The Prof G Pod with Scott Galloway – Prof G Markets: Exxon Buys Pioneer, Private Credit, and Ireland’s Sovereign Wealth Fund

Intro

In this episode of “The Prof G Pod with Scott Galloway,” Scott discusses a range of topics including Exxon’s acquisition of Pioneer, the private credit industry, and Ireland’s new sovereign wealth fund. He also explores the world championship pump and digresses on envisioning his own death. Additionally, he covers recent news on inflation, TikTok, Disney, Goldman Sachs, and more.

Main Takeaways

Exxon’s Acquisition and Fossil Fuels

• Exxon Mobil acquires shale oil producer Pioneer Natural Resources for $60 billion, doubling its footprint and production in America’s Permian Basin.
• Fossil fuels are still a necessary and efficient energy source despite concerns for the environment.
• Bet on US oil production is a smart move due to political instability in other oil-rich regions.
• Exxon’s acquisition premium of 18% is relatively low compared to the average of 37% for public M&A in 2021.

The Private Credit Industry

• Private equity giants KKR and Carlyle are launching two new private credit funds that will not charge a carry fee, signaling that private credit is having to sweeten its terms to win over investors.
• Private credit industry is highly competitive, and alternative investments have been a genius marketing strategy for investors.
• Investors pay high fees (2% of investment annually) and give up 20% of the upside to access unique insights and tools, but these investments have generally underperformed benchmarks.
• KKR and Carlyle are moving towards a Walmart/Vanguard/Amazon strategy by creating massive AUM and charging small fees, rather than taking 20% of the upside.

Ireland’s Sovereign Wealth Fund

• Ireland’s new sovereign wealth fund, the Future Ireland Fund, will be funded by profits from US tech companies operating in Ireland, thanks to Ireland’s favorable corporate tax laws.
• The government estimates the Future Ireland Fund could hit $100 billion in assets by the next decade.
• Apple International in Dublin, Ireland receives all of Apple’s intellectual property, which is then leased back to their American unit for $50 billion a year, suppressing profits in a high tax domain and increasing profits in a low tax domain, resulting in pure tax avoidance.
• Ireland charges a lot less tax on those profits, allowing them to attract and facilitate tax avoidance, creating a sovereign wealth fund that should be called the multinational tax avoidance fund.

Other Notable Takeaways

• The IPO market has become the last stop on the pump and dump train.
• TikTok is growing rapidly and could potentially become the biggest media company in the world within three to five years.
• Goldman Sachs is selling GreenSky, the consumer lending firm it acquired for $1.7 billion two years ago.
• The Consumer Price Index showed inflation was stable at 3.7% year over year in September.
• Utah filed a lawsuit against TikTok, accusing the app of promoting addictive and harmful social media habits among children.
• Disney is raising prices at its theme parks, with some ticket prices increasing by up to 16%.

Summary

Exxon’s Acquisition and Fossil Fuels

Exxon Mobil’s acquisition of Pioneer Natural Resources for $60 billion is a strategic move to double its footprint and production in America’s Permian Basin. Despite concerns for the environment, fossil fuels remain a necessary and efficient energy source. The acquisition premium of 18% is relatively low compared to the average for public M&A in 2021, making it a smart bet on US oil production.

The Private Credit Industry

The private credit industry is highly competitive, and private equity giants KKR and Carlyle are sweetening their terms to win over investors. They are launching new private credit funds that will not charge a carry fee, aligning with the trend of charging small fees to create massive assets under management (AUM). However, alternative investments in private credit have generally underperformed benchmarks, raising questions about their value proposition.

Ireland’s Sovereign Wealth Fund

Ireland’s new sovereign wealth fund, the Future Ireland Fund, will be funded by profits from US tech companies taking advantage of Ireland’s favorable corporate tax laws. The fund, estimated to reach $100 billion in assets by the next decade, highlights Ireland’s role as a facilitator of tax avoidance. Apple’s tax avoidance strategy, leasing intellectual property back to their American unit, allows Ireland to attract multinational corporations and create a sovereign wealth fund that critics argue should be called the multinational tax avoidance fund.

Other Notable Takeaways

The IPO market has become a less attractive option for private companies as they can find ample capital in the private markets. Private equity firms are using false signals to create the illusion of scarcity and value, leading to inflated IPO prices and underperforming IPOs. TikTok’s rapid growth positions it as a potential contender to become the biggest media company in the world within three to five years. Inflation remains stable at 3.7% year over year. Disney is raising prices at its theme parks, and Goldman Sachs is selling GreenSky, a consumer lending firm it acquired two years ago.

Conclusion

This episode of “The Prof G Pod with Scott Galloway” covers a range of topics, from Exxon’s acquisition of Pioneer and the private credit industry to Ireland’s sovereign wealth fund. It highlights the complexities of the energy sector, the challenges and opportunities in alternative investments, and the role of tax avoidance in shaping economic policies. Additionally, it touches on current news and trends in inflation, social media, and corporate finance.