{"id":38513,"date":"2025-09-12T20:07:58","date_gmt":"2025-09-12T14:37:58","guid":{"rendered":"https:\/\/kuvera.in\/blog\/?p=38513"},"modified":"2025-09-12T20:16:06","modified_gmt":"2025-09-12T14:46:06","slug":"the-weekly-wrap-the-smell-of-money","status":"publish","type":"post","link":"https:\/\/kuvera.in\/blog\/the-weekly-wrap-the-smell-of-money\/","title":{"rendered":"The Weekly Wrap | The Smell of Money"},"content":{"rendered":"

In 2018, Richard Tornetta sued Elon Musk. Last year, he won. No, not Musk. It was Tornetta who won.<\/span><\/p>\n

Now, everyone knows Musk. The CEO of EV maker Tesla, the founder of SpaceX and Starlink, the owner of tweeting platform X and artificial intelligence firm xAI, Donald Trump\u2019s ally until recently, and so on.<\/span><\/p>\n

But few would perhaps know Tornetta. So, who is he and why is he important? Tornetta is a former heavy metal drummer and owned nine shares of Tesla\u2014yes, just nine shares\u2014when he sued Musk challenging his annual pay package of $56 billion. Last year, a court in Delaware, US\u2014where Tesla was incorporated at the time\u2014cancelled the package saying it was unfair to Tornetta and other Tesla shareholders.<\/span><\/p>\n

That case is now part of America\u2019s corporate law history. It will be taught in law schools and discussed and debated for decades. But, well, that\u2019s history. Let\u2019s move to the present.<\/span><\/p>\n

Tesla\u2019s board has now offered Musk a pay package of $1 trillion\u2014yes, you read that right! Before we get into the details of the package, you may be wondering how\u2019s that even possible after last year\u2019s court ruling?\u00a0<\/span><\/p>\n

Here\u2019s how. After losing in the Delaware court, Tesla shifted its headquarters to Texas. And Texas recently enacted a law that makes it almost impossible for small shareholders like Tornetta to sue companies and their managements. Under this law, a shareholder or a group of shareholders must own at least 3% of a company\u2019s stock before they can sue. In the case of Tesla, for instance, this would require you to own stock currently worth over $33 billion before you can sue the EV giant that has a market cap of $1.16 trillion.<\/span><\/p>\n

With help from the new Texas law, Tesla\u2019s board has now proposed to increase Musk\u2019s pay by nearly 20 times, potentially raising corporate governance concerns and ethical issues considering the widening wealth gap.<\/span><\/p>\n

The package involves Musk, already the world\u2019s richest person with an estimated net worth of over $380 billion, getting up to 423.7 million additional shares of Tesla stock in the next decade, provided the company meets certain milestones. These shares are currently worth a little less than $150 billion.<\/span><\/p>\n

The milestones include Tesla delivering a total of 20 million vehicles by 2035, one million bots called Optimus, and putting one million robotaxis in commercial operations. In addition, Musk must help Tesla reach a market valuation of $8.5 trillion and lift the company\u2019s earnings to $400 billion a year, up from $17 billion last year.<\/span><\/p>\n

Now, some of these targets are lower than what Musk has promised over the years. Still, the targets are audacious. And no one can predict whether Tesla and Musk can achieve these goals. But if they do, that will rewrite the corporate playbook not just in America but across the world.<\/span><\/p>\n

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\"SIP_Kuvera\"<\/b><\/strong><\/span><\/p>\n

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Pump and Dump<\/h3>\n

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Over the past few months, we have pointed out several instances of stock market scams that the Securities and Exchange Board of India has unearthed\u2014from banning people like Ketan Parekh and the \u2018She Wolf\u2019 Asmita Patel for engaging in malpractices to catching others in pump-and-dump schemes. But India isn\u2019t the only country where such scams are happening. Something similar has been happening in the US, too, where stock markets are trending near record-highs.<\/span><\/p>\n

New York-based Nasdaq recently submitted a set of proposals to the Securities and Exchange Commission\u2014the equivalent of SEBI in the US\u2014that seek to tighten listing standards on the stock exchange favoured by tech companies and investors, including many from India.<\/span><\/p>\n

The proposals include a higher minimum public float for some new IPOs and a quicker process to suspend and delist thinly traded companies. Nasdaq said companies mainly operating in China must raise at least $25 million in IPOs to qualify for listing on the exchange. It would also require a minimum $15 million market value of public float.\u00a0<\/span><\/p>\n

Why did the Nasdaq take these measures? And why did it single out China?<\/span><\/p>\n

Well, more than 100 Chinese companies, including tech giants like Alibaba, Baidu and JD.com, are listed in the US. And a growing number of Chinese companies are looking to list on US exchanges, thanks to stricter rules at home. In April, for instance, Chinese tea chain operator Chagee raised $411 million in its Nasdaq debut.<\/span><\/p>\n

But here\u2019s what caused the alarm.<\/span><\/p>\n

Nasdaq said it noticed patterns associated with \u201cpotential pump-and-dump schemes in US cross-market trading environments\u201d. While Nasdaq didn\u2019t specifically name any companies, US media reports highlighted several instances.<\/span><\/p>\n

The reports noted that several Nasdaq-listed micro-cap stocks such as Ostin Technology, Concorde International, Top KingWin, and Everbright Digital had dropped over 80% within a few weeks, causing billions of dollars in losses to their investors. Shares of many US-listed Chinese firms were heavily promoted on social media before they crashed.\u00a0<\/span><\/p>\n

A case in point is that of Regencell Bioscience, a Chinese herbal medicine company whose shares soared from just 11 cents in March to $78 in June and are now trading below $14. In other words, its shares jumped more than 700 times between March and June, before crashing more than 80%! Similarly, Ostin\u2019s shares plunged 94% in a single day in June.<\/span><\/p>\n

Now, we are not saying that there was any fraud in these cases, and Nasdaq hasn\u2019t either. But the sharp price movement is enough to raise suspicions. So, for us, the lesson is that whether you invest in Mumbai or New York, be careful.<\/span><\/p>\n

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IT\u2019s Not Fair<\/h3>\n

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Coming back home, India\u2019s vast IT services industry is facing a massive challenge. And no, we aren\u2019t talking about the shift to AI that threatens to upend the sector and slash thousands of jobs. We are talking about a new proposal in the US to tax outsourcing services.<\/span><\/p>\n

Last week, US Senator Bernie Moreno introduced the HIRE Act\u2014short for the Halting International Relocation of Employment Act\u2014proposing to impose a 25% tax on companies that hire foreign workers over Americans. The proposal is in line with the Trump administration\u2019s move to impose 50% tariffs on Indian goods last month. White House trade adviser Peter Navarro has also called for tariffs on services, not just goods, seeking to intensify pressure on India to stop buying Russian crude oil.<\/span><\/p>\n

The bill has sent shivers down the Indian IT industry\u2019s spine, even though it is too early to say whether and in what shape the law will pass. But if it does pass, it could potentially affect IT companies severely.<\/span><\/p>\n

The IT industry has thrived for nearly three decades, relying on American and European companies outsourcing their back-office and tech-related work to Indian companies. From Apple and Amazon to Yahoo and Zoom, a vast number of American corporations send software services work to Indian companies. This has helped the Indian IT industry grow to $283 billion in size\u2014making up nearly 7% of the Indian economy. In the process, the IT industry has created millions of jobs, and driven in boom in everything from cars to apartments.<\/span><\/p>\n

Any jolt to the IT industry, therefore, will have a multiplier effect that will ripple through the entire economy.\u00a0<\/span><\/p>\n

But the bill could be a double-edged sword and is likely to hurt American companies, too, especially those that rely heavily on outsourcing. It will also hurt those US firms that have invested millions of dollars to set up global capability centres (GCCs) in India where they perform not only low-end work but also high-end research and development as well as critical finance and operations activities.\u00a0<\/span><\/p>\n

These US companies are likely to push back against the bill and may even mount legal challenges, if required. Moreover, replacing Indian IT services won\u2019t be as easy as, say, switching Indian textiles or footwear.<\/span><\/p>\n

Still, the bill couldn\u2019t have come at a worse time for Indian IT companies. The IT sector is already struggling with weak revenue growth in the US market, which accounts for half of their revenue, as clients defer non-essential tech spending. The rapid rise of AI makes it even worse. All in all, the IT sector must brace for a rough ride.<\/span><\/p>\n

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Shifting Tactics<\/h3>\n

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Moving on to mutual fund news, Indian investors recalibrated their tactics once again in August after investing a record sum in July when inflows into equity schemes had soared 81% to Rs 42,702 crore.<\/span><\/p>\n

Latest data released this week by the Association of Mutual Funds in\u00a0India\u00a0showed net inflows into equity schemes fell 22% month-on-month to Rs 33,430 crore in August.<\/span><\/p>\n

Investors turned cautious as the US imposed 50% tariffs on Indian goods, hurting export-oriented industries. High valuations, foreign fund outflows, and rising gold prices also prompted a shift in investor allocation.<\/span><\/p>\n

Inflows into large-cap equity schemes soared 33% to Rs 2,835 crore while the amount of money flowing into small-cap funds fell 23% to Rs 4,993 crore. Mid-cap funds remained resilient, with inflows slipping only 1% to Rs 5,331 crore. Inflows into gold ETFs jumped to a seven-month high of Rs 2,190 crore while inflows into silver ETFs were steady at Rs 1,759 crore. SIP contributions also remained stable at Rs 28,265 crore, versus July\u2019s record high of Rs 28,464 crore.<\/span><\/p>\n

Meanwhile, fund houses have started seeking SEBI approval for Specialised Investment Funds, which will follow more complicated investing strategies and where the minimum investment amount is Rs 10 lakh. SEBI had introduced SIFs earlier this year, seeking to bridge the gap between retail investors and portfolio management services where the minimum ticket size is Rs 50 lakh.<\/span><\/p>\n

Edelweiss MF has branded its SIFs under Altiva, SBI MF will offer such SIFs under the Magnum brand, and Quant MF is calling its SIF products qsif. Edelweiss MF\u2019s Altiva Hybrid Long-Short Fund, SBI MF\u2019s Magnum Hybrid Long-Short Fund and Quant MF\u2019s qsif Hybrid Long-Short Fund will soon launch new fund offers. But should you invest? Well, we suggest understand the products first, and evaluate your risk appetite and asset allocation, before writing a Rs 10-lakh cheque.<\/span><\/p>\n

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Market Wrap<\/b><\/h3>\n

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Indian stock markets rose for a second week in a row, as investor sentiment improved after the government cut GST rates and on expectations that the US Federal Reserve will cut interest rates next week. A US rate cut could push more foreign flows towards emerging markets such as India.<\/p>\n

\nBoth the Nifty 50 and the BSE Sensex gained about 1.5% this week. The small-cap index climbed 1.9% while the midcaps rose 2%. All but one of the 16 major sectors gained.<\/p>\n

The IT index gained 4.3%, helped by a share buyback plan announced by Infosys. The buyback plan helped Infosys clock a 5.6% gain this week. HCL Tech, Wipro, Tech Mahindra and TCS also ended higher.<\/p>\n

The auto index jumped 2.1% this week, boosted by tax cuts. Royal Enfield bike maker Eicher was the top performer, rising 4.5%. Tata Motors jumped 3.4% while Maruti Suzuki gained 2.9%.<\/p>\n

Bajaj Finance surged 7% on hopes a rise in consumer spending will boost demand for its loans. Other major gainers included non-bank lender Shriram Finance, Adani Ports, Adani Enterprises, and Axis Bank.<\/p>\n

Tata Group companies Trent and Titan were the top losers, followed by Zomato parent Eternal and IndusInd Bank. Other stocks that ended in the red included Hindustan Unilever, UltraTech and Asian Paints.<\/p>\n

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\"FD_Kuvera\"<\/p>\n

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Other Headlines<\/b><\/h3>\n

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