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Tag: Private Equity

  • Dow gives back earlier gains, stocks end lower after Russia’s brief rebellion

    Dow gives back earlier gains, stocks end lower after Russia’s brief rebellion

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    U.S. stocks closed lower Monday, after Russia on the weekend was rocked by a brief revolt from the Wagner mercenary force. The Dow Jones Industrial Average
    DJIA,
    -0.04%
    fell about 11 points, or less than 0.1%, ending near 33,715, according to preliminary FactSet data, giving up earlier gains in the final moments of trade. The S&P 500 index
    SPX,
    -0.45%
    fell 0.4%, while the Nasdaq Composite Index
    COMP,
    -1.16%
    closed down 1.2%. Stocks have been struggling to extend a recent rally driven by a handful of technology stocks that earlier in June lifted major indexes to their highest levels in more than a year. Investors and oil markets were on edge Monday after a brief mutiny in Russia over the weekend raised concerns about potential disruptions to global oil supplies. U.S. crude prices edged higher Monday, with West Texas Intermediate oil for August
    CL00,
    +0.53%

    CLQ23,
    +0.53%
    ending slightly below $70 a barrel.

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  • 4 Things to Know About Private Equity Investors in Franchises | Entrepreneur

    4 Things to Know About Private Equity Investors in Franchises | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Do you hope to someday bring on a private equity (PE) partner to accelerate your franchise business? If you’re a franchisor, this simple list should be at the root of every decision you make going forward as you build your enterprise, from now until you’re ready to sell or bring on a PE partner:

    1. Private equity buyers want proof of franchise model quality, specifically strong unit-level economics and positive franchisee validation

    This means to get top dollar, it’s not enough to have a strong franchise value proposition for franchisees. You must track system metrics and show positive trends over time. Collect franchisee profit and loss statements from the beginning. Standardized point-of-sales systems can help collect unit-level performance information that buyers will want to see. Franchisee satisfaction surveys should be implemented. If franchisee feedback isn’t strong, move quickly to address issues and communication gaps.

    Related: Thinking of Selling Your Franchise to a Private Equity Firm? Here Are 9 Ways to Build a Valuable Reputation

    2. There must be additional evidence of brand momentum through new unit openings, same-store sales growth, significant open whitespace and other growth opportunities yet available

    The operating model must be replicable, and there must be proof. For example, can you demonstrate that you open 100% of the units you sell? Are franchisees ramping to profitability within 18 months or fewer? That is much more valuable and important than selling a bunch of multi-unit licenses that never open. Do franchisees experience a solid cash-on-cash return? Buyers especially get excited when they see existing franchisees returning to buy new expansion units.

    Private equity sponsors want to see strong growth potential within their own planned hold period. But they also want a terrific growth story for the next sponsor as well to command a good exit price. Franchise businesses can trade between private equity (PE) sponsors multiple times. Technically, this is called a “secondary buyout” (whether it’s the second PE-to-PE transaction or the tenth). I prefer to think of it as the PE Profit Ladder. At each step, new sponsors need to see a compelling long-term growth story for the business to command premium enterprise value.

    3. If No. 1 and No. 2 are missing or weak and if the evidence doesn’t match the hype, PE quickly moves on

    While you may be selling franchise licenses, that in and of itself doesn’t make your business attractive. It validates that you’re good at selling franchises, not that PE will find your company attractive. You may have even received (or paid for) flattering press coverage. Are you starting to believe your own press? Buyers may be calling you with effusive, “We’d love to talk about your business,” messages. After basking in the warmth of some positive market attention and getting these phone calls, the transition to engaging seriously with a seasoned PE buyer who assesses your business with a swift, clinical eye can feel like suddenly walking into a freezer. Where did the love go?

    Related: Is This the Right Time to Sell your Franchise to a Private Equity Firm?

    4. This is where your franchisee-franchisor relationship karma will finally catch up to you

    Your franchisees have tremendous power over your sale outcome. If that idea strikes fear into your heart, you know where your work begins. Call it “turnabout is fair play,” “revenge of the franchisees” or whatever you like.

    If you’re a franchisor, your ability to sell your company to private equity at a high price with great terms depends on the quality of your relationship with your franchisees, strong return on investment for franchisees and the quality of operators you attract to your system. I’ve seen this collapse of the hype-machine dawn on sellers far too late. PE’s brutally cool, fact-based assessment and the importance PE attaches to franchisee satisfaction, profitability and positive references about their franchise experiences can be jarring to some sellers. If you’re used to acting independently as a founder, it can feel like turning in your high school math test and getting it back with a bunch of red pen mark-ups. Whatever attention you are, or are not, currently investing to ensure strong franchisee profitability, the market will one day hold you accountable.

    Most PE sponsors want growth stories, not turnaround projects ripe with risk and headaches. Turnaround projects in franchising carry significant extra risks and uncertainties because of franchising’s distributed ownership model. For many private equity investors, franchise turnarounds just aren’t worth the effort within the available time or will only be considered at a steeply discounted price by specialist firms.

    If you or your banker diligently advertise that your business is for sale and months pass with no deal, this well-meaning effort effectively spreads the word to the buyer community that you tried to sell the business but have no takers. This creates a negative impression that you will have to walk back if you decide to wait and go to market again later. It’s like that house that didn’t sell and is finally taken off the market. Two years later, prospective buyers watching the neighborhood see it listed again and remember that it didn’t sell the first time around. They wonder, “What’s wrong with that house? What’s changed since the last time it was on the market?” If you land here, you need to hear the market feedback and make meaningful changes to improve the value proposition for franchisees.

    You are much better off fixing your franchise model first and only going to market when you have something truly valuable to sell. Franchising is a brilliant wealth creation model that performs optimally when franchisees can create a rock-solid return on their investment. If you remain focused on promoting and growing unit-level profitability, you will build a truly valuable system that will stand up to PE buyer scrutiny.

    Related: A Beginner’s Guide to Private Equity

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    Alicia Miller

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  • Private equity investor identified as political contributor allegedly duped by George Santos | CNN Politics

    Private equity investor identified as political contributor allegedly duped by George Santos | CNN Politics

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    CNN
     — 

    Private equity investor Andrew Intrater is one of the people federal prosecutors allege Rep. George Santos induced to donate money as part of an alleged scheme that diverted purported political contributions to Santos’ personal use, Intrater’s lawyer confirmed to CNN on Thursday.

    In a 13-count indictment made public Wednesday, prosecutors alleged that Santos and an unnamed associate duped two donors – described only as Contributor #1 and Contributor #2 – into giving $25,000 apiece to support the Republican’s candidacy last year.

    The donors were told the money would go to an independent committee that could raise unlimited amounts to help his campaign and would help underwrite television ads, according to the indictment. Prosecutors, however, say the money instead went to a limited liability company that Santos controlled and the funds paid for designer clothing, credit cards bills and other personal expenses.

    “From the outset, Andy Intrater aided the government’s investigation of George Santos and is identified as a victim in the Indictment as Contributor #2,” Intrater’s lawyer, Richard D. Owens, said in a statement. “Andy is gratified that Santos will now have to answer in court for the many lies George told to Andy and so many other Americans.”

    Santos pleaded not guilty Wednesday in New York and has vowed to fight the charges.

    Intrater has financially supported Santos’ political ambitions in recent years, donating more than $24,000 to Santos’ congressional campaigns and his federal leadership PAC since 2020, Federal Election Commission records show.

    Intrater told The New York Times earlier this year that he also had invested more than $600,000 in a fund offered by Harbor City Capital, where Santos worked as an account manager, partly because he admired Santos as a “hard-working guy.”

    Intrater told the paper he later discovered he had been misled.

    The Securities and Exchange Commission filed a complaint in April 2021 against Harbor City and its founder, Jonathan P. Maroney, alleging the company ran a $17 million “Ponzi scheme.” Maroney has not been charged with a crime, and Santos is not named in the SEC complaint.

    Intrater is perhaps best known in US political circles as a cousin of Viktor Vekselberg, one of several Russian oligarchs sanctioned in 2018 by the US Treasury Department, for “worldwide malign activity.”

    The New York Times earlier reported that Intrater was Contributor #2 in the indictment. CNN has not confirmed the identity of the other contributor described in the indictment.

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  • Top global regulator warns of ‘massive adjustment’ for financial system

    Top global regulator warns of ‘massive adjustment’ for financial system

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    AMSTERDAM — The world’s financial system needs a “massive adjustment” to cope with higher interest rates, and key rules will have to be revisited, according to a top global regulator.

    Klaas Knot, chair of the Financial Stability Board, an international standard-setting body, told POLITICO that rising interest rates fueled problems at several regional U.S. banks and similar losses may show up elsewhere.

    “The speed with which interest rates have changed, that, of course, implies a massive adjustment in the financial system,” the Dutchman said in an interview from his office in Amsterdam. He added it was unclear exactly where those losses would be.

    “In many, many places of the financial system, that adjustment will go well because it has been well-anticipated and has been well-managed. But history teaches us that is not always the case everywhere.”

    The warning of potential trouble ahead echoes fears of other global officials and comes after the failure of Silicon Valley Bank, a $200 billion lender to the tech sector, sparked contagion across U.S. regional banks. The subsequent market panic contributed to bringing down Credit Suisse in Europe, forcing the Swiss government to hastily merge the lender with UBS.

    Any domino effect can have huge impacts for the economy, businesses and households.

    “We’ve seen the impact of rapidly changing interest rates manifest in the second tier of the regional U.S. banks,” Knot said. “But I would be very surprised if that was the only sub-sector of the financial system where you would have a significant impact.”

    Despite the turmoil, Knot said he was more worried about risks stashed at “nonbanks” — a term that encompasses investment funds, insurers, private equity, pension funds and hedge funds — where authorities have less visibility on hidden losses.

    “If they are hidden for a very long period of time, sometimes the problem then grows so big, that it only becomes unhidden or visible when it’s too big to deal with,” he said.

    The FSB boss pointed to financial players that took the wrong side of a bet on interest-rates and may now be nursing losses. “I hope, of course, that this is well-dispersed over the financial sector,” he said. “Where we are worried is specific concentrations of such risk.”

    In particular, he said, those losses could be amplified when there is a mismatch between hard-to-sell assets and easy withdrawals, and borrowed money is used to juice returns.

    That combination has worried authorities for some time — but Knot said this didn’t mean regulators are behind. For instance, the FSB, whose membership includes central bankers, financial regulators and finance ministries, will issue recommendations for open-ended investment funds in July.

    Under the plans, regulators would get more powers to trigger restrictions in a crisis, rather than leaving those decisions in the hands of the fund manager.

    Rewriting the rules

    The financial rulebook will need to be revisited substantially in light of recent events, he said.

    “It’s a mistake to see the regulatory framework as something that is fixed, and something that should not be touched,” he said. “The financial industry is not at all fixed, it is continuously evolving. So, the regulatory framework should evolve with the evolving risks.”

    The Dutchman said this means revisiting assumptions about how quickly banks can sell assets to meet depositor withdrawals, the speed of those withdrawals in a digital era, and the reserves that have to be set aside to cover potential unrealized losses from interest-rate risks — all of which were factors in the U.S. bank collapses.

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    Hannah Brenton

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  • Bed Bath & Beyond Files for Bankruptcy

    Bed Bath & Beyond Files for Bankruptcy

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    Bed Bath & Beyond Files for Bankruptcy

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  • Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color | CNN Business

    Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color | CNN Business

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    CNN
     — 

    When customers at Silicon Valley Bank rushed to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some of the founders of color who panicked about losing access to payroll funds.

    As a Black woman with nearly 10 years of business experience, Hamilton knew the options for those startup founders were limited.

    SVB had a reputation for servicing people from underrepresented communities like hers. Its failure has reignited concerns from industry experts about lending discrimination in the banking industry and the resulting disparities in capital for people of color.

    Hamilton, the 43-year-old founder and managing partner of Backstage Capital, said that when it comes to entrepreneurs of color, “we’re already in the smaller house. We already have the rickety door and the thinner walls. And so, when a tornado comes by, we’re going to get hit harder.”

    Established in 1983, the midsize California tech lender was America’s 16th largest bank at the end of 2022 before it collapsed on March 10. SVB provided banking services to nearly half of all venture-backed technology and life-sciences companies in the United States.

    Hamilton, industry experts and other investors told CNN the bank was committed to fostering a community of minority entrepreneurs and provided them with both social and financial capital.

    SVB regularly sponsored conferences and networking events for minority entrepreneurs, said Hamilton, and it was well known for funding the annual State of Black Venture Report spearheaded by BLK VC, a nonprofit organization that connects and empowers Black investors.

    “When other banks were saying no, SVB would say yes,” said Joynicole Martinez, a 25-year entrepreneur and chief advancement and innovation officer for Rising Tide Capital, a nonprofit organization founded in 2004 to connect entrepreneurs with investors and mentors.

    Martinez is also an official member of the Forbes Coaches Council, an invitation-only organization for business and career coaches. She said SVB was an invaluable resource for entrepreneurs of color and offered their clients discounted tech tools and research funding.

    Minority business owners have long faced challenges accessing capital due to discriminatory lending practices, experts say. Data from the Small Business Credit Survey, a collaboration of all 12 Federal Reserve banks, shows disparities on denial rates for bank and nonbank loans.

    In 2021, about 16% of Black-led companies acquired the total amount of business financing they sought from banks, compared to 35% of White-owned companies, the survey shows.

    “We know there’s historic, systemic, and just blatant racism that’s inherent in lending and banking. We have to start there and not tip-toe around it,” Martinez told CNN.

    Asya Bradley is an immigrant founder of multiple tech companies like Kinley, a financial services business aiming to help Black Americans build generational wealth. Following SVB’s collapse, Bradley said she joined a WhatsApp group of more than 1,000 immigrant business founders. Members of the group quickly mobilized to support one another, she said.

    Immigrant founders often don’t have Social Security numbers nor permanent addresses in the United States, Bradley said, and it was crucial to brainstorm different ways to find funding in a system that doesn’t recognize them.

    “The community was really special because a lot of these folks then were sharing different things that they had done to achieve success in terms of getting accounts in different places. They also were able to share different regional banks that have stood up and been like, ‘Hey, if you have accounts at SVB, we can help you guys,’” Bradley said.

    Many women, people of color and immigrants opt for community or regional banks like SVB, Bradley says, because they are often rejected from the “top four banks” — JPMorgan Chase, Bank of America, Wells Fargo and Citibank.

    In her case, Bradley said her gender might have been an issue when she could only open a business account at one of the “top four banks” when her brother co-signed for her.

    “The top four don’t want our business. The top four are rejecting us consistently. The top four do not give us the service that we deserve. And that’s why we’ve gone to community banks and regional banks such as SVB,” Bradley said.

    None of the top four banks provided a comment to CNN. The Financial Services Forum, an organization representing the eight largest financial institutions in the United States has said the banks have committed millions of dollars since 2020 to address economic and racial inequality.

    Last week, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow that his bank has 30% of its branches in lower-income neighborhoods as part of a $30 billion commitment to Black and Brown communities across the country.

    Wells Fargo specifically pointed to its 2022 Diversity, Equity, and Inclusion report, which discusses the bank’s recent initiatives to reach underserved communities.

    The bank partnered last year with the Black Economic Alliance to initiate the Black Entrepreneur Fund — a $50 million seed, startup, and early-stage capital fund for businesses founded or led by Black and African American entrepreneurs. And since May 2021, Wells Fargo has invested in 13 Minority Depository Institutions, fulfilling its $50 million pledge to support Black-owned banks.

    Black-owned banks work to close the lending gap and foster economic empowerment in these traditionally excluded communities, but their numbers have been dwindling over the years, and they have far fewer assets at their disposal than the top banks.

    OneUnited Bank, the largest Black-owned bank in the United States, manages a little over $650 million in assets. By comparison, JPMorgan Chase manages $3.7 trillion in assets.

    Because of these disparities, entrepreneurs also seek funding from venture capitalists. In the early 2010s, Hamilton intended to start her own tech company — but as she searched for investors, she saw that White men control nearly all venture capital dollars. That experience led her to establish Backstage Capital, a venture capital fund that invests in new companies led by underrepresented founders.

    “I said, ‘Well, instead of trying to raise money for one company, let me try to raise for a venture fund that will invest in underrepresented — and now we call them underestimated — founders who are women, people of color, and LGBTQ specifically,’ because I am all three,” Hamilton told CNN.

    Since then, Backstage Capital has amassed a portfolio of nearly 150 different companies and has made over 120 diversity investments, according to data from Crunchbase.

    But Bradley, who is also an ‘angel investor’ of minority-owned businesses, said she remains “really hopeful” that community banks, regional banks and fintechs “will all stand up and say, ‘Hey, we are not going to let the good work of SVB go to waste.’”

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  • SVB collapse was driven by ‘the first Twitter-fueled bank run’ | CNN Business

    SVB collapse was driven by ‘the first Twitter-fueled bank run’ | CNN Business

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    New York
    CNN
     — 

    The massive amount of customer withdrawals that led to the collapse of Silicon Valley Bank had all the hallmarks of an old-fashioned bank run, but with a new twist befitting the primary industry the bank served: much of it unfolded online.

    Customers withdrew $42 billion in a single day last week from Silicon Valley Bank, leaving the bank with $1 billion in negative cash balance, the company said in a regulatory filing. The staggering withdrawals unfolded at a speed enabled by digital banking and were likely fueled in part by viral panic spreading on social media platforms and, reportedly, in private chat groups.

    In the day leading up to the bank’s collapse, multiple prominent venture capitalists took to Twitter in particular, and used their large platforms to raise alarms about the situation, sometimes typing in all caps. Some investors urged startups to rethink where they kept their cash. Founders and CEOs then shared tweets about the concerning situation at the bank in private Slack channels, according to The Wall Street Journal.

    On the other side of a screen, startup leaders raced to withdraw funds online – so many, in fact, that some told CNN the online system appeared to go down. Still, the end result was a modern race to withdraw funds, which House Financial Services Chair Patrick McHenry later described in a statement as ” the first Twitter-fueled bank run.”

    “Even back in the ancient days, way before we had any form of modern communication, this stuff tended to be rumors that moved really fast. The reason it would happen is people would walk down the street and observe people standing outside of banks,” Andrew Metrick, Janet L. Yellen Professor of Finance and Management at the Yale School of Management, told CNN. “Now we don’t have that, but we have Twitter.”

    The experience of the bank run was also far removed from prior eras when a large number of customers would physically show up at a bank to withdraw funds (though some did line up outside Silicon Valley Bank locations, too.) Now, many could do so online or through mobile devices.

    “What made the Silicon Valley Bank run unique was (1) the ease with which its customers could execute withdrawals and (2) the speed with which news of Silicon Valley Bank’s impending demise spread,” Ben Thompson, an analyst who tracks the tech industry, wrote in a post on Monday. “It was the speed, fueled by zero distribution costs for both rumors and withdrawals, that was so destabilizing.”

    Silicon Valley Bank was arguably uniquely susceptible to those factors given its tech-focused customer base. Moreover, its clients, many of whom were venture-backed businesses, were far more likely than the average consumer to keep more than the standard maximum FDIC insured amount of $250,000 in their accounts.

    “The FDIC covers 250K, but am I going to recover my whole 8 figures?” one startup founder told CNN last week, after the bank had collapsed. Other large tech companies kept even larger sums with the bank. That likely made the bank’s customers even more susceptible to the panic spreading online.

    Some prominent tech figures, including Mark Suster, a partner at venture capital firm Upfront Ventures, urged those in the VC community to “speak out publicly to quell the panic” around Silicon Valley Bank last week and cautioned against creating “mass hysteria.”

    “Classic ‘runs on the bank’ hurt our entire system,” he wrote in a lengthy Twitter thread on Thursday. “People are making public jokes about this. It’s not a joke, this is serious stuff. Please treat it as such.”

    His calls for calm weren’t enough. The next day, the US Federal Deposit Insurance Corporation stepped in and took control of the bank, which only added to the viral panic on Twitter.

    “YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW,” Jason Calacanis, a tech investor, wrote on Twitter Sunday. “THAT IS THE PROPER REACTION.”

    Hours later, the Biden administration stepped in and guaranteed the bank’s customers would have access to all their money starting Monday.

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  • The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

    The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

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    CNN
     — 

    For much of the weekend, Silicon Valley scrambled to find a way through what one prominent tech investor described as an “extinction-level event for startups” after the collapse of a top lender in the industry.

    Startups raced to line up loans from venture funds and fintech firms to make payroll. Venture-backed retailers hosted last-minute sales to boost their cash reserves. And at least one prominent startup accelerator convinced thousands of CEOs and founders to sign an “urgent” petition calling for Treasury Secretary Janet Yellen and others to offer “relief.”

    Then, late Sunday, federal officials stepped in to guarantee that all customers of the failed Silicon Valley Bank would have access to their full deposits on Monday. The sense of relief was palpable throughout the tech sector.

    “Obviously, I’m quite relieved,” said Stefan Kalb, co-founder and CEO of Seattle-based startup Shelf Engine, who told CNN that his company would have had to shut down by the end of the week without the government intervention. “It was a very stressful weekend and I’m quite relieved with the news.”

    Parker Conrad, the CEO of HR platform Rippling, who had previously said some customers’ payrolls were being delayed by the bank failure, tweeted Sunday: “Anyone else breathing a sigh of relief and looking forward to a good night’s sleep tonight?”

    And Garry Tan, the CEO of tech startup accelerator Y Combinator who authored the petition to Yellen, praised the federal government for “decisive action.” Tan, the investor who had previously warned of “an *extinction level event* for startups” that would “set startups and innovation back by 10 years or more,” added his appreciation on Sunday for “everyone who helped us through a very very intense time.”

    But even as the tech industry enjoys a respite from a fearful weekend, unknowns remain. “You can feel the collective *sigh*,” Ryan Hoover, a tech founder and investor wrote on Twitter Sunday. “I’m still nervous,” he added. “Hard to predict the collateral effects.”

    It’s unclear how the aftershocks of the bank’s collapse will add to the startup industry’s growing challenges accessing capital. SVB’s collapse also risks changing how the world, and prospective recruits, think of Silicon Valley.

    For years, the term itself conjured an image of an enclave of bright, contrarian, libertarian engineers and thinkers who could see around corners and make big bets on the future. Now, that same industry is relying on the federal government to survive after failing to see the risk, or worse, contributing to it through a shared hysteria.

    In the chaotic days leading up to the bank’s collapse on Friday, some venture firms reportedly urged their portfolio companies to withdraw their money, which may have contributed to the bank failing.

    Then, over the weekend, many venture capitalists and tech founders banded together to try and lobby government and public goodwill towards saving the companies impacted by Silicon Valley Bank’s sudden collapse.

    While some VCs appeared to embrace fear-mongering on Twitter, much of the public messaging focused on the small businesses with exposure to Silicon Valley Bank that might be not be able to continue operating after losing access to the money in their bank account.

    “We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy,” the Y Combinator petition stated. “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank.”

    A separate coalition of more than a dozen venture capital firms, including Lightspeed Venture Partners and Upfront Ventures, released a joint statement late Friday supporting Silicon Valley Bank, given its unique and vital role in the startup economy. The bank worked with nearly half of all venture-backed tech and healthcare companies in the United States.

    “For forty years, it has been an important platform that played a pivotal role in serving the startup community and supporting the innovation economy in the US,” the statement read. “In the event that SVB were to be purchased and appropriately capitalized, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them.”

    Even before the bank’s collapse, the startup industry was in a tough moment. Venture capital funding had dwindled amid rising interest rates and broader macroeconomic uncertainty; tech companies were cutting staff and ambitious projects; and some of the biggest private companies were reportedly slashing their valuations.

    The instability at a top tech lender, and the lingering questions about its impact on other regional banks and the broader financial system, risk making it even harder for money-losing startups to access the capital they need to survive.

    President Joe Biden emphasized in remarks Monday that “no losses will be borne by the taxpayers” related to the government’s intervention for Silicon Valley Bank. But some are already skeptical of that statement, including Democratic Sen. Elizabeth Warren of Massachusetts, who wrote in an op-ed Monday morning, “We’ll see if that’s true.”

    More immediately, there’s uncertainty around how long it will take for companies to get their money out of the bank.

    As of Monday, Kalb said the money in his Silicon Valley Bank account has not been transferred yet to the new JPMorgan Chase account he set up for Shelf Engine on Thursday. “I’ve been obsessively checking my email,” he said. “Hopefully the money will be able to be transferred shortly.”

    Ben Kaufman, the co-founder of venture-backed toy store and online retailer Camp, told CNN’s Poppy Harlow in an interview Monday morning that he and his team spent the weekend trying to “fight for survival,” including holding a last-minute 40% off sale, using the code “BANKRUN,” to raise capital over the weekend.

    “We did not know how long it was going to take for us to get our cash out … we still kind of don’t, they say today, we’ll see what happens,” he said, noting the bank held 85% of his company’s assets. “We hope we can, and we’re so grateful that the Fed stepped in, and the way they did.”

    When asked if the past week’s events would change how and where he stores his money, Kaufman said that is “going to have to be a consideration moving forward.”

    “I don’t want to do this again,” he said.

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  • Look for stocks to lose 30% from here, says strategist David Rosenberg. And don’t even think about turning bullish until 2024.

    Look for stocks to lose 30% from here, says strategist David Rosenberg. And don’t even think about turning bullish until 2024.

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    David Rosenberg, the former chief North American economist at Merrill Lynch, has been saying for almost a year that the Fed means business and investors should take the U.S. central bank’s effort to fight inflation both seriously and literally.

    Rosenberg, now president of Toronto-based Rosenberg Research & Associates Inc., expects investors will face more pain in financial markets in the months to come.

    “The recession’s just starting,” Rosenberg said in an interview with MarketWatch. “The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle.” Investors can expect to endure more uncertainty leading up to the time — and it will come — when the Fed first pauses its current run of interest rate hikes and then begins to cut.

    Fortunately for investors, the Fed’s pause and perhaps even cuts will come in 2023, Rosenberg predicts. Unfortunately, he added, the S&P 500
    SPX,
    -0.61%
    could drop 30% from its current level before that happens. Said Rosenberg: “You’re left with the S&P 500 bottoming out somewhere close to 2,900.”

    At that point, Rosenberg added, stocks will look attractive again. But that’s a story for 2024.

    In this recent interview, which has been edited for length and clarity, Rosenberg offered a playbook for investors to follow this year and to prepare for a more bullish 2024. Meanwhile, he said, as they wait for the much-anticipated Fed pivot, investors should make their own pivot to defensive sectors of the financial markets — including bonds, gold and dividend-paying stocks.

    MarketWatch: So many people out there are expecting a recession. But stocks have performed well to start the year. Are investors and Wall Street out of touch?

    Rosenberg: Investor sentiment is out of line; the household sector is still enormously overweight equities. There is a disconnect between how investors feel about the outlook and how they’re actually positioned. They feel bearish but they’re still positioned bullishly, and that is a classic case of cognitive dissonance. We also have a situation where there is a lot of talk about recession and about how this is the most widely expected recession of all time, and yet the analyst community is still expecting corporate earnings growth to be positive in 2023.

    In a plain-vanilla recession, earnings go down 20%. We’ve never had a recession where earnings were up at all. The consensus is that we are going to see corporate earnings expand in 2023. So there’s another glaring anomaly. We are being told this is a widely expected recession, and yet it’s not reflected in earnings estimates – at least not yet.

    There’s nothing right now in my collection of metrics telling me that we’re anywhere close to a bottom. 2022 was the year where the Fed tightened policy aggressively and that showed up in the marketplace in a compression in the price-earnings multiple from roughly 22 to around 17. The story in 2022 was about what the rate hikes did to the market multiple; 2023 will be about what those rate hikes do to corporate earnings.

    “ You’re left with the S&P 500 bottoming out somewhere close to 2,900. ”

    When you’re attempting to be reasonable and come up with a sensible multiple for this market, given where the risk-free interest rate is now, and we can generously assume a roughly 15 price-earnings multiple. Then you slap that on a recession earning environment, and you’re left with the S&P 500 bottoming out somewhere close to 2900.

    The closer we get to that, the more I will be recommending allocations to the stock market. If I was saying 3200 before, there is a reasonable outcome that can lead you to something below 3000. At 3200 to tell you the truth I would plan on getting a little more positive.

    This is just pure mathematics. All the stock market is at any point is earnings multiplied by the multiple you want to apply to that earnings stream. That multiple is sensitive to interest rates. All we’ve seen is Act I — multiple compression. We haven’t yet seen the market multiple dip below the long-run mean, which is closer to 16. You’ve never had a bear market bottom with the multiple above the long-run average. That just doesn’t happen.

    David Rosenberg: ‘You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios.’


    Rosenberg Research

    MarketWatch: The market wants a “Powell put” to rescue stocks, but may have to settle for a “Powell pause.” When the Fed finally pauses its rate hikes, is that a signal to turn bullish?

    Rosenberg: The stock market bottoms 70% of the way into a recession and 70% of the way into the easing cycle. What’s more important is that the Fed will pause, and then will pivot. That is going to be a 2023 story.

    The Fed will shift its views as circumstances change. The S&P 500 low will be south of 3000 and then it’s a matter of time. The Fed will pause, the markets will have a knee-jerk positive reaction you can trade. Then the Fed will start to cut interest rates, and that usually takes place six months after the pause. Then there will be a lot of giddiness in the market for a short time. When the market bottoms, it’s the mirror image of when it peaks. The market peaks when it starts to see the recession coming. The next bull market will start once investors begin to see the recovery.

    But the recession’s just starting. The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle when the central bank has cut interest rates enough to push the yield curve back to a positive slope. That is many months away. We have to wait for the pause, the pivot, and for rate cuts to steepen the yield curve. That will be a late 2023, early 2024 story.

    MarketWatch: How concerned are you about corporate and household debt? Are there echoes of the 2008-09 Great Recession?

    Rosenberg: There’s not going to be a replay of 2008-09. It doesn’t mean there won’t be a major financial spasm. That always happens after a Fed tightening cycle. The excesses are exposed, and expunged. I look at it more as it could be a replay of what happened with nonbank financials in the 1980s, early 1990s, that engulfed the savings and loan industry. I am concerned about the banks in the sense that they have a tremendous amount of commercial real estate exposure on their balance sheets. I do think the banks will be compelled to bolster their loan-loss reserves, and that will come out of their earnings performance. That’s not the same as incurring capitalization problems, so I don’t see any major banks defaulting or being at risk of default.

    But I’m concerned about other pockets of the financial sector. The banks are actually less important to the overall credit market than they’ve been in the past. This is not a repeat of 2008-09 but we do have to focus on where the extreme leverage is centered.

    Read: The stock market is wishing and hoping the Fed will pivot — but the pain won’t end until investors panic

    It’s not necessarily in the banks this time; it is in other sources such as private equity, private debt, and they have yet to fully mark-to-market their assets. That’s an area of concern. The parts of the market that cater directly to the consumer, like credit cards, we’re already starting to see signs of stress in terms of the rise in 30-day late-payment rates. Early stage arrears are surfacing in credit cards, auto loans and even some elements of the mortgage market. The big risk to me is not so much the banks, but the nonbank financials that cater to credit cards, auto loans, and private equity and private debt.

    MarketWatch: Why should individuals care about trouble in private equity and private debt? That’s for the wealthy and the big institutions.

    Rosenberg: Unless private investment firms gate their assets, you’re going to end up getting a flood of redemptions and asset sales, and that affects all markets. Markets are intertwined. Redemptions and forced asset sales will affect market valuations in general. We’re seeing deflation in the equity market and now in a much more important market for individuals, which is residential real estate. One of the reasons why so many people have delayed their return to the labor market is they looked at their wealth, principally equities and real estate, and thought they could retire early based on this massive wealth creation that took place through 2020 and 2021.

    Now people are having to recalculate their ability to retire early and fund a comfortable retirement lifestyle. They will be forced back into the labor market. And the problem with a recession of course is that there are going to be fewer job openings, which means the unemployment rate is going to rise. The Fed is already telling us we’re going to 4.6%, which itself is a recession call; we’re going to blow through that number. All this plays out in the labor market not necessarily through job loss, but it’s going to force people to go back and look for a job. The unemployment rate goes up — that has a lag impact on nominal wages and that is going to be another factor that will curtail consumer spending, which is 70% of the economy.

    “ My strongest conviction is the 30-year Treasury bond. ”

    At some point, we’re going to have to have some sort of positive shock that will arrest the decline. The cycle is the cycle and what dominates the cycle are interest rates. At some point we get the recessionary pressures, inflation melts, the Fed will have successfully reset asset values to more normal levels, and we will be in a different monetary policy cycle by the second half of 2024 that will breathe life into the economy and we’ll be off to a recovery phase, which the market will start to discount later in 2023. Nothing here is permanent. It’s about interest rates, liquidity and the yield curve that has played out before.

    MarketWatch: Where do you advise investors to put their money now, and why?

    Rosenberg: My strongest conviction is the 30-year Treasury bond
    TMUBMUSD30Y,
    3.674%    .
    The Fed will cut rates and you’ll get the biggest decline in yields at the short end. But in terms of bond prices and the total return potential, it’s at the long end of the curve. Bond yields always go down in a recession. Inflation is going to fall more quickly than is generally anticipated. Recession and disinflation are powerful forces for the long end of the Treasury curve.

    As the Fed pauses and then pivots — and this Volcker-like tightening is not permanent — other central banks around the world are going to play catch up, and that is going to undercut the U.S. dollar
    DXY,
    +0.70%    .
    There are few better hedges against a U.S. dollar reversal than gold. On top of that, cryptocurrency has been exposed as being far too volatile to be part of any asset mix. It’s fun to trade, but crypto is not an investment. The crypto craze — fund flows directed to bitcoin
    BTCUSD,
    +0.35%
    and the like — drained the gold price by more than $200 an ounce.

    “ Buy companies that provide the goods and services that people need – not what they want. ”

    I’m bullish on gold
    GC00,
    +0.22%
    – physical gold — bullish on bonds, and within the stock market, under the proviso that we have a recession, you want to ensure you are invested in sectors with the lowest possible correlation to GDP growth.

    Invest in 2023 the same way you’re going to be living life — in a period of frugality. Buy companies that provide the goods and services that people need – not what they want. Consumer staples, not consumer cyclicals. Utilities. Health care. I look at Apple as a cyclical consumer products company, but Microsoft is a defensive growth technology company.

    You want to be buying essentials, staples, things you need. When I look at Microsoft
    MSFT,
    -0.61%    ,
    Alphabet
    GOOGL,
    -1.79%    ,
    Amazon
    AMZN,
    -1.17%    ,
    they are what I would consider to be defensive growth stocks and at some point this year, they will deserve to be garnering a very strong look for the next cycle.

    You also want to invest in areas with a secular growth tailwind. For example, military budgets are rising in every part of the world and that plays right into defense/aerospace stocks. Food security, whether it’s food producers, anything related to agriculture, is an area you ought to be invested in.

    You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios. If you follow that you’ll do just fine. I just think you’ll do far better if you have a healthy allocation to long-term bonds and gold. Gold finished 2022 unchanged, in a year when flat was the new up.

    In terms of the relative weighting, that’s a personal choice but I would say to focus on defensive sectors with zero or low correlation to GDP, a laddered bond portfolio if you want to play it safe, or just the long bond, and physical gold. Also, the Dogs of the Dow fits the screening for strong balance sheets, strong dividend payout ratios and a nice starting yield. The Dogs outperformed in 2022, and 2023 will be much the same. That’s the strategy for 2023.

    More: ‘It’s payback time.’ U.S. stocks have been a no-brainer moneymaker for years — but those days are over.

    Plus: ‘The Nasdaq is our favorite short.’ This market strategist sees recession and a credit crunch slamming stocks in 2023.

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  • Gen3 Marketing Successfully Integrates Agencies, Introduces a Singular Brand

    Gen3 Marketing Successfully Integrates Agencies, Introduces a Singular Brand

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    Press Release
    –

    Feb 1, 2023 15:30 EST


    BLUE BELL, Pa., February 1, 2023 (Newswire.com)
    –
    Gen3 Marketing, the largest independent affiliate marketing agency in the world, today announced the consolidation of all its agencies under a single brand, aptly named Gen3 Marketing.

    Through this consolidation, Gen3 Marketing will operate as a singular agency with a primary focus on the successful execution of affiliate partnerships and digital campaigns that leverage proprietary data and established relationships to achieve industry-leading results. 

    The strategic integration of five best-in-class agencies allows Gen3 Marketing to offer more comprehensive solutions while also broadening the agency’s geographic footprint. The Gen3 Marketing brand will now include the teams, resources, and portfolios of the following agencies it had previously acquired:

    OPM Pros

    OPM Pros quickly became known for creating results-driven value for its partners through the power of strategy, relationships and innovation. OPM Pros has helped augment Gen3 Marketing’s capabilities with an award-winning reputation and experienced leadership.

    AffiliateManager.com

    AffiliateManager.com has been helping companies compete with effective affiliate marketing programs since 2002. The integration sharpens Gen3’s business-to-business focus while offering proprietary tools for smaller clients.

    Optimus-pm

    For more than 10 years, Optimus-pm has been an industry-leading affiliate marketing agency with an unparalleled reputation for delivering cost-effective results. Based in the UK, Optimus-pm injects global experience into Gen3 Marketing and bolsters its international roster.

    OAK Digital
    Founded in 2015 in New York City, OAK Digital brings seasoned management, a global workforce and content partnership expertise to Gen3. The integration provides Gen3 with innovative approaches to affiliate content strategies that deliver measurable results.

    The agency consolidation will include Gen3 Marketing’s first-ever dedicated Premium Content team, which employs a hybrid affiliate/PR approach to powerfully transform clients’ businesses by driving incremental awareness and growth. This team sits side by side with the agency’s expert SEO, PPC, Display and Social teams, allowing for a comprehensive integrated marketing solution for those clients in need of these services.

    “Ever since our inception, we have endeavored to deliver cost-effective strategies that exceed the marketing and growth objectives of our clients,” says Gen3 Chief Operating Officer, Sam Leone. “As a leading international agency, this brand consolidation unifies the way we deliver service and provides our clients with more resources, data, reach and capability.”

    Founded in 2007, Gen3 Marketing has earned more than 40 industry awards by delivering streamlined, customized affiliate marketing programs that consistently generate industry-leading ROI for clients in any vertical around the world.

    The agency, who works with some of the fastest-growing online brands, recently executed successful campaigns for GNC, Carhartt, Fender Guitars and Fresh Direct.

    “While Gen3 Marketing has consolidated under one single brand, one thing will remain the same: the agency will continue to focus all of its resources to achieve powerful results for clients and strategically transform data into outcomes,” explains Co-CEOs Mike Tabasso & Andy Cantos.

    For any further questions regarding this news, please contact Gen3 Marketing at info@gen3marketing.com or visit www.gen3marketing.com.

    About Gen3 Marketing

    Gen3 Marketing was founded in 2007 and is headquartered in Blue Bell, Pennsylvania, with established agency hubs in Santa Barbara, California, Canada and the UK.

    Gen3 Marketing employs over 200 people on six continents and manages over 500 affiliate programs across all verticals. The agency recently won Agency of the Year at Rakuten’s 2022 Golden Link Awards, as well as Agency of the Year at CJU22 as part of the 2022 CJ Excellence Awards. 

    Source: Gen3 Marketing

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  • Why urgent care centers are popping up everywhere | CNN Business

    Why urgent care centers are popping up everywhere | CNN Business

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    New York
    CNN
     — 

    If you drive down a busy suburban strip mall or walk down a street in a major city, chances are you won’t go long without spotting a Concentra, MedExpress, CityMD or another urgent care center.

    Demand at urgent care sites surged during the Covid-19 pandemic as people searched for tests and treatments. Patient volume has jumped 60% since 2019, according to the Urgent Care Association, an industry trade group.

    That has fueled growth for new urgent care centers. A record 11,150 urgent care centers have popped up around the United States and they are growing at 7% a year, the trade group says. (This does not include clinics inside retail stores like CVS’ MinuteClinic or freestanding emergency departments.)

    Urgent care centers are designed to treat non-emergency conditions like a common cold, a sprained ankle, an ear infection, or a rash. They are recommended if patients can’t get an immediate appointment with their primary care doctor or if patients don’t have one. Primary care practices should always be the first call in these situations because they have access to patients’ records and all of their health care history, while urgent care sites are meant to provide episodic care.

    Urgent care sites are often staffed by physician assistants and nurse practitioners. Many also have doctors on site. (One urgent care industry magazine says, in 2009, 70% of its providers were physicians, but that the percentage had fallen to 16% by last year.) Urgent cares usually offer medical treatment outside of regular doctor’s office hours and a visit costs much less than a trip to the emergency room.

    Urgent care has grown rapidly because of convenience, gaps in primary care, high costs of emergency room visits, and increased investment by health systems and private-equity groups. The urgent care market will reach around $48 billion in revenue this year, a 21% increase from 2019, estimates IBISWorld.

    The growth highlights the crisis in the US primary care system. A shortage of up to 55,000 primary care physicians is expected in the next decade, according to the Association of American Medical Colleges.

    But many doctors, health care advocates and researchers raise concerns at the proliferation of urgent care sites and say there can be downsides.

    Frequent visits to urgent care sites may weaken established relationships with primary care doctors. They can also lead to more fragmented care and increase overall health care spending, research shows.

    And there are questions about the quality of care at urgent care centers and whether they adequately serve low-income communities. A 2018 study by Pew Charitable Trusts and the Centers for Disease Control and Prevention found that antibiotics are overprescribed at urgent care centers, especially for common colds, the flu and bronchitis.

    “It’s a reasonable solution for people with minor conditions that can’t wait for primary care providers,” said Vivian Ho, a health economist at Rice University. “When you need constant management of a chronic illness, you should not go there.”

    Urgent care centers have been around in the United States since the 1970s, but they were long derided as “docs in a box” and grew slowly during their early years.

    They have become more popular over the past two decades in part due to pressures on the primary care system. People’s expectations of wait times have changed and it can be difficult, and sometimes almost impossible, to book an immediate visit with a primary care provider.

    Urgent care sites are typically open for longer hours during the weekday and on weekends, making it easier to get an appointment or a walk-in visit. Around 80% of the US population is within a 10-minute drive of an urgent care center, according to the industry trade group.

    “There’s a need to keep up with society’s demand for quick turnaround, on-demand services that can’t be supported by underfunded primary care,” said Susan Kressly, a retired pediatrician and fellow at the American Academy of Pediatrics.

    Health insurers and hospitals have also become more focused on keeping people out of the emergency room. Emergency room visits are around ten times more expensive than visits to an urgent care center. During the early 2000s, hospital systems and health insurers started opening their own urgent care sites, and they have introduced strategies to deter emergency room visits.

    Additionally, passage of the Affordable Care Act in 2010 spurred an increase in urgent care providers as millions of newly insured Americans sought out health care. Private-equity and venture capital funds also poured billions into deals for urgent care centers, according to data from PitchBook.

    Urgent care centers can be attractive to investors. Unlike ERs, which are legally obligated to treat everyone, urgent care sites can essentially choose their patients and the conditions they treat. Many urgent care centers don’t accept Medicaid and can turn away uninsured patient,s unless they pay a fee.

    Like other health care options, urgent care centers make money by billing insurance companies for the cost of the visit, additional services, or the patient pays out of pocket. In 2016, the median charge for a 30-minute new insured patient visit was $242 at an urgent care center, compared with $294 in a primary care office and $109 in a retail clinic, according to a study by FAIR Health, a nonprofit that collects health insurance data.

    “If they can make it a more convenient option, there’s a lot of revenue here,” said Ateev Mehrotra, a professor of health care policy and medicine at Harvard Medical School who has researched urgent care clinics. “It’s not where the big bucks are in health care, but there’s a substantial number of patients.”

    Mehrotra research has found that between 2008 and 2015, urgent care visits increased 119%. They became the dominant venue for people seeking treatment for low-acuity conditions like acute respiratory infections, urinary tract infections, rashes, and muscle strains.

    Some doctors and researchers worry that patients with primary care doctors – and those without – are substituting urgent care visits in place of a primary care provider.

    “What you don’t want to see is people seeking a lot care outside their pediatrician and decreasing their visits to their primary care provider,” said Rebecca Burns, the urgent care medical director at the Lurie Children’s Hospital of Chicago.

    Burns’ research has found that high urgent care reliance fills a need for children with acute issues but has the potential to disrupt primary care relationships.

    The National Health Law Program, a health care advocacy group for low-income families and communities, has called for state regulations to require coordination among urgent care sites, retail clinics, primary services, and hospitals to ensure continuity of patients’ care.

    And while the presence of urgent care centers does prevent people from costly emergency department visits for low-acuity issues, Mehrotra from Harvard has found that, paradoxically, they increase health care spending on net.

    Each $1,646 visit to the ER for a low-acuity condition prevented was offset by a $6,327 increase in urgent care center costs, his research has found. This is in part because people may be going to urgent care for minor illnesses they would have previously treated with chicken soup.

    There are also concerns about the oversaturation of urgent care centers in higher-income areas that have more consumers with private health care and limited access in medically underserved areas.

    Urgent care centers selectively tend not to serve rural areas, areas with a high concentration of low-income patients, and areas with a low concentration of privately-insured patients, researchers at the University of California at San Francisco found in a 2016 study. They said this “uneven distribution may potentially exacerbate health disparities.”

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  • Southwest Airlines cancels two-thirds of its flights, with more cancellations planned

    Southwest Airlines cancels two-thirds of its flights, with more cancellations planned

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    Southwest Airlines Co. canceled more than two-thirds of its flights Monday and plans to slash its schedules Tuesday and Wednesday, in a meltdown that stranded thousands of customers and that worsened while other airlines began to recover from the holiday winter storm.

    “We had a tough day today. In all likelihood we’ll have another tough day tomorrow as we work our way out of this,” Chief Executive Bob Jordan said in an interview Monday evening. “This is the largest scale event that I’ve ever seen.” 

    Southwest
    LUV,
    +1.78%
    plans to operate just over one-third of its typical schedule in the coming days to give itself leeway for crews to get into the right positions, he said, adding that the reduced schedule could be extended.

    Southwest’s more than 2,800 scrapped flights Monday, the highest of any major U.S. airline, came as the Dallas-based airline proved unable to stabilize its operations amid the past week’s storm. Between Thursday and Monday, the airline canceled about 8,000 flights, according to FlightAware.

    On Monday, the Department of Transportation called Southwest’s rate of cancellations “disproportionate and unacceptable” and said it would examine whether the cancellations were controllable and whether the airline is complying with its customer service plan.

    Ryan Green, Southwest’s chief commercial officer, said in an interview the airline is taking steps such as covering customers’ reasonable travel costs—including hotels, rental cars and tickets on other airlines, and will be communicating the process for customers to have expenses reimbursed. He also said customers whose flights are being canceled as the airline recovers are entitled to refunds if they opt not to travel. 

    The troubles at Southwest intensified Monday despite generally improving weather conditions and warming temperatures throughout much of the eastern half of the country, which had been pummeled by snow, wind and subfreezing temperatures in recent days.

    An expanded version of this report appears on WSJ.com.

    Trending at WSJ.com:

    SPAC boom ends in frenzy of liquidation

    Wall Street nailed earnings but missed the bear market

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  • What Is Equity and How Do You Calculate It for Shareholders?

    What Is Equity and How Do You Calculate It for Shareholders?

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    Almost everyone understands home equity — this private equity is the percentage of your home you own after paying down your mortgage. More technically, it’s the value of an asset, like property, minus its liabilities, like debt.

    But the term “equity” also applies to things like businesses. As a business owner and entrepreneur, you need to know how equity affects your enterprises and how to calculate it for your shareholders, mainly before you go public. This article will discuss how to calculate equity for shareholders in detail.

    How equity works

    Equity is the value of an asset without its liabilities.

    For example, say that you own a business building, like a retail storefront, worth $500,000. You’ve paid down $300,000 of that property’s mortgage, leaving you with $200,000 plus interest in liabilities. Thus, the equity in the property is (roughly) the $300,000 you own of the building.

    This is a basic example, of course. You can look for and calculate the equity in everything from basic items to business enterprises and stock portfolios. Regardless, equity is vital so that investors, shareholders and other interested parties can determine the actual value of an asset.

    Related: How to Safely Tap Home Equity in a Financial Emergency

    Shareholders’ equity explained

    Shareholders’ equity, therefore, is the net worth or total dollar value of the company that would be returned to shareholders of the company’s stock if:

    • The company’s assets were to be liquidated.
    • The company’s debts were to be paid off.

    Put more simply, shareholders’ equity is the total equity left over that shareholders would have to divvy up between themselves if a company was liquidated entirely to settle any outstanding debts.

    You can also think of stockholders’ equity (or SE) as the owners’ collective residual claim on company assets only after outstanding debts are satisfied. Shareholders’ equity is the same as a firm’s total assets minus its total liabilities.

    It’s essential to know how to calculate share owners’ equity for a variety of reasons:

    • Investors and analysts may need to determine the market value of a company and make suitable equity investments.
    • A business’s board of directors can use this information to determine the business’s valuation for financial statements accurately.

    While similar, shareholder equity is not the same thing as liquidation value. The company’s liquidation value is affected by the asset values of physical things like equipment or supplies.

    Related: Debt vs. Equity Financing: Which Way Should Your Business Go?

    Shareholders’ equity example

    Here’s an example of shareholders’ equity:

    Imagine that you have Company A, with total assets of $3 million. You have total liabilities of $1.2 million. If the company was liquidated, and its assets turned into $3 million, you would use some of that money to pay off the $1.2 million in liabilities.

    What does that leave the shareholders? Approximately $1.8 million.

    What components are included in shareholders’ equity?

    For any given company, shareholders’ equity could be comprised of many different components. These include:

    • Stock components, such as common, preferred and treasury stocks.
    • Retained earnings — this is the percentage of net earnings not paid to shareholders as dividends (yet).
    • Unrealized gains and losses.
    • Contributed capital.
    • Physical assets like business equipment and products.

    When calculating shareholders’ equity using either of the below two formulas, it’s essential to add up all of these components when calculating the total asset value of a firm.

    Related: Use a Balance Sheet to Evaluate the Health of Your Business

    Positive vs. negative shareholders’ equity

    Things can even get a little more complicated. There are positive and negative types of equity.

    Positive shareholders’ equity means a company has enough assets to cover its debts or liabilities. Negative shareholders’ equity, on the other hand, means that the liabilities of a firm exceed its total asset value.

    If the shareholders’ equity in a company stays negative, the balance sheet may display it as insolvent. In other words, the company could not liquidate itself and all of its assets and still pay off its debts, which could spell financial trouble for investors, shareholders, business owners and executives.

    Many investors look at companies with negative shareholder equity as risky investments. While shareholder equity isn’t the only indicator of the financial hole for a company, you can use it in conjunction with other metrics or tools. When used with those tools, investors and potential shareholders can get a more accurate picture of the financial health of almost any enterprise.

    While retained earnings are an essential part of shareholders’ equity (as the current percentage of net earnings is not given to shareholders as dividends), they should not be confused with liquid assets like cash. You can use several years of retained earnings for assets, expenses or other purposes to grow a business. It’s not “realized” cash at the moment.

    How to calculate equity for shareholders

    Fortunately, calculating equity for shareholders is relatively straightforward. Remember, equity is just the total asset value of the company minus its liabilities. You can calculate shareholder equity using the information found on any corporate balance sheet.

    Here’s the formula:

    Shareholder equity = total assets – total liabilities

    Also called the balance sheet or accounting equation, the shareholder equity equation is one of the most critical tools when analyzing the company’s health.

    Here’s how to calculate shareholder equity step-by-step:

    • First, determine the company’s total assets on the balance sheet for a given period, such as one fiscal year. Be sure to add up all these assets carefully and correctly, or use an up-to-date balance sheet.
    • Next, add up all of the total liabilities. Any up-to-date balance sheet should include this information. Liabilities include debts and outstanding expenses.
    • Then determine the total shareholder equity, and add that number to the total liabilities.
    • The remaining assets should equal the sum of total shareholder equity and liabilities.

    A note when calculating total assets includes both current and noncurrent assets. If you aren’t aware, current assets are any assets you can convert to cash within one fiscal year.

    This includes cash, inventory and accounts receivable. Noncurrent or long-term assets you can’t convert into cash in the same timeframe, such as patents, property and plant and equipment (PPE).

    A note when calculating total liabilities: Liabilities also include both current and long-term liabilities. In keeping with the above, current liabilities are any debts due within one year, such as accounts payable or outstanding taxes.

    Long-term liabilities are any debts or other obligations due for repayment later than one year in advance, such as leases, bonds payable and pension obligations.

    Related: How to Protect Your Personal Finances From Business Risks

    Secondary formula

    The above shareholder equity formula should serve you well in most cases. Still, there’s a secondary formula that might be helpful as well.

    Here’s the secondary formula:

    Shareholders’ equity = share capital + retained earnings – treasury stock

    This “share capital method” of calculating shareholders’ equity is also known as the investor’s equation. This formula sums up all the retained earnings of a business and the share capital, then subtracts treasury shares.

    The retained earnings in this formula are the sum of a company’s total or cumulative profits after they pay dividends. Most shareholders receive balance sheets that display this number in the “shareholders’ equity” section.

    This formula can give a slightly more accurate picture of what shareholders may expect if forced/decided to liquidate a company or exit. However, you can use both formulas to calculate equity for shareholders equally well.

    The value of equity for shareholders

    Equity is essential for shareholders for several reasons.

    For starters, shareholder equity tells you the total return on investment versus the amount invested by equity investors.

    Ratios such as return on equity, or ROE (the company’s net income divided by shareholder equity), can be used to measure how well the management team for a company uses equity from investors to generate a profit. ROE can tell investors how capable current executives are at taking investment cash and turning it into more money.

    A company with positive shareholders’ equity has enough assets to cover liabilities. In an emergency, shareholders or investors could theoretically exit without taking substantial financial losses.

    As mentioned earlier, you can also use SE with other financial metrics or ratios to accurately determine whether a company is a wise investment.

    These metrics include share price, capital gains, real estate value, the company’s total assets and other vital elements of private companies. Because equity is essential for shareholders, it’s also crucial for business owners and people on executive boards to calculate.

    Furthermore, equity affects the value of startups on the stock market. Suitable asset allocation will help businesses grow, resulting in a higher amount of money from stock purchasers and ETF managers.

    Return on equity in detail

    Here’s a deeper dive into return on equity. Analysts and investors use this metric to determine if a company uses equity or investment cash to profit efficiently and effectively.

    Say that you have a choice to invest in a company and want to check out its return on equity before making a decision. You look at the company’s balance sheet and figure out that the return on equity is 12% and has stayed at 12% for several years.

    Related: Debt vs. Equity Financing: Which Way Should Your Business Go?

    That’s a pretty good return on any investment. It may indicate that the company is worth putting your own money into.

    On the other hand, if the return on equity is low, like 1%, and the current shareholders’ equity for a company is negative, it’s a surefire sign that your investment dollars will be worth more if you invest them elsewhere.

    Calculating equity is essential when propositioning investors for more funding and advising your shareholders. Now you know how to calculate equity for shareholders with two distinct formulas.

    Looking for more resources to expand your professional financial knowledge? Explore Entrepreneur’s Money & Finance guides here

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  • Saudi crown prince set to invest in Credit Suisse’s new investment bank

    Saudi crown prince set to invest in Credit Suisse’s new investment bank

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    Saudi Arabia’s crown prince and a U.S. private-equity firm run by Barclays PLC’s former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse’s
    CSGN,
    +6.61%

    CS,
    +9.39%
    new investment bank, people familiar with the matter said. 

    Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from U.S. investors including veteran banker Bob Diamond‘s Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500 million committed from an additional investor it hasn’t named.  

    Credit Suisse has received a number of proposals from investors interested in CS First Boston. Credit Suisse Chairman Axel Lehmann at a conference on Thursday said it has other firm commitments in addition to the $500 million from the unnamed investor. The bank hasn’t received a formal proposal from any Saudi entity, some of the people familiar with the matter said. 

    Credit Suisse is spinning off the New York-based investment bank as part of a fresh start after being buffeted by scandals, regulatory scrutiny and steep losses. It is raising $4.2 billion in new stock that separately will make Saudi National Bank its largest shareholder. It isn’t clear if Prince Mohammed would make the investment through that bank, or another investment vehicle. He is chairman of the country’s sovereign-wealth fund, Public Investment Fund, which along with another government fund is Saudi National Bank’s main owner. 

    An expanded version of this report appears on WSJ.com.

    Also popular on WSJ.com:

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  • Meet the 10 biggest megadonors for the 2022 midterm elections

    Meet the 10 biggest megadonors for the 2022 midterm elections

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    With four weeks until Election Day, congressional candidates are on track to break midterm fundraising records, having raised nearly $2.5 billion so far this cycle. That’s already 70% more than what was raised during the 2014 cycle and just $200 million shy of the total raised during the full 2018 cycle.

    This cycle has also seen record-shattering outside spending, topping $1 billion through the beginning of October, according to an OpenSecrets estimate.

    The increase in spending and fundraising is due in large part to the involvement of millionaire and billionaire megadonors who have sought to influence the outcome of an election in which both chambers of Congress are in play.

    “When megadonors pump millions of dollars into super PACs, they get to help call the shots,” said Michael Beckel, research director at Issue One, a nonpartisan political reform organization. “Massive spending from a megadonor can influence what issues are talked about on the campaign trail and in Congress.”

    Super PACs are independent political action committees that can raise unlimited sums of money but are not allowed to coordinate with a candidate or campaign. Due to contribution limits, such as those restricting individuals’ candidate contributions to $2,900 per election per candidate, most megadonor spending goes to super PACs.

    More context: These are the basics of campaign finance in 2020 — in two handy charts

    A MarketWatch analysis of Federal Election Commission data through the end of September shows that these 10 business moguls and philanthropists are the biggest federal-level donors this cycle.

    Read: These 3 races could determine whether Democrats or Republicans control the Senate in 2023

    And see: If this seat flips red, Republicans will have ‘probably won a relatively comfortable House majority’

    Top federal-level megadonors this cycle
    Rank

    		 Contributor

    		 Total Contributions

    		 For Republicans

    		 For Democrats

    		 Nonpartisan/Bipartisan
    1

    		 George Soros

    		 $128,782,000

    		 $0

    		 $128,782,000

    		 $0
    2

    		 Ken Griffin

    		 $50,955,800

    		 $50,955,800

    		 $0

    		 $0
    3

    		 Richard Uihlein

    		 $49,117,000

    		 $49,117,000

    		 $0

    		 $0
    4

    		 Sam Bankman-Fried

    		 $39,931,000

    		 $201,000

    		 $37,725,000

    		 $2,005,000
    5

    		 Jeff Yass

    		 $32,754,000

    		 $32,754,000

    		 $0

    		 $0
    6

    		 Peter Thiel

    		 $30,189,000

    		 $30,189,000

    		 $0

    		 $0
    7

    		 Fred Eychaner

    		 $22,343,000

    		 $0

    		 $22,343,000

    		 $0
    8

    		 Stephen Schwarzman

    		 $21,870,000

    		 $21,865,000

    		 $0

    		 $5,000
    9

    		 Larry Ellison

    		 $21,003,000

    		 $21,003,000

    		 $0

    		 $0
    10

    		 Ryan Salame

    		 $18,932,000

    		 $17,432,000

    		 $0

    		 $1,500,000
    Totals:

    		 $415,877,000

    		 $223,517,000

    		 $188,850,000

    		 $3,510,000

    Source: MarketWatch analysis of FEC data as of Sept. 30, 2022
    Note: Partisan breakdown includes non-party affiliated PACs with over 95% of their spending benefitting one party, data has been rounded to the nearest thousand

    Big spending by itself doesn’t automatically mean winning. There have been notable instances of the financially strongest candidates losing (such as crypto-backed House candidate Carrick Flynn earlier this year and billionaire Michael Bloomberg’s self-financed presidential bid) — but money can certainly help put a candidate on the right track.

    “Money alone doesn’t guarantee electoral success, but every candidate prefers to be the one with more money to spend,” Beckel said. He added: “Outside spending on behalf of a candidate isn’t a silver bullet that’s going to guarantee electoral success. But it goes a long way to boosting somebody’s name recognition, and to presenting them as a viable candidate — somebody who has the resources to run a competitive campaign.”

    Information about the spending by the top 10 donors this cycle has been compiled from MarketWatch’s analysis of FEC data and filings, super PAC websites and previously reported comments. Read on to find out who are the top 10 biggest donors this cycle.

    10. Ryan Salame — $19 million

    Ryan Salame, the co-CEO of FTX Digital Markets, a subsidiary of cryptocurrency exchange FTX, founded a hybrid PAC earlier this year called American Dream Federal Action. The vast majority ($15 million) of the $19 million Salame has spent this cycle has gone into bankrolling the PAC, which has spent $2.4 million in independent expenditures supporting Illinois Republican Rep. Rodney Davis, $2 million supporting Republican Senate candidate Katie Britt from Alabama, and $1.2 million each supporting Arkansas GOP Sen. John Boozman and Brad Finstad, a GOP congressional candidate in Minnesota.

    On its website, the PAC describes itself as “organization dedicated to electing forward-looking candidates — those who want to protect America’s long term economic and national security by advancing smart policy decisions now.” A representative for Salame didn’t respond to a request for comment.

    9. Lawrence Ellison — $21 million

    The co-founder of Oracle
    ORCL,
    +0.26%
    has similarly bankrolled a PAC this election cycle — giving a total $20 million to Opportunity Matters Fund Inc. The super PAC has largely held onto its funds so far, recent FEC records show, having $17 million cash on hand as of the end of August. Of the independent expenditures it has made this cycle, it spent the most on Georgia Republican Senate candidate Herschel Walker ($1.3 million), Wisconsin Republican Sen. Ron Johnson ($1.3 million) and North Carolina Senate candidate and current Republican Rep. Ted Budd ($1.1 million). A representative for Ellison didn’t respond to a request for comment.

    8. Stephen Schwarzman — $22 million

    Billionaire Stephen Schwarzman, the CEO of private-equity giant Blackstone
    BX,
    -2.41%    ,
    is the eighth biggest donor at the federal level this cycle. In March, Schwarzman gave $10 million to both the Senate Leadership Fund and Congressional Leadership Fund, super PACs aimed at obtaining a Republican majority in the Senate and House, respectively. A representative for Schwarzman didn’t respond to a request for comment.

    7. Fred Eychaner — $22 million

    Fred Eychaner has also contributed $22 million so far this cycle, but unlike most of the spending on this list, his has been directed toward Democratic causes. The chairman of Chicago-based Newsweb Corporation has given $9 million to the House Majority PAC and $8 million to the Senate Majority PAC, as well as just under $1.5 million to the Democratic National Committee and several hundred thousands to the Democratic Congressional Campaign Committee and Democratic Senatorial Campaign Committee. A representative for Eychaner didn’t respond to a request for comment.

    6. Peter Thiel — $30 million

    Venture capitalist Peter Thiel was heavily involved in backing Ohio Republican J.D. Vance’s primary bid, giving $15 million in the spring to the Vance-aligned Protect Ohio Values PAC.

    The massive primary investment was “historic” and record-setting, according to Beckel, who added that Thiel’s involvement in the Ohio Senate primary could mark “a new chapter of how mega donors are choosing to play in politics.”

    “I think it’s become clear for a lot of megadonors that there are high stakes to a lot of primaries, and by spending in the primary, where there is typically lower turnout than in say, a statewide general election, they can get a lot of bang for their buck by investing in a primary election,” Beckel added.

    Thiel has indicated that he doesn’t intend to put any more money toward Vance’s bid as he reportedly believes the Ohio candidate is on track to win, and instead will focus his funding on Arizona Republican Blake Masters’ bid to oust Democratic Sen. Mark Kelly in the final weeks leading up to the midterm election.

    Thiel, known for his roles in PayPal
    PYPL,
    -1.69%    ,
    Palantir
    PLTR,
    -0.25%
    and Facebook
    META,
    -3.92%    ,
    has also given a total $15 million to the Masters-aligned PAC, Saving Arizona, with his most recent contribution in July. Both Vance and Masters are venture capitalists, but Masters has worked with Thiel. He served as chief operating officer of Thiel Capital and president of the Thiel Foundation, and he co-authored a book on startups with Thiel in 2014. A representative for Thiel didn’t respond to a request for comment.

    5. Jeff Yass — $33 million

    Options trader Jeff Yass, who founded trading firm Susquehanna International Group, has contributed about $33 million on a federal level this cycle. Yass has given $15 million to the School Freedom Fund, or the equivalent of 97% of the PAC’s total fundraising. The group focuses on the issue of school choice, and its website states that some bureaucrats “hindered the development and education of our youth through school closures, mask mandates, critical race theory, and more.”

    Aside from the School Freedom Fund, Yass’ other biggest contributions are to the conservative Club for Action ($6.5 million), Kentucky Freedom ($5 million), Protect Freedom ($2 million) and Crypto Freedom ($1.9 million). A representative for Yass didn’t respond to a request for comment.

    4. Sam Bankman-Fried — $40 million

    Sam Bankman-Fried, the founder and CEO of FTX, is the main funder behind Protect Our Future PAC, giving it $27 million of the $28 million it raised this cycle. 

    The organization says on its website that it focuses on promoting Democratic candidates championing pandemic preparedness and prevention “so this is the last time in our lifetime, and our children’s lifetimes, that we will face the devastation that has gripped communities across the U.S. since 2020.”

    The group spent more than $10 million supporting Democrat Carrick Flynn’s House bid in Oregon. Flynn lost his primary in May by 18 points despite his massive outside spending advantage. In addition to Flynn, the group has made over $1 million in independent expenditures each supporting Democratic congressional candidates Lucy McBath, a current representative from Georgia; Jasmine Crockett of Texas, Adam Hollier of Michigan, Valerie Foushee of North Carolina and Shontel Brown, a current representative from Ohio.

    Most of the other $10 million Bankman-Fried spent this cycle has gone to the House Majority PAC ($6 million) and the crypto PAC GMI ($2 million).

    While the vast majority of his spending has supported Democratic candidates and causes, Bankman-Fried does not classify himself as an exclusively Democratic donor — for instance he gave $105,000 to the Alabama Conservatives Fund in June and $45,000 to the NRCC in July. 

    He told Politico in August that he is “legitimately worried about doing things that will make people view me as partisan when it’s not how I feel … because I think it both misses what I’m trying to do and makes it harder for me to act constructively.” A representative for the FTX boss didn’t respond to a request for comment.

    3. Richard Uihlein — $49 million

    Richard Uihlein is the founder of the shipping and business supply company Uline, and is a longtime conservative donor. This cycle has seen nearly $50 million in political spending by him, with just over half of it going to Club for Growth Action. Uihlein has also given about $14 million to Restoration PAC, an organization that says it is “dedicated to strengthening the foundations that made America the greatest nation in the world: God, family, education, and community.”

    Uihlein’s next largest contributions are to the conservative Team PAC ($2.5 million) and the Arkansas Patriots Fund ($2.2 million), which earlier this year made ad buys favoring Republican Sen. John Boozman’s primary opponent. A representative for Uihlein didn’t respond to a request for comment.

    2. Ken Griffin — $51 million

    With $51 million in federal-level political spending, Ken Griffin, CEO of hedge fund Citadel, is the second most prolific donor this cycle.

    The biggest beneficiaries are the Republican-aligned Congressional Leadership Fund with $18.5 million in contributions, the Senate Leadership Fund with $10 million and Honor Pennsylvania, a super PAC that backed Republican Dave McCormick’s Senate bid. McCormick lost in the primary to Mehmet Oz by less than a thousand votes. 

    While Griffin spent about $64 million during the last cycle, his $51 million figure this year marks by far the most he has spent during a midterm cycle. During the 2018 cycle, his contributions totaled less than $8 million.

    A spokesperson for Griffin told MarketWatch that Griffin “supports leaders who are committed to protecting the American Dream and pursuing policies that will create a better future for the United States.”

    “The right policies will focus on creating rewarding jobs, prioritizing public safety, and investing in a strong national defense,” his spokesperson said. “Preserving the American Dream will require that every child is well educated, can access great healthcare, and has the opportunity to succeed.”

    1. George Soros — $129 million

    Not one donor comes close to matching the sum that billionaire philanthropist George Soros has contributed this cycle: $129 million. However, much of that money hasn’t actually been put to work this cycle.

    The majority of those on this list have focused their funding on Republican causes, but Soros’ money has gone to Democratic groups — specifically Democracy PAC II, whose $125 million in contributions comprises 99% of its fundraising. The super PAC spent more than $80 million on Democratic groups and candidates during the 2020 election.

    A representative for Soros pointed MarketWatch to a Politico article from January, in which Soros said the $125 million is aimed at supporting pro-democracy “causes and candidates, regardless of political party” who are invested in “strengthening the infrastructure of American democracy: voting rights and civic participation, civil rights and liberties, and the rule of law” and called his contribution a “long-term investment” that will  support political work beyond this year.

    So far this cycle, Democracy PAC has spent very little and holds $113 million in available cash. Contributions the PAC has made this cycle include $5 million to the Senate Majority PAC, $2.5 million to One Georgia and $1 million to both Care in Action and House Majority PAC.

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  • Inspired Healthcare Capital Fully Subscribes Senior Housing DST Offering

    Inspired Healthcare Capital Fully Subscribes Senior Housing DST Offering

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    Inspired Healthcare Capital, a private equity firm specializing in senior housing investments, has fully subscribed Inspired Senior Living of Hamilton DST.

    Press Release
    –

    Jul 7, 2022


    SCOTTSDALE, Ariz., July 7, 2022 (Newswire.com)
    –
    Inspired Healthcare Capital, a private equity firm specializing in senior housing investments, has fully subscribed Inspired Senior Living of Hamilton DST, a Delaware statutory trust offering that owns a 195-unit Class A senior housing property in Hamilton, New Jersey. 

    The DST offering launched in early May 2022 and raised more than $56 million in equity from accredited investors through a network of independent broker-dealers and registered investment advisors. Proceeds from the offering, with leverage, were deployed to purchase the senior housing property for $115.3 million. 

    Located approximately one hour from Philadelphia and New York City, the four-story property was built in 2017 and encompasses independent living, assisted living, and memory care. Situated on 23 acres of land, it consists of studio, companion, and one- and two-bedroom units with a total of 204 beds. The company noted that the property is the only full-continuum community within 15 miles and the only provider of independent living in the greater Hamilton region. 

    “We are very pleased to continue to offer highly sought-after senior housing real estate opportunities to financial advisors and their investors. This will be our fifth fully subscribed DST offering this year with another eight DSTs coming out in the next 45 days,” said Patrick Lam, President of Capital Markets. 

    Inspired Senior Living of Hamilton DST offering was structured to generate investor distributions at an annualized rate of 6.25%, the company said. 

    Inspired Healthcare Capital LLC is an alternative investment sponsor based in Scottsdale, Arizona, that focuses on senior housing real estate with more than $800 million in assets under management. IHC raised approximately $60 million in May 2022 and is on target to raise approximately $600 million in 2022. IHC currently has 50 active selling agreements and relationships with over 28 broker dealers. 

    COVID-19 Despite the difficult lending environment created by COVID-19, Inspired Healthcare Capital was able to secure financing on multiple Senior Housing acquisitions as well as honor and maintain all distributions to investors in 2021, whereas other sponsor firms reduced or suspended distributions. During this time, IHC closed on nine properties worth $163,350,000 and was able to secure financing of $42,730,000.

    For any questions please contact Investor Services at 855-298-2988 or visit our website at IHCFunds.com

    Source: Inspired Healthcare Capital

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