And if you look at private equity, pull

up that chart I had there. This is just

stunning how big this industry is

getting. You know, $5 trillion is what

we're up to here. And it just keeps

growing.

>> I I think private equity is totally

screwed. I I don't think Silver Lake or

Infinity or this deal

are screwed, but I think private equity

in general is totally hosed.

>> All right. Well, it's gotten huge just

since 2015 and tripling in size. So why

is this I guess my question for the

gentleman here and for the audience why

is private equity becoming so large and

what impact does that have on society if

people can't put EA into their

retirement account? They can't put

Stripe into their retirement account. If

we take all the great companies and we

start to privatize them, SpaceX never

goes public. What impact does that have

on people's retirement accounts?

>> Okay, look I think I think the history

of this is important. There was a

long-standing belief that the best way

to generate the best risk adjusted

return. What does that mean? That means

to manage through periods where the

stock markets go down and to manage

through periods of volatility. The best

way to do that was to have what's called

a 60/40 allocation. 60% to bonds and 40%

to equities. Over many years, especially

when we artificially suppressed rates at

zero through Obama, a lot of people

started to move their allocations away

from 60/40 and they started to make more

and more investments further out on the

risk curve. The biggest beneficiaries of

that were venture capital, private

equity, and hedge funds.

The thing with private equity is that

because rates were zero, they had an

infinite amount of borrowing capacity,

had very little downside to them, and so

they were able to manufacture returns

much faster than venture capital and

hedge funds could. So, as a result, you

had an initial group of people that were

defining the asset class, making a ton

of money, and then you had all these

fast followers that said, "Well, if

they're doing it, I can do it, too. So

far, so good." But then always what

happens is then you have this flood of

lagards that just flood the zone. And

it's these lagards that make it very

difficult to generate returns because

they start overpaying for assets. They

start mismanaging and undermanaging the

assets that they do own. And so where we

are is that private equity has seen a

very consistent way of returning money

to help improve that 60/40 portfolio. as

a result they got a lot of money but

then that created a lot of competition

and so that's why you see this hockey

stick graph Jason and when you see that

kind of graph

>> it doesn't matter what asset class it is

the returns go to zero and so we've seen

this in venture capital

>> we've seen this in hedge funds

>> and we're now going to see this in

private equity

>> too much money going in to be clear what

you're saying means you kind of exit it

right there's there's no returns and so

again I've said in any of these

alternative asset classes, there's only

one thing you should always ask if you

had to have one critical question.

What are your distributions?

Don't show me your IRRa. What is your

DPI?

>> The distributions on your paidin

capital. And if the answer is zero,

then it is a very challenged asset

class. And what I will tell you in

private equity is that over the last

four or five years,

distributions have been few and far

between.

So I think what's going to happen is

that the money is going to come out of

private equity and it's going to get

concentrated into the few companies that

know what they're doing of which

Silverlake has generated over you know

the last 15 20 years

tens and tens of billions of dollars of

distributions. They are just an

exceptionally well-run organization.

They've done these huge buyout deals

successfully before. So, we need to go

through that in PE. Where does the money

go? The money's already leaked into

private credit, which is the next big

bubble that's building. It looks like

this chart that you just showed,

which is loaning businesses money. You

know, it's super interesting because you

make such a good point. What we're

seeing in private equity is these

continuation funds. Now continuation

funds are coming chimoth to venture. So

I've been getting pitched on these

continuation funds where like hey take

all your assets sell it to a new group

of people and then reset the clock and

then there's never an exit. The good

news is I will say the last year we've

seen a lot more activity for shares of

our companies that are still private. So

the secondary market freeberg is coming

back in a major way. But I do get

worried about these continuation funds

because now you're just moving an asset

from one class to the other and we need

to have a functioning IPO market. How

functioning is the IPO market today?

Would we say it's completely

dysfunctional?

>> How dysfunctional is the IPO market? Let

me say it another way. And and how do we

correct that? And this leads into your

new spec.

>> Look, there are three ways to go public.

There's the traditional way IPO,

there's the direct listing, and then

there's the reverse merger or the spa.

Up until I floated IPO A in 2018, I

think it was the first way was really

the only way.

I was involved in two direct listings,

Slack and Coinbase.

And in both of those, what I learned is

that, you know, it has the same vagaries

as the traditional IPO. So in the

traditional IPO, you go to a bank, they

underwrite you, they act as a

gatekeeper, and they take six, seven, 8%

fees as a result, and then they allocate

what is essentially underpriced stock to

their best customers. Then you see a

one-day pop, maybe a two or three day

pop. All of those customers tend to

unload and then the stock tends to drift

down. So the IPO is expensive and it

typically is mispriced.

The direct listing

you have a different dynamic which is

the first trade is always the highest

trade and then it just goes straight

down. That happened with Slack and it

happened with Coinbase. So

>> Spotify would be in that group as well.

Yeah.

>> Yeah. With Slack I remember like I I was

like offside a billion dollars and I was

like well I'm never letting this happen

again. And so when I had the Coinbase

thing, I sold it the first day. And I

texted Brian. I said, "This is not a

directional indication of your company.

It's the dynamics of the direct listing

because I learned it the hard way that

the time to sell is on day one." So

where does the spack come in, you know,

especially now in version two? Version

two being the the thing that I have been

tinkering and refining with and am

trying to push in in this new version.

I think that it's creating an incredibly

competitive vehicle where you can have a

ton of money go into these private

companies, take them public at a very,

very low cost of capital. And I think

that that's should be very enticing.

>> So, you closed your financing. Can you

just tell us what the capital raise was

like as you went out and met with folks?

What do you hear?

>> Yes. You know, Nick, maybe you can find

it. You know that image of the Raptor

engines?

>> Yes. super complex to being elegantly

simple.

>> Yeah. Nick, can you can you maybe just

throw that up? What I would say is like

Spack 1.0, of which I was, you know,

right in the front of the parade, had a

bunch of misfires and it was

complicated, but it worked. There were

some hot fires that worked, but then

there were some clear misfires. And the

whole point was to prove that you could

create a competitive alternative to the

IPO. The thing that I'm the most proud

of quite honestly is

for all intents and purposes I started

a normalization of this vehicle that's

now raised more than 1502 200 billion

dollars for American companies. I am

very proud of them. That's an important

thing for the American capital markets.

I think what we did in American

exceptionalism is Raptor 2. It's not yet

perfect, but I do think it tries to

improve on the things that I noticed was

not working in Raptor 1. And in that is

a lot of the compensation and

incentives. And so when I showed that to

investors, they were quite excited. I

think that they want a competitive IPO

market that brings many many American

businesses to the public market so that

they can be owned by everybody, the

transparency they like, and the fact

that the incentives are such now where

there's absolutely no compensation

unless this thing really works. And

historically they received warrants in

the company typically with a strike

price of 1150. So 15% above the issue

price of the stock

>> and founders shares that were basically

>> and there was founder shares. But like

did you have a reaction from them saying

hey we want some

>> warrants we we need a little extra

kicker here like there's some sort of

desire for that.

>> No in fact it was the opposite. I think

that the institutional investors and you

know my investors in this 98.7 of the

capital was allocated to these guys are

the best of the best. You you know who

they are. So they're every single blue

chip A+ institutional investor and what

they wanted was great companies. They

want great companies to be public and

the reason is the thing that Freeberg I

think you mentioned this before. When a

good company gets public, the amount of

money that they can raise in the publics

and then the amount of growth that they

have in the publics far outclasses what

they'll ever do as a private company.

And so they want the simplest and

cheapest way of great businesses to get

out. Jamat, do you think that the

transaction when you find a merger

partner, the traditional spa has been

announced as a merger concurrent with a

pipe being done where new investors are

underwriting the valuation of the deal

and saying we like this company at this

price cuz we are now going to write

money in in the form of a pipe and

historically the pipe was for common

shares. So it kind of was like this is a

good price and everyone felt good about

it. Number one, do you anticipate that

there'll still be a pipe being done in

concurrent with the merger and this

transaction? And then number two is do

you think it'll look like a common pipe?

Because after the spa frenzy died down,

in order to get deals done, the pipe

started to get done with convertible

preferred securities. So they were

senior to common and they almost were

like dead. How do you think this is

going to play out? because a clean deal

has not happened in quite some time

where a spa has announced a merger and

simply raised money via common in the

form of a pipe.

>> It's a great question. I think it comes

down to the underlying asset, but there

are some incredible companies that are

private

that if they go public

will be able to demand

common pipe capital. I think that the

future maybe just prognosticating and

guessing what does Raptor 3 look like in

this back. I think the Raptor 3 will

look like where somebody a sponsor like

me rolls everything up into one thing so

that it's already pre-wired from the

beginning where I'll just speak to

a billion, two billion, three billion,

whatever it is, flexible capital that

can come in as common so that it's a

totally pre-baked IPO

>> at a very fair price. I think that I

think that that's what the Raptor 3

version of a spa will look like.

>> So more capital and then they they put

their full trust and faith in the

sponsor to run the deal. Well, no then

no meaning then there's no conversion

risk that all the money comes over right

from day comes over right and so then

you have to fully commit