Wednesday, January 31, 2024

Orioles New PEU Owners

The owners of the Baltimore Orioles agreed to sell the team to billionaires David Rubenstein and Mike Arougheti.  Rubenstein co-founded The Carlyle Group and family office Declaration Partners while Arougheti started Ares Management.  Both men are private equity underwriters (PEU).

Rubenstein, who is from Baltimore, will become the club's "control person" with Major League Baseball -- a fancy way of saying the franchise's main decision maker.
Let's hope Rubenstein fares better than fellow PEU David Tepper, owner of the Carolina Panthers (NFL).  Tepper sought public subsidies but showed what he thinks of the common folk when he pitched his drink on a Jacksonville Jaguars fan from his safe skybox position.

Rubenstein is known more for his tennis game.  I can't wait for him to throw the first pitch.  Seventy four year old man throws seventy four mile per hour fastball?  Doubtful, but he has an incredible sales pitch.  Imagine the possibilities:
  • Rent a Declaration Partners owned apartment and get free Orioles tickets. 
  • Buy a ten pack of Vault COVID tests and enter a drawing to sit with Rubenstein in his skybox.
  • Buy Paxos Gold cryptocurrency and get a free Orioles NFT showing you with Cal Ripken

If you buy your Orioles tickets on StubHub anchor investor Rubenstein gets a cut through Declaration.  

The commercialization cross selling opportunities are incredible.

Update 2-4-24:  CNN ran a story on why tickets to games are unaffordable for families.

Ticketmaster and StubHub use sophisticated dynamic pricing algorithms that change minute-by-minute based on demand. Teams such as the New York Yankees have taken a stake in ticket resale platforms. These clubs see an opportunity to make more money by taking a cut of the secondary ticket sale between buyers and sellers.

Billionaire team owners rely on public funds for their new stadiums/arenas:

“The new generation of stadiums are designed to maximize the number of really good seats at the expense of large numbers of cheap seats,” Matheson said. “You design arenas for a super-premium experience. There’s no sense in trying to make arenas that have large numbers of cheap seats.”

The public pays but doesn't garner the benefits.  It's a familiar PEU refrain....

CBS provided more names in the ownership group headed by Rubenstein.  It's a club deal for a baseball club.  In addition to Rubenstein and Arougheti new owners include:

Mitchell Goldstein and Michael Smith, Co-Heads of the Ares Credit Group; Orioles' legend Cal Ripken Jr.; Kurt Schmoke, former Baltimore Mayor; Grant Hill, NBA Hall of Famer; Mike Bloomberg, entrepreneur and philanthropist; Michele Kang, business leader; and other investors.

Update 2-12-24:  CNN reported:

Professional sports teams are becoming real estate empires, building luxury apartments and shopping malls.

Billionaire owners have built dozens of new stadiums and arenas, often with hundreds of millions of dollars in taxpayer funding. State and local governments spent $33 billion in public funds to build stadiums in North America between 1970 and 2020, with the median public contribution covering 73% of costs, a study published last year found. As part of teams’ agreements with cities and states, they have been handed the rights to transform the land around these ballparks into offices, apartment buildings, hotels and shopping malls.

David Rubenstein cut his PEU teeth selling Alaskan Native tax losses to corporations.  Surely he can take advantage of a few poor people who live around a ballpark by making the area more billionaire friendly. 

Carlyle did a joint venture with Atlantic Realty Partners in 2014 for apartments close to the new Atlanta Braves stadium.

Update 3-10-24:  Yardbarker reported:

...the MLB Ownership Committee recommended approval of the sale to David Rubenstein.
Next step is full vote of MLB club owners.

Update 3-12-24:  Birdwatcher predicts Rubenstein will fork over big bucks to retain and recruit talent.  Rubenstein laid out a World Series title as the goal.  PEU peer David Tepper set a similar goal when he purchased his NFL team, the Carolina Panthers:
"Winning is the most important thing both on the field and in the community, and I am committed to winning a Super Bowl championship together.
As for the on-the-field product, Tepper said there are no plans to make changes to a team that has made the playoffs in four of the past five seasons, including the Super Bowl in 2015, under coach Ron Rivera.
Update 3-29-24:  The day after a monster container ship destroyed Baltimore's Francis Scott Key Bridge, killing six people, Major League Baseball owners unanimously approved the sale of the Orioles to PEU David Rubenstein. Rubenstein takes over with naming rights to Camden Yards on the agenda.  FTX?  Theranos?  Maersk?  

How about Carlyle?  That is if private equity really is mankind's highest calling...

Monday, January 29, 2024

Rubenstein's Family Office Competes with Carlyle

Carlyle Group co-founder David Rubenstein started family office, Declaration Partners.  He later opened it up to other wealthy individuals.  

Declaration is raising its second real estate fund, according to Fortune.  

This fund/conflict of interest will focus on multifamily housing and industrial properties.  

Declaration, which was created in 2017 with an anchor investment from Rubenstein’s family office, initially relied on the billionaire’s money with executives at the firm investing alongside him. It later raised capital from other wealthy individuals on a deal-by-deal basis before deciding to launch a fund.
Rubenstein was Carlyle's primary fundraiser for decades and currently Co-Chairman of Carlyle's Board of Directors.  

Mr. Rubenstein is Co-Founder and Co-Chairman of the Board.
What do you do when your competition for both fundraising and potential real estate investments is your board chair's family office?  

Declaring conflicts of interest is so passé.  Actually taking action to avoid them is non-existent.

David Rubenstein signed The Giving Pledge in 2010.  Signers commit to giving away more than half of their fortune.  In 2012 Rubenstein had an estimated net worth of $1.9 billion.  

The Fortune story noted:

Rubenstein, 74, a former White House staffer who became a leveraged-buyout legend, built Carlyle into one of the world’s largest managers of alternative assets. He has a net worth of about $5 billion, according to the Bloomberg Billionaires Index, and also hosts a Bloomberg Television show.
In twelve years Rubenstein's net worth rose 163%.   What role did PEU preferred taxation play in his wealth accumulation?  Mr. Rubenstein tends to avoid the topic as it is not serious money.

Update:  Chairman Rubenstein is stepping down from the Kennedy Center board but will head up the new Kennedy Center Foundation.  His bio for the article failed to mention his conflict of interest with Declaration Partners.  His association with Carlyle is front and center.

Friday, January 26, 2024

BrightSpring IPO Dulls Market

Brightspring Health Services' IPO priced below the desired range, coming in at $13 per share vs. $15-18.  Sponsor KKR hoped to garner up to $960 million but settled for $633 million.

Brightspring is yet to open this morning on the NASDAQ exchange.

Carlyle Group co-founder David Rubenstein said recently in Davos, Switzerland:

“Now the recession fears are gone, interest rates are coming down almost certainly very soon, so I think you’ll see a lot more M&A activity and a lot more private equity activity.”
The Bloomberg story added:

A pickup would be especially welcome in the private equity business, where sponsors and investors have found themselves stuck in older investments because they couldn’t find buyers or acceptable prices to help them exit.
Fast Company quoted Reuters with:

Although it’s only January, the fact that one of the first high-profile IPOs of the year saw its shares priced below their original range could signal that investors aren’t as excited about the IPO market as they were in earlier years.
It could also signal investors looked at the S-1 and its many amendments.  Brightspring is an assemblage of a mish mash of healthcare companies, ResCare, PharMerica, Abode Hospice and others.

We own or have rights to use various trademarks, tradenames, service marks, and copyrights, which are protected under applicable intellectual property laws, including, for example: BrightSpring, PharMerica, ResCare, All Ways Caring, Amerita, Onco360, Chem Rx, Abode, Adoration, Springhealth, Pharmacy Alternatives, and Rehab Without Walls.
BrightSpring purchased hospice provider Abode Healthcare in April 2021 for $750 million.   Goodwill comprised 95% of the purchase price ($715 million).  Goodwill can quickly evaporate under conditions of financial stress.

Investors may remember the bath they've taken on Aveanna Healthcare, a similar mish mash of healthcare companies (with less total revenue than BrightSpring).  Aveanna's IPO priced at $12 per share in April 2021.  It now trades at $2.40 a share.  IPO investors have an 80% loss.

Potential shareholders may have noticed KKR Capital Markets is the first underwriter listed under Goldman Sachs (the lead underwriter) and considered that a conflict of interest.  

KKR Capital Markets LLC, an affiliate of KKR Stockholder and an underwriter in this offering, acted as an arranger and bookrunner for various financing transactions under the First Lien Facilities and the Second Lien Facility, and received underwriter and transaction fees totaling approximately $5.8 million and $2.5 million for the year ended December 31, 2021 and 2020, respectively
How many ways has KKR made money off this?  Management fees to sponsor totaled $17.5 million since KKR bought BrightSpring in March 2019.  

Under related party transactions the S-1 stated:

KKR has ownership interests in a broad range of portfolio companies, and we may enter into commercial transactions for goods or services in the ordinary course of business with these companies. We do not believe such transactions are material to our business.
Encouraging affiliates to buy goods/services from other affiliates is a time honored PEU tradition.

Investors may remember their experience with Gentiva or Kindred Healthcare, both chronic underperformers.  BrightSpring's Jon Rousseau comes from that lineage.

Rousseau moved from Kindred to ResCare in 2016, the same year Kindred reached a $125 million settlement with the Justice Department for fraudulent rehab billing.

They may recognize Mike McMaude (President of the Home Health Division) as the former President of the Home Health division of Amedisys.  

Investors could recall Amedisys settlement with the Justice Department for fraudulent billing in 2014.

Amedisys Inc. and its affiliates (Amedisys) have agreed to pay $150 million to the federal government to resolve allegations that they violated the False Claims Act by submitting false home healthcare billings to the Medicare program.

The settlement announced today resolves allegations that, between 2008 and 2010, certain Amedisys offices improperly billed Medicare for ineligible patients and services. Amedisys allegedly billed Medicare for nursing and therapy services that were medically unnecessary or provided to patients who were not homebound, and otherwise misrepresented patients’ conditions to increase its Medicare payments. These billing violations were the alleged result of management pressure on nurses and therapists to provide care based on the financial benefits to Amedisys, rather than the needs of patients.

McMaude left Amedisys prior to this period according to his Grant Capital "advisor bio":

Prior to Abode, Mike and the Managing Partner of Grant Avenue Capital partnered together on Voyager HospiceCare, where Mike was the CEO from 2007 until its successful sale to Harden Healthcare in 2010. Following the sale, Mike continued to serve as COO until 2012.
McMaude was the man in charge for this $6.1 million fraudulent Voyager HospiceCare billing settlement with the Justice Department:

(The whistleblower) revealed that the hospice company was submitting false claims over a course of four years to Medicare for beneficiaries that did not have a terminal prognosis of six months or less. Later, the government found out that there were various practices that the company was involved in resulting in the submission of false claims such as implementation of an inadequate compliance program, delaying discharges of patients determined not to have a six month or less prognosis and instructions to staff to document patient conditions in a misleading manner. offered:
Investors pushed back on price due to their concerns about the company's valuation. its debt load and KKR's role.

I would add investors should be very concerned about management ethics, or lack thereof, especially under the greedy hand of KKR.  There's alot more stock to sell.

Update:  BTSG last traded at $11.35, down $1.65 or over 12% with ten minutes left in the session.  Reason for celebration?

BTSG closed at $11.00, down $2 for the day, a decrease of over 15%.   Is BTSG a pothole on the smooth path of PEU montetization?  Will it impact future IPOs or affiliate flips?

Thursday, January 25, 2024

Carlyle Here to Help

The Carlyle Group announced a two part deal involving student loans.  Carlyle bought $415 million in packaged student loans from Truist Bank and took an equity stake in student loan provider Monogram.  The press release stated:
"Carlyle is excited to partner with Monogram to deliver attractive and competitive financing solutions to the private student loan market." 
Monogram will partner with Carlyle to originate, acquire, and manage high-quality third-party private student loan assets.
Parents of student loans borrowers should be comforted by Carlyle's breadth of corporate offerings. Carlyle might provide their college child student housing.

Once their child graduates from college they can begin working for a private equity owned company that constrains wages and offers reduced benefits.  Someone has to pay for those increased interest expenses and it's usually employees.  

Should their child become stressed trying to manage everyday bills and pay back their student loan, Carlyle has good news.  Affiliate Acentra Health recently added EAP Consultants:
Acentra Health, a leading provider of clinical services and technology solutions to government healthcare agencies, announced today that it has acquired EAP Consultants, LLC (“Espyr”), a leader in workplace mental health and well-being programs. 
The companies will provide EAP solutions and services that support government agencies and commercial organizations, serving employees, students, and their families. Services include clinical intake and support; work-life services, such as legal, financial, child and elder care support; critical incident debriefings; and counseling services available by appointment, on-demand, in-person, virtually, and by phone and text.
Mental health concerns can manifest physically and Carlyle can help there as well.
The current market for third-party healthcare navigation and advocacy services is over $1 billion today and we believe that strong industry tailwinds support the prospect of robust multi-year growth of over 25% in the market, particularly given the $300 billion problem of unnecessary U.S. healthcare spending from uncoordinated, unnecessary, and avoidable care.
It's clear Carlyle cares deeply about your student and wants to make money off them over their lifetime.  So what if that results in stress, causes mental health issues, even physical problems...

Update:  WSJ ran a story on nearly 60% of parents helping their adult kids financially.  How much of that support goes to pay PEU affiliates, directly or indirectly?

Wednesday, January 24, 2024

Infrastructure Crapification

Pennsylvania towns and communities have the option of selling their water and sewer utilities to private companies, courtesy of a relatively new state law.  Didn't state legislators research The Carlyle Group's history with public infrastructure?  It includes:

  • Bribing municipal officials for a Synagro Technologies city sludge contract in Detroit, Michigan.
  • Reneging on its promise to sell Mountain Water to the City of Missoula, Montana
  • Abandoning its lead developer role for the Harbor Island expansion at the Port of Corpus Christi, Texas

There is also the case of Chicago public parking.  Privatization raised prices such that parking in Chicago became the most expensive in the U.S.   WTTW reported:
The courts have called the deal “foolish, short-sighted or worse,” but, it turns out, it’s not illegal to strike a bad deal. With some 60 years left on its lease, Chicago Park Meters LLC has already made back its initial investment — and then some! An impressive return on investment for them, and a tough break for Chicagoans.
Towamencin Township is finding out about bad deals and unreliable bidders.  
In May 2022 supervisors voted four-to-one to sell the township’s sewer plant and system to Florida-based NextEra for an agreed purchase price of $115.3 million.
Carlyle's latest public infrastructure joint venture VICO Partners bid on the sewage system but came in a distant fourth.

Within a year winner NextEra reneged on the deal:
Recently, NextEra made the township aware of its business decision to redirect efforts away from water and wastewater acquisitions and focus more on renewable energy projects. This decision, which was mainly due to the passage of the Inflation Reduction Act
Not only did NextEra abandon their $115 million deal, they played hardball in doing so:
NextEra told the township that if it did not agree to the deal, then NextEra would close the sale and then flip the system to PA American Water anyway. 
Supervisor Rich Marino said NextEra would face a $10 million penalty if it did not complete the deal. “They expressed in no uncertain terms they were not going to be on the hook for $10 million,” he said..
PA American will pay $11 million less than NextEra's winning bid.  It's not clear which items township supervisors plan to remove from the privatization candy list.

Act Twelve "allows the doubling and tripling of rates" paid by citizens.  It also exposes communities to less than ethical private corporations whose long term commitment is to only one thing, greed.

Our national government, Congress and the White House, have long been intertwined with private equity underwriters (PEU).  

Politicians Red and Blue love PEU and increasingly, more are one.  Local elected officials should not emulate this unseemly practice.

Tuesday, January 23, 2024

The Hands that Rule

Image is everything, especially for the financial elite.  Kurt Anderson wrote in The Atlantic in his take down of Bill Ackman and his attempts to run the world like a marionette:

(Henry) Kravis’s appearance as a character in this particular role is ironic, and in a work of fiction would prompt a quick flashback—in which, irony upon irony, I turn up as a minor character. I knew Henry Kravis, not well, nearly 30 years ago, when KKR controlled the media company that owned New York magazine. In the mid-’90s I was New York’s editor in chief. One day Kravis invited me for breakfast in his 26-room Park Avenue triplex to tell me that the magazine’s coverage of Wall Street displeased him and his friends and associates, and that I should end it. I didn’t, and six months later I was fired. In other words, I had a significant but not good relationship with him. 

Ackman approached Henry Kravis and KKR with his concerns regarding Business Insider's applying the Ackman plagiarism standard to his wife.  KKR's affiliate Axel Springer owns and operates Business Insider.  

In 2011 financial reporters knew to tread lightly around the greed and leverage boys.

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

Storied newspapers continue imploding, leaving fewer and fewer journalists to uncover the kajillion ways private equity underwriters (PEU) tilt the world, already obscenely oriented to their advantage. 

CNN Business reported on the unraveling at the Los Angeles Times

“We have a billionaire who doesn’t understand media and thinks he can cut his way to success,” another staffer told me, likening the drama playing out in the editorial leadership to the reality television show “Survivor.”

My wise friend wrote:

I think the billionaire class has finally arrived at what it has always wanted: Controlling the Fourth Estate.  Poor Upton Sinclair.   He always pushed for an independent bank to fund news organizations throughout the land.  But he was a socialist, so I guess that was bad and this is good (sarcasm).
Enough Americans have worked for a PEU owned affiliate to know the carnage involved in freeing up funds previously used for staff in order to service sponsor management fees, grossly higher interest expenses and PEU cash siphoning.  Wealthy founders and investors come first.  

I expect Henry Kravis will slowly turn Axel Springer and Business Insider to his PEU will.  It may not happen within Ackman's tantrum time frame, but it should happen just the same.  

Update 1-24-24:  Institutional Investor has a piece on an economist who long ago called out the PEU boys for fudging returns.  It states:

conferences have canceled his speaking engagements at the request of well-heeled sponsors
The economist uses KKR as an example of spurious IRR claims:

“This year, I put a LinkedIn post congratulating KKR for the 25th year in a row having a 26.3 percent return,” quips Phalippou, saying the number is that high because KKR’s early investments were highly profitable. “But logically, it makes no sense. Most people would understand that it means that if I had given $1 to KKR when they started in 1976, every year I would have accumulated 26 percent,” he explains. “That would mean a $1 million investment in 1980 would be worth about $100 billion. It’s not the case, by miles.”

Monday, January 22, 2024

PEUs Have Something to Hide

The Lever
reported on lawmaker's latest preferential treatment offered to the greed and leverage boys:

As of Jan. 1, small businesses must report who owns and controls the company to financial regulators or face stiff penalties. The disclosure is required under a new anti-money laundering law designed to curb tax fraud and terrorism financing

But while mom-and-pop cafes and hardware store owners are now busy filling out the disclosure paperwork, many investment vehicles flagged by law enforcement agencies are exempted from those same disclosure rules after Wall Street firms spent millions lobbying on the matter. 

Early versions of what became the Corporate Transparency Act did not include the special carve-out. But the final legislation had a line exempting pooled investment vehicles. That means venture capital funds, hedge funds and private equity funds are not required to report their ownership information, even though the FBI has said such opaque entities are among those used in criminal money laundering.The government’s new rules requiring companies to disclose their “beneficial owners” — people who have substantial, although sometimes obscured, control over the business — are aimed at tracking bad actors who use shell companies to shield their identities and unlawful gains.

The Justice Department settled with Vista Equity's Robert Smith for using shell to companies to shield his identity and hide $200 million in his commission of tax fraud.

Smith admits that he knowingly and intentionally used the Excelsior Trust and Flash Holdings and their associated foreign bank accounts in the British Virgin Islands and Switzerland to conceal from the IRS, and the U.S. Treasury Department, income earned and distributed to Flash Holdings from private equity funds. As a result of the overall scheme, Smith willfully did not report to the IRS over $200 million of partnership income. Smith also failed to report his ownership of his foreign bank accounts in BVI and Switzerland as required by law.

Over the years, Smith used millions of this unreported income to acquire and make improvements to real estate used for his personal benefit. Smith admits that, in 2005, he used approximately $2.5 million in untaxed funds to purchase and renovate a vacation home in Sonoma, California. In 2010, Smith again used untaxed funds to purchase two ski properties and a piece of commercial property in France. In 2011 and 2012, Smith used approximately $13 million of untaxed funds to build and make improvement to a residence in Colorado and to fund charitable activities at the property.

The American Investment Council (AIC), the private equity lobby, bragged that it “worked with Members of Congress and their staffs to help craft these exemptions.”   That is the language of penetration.  It turned the Corporate Transparency Act into the PEU Opacity Boondoggle.

Their logic for a PEU exemption?  Criminals don't think long term.  Smith's hidden private equity income went toward vacation homes, ski properties, commercial properties and residence improvements, all long term uses.

Is the AIC protecting legendary PEU founders like Robert Smith and their limited partners?  If you have nothing to hide, you have nothing to hide.....

The AIC was once called the Private Equity Growth Capital Council.  It didn't roll off the tongue very well so I suggested they use Private Equity Capital Knowledge Executed Responsibly (PECKER).  They never took me up on that.

Update 1-24-24:  Billionaire Joe Lewis admitted to sharing insider information with friends and employees and pled guilty to three counts of securities fraud.  Lewis said he knew what he was doing was wrong and feels embarrassed.

Friday, January 19, 2024

PEU Fanboy Tony Robbins

Tony Robbins can work magic with crowds, sell a book and separate people from their hard earned money.  Does he have the chops to save private equity underwriters (PEU) after two scathing books?  That is Tony's current task.

Tony Robbins returns with the final book in his financial freedom trilogy by unveiling the power of alternative investments. Robbins, and renowned investor Christopher Zook, takes you on a journey to interview a dozen of the world’s most successful investors in private equity, private credit, private real estate, and venture capital. They share their favorite strategies and insights in this practical guidebook. 

For decades, trillions of dollars in “smart money” has been making outsized returns using private equity, private credit, venture capital and other alternative investments. Robbins teams up with renowned private equity investor Christopher Zook, founder of CAZ Investments, to sit down with more than a dozen of the world’s greatest alternative investment managers, collectively managing over half a trillion dollars on behalf of investors. Names like… 

Robert F. Smith – Founder of Vista Equity Partners, Smith is the considered the most successful enterprise software investor of all time. 

Vinod Khosla – Founder of Khosla Ventures, Vinod Khosla is considered a legend in Venture Capital. He is famous for turning a $4 million investment into a $7 billion windfall for his investors.

Robbins may not have used his best judgement in picking Smith given his 2020 settlement with the Department of Justice.

Robert F. Smith, the Chairman and Chief Executive Officer of a San Francisco based private equity company, entered into a Non-Prosecution Agreement (the agreement) with the Department of Justice, for his involvement from 2000 through 2015 in an illegal scheme to conceal income and evade millions in taxes by using an offshore trust structure and offshore bank accounts.

As a result of the overall scheme, Smith willfully did not report to the IRS over $200 million of partnership income. 

Offshore, onshore,,,  Vinod Khosla is hated for his exclusion of the public from a California beach.   

Why would Tony Robbins write a fanboy book about the greed and leverage boys, given their propensity for not sharing?  Because Tony is one.  Flashback to 1999.

Dotcom era magic transformed GHS, a sleepy healthcare technology company, The 1999 proxy statement stated:

Following the Spin-off, GHS's sole business will involve the continued development of an online network to focus on personal and professional improvement. In May 1999, GHS consummated the acquisition of, LLC, a company founded by Anthony J. Robbins that is engaged in the development of a web site for personal and professional improvement., LLC has an agreement with Anthony J. Robbins and his operating company, Robbins Research International Inc. that makes GHS the exclusive online source for Robbins' training, courses, content and publications. In addition, in May 1999, GHS completed its acquisition of, the online arm of The Learning Annex and has the option to purchase The Learning Annex's traditional offline business. As a result of this acquisition, GHS has exclusive online access to educational content and materials covering a wide range of topics. GHS's ultimate objective is to make its online network the leader in online personal and professional improvement content, services, communities, and interactive sales.
GHS became dreamlife, inc. in late 1999.  NYT reported in early 2000:

Mr. Robbins, who created Dreamlife last spring and whose stake is now worth $370 million, specializes in helping the successful become more successful.

Tony picked the right group.  Nobody's done better than the PEU boys the last decade and a half.

Robbins dropped from Chairman of the Dreamlife board to Vice Chairman in August 2001.  SEC filings changed from dreamlife, inc. to EOS International, Inc.

The company's 2002 Annual Report noted a financial red flag:

On November 6, 2001, KPMG LLP declined to stand for reelection as the principal accountants for the Company. 

By Q4 2003 the company was hemorrhaging. The 10-Q stated:

Due to lack of working capital at Eos and possible non-compliance with bank covenants, there is uncertainty as to whether Eos can continue as a going concern.

The 2003 proxy statement referred to a PEU board position:

In connection with the $7.5 million private equity offering effected by the Company on January 14, 2003, the Company has agreed to use commercially reasonable efforts to cause the election to the Board of Directors of a person designated by Draupnir, LLC, an investor in the offering.
The Robbins founded firm received private equity funding in an attempt to save the distressed dotcom

At December 31, 2003, Eos, on a stand alone basis, had negative working capital of $524,000, including $262,000 of restricted cash and approximately $74,000 of unrestricted cash, offset by accounts payable of $345,000 and other accrued liabilities of $738,000, consisting of related party balances of $367,000 for management fees, and estimated costs of $155,000 for the offer and sale of its common stock incurred in the quarter ended December 31, 2003.

 Dreamlife/EOS suffered a nightmarish death.  It's last SEC filing occurred on 10-14-2004.

I'm sure this is all chronicled in Robbins' new PEU book.

Update 1-21-24:  Vista Equity's Robert Smith talked about investing in AI in Davos.  Who plans to use AI for tax cheating avoidance?

Wednesday, January 17, 2024

Davos 2024: Legendary PEU Performances

The World Economic Forum is the annual meeting of global tamperers where private equity underwriters (PEU) land en masse in private jets.  The PEU boys have long attended to push their interests (greed), influence governmental figures in attendance and "do deals."  

CNBC interviewed two PEU legends, David Rubenstein (The Carlyle Group) and Steven Schwarzman (Blackstone).  

CNBC's Joe Kernan asked Rubenstein about private equity's preferred "carried interest" taxation at the end of the interview.  Rubenstein said he does not mention it when meeting with U.S. Presidents.  Nobody important talks about it.

Flashback to 2011 when Rubenstein said taxing PEU profits as income wouldn't amount to "serious money."  Over the last thirteen years I imagine Rubenstein and Schwarzman made serious money thanks to their ongoing "carried interest" tax break (which is highly unpopular with the public).

Kernan's exchange with Schwarzman focused on attractive pricing for European real estate.  Reporter Joe missed the #1 shared story on Bloomberg.

My wise friend steered me to these stories and offered comment:

Meanwhile Steve Schwarzman is in Davos talking about real estate deal values in Europe and how he has so much money to pursue great deals.. Yes Steve when you can walk away from your obligations there's always money to do new deals.  What is Davos about this year? TRUST, how could anyone trust Steve?

Think of his hypocrisy as he speaks. It's mind blowing the Fed made him, the Fed empowered him, and now he calls the shots... he gets to walk away from obligations that no individual could do and he's presented with great opportunities ......what a meritocracy if people only understood 

On Rubenstein he offered:

At the same time David Rubenstein is on the air talking about he never speaks to the president about carried interest and how carried interest is not a big revenue deal for the US government. And O NO Dave it is a big deal.  That's why we created the CAYMAN Islands.

And Carlyle has hundreds of affiliates based in The Caymans.  

Rubenstein and Schwarzman are in Davos yet again to craft the global system to their needs and desires.  The sad thing is elected officials have catered to this group.  The greed and leverage boys co opted government long ago.  They work tirelessly behind the scenes for their greater share.

It's just another day at Davos.  Beware the PEU private jet swarm.

Update 1-19-24:  Seeking Alpha reported:

Citi analyst Christopher Allen downgraded Blackstone (NYSE:BX) and Carlyle Group (NASDAQ:CG) stocks to Neutral from Buy on Friday on the view that current risk/rewards screen more balanced after taking into account last year's rallies. 

Indeed, BX closed out 2023 72% higher, while CG posted a 35.7% climb, as seen in this chart. The S&P 500, by comparison, jumped 24.7%.

The Citi analyst favors KKR of all the publicly traded PEUs.  Barron's reported:

In a Wednesday interview at the World Economic Forum in Davos, Stephen Schwarzman said BREIT weathered an environment of higher interest rates by avoiding areas of “real stress” in the real estate market.

He didn't mention pretend and extend.  A different report noted:

Blackstone’s Steve Schwarzman to a closed-door meeting of big investors and sovereign funds, where complaints about government policies — or lack thereof — ran thick: “Stop being professional victims. You can change things.”

They are the policy making billionaires.... shaping the world in their favor.

Update 1-20-24:  Oxfam chronicled a decade of failure by the World Economic Forum to impact income inequality.  Oxfam's interim director highlighted the impact of billionaires on taxation and global systems that have increased income inequality.

The WEF made it harder to search their 2024 program for private equity speakers/programs.  The WEF is clearly a fan of the PEU boys.

Davos has ten years of backsliding on income inequality...why does Oxfam continue to attend?  Making deals and influencing government representatives are why David Rubenstein and Stephen Schwarzman show up year after year.

In 2017 Rudy Haverstein posted the image below on Twitter (now X):

Update 1-21-24:  The Guardian reported on an effort by the super-wealthy at Davos to increase taxes on this elite class of society for the many extra benefits they receive.  They waited in long lines to exclusive Davos events, like the general public at Disney World.  It's a small comfort, but a comfort just the same.

Tuesday, January 16, 2024

Ackman Chokes on MLK Quote

Hedge fund giant Bill Ackman targeted the legacy of civil rights legend Martin Luther King.  He did so weeks after downing Harvard University President Claudine Gay and placing a bullseye on Business Insider and MIT faculty for violating an unwritten rule.   

BI applied Ackman's plagiarism standard to Mrs. Ackman and she came up wanting.  The Mr. blamed MIT faculty and set up a plagiarism howitzer to take the turncoats down.  Fortunately, the Mrs. did not have to resign from her marriage.

Ackman and fellow billionaires crafted a world where they have numerous advantages, courtesy of elected officials. Politicians Red and Blue repeatedly ignored public will in keeping preferred "carried interest" taxation for the uber-rich class (hedge funds and private equity).

Ackman recently posted his support for Blue Team Presidential hopeful Dean Phillips in a lengthy X post that compares the U.S. Presidency to a corporate CEO.  He wrote:

Dean has meaningful skin in the game as he has invested $5 million of his own capital in his run. This is how democracy happens.  

I didn't realize having millions was a requirement of representative government.

The Daily Beast reported:

It’s difficult to get a full and clear understanding of (Dean) Phillips’ financial picture, but real estate records provide a glimpse into his lifestyle and other personal financial choices. Despite his advocacy for accountability and reform, those records reflect an innate duality—an inescapable reality that Phillips manages a rarefied financial life, with complexities and curiosities that defy transparency and create an opacity of their own.

Phillips serves the second-wealthiest district in Minnesota (which has the third-largest racial wealth gap in the country).  Ackman is giving a Phillips dedicated PAC $1 million to kick start his campaign and is working hard to elevate Phillips public profile.

Tesla CEO Elon Musk joined Ackman and Phillips in the conversation on Ex-Twitter.

Musk threatened Tesla's board with taking artificial intelligence outside the company unless he received a much greater share of the company's stock.  No conflict of interest there.

These guys blaze right through conflicts of interest as if they don't exist.  Many run multiple large scale enterprises.  Isn't the CEO position considered a full time job?    

Ackman's take on Rev. Martin Luther King's famous speech is not supported by King's daughter Bernice. 

Bernice King, Martin Luther King Jr.’s daughter, has previously refuted this (Ackman's) interpretation. She underscores that her father’s dream was not about neglecting racism but annihilating it. DEI efforts, according to her, are in alignment with her father’s vision, challenging Ackman’s stance that DEI practices contradict King’s teachings.
Stuffing too much white bread into one's piehole can be difficult to swallow. I'm afraid I'll need a lot more water to wash down what Dean, Musk and Ackman are selling.  

How about a Teddy Roosevelt like character for President?  We need someone from within the class that knows the games they play and has the courage to dismantle the gross excesses of PEU society.

Update 1-17-24:  Experts panned Ackman's claims about Dr. King's meaning. 

Update 1-19-24:  Slate reported:

Now that Vivek Ramaswamy is out of the presidential race, billionaire tech bros are suddenly lining up behind a new candidate—Dean Phillips, who’s making a long-shot bid to challenge Biden for the Democratic nomination.

Update 1-21-24:  Ackman continued throwing his weight around (leverage) on behalf of Dean Phillips.  Harvard is trying hard to reestablish VC and PEU ties.

Update 1-22-24:  Larry Summers joined Bill Ackman in raking Harvard over the antisemitism coals.  

Update 1-23-24:  The Atlantic characterized Ackman as a classic fictional villain.  Author Kurt Anderson once worked for a KKR owned magazine and experienced the same "we don't like what you are writing" arm twisting from Henry Kravis.  The PEU boys are consistent in their image optimization insistence.

Update 1-25-24:  Four TED fellows resigned after the organization booked Bill Ackman for an upcoming conference.  One said:

“The whole setup of the conferences just has no capacity to really interrogate ideas. It’s a celebration of the individual. It’s not a space for free debate at all.”
That person described Elon Musk's talk at a previous TED conference as a "puff piece."

Tuesday, January 9, 2024

Carlyle Jacks Up Another Infrastructure Investment

The Carlyle Group is suing to stop the sale of London's Southend Airport.

Carlyle Group has accused the regional airport of breaching an agreement.

Carlyle's 2021 investment in London's Southend Airport was characterized as:

“The combination of the proven operational capability of the LSA management along with the airport development experience of CGI (Carlyle Global Infrastructure) and its financial strength will provide a strong platform as we rebuild our commercial relationships with our airline and other partners into the recovery.”

Carlyle provided a £125mln loan facility convertible into 30% of shares in London Southend Airport Company Ltd.

"CGI represents a true strategic development partner that will enable us to realise the full potential of LSA. Carlyle is a global investment firm with US$260bn under management,” said David Shearer, executive chairman at Esken.

This is the latest infrastructure deal Carlyle has blown up.  London's Southend Airport follows Carlyle's abandonment of its lead development role for the Harbor Island expansion at the Port of Corpus Christie.   

Carlyle is seeking early repayment of the London Southend Airport loan (before the current deadline of 2028).  

The Brintons' family recalls how Carlyle used such a tactic to take over their company.  

“It was taken from under our feet without our consent.”

Private credit is the rage but borrower should be aware that your PEU creditor may take your firm via a debt cramdown.  Financial barbarians don't always come through the front door.

Carlyle CEO Harvey Schwartz said in October:

"I think the year ahead will certainly present incredible alpha opportunities. But generally speaking I think we’ll have more of a headwind than a tailwind."
The amount owed to Carlyle stands at £193.7m.  In two and a half years the loan grew by £68.7m?  That's a significant headwind.

Update 2-21-24:  Creditors Carlyle Group and Cyrus look likely to take over Southend Airport.  The legal battle may have a few more chess moves.  Picking up a British asset at a knockdown price reminds me of Brintons'.

Update 3-7-24:  The people at Southend are trying to understand what happened as Carlyle's debt cramdown is executed.  

Monday, January 8, 2024

Pentagon Chief Power Unto Himself

Before becoming President Biden's Pentagon Chief Lloyd Austin was a private equity underwriter (PEU) with Pine Island Capital in Washington, D.C.  Austin failed to keep the chain of command informed of his recent incapacitation.  The Guardian reported:

The White House has said that the US defense secretary, Lloyd Austin, will stay in his job but noted his “lack of transparency” and called for a review of procedures after he spent three days in hospital without informing the president.

The PEU boys aren't known for their transparency.  They purposefully like working in the dark, behind the scenes.  Did Lloyd Austin's PEU arrogance show in his failure to inform?   

The greed and leverage boys have their own set of rules.  It's time Washington officials took a surgical scalpel to their preferred "carried interest" taxation.  That dodge has gone on for over a decade too long.

Pentagon Chief Lloyd Austin gets a free reset, something his PEU peers are trying to achieve.  It's a shame those in charge are so loose with the rules, but that's a clue as to who is actually making them.

Politicians Red and Blue love PEU and increasingly, more are one.

Sunday, January 7, 2024

Business Insider Ticks Off Billionaire PEU


Business Insider’s parent company is divided over the publication’s recent article about plagiarism allegations made against the wife of businessman Bill Ackman.

Ackman led the effort to oust now-former Harvard president Claudine Gay over plagiarism accusations, amid campus controversies around Israel and Gaza. Last week, Business Insider reported that his wife, Neri Oxman, plagiarized portions of her dissertation.

The company recently added the ‘Business’ back to its name,in a move intended to return the brand to its roots. Top execs at Axel Springer seem to be worried that reports like those on Oxman last week could damage BI’s reputation in the eyes of some potential business readers. 

The greed and leverage boys dislike news organizations and reporters who ask challenging questions, much less those with the temerity to hold up a mirror to financial giants. 

Flash back to July 2011:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

This lament came from a former major business reporter, much bigger than Business Insider

A wise friend warned me after I closed a "PEUs Rule" piece with financial giants expanding their influence into the realm of university Presidents.  

PEU chiefs have more riches and power every day.  We've had decades to see how they use it.

Ironically, I used a story from Insider, now Business Insider again.  Ackman wants to remake the Harvard Presidency in his image.

Mr. Ackman was much more charitable to his wife's improper citation than he was to Harvard President Gay.  It's a good thing Mrs. Ackman did not have to resign from her marriage.

Update 1-8-24:  Daily Beast called it a "C-Suite War" over the BI plagiarism story.  The C's look out for one another.  CNN wrote of Ackman's war with Business Insider and MIT.  Reason wrote about Ackman's fury.

Update 1-9-24:  CNN chronicled Ackman's targeting university leaders and now professors at MIT.  Ackman said Business Insider breached "the code" of conduct, that his family should be off-limits from media scrutiny.

Friday, January 5, 2024

PEU Extend and Pretend in 2024

reported on December 16, 2023:

Private equity giants are turning to a new take on an old solution to higher debt costs for M&A deals: borrow all of the money they can and defer paying it back.

A January 4, 2024 Bloomberg piece stated:

Private equity firms, eager to sell debt-laden businesses, are finding private credit firms increasingly willing to keep outstanding loans intact, even for companies that may soon have new owners.

Another Bloomberg story which also ran today offered:

Calstrs Seeks to Borrow More Than $30 Billion to Manage Cash 

Calstrs could leverage 10% of portfolio under new policy 

Adds to growing trend of pensions adopting riskier investments

The California State Teachers’ Retirement System, the country’s second-largest pension fund, may borrow more than $30 billion to help it maintain liquidity without having to sell assets at fire-sale prices, according to a new policy its investment committee will consider this month.

Calstrs already leverages 4% of its portfolio, and the new policy would not create a new asset allocation policy. Instead leverage would be used to smooth cash flow and as an “intermittent tool” to manage the portfolio.

A wise friend refers to these acts as "extend and pretend."  He recently wrote:

This is an extension of extend and pretend for the private equity boys whereby the settlement of prices in this sphere will be pushed out further with customer money/ portfolios. This is another joke where they scrape fees at everyone else's expense.
That was the game plan after the 2008 Great Financial Crisis.  The moves get crazier and crazier for those who love money. 


I close with a B-52's Love Shack rewrite:

Everybody's extendin', everybody's pretendin' Folks linin' up hoping not to write downEverybody's extending', everybody's pretendin'PEUnky little shackPEUnky little shack

The Love Shack video shows one sphincter moment, something the PEU boys are currently experiencing.

How long can they hold on? 

Update 1-8-24:  Bloomberg did two PEU stories, one titled:

Private Equity’s Horrible, No-Good ’23 Set to Continue Into ’24

The other:

Private US Companies Increasingly Going Bust as Profit Shrinks
Not all private companies are PEU affiliates, but many are and PEU strategie, (high leverage levels, management fees and cash bleeding) place affiliates in a more precarious financial position.

Thursday, January 4, 2024

PEUs in Epstein's Address Books

In 1997 a little black book was found on Fifth Avenue in New York.  It is believed to be Jeffrey Epstein's, according to a 2021 Business Insider story.  

Private equity underwriters (PEU) were fairly uncommon.  They would metastasize after the new millenium.  

A smattering of PEUs were in Epstein's 1997 black book

Prince Bandar - Investment Enterprises Ltd.

Leon Black - Apollo

David Bonderman - TPG

Lynn Forester (listed twice) - went on to form Inclusive Capital Partners

Henry Kravis - KKR

Black, Bonderman and Kravis became PEU royalty.  

Epstein's 2004 black book had more PEUs:

Tony Blair - Khosla Ventures, a longtime defender of the greed and leverage boys

Ron Burkle - Yucaipi

John Huntsman - Huntsman Gay Global Capital

Ron Perelman - MacAndrews and Forbes

Thomas Pritzker - Madison Dearborn Capital Partners, Pritzker Private Capital

Ehud Olmert - Genesis Angels

Ehud Barak - SCP Private Equity Partners, Epstein funded one investment for Barak  

Tom Barrack - Colony Capital

John Kerry - courted PEU money for climate change, referencing private equity's "sway"

Andrew Farkas - Island Capital

Craig Hatkoff - Victor Capital Group

These entries show the crowd Epstein circulated within, the ultra-wealthy and uber-powerful.  A number of former elected officials went on to become PEUs.  More went on to take highly paid speaking PEU engagements.  

A more recent trend is the PEU to elected official phenomena.

Politicians Red and Blue love PEU and increasingly, more are one.

Update 1-5-24:  Fox News reported "Epstein victim Virginia Giuffre said (hedge fund giant) Glenn Dubin was the "first" individual Ghislaine Maxwell had sent her to for sex after she completed her massage training."  Dubin co-founded Highbridge Capital Management.