Market Beats | Xiaohongshu Could Need State-Owned Backer for IPO; US FDA Head of Food Resigns; China to Increase Support for Private-Owned Companies; xAI Releases AI Model That Beats Most Rivals; Uber-Backed Lime Prepares for IPO Amid Strong Bookings Growth

—— Xiaohongshu Could Need State-Owned Backer for IPO; US FDA Head of Food Resigns; China to Increase Support for Private-Owned Companies; xAI Releases AI Model That Beats Most Rivals; Uber-Backed Lime Prepares for IPO Amid Strong Bookings Growth

1. Xiaohongshu Could Need State-Owned Backer for IPO

Chinese regulators have privately suggested to Xiaohongshu Technology Co.—the company behind the Rednote app—that bringing a state-owned investor on board could help smooth the approval process for any future listing, according to people with knowledge of the matter.

It remains uncertain whether Xiaohongshu will act on the recommendation, said the people, who requested anonymity because the discussions are confidential.

Neither the China Securities Regulatory Commission nor Xiaohongshu responded to requests for comment.

Amid questions about TikTok’s fate in the US, many social media users have gravitated toward Xiaohongshu, a service similar to Instagram. It stands out as one of the few prominent Chinese internet unicorns that has yet to go public.

Xiaohongshu has climbed the ranks of Apple Inc.’s iPhone app store in the US, becoming one of the most-downloaded free apps. Bloomberg News has reported that the company is poised to generate more than \$1 billion in net income in 2024. On the platform, users can share photos, videos, and other content, as well as read reviews and make purchases.

Major backers of Xiaohongshu are in discussions to sell shares at a valuation of at least $20 billion, according to people familiar with the situation. The South China Morning Post reported in December that underwriters have been chosen for a potential share sale in Hong Kong.

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2. US FDA Head of Food Resigns

Vanguard Group’s significant reduction in fees for many of its mutual funds and ETFs is a strategic move that emphasizes its ongoing commitment to low-cost investing. This decision could indeed have major implications for the asset management industry, pressuring competitors to also lower their fees or find other ways to attract and retain investors.

The reduction to an average fee of just 0.07% highlights Vanguard’s unique position in the market, leveraging its massive scale and customer-centric business model to offer more value to investors. The move could accelerate the trend towards low-fee investment products, which has been popular among both individual and institutional investors who are increasingly cost-conscious.

This fee cut could potentially lead to increased inflows for Vanguard, as cost is a significant factor for many investors when choosing funds. Competitors may need to respond with cuts of their own or differentiate their offerings in other ways, such as by focusing on performance, specialized products, or enhanced services.

This dynamic could lead to further innovation in the industry as firms strive to meet investor demands in different ways.

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3. China to Increase Support for Private-Owned Companies

Chinese stocks in Hong Kong rallied after a meeting between President Xi Jinping and prominent entrepreneurs signaled Beijing’s endorsement of the private sector. 

The Hang Seng China Enterprises Index rose as much as 2%, with technology stocks including Alibaba Group Holding Ltd. and Xiaomi Corp. contributing the most to the advance. The gauge has now gained more than 23% since a low in January. The CSI 300 Index, an onshore benchmark, also edged higher. 

Xi promised to abolish unreasonable fines against private firms and urged entrepreneurs to maintain their competitive spirit. The show of support is seen adding fuel to this year’s world-beating stock rally in Chinese stocks, which has largely been driven by optimism over DeepSeek’s artificial intelligence capabilities.

Alibaba’s Jack Ma and DeepSeek founder Liang Wenfeng were among the attendees at the meeting.

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4. xAI Releases AI Model That Beats Most Rivals

Elon Musk’s AI venture, xAI, unveiled its updated Grok-3 model, highlighting a version of chatbot technology that Musk has described as the “smartest AI on Earth.”

According to a company livestream on Monday, Grok-3 outperforms Alphabet Inc.’s Google Gemini, DeepSeek’s V3 model, Anthropic’s Claude, and OpenAI’s GPT-4o in math, science, and coding benchmarks. During the presentation with three xAI engineers, Musk noted that Grok-3 has “more than 10 times” the compute power of its predecessor and wrapped up its pre-training in early January.

“We’re continuously enhancing the models, literally on a daily basis,” Musk said. “Within 24 hours, you’ll see improvements.”

The company also introduced DeepSearch, a new smart search engine powered by Grok-3. DeepSearch shows its reasoning process, explaining how it understands queries and formulates responses. Users can opt for research, brainstorming, or data analysis modes. Musk’s team added that a voice-based chatbot is in the works and will be launched “as soon as possible.”

Grok-3 is available immediately to Premium+ subscribers on X, and xAI is introducing a new “SuperGrok” subscription for the bot’s mobile app and Grok.com. Eventually, the firm plans to open-source earlier versions of Grok once the latest model is fully stabilized—something Musk expects will happen for Grok-3 in a few months.

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5. Uber-Backed Lime Prepares for IPO Amid Strong Bookings Growth

Lime, the shared electric bike and scooter operator, pledged to maintain double-digit growth in bookings after recording a record number of trips in 2024. That momentum, the company said, will help pave the way for its long-anticipated initial public offering.

The startup—backed by Uber Technologies Inc.—is set to announce on Tuesday that it achieved a second consecutive year of positive free cash flow in 2024. It also reported annual gross bookings growth exceeding 30%, driven by an aggressive expansion over the past year, including launches in more than 20 cities such as Tokyo and Athens. During that period, Lime increased its fleet of bikes and scooters by nearly 20% to over 270,000 vehicles.

Founded in 2017 in San Francisco, Lime has been laying the groundwork for an IPO, initially signaling interest in 2021 before US public equity markets began to cool. Over the past year, the company bolstered its executive team by hiring a chief legal officer and chief technology officer, among others.

In an April interview with Bloomberg, Chief Executive Officer Wayne Ting said the precise timing of Lime’s IPO hinges largely on broader market conditions. While there is no specific update on the schedule, Ting emphasized that the company is focused on showing investors a solid track record of profitability and free cash flow before turning its attention to a public listing.

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6. Tesla Model 3 Sales Drop 36% in California

Tesla Inc.’s declining car registrations in California throughout 2024, especially a significant 36% drop in sales for its Model 3, indicates challenges for the company in its most crucial market. Despite introducing the Cybertruck to its lineup, Tesla was unable to counteract the broader downturn in its sales figures within the state.

Several factors could be contributing to Tesla’s reduced performance in California. The Model 3’s major overhaul early in the year might have temporarily disrupted production and sales. However, external factors, such as CEO Elon Musk’s high-profile involvement in the U.S. election, could also have influenced consumer sentiment and purchasing decisions, potentially leading some customers to look elsewhere.

This situation exemplifies how corporate leadership can impact a company’s market performance, particularly when such activities intersect with political events.

For Tesla, maintaining its lead in the competitive EV market could require not just innovations in technology and expansions in product offerings but also managing public perceptions and the potential fallout of executive actions outside the core business activities.

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7. US Stocks Tank Amid Tariffs

U.S. stocks faced a downturn on Friday afternoon, closing in negative territory as the automotive and Chinese sectors led the fall. This decline was primarily driven by an announcement from the White House confirming President Donald Trump’s intention to proceed with significant tariffs on imports from Mexico, Canada, and China starting Saturday.

Specifically, Trump’s administration plans to impose a 25% tariff on goods from Mexico and Canada, and a 10% tariff on Chinese imports. This news negatively impacted investor sentiment, particularly affecting a UBS Group AG basket of stocks deemed at risk from these tariffs, which plunged by 3.7%. Additionally, despite an initial gain, the S&P 500 Index ended the day down by 0.5%.

The financial markets reacted swiftly, with the Bloomberg Dollar Spot Index reaching a session high, indicating a flight to safety among investors. Meanwhile, the Cboe Volatility Index (VIX), often referred to as the “fear gauge,” increased to just over 16, reflecting growing uncertainty and risk aversion among traders.

The ongoing threat of tariffs has been a significant concern for U.S. equity markets since Trump’s election victory in November. Analysts and strategists have cautioned that such high levies could spark inflationary pressures, potentially leading to broader economic disruptions and negatively impacting stock valuations.

Given this backdrop, sectors such as automotive, technology, and manufacturing, which have substantial exposure to international trade, are particularly vulnerable to the effects of prolonged trade wars and the imposition of tariffs.

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