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Welcome Back! Let's get into it! |
The Main Stories 🔍 |
Goldman is bearish AI: Goldman Sachs put out a report noting how the big Tech firms like Nvidia, Microsoft, Meta, and Google have poured billions into AI but don't really have an "ROI". Even more so, them and other firms are expected to continue to invest heavily in AI, at the expense of cash flow, energy usage, trust, and copyrights, without a clear path to return on their investment. These big tech giants have spent over $100 Billion and are now spending over $10 Billion a month! |
Goldman's Jim Covello is pretty bearish - noting that so far AI isn't showing that it would be able to solve complex problems that would justify these billions of dollars of investment. Covello asks that even if things do get better, then what's the cost to get there? |
The energy usage part is massive - all of these firms have carbon footprint pledges, but have seen their impact on the environment increase due to the massive acceleration of power grid usage. Secondly, water goes to waste every time you ask ChatGPT a question: roughly 1/2 liter of water is depleted every time you submit a question. |
Goldman isn't alone - Sequoia, the large VC firm, put out a piece arguing that these tech giants need $600B in revenue to payback their AI investments. The problem with their piece below may be that AI revenue might be lower margin…if that's the case there's a big problem for software multiples. If AI ultimately becomes a lot more limited than everyone is projecting, then there might be some serious problems for the folks that went all in. |
 | From Sequoia |
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I think it's fair to admit AI isn't insanely robust at this moment. It might be incredible in a year or two, but right now it's really a more efficient google search (excluding the fact that you sometimes get wrong answers). I use AI mostly to give me a high-level answer on a complicated question that would've taken me 15-45 minutes (or even longer) to figure out without AI. But I still need to sanity check the work AI gave me, as if they were an intern or something. I still think we're going to see AI dramatically improve over time, but there's decent odds that Goldman and Sequoia's alarm bells are appropriate. |
The Incora ruling may have changed liability management exchanges (LMEs): A judge ruled that an LME by aerospace parts company Incora in 2022 wrongly stripped collateral from disadvantaged creditors such as JP Morgan, BlackRock, and King Street. This is a loss for PIMCO and Silver Point Capital, who participated in the $250 million LME back in 2022. This could be sign of more LMEs to be challenged (or not even happen in the first place) due to litigation and invalidation concerns. |
Bill Hwang is guilty: The founder of Archegos, the hedge fund known for causing massive losses across the Street back in 2021, was found guilty on 10 out of 11 counts, including manipulation, fraud, and racketeering. The findings included Hwang lying to banks (like Credit Suisse who lost over $5 Billion) about stock purchases and value. Hwang may face up to 20 years in prison, per charge. |
The Senate is floating a bill to ban stock trading among elected officials: Years after a host of extremely profitable (and opportunistically) timed trades by elected officials during the pandemic began ringing alarm bells, a bipartisan group of senators agreed this week on a bill to ban members of Congress, their spouses, and dependent children from trading stocks in office. Also restricting the President and VP, the ban requires divestment within 90 days and imposes penalties equal to either the greater of a lawmaker's monthly salary or 10% of the value of the offending assets (not sure if this would do all that much to hurt Pelosi's crazy returns). |
More Headlines 🍿 |
Clearlake Capital's fundraising is struggling following a string of bad 2020 and 2021 private equity deals Hebbia, a GenAI startup and The Wall Street Rollup newsletter sponsor, raised a $130 million Series B investment led by Andreessen Horowitz and Peter Thiel. The company's flagship product, dubbed "the Matrix," allows users to compare and extract data from multiple documents (i.e. earnings reports) displayed side-by-side simultaneously Bill Ackman is marketing a $20 Billion Closed-End Fund Network executives from ESPN, NBC, and Amazon reportedly finalized contracts with the NBA to broadcast the next 11 seasons for $76B. Owned by Warner Bros. Discovery, legacy contract holder TNT now has five days to come up with a better offer (or legal maneuver as CEO David Zaslav has hinted) to preserve its coveted relationship with the NBA Platinum Equity is coming with $300 million PIK Toggle notes for a dividend recap of their portfolio company, Calderys. Platinum's unique, risky move comes amidst a PIK wave in the leveraged loan market. Though some argue the structures indicate strong market fundamentals, others fear they're a warning sign of a developing bubble The retreat from ESG-oriented investing is easing in the bond market. Exploding energy demand from data centers is expected to drive a boom in the green bond market. With sales running at their fastest pace ever, MS is projecting green debt issuance to surpass the previous 2021 $1T record Following its 80+% rally since April, Tesla now amounts to more than 15% of Cathie Wood's flagship ARK Innovation ETF. For years, Wood has floundered. Now her firm is abandoning their previous guardrails which capped any single position to ~10%, riding the Musk fever like they did in the late 2010s UiPath shares fell after laying off 10% of their workforce. The payment automation software provider announced that it expects up to $25mm in restructuring charges to land in Q1 next year LegalZoom tanked over 25% after their CEO was ousted and sales outlook was cut Hubspot fell 12% on Google backing out of a potential acquisition Retailer, Big Lots, is closing up to 40 stores and weighing bankruptcy The Hawk Tuah girl is in talks for a reality show. Weeks after Hailey Welch went viral for spitting on camera, she's been attracting interest from producers looking to film a series documenting her life. Overnight Welch went from working in a bed spring factory to landing on Barstool Sports' Plan Bri Uncut, so who knows what's next
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Wall Street Comp Survey Findings 🤑 |
Throughout the month of July we're going to go over Wall Street Compensation findings. Let's start with Private Equity. |
U.S. Private Equity: Here's what we found for compensation across the U.S. |
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NYC Private Equity: Here's compensation trends for NYC specifically |
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U.S. Private Equity excluding NYC: Here's compensation trends outside of NYC |
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In terms of carried interest, Within NYC, there was some carry at smaller funds for Associates who received a ~75bps fund ballpark. In terms of Senior Associate carry, we found ~20-35bps of carry for larger funds and 75-200bps for smaller funds. Meanwhile VPs saw anywhere from 10-20bps for a megafund and 500-100bps for large funds. |
Outside of NYC, Senior Associates saw 100-200bps of carry depending on fund size. For VPs, we saw 35-40bps for a massive fund and 150-225bps for a middle sized fund. |
We'll be back with more Wall Street Comp anecdotes next week 👀 |
M&A Transactions💭 |
WestRock (NYS: WRK), manufacturer of corrugated packaging, was acquired for $11.0B by Smurfit Kappa Group (DUB: SK3). |
Canatu, developer of a carbon nanomaterial touch sensor, has reached a definitive agreement to be acquired for $247.21M by Lifeline SPAC I (HEL: LL1SPAC). Bryan, Garnier & Company advised on the sale. |
JM Financial Credit Solutions, provider of financial consultancy services, was acquired for $153.54M by JM Financial (NSE: JMFINANCIL). |
Paramount Global (NAS: PARA), operator of three global business segments: TV media, filmed entertainment, and direct to consumer, has reached a definitive agreement to be acquired for $8.0B by Skydance Media. BDT & MSD Partners, Centerview Partners, and Rothschild & Co advised on the sale. |
Ultra PMES, provider of power conversion and power management solutions, has reached a definitive agreement to be acquired for $550.0M by ESCO Technologies (NYS: ESE). Lazard advised on the sale. |
Stardust Power (NAS: SDST), a development stage manufacturer of battery grade lithium products, was acquired for $490.0M by Global Partners Acquisition Corp. II (NAS: GPAC). Cohen & Company advised on the sale. |
Godrej Industries (BOM: 500164) has reached a definitive agreement to acquired the Chemicals Unit II in Kheda of Shree Vallabh Chemical for $450.0M. |
Morphic Therapeutic (NAS: MORF), a biopharmaceutical company, has reached a definitive agreement to be acquired for $3.2B by Eli Lilly and Company (NYS: LLY). Centerview Partners and Evercore Group advised on the sale. |
The Paper Market Asset of Imerys (PAR: NK) were acquired for $161.19M by Flacks Group. Morgan Stanley advised on the sale. |
Devon Energy (NYS: DVN) has reached a defintive agreement to acquire The Williston Basin Business of Grayson Mill Energy for $5.0B. Jefferies advised on the sale. |
APEIRON Biologics, developer of antibodies, has reached a definitive agreement to be acquired for $100.0M by Ligand Pharmaceuticals (NAS: LGND). |
Systimmune, operator of a biopharmaceutical company, was acquired for $800.0M by Bristol-Myers Squibb (NYS: BMY). |
Outsell, developer of an AI driven marketing automation platform, was acquired for $100.0M by Impel. |
National Western Life Insurance Company, an insurance company, was acquired for $1.9B by Prosperity Life Group. Goldman Sachs advised on the sale. |
LandVault, operator of virtual video game strategy, was acquired for $450.0M by Infinite Reality. |
Elanco Aqua, manufacturer of vaccines, was acquired for $1.3B by Merck & Co. (NYS: MRK). Bank of America advised on the sale. |
Capita One, provider of software services, has reached a definitive agreement to be acquired for $254.02M by Orchard Information Systems. Barclays advised on the sale. |
Private Placement Transactions💭 |
Myricx Bio, developer of precision medicines, has raised $114.0M of Series A venture funding led by Abingworth and Nova Holdings. |
Hebbia, developer of a SaaS platform to build artificial agents that complete end-to-end tasks, has raised $130.0M of Series B venture funding led by Andreessen Horowitz at a pre-money valuation of $610.0M. |
Infinite Reality, developer of digital media and e-commerce solutions, has raised $350.0M of venture funding from undisclosed investors at a pre-money valuation of $4.75B. |
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In Other News 📰 |
These cannabis gummies keep selling out in 2023 |
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Order Now |
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Noteworthy Chart 🧭 |
How about this chart on the professionals fees from the WeWork bankruptcy… |
 | Sujeet Indap @sindap |  |
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WeWork final professional fee requests just filed. $111mn total for 7 month case for reorganized company officially valued at $750mn: dm.epiq11.com/case/wework/do… |  | | | 8:19 PM • Jul 6, 2024 | | | | | | 851 Likes 76 Retweets | 28 Replies |
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Best of YouTube ⌚️ |
From CNBC - how Americans are paying for Vacation: |
 | How Americans Are Paying For Vacation |
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Meme Cleanser 😆 |
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 | gigabear🧸 @2170cell | |
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|  | | | 6:53 PM • Jul 7, 2024 | | | | | | 43.5K Likes 2.48K Retweets | 54 Replies |
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 | another finance girlie @ebitdagirliee | |
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The concept of having a name for a deal always ends up being so cringe. Like why the fuck are 45 year old bankers calling this car wash rollup project strawberry?? | | | 4:06 AM • Jul 9, 2024 | | | | | | 195 Likes 7 Retweets | 7 Replies |
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 | 🅿️ @the_P_God | |
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I get to help businesses sell themselves to private equity firms or strategic acquirers and then watch 75% of the staff get laid off |  femme fatale @eliesaaabs
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| | | 3:48 PM • Jul 7, 2024 | | | | | | 1.7K Likes 32 Retweets | 7 Replies |
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