| |  | TOGETHER WITH |  | | | Good Morning.
You may have heard earlier in the week that Melvin Capital, the embattled hedge fund whose short positions were eviscerated by Reddit investors last year, is finally closing down. To add insult to injury, the New York Post revealed Thursday that founder Gabe Plotkin is still charging Melvin's investors — who won’t get all their money back until July — fees through the rest of the month.
"Plotkin should sell his $44 million Miami Beach home after losing all of us so much money… rather than charging us more fees," one furious investor told the Post. It's tough out there, even at the top. | | | • | | Founders, pay heed: Europe’s biggest startup is raising money at a decreased valuation. | | • | | Chinese President Xi Jinping is using the West’s playbook vis-à-vis Russia to brace his country against potential economic sanctions. | | • | | Real Madrid is diversifying its revenue streams. | | | | |  | Startups | Fintech Startup Seeks Funding at Lower Valuation | | Time is catching up with buy-now-pay-later firm Klarna.
The Swedish fintech company, and Europe’s third most valuable startup, is aiming to raise $1 billion at a valuation of around $30 billion, a third less than it fetched just under a year ago, according to The Wall Street Journal. Amid this year’s tech rout, it’s not the only firm that should expect to take a step back. | Value Proposition | | Klarna was valued at just $3.5 billion in 2019, but came out the other side of the pandemic with a massive new valuation as more and more retail transactions moved online. The "buy now, pay later" (BNPL) segment, which pitches itself as a consumer-friendly way to make large purchases without interest or fees, processed $55 billion in transactions in the US alone last year, according to Mercator. That's expected to reach $100 billion by 2024.
Like many tech startups, Klarna is focused on growing its customer base and achieving scale, which typically means raising huge sums of capital and absorbing similarly huge losses (Klarna was $700 million in the red last year). For much of the last decade, investors have been comfortable stomaching that risk because the reward for backing a best-in-breed company in a new category, like BNPL, can be massive.
But as of late, many investors are reframing their risk appetite: | • | | When the company sought to raise money at a $50 billion valuation earlier this year, investors balked, according to the WSJ. | | • | | Klarna’s not the only startup to feel the sting: “If you plan to raise money in the next 6-12 months, you might be raising at the peak of the downturn,” Y Combinator, a famed tech incubator that backed Dropbox and Reddit, wrote in a note to its portfolio company founders Thursday. “Remember that your chances of success are extremely low, even if your company is doing well.” | | | | Equity in private startups is still trading at a premium, according to private stock marketplace Forge Global, but on average fell from a 58% premium over a company’s last fundraising round in Q4 2021 to a 24% premium in Q1 2022.
Concern Now, Regulation Later: Shares in Klarna’s BNPL competitor Affirm, which trades on the Nasdaq, are down 75% this year. Traditional lenders and PayPal, the original fintech giant, have moved into the space, while UK and US regulators have both hinted at forthcoming regulation. When it rains it pours. At least you can still pay for that fancy umbrella in four easy installments. | | | | | | Global Economy | China is Making Sure it Can’t Be Economically Sanctioned Like Russia | | In their efforts to cut off Russia’s elite from global markets, Western nations bent on punishing the country for its invasion of Ukraine may have inadvertently revealed their cards to another not-entirely-friendly world power.
On Thursday, The Wall Street Journal reported that Chinese President Xi Jinping ordered senior officials to divest foreign holdings, immunizing them from the sorts of sanctions the West is putting on Russian oligarchs. Meanwhile, Bloomberg reported China quietly reached out to Russia about strengthening energy ties. | In On the Secrecy | | China has no rules against foreign investments by its citizens, though the extent of holdings by senior officials is unclear because of the Communist government’s highly secretive nature. Don’t bother asking, either: nine years ago, activists who criticized the lack of disclosures were arrested.
Given the massive Western sanctions against Russia, which French economy minister Bruno Le Maire said had frozen $1 trillion in assets, Chinese officials’ foreign holdings are suddenly a matter of acute concern to Beijing. According to the WSJ Xinping secretly issued an order in March blocking the families of ministry-level officials from owning foreign real estate or stocks.
As it moves closer toward greater economic independence from the West, China is leaning on Russia: | • | | Beijing quietly reached out to Moscow about buying more oil for its strategic reserves, according to sources who spoke to Bloomberg. Chinese oil refineries have also been making discrete purchases of cheap Russian crude since March. | | • | | China doesn’t disclose its holdings — again, secretive regime — but analysts at Kpler estimate the country has 926 million barrels in reserve, 6% lower than in fall 2020 (US reserves are currently at 538 million barrels). What better way to stock up than with Russian oil selling at a 20% discount? | | | | Worst-Case Scenario: What if China’s pursuit of limiting exposure to sanctions leads to global economic fragmentation? Analysts at Bloomberg Economics simulated what would happen if two camps — US and Western-aligned nations vs. Russia and China-aligned nations — imposed historically high tariffs on each other. The result is not pretty: global trade would plummet 20% and the world economy would shrink by 3.5%. Cooler heads, please prevail. | | | | | | SPONSORED BY Outer | A Facelift For Your Yard | Let us paint a picture for you — it’s Friday at 4:30pm and you’re finished with emails for the day. The humidity has been burned off by the strong July sun and now all you have to do is craft an ice-cold, spicy margarita and relax. Now that we’ve channeled our inner Don Draper — take a quick look outside. Does your outdoor furniture setup live up to this relaxing scene? If not, it’s time to check out Outer. Outer is taking the furniture industry by storm with its unique and innovative designs. Delightful sectionals that redefine couch comfort? They’ve got it in spades. Sleek fire pit tables with just the right amount of European sophistication — no brainer. Patented OuterShells® to keep your investment looking crisp and clean for the years to come? Clearly. Give your yard the facelift it deserves. Check out Outer before summer is over! | | | | | | Sports & Entertainment | Real Madrid Scores €360 Million Live Events Deal | | Owning a professional sports team is supposed to be the ultimate status symbol. Ultimately, though, it’s very, very expensive.
To keep up with the rising costs, Spanish soccer powerhouse Real Madrid struck a €360 million deal, announced Thursday, with investment group Sixth Street and US-based sports-entertainment group Legends to diversify its income by hosting concerts and other events at its Santiago Bernabéu stadium. Sounds like a hat trick to us. | Settle it on the Pitch Deck | | If the football rumor mill is to be believed, Real is a leading contender to sign 23-year-old French phenom Kylian Mbappé, whose next contract, is expected to be worth a gargantuan €200 million. No wonder club owner and Spanish tycoon Florentino Pérez is looking to shore up his business ledger.
With the new deal in place, the club will transform its home stadium into a truly multi-use space: | • | | A retractable roof being installed over the 81,000-seat stadium will allow for more events on its calendar. Legends — founded in 2008 by Dallas Cowboys owner Jerry Jones and Yankee Global Enterprises, owners of the New York Yankees — supports venues in hosting live events and aims to help the storied soccer club squeeze more cash from fans. | | • | | The tie-up will last 20 years, with a new company established to manage the stadium. A revenue-splitting model will stream 70% of proceeds to Real and the other 30% to Sixth Street, which acquired a majority stake in Legends last year. | | | | Red Card: Florentino is notorious for his pursuit of more revenue for his properties, not always successfully. Last year, he served as the founding chairman of the doomed European Super League, a breakoff soccer tournament between prominent teams in England, Italy, and Spain that failed before a single match was played, in part due to outrage from fans. At least he knows how to put his money where his mouth isn’t — on the pitch. | | | | | | Extra Upside | • | | Home sales in the US are falling courtesy of pesky rising mortgage rates. | | • | | Sounds cool, is cool: military satellites communicated with one another using real-life space lasers. | | • | | The Motley Fool thinks these 4 cybersecurity stocks are a need, not a want. As in, if investors want a portfolio with the ability to capitalize on the massive eruption we’ve seen in cyberattacks (think: Equifax, Solarwinds, Colonial Pipeline), they probably don't want to invest in them – they’ll need to. With $172B in cybersecurity spend expected in 2022, now looks like the time to invest in cybersecurity before the boom. Check them out right here.* *Partner | | | | | | |  | Just For Fun | | | | | Written by Sean Craig and Brian Boyle. | | No longer want to receive these emails? Unsubscribe here. Copyright © 2022 The Daily Upside, LLC., All rights reserved. 1230 York Avenue, Box 154, New York, NY 10065 | | | | |
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