SkinTECH Failure: Luxury Covering

The Business of Fashion reported the resignation of CaaStle's founder and CEO Christine Hunsicker.  CaaStle provides clothing rental logistics services for high end brands.  A letter sent by the CaaStle board stated that Hunsicker:

had given some investors “misstated financial statements and falsified audit opinions, as well as capitalisation information that understated the number of company shares outstanding,” the letter said. 

“The company is facing a severe and immediate liquidity problem,”

Having Caa in the company's name should have been a warning given Moody's ratings considers Caa1 "judged to be of poor standing and are subject to very high credit risk."  Forget the sorry name, what does the company actually do?  

Crunchbase reports:

CaaStle is focused on developing systems and methods for managing data associated with wearable items in a clothing subscription service. This includes creating electronic platforms for transactions and inventory sharing, as well as user interfaces for electronic interactions. They are also working on garment size recommendations and optimizing wearable item selection. Additionally, CaaStle is exploring image analysis for apparel and electronic recommendation engines for apparel subscriptions. These efforts aim to enhance the efficiency and user experience of their Clothing as a Service model.

What happens if skintech CaaStle does not get another liquidity injection from Bill Ackman?  

Who gets the keys to the CaaStle?  Maybe nobody, as in the case of fintech Synapse.  Marc Andreessen fled from that stinking corpse all the way to Washington, D.C. where he joined the "government as a SERVE US billionaires" model.  

Trump's Instant "T" Frustrates PEU Leaf Readers

Private equity underwriters (PEU) hired high level tea leaf readers over the last few decades.  They include:

The Carlyle Group - Admiral James Stavridis (a regular on CNN)

KKR - General David Petraeus

Apollo - David Krone, former Chief of Staff Senator Harry Reid

These talented seers of the future were aided by PEU founders, legendary for their ability to influence government policy.  

Trump II's tariff gyrations have flummoxed PEU Legends and their high paid strategists.  "T" is for tariff and it's very hard to read the leaves if they remain in the mind of one man, especially one known for his savage whims.

The greed and leverage boys thought they'd be shopping affiliates in an economy with accelerating growth and increasing capital flows into the U.S. because "our tech is the world's future."  That is not happening.

Oddly, PEUs may gain new affiliates via their private credit offerings, getting the keys to other PEU's affiliates unable to keep up with interest payments.  

PEU Libation Day may involve exchanging their sponsor's name, creditor eats wiped out equity owner.  Those tea leaves are somewhat readable.

Otherwise, the world awaits the decrees of the Savage Whimmer.  Libation may be in all our futures.

PEU Water: Sign of the Thames

Thames Water will sell to KKR, a private equity underwriter (PEU) according to the BBC.  The debt bloated utility will stiff some creditors as part of the deal. 

KKR will become the second financial barbarian to own Thames Water.  Macquarie Asset Management held the British water utility from 2006-2017.  Macquarie knows how much it siphoned from Thames Water through deal fees, annual management fees, dividends/special distributions and liquidity recapitalizations (debt for dividend).   

Montanans can advise Londoners of the perils of PEU water utility ownership.  The Carlyle Group purchased Mountain Water which supplied water for the City of Missoula.  That sage resulted in surprise sales and loads of litigation.  (PEU Report did many posts on Carlyle's treatment of Mountain Water.)

Macquarie Asset Management settled with the SEC on another matter in September 2024.  Their statement reads:

This legacy matter is not consistent with how we do business. We have already undertaken and are focused on completing additional remedial steps to address the issues identified in the investigation, with clients the priority.

So Thames Water's prior owner has had shady episodes.  They are in the rear view mirror.  What's ahead with KKR?

KKR Private Equity Conglomerate LLC is set up to invest in companies outside the U.S.   Investors have pumped in nearly $10 billion to date (SEC filing).  The most recent K-PEC annual report stated:

The Company operates so that it will qualify to be treated as a partnership for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, and not as a publicly traded partnership taxable as a corporation. As such, it will not be subject to any U.S. federal and state income taxes. In any year, it is possible that the Company will be considered a publicly traded partnership and will not meet the qualifying income exception, which would result in the Company being treated as a publicly traded partnership and taxed as a corporation, rather than as a partnership. In such case, the members would then be treated as shareholders in a corporation, and the Company would become taxable as a corporation for U.S. federal, state and/or local income tax purposes. The Company would be required to pay income tax at corporate rates on its net taxable income. 

K-PEC has two KKR PEUs as co-chairman, Peter Stavros and Nathanial Taylor.  In another small world revelation the 10-k stated:

Stavros was with GTCR Golder Rauner from 2002 to 2005, where he was involved in the execution of numerous investments in the health care sector.

GTCR sold LifeCare Hospitals to The Carlyle Group just weeks before Hurricane Katrina struck New Orleans turning lifesaving facilities into death traps.  Twenty four patients died in the LifeCare unit within Memorial Hospital (owned by Tenet Healthcare).  That got no mention in President George W. Bush's Lessons Learned report and brother Jeb landed a spot on the Tenet Healthcare Board of Directors.  

Having survived a river-flooded 725 bed hospital in Virginia and worked hard to evacuate a Texas Gulf Coast hospital before then record Hurricane Gilbert, I was particularly sensitive to the plight of those flood victims.  Seeing politically connected PEUs get no mention provided the impetus for my blogging and PEU Report.  

Politicians Red and Blue love PEU and increasingly, more are one.  Elected officials had decades to eliminate PEU preferred "carried interest" taxation and did not, despite the public's loathing of this unfair tax break that helped grow millionaires into billionaires.

Water is life, too much is death and just as the fish has no concept of water, most of us do not know we live in a PEU milieu.

Pablum Pardons "Jiggery-Pokery" Pack

Trump II, who I recently nicknamed Pablum, pardoned a number of convicted fraudsters this past week in his "Just Us" Financial Criminals campaign. The list includes Trevor Milton (Nikola), Carlos Watson (Ozy Media), Devon Archer (defrauded Ogala Sioux) and former state representative Brian Kelsey (election finance cheating). 

The Digital Caligula also pardoned four people convicted of effectively running a money laundering operation by ignoring federal requirements. All four were with BitMEX Crypto Exchange.

My wise friend wrote:

In a world where fraud is the currency, Price is the only thing Holding the Structure.

Lose control of price and you lose control of the structure. CUI BONO? Those defining their wealth by the last marginal buyer. 

Isn't this what private equity does as they eat the structure from the inside through debt transactions.  What's holding the collection of sellable organs (cadaver) together?  Less regulation, Less crime, More fraud.

Extend, Pretend, Lend, Send (offshore, safe from re-appropriation).

There may be a DC Universe inspiration to Trump's pardon frenzy. 

Lex Luthor summons a group of other super-criminals: Cheetah, Star Sapphire, The Shade, Copperhead, and Solomon Grundy, for one purpose: to destroy the League.

"Trevor, Carlos and Devon" sound sinister enough.  The "BitMEX Crypt" gang is a solid criminal moniker. I'm not sure "Brian" will make the criminal mastermind cut. He may need to remain in Tennessee.

Trump is not building crime fighting capacity, he is unraveling it at breakneck speed.  We need someone to foil the "Just Us" Fin-Crims League's plans.  It's forming and the fraud will soon be storming.

Musk Sells to Musk: xAI Gobbles X

Elon Musk's xAI bought Elon Musk's X for $45 billion.  Musk somehow had time to arrange the deal while running six companies and heading the Department of Ungodly Greedy Executives Biased Against Government (DOUGEBAG).  

This deal occurred within a wider AI context.

Tech giants are reshaping finance and intellectual property law to "deliver on AI's promise."  Google founder Eric Schmidt revealed how AI companies steal copyrighted information to train their models, settling with aggrieved parties after becoming financially successful.

Don't count on Uncle Sam to level the playing field between information creators and usurpers/appropriators.   That enforcement beat has been shuttered.

Musk sold his social fabric-ripping X to his machine generated, empathic AI company, which is doing how much government business?  How might any merger costs be passed on to Uncle Sam?  What kinds of tax benefits does Elon get from Elon selling to Elon?  Rest assured, we will never know.

The deal is an all stock deal between two private companies, reminiscent of a private equity underwriter (PEU) selling an affiliate from one fund to another.  Such deals free up cash to pay earlier investors, even entice them to roll over their money.  So who's rolling and who's getting rolled in this deal?  Musk's PEU sales team knows.

It turns out xAI can analyze credit.  Did the parties in this deal use xAI for that purpose?

It's hard to see because there is nothing transparent about xAI gobbling up X.  

How would xAI value X (its new appendage) or the combined companies?  Would it use:

Mark to market for comparable assets

Mark to model

Mark to fantasy

Mark to AI hallucination

Probably all of the above in a monte carlo analysis.  

To close, give credit where credit is due, except when it is copyrighted material scooped up by voracious AI.  

Remember, there's a lot of anus in there.

But Eric Schmidt never told us that....

I look forward to seeing the picture where self-medicating Elon shakes hands with employee-abusing Elon to close the X/xAI deal.

Special PEUport on DOUGEBAG

Fox News did a special report this evening on what I call DOUGEBAG, the Department of Ungodly Greedy Executives Biased Against Government.  It was Elon and the seven C-Suiters.

Musk is CEO, Chairman or major investor in six companies with very forgiving Boards of Directors, given the time he has spent leading DOUGEBAG.  Fox tried to push the "public company standard" but DOUGEBAG is running the private equity underwriter (PEU) playbook.  

Half of the crew eviscerated Twitter after Musk took it private.  All of these guys are on the private side and on loan to DOUGEBAG.  Musk has one public company, the rest are privately owned.

Employee ratings for some of the DOUGEBAGS include:

Energy Company CEO -"70 hour weeks, minimal notice of MANDITORY overtime, extremely minimal pay" 

PEU Operating Executive - "is the most egotistical person I've ever met and is seemingly incapable of making good decisions. Because of the constant changes and layoffs, productivity is at an all-time low." 

Healthcare PEU - "This is a greed-driven company that is preying on our nation’s most vulnerable and poorest people."

A Musk private company - "You will always have 80% of what you need, and the goal posts constantly move.  Zero consideration for work life balance.  Overtime is scheduled naturally and is expected.  Wasted time during every shift.  Extremely inefficient processes Very chaotic work environment with little accountability.  Lots of mandatory overtime with little flexibility.  Often very unsafe.

Boring company - "Horrible safety, safety department is non existent.  Very political culture.  Management demands but does not return.  Team did not have a lead on day or night shift for six months.  Can be fired at a moments notice for non-communicated expectations.  Very few experienced engineers.  No work-life balance. Was told "I worked 3 months without seeing my family, what's the issue with you." Stock options are ISUs that you have to purchase.

It turns out the reasonable PEU executives are anything but.

Update 3-28-25:  The Daily Beast titled their piece on the Special PEUport:

PEU Vectoring for Your 401(k)

Two years and ten days ago Red Team former Senator Pat Toomey joined the Apollo board of directors.  Apollo is a politically connected private equity underwriter (PEU).  

Leon Black, Josh Harris and Marc Rowan founded Apollo in 1990.  Rowan recently received strong consideration for Treasury Secretary.  Harris left and now owns stakes in professional sports teams (whose leagues now court PEU investment).  Leon Black retired after funding Jeffrey Epstein's child abuse empire which snared many political and financial heavy hitters.

Back to Pat Toomey's service on the Apollo board.  His 2023 board compensation totaled nearly $720,000 for just over ten months of service.  That's roughly $70,000 per month.

PEUs, like Apollo, want access to Americans' 401(k) accounts.  Bloomberg and Barron's recently ran stories on private equity's seeking access to those retirement accounts.

A look at Toomey's Senate career from a fundraising perspective provides insights.  Open Secrets shows his big backers include:

Toomey's largest backer, The Club for Growth, wants to go further than the 401(k), it wants to turn Social Security into a personal retirement account.  That must have the PEU boys salivating, given their longtime love for Uncle Sam's wallet.

Blackstone is another Toomey sponsor and politically connected PEU.  They just got Tim Sheehy elected Senator from Montana.  Blackstone spread money amongst the Reds, Whites and Blues

Federated Hermes sponsored Toomey to the tune of $143,900 during his Senate career.  They are in the retirement account business and were sued in 2023 for limiting their own employee retirement options. (pushing their own book).  

The filing alleged persistent underperformance and excessive fees.  Let's hope that's not in everyone's retirement PEUture.

Toomey's 2024 Apollo board compensation should be released in the next month.  I will add that to this piece as an update.

Politicians Red and Blue love PEU and increasingly, more are one.  Will Trump II, the digital Caligula, and his compliant Congress give the greed and leverage boys access to your 401(k)?  In a heartbeat...

Update 3-27-25:  "Business leaders are backing President Donald Trump publicly, but privately they are concerned about Trump's tariffs and how they'll impact the economy, according to David Rubenstein."

Is your 401(k) excited about blockchain-powered fund infrastructure?