🎙️ Fireworks

🇺🇸 Who’s ready to celebrate Independence Day with fireworks, grilling, and parades? There’s something about mid-week holidays that hit differently.

Wherever this finds you, we wish you a wonderful Fourth of July. After grillin’ and chillin’ all day Tuesday, we’ll be right back in your inboxes on Wednesday with all things markets.

— Weronika & Matthew

Here’s the rundown:

Today, we'll discuss the two biggest stories in markets:

• Work-from-home insider trading

• Tesla and BYD hit record sales on EV demand surge

All this, and more, in just 4 minutes to read.

CHART(S) OF THE DAY

IN THE NEWS

💰 Insider Trading Is Better at Home (Bloomberg)

Work-from-home has drastically changed office (and some financial) dynamics forever. One sliver of financial-related crime that might have benefited: insider trading.

For couples living together, one person might be in a deal-making Zoom meeting or conference call. You walk by and overhear your partner, which gives you the information you could trade on, notes Bloomberg’s Matt Levine.

• The Securities and Exchange Commission recently announced insider trading charges against Jordan Meadow, a rep for a New York-based broker-dealer, and Steven Teixeira, the chief compliance officer of an international payment processing company.
  

• The SEC’s complaint alleges that they traded on nonpublic information that Teixeira obtained from his girlfriend’s laptop while she was working from home during the pandemic.

The complaint also alleges that Teixeria used his girlfriend’s information on possible upcoming mergers and acquisitions of public companies to purchase call options.

He tipped the info to his friends, too, earning him about $28,600 in profit, while Meadow made more than $730,000. Per the complaint, Meadow then recommended trades to his brokerage customers, resulting in millions of dollars in profits for them and hundreds of thousands of dollars in commissions for himself.

Why it matters:

A quick buck: “Our complaint alleges brazen betrayals of trust by Teixeira, who misappropriated information from his girlfriend’s laptop to make a quick buck, and by industry-veteran Meadow, who was all too eager to use the information to line his pockets,” said the Associate Regional Director of the SEC’s Philadelphia Regional Office.

• “We will continue to pursue and prosecute insider trading where appropriate to hold people accountable for their actions.”

Insider trading is nothing new, though it’s notoriously hard to prove and prevent. One study estimated that only about 15% of insider trading in the U.S. is detected and prosecuted. The issue has come to light in recent years amid increased enforcement, but it’s still challenging to catch.

Not all insider trading is illegal: When company insiders buy or sell shares in their company in accordance with laws, then file their trades with the SEC, they’re usually OK. What makes it illegal is when someone possesses material and nonpublic information.

• You might recall that high-profile individuals such as Martha Stewart and former McKinsey global head Rajat Gupta served time behind bars for insider trading.
  

• The SEC uses sophisticated tools to detect illegal insider trading, particularly around important events, earnings reports, key corporate developments, or large stock price swings. They also rely on tips and complaints from investors on the wrong side of the trades.

But hey, maybe artificial intelligence could one day find a way to stamp out the practice altogether. Regulators aren’t ruling that out.

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🔋 Tesla and China’s BYD Hit Record Sales (Reuters)

Tesla and Chinese BYD have achieved record sales milestones in the second quarter, solidifying their positions as the world's leading electric car manufacturers. Tesla’s stock soared about 7% Monday in a shortened trading day, continuing its remarkable 159% YTD rise in 2023.

Tesla delivered a total of 466,140 vehicles worldwide, surpassing expectations, partly thanks to its price cuts. Meanwhile, BYD, the top-selling car brand in China, recorded its best-ever quarter with 700,244 units of fully electric and plug-in hybrids.

• Tesla remains committed to prioritizing volume over profitability, intensifying the competition for traditional automakers that have lagged in the EV space.
  

• Volkswagen appointed new leadership for its Audi brand, aiming to catch up to Tesla after trailing behind in the first quarter. The move underscores the mounting pressure on legacy carmakers to accelerate their EV efforts.

Why it matters:

While Tesla dominates the EV market in the U.S., it faces competition globally from companies with more recent EV offerings. Tesla’s latest addition to its lineup, the Model Y, debuted in 2020.

• To maintain its market share, Tesla must update its product portfolio to stay competitive against rivals.

In China, Tesla's second-largest market, the Elon Musk-led company has faced competition from BYD.

• Tesla recently announced a price reduction of over 4.5% on its premium car models nationwide. Tesla also has implemented a cash subsidy program for certain buyers of its Model 3 sedan, aiming to increase its competitiveness and attract more customers in China.

BYD made progress in full EV sales, nearly doubling its deliveries compared to the previous year, reaching 352,163 units in the second quarter. The company, headquartered in Shenzhen, saw a 98% surge in total sales year-on-year, marking its strongest quarter to date.

• BYD also sold a record 251,685 new EVs in June alone, indicating that the global shift from combustion vehicles to EVs is upon us.

MORE HEADLINES

🧳 Record number of travelers expected this July 4

🚗 Why this might be the least-affordable car market in history

⛽ Saudi Arabia + Russia curb oil production yet again to try to boost prices

See you next time!

That's it for today on We Study Markets!

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