Happy Friday. Welcome to The Chaos Coordinator! We are Brain Candy's snarky little sister, delivering carefully curated news happening across the industry (that you should probably care about) right to your inbox, with a hefty dose of irreverence.
Before we get into it, let's take a quick moment for all the fellow Gen-Z correspondants who found themselves at the center of explaining coconut trees, a British pop star turned political influencer, and the resurgence of a very off-putting chartreuse green to their older counterparts this week. Keep on the slay.
In this issue, we dive into:
Equity Warrants
Q2 2024 Global M&A
Political Clones
Project Coconut
What's happening in.....
PE/VC
Explain Equity Warrants Like I'm 5
Private Credit has a new accessory. No, it's not a Trader Joe's tote bag.
In the ever-so-elusive realm of private credit, equity warrants are becoming more prevalent, particularly in the lower middle market, as a means to enhance returns and align the interests of borrowers and lenders. These warrants, which have been part of financial deals for decades but were not common in private credit, have seen increased use since 2022 due to the high-interest rate environment and challenging exit conditions. They allow part of the lender’s return to be deferred through equity participation at an agreed-upon exit event, rather than adding immediate cash-pay interest. This approach is particularly appealing to companies confident in their growth strategies, as it lets them reinvest cash back into their business rather than repaying lenders right away. Simple, right? Warrants come in two main forms: penny warrants, which let lenders buy a company’s securities at a nominal price, and traditional warrants, which give the right to purchase stock at a set price before a specific expiration date. These instruments are particularly useful for borrowers with complex financing needs, offering a flexible solution that can bridge the return requirements of lenders and the growth ambitions of borrowers.
The role of private equity in M&A dealmaking has grown, and as a result, the industry's recovery has been steadily trending in a positive direction. PE's share of the overall value of M&A deals increased to 41% in Q2 from 33.5% in Q1. Bank lending for leveraged buyouts has increased, reducing borrowing costs and leading to a rise in major take-private transactions. Pitchbook's Q2 2024 Global M&A Report covers the factors influencing M&A dealmaking by area and industry and discusses how these changes could pave the way for a busy second half of the year.
Incase You Haven't Experienced Enough Existential Crises This Week
Here's a new one: AI generated political clones.
In a turbulent election cycle, there is growing concern about AI deepfakes. A Jumio survey of over 8,000 adults across the US, UK, Mexico, and Singapore revealed that 72% worry about deepfakes daily. A notable example includes a robocall that cloned President Joe Biden’s voice in January, underscoring the potential for AI to deceive the public. Mexicans expressed the most concern (89%), while Americans were the least worried (just over half). More than half of respondents believe their governments are not doing enough to regulate AI, and 43% have some faith in their government's regulatory abilities. Three-fourths of global respondents worry about AI's influence on elections, including 72% of Americans. Confidence in spotting deepfakes is generally low, with only one-third of Brits and similarly low numbers of Americans believing they can detect deepfake politicians. Jumio also found that the older a participant was, the less confident they were in their ability to detect a deepfake.
Do You Think This Campaign Just Fell Out of a Coconut Tree?
It exists in the context of all in which you live and what came before. And the culture-shaking force of three words from Charli XCX.
American youths have had a lot to discuss in the days following Kamala Harris' announcement of her presidential run. Last Sunday (yes, it has only been five days), President Joe Biden dropped his re-election candidacy and backed VP Harris. Despite the uncertainty brought about by the president's unexpected departure and Harris's subsequent rise, social media users, especially young ones, have been captivated by the race. In the hours following the announcement, the Harris campaign wasted no time leaning into the frenzy. And neither did British pop star Charli XCX.
Now, if you 1) aren't surrounded by interns this summer who can educate you or 2) live under a rock and have not yet wrapped your head around the Brat phenomenon, let's debrief. Charli XCX released her now critically acclaimed album, Brat, in early June. The album cover and its "attitude" became a viral sensation, inspiring "brat summer," "brat aesthetic," and now "brat politics" as the album discourse moves from social media into mainstream political discussions. Harris' campaign, KamalaHQ, has adopted the Brat aesthetic on its social media profilepages, and the internet is practically overrun with Brat-soundtracked videos of Harris.
So, how exactly does the Democratic candidate embody brat? According to the internet, "Kamala Harris is 'brat' because she's bold, unapologetically herself, and tapping into young voters with relatability." One TikToker wrote, "The memeification of Kamala's campaign is going to win her the election because she's the first candidate in years (ever?) to treat young people as a serious and important voting demographic. Incorporating Gen Z culture into her marketing campaign is not only very brat, it also validates the importance of young voters as a population worth marketing to."
-1.png?upscale=true&width=588&upscale=true&name=Chaos%20Connections%20(1)-1.png)
