Randy Steuart

(mostly) credit guy lookin for bps and peops

[Randy Steuart @randysteuart]

"Every mispricing in a market is a cognitive artifact. Somewhere, a population of brains is compressing information in a way that does not match the complexity of the underlying reality. The price is not "wrong" in some abstract sense. The price is an accurate reflection of how participants are currently processing information. The opportunity exists because that processing has structural limitations."

From What You're Actually Trading by @o_wutang

Great piece.

Markets have different "Compression Regimes"

[Randy Steuart @randysteuart]

Commentary only. Not investment advice. Ewing Morris has no position in Caesars Entertainment.

[Randy Steuart @randysteuart]

$CZR's palace intrigue.

Hasn't been a great time to be a Caesars Bondholder.

OTOH, a great time to be a Permitted Holder.

cc: @sindap

[Randy Steuart @randysteuart]

The Acquired Podcast's Nintendo story is yet another example that the internet is the most meritocratic Access Conduit that has ever existed on planet earth.

You can ‘Nintendo’ your way to anybody.

Like Zuck... and Dimon and Ek and Jensen.

On stage. At Chase Center.

Amazing.

It turns out that a singular, striking post/pod/essay can be the magnet that attracts someone who will change what's possible.

"It's about the magnitude of the way a small number of people feel about episodes..."

Power law mentality.

Cut from @AcquiredFM

[Randy Steuart @randysteuart]

https://t.co/C6H8JYp6aL

[Randy Steuart @randysteuart]

I'll be in midtown May 11 and 12, if anyone wants to chat co-ops + advance notice bylaw outtakes, why "Fundamental Change" > "Change of Control Triggering Event", the return of the dreaded Defeasance Threatened Tender as well as trade absurdly underfollowed X accts.

DM's open.

[Randy Steuart @randysteuart]

spactivism spactivate

[Randy Steuart @randysteuart]

Nice

https://t.co/JbGvY2NXcj

[Randy Steuart @randysteuart]

I'll be in midtown May 11 and 12, if anyone wants to chat co-ops + advance notice bylaw outtakes, why "Fundamental Change" > "Change of Control Triggering Event", the return of the dreaded Defeasance Threatened Tender as well as trade absurdly underfollowed X accts.

DM's open.

[Randy Steuart @randysteuart]

@lichthauch Georges St. Pierre.

[Randy Steuart @randysteuart]

Help first and see what happens.

@EricJorgenson did this
@naval noticed
then @balajis
then @elonmusk

How about that.

"Every day is an audition."

Give your greatness.

Appreciate the books Eric.

Cut from Smart Friends Pod (7/2024)

[Randy Steuart @randysteuart]

it’s 1982. US treasuries are yielding 13%.

bonds are trading at a huge discount.

you’re exxon.

you have excess cash.

you issued bonds in the good times.

and now you want to buy your bonds back in the 60’s.

but most investors account for the bonds at book value (cost).

selling them to you would trigger a writedown and getting yelled at.

so you’re stuck.

“why couldn’t you just ‘make-whole’ these bonds” you ask?

(the standard option of buying back a bond very early at a yield close to treasuries)

because it’s 1982.

make-wholes were born in the mid 90’s.

“you can’t do that”

exxon might give up on it.

but then a guy at morgan guaranty trust comes up with a solution.

defeasance.

retiring the bonds by way of buying and setting aside enough US treasuries to cover the bonds.

the nuclear option.

exxon defeases its 515mm of bonds for 60 cents on the dollar in treasury bonds.

then every company wants to know what this newfangled defeasance thing is.

nothing new under the sun.

[Randy Steuart @randysteuart]

@johnarnold "Amend and Extend" (Pretend), final answer

"we had to"

¯\_(ツ)_/¯

[Randy Steuart @randysteuart]

While the $EA Defeasance Threatened Tender (DTT) challenge plays out, $SIRI seen pulling a DTT on its 2026 bondholders to save a grand total of... ~50 cents.

50% declined to tender.

Co confirmed the exercise of Defeasance to those dissenting bondholders.

...padme.jpg

Not Investment Advice. Not Legal Advice.

[Randy Steuart @randysteuart]

Busy morning in Digital Media. $ZD sells Connectivity for >10x. $1.2Bn cash.

Stock is up >60%. Trades now at ***checks notes*** 2.2x PF EBITDA.

Plus we've got a fresh transaction in a declining revenue "website" comp: https://t.co/0T84Hw4KC7. IAC sold it for ~6.5x EBITDA.

Judging by the market reaction ($45), looks like the market is valuing Ziff Davis' cash and investments at ~30 CENTS on the dollar. Assumes remainco EBITDA is valued at 5x.

Returning the cash to shareholders here seems like the most reasonable course of action.

Interesting to compare $ZD's PF enterprise multiple of 2.2x to https://t.co/3atz4UNw8O debt (DOTMER) which trades low 9's yield at 4 times leverage.

If the debt market is comfy going to 4x leverage on digital media assets, there are plenty of options here for Ziff and none of them have to do with buying other assets.

Disclaimer: We own ZD at Ewing Morris. Views are our own, not investment advice. Sources: Bloomberg and Ewing Morris

[Randy Steuart @randysteuart]

The Roadmap

Sell or Spin (a la Diller) Connectivity.

Provides real-time data on internet and WiFi networks.

News: IT’S NOT EVEN A PUBLISHING ASSET!

It’s a subscription-based cash machine with excellent long term growth.

With a ~45% EBITDA margin…

10x? 15x?

Takes out the market cap right there with selling ONLY 20% of EBITDA?

Sell Health & Wellness.

News: Double digit revs and EBITDA growth. (What AI?)

Likely highest multiple digital media segment.

Condition-mapped pharma audiences (both HCP’s and patients).

10x here?

That’s another ~multiple of market cap?

So here we are at ~2x the total market cap on about only 50% of co EBITDA.

What about the rest?

Who cares!?

Actually, me.

And Vivek.

And you might too.

7/8

[Randy Steuart @randysteuart]

$EA DTT Update:

[Randy Steuart @randysteuart]

There it is.

The most unwelcome development in public credit since LME:

The Defeasance Threatened Tender.

Today's casualty - the $EA 2051 senior bondholders.

Traded just yesterday in the low 90's.

This morning's tender... SEVENTIES.

...AND if BH's don't take the deal, the defeasance option is even worse...

Kind of incredible this left tail risk wasn't more baked in.

But then again, before this inaugural thread of mine calling it out in September, I had exactly zero followers.

Public credit and shareholder engagement are my beats.

Follow if interested. DM's open.

[Randy Steuart @randysteuart]

But the crazy thing is there's actually a big left tail now - EA could consider its option of defeasance.

IYKYK.

NIA, NLA, NAA (Not advice about anything).

[Randy Steuart @randysteuart]

If the credit market has ANY capitalistic sense left, this defeasance option should be wiped from new issues.

The Optional Redemption covenant already affords issuers what they need to unilaterally retire their bonds.