M&A Heat: Bally's $685mn M&A Deal

In this issue of the Peel:

• ?? We heading to the moon? Place your bets now…
• ?? Moderna and Merck’s joint cancer vaccine is entering phase 3 trials.
• ?? Standard General is offering $15/sh to buy out Bally’s.

Market Snapshot ??

Banana Bits ??

• Despite the strong jobs number, this employment index shows weakness in U.S. hiring
• The ECB is in a similar boat as the U.S. with their own rate regime
• The OpenAI vs Elon lawsuit is heating up in the nerdiest way possible
• Death and Taxes—the two “certainties” that both our Presidential candidates do a damn good job of avoiding

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Macro Monkey Says ??

100k Or Bust

Apes, degenerates, and scumbags unite!

Our favorite asset class, full of enough wild speculation to make even the likes of Jesse Livermore nauseous, has reached new highs.

~$72.75k is BTC’s official new all-time high, reached around midday yesterday. We were going to talk about the jobs report again today, but enough of the nerd stuff. Let’s have some fun and get into it.

Fueling The Fire

Everybody who told you to “have fun staying poor” back in 2020/2021 has a big, fat smile on their face as several years later, the world’s largest digital currency has officially generated a positive return.

Source

If you bought BTC at its previous all-time high, congratulations because you’re up about 5.5%.

And if you bought at the most recent trough in late 2022, take a non-sarcastic congratulations because you’re now up ~385%.

Unfortunately for traditional asset managers like Fidelity and BlackRock, they’ve only started getting in on the fun recently. But, it was precisely their “getting in on the fun” that brought us to the glory we’re at today.

A net of nearly $8bn has flowed into spot BTC ETFs launched in January and offered by these traditional asset managers. Nine of the spot BTC funds launched were new, but BlackRock, Fidelity, and Ark have soaked up >90% of those inflows.

Meanwhile, this is a nightmare for some asset managers, like Grayscale, which has seen its BTC premium entirely disappear now that spot ETFs have taken away just about all arbitrage opportunities.

Even operators like Wisdomtree have seen outflows despite their spot BTC ETF launching alongside those of Fidelity and BlackRock. Lower fees at the big dawgs are likely sucking those dollars away, however.

What Else Is Halvening?

If $8bn of flows in 2 months isn’t enough reason for BTC to boom, recall that supply is about to get crushed like demand was back in late 2022.

The next BTC halving, or “halvening” as we digital asset experts like to call it, is set to occur next month.

Source?

As the name suggests, BTC halving is a process by which the number of newly minted BTCs is reduced by… half.?

A quick explanation:

• A “block” is a 1MB file of transaction records of the BTC network
• To produce a “block,” BTC “miners” use their high-tech computers to “mine” the next block by solving a complicated math problem
• The answer to that math problem is a random 64-character “hash” that miners race to solve first
• The first “miner” to solve the math problem with the correct hash and produce the next “block” is rewarded in BTC
• These “blocks” then close off forever, making the records unchangeable, and link to previous blocks, forming the “blockchain” of BTC

So, when miners would earn 50 BTC for each block produced back in 2012, there were tons of miners competing for what, at the time, was still a small reward in dollar figures.

Today, BTC miners earn 6.25 BTC per newly mined block. By reducing the amount of BTC miners earn, Satoshi and the other BTC gods can ensure that inflation remains relatively stable.

Imagine if the Fed could only print half as much money as it did last time every time JPow fires up the printer…

Next month, the 4th “halvening” is set to reduce the reward to 3.125 BTCs. As we’ve pointed out before, when supply decreases, prices will surge as long as demand does not decrease by the same amount or more.

And, based on the fact that my friend from high school, who is now in the U.S. Air Force, texted me last week—and this is verbatim— “Is Shiba Inu going to the moon?” there’s no shortage of demand now.

In case you were wondering, my response was: “Thanks for letting me know we’re at the top.”

Tough that that take has already aged like milk.

What's Ripe ??

Moderna (MRNA) ??8.7%

• Damn, this stock moved a lot higher on Monday—what are these guys doing, curing cancer? Oh wait… they actually are?!
• Moderna, their partner in C-19 crime BioNTech (BNTX, +5.5%), and new partner in crime Merck surged on positive news surrounding mRNA vaccines.
• Moderna and Merck announced they’re moving onto a Phase 3 trial for a joint cancer vaccine, combining Moderna’s mRNA with Merck’s Keytruda drug.

Oracle (ORCL) ??1.5%

• Shares of this boomer version of a tech stock caught a bid leading into the firm’s earnings report last night. And for good reason.
• We didn’t get the numbers until after the close, but Oracle delivered, beating on the bottom line with sales just barely coming up short.
• The firm reiterated optimistic guidance for the 2024 fiscal year as well as its goal of $65bn in sales by 2026. Shares were up nearly 14% after hours.

What's Rotten ??

EQT Corp (EQT) ??7.8%

• This natural gas producer was stinkin’ up the S&P 500 yesterday, leading the index lower on an announcement to get back with their ex.
• EQT announced plans on Monday to re-acquire the pipeline operator Equitrans, which EQT spun off back in 2018.
• Market’s sold off as the deal is dilutive to existing shareholders. The purchase price of $12.50/sh clocked in ~12% higher than Friday’s close.

New York Community Bancorp (NYCB) ??5.0%

• Getting a cool, free $1bn wired to your bank account would probably fix all the problems of literally everyone in America. But not NYCB
• Even after receiving a billy from the damn former Treasury Secretary, investors aren’t confident they’ll be able to plug the holes in its balance sheet.
• Also, that $1bn ain’t free… to existing investors, at least. The deal dilutes about 50% of their existing ownership, so it's pretty hard to stay excited.

Thought Banana ??

A Gamble On Gambling

Goodness, beauty, and gambling—the three things that make life worth living.

Unfortunately, betting on goodness and beauty in 2024 is like betting on the iPhone during the Middle Ages—simply not possible.?

But gambling is always there for you. And one hedge fund, in particular, is making sure a certain gambling operator is always there for them, by force of law.

Bally’s Is Balling

Source

This is the kind of company every male college student dreams of starting someday. If operating 15 casinos, a horse racetrack, and an online sports betting site in 14 states isn’t enough, maybe getting bought out for $685mn will do it.?

And on Monday, that’s exactly what happened for Bally’s Corp. Hedge fund Standard General, which already owns a solid portion of the company, is offering $15/sh for every share it doesn’t already own.?

However, the more important detail here is that the very same hedge fund offered Bally’s $38/sh for the company back in 2022.

That would’ve been a $2.1bn valuation, and management told ‘em to shove it. Shares peaked over $71/sh in 2021, but after SG’s January 2022 offer, the stock never returned to that $38 level.

So, now that shares are at a ~67% discount, the hedge fund figured it was time for round two.

Since the initial offer, revenue has grown, as we can see above, but only by ~11%. The post-pandemic boom got Bally’s back on track, but they haven’t been able to get back to the glory days of growth.

The offer, in addition to being a long-awaited victory lap for SG, shows just how much formerly hot sectors of the market have cooled off.

The Takeaway?

Gambling stocks were kings of the world—as they should be—at the time of the initial offer. But now, nobody wants to gamble when treasuries are yielding >5%.

At the same time, the deal is further proof that M&A activity is so damn BACK. While interest rates and a return to economic “normalcy” have slowed down Bally’s, getting used to this new rate regime is spurring deal flow back to Wall Street.?

Now, who wants to give me a line for the odds of this deal actually going through?

?? The Big Question ??: Will we continue to see consolidation in the U.S. gambling industry? What other companies and sectors will see deal values reduce similarly? Anybody got any locks for this week?

Banana Brain Teaser ??

Previous ??

A certain restaurant that regularly advertises through the mail has 1,040 cover letters and 3,000 coupons in stock. In its next mailing, each envelope will contain 1 cover letter and 2 coupons. If all the cover letters are used, how many coupons will remain in stock after this mailing??

Answer: 920

Today ??

The price of a coat in a certain store is $500. If the price of the coat is to be reduced by $150, by what percent is the price to be reduced?

Send your guesses to [email protected]

Wise Investor Says ??

“If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.” — Satoshi Nakamoto

How Would You Rate Today's Peel??

??All the bananas? ? ? ? ? ? ? ? ? ? ? ? ???Meh? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ??Rotten AF

Happy Investing,

David, Vyom, Jasper & Patrick