🍋 If You Can't Beat 'Em, Advise 'Em

How investment banks are taking on a matchmaker role in an effort to win back LevFin revenue, plus $TSLA and $META earnings.

Together With

“I think that the first thing is you should have a strategic asset allocation mix that assumes that you don't know what the future is going to hold.” — Ray Dalio

Good Morning! Wall Street CEOs are getting tested by calls to strip them of their power. Boeing lost $355M last quarter, less than the worst-case scenario analysts expected. And Tesla’s stock surged with Musk promising cheaper cars. Meta’s stock sank 16% after-hours on weak revenue guidance, and Chipotle is defying the restaurant slump with earnings and foot traffic rising again (pre-Covid Chipotle still hit different ). Plus the scoop on a potential TikTok ban, and can minimalism make you richer?

SQUEEZ OF THE DAY

If You Can't Beat 'Em, Advise 'Em

Investment banks are adapting to private credit taking their share of the leveraged buyout market. It’s the classic, if you can’t beat ‘em, advise ‘em approach.

Now banks are advising private lenders to reclaim the fees their leveraged lending desks have lost.

Private credit funds sitting are on a record $430 billion of dry powder and bulge-bracket banks like Wells Fargo, Barclays and JPMorgan Chase have formed strategic alliances with private credit firms and committed resources to originate private credit deals, adapting to the growing dominance of direct lenders.

Before private lenders started taking more of the leveraged lending business, leveraged finance used to generate about a third of Wall Street's investment banking fees. They'd finance the biggest buyouts with both junk bonds and leveraged loans that would be syndicated to investors. 

Banks’ vast relationships, including with lesser-known privately held companies, are invaluable. Ares, a private equity megafund that has become one of the biggest players in the private credit space, is optimistic that banks can add value by being a one-stop shop for firms looking to raise capital.

Takeaway: Despite the opportunities for additional revenue through advisory services and potential fee-sharing with direct lenders, major banks remain cautious. Citigroup and Goldman Sachs have not fully committed to expanding into private credit advisory, maintaining a careful approach in a competitive financial market influenced by post-crisis regulations and a landscape rich with well-capitalized direct lenders.

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HEADLINES

Top Reads

  • Wall Street bosses are tested by calls to strip them of power (YF)

  • Boeing reports better-than-feared quarter, says supply chain is stabilizing (CNBC)

  • Tesla stock surges as EV maker will 'accelerate' the launch of cheaper cars (YF)

  • Meta shares sink 16% on weak revenue guidance (CNBC)

  • Chipotle defies restaurant slump as earnings rise again (YF)

  • Biden just signed a potential TikTok ban (CNN)

  • Bank of America’s hidden losses (Axios)

  • Why the Fed keeping rates higher for longer may not be such a bad thing (CNBC)

  • Jamie Dimon is worried the US economy is headed back to the 1970s (YF)

  • Switzerland says UBS may need more cash (CNN)

  • Dimon says NYC must fight to compete with cities worldwide (BB)

  • Foot Locker debuts ‘store of the future’ to win back Wall Street’s confidence (CNBC)

CAPITAL PULSE

Markets Rundown

S&P 500 ends higher as markets weigh rising yields, upbeat corporate results.

Movers & Shakers

  • (+) Tesla ($TSLA) +12% despite weaker-than-expected Q1 revenue; the EV maker announced cheaper models.

  • (+) Texas Instruments ($TXN) +6% after the chipmaker announced higher revenue than expected.

  • (–) Old Dominion Freight Line ($ODFL) -11% after a mixed Q1 financial update.

Private Dealmaking

  • CoStar Group bought Matterport, a spatial data company, for $2.1 billion

  • Xaira, the ex-Stanford president’s biotech, raised $1 billion

  • Endeavor BioMedicines, a biotech focused on fibrosis, raised $132.5 million

  • Parloa, a conversational AI platform, raised $66 million

  • Midi Health, a virtual menopause care provider, raised $60 million

  • Constantinople, a banking software provider, raised $33 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

BOOK OF THE DAY

Fight Right

How we fight predicts the future of our relationships. Most of us blunder into conflict without knowing what we are really fighting about and then quickly become overwhelmed by physiological responses we can’t control and emotions we don’t anticipate. The truth is the happiest and most successful couples fight—all the time. Conflict is human, and necessary.

Through decades of research, Drs. John and Julie Gottman, founders of the world-famous Love Lab, have identified the five common mistakes we make when we are at odds. In Fight Right, we learn the five secrets that help us to get back on track and harness conflict to build stronger, healthier relationships.

With kindness, clarity, and a deep understanding of the struggles couples are going through, the Gottmans show us that we each have a unique conflict culture, borne of how we were raised and how we experienced past relationships, and they take us through all the possible combinations, from Avoiders, to Validators, to Volatiles, and how they can best work together.

Fight Right is an essential resource that will help couples escape the win-or-lose mentality in favor of a collaborative approach: calming down, staying connected, and really understanding, so that our fights can bring us closer.

“An indispensable resource that couples will use over and over again.”

DAILY VISUAL

China: Housing Slowing

Source: Apollo

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DAILY ACUMEN

Intellectual Humility

Cultivating intellectual humility - the willingness to admit the limitations of your knowledge, openness to revising your beliefs based on new evidence, and ability to present your ideas without defensiveness - can lead to immense personal growth and improved relationships.

The author shares his own transformative experience of questioning his long-held religious beliefs after a tragic loss, highlighting how intellectual humility allowed him to authentically revise his worldview.

While it can be challenging to let go of strongly held convictions, approaching disagreements with curiosity and a genuine desire to learn can turn these moments into opportunities for growth.

Researchers are exploring various interventions to develop intellectual humility, from enhancing listening skills to exposure to diverse perspectives.

By embracing the discomfort of admitting when we're wrong and remaining open to new information, we can experience the freedom and joy that comes with intellectual humility.

ENLIGHTENMENT

Short Squeez Picks

MEME-A-PALOOZA

Memes of the Day

 

 

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