Sizing Up Elon

Good morning and happy Friday.

They say that owning a boat is akin to owning a hole in the water that you throw money into. Owning a boat business might be just as bad.

On Thursday, Ski-Doo — maker of snowmobiles and other recreational vehicles — announced it has begun a sale process for most of its marine brands, including its line of fishing boats, pontoon boats, and other aquatic apparel and accessories, citing rapidly declining consumer demand. Notably, however, the company is hanging on to its Sea-Doo brand of jet skis, making it the corporate equivalent of everyone's lakehouse-owning uncle who gives up on boat life but just can't part with his favorite toy.

Sometimes it pays to be the little guy, Elon.

This week, X (née Twitter) managed to duck the European Union's new(ish) Digital Markets Act, a sweeping raft of legislation geared toward putting a special regulatory burden on Big Tech. X did so by successfully arguing that it isn't actually all that big. Now, the bad news for X: EU lawmakers might start looking at the companies in CEO Elon Musk's stable as one interconnected web, sources told Bloomberg and the Financial Times on Thursday.

The Musk Cinematic Universe

The DMA works by categorizing certain large companies as digital "gatekeepers" and placing them under particularly stringent rules. The list of gatekeepers so far includes all the usual Silicon Valley suspects — Meta, Amazon, Microsoft, Google — plus TikTok's parent company ByteDance and Booking.com, which has argued fervently against its inclusion in the Big Boys' club. 

It's always been a sleight-of-hand that Twitter/X is talked about in the same breath as platforms like Facebook, as its user numbers have always been far smaller. In the end, X's winning argument hinged on how little ad money it makes in the EU:

• As reported by Ars Technica, X told the European Commission in filings that its advertising revenue and user numbers in the EU have both declined since 2022, when Musk took the company private.
• X and Musk also recently lost a bitter enemy at the EU in the form of Commissioner Thierry Breton, who announced a surprise resignation last month. All in all, a good start to fall for the company.

However, there is a fly in the ointment: Sources told Bloomberg that under the new Digital Services Act, which was drafted alongside the DMA, officials are considering calculating fines for X based not on how much revenue the company makes, but how much revenue all of Musk's private companies make. So that's SpaceX, Neuralink, The Boring Company, and the newly-hatched xAI (although to be honest, that probably doesn't pull in too much revenue yet). It would be a highly unusual way to regulate a company — essentially deciding that it's synonymous with its chief executive. It's a testament to how Musk has positioned himself at the heart of his companies, which are pretty porous: When he took over at Twitter, employees were lassoed from SpaceX and Tesla to help him mold the company.

Bolt to the Blue: X's user numbers may take another hit soon. On Thursday, the platform announced some changes to how blocking other users would work; subsequently, rival microblogging platform Bluesky — which was founded by Twitter founder Jack Dorsey — notched so many new signups that it briefly crashed.

Written by Isobel Asher Hamilton

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The IPO market may seem dead in the water, but Blackstone can be forgiven for feeling invincible. 

On Thursday, amid a strong earnings call, the private equity giant announced that it is planning to take some of its portfolio companies public. "When you have this strong of an equity market it's almost like a magnet pulling companies out of the private market," Blackstone president Jonathan Gray told the Financial Times.

Public Notice

Life is pretty good for the world's largest alternative asset manager. Assets under management climbed to a titanic $1.1 trillion in the latest quarter, the company reported, a new record. Meanwhile, distributable earnings — a.k.a. cash that can be used for shareholder dividends — increased 6% year-over-year to hit $1.3 billion in the third quarter. And now in a new era of easing interest rates, things might get even better.

Rate cuts the world over have already helped spur a dealmaking flurry at Blackstone. The firm invested $34 billion this past quarter, more than any quarter in the past two years. Its PE funds appreciated by over 6% in the quarter, contributing to the firm's highest overall fund appreciation period in over three years. Still, "realizations are the one engine that has been muted," Gray told the FT. But with falling rates and a white-hot equities market, renewed investor interest in the IPO market is on the horizon — and Blackstone's portfolio appears ready to be cashed out:

• Gray noted that the biggest companies in its portfolio are among the most listable. That includes companies such as payroll software group UKG and health supplies company Medline Industries. Blackstone also sits on $70 billion worth of data centers.
• The listings could revive a sleepy IPO market. IPOs have raised just $77.6 billion through the first nine months of the year, per EY figures, down 23% from 2023 and just a fraction of the record amount seen in 2021. Still, Blackstone isn't alone in sizing up a rebounding market — major PE players like BC Partners and Carlyle have also been moving to list larger portfolio companies.

Credit Report: While the lack of public listings has slowed Blackstone's exits, the firm's been buoyed by massive growth in its credit and insurance arm, which took in over $21 billion in the third quarter, becoming its biggest unit by assets. Shares of Blackstone surged roughly 7% to a new record high on the strong earnings beat, and are up about 32% overall year-to-date. If anyone can thaw this frozen IPO marketplace, it's probably Blackstone. 

Written by Brian Boyle

What doesn't it cure? 

A new study suggests increasingly popular GLP-1 drugs — better known by the brand names Ozempic, Wegovy, and Mounjaro, and used to treat diabetes and obesity — could help cut opioid and alcohol abuse nearly in half. But, as with all early-days research, until there's more evidence, GLP-1 makers will have to subsist on an all-you-can-eat buffet of optimism.

A Mega Study in Contrasts

The study, published in the peer-reviewed journal Addiction, saw researchers scan a vast trove of US electronic health records to look for people with an opioid or alcohol addiction who had also been prescribed a GLP-1 drug to treat obesity or diabetes. 

Their subsequent analysis revealed a very large, and very promising, gap:

• Among more than 500,000 people diagnosed with opioid-use disorder, the researchers found 8,103 who were prescribed GLP-1 drugs. Those with prescriptions had a 40% lower rate of opioid overdose.
• Among more than 817,000 people diagnosed with alcohol use disorder, they found 5,621 with GLP-1 drug prescriptions. Those with a prescription reported a 50% lower rate of intoxication.

But GLP-1 drug manufacturers like Novo Nordisk and Eli Lilly — which have already earned billions from the weight-loss craze — shouldn't pop the non-alcoholic prosecco just yet. Since results were based on analysis of records, the researchers notes, a causal link can't be established without holding randomized controlled trials.

Consider This: "A note of caution is that the outcomes are very extreme instances of substance intoxication," said Matt Field, a psychology professor at the University of Sheffield, in response to the report. "This leaves open the possibility that while Ozempic may (for reasons currently unknown) prevent people from taking so much alcohol or heroin that they overdose and end up in hospital, it may not actually help them to reduce their substance use, or to abstain altogether."

Written by Sean Craig

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