Growing De-Dollarization, Twitter's Grand Ambitions, and KKR Fundraising

What's happened: The de-dollarization trend is gaining traction as key geopolitical players, including huge economic powers like China, Brazil, and India, are reducing their reliance on the dollar. These nations are actively looking for options outside of USD by exploring alternative global banking systems, expanding ruble-yuan trade, and engaging in bilateral trade using their own currencies.

Why it matters: These countries explain that they are distancing themselves from the U.S. dollar because of how the dollar is used against political adversaries. Ruble-yuan trade has experienced an astonishing eightfold surge since early 2022. There are reports that Russia and Iran are developing a gold-backed cryptocurrency as an alternative to the U.S. dollar for international trade. Recently, China and Brazil reached an agreement to abandon the U.S. dollar as an intermediary currency in their trade and financial transactions, deciding instead to conduct business using their own currencies. China has established similar deals with Russia, Turkey, Pakistan, and other nations, signaling a growing shift in global financial dynamics.

What’s happened: Elon Musk wants to transform Twitter into a company worth over $250 billion by turning it into a finance-first app. The idea dates way back to Musk's earlier experience with X.com, the startup that later became PayPal. He has gone as far as to say that Twitter could even become the world's largest financial institution if it is successful. But that’s quite a big if.?

Why it matters: Musk's aspirations face significant challenges, including competition from established financial players as well as regulatory hurdles. Twitter has only recently begun taking steps toward a payments and finance future, filing paperwork with the U.S. Treasury in November to become a payment processor. There has also been a huge amount of staff churn since Musk’s takeover of the company.?

What’s happened: Accel-KKR, a technology-focused private equity firm, has raised $5.3 billion for two funds: Accel-KKR Capital Partners VII LP and Accel-KKR Emerging Buyout Partners II LP. The firm has a strong history in technology investments and currently holds $19 billion in cumulative capital commitments.

Why it matters: The successful fundraising illustrates the ongoing interest in technology investments, particularly in software and IT-enabled services companies. Accel-KKR's active role in the tech sector positions the firm to capitalize on market opportunities, potentially leading to substantial growth for both the firm and its portfolio companies.

Summary Thoughts: The de-dollarization movement is gaining momentum as more and more countries look for alternatives to the dollar for their trade and global deals. It’s a development that poses a challenge to the U.S. dollar's global dominance, and brings with it potential long-term implications for the United States' economic power and international financial stability. In late March, China completed its first-ever yuan-settled energy deal, buying 65,000 tons of liquified natural gas from the UAE. Saudi Arabia, a close ally of the U.S., also expressed openness to accepting other currencies for oil trade settlements. It will be interesting to keep an eye on this space and see what happens with the petro-dollar.?

Musk's plan for Twitter is based on the enormous success of Asian apps that blend social media with digital commerce. Think Tencent's WeChat and Ant Group's Alipay. Musk wants? to engineer a "super app" that combines the 3 C’s: content, communication, and commerce. While Musk's ambitions for Twitter are grand, from here it looks like the company is facing an uphill battle. It must register for licenses in each state where it plans to operate, and it has yet to even register in California. This is not to mention that Twitter's revenue declined to $3 billion in 2022, and the company has seen a significant exodus of workers since Musk's acquisition.

Accel-KKR has raised $5.3 billion in new capital commitments for two funds, focusing on software and IT-enabled services companies. The successful fundraising highlights the firm's active role in the technology sector and signals continued interest in technology investments, potentially leading to significant growth in the industry. This is encouraging news for many private equity investors given the current uncertain climate.?

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