🍋 LBOs are Down

Together With

 "Charlie and I both think about worst case scenarios a lot." — Warren Buffett

Good Morning! As we close out the week, Roger Federer will close out his professional career today at the Laver Cup, playing one last doubles match with his greatest rival and friend, Rafael Nadal. A late-night hamburger is going to cost more at your local diner, as food inflation has sent the American Diner Index up 13%.

The economic effects of the state of the world are also very pronounced in housing these days, with US home sales having declined for 7 months in a row. Consequently, the lack of affordability is pushing homeowners to lower asking prices, lowering expectations from peak levels.

If you're a Tesla Stan, you may want to lower your expectations too, as the EV giant recalled almost 1.1 million vehicles for malfunctioning automatic windows. Not as nice as a Tesla, tents are being set up in NYC for migrants, as shelters are already overflowing.

Miss your second monitor on while traveling? Check out ViewSonic's portable monitors.

Next week we will be releasing our first ever Private Equity Recruiting Course. If you are interested in being notified when it drops, sign up here.

1. Story of the Day: LBOs are Down

PE industry titan and founder of Thoma Brava, Orlando Bravo said mega-buyouts are getting tougher to do, with investors staying away. "The problem with doing really big deals is getting the equity," said Bravo.

PE transactions are down roughly 30% this year after a record 2021, despite the $992 billion in volume being historically high.

With the Fed's aggressive monetary tightening, debt costs are higher, sending equity valuations lower, and making it tough for the opposite ends of the table to agree on a price. 

Back to Bravo, he's hopeful that his firm's specialization in high-growth tech and software deals strapped with less debt than other PE targets, means they'll do alright. He said, "There is enough financing because it's only 25% of these deals."

In June, Thoma Bravo bought US enterprise software firm Anaplan, in a transaction valued at $10.4 billion. The cost consisted of roughly 24% of loans.

As the US and Europe are expected to fall into a recession, Scott Kleinman, co-president of Apollo Global, said that the PE drought looks like it'll last until late 2023.

Short Squeez Takeaway: Despite the mayhem in the markets, creative private equity and credit folks will definitely figure out a way to get deals done. Whether or not those deals are of the highest quality that remains to seem. But the hella dry powder that these folks are sitting on is getting invested one way or another.

2. Markets Rundown

All markets were down following yesterday's Fed driven dip.

Movers & Shakers

  • (+) Eli Lilly ($LLY) +5% after UBS upgraded the company from neutral to buy.

  • (+) Trip.com ($TCOM) +5% despite reporting falling revenue in Q2.

  • (–) Novavax ($NVAX) -13% on being downgraded to underweight from Neutral by JPMorgan.

Private Dealmaking

  • FTX, a crypto exchange, raises another $1 billion 

  • Sardine, a fraud detection platform For financial services company, raised $52 million

  • Zen Chef, a restaurant software and management platform, raised $50 million

  • Zendesk, a software maker, to go private, acquired by private equity firms for $10.2 billion

  • KKR invests $450 million in Hero Future Energies, a renewable energy company 

  • IMAX acquires AI Video Enhancement Company SSIMWAVE for $21 million

  • Miner extractable value startup Skip raises $6.5 million

3. Top Reads

  • Wall Street is finally getting the Fed’s message on interest rates (YF)

  • Are the new AirPods worth it? (CNBC)

  • Supply chain issues and inflation fuel billion-dollar black market (Fox)

  • JP Morgan Chase CEO warns policy makers to ‘prepare for the worst’ (CNN)

  • FedEx hikes package rates, details cost cutting as demand weakens globally (CNBC)

  • Powell has pretty much sealed the fate of the short-term stock market (The Street)

  • Bed Bath & Beyond is not helping itself (CNBC)

  • Powell heading into the ‘danger zone’ (CNN)

  • Fed says this will hurt, but it matters who feels the pain (Axios)

A Message From ViewSonic: Portable Monitors for Productivity on the Go

Gone are the days of working from the office all the time. Working from home or on the road is where it's at. The worst part about working on the road? That tiny tiny laptop screen… It doesn’t have to be that way though. ViewSonic is changing the game with their portable monitors.

The monitors look beautiful and are lightweight af. With a weight of less than 2 lbs. and a thickness of just .6 in., these ultra-slim portable monitors can be effortlessly stowed into backpacks, purses, and even laptop cases. 

Simply plug in a single USB Type-C cable that transfers power, audio, and video, and watch your productivity take off with a second screen.

I myself use one of these and highly recommend.

Use code OWS for 15% off ViewSonic portable monitors in the US & Canada.  

4. Book of the Day: Superabundance

Generations of people have been taught that population growth makes resources scarcer. In 2021, for example, one widely publicized report argued, “The world's rapidly growing population is consuming the planet's natural resources at an alarming rate . . . the world currently needs 1.6 Earths to satisfy the demand for natural resources . . . a figure that could rise to 2 planets by 2030.” But is that true?

After analyzing the prices of hundreds of commodities, goods, and services spanning two centuries, Marian Tupy and Gale Pooley found that resources became more abundant as the population grew. That was especially true when they looked at “time prices,” which represent the length of time that people must work to buy something.

To their surprise, the authors also found that resource abundance increased faster than the population―a relationship that they call “superabundance.” On average, every additional human being created more value than he or she consumed. This relationship between population growth and abundance is deeply counterintuitive, yet it is true.

Why? More people produce more ideas, which lead to more inventions. People then test those inventions in the marketplace to separate the useful from the useless. At the end of that process of discovery, people are left with innovations that overcome shortages, spur economic growth, and raise standards of living.

“Abundance is not something we acquire. It is something we tune into.”

5. Short Squeez Picks

  • How adaptability helps you propel forward in your career 

  • What don’t people get about your job?

  • This advice from Steve Jobs is only 5 words, but teaches how to build a great business

  • Don’t give up on the stock market 

  • Six behaviors to increase your confidence

6. Daily Visual: Rents Could Finally be Peaking

Median US rent for two bedrooms or less

Source: Axios

7. Daily Acumen: Precautionary Principle

“The Precautionary Principle reflects the reality of working with and within complex systems. 

It shifts the burden of proof from proving something was dangerous after the fact to proving it is safe before taking chances. 

It emphasizes waiting for more complete information before risking causing damage, especially if some of the possible impacts would be irreversible, hard to contain, or would affect people who didn’t choose to be involved.”

Source: FS Blog

8. Crypto Corner

  • Jamie Dimon says crypto tokens, Bitcoin are ‘decentralized ponzi schemes’

  • Kraken CEO Jesse Powell steps down 

  • Coinbase tested group to speculate on crypto 

  • 23-year-old ‘crypto king’ has Lambo, luxury cars seized 

  • How expectations are influencing Bitcoin and Ethereum prices following Fed rate increase

9. Memes of the Day

 

 

 

*****

What'd you think of today's email?

Login or Subscribe to participate in polls.

*****

Want to reach an audience of 150,000+ business leaders, young professionals, and policy influencers? Advertise in Short Squeez.  

Join the conversation

or to participate.