Business

➚ BUY: G20. Leaders of the world’s biggest economies are meeting in Brazil to try to reach a deal, four years in the making, on how to tax global tech giants. Eight countries have imposed their own taxes, risking retaliatory tariffs from the US on everything from French cheeses to Italian leather.

➘ SELL: Magnificent 7. Those tech giants have lost $1.2 trillion in market value since Tuesday’s earnings from Alphabet and Tesla stoked fears of slowing growth and AI hype. The S&P 500 had its worst day since September 2022, and the losses spread to Europe and Asia today.

Ex-NY Fed president: “Cut rates now”… LVMH sales slowdown rattles luxury stocks… Publicis courts influencers... Overdue credit card bills pile up… CrowdStrike’s $10 apology… AI bots monitor Paris’ Olympics CCTV… A hospital chain is developing TV shows…

Brother, can you spare a billion: Bill Ackman sent a letter to big investors asking them to put in orders, “the sooner the better,” for shares of his US fund, which is set for an IPO next week. Not thinking the letter would be public — lawyers later disagreed — he disclosed the names of several anchor investors (Texas Teachers is in for at least $60 million) and addressed doubters’ concerns (“We have addressed [one] issue by analogy by comparing PSUS to Berkshire Hathaway.”)

The IPO is a high-stakes moment for Ackman and a milestone in his decade-long comeback story. Bravado is a key ingredient in any Ackman endeavor, but the billionaire may have overshot here: After privately telling investors for weeks that the IPO could raise as much as $25 billion, he’s now aiming for $10 billion.

Ackman expects PSUS to trade above the value of the stocks it owns, something few such funds have ever done. George Soros’ Quantum Fund pulled it off in the 1980s, as did an early bitcoin ETF, back when it was harder for individuals to own actual tokens. But there’s no real economic reason that a basket of stocks should trade for more than the sum of its parts.

Ackman is betting on an uneconomic driver: his growing army of ideologically aligned, extremely online fans. Ackman has become a celebrity on X, where he’s criticized diversity efforts, supported Israel, and, recently, boosted conspiracy theories about Joe Biden and the Trump shooter.

Ackman’s transformation into a right-wing provocateur has been very good for business. Shares of his Amsterdam-listed fund, a precursor to the one he’s now taking public in New York, have been on a tear since he started posting, despite European rules that prevent Ackman from talking about the fund, called PSH, on X. With his US fund, he’s free to do so.

The disclosure of today’s letter led to a strange caveat: “The Company specifically disclaims the statements made by Mr. Ackman.”

Credit shops seek buyers

THE SCOOP

The world of private credit spent the past few years blooming. Now comes the pruning.

Hundreds of funds have cropped up over the past decade to do the job that banks used to do, before post-2008 regulations penalized them for riskier activities. Loans made by private investment funds have doubled since 2019 to $1.6 trillion, and with banks continuing to nurse their balance sheets and tangle with regulators, it’s likely to continue. A Blackstone executive recently said the industry is “still in batting practice,” and sees it hitting $25 trillion eventually — twice the total loans at all US banks right now.

But that growth is being concentrated at the biggest firms, and smaller players are being squeezed. At least half a dozen lending shops are currently running sales processes, an acknowledgment that niche strategies can no longer compete.

Crestline, with $18 billion under management, is seeking a buyer. So are Waterfall, with $12.5 billion, and MGG Investment Group, with $5.5 billion, people familiar with the matter said. Last week, Blue Owl, one of those $100 billion-plus giants, bought Atalaya Capital, which has about $10 billion in structured credit products. A handful of others are being less formally shopped, industry participants said.

Crestline declined to comment. Waterfall and MGG did not respond to requests for comment.

LIZ’S VIEW

The first wave of private credit, in the 2010s, focused on loans to midsized companies, especially for leveraged buyouts. That’s a fairly basic financial product — underwriting matters, but it’s not rocket science.

The wave that’s building now is in more complex types of borrowing, backed by everything from equipment leases to restaurant franchise fees to fiber-optic cables. Billions of dollars of structured credit gizmos are being offloaded by banks, whose regulators don’t like them, to private investors. Atalaya’s CEO, Ivan Zinn, recently pegged the size of that “asset-backed financing” market at $7 trillion, and estimated that private investment firms only have about 5% share.

Firms like Blue Owl got big during the first wave, and are now buying their way into the second.

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— Bill Reinsch, a former Commerce Department official, to the Washington Pos, whose deep dive on 30 years of US sanctions is worth the long read.

Cleanup in the aisle?: Southwest is ditching the free-for-all seating policy that has been a defining feature for decades. The airline says passengers want assigned seats, but the change will also let the company charge for premium rows, at a time when it’s under pressure from activist investor Elliott over its profit margins. Are free checked bags next? Airline money grabs can go over badly with customers, a lesson American Airlines learned the hard way when it changed how it handled high-end corporate bookings.

Canary in the coal mine: Can Canary Wharf, the Thatcher-era symbol of London’s financial might, hang on? As the FT reports, the long-term leases signed with some of the world’s biggest banks in the 1990s are expiring, and buildings are showing their age. London itself has lost its central place in global finance, thanks to Brexit, Britain’s lackluster economy and its toll on the country’s banks, and rising powers in Asia and the Middle East. Take note, Hudson Yards.

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