Equity Dutch auctions were designed to democratize initial public offerings. In 2014, I founded @ARKInvest to help democratize investing in the innovation space. Despite best intentions, this week $U went public in a Dutch auction sponsored by $GS that we believe missed the mark.
Some of us who placed bids above the initial 40-44 indicated range, and then raised our bids above the revised 44-48 range, assuming that our bids would be filled, learned the hard way that we would receive nothing. Very few things surprise me in this business, but this one did.
Apparently, $GS introduced a Dutch auction twist that did not require it to inform those who had committed to a price above the “range” that the range had changed, unless the “indicated price range” had increased by 20%+. Excuse me?
I am sure that $GS disclosed this twist in many documents, but it never apprised us despite discussions with its sales traders of our clear desire to gain exposure to $U. Did $GS’s highest revenue generating customers get the word? I don’t want to be in that club. Just wondering.
.@GrousARK has done some of the most provocative and differentiated research on #gaming in the financial services industry. We are excited to share our forthcoming blogs and white papers during the next few months.
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I believe the Delaware court decision, forcing #Tesla to void the March 2018 vote on Elon Musk’s performance-based pay package, is un-American, an assault on investor rights, and an insult to the Board of Directors of one of the most stunningly successful companies in US history.
I have known Robyn Denholm, Chair of Tesla’s Board, professionally for 17 years since she was named Juniper Networks CFO in 2007. Robyn was and is an independent Director on Tesla’s Compensation Committee.
Robyn is a professional of unquestionable integrity with a no-nonsense, objective, truth-wins-out philosophy. In 2014, when Tesla named her to its Board, I remember thinking that she would add a fresh pair of eyes and enhanced rigor to every part of the process she touched.
Government statistics do not seem to be capturing how weak the economy is. Many companies are reporting shockingly weak revenues. UPS’s US delivery volume growth is worse today than in 2007-2009. After falling for nearly two years, it dropped another ~11% last quarter.
At first I thought that Amazon still was taking share and causing problems, but this chart suggests that market share has changed very little since 2020.
This week, another economic bellwether, 3M, reported that global organic sales dropped more than 3% year over year on a local currency basis last quarter. The services side of the economy is unlikely to escape the global monetary tightening that is gripping these companies.
China is exporting deflation in a more profound way than I believe many economists and strategists appreciate. All else equal, the 15% depreciation in the yuan relative to the dollar in the last year should have increased its PPI inflation rate by 15%. Instead it has dropped 4%.
In other words, the deflationary vortex emanating from China is approaching 20% (15%+4%), highlighted by the burgeoning defaults in Chinese real estate and trust companies.
After it entered the World Trade Organization in 2001, China’s real GDP grew at a double digit rate for nearly 20 years. Rapid growth can cover many economic sins, typically excessive debt and associated leverage. Those excesses are surfacing in China now.
Ironically, as crypto assets soared during the Silicon Valley Bank meltdown, this administration suggested that investors in regional banks - equity and bond holders - should prepare to be “wiped out” in the aftermath of an unprecedented 20-fold increase in the Fed funds rate.
Now we are hearing anecdotes not only that businesses and individuals are hedging their fiat assets with some crypto assets but that they also are lowering risk and increasing returns by shifting from low yielding bank deposits into higher yielding money market funds, a win-win.
As a result, now that they can borrow at will from a government facility at ~4.5%, regional banks seem to be moving from a liquidity crisis to a slower moving solvency crisis.
If you are correct, Congressman, then the FDIC and others will prevent the US from participating in the most important phase of the internet revolution. Like you, I believe regulators are using crypto as a scapegoat for their own lapses in oversight of traditional banking.
Despite a yield curve that inverted last July - and credit default swaps that started flashing red - the Fed continued to vote UNANIMOUSLY to jack rates up in 75 basis point increments. They paid no heed to commodity prices and other inflation indicators that were unwinding.
Many banks made two assumptions that are haunting them now. The first was that interest rates would remain low for an extended period of time, and the second, that deposits would continue to increase. After all, they had not declined on a year-over-year basis since the 1930s.
The echo is more like the early 1920s, after a pandemic and a war - the Spanish Flu and WWI - as three major innovation platforms were evolving into mass market opportunities - electricity, telephony, and the automobile, contributing to the breathtaking “Roaring Twenties”
In response to a supply chain- and war-related surge in inflation, the gold standard forced the newly formed Fed to drain money from the economy, pushing pricing from a 24% inflationary peak in June 1920 to a -15% deflationary trough one year later in June 1921.
Now, inflation - which peaked in the 8-10% range last year - is likely to surprise on the low side of expectations this year, dropping below 2% and perhaps turning negative. The banking crisis could lead to “bad deflation” while innovation generates “good deflation”.