The Sound of PE Imploding
Enviva - PE / stock market darling that raised a $1bn continuation fund filed BK this
WheelPros - Clearlake continuation fund that just LME’d last year files BK
Good luck out there everyone.
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maybe niche in these circles, but I'm happy you didn't refer to wheel pros as their rebranded name. Brutal what has happened to the Hoonigan brand I grew up with.
Had no idea about Hoonigan, had lost touch with it. This is so unfortunate.
Very sad
1) highly discretionary business. 2) bought a ton of assets for top dollar and failed funneling it through their DC network. 3) caught some falling knives (TAP acquisition). Still a ton of well-known brands in the business.
There was a study of long surviving companies in the world - the vast majority was in Japan. A bunch that was a few hundred years old.
commonality? No leverage. It’s pretty hard for an established business to go BK if there’s no debt (or fundamental developments that obsoletes the product / service).
How is enthusiast auto holdings doing ? Owned by Cortec similar business ?
2 overleveraged MF deals blow up, "PE imploding"... NGMI
Neither Clearlake nor Riverstone are MFs. And neither was American Securities, Onex, Centerbridge, Huron, etc etc. what they all are are MM/UMM funds that levered to the hilt and confused a private market bubble for genius investing
These two are isolated incidents in my opinion (Clearlake has a whole arsenal full of dogshit though) but the Wheel Pros bk is particularly interesting to me.
If you know anything about the company, wheel pros owns a smaller brand called hoonigan. Hoonigan was founded by Ken Block, a rally car driver an overall really cool dude. Ken passed away in 2023 tragically in an accident but hoonigan had a huge online presence and a YouTube channel that I used to watch quite a bit.
There have been multiple instances of PE funds coming in and buying automotive YouTube channels / brands and people are finally starting to take notice. Hoonigan was a great example of this, and interestingly, after PE ownership a lot of the main “faces” of each channel / brand tend to leave. It just happened with Donut Media too. All these guys leaving complain about PE stifling creative vision and putting a heavy emphasis on profit generation (nothing new here) but it has caused a considerable uproar.
As a consumer of this content, I can’t really blame people for leaving. Content quality seriously degrades whenever fund buys a brand and its really interesting that now we have our first real bankruptcy. Cheers, Clearlake lol.
More proof PE has vastly overstretched what it should be and a large amount of players are going to die out over the next 10-15 years. Ultimately a good thing.
Then how are people going to get rich by dumping their companies onto PE funds?
Not isolated. The number of BKs and LME (hope and prayer) is very long and getting longer as the ‘20-‘22 deals start hitting maturity walls.
Nature of PE is that problems can stay hidden a very long time in benign macro environments, open / low interest credit markets to refi, and abundant capital to deploy from next buyer. None of these three conditions hold or will hold over the foreseeable future.
You may very well be correct, but a lot of funds have hedges on any debt for 20-22 vintage portcos. I’m not disagreeing that there is a whole lot of dogshit out there, but it really does seem pretty thematic with the types of companies that are sucking wind. Lots of platinum/ Clearlake names that are levered to the tits and highly discretionary in nature.
The reality is a lot of the big funds are either going to sell into a CV or put more equity in because they can afford to.
I noticed that with Doug Demuro's channel and his car auction website since he sold a majority stake to PE. His channel doesn't feel the same anymore. He used to make YouTube videos for YouTube viewers, now it's just a funnel to push his auction website. And they hired and then fired bunch of creators on the side projects because they weren't making enough money. Feels like non-PE owner would've kept it for longer before pulling the plug. Can't blame Doug here, even I would jump at making tens of millions to sell a stake, especially since YT is not reliable for long-term income.
I agree, it’s generally a pretty short sighted strategy, but then again a PE investor can be short sighted. All they really need to do is milk these YouTube channels, which are essentially marketing engines for a brand or product, for a few years and exit. They don’t care if the content suffers or if viewership declines - in fact, I’m sure they expect it. Just kind of unfortunate because as a fan of Hoonigan / Donut, the golden era of car youtube content is probably over.
I also don’t blame the channel owners for selling out to PE either, who wouldn’t take a fat payday after grinding for a long time. This is prevalent in a lot of different spaces but it’s pretty interesting to see it permeating into niches that I never thought PE would touch.
WheelPros seems like there was too much bro energy / echo chamber in IC. Who would buy this ish
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