Gapping down
In reaction to earnings/guidance:
- LNN -5.9%, AYI -2.9%
Other news:
- AMC -27.4% (binding settlement term sheet)
- LLAP -5.9% (stock offering)
- NAPA -3.4% (stock offering)
- HEAR -2.8% (discloses it delivered a counter-proposal to Immersion Corporation (IMMR))
- DWAC -2.4% (files to delay form 10-K)
- NNDM -1.4% (Stratasys receives revised proposal from Nano Dimension (NNDM) for $20.05 in cash)
- MLI -1.1% (manufacturing plant damaged by tornado)
Analyst comments:
- NCNO -2.3% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- BA -0.8% (downgraded to Neutral from Buy at Northcoast)
Gapping up
In reaction to earnings/guidance:
- CDLX +13.9%, MSM +3.7%, GTX +1.9% (guidance)
Other news:
- BFLY +25.1% (receives 510(k) clearance)
- APE +22.3% (binding settlement term sheet)
- NTCO +12.4% (divests Aesop to L'Oréal)
- TLSA +8.8% (Announces Positive Data on Intranasal Anti-CD3 Monoclonal Antibody in Intracerebral Hemorrhage)
- SRG +3.4% (provides Q1 update)
- AEG +3.2% (Aegon UK divests its individual protection book)
- MARA +2.3% (publishes bitcoin production update)
- GOSS +1.8% (terminating GB5121)
- PLUG +1.6% (reports record production of PEM Electrolyzer stacks in Q1 2023; On track to meet 100MW per month target in Q2)
- COIN +1.5% (Bitcoin down on possible rumors)
- CIVI +1.5% (appoints new COO)
- RIOT +1.1% (Bitcoin down on possible rumors)
Analyst comments:
- HCAT +4.6% (upgraded to Overweight from Equal Weight at Wells Fargo)
- ETSY +3.6% (upgraded to Overweight from Neutral at Piper Sandler)
- BURL +2% (upgraded to Buy from Hold at Loop Capital)
- CSX +1.2% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
- NSC +1.2% (upgraded to Equal-Weight from Underweight at Morgan Stanley)
Saudi Arabia Discloses Ties to Andreessen Horowitz, Dozens of Other Venture Funds
THE TAKEAWAY
• Saudi Arabia’s Sanabil has begun disclosing ties to top venture firms
• Andreessen Horowitz, Coatue and Insight are among partners
• Some VCs distanced themselves from Saudi money after Khashoggi murder
For several years, venture capital firms have been cagey about whether they have raised money from Saudi Arabia, following the 2018 murder of Washington Post columnist Jamal Khashoggi in one of the country’s consulates. The Saudis, for their part, are no longer keeping quiet.
The venture arm of the Saudi Public Investment Fund, the country’s $620 billion sovereign wealth fund, has begun disclosing on its website its partnerships with nearly 40 U.S. VC firms and a handful of international funds. Among the relationships disclosed by the Saudi venture arm—known as Sanabil Investments—are connections to marquee investment firms Andreesseen Horowitz, Coatue Management, Craft Ventures and Insight Partners.
It couldn’t be learned when Sanabil made its investments in the venture funds or when it began disclosing the relationships on its website. Some of the venture funds, such as Uncorrelated and Treasury, were founded only recently. Venture firms typically won’t discuss the investors, known as limited partners, that they raise money from.
There have long been deep connections between Silicon Valley and Saudi Arabia, which has sought to diversify its economy away from oil while elevating its global influence. The country’s sovereign wealth fund was a big backer of SoftBank’s Vision Fund and has made a string of direct investments in tech companies, including an eye-popping $3.5 billion it put into Uber in 2016. It was also a big backer of the private equity firm Blackstone. And in April 2018, Saudi Arabia’s crown prince, Mohammed bin Salman, made a widely publicized visit to Silicon Valley, meeting with Apple CEO Tim Cook and Google CEO Sundar Pichai.
But later in 2018, after a team of Saudi operatives killed Khashoggi in a Saudi consulate in Turkey, some high-profile figures in tech vowed never to work with the Saudi fund again. “It will be a real moral challenge for anyone to accept money moving forward from Saudi Arabia,” Menlo Ventures partner Venky Ganesan told The Washington Post in 2018.
That same year, Sam Altman, the entrepreneur and investor who is now CEO of OpenAI, stepped down from an advisory board for Neom, a futuristic city the Saudi government is building in the northwestern part of the country. Marc Andreessen, one of Andreessen Horowitz’s co-founders, was also on the Neom advisory board at the time, though it couldn’t be determined whether he is still on it. Following the Khashoggi murder in 2018, representatives of Andreessen Horowitz, Greylock and other venture firms declined to publicly discuss their limited partners.
For this story, a spokesperson for Andreessen Horowitz, along with 35 other investment firms listed on Sanabil’s website, either didn’t respond to requests for comment or declined to comment. Other venture firms Sanabil lists include Dragoneer Investment Group, Greenoaks Capital Partners, TCV, Eduardo Saverin’s B Capital Group, startup accelerators 500 Startups and Techstars, crypto fund Polychain Capital, Iconiq Capital and Race Capital, among others.
One venture firm that did respond was San Francisco–based Village Global. “We think highly of the team there,” Village co-founder Ben Casnocha said in an email, referring to Sanabil. “We don’t otherwise share information about any of our LPs as we’re obligated by various confidentiality provisions in our agreements with them.” (Village also lists nearly two dozen individual LPs on its website, including Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates.)
Sanabil didn’t respond to a request for comment. A public relations firm, Teneo, that represents PIF and Neom also didn’t respond to requests for comment.
But tech’s effort to distance itself from Saudi Arabia has changed in recent years, in part due to a successful public relations campaign run out of New York to distance the sovereign wealth fund, led by Yasir Al-Rumayyan, from the politics of Riyadh. At the same time, U.S. investors are struggling with a more challenging fundraising environment and are hopeful the deep-pocketed funds in the Middle East will help them meet their ambitious fund targets.
Sovereign wealth funds from the region control more than $3 trillion, according to sovereign wealth fund tracker Global SWF. According to Sanabil’s website, it invests $2 billion a year in VC, growth and buyout funds.
Last week, several Silicon Valley investors attended the Future Investment Initiative Institute conference in Miami, an event for global leaders that lists the Saudi PIF as a founding partner. Andreessen and Ben Horowitz, the other co-founder of Andreessen Horowitz, spoke onstage with former WeWork CEO Adam Neumann to discuss his new real estate company, Flow. The startup raised $350 million from Andreessen Horowitz in August 2022.
One of the venture funds Sanabil invested in is Valor Equity Partners. Valor’s founder, Antonio Gracias, is a board director at Elon Musk’s rocket company, SpaceX and a former board director at Musk’s electric vehicle company, Tesla. Gracias spoke onstage Friday with Sanabil Chief Investment Officer Hani Enaya, according to the program and a photo from the event. Other speakers included Jared Kushner, Shervin Pishevar, Thiel Capital’s Jack Selby and the mayor of Miami, Francis Suarez.
And in October, Horowitz traveled to Riyadh for an earlier Future Investment Initiative Institute conference, where he spoke with Princess Reema bint Bandar bin Sultan bin Abdulaziz Al Saud, the Saudi ambassador to the U.S. Scott Shleifer, co-founder of Tiger Global Management’s private equity unit, also appeared at the event.
Erdoğan’s authoritarian bargain collapses in Turkey
Next month’s elections offer a chance for the united democratic opposition but victory will not be easy
Turkey’s presidential and parliamentary elections on May 14 will pose a key question of our time: is it possible to slow authoritarian backsliding and renew democratic progress? At a time of autocratic surge, it has become fashionable to make bleak predictions about the fate of liberal democracies.
Less scrutinised is the future of autocracies. Will countries such as Turkey that descended into one-man rule remain autocratic? Is it possible to depose entrenched strongmen like Recep Tayyip Erdoğan through elections?
Turkey’s opposition parties have never been more optimistic about that prospect, and for good reason. Just like democracies, autocracies die in poverty. Strongmen mobilise popular support behind their autocratic agendas but they must deliver economic growth. Erdoğan came to power in 2003 after the worst economic crisis in three decades. He took the reins of power in the name of the forgotten people, pledging prosperity. He followed through on that promise in his first decade in charge thanks to an economic rebound and a pro-western foreign policy.
But Erdoğan’s reign has since degenerated into corruption, misrule and cronyism. While a few at the top enjoy immense wealth, millions of Turks are below the poverty line. Erdoğan’s authoritarian bargain has collapsed. Turkey’s opposition promises a new contract with society — one that restores parliamentary democracy, pursues a peaceful, pro-western foreign policy and promotes shared prosperity. It might finally have the ear of the people.
Feeding the opposition’s optimism is its united stance. Autocrats do not need majorities to destroy democracies; all they need is a divided opposition. Erdoğan has been blessed with weak opponents. The six-party opposition bloc has recently united around Kemal Kılıçdaroğlu, leader of the main opposition Republican People’s party (CHP).
Boosting his prospects is the bloc’s decision to appoint Ekrem İmamoğlu and Mansur Yavaş, the popular CHP mayors of Istanbul and Ankara, as vice-presidents should the opposition win. But even more important is the stance of the pro-Kurdish Peoples’ Democratic party. The party, which is the third-largest in parliament but is not part of the opposition bloc, signalled it may back Kılıçdaroğlu in the presidential vote.
Still, beating an autocrat in elections that are neither free nor fair is not easy. Compounding the challenge is an unfavourable international context. The west’s resolve to defend democratic change played a key role in the spread of democracy that began in late 1970s. That surge drew to a halt in the mid-2000s, partly due to the west’s pullback. Autocrats from China to Turkey have a freer hand today to promote their own model. And they help each other out. Cash flows from Russia, China and Saudi Arabia have aided Erdoğan at critical junctures. Once again, they are rallying behind him.
Western countries, by contrast, have long given up on Turkey’s democratic forces, forging a transactional relationship with Erdoğan that has strengthened his hand against his domestic rivals. President Joe Biden pledged to restore democracy to the heart of US foreign policy, but for the sake of geopolitical interests he largely kept quiet about Erdoğan’s assault on democratic norms. The EU, too, looked the other way when Erdoğan dismantled Turkey’s democratic safeguards, instead striking a bargain to shut out migrants from conflict-ridden countries.
But standing up for embattled democrats and defending free and fair elections would not be a distraction from the west’s pursuit of its interests. Quite the opposite, defending democracy serves those goals. Autocrats are unpredictable allies. They pursue destabilising, reckless, militaristic, anti-western foreign policies. Since Erdoğan centralised power in his hands, Turkey has armed radical groups, launched military incursions into Syria, flexed its muscles in Libya, purchased a Russian missile defence system, helped Iran and Russia circumvent western sanctions and threatened to block Nato expansion.
Turkey’s opposition faces an uphill battle. It will be a tight race. If the opposition wins, the country’s authoritarian turn under Erdoğan will be a detour in the long, difficult road to democratic consolidation. If it loses, Turkey will slide deeper into authoritarianism, and elections will not matter. What happens in the upcoming vote will not only determine the fate of the country. It will also decide what Turkey does beyond its borders. Above all, the result will say a lot about the future of democracy across the world.
Jamie Dimon says regulations stoked banking turmoil
JPMorgan chief executive uses annual shareholder letter to caution policymakers against ‘knee-jerk’ responses
Jamie Dimon has criticised regulators in the wake of the banking turmoil for incentivising banks to load up on government securities and imposing flawed stress tests.
Dimon said the failure last month of Silicon Valley Bank and the Swiss government-engineered takeover of Credit Suisse risked undermining confidence in the banking industry and had prompted investors to price in a greater risk of a US recession.
In his annual shareholder letter, the JPMorgan Chase boss said rules had encouraged banks to amass large portfolios of US Treasury bonds that dropped in value as the Federal Reserve raised interest rates, leaving lenders nursing paper losses that have spooked investors.
“Ironically, banks were incented to own very safe government securities because they were considered highly liquid by regulators and carried very low capital requirements,” he wrote in the letter, published on Tuesday.
The decision by SVB to invest its deposits in longer dated Treasuries damaged confidence in the lender and ultimately led to a bank run.
Dimon also took aim at US stress tests, the annual exercises run by the Fed to gauge the biggest banks’ ability to withstand major economic shocks. He said the exercise had become “an enormous, mind-numbingly complex task about crossing t’s and dotting i’s” that might give risk committees a false sense of security.
“Even worse, the stress testing based on the scenario devised by the Federal Reserve Board . . . never incorporated interest rates at higher levels,” he added.
“A less academic, more collaborative reflection of possible risks that a bank faces would better inform institutions and their regulators about the full landscape of potential risks,” he said.
His comments on the banking turmoil reflect the growing belief among executives that the collapse of SVB and Signature Bank, two of the largest bank failures in US history, will lead to a toughening up of regulations.
SVB was not subject to some of the Fed’s toughest supervisory measures, including regular stress tests, because it had fewer than $250bn in assets.
Dimon urged policymakers to avoid “knee-jerk, whack-a-mole or politically motivated responses”.
“We should not aim for a regulatory regime that eliminates all failure but one that reduces the chance of failure and the odds of contagion,” wrote Dimon, who has in the past complained that regulatory requirements disincentivise banks out of some activities such as mortgage lending.
He added: “We should carefully study why this particular situation happened but not overreact.”
Dimon, 67, is one of the banking industry’s elder statesmen. He uses his annual letter to opine on topics beyond his own institution, making it one of the most widely read missives on Wall Street.
He warned that JPMorgan, the largest US bank with more than $2tn in assets, was “prepared for potentially higher interest rates, and we may have higher inflation for longer”.
Higher rates will result in pain for any borrowers who have to refinance their loans, which Dimon said could expose additional weaknesses in the US economy, including in the areas of the property market.
Dimon also touched on JPMorgan’s succession planning, a perennial debate swirling around the lender given that he has led the bank since 2006.
Dimon said the bank had “multiple successor candidates who are well known to the board and to the investor community”. In 2021, JPMorgan made a series of executive changes seen as preparing potential successors to Dimon, who has the backing from JPMorgan’s board to remain in the job for several more years.
Sixth Street commits $125mn to buy new US women’s football club
Group will be first institutional investor to become majority owner of professional US sports franchise
Sixth Street Partners will be the first institutional investor to become the majority owner of a professional US sports franchise after it committed $125mn to buy a new National Women’s Soccer League club.
The deal underscores the push by private capital into sports management. The overall investment includes a record $53mn league expansion fee — the price paid to enlarge the collectively owned league by adding a team. That marks a tenfold increase from expansion fees paid in 2020.
Private capital firms have a history of owning sports teams in Europe and Asia, but they were prohibited from investing in US professional sports until 2019, when Major League Baseball became the first league to amend its ownership bylaws to allow it. Many other US leagues have quickly followed suit — in the face of rapidly rising team valuations, more lucrative broadcast rights agreements and the onset of the coronavirus pandemic — although private capital has largely been relegated to remaining passive minority investors.
Jessica Berman, the NWSL commissioner, said it was “proud to pioneer this for domestic leagues in the US, because we think this is likely we are tackling issues that other leagues are wrestling with”.
Alan Waxman, chief executive of Sixth Street, said it is investing with the intent to own the franchise for a minimum of 10 years. The league, having only launched in 2012, is catching up with its men’s counterpart, Major League Soccer, which began play in 1996.
“We think it’ll be 10 years before the NWSL becomes at parity with every metric with the MLS. That’s team valuations, media revenue, sponsorships,” Waxman said.
The NWSL franchise being purchased by Sixth Street, an as-yet unnamed club that will be based in the San Francisco Bay Area, will become the league’s 14th team. Other minority investors and board members for the team are former Meta executive Sheryl Sandberg, former Golden State Warriors and NBA executive Rick Welts, and four former US women’s national team members with ties to the region: Brandi Chastain, Leslie Osborne, Danielle Slaton and Aly Wagner.
Waxman, a Bay Area resident, said he was drawn to the investment after his wife convinced him to meet the four former players who had been leading the effort to bring a team there. Sixth Street has long-term investments with Real Madrid and FC Barcelona, as well as with the NBA’s San Antonio Spurs.
The launch of the NWSL franchise, which will begin play in the 2024 season, comes at a pivotal time for the league. Since 2021, the NWSL has been reckoning with a systemic abuse scandal that led to the departure of previous commissioner Lisa Baird, the resignation or firing of several team coaches and the forced sale of two existing teams, the Chicago Red Stars and the Portland Thorns. The league is still in the process of evaluating buyers for those two clubs.
“We’re not looking for the historical women’s sports investor who was here because they had a granddaughter or a daughter or because it’s a social cause,” said Berman. “This is a business. We expect sophisticated people to want to invest and believe in the value proposition and see all the trends that [Sixth Street] has talked about as the basis for justifying the valuation for their investment”.
Early premarket gappers
- Gapping up:
- BFLY +26.2%, APE +19.6%, NTCO +3.9%, AEG +3.5%, OZK +2.9%, MARA +2.4%, SSYS +2%, WBX +1.9%, RIOT +1.8%, CIVI +1.5%, COIN +1.3%, MSTR +1.2%, SPXC +0.7%, AAL +0.6%, CNC +0.5%, GMED +0.5%, AYI +0.5%
- Gapping down:
- AMC -27.6%, LLAP -6.5%, ZUO -4.2%, NAPA -3.8%, HEAR -2.8%, MLI -1.1%, TECK -0.8%, ARES -0.5%, DWAC -0.5%