Market Recap

• US Markets: DOW -0.12%, S&P -0.83%, NASDAQ -1.54%.

• Walmart shares rose after revenue beat expectations, however, earnings fell short as the company paid ~$3.1B in opioid settlement to respective municipalities.

• Berkshire Hathaway acquired $4.1B stake in chipmaker TSMC, position falls into Buffet’s top 10 largest holdings.

• Household debt has reached a record $16.5T.

  • Mortgage balances are largest contributor.

  • Credit card debt is up 15% y/y.

  • Auto loans 5.6% y/y.

• Big Tech companies are cutting costs across the board.

  • Adjusting to macroeconomic pressures and adopt leaner, more agile operating models.

  • Amazon is laying off sizable chunk of its Alexa AI division.

  • Google is being urged by activist investor, TCI Fund Management, to reduce wages for non-engineering employees.

  • Meta, more accurately Zuck, continue to heavily invest in “innovative” metaverse projects despite inefficient capital and investor pressure.

What I learned today:

• Read an interesting article on how Joe Rogan’s Spotify deal limited his business growth and bottom line as more of his listeners solely rely on Spotify for his content or vice versa.

• At work, we are live on a deal where we would assume a FO’s position in an emerging influencer marketing platform. Discussions around valuation, operational efficiencies/deficiencies, FCF forecasts, and revenue modeling have dominated the conversation thus far.

  • Interesting to analyze how long high-growth companies’ current cost structures can support targeted growth levels (Bookings, ARR, EBITDA, etc.)

  • Also find it interesting how paramount early convertible debt/priced round terms affect companies’ future operating and financing behavior. Current deal features standard conv. debt terms with a 40% discount on next equity raise. The company has operated efficiently with the capital invested, and various exit opportunities are closer than further away. Hence, to maintain ownership and avoid the dilution caused by the 40% discount, the company hasn’t taken on as much growth capital as they could’ve, and their valuation reflects this reasoning.

  • Valuing early to mid-stage private AdTech companies has proven to be intellectually challenging. Gross verse Net Revenue multiples? Bookings multiples? The multiples range from 3x-5x on the Gross Revenue and Bookings (as of current market), and the company’s healthy positive EBITDA multiples could span from 7x-13x. Very nuanced for what should be a fairly straight-forward valuation, respectively.

First post on Mirror here, going to try and collect my daily thoughts and synthesize my daily notes into a digestible post.

Anthony