📈 Sovereign, wealthy, thriving

Good morning. A Polish influencer who goes by the name Łatwogang raised more than £50 million for a children’s cancer charity after streaming for nine straight days. And, as if that wasn’t enough of an endurance test, a song dedicated to children fighting cancer played on a loop the entire time.

The sum raised was even more impressive considering the initial target for the fundraiser was a mere ~£120,000. We hope Łatwogang is proud of what he did (and gets some rest).

Today’s reading time is 5½ minutes.

MARKETS

▼	TSX	33,818.19	-0.25%
▲	S&P 500	7,173.91	+0.12%
▼	DOW JONES	49,167.79	-0.13%
▲	NASDAQ	24,887.1	+0.20%
▼	GOLD	4,694.5	-0.98%
▲	OIL	96.65	+2.38%
▲	CAD/USD	0.73	+0.31%
▼	BTC/USD	76,984.31	-1.57%

Markets: Despite the energy sector jumping on higher oil prices and Shell’s deal to buy ARC Resources, Canada’s main stock index fell for a third straight day yesterday. Blame weak performance in mining and consumer goods sectors.

ECONOMY

Canada is getting a sovereign wealth fund

Many things make Canada unusual: Newfoundland’s time zone, our extraordinarily high per capita production of elite hockey players, and the most lakes in the world. We’re also one of the only wealthy, resource-rich countries without a national sovereign wealth fund.

That (albeit somewhat arcane) last one is about to change.

What happened: Prime Minister Mark Carney announced the creation of a sovereign wealth fund seeded with an initial endowment of $25 billion doled out over the next three years.

The “Canada Strong Fund” will be managed by a new arms-length Crown corporation with an independent CEO and board of directors.
Carney said Canadians will be able to voluntarily buy into the fund, though details were scant on exactly how that would work.

Why it matters: Depending on how it’s designed, a sovereign wealth fund could be a way to spread around the fruits of economic growth, either through direct dividends to Canadians or by funding public services.

Norway, for example, draws on a portion of the returns generated by its primary sovereign wealth fund (the world’s largest with assets worth around $3 trillion) to finance around 20% of its national budget.

Yes, but: The government has not yet provided basic details on how the fund will work, leaving many questions unanswered, like…

Will its management board be free to invest as it sees fit to maximize profits, or will it have a mandate to back projects of national interest (similar to Quebec’s Caisse)?
Will the fund be limited to investing domestically, or free to allocate capital abroad?
Will the government be able to draw on the fund’s returns, and if so, what rules will be in place to prevent them from draining it (as happened with Alberta’s Heritage Savings Trust Fund).

Bottom line: Regardless of the answers to those questions, with just $25 billion to invest, the fund is unlikely to make much of an impact on Canadians’ lives anytime soon. For that to change, the government will need to find new ways to capitalize it — or wait a very long time for that seed funding to grow.—TS

BIG PICTURE

Source: Wikipedia Commons.

Rogers is offering buyouts to half of its workforce. The telecom has reportedly offered voluntary departure packages to half of its 25,000 employees as it looks to pay down its mounting debt load. Profits in the telecom sector have cooled in recent years, driven by fewer newcomers coming to Canada in need of a new phone plan. At the same time, Rogers has been on a major spending spree, including a $20 billion takeover of Shaw, an $11 billion NHL broadcasting deal, a $4.7 billion deal for Bell’s stake in MLSE, and plans to pay $4 billion for the last 25% stake in MLSE this year. (Globe and Mail)

OpenAI and Microsoft call it quits. The two companies reached a deal to end their exclusive partnership, giving OpenAI the freedom to pursue deals with other cloud providers like Amazon to power its models. As part of their new deal, Microsoft will lose its exclusive access to OpenAI’s IP, though it will still have access to its models. In exchange, Microsoft will no longer pay a revenue share to OpenAI, and will retain its 27% stake in the company. (TechCrunch)

Canadian-owned Letterboxd is looking for a buyer. Vancouver-based holding company Tiny is reportedly looking to sell its controlling stake in the movie recommendation and social media platform, Letterboxd. The app, which lets users review movies and share their favourite flicks, blew up during the pandemic, growing from one million users in 2020 to over 26 million this year. (Semafor)

📡 What else is on our radar:

Shell is buying Canadian energy producer ARC Resources for $22 billion.
Major League Soccer is reportedly looking to move the Whitecaps out of Vancouver. The owners put the team up for sale in 2024, but said they were committed to keeping the team in the city.
Elon Musk’s legal case against OpenAI and Sam Altman — alleging the startup abandoned its non-profit mission — began yesterday.
The suspected shooter from the White House correspondents’ dinner is being charged with attempting to assassinate Donald Trump.

WHAT THEY’RE SAYING

Source: Adidas.com.

What they’re saying: “There has never been a better pre-release ad campaign,” economist Florian Ederer quipped on X in reference to the new Adidas Adizero Adios Pro Evo 3 running shoes. The shoes were worn by Sabastian Sawe and Yomif Kejelcha in Sunday’s London Marathon, where they became the first two runners ever to eclipse the two-hour barrier in an official marathon. Tigst Assefa, who broke the women's-only record, also sported them.

Why it matters: We are in the midst of a super-shoe boom, and the Pro Evo 3 is now the buzziest of them all. With a wider release slated for later this year, there will be demand among elite runners looking to unlock another level in their game. That said, with a US$500 price tag and a design that limits repeated use, Adidas might see a massive boost in prestige rather than a massive boost in sales.

BUSINESS

Spotify wants to become your personal trainer

Source: Spotify and Peloton.

Spotify is hoping some exclusive pilates classes will get more people to splurge on premium subscriptions.

What happened: Spotify is partnering with Peloton to launch a new fitness hub for premium subscribers that will include over 1,400 guided workout classes and exclusive content from wellness creators.

For the struggling Peloton — which has seen its stock sink ~96% since its 2021 peak — the tie-up will put its digital products in front of millions of new potential customers.
Meanwhile, Spotify is looking to position itself as more of an everything app for all kinds of media rather than just a music and podcast platform. It’s recently added a DM-style messaging feature to the app, a vertical video feed, and even a marketplace to buy physical books.

Why it’s happening: The music streaming business model isn’t great as a standalone product. Regardless of how many people listen, Spotify is still paying over 70% of its revenue to artists and labels in royalties. Expanding the perks of its paid subscriptions beyond audio could help grow the part of its business that actually turns a profit.

Since every additional stream triggers the same payout to rightsholders, growth doesn’t meaningfully improve profit margins. The real money comes from converting free listeners (about 61% of its users) into lifelong, paid subscribers.

Bottom line: Unlike video streaming services like Netflix or Disney+, which all offer different content, music streamers are selling the same catalogue of music at roughly the same price. Carving out a niche in fitness is a bid by Spotify to differentiate itself from the competition.—LA

ONE BIG NUMBER

🤖 US$2 billion. Value of Meta’s deal to acquire Singapore-based AI startup Manus, an acquisition that Chinese regulators have unexpectedly blocked. Beijing reportedly became concerned with the transfer of advanced AI to a foreign company, while the White House accused China last week of copying American AI models in an “industrial-scale” campaign.