Betting On TikTok
Hi, The Investor’s Podcast Network Community!
Do you remember? Yes, it’s September 21st, and we’re all socially obligated to queue up Earth, Wind & Fire at least once today 🎧
We’re remembering Instacart’s journey to IPO, which launched earlier this week, in the Chart of the Day below.
In 2012, an app-based grocery-delivery business where other people shop for you wasn’t on most people’s radars. Flash forward, and InstaCart is worth over $8 billion. But everyone is doing grocery delivery now, including Walmart, Amazon, DoorDash, and Uber Eats.
💭 Can Instacart differentiate itself? Investors aren’t sure — its stock initially popped 40% above its IPO price of $30, only to drift back down to earth.
— Matthew, Shawn, and Weronika
Here’s today’s rundown:
Today, we’ll discuss the three biggest stories in markets:
- The billionaire keeping TikTok on phones in the U.S.
- The ex-Goldman traders making a fortune in coal
- Why America’s biggest landlords can’t buy homes, either
All this, and more, in just 5 minutes to read.
POP QUIZ
What was the first digitally powered grocery delivery business? Hint: It’s not Instacart. (Read to the end to see!)
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CHART OF THE DAY
One very wealthy man doesn’t just want to avoid a TikTok ban — he’s putting his money where his mouth is, pouring more than $60 million in support of Club for Growth, a Conservative Super PAC pushing against bans.
- Jeff Yass is a billionaire. He runs a firm that invested early in TikTok’s parent company, ByteDance.
- It now holds a roughly 15% stake in the popular app, with a fast-growing user base competing with Facebook, Instagram, YouTube, and X (formerly Twitter) for eyeballs.
Yass himself has a roughly 7% stake in TikTok, or roughly $21 billion, according to a report from the Wall Street Journal this week.
Yass and the group Club for Growth started taking a stance against TikTok bans last year after the U.S. government restricted federal employees from using the app on government-owned devices. Yass and his peers view it as a free-speech issue.
- “I’ve supported libertarian and free market principles my entire adult life. TikTok is about free speech and innovation, the epitome of libertarian and free market ideals.”
How we got here: Yass built his fortune by founding Susquehanna International Group, one of Wall Street’s top trading firms. He and his college buddies pioneered using quantitative models and computers to make rapid-fire trades for stock options.
Why Yass loves TikTok: Susquehanna invested $2.08 million in ByteDance in 2012, the year it was founded, and has contributed hundreds of millions of dollars ever since.
Why it matters:
The story underscores how business and markets interweave with politics and how wealthy investors can influence political decision-making.
- Support for a TikTok ban grew during former President Donald Trump’s time in office over fears that social media apps with ties to China would allow China to spy on the U.S.
- More recently, politicians from both sides, including President Joe Biden, have criticized TikTok’s data privacy rules. Strategists and policy experts note it’s impossible to ban an app entirely.
TikTok has more than 150 million U.S. users, a number that’s only growing.
- Said one policy expert: “They can ban financial transactions, or they can try to force divestiture. But they don’t have the ability to ban TikTok itself.”
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In some circles, working as a trader at Goldman Sachs is near the peak of high finance. Why, then, would two traders set their careers aside to strike it on their own?
- The question is more perplexing when considering they risked it all for a seemingly dying industry: Coal.
Black gold: The timing has been perfect for Peter Bradley and Spencer Sloan, boosted by an energy crisis in Europe born out of Russia’s invasion of Ukraine.
- Their company is Javelin Global Commodities, and in just eight years, it has emerged as the biggest exporter of U.S. coal.
- Predictions of coal’s demise have been premature, and Javelin was positioned to capitalize on Europe’s energy crunch after gas & oil stopped flowing from Russia, minting record profits last year.
Javelin trades some 60 million tons of bulk commodities annually, mostly coal, which puts it on par with some of the largest commodities companies worldwide.
How’d they do it? A little help from a big name in the coal biz: Robert Murray. Murray bought up coal mines in Colombia from Goldman Sachs, as the bank sought to minimize its exposure to investments with poor ratings for their environmental impact.
- The two Goldman traders, Bradley and Sloan, saw an opportunity and secured the rights to the coal magnate’s new mines in exchange for a 34% stake in their new commodity trading business.
Why it matters:
Coal remains critical to keeping the lights on worldwide, particularly outside the U.S. and Europe.
Last summer, the not-entirely-dying industry saw its biggest coal price rally in 15 years, despite what the duo suggests are unfortunately “very negative” perceptions of coal.
Picking up pennies: Even though coal’s future in global energy production remains extremely uncertain, when there’s an opportunity to make money today, someone will take it, even as others shy away.
As European power plants grew desperate to replace supplies from Russia, Javelin stepped in — at one point, the company provided Poland with around one-fifth of the coal it needed to restart old coal-fired power plants.
- As Bloomberg puts it, “Bradley and Sloan’s driving thesis is that though increased regulation and scrutiny might scare off the competition, coal isn’t going anywhere soon.”
- Climate advocates feel differently, with one foundation leader commenting, “It’s pretty disheartening that vast fortunes are still being made in activities that are driving dangerous, and potentially catastrophic, global warming.”
MORE HEADLINES
📺 Rupert Murdoch steps down as chairman of Fox Corp. and News Corp.
📦 How AI could police package theft, possibly saving retailers millions
😁 What Americans say is the top factor to a fulfilling life (it’s not money)
⚠️ McDonald’s is once again being sued over hot coffee
👀 Amazon is giving Alexa and AI upgrade
It’s not just everyday Americans finding it challenging to buy homes — Wall Street’s most prolific homebuyers face similar hangups.
The combination of elevated borrowing costs and a limited supply of available properties has slowed acquisition deals for big property investors.
- Despite having deep pockets, securing economical financing remains elusive, even for prominent investment firms & landlords.
- Home prices and mortgage rates have pushed past what big landlords, including AMH and Invitation Homes INVH, can pay and still meet profit targets. And the competition with families willing to pay up for the limited homes on sale is heating up, too.
On the sidelines: In the second quarter, landlords owning over 1,000 properties made up just 0.4% of U.S. home purchases, a decline from a 2.4% peak in late 2021, per John Burns Research & Consulting.
Since their rise after the 2008 housing crash, massive suburban American landlords have rarely held such a minimal market share.
- One rental property landlord explained the issue point-blank: “I’m a part of the problem — and the solution. I don’t want to give up my inventory until I see other inventory available.”
- In other words, selling means giving up low-rate mortgages from years past. But if no one sells, home prices remain prohibitively high. At the same time, mortgage rates are at their highest levels in two decades.
Why it matters:
Property giants typically include a mix of private equity firms and wealthy individual investors focused on acquiring foreclosed homes.
As those became scarce during the pandemic when greater mortgage forbearance programs were implemented, some investors turned to the open market for further purchases.
- In thriving cities like Miami, Houston, and Phoenix, about one in every four homes sold was bought by individuals who had no intention of residing there.
Between the lines: Landlords stepping back from buying more homes suggests the Federal Reserve may be nearing the ideal interest rate to cool the overheated housing market — one of its tools for indirectly discouraging spending elsewhere and cooling inflation.
TRIVIA ANSWER
Webvan was conceived in the dot-com bubble’s heyday in 1996, offering customers grocery delivery in a 30-minute window of their choice. The business was ahead of its time and went bankrupt in 2001 but expanded to 10 cities before falling apart.
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