🤔 Ackman Wants to IPO

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June 7th, 2024 • Here's what you need to know today in just 10 minutes

MARKET UPDATE

Good Morning Investor! SShares of American biotechnology wizard Illumina ($ILMN) skyrocketed by over 7% yesterday. The reason? The board just gave a thumbs up to the spinoff of their blood-testing company, Grail. It seems Illumina is intent on proving they’re the life of the healthcare party! Not to be outdone in the excitement department, shares of software sensation Smartsheet ($SMAR) decided to join the fun, soaring over 17%. The catalyst? A stellar earnings report that had investors cheering like they just discovered a hidden feature in Excel.

TODAY’S BIG HEADLINES

Ackman Wants to IPO

AI is Driving Demand For The Old Reliable, Coal

How The Soda Industry is Being Disrupted

SUPER INVESTORS

Ackman Wants to IPO 🤔

Axios

Hedge Fund Star Goes for IPO Glory: Bill Ackman, the rock star of the investing world, is making headlines once again. Known for his dazzling TV appearances, investment conference charisma, and his hedge fund's stellar performance, Ackman now plans to cash in on his celebrity status by taking his hedge fund public via an IPO.

  • Ackman is the brains behind Pershing Square Capital, a fund that's outperformed the market with a compound annual growth rate of 16.4% since its inception in 2004. That’s a mic drop compared to the market’s average return of 9.7%.

  • With $16.3 billion in assets under management (AUM), Pershing Square is no small fry in the hedge fund world.

The Big IPO Plan: Ackman is laying the groundwork for his fund's public debut as early as next year. He’s already started by selling shares amounting to a 10% stake in a private round, which valued the fund at a cool $10.5 billion.

  • This private round attracted some heavyweight investors, including Arch Capital Group, BTG Pactual, Consulta Ltd., Iconiq, and Menora Mivtachim.

Ackman's Unique Pitch: Ackman insists his fund is a cut above the rest, branding it as a 'durable' asset manager rather than the typical roller-coaster ride of a long-short hedge fund. This distinction is crucial given the bad rap hedge funds have had since the 2008 financial crisis.

  • In 2023, Pershing Square Capital raked in net gains of $3.5 billion, bringing its total gains to $18.8 billion since its founding.

  • The fund now proudly holds the 20th spot on the list of best-performing hedge funds worldwide. Despite some bumps along the way, it’s generated a whopping $12.3 billion over the past three years.

Heavyweights in the Ring: Ackman’s move will put Pershing Square alongside other publicly traded hedge funds and private equity giants like Carl Icahn’s Icahn Enterprises L.P. ($IEP), KKR & Co. ($KKR), and Apollo Global Management ($APO). It’s shaping up to be a heavyweight bout in the world of finance.

INDUSTRIALS & ENERGY

AI is Driving Demand For The Old Reliable, Coal🌡️

Coal Makes an Unexpected Comeback: Coal is making a comeback like a retired rock star returning for one last world tour. AI’s insatiable appetite for energy is forcing the US to dust off the long-forgotten fuel of yesteryear. This coal comeback throws a major wrench in the US’s grand plans to phase out the old black rock, potentially ramping up production instead.

  • Coal-fired plants once destined for decommissioning are now getting a second chance at life due to soaring energy demands and the shaky reliability of renewable energy sources.

  • These surprising developments have drastically shifted projections, with only 54 gigawatts of America’s coal-powered capacity now expected to go offline by 2030. That’s a 40% decrease from last year’s estimates. It seems coal is refusing to go gently into that good night.

AI’s Power Hungry GPUs: The numbers might continue to shrink as AI adoption accelerates. As we’ve reported here at Tickergeek, AI-focused GPUs demand ten times more energy than traditional server CPUs. It looks like AI’s energy diet is making coal the uninvited guest that just won’t leave the party.

Green Goals in Jeopardy: These shifting dynamics have thrown a serious monkey wrench into the US’s goal of a carbon-free power sector by 2035.

  • Combine this with the renewable sector’s myriad issues—equipment shortages, infrastructure hiccups, and regulatory gridlock—and it’s clear why coal is making a reluctant resurgence.

  • Meanwhile, OPEC and the IEA are butting heads. OPEC argues that further investment in fossil fuels is necessary, predicting oil usage will continue to grow over the next 20 years.

Coal’s Last Hurrah: Despite the grim outlook, coal usage is still projected to decline by 4% this year and continue its downward trend, just more slowly than before. Think of coal as the veteran quarterback coming out of retirement, giving cleaner energy sources like nuclear time to catch up. Eventually, though, the final whistle will blow for coal, and the grid will wave it a bittersweet goodbye.

CONSUMER DISCRETIONARIES

How The Soda Industry is Being Disrupted🧃

Out With the Old, In With the Bold: Disruption on the Horizon: The days of the big three soda titans—PepsiCo ($PEP), Coca-Cola ($KO), and Dr. Pepper ($KDP)—hogging the limelight are fizzling out faster than a flat cola. The real sparkle in the soda industry now comes from a fizz-tastic lineup of upstarts like Olipop, Poppi, Vina, United Sodas of America, and Zevia.

  • These newcomers are shaking things up with vibrant can designs and a kaleidoscope of innovative flavors that would make even Willy Wonka envious.

  • In some cases, these rebels are also going for the health-conscious jugular, promoting their drinks as probiotic elixirs, a far cry from the high-fructose corn syrup concoctions of yesteryear.

The Big Three’s Soda Stranglehold: Despite the sparkling rise of these effervescent upstarts, the big three still hold a bubbly 91% market share of the US soft drink market. Pepsi’s market share has slipped, with Dr. Pepper narrowly fizzing past it into second place with an 8.3% share, while Coca-Cola reigns supreme with a frothy 19.2%. And that's just for their flagship colas!

  • Even with their domination, growth has been as flat as a week-old soda. Coke reported a measly 3% growth in the first quarter, driven mainly by price hikes rather than organic growth.

  • Pepsi didn't fare much better, with a paltry 2.3% growth, and its North American beverage division actually saw sales drop by 5%.

The Upstarts Are Coming: Meanwhile, upstarts like Olipop are reporting growth figures that would make a soda jerk blush. Olipop is forecasting $500 million in sales for 2024, doubling year-over-year. The company claims that its sodas are now stocked in a whopping 25,000 US supermarkets. Not bad for a company that was bubbling under with just $1 million in sales five years ago.

  • Now Olipop is looking to raise a fizzy $800 million, just two years after being valued at $200 million. And here's the cherry on top: Olipop is reportedly now profitable.

Poppi Pops the Top: And let's not forget Poppi, the best-selling soft drink on Amazon for February, with a whopping 19% market share on the platform. That’s about 1.5 times Coca-Cola’s share on Amazon.

  • However, Poppi’s ride hasn’t been all rainbows and root beer. They’ve recently been hit with a class-action lawsuit alleging their prebiotic drinks' gut health benefits might be a bit too good to be true.

A New Soda Saga: The trend is crystal clear: consumers are flocking to these new soda stars that team up with celebrities, offer a cornucopia of unique flavors, and cater to health-conscious cravings. The old guard better watch out, because this new generation of sodas is shaking up the industry.

MORE NEWS

Additional market-moving events🌎

Burger Court Dule: Fast-food behemoth McDonald’s loses “Big Mac” trademark as EU court sides with Irish-based Supermac’s. (BBC)

Bigger & Better: Elon Musk’s xAI startup has announced it will be building the world’s largest supercomputer in Memphis. (FOX)

Electric Takeover: Legendary automakers Porsche and Ferrari see sales slump in China as buyers move towards EVs. (Fortune)

Quiet Corner: Ebay will no longer be accepting American Express as a form of payment due to their “unacceptably high“ fees. (The Verge)

EARNINGS

This Week’s Earnings Calendar📅

Analyst consensus estimates

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Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500.

Here’s how the two stocks have performed since then:

  • Evolution AB: 1,134.50 SEK (📉-13.60%)

  • Hims & Hers Health: $21.57 (📈+49.07%)

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