Monday, May 23rd 2022

Three Things (5/23)

Commentary

“If everyone is moving forward together, then success takes care of itself.” – Henry Ford.

1) Bipartisan bill takes aim at Google’s ad business

  • A group of bipartisan senators intends to propose a bill that would require Google to sell off a meaningful portion of its ad business.

  • The bill is among the most aggressive proposals circulating in Washington, aiming to reign in Big Tech.

  • The proposal’s goal is to provide greater transparency on customer best interest, data collection, and fees charged while decreasing the scope of the tech giant’s control on digital ads.

Titan’s Takeaway: The latest saga of tech regulation appears to be targeted at the lucrative toll road for digital ads. We’ve seen this movie before, and if this somehow gets legislated ahead of the midterm elections, we believe there’s a chance these politicians may trigger a major unlock in value for Google shareholders like our Flagship clients 🤝.

2) Doordash authorizes sweeping share buyback

  • DoorDash Inc. has authorized a buyback of up to $400 million of its shares, according to a regulatory filing.

  • DoorDash shares have hit record lows recently and are down 55% year-to-date.

  • Chief Executive Tony Xu noted in their most recent earnings call that $4 billion in cash flow gives the company a lot of flexibility.

Titan’s Takeaway: The move by Doordash to initiate a buyback plan comes as a surprise as other gig-economy companies don’t expect to return capital to shareholders any time soon. The company has free cash flow, believes its stock is cheap and wants to quickly shore up RSU issues for stock-incentivized employees.

3) China cuts key interest rate unexpectedly amid Covid lockdowns

  • The People’s Bank of China cut its benchmark rate for five-year loans to 4.45% from 4.6%, the biggest single reduction since the rate entered the bank’s policy armory in 2019.

  • The move represents an unexpected policy shift in Chinese monetary policy.

  • Economists believe the change in rates will provide temporary relief to a struggling housing sector but limited help to the slowing economy.

Titan’s Takeaway: On top of weaker consumer demand, capital outflows from Chinese capital markets hit a record level in Q1. China needs to restore growth in the economy quickly or these outflows could lead to a 2015-esque situation where the Yuan collapsed and Chinese assets were dumped by investors.

As of this writing, GOOG was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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