Buyer's regret grips Musk, and the markets

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The Weekend Pitch

July 17, 2022

Presented by Masterworks

(Drew Sanders/PitchBook News)

For months, everyone knew how Elon Musk felt about buying Twitter because he was constantly tweeting about it. This week, we heard from Twitter.

In a scathing 62-page complaint, the social media company asserted that Musk's effort to derail the $44 billion deal was an act of "hypocrisy" and "bad faith."

Twitter's allegation that Musk merely invented a complaint about spam bots to get out of the deal links him in with a growing crowd of dealmakers who are having second thoughts about their investments during a market rout for tech stocks.

I'm James Thorne and this is the Weekend Pitch. You can reach me on Twitter @jamescthorne or at james.thorne@pitchbook.com.

For all the obvious reasons, the Musk-Twitter saga is like nothing we've ever seen. There is nobody in the world quite like Musk and no company quite like Twitter—so the clashing of the two is business-news poetry.

But the imperiled deal is also emblematic of this moment. In fact, of a moment in every business cycle when euphoria gives way to regret and dealmakers everywhere scramble for an escape hatch.

Quote/Unquote

(Getty Images)

"It's a race to zero for a lot of these companies. Everyone has been undercutting each other to sign up retailers, and some of those deals frankly could never be profitable for them. On top of that, they promise retailers that they'll approve a certain ratio of people and find themselves in a position where they're lending to people they shouldn't be lending to. I'm not sure it's sustainable, and that's where I think we'll see a cooling off."

— Philip Belamant, CEO and co-founder of merchant-agnostic buy now, pay later provider Zilch, on the consumer-focused industry, which is facing shrinking investor interest as macroeconomic conditions threaten its business models.

Deal flow

Private equity deal activity slowed relative to the torrid pace set in 2021, but it remains on track for a healthy year by historical standards. Through the first half of 2022, US PE firms completed approximately 4,000 deals, with a cumulative value of just over $400 billion

Read more in our latest PE Breakdown report.

Did you know ...

(Morsa Images/Getty Images)

... That private equity firms have committed $20.3 billion to student housing in 2022 alone, according to PitchBook data, a total that exceeds the previous five years combined. Investors are flocking to the sector as they look to further capitalize on rising real estate values and an unprecedented global student housing shortage.

Datapoints

US VC firms raised $121.5 billion in the first six months of 2022, 87% of the record $138.9 billion committed in 2021, according to the latest PitchBook-NVCA Venture Monitor. Of this year's total, $77 billion was committed to funds worth $1 billion or more—far and away the largest annual total raised by these mega-funds.

Recommended reads

Astronomers have logged hundreds of flashes, known as fast radio bursts, that reach Earth from the depths of space. A new clue may help in the search to track down their origins. [The Atlantic]

Bitcoin miner woes are at risk of getting worse after the Celsius bankruptcy filing. [Bloomberg]

As the housing shortage becomes more than a coastal problem, it may bring consequences for the quality of American family life, the economy and the future of housing politics. [The New York Times]

Brijendra K. Syngal, who died aged 82 earlier this week, was known as "the father of the internet" in India. [BBC News]

Amazon has provided Ring doorbell footage to law enforcement 11 times this year without the user's permission, a revelation bound to raise more concerns for privacy and civil liberty. [The Guardian]

Currency headwinds, waning demand and questions over pricing strategy are things to watch as Big Tech reports earnings. [Protocol]

This edition of The Weekend Pitch was written by James Thorne and Ryan Prete. It was edited by Alec Davis and Clarinda Simpson.

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Buyer's regret grips Musk, and the markets

Quote/Unquote

Deal flow

Did you know ...

Datapoints

Recommended reads

Older messages

Years-long runway for VC

VC fund returns take a turn

A positive sign for VC

Betting on recession

Bright spots in a rocky PE landscape

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