Hello and welcome to another edition of Lemonade Stand Finance!

🍾 Big deals on Wall Street are back🍾

Todays agenda:

• We’re going to tell you why this deal making is happening and why it matter to YOU.

• A bunch of financial literacy packed in

• Bullet news summary of the biggest stories in finance

Case Study: “The animal spirits are stirring on Wall Street” - Originally posted by The Wall Street Journal

Summary of the Article:

• In 2024, Wall Street is buzzing with a bunch of really big business deals, known as mergers and acquisitions (M&As).

• This is a big change from last year when things were pretty quiet on this front.

• The highlight so far is a massive deal where Capital One Financial is buying Discover Financial Services for $35.3 billion.

• This increase in big deals is pretty interesting. It shows that companies are ready to spend big money again.

• Last year, things were slower because it cost more for companies to borrow money for these deals, and the prices of companies were jumping around a lot.

• But now, we're seeing a comeback. Total deal value has gone up by 24% this year, thanks to steadier interest rates and stock prices going up.

A few key points to learn here:

1. M&As Are Back: There's a new energy in the world of big company deals. After a slow period, we're now seeing a bunch of major deals happening.

2. What’s Driving This: Lower costs for borrowing money and more stable stock prices are encouraging companies to go for these big deals.

3. Why This Matters: This uptick in M&As can tell us a lot about how confident companies and investors are feeling about the economy and the business world right now.

Insights & Education

1. Why Companies Buy Each Other: Companies often merge or acquire others to grow quickly, tapping into new markets and customer bases faster than they could on their own. They also do it to gain new technologies or expertise that the other company has, which can be more efficient than developing these from scratch. Additionally, by merging, companies can cut costs and become more competitive by combining their resources and strengths.

2. Borrowing Money for Big Deals: To buy another company, you need a lot of money. Companies usually don’t have enough cash on hand, so they borrow it. It’s like getting a mortgage to buy a house, but on a much bigger scale.

3. Role of Interest Rates: Interest rates are what you pay for borrowing money. When they're low, it's like a sale at a store – cheaper to borrow. This can encourage companies to buy other companies because they can borrow money at a lower cost.

4. Global Differences in M&A Activity: The M&A scene varies around the world. The U.S. is currently bustling with activity, while places like Asia and Europe are quieter, showing how different each region’s economic situation can be.

5. Taking Risks in Business: Big deals are risky, kind of like making a big bet. They can lead to huge rewards, like better business growth, but if things don’t go well, they can cause big problems too, especially when a lot of borrowed money is involved.

6. The Economy's Role in M&A Activity:

   The overall economic outlook is like the weather for M&As. When interest rates are low and inflation isn't a big worry, companies are more inclined to engage in M&As since borrowing money for these deals is cheaper. However, if inflation rises or interest rates increase, it could deter companies from pursuing M&As, affecting the overall pace and volume of these transactions in the market.

7. Key Investor Takeaways from M&A Trends:

   Keeping track of mergers and acquisitions (M&As) is vital for stock investors. These big deals can significantly impact the market, potentially leading to growth opportunities or risks in the sectors where you’ve invested. Understanding M&A activity can guide your investment decisions, helping you determine whether to invest, hold, or sell your stocks.

Jargon Explained

• Mergers and Acquisitions (M&As): Transactions where companies either merge together or one company buys another.

• Interest Rates: The cost of borrowing money. Lower rates can make it cheaper for companies to finance big deals.

• Cyclical Trends: Patterns in business or economic activities that repeat over time, like periods of high or low M&A activity.

• Risk Appetite: A company’s willingness to take risks, often influenced by the potential for higher rewards.

• Market Volatility: When stock prices keep going up and down quickly, it can make the market unpredictable.

• Monetary Policies: Decisions by central banks, like the Federal Reserve, about interest rates, which can impact the economy and business decisions.

• Global Economic Sentiments: Overall feelings or attitudes of investors and businesses about the current and future state of the world economy.

Bullet News

• Marijuana Companies' Banking Challenges: Cannabis businesses struggle with banking access due to federal laws, leading to reliance on cash and high operational costs.

• Trump Media's Stock Drop: Truth Social's parent company's shares fell sharply after revealing financial struggles and a near cash depletion last year, impacting Trump's investment value significantly.

• Baltimore Bridge Collapse Impact on Reinsurance: The unexpected collapse of Baltimore’s Francis Scott Key Bridge, with insured losses estimated between $2 billion and $4 billion, is expected to increase reinsurance pricing and add challenges to the industry.

• Banks' $2tn Property Debt Challenge: U.S. banks face pressure to manage a massive $2 trillion in maturing commercial real estate debt over the next three years.

• BYD's Impressive Sales Growth Amid EV Market Competition: Chinese EV maker BYD reports a significant sales increase in March, intensifying competition with global automakers like Tesla.

That’s it for today!