As of a result of the Covid-19 pandemic, CEOs across industries saw their company's valuations increase astronomically. Leaders of companies such as Zoom, Moderna and Carvana all benefited from a dramatic shift in demand resulting from the changes brought on by the virus. However, as fast as these CEO's wealth rose, it has plummeted even quicker as economies return to a pre-pandemic state of normalcy. One of the most well-known pandemic companies, Moderna Inc.'s scientist Stephane Bancel's net worth increased to $15B as the company's shares rose nearly 2,400%. His net worth as of Sept. 30th stands at $4B, marking a net loss of 73% since its peak during Covid. Alongside Bancel, a group of 57 executives across the Stay Home, Vaccine, Remote Work, E-Commerce, Medical Equipment, Payment and Chip spaces have been deemed the "Covid Billionaires".
"We’ve seen both extreme wealth and extreme poverty shoot up at the same time...I don’t think enough people have clocked how off the charts it’s been."
Max Lawson, Oxfam International
Private Funding Pulse Check
Odyssey Therapeutics, a biotechnology company creating medicines for patients with cancer and inflammatory diseases, has closed on a $168M Series B round that included Dallas, TX-based Colt Ventures
Penny Pritzker's Family Office, PSP Partners has participated in a Series B round that totaled $94M for Enable, a software development company that helps companies take control of their rebate programs
Vulpes Investment Management engaged in a Series B investment with Flash Coffee, one of Asia's fastest growing tech-enabled coffee chains, totaling $5.1M
Thiel Capital took part in a $17.5M Venture deal with Quantum Systems, an aviation and aerospace manufacturing company of small Unmanned Aerial Vehicles (sUAV)
Leveraged Buyouts Sharply Decline Amid Rising Cost of Capital
In a move that may come as a surprise, private equity firms have resorted to facilitating deal flow entirely with cash from their own funds due to the rising cost of borrowing capital. Over recent weeks, deals as large as $2B have been financed without debt, meaning private equity firms are effectively covering the entire tab themselves. Experts predict this trend to be short lived, however it exemplifies a sharp contrast to industry norms which for decades relied on leverage to promote rapid growth. Even capital-rich private credit funds, deemed to be the "saviors of LBO financing", have decreased their new debt commitments. While uncommon, deals financed entirely with equity are not new to the industry, as managers flocked to fund deals themselves during the height of the pandemic when credit became tight. After a large spike during the first half of 2021, LBO activity has drastically depleted, recording just $12B worth of global deals in Q3 2022.
Slowing Wage Growth and Dwindling Savings Pose for Painful 2023
Most would agree that the post-pandemic party is over. Roughly $5T in government stimulus, rates near zero and a myriad of lending programs helped the United States economy stage one of the fastest recoveries in history. However, many experts believe that the Federal Reserve and Congress overspent to recover the economy and now face an onslaught of headwinds. Over the last few years, Americans have built up large cushions of savings, topping a total of $2.1T. Since then families have spent a collective $630B of their reserves in an effort to cover their daily expenses. "Day-to-day" cash flow is also down, with real disposable personal income declining below the pre-pandemic high of $46K per capita. Other notable headwinds for 2023 include a weakening job market, more Fed interest rate hikes and an expected divided Congress that may struggle to pass any fiscal relief should conditions worsen.
"The removal of huge stimulus and the shift to slower growth will be a painful process akin to waking up the next morning with a hangover after a long, hard bender."
Lauren Sanfilippo, Bank of America
Veteran Venture Capitalist Launches New VC Fund
Jack Selby, Managing Director at Thiel Capital and former MD at Clarium Capital Management LLC has announced he is launching his own venture fund to target early-stage startups based in Arizona. The fund aims to raise $110M and garner an early jump on the region's increasing entrepreneurial environment. Selby believes Arizona's "business-friendly government" provides for an excellent opportunity to cement itself as an appealing alternative to traditional coastal tech hubs, using Carvana Co. as a prime example. A significant portion of the early fund investors have come from the Arizona real estate industry. This brought on its own challenges, as Selby cited the difficulties of convincing traditionally fixed-income-minded investors to diversify into venture capital. Selby has stated that he anticipates the fund to make roughly 20 investments across a variety of industries, expecting to write checks of up to $5M.
"They really have a fixed-income mentality...What I do as an early-stage venture-capital investor is effectively sticking straws in the ground and trying to find oil. Those two worlds don’t overlap very much, if at all, and so trying to breach that gap was a real challenge."
Captrust has acquired Foxborough, MA-based RIA firm Patriot Pension Advisors, adding 26 retirement plans and $900M in AUM (P&I)
Sequoia Financial Group, a top-ranked RIA firm, has sold a minority stake to private equity firm Valeas Capital Partners for $200M (Barron's)
Standard Insurance Company and Securian Financial Group, Inc. reached a definitive agreement for Standard to acquire Securian's retirement record keeping business, a group that served retirement plans totaling $17B (BW)
Written by:
Andrew Popp | Data Research Associate
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