Apr 4, 2022
The Weekly Scan April 4, 2022
Find out what’s happening in the world of business this week.
Welcome to the Weekly Scan. Here’s what we’re following for the week of April 4, 2022.
Puff, puff pass the bill? The House of Representatives passed legislation on April 1, 2022 that would decriminalize the use of marijuana on a federal level, and would also expunge convictions for marijuana possession, while placing a sales tax on the plant. Known as the Marijuana Opportunity Reinvestment and Expungement (MORE) Act, it will now move to the Senate. The Senate would need 60 votes to pass the bill into law, and full legalization of marijuana has been opposed by certain members of both parties.
- The takeaway: Congress unsuccessfully attempted to pass legislation legalizing cannabis in 2020. Meanwhile, marijuana has been legalized or decriminalized by several states in recent years. Recreational or medicinal use of marijuana is currently legal in 37 states. In the 2020 election, Montana, New Jersey, Arizona, and South Dakota voted to legalize marijuana for recreational use via ballot measure. The bill being considered by the House would use some of the revenue produced by a marijuana tax to help communities affected by drug convictions. In 2018, arrests related to marijuana made up 43% of all arrests in the U.S., and Black Americans are nearly 4 times more likely than white Americans to face arrest for possession of marijuana.
Put that out. Walmart announced it will stop selling cigarettes at some of its locations in Florida, Arkansas, California, and New Mexico. The retailer will replace tobacco products with candy and other grab-and-go options at self-checkout stations. Before the Covid-19 pandemic, Walmart executives had debated moving away from tobacco sales at some stores, following a directive from CEO Doug McMillon to consider alternatives to tobacco products. Walmart has not yet said how many of its 4,700 stores would ultimately stop selling cigarettes. Walmart’s competitors Target and CVS Health halted the sale of tobacco in 1996 and 2014, respectively. Currently, 5% of U.S. cigarette sales come from Walmart, according to one Goldman Sachs analyst. Most cigarette purchases happen at gas stations and convenience stores.
- The takeaway: Walmart has been moving towards eliminating tobacco products from its shelves in recent years. In 2019, Walmart raised the legal age for buying cigarettes at its stores to 21, before the federal government passed a law raising the age to 21. The retailer’s warehouse chain Sam’s Club also gradually stopped selling tobacco products in 2018. Walmart is also reportedly moving away from tobacco as it tries to move further into the healthcare and pharmacy space. U.S. health authorities estimate that cigarettes are responsible for 480,000 deaths annually. Selling cigarettes is also less profitable than selling other items like candy near registers.
The Great Crypto Heist. Hackers managed to steal roughly $622 million in cryptocurrency from the blockchain-based gaming network Ronin Network on March 23, 2022. Ronin, which powers the Axie Infinity online video game, reportedly lost 173,600 Ethereum and 25.5 million USD Coin. Ronin requires any withdrawals or deposits to be approved by five of nine validators. The hackers reportedly got access to four validators, and a fifth one connected to Axie DAO, an organization associated with Axie Infinity. In the future, Ronin says it will mandate the approval of eight out of nine validators, and will increase the number of validators over time.
- The takeaway: Ronin uses software called bridges, which allow people to convert tokens into ones that can be used on other networks. Those bridges aren’t often audited, and are therefore vulnerable to attack. Hacks in the cryptocurrency industry are somewhat common, according to Fortune. In August 2021, a hacker stole $611 million in cryptocurrency from Poly Network, a decentralized finance (DeFi) protocol. Overall in 2021, $2.3 billion was stolen from DeFi organizations.
Home is where healthcare is. UnitedHealth Group announced plans to acquire home healthcare provider LHC Group for about $5.4 billion cash. UnitedHealth, which is the largest health insurance provider in the U.S., will combine LHC Group with its drug benefits and analytics arm known as UnitedHealth Optum. UnitedHealth will pay $170 per share to acquire the company, 8.12% higher than the closing price of the day before the announcement. After the sale is finalized, the co-founders of LHC Group plan to invest $10 million in UnitedHealth’s stock. In February 2022, the Department of Justice sued UnitedHealth over its attempted $8 billion acquisition of billing and payment servicer Change Healthcare, saying that UnitedHealth would gain access to competitor data.
- The takeaway: UnitedHealth is hoping to move further into home health services with its acquisition of LHC Group. LHC Group currently serves mostly older people who have chronic illnesses or injuries. The demand for home healthcare has reportedly increased during the pandemic, as people prefer to access care from their homes rather than going in to doctor’s offices or hospitals. Another health insurer, Humana, acquired a controlling interest in home health service Kindred at Home for $5.7 billion in 2021.
Other stories we’re following:
Keep going. The House approved legislation that would extend the age for mandatory withdrawals from retirement accounts to 75 from 72. It would also increase catch-up contributions to 401(k)s to $10,000 from $6,500 for people 50 and older. The legislation builds on the Secure Act, passed in 2019, which extended the required withdrawal age from retirement accounts to 72 from 70 1/2. The new legislation must still pass in the Senate.
Extra lives. Taking a page from Tesla’s playbook, GameStop announced it’s seeking shareholder approval to split its stock in the form of a dividend. The announcement caused the company’s share price to pop last week. Tesla announced similar plans in March for a stock split, so it can start paying a dividend.
Here’s what we covered last week in the Scan:
- Jobless claims fell to their lowest level in more than 52 years
- The SEC has proposed new rules that would require public companies to disclose their greenhouse gas emissions and the climate risks to their businesses.
- President Biden has warned that Russia may be exploring ways to levy cyberattacks on critical infrastructure in the U.S.
- People are suddenly feeling less generous, and they’re tipping less, according to Block Inc., owner of payment app Square.