are happily lending to second-tier leagues like Italy’s Serie A, which up until recently did not look to have the brightest financial future.

New Plan: Get the Ball to the Italians

Though it has elite clubs like AC Milan and impressive footballers like Lautaro Martinez, Serie A has been dealing with financial and talent woes for the past few years. During the 2020/21 season, at the height of COVID, the league saw $2.7 billion in revenue, while the English Premier League brought in more than $6 billion. Despite organizations pumping millions of dollars into new players and increasing their debts, an Italian team hasn’t won the Champions League in more than a decade, and 2022 marked the second consecutive time the country’s national team failed to qualify for the FIFA World Cup.

With little liquidity, Serie A teams need backers with deep pockets, something they tried and failed to obtain in 2021, when not enough clubs supported selling a $2 billion stake in the league’s TV rights to a private equity firm. One of the biggest Serie A shakeups came last summer when Gerry Cardinale, CEO of the investment firm RedBird who helped create the New York Yankees’ YES Network when he was a banker at Goldman Sachs, purchased 70% of AC Milan, which currently sits 5th in the league, from Paul Singer’s Elliott Management for $1.3 billion.

Now more major investors are looking to join Cardinale. On Tuesday, Bloomberg reported groups like Goldman Sachs, JPMorgan Chase, and Deutsche Bank have expressed interest in financing Serie A’s media business:

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Toward the end of 2021, the Luxembourg private equity firm CVC Capital Partners reached a $2.2 billion deal with Spain’s LaLiga for some of its broadcasting rights, and that money was funneled toward capital improvements, paying off debts, and acquiring new talent.

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Also this week, sources told Bloomberg, Germany’s Deutsche Fussball Liga is looking to sell media rights to a private equity firm. It previously considered selling 20% of a new media unit valued at roughly $19.2 billion.

Very, Very Sneaky: Even those at the top of the league are getting slide tackled. For the 2021/22 season, Juventus FC reported a $275 million loss, the largest in Serie A history. The team also earned itself a red card recently after it was discovered that it had historically inflated player valuations during transfers. The club — which is normally one of Serie A’s most successful — was docked 15 points, dropping them down to 10th place in the league’s overall rankings.

-Griffin Kelly

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Commodities

Value of Manuka Honey Plummets

(Photo Credit: cygnus921/Flickr)

So what if you can’t afford eggs anymore? Luxury honey is a steal.

Manuka honey, an expensive, especially viscous honey produced predominantly in New Zealand, experienced a pandemic bubble that has now burst in spectacular fashion, according to Bloomberg, leaving the market in a sticky oversupply situation… oh, bother.

Honeytrap

At this point, you’ve probably become numb to stories about pandemic darlings whose COVID-19-induced highs have come crashing down — your Pelotons, your Carvanas. It’s plain to see why these companies became super valuable during lockdowns and subsequently fell out of favor. In manuka honey’s case, its antibacterial and anti-inflammatory properties led consumers to lap it up, and suppliers bulked up in response.

Pre-pandemic, manuka sold for around 100 times more than regular honey. After peaking in 2021, however, its price tag has oozed back down:

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According to Bloomberg manuka honey’s price peaked at NZ$64 per kilo, whereas a kilo last season cost NZ$13 — that’s a whopping 80% decrease.

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Just as we’re seeing a trend towards premiumization in the liquor market, the only manuka suppliers still treading water are those selling the most mind-bogglingly expensive products. To give you some flavor, one 230g jar of top-of-the-line manuka goes for £1,390 at Harrods in London. Maybe the worker bees should consider unionizing.

This Might Sting a Little: While the pandemic had an ultimately deflating effect on manuka honey, a new vaccine might just help American bees. The US Department of Agriculture approved the first-ever vaccine for honeybees early in January, inoculating them against the highly contagious and sadly incurable foulbrood disease, hopefully boosting bee population numbers. Somebody better let Nicolas Cage know…

– Isobel Asher Hamilton

Extra Upside

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It’s a walkoff: Nike is suing Lululemon for allegedly stealing shoe designs.

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ChatGPT creators release an AI detection tool so teachers can see if students cheated with the help of ChatGPT.

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Just For Fun

Not very helpful.

Not a bunny hill.

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