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🍋 2023 Could Be Private Equity's Year

🍋 2023 Could Be Private Equity's Year

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"Everything has a price, but not all prices appear on labels." — Morgan Housel

Good Morning! It's the most Friday Monday of the year. Dating app Grindr’s stock grinded out a 112% gain after its IPO on Friday, making its biggest investors billionaires. Elsewhere, OnlyFans CEO doesn't see a slowdown impacting her company. (no surprises here)

Former President Trump was reinstated back to Twitter after Musk put out a poll. But Trump says he’ll stick to his own platform because Twitter has too many problems. And Americans are stressed-out ahead of the holiday season, saying they’ll buy fewer gifts and donate less to charity this year.

YORK Athletics bridges the gap between style and performance to deliver the new modern classic shoe. They are offering 30% off your entire order for their Black Friday sale.

1. Story of the Day: 2023 Could Be Private Equity's Year

Wall Street is struggling this year. But that could all change soon for private equity bros.

Private equity firms have deployed capital at record low numbers this year. Private equity investors are looking for diamonds in the rough and undervalued companies. But since private equity firms pile on debt to amplify returns, rising interest rates and recession risks increase the chance investors will overpay for mid companies.

A perfect storm is brewing for the private equity industry. While deal flow falls to multi-year lows, firms are still sitting on record levels of dry powder. There's over $1 trillion of private equity capital begging to be deployed.

PE firms prefer sitting on piles of cash right now, but that doesn’t mean they can forever. Private equity investors essentially invest other people’s money, so there are strict rules about what firms can and can’t do. Ultimately, firms will either have to invest their clients’ money or return it.

As a result, many experts think there will be a significant uptick in private equity acquisition volume next year. Many think that private equity firms will target the healthcare and industrial industries for underperforming stocks to take private.

Takeaway: Private equity firms are looking for creative ways to navigate the next global setback. Investors, for example, bought up oil assets when prices crashed in March 2020. The current downtown might be a blessing in disguise for PE firms that can acquire discounted assets and sell them when the market bounces back. As the clock ticks for private equity firms to deploy capital, we might see a lot of distressed buyouts next year.

2. Markets Rundown

If you want access to Wall Street insider interviews, industry deep-dives, and investment ideas, check out our Insiders newsletter.

Stocks closed higher on Friday, but they were still down on the week.

Movers & Shakers

(+) Foot Locker ($FL) +9% because the company's earnings were better than expected.
(+) Palo Alto Networks ($PANW) +7% after beating revenue estimates.
(–) Coinbase ($COIN) -7% following FTX fall-out, a downgrade from banks.

Private Dealmaking

Astera Labs, a California-based chipmaker, raised $150 million
Syzygy Plasmonics, a decarbonization platform, raised $76 million
Advanced Navigation, an Australian AI robotics developer, raised $68 million
Descript, an AI-powered media editing app, raised $50 million
Privy, a digital trust platform, raised $48 million
MotherDuck, a data infrastructure and analytics startup, raised $35 million

A Message from York Athletics: Your New Go-to Shoe at 30% Off…Yes, 30% Off

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4. Book of the Day: Power Failure

No company embodied American ingenuity, innovation, and industrial power more spectacularly and more consistently than the General Electric Company.

GE once developed and manufactured many of the inventions we take for granted today, nearly everything from the lightbulb to the jet engine.

GE also built a cult of financial and leadership success envied across the globe and became the world’s most valuable and most admired company.

But even at the height of its prestige and influence, cracks were forming in its formidable foundation.

In a masterful re-appraisal of a company that once claimed to “bring good things to life,” pre-eminent financial journalist William D. Cohan argues that the incredible story of GE’s rise and fall is not only a paragon, but also a prism through which we can better understand American capitalism.

Beginning with its founding, innovations, and exponential growth through acquisitions and mergers, Cohan plumbs the depths of GE's storied management culture, its pioneering doctrine of shareholder value, and its seemingly hidden blind spots, to reveal that GE wasn't immune from the hubris and avoidable mistakes suffered by many other corporations.

“This was American Capitalism. GE was America.”

A Message from Contrarian Thinking: Launch Your Next Income Stream at Contrarian Thinking

We talk a lot about money at Short Squeez. So we had to chat with Codie Sanchez at Contrarian Thinking who kind of obsesses on making it. They have a weekly newsletter sent to 200k+ on building up bank accounts.

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176 new businesses started (+ 100’s side hustles)

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109 people started newsletters

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6. Daily Visual: Biggest Producers of Chili

Countries producing the biggest amount of dry chilis and peppers (2020, in tons)

Source: Statista

7. Daily Acumen

Former GE CEO Jack Welch on what he regrets:

"The only time he spoke about his children was when he told me that he ‘loved them to pieces’ but that he had made ‘a mistake’ when he gave each of them a bunch of G.E. stock when he first became C.E.O.,” Cohan writes.

Because the stock had performed well, they each had something like fifty million dollars in company shares.

Although two of his four kids went to Harvard Business School and one went to Harvard’s Graduate School of Design, they all quit their jobs, disappointing their father.

“They turned out differently than I’d hoped,” Welch tells Cohan. “We’re close. But they got too much money. . . If I had to do it all over again, I wouldn’t have given it to them.”

A father reflects, after a lifetime, on his troubled relationship with his children, and concludes that he should have adjusted their compensation."