Tuesday, Apr 12th 2022

Three Things (4/12)

Commentary

“The search for a scapegoat is the easiest of all hunting expeditions.” ―Dwight D. Eisenhower

The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

1) Epic Games raises $2 billion as private capital market thaw continues

  • The Fortnite-maker is valued at $31.5 billion after this latest capital raise.
  • Investors in Epic’s latest round include Sony and KIRKBI, the investment company behind Lego.
  • This is Epic’s first fundraise since April 2021, when it raised $1 billion at a $28.7 billion valuation.

Titan’s Takeaway: Epic’s funding announcement made four mentions of the idea that still seems to make investors reach for their pocketbook: the metaverse. And between Shein’s reported fundraise last week and Epic’s round announced this week, private market investors are beginning to move more enthusiastically after the public market sell-off in Q1 cooled sentiment.

2) Shopify to propose stock split, new share class as stock slides amid rising rate environment

  • The company’s new share structure would create a “Founder share,” increasing CEO Tobi Lutke’s voting power to 40% from 34%.
  • Shopify also proposed a 10-for-1 stock split.
  • These proposals will go to a vote at Shopify’s annual shareholder meeting on June 7.

Titan’s Takeaway: Executives and leaders can say that public market fluctuations in a company’s stock price doesn’t matter for the business, but actions speak louder. In the last two weeks, Shopify has altered employee comp plans and now rejiggered its share class structure — coming after a ~60% drop in five months, it appears stock prices do change plans.

3) Elon Musk won’t join Twitter’s board of directors as billionaire’s plans for his stake in the company remain unclear

  • Musk was set to join the company’s board on Saturday, April 9, but told the company he would not be taking the seat.
  • Twitter CEO Parag Agrawal said in a statement: “I believe this is for the best.”
  • Musk still owns 9.1% of Twitter, making him the company’s largest shareholder.

Titan’s Takeaway: The most important detail in Musk’s initial agreement to join Twitter’s board was his promise not to buy more than 14.9% of the company’s outstanding shares. With this agreement appearing to be off the table, the possibilities for the shape the relationship between Twitter and its largest shareholder could take have multiplied greatly.

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