Market Updates

The U.S. enacted legislation that could lead to a TikTok ban. The law gives the app’s Chinese-owned parent company ByteDance one year to sell its share of the app to a non-Chinese buyer, or face consequences that include removal from app stores and web hosting services. Proponents of the law view the app as a national security risk, suggesting that its data accessible to the Chinese government, while opponents voice First Amendment concerns. Even if there are interested, qualified buyers, the Chinese government would need to approve the sale, and it is unlikely to do so, particularly if the purchase includes the coveted TikTok algorithm. Expect there to be a long court battle that will likely keep the status quo going for some time, but the law does set a precedent that any investors in foreign companies should be aware of.

More crypto punishments are coming, most notably Binance Founder CZ Zhao is facing looking at three years. The former CEO of the world’s largest cryptocurrency exchange will be sentenced next week after pleading guilty to money laundering charges. He has already paid a $50 million fine, while the company paid a $4.32 billion penalty. Elsewhere, crypto trader Avraham Eisenberg was found guilty of fraud and market manipulation in conjunction with his $110 million exploit of Mango Markets in 2022. He faces up to 20 years in prison and will be sentenced in July. As more of these cases reach resolutions, it could act as deterrence to future bad actors and continue to cement crypto’s legitimacy in the mainstream.

A “lost” Gustav Klimt painting sold for $32 million at auction. The partially unfinished “Portrait of Fräulein Lieser” was one of the Austrian artist’s final works and was still in his studio when he died in 1918. The painting disappeared from the record when the Liesers, the Jewish family who originally commissioned it, fled from Nazi rule, and lost most of their possessions. After the painting resurfaced this year, an agreement was made between the current owners and the heirs of the original owners to go forward with the sale. The final sale price of $37 million with fees represented the low end of the estimated value, but the Austrian auction house was “very happy with the result.”

Moody’s lowered its outlook for three leading private credit funds. The ratings company modified its classification from “stable” to “negative” for funds from Blackrock, KKR and Oaktree Capital Management with a combined value of more than $20 billion. That means they each face the chance of a ratings downgrade in the medium term, which would downgrade the funds from investment grade to junk status. The reason for the change is the rise in loans in “non-accrual” status, meaning those that are behind on payments. With the rise in interest rates, private credit lenders see higher potential returns, but as Moody’s is warning, a higher risk of those loans defaulting.