Ghosts in Washington

⏱️ TikTok is ~72 days away from yet again facing a ban on American soil. Take a look at some of the Avengers that have assembled so far and their bids to buy.

January 24, 2025

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In this issue of the peel:

  • ⏱️ TikTok is ~72 days away from yet again facing a ban on American soil. Take a look at some of the Avengers that have assembled so far and their bids to buy.

  • 🛫 GE Aerospace is living its best life post-divorce with the rest of GE. Union Pacific’s Q4 earnings reminded me that railroads still exist. EA is learning the hard way why soccer sucks, and American Airlines didn’t stick the landing in Q4.

  • 🧑‍🎓 After 16 years of constant education to get your finance degree, the #1 thing everyone wants to do next is more studying. Find out which certifications are right for you.

Market Snapshot

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Macro Monkey Says

TikTok Bidders

The ghost of Joseph McCarthy still lingers on Capitol Hill, beating up communists and wishing death on anyone misfortunate enough to wear red that day.

It’s a shame it’s just his ghost through—he’d be the perfect guy to run TikTok. Sadly, we’re stuck with this awkward bunch of MBA grads, tech-CEO-wannabes, and Kevin O’Leary.

The big question is “Who has enough money?”—but that’s tough to answer when no one knows if it’s even for sale or, let alone, how much Bytedance wants.

Let’s get into it.

What’s Happening

When President Trump officially banned the ban of TikTok for 75* days (not 90, as my dumb*ss previously reported) on January 19th, he also created the busiest, most stressed-out C-Suite environment since the music stopped in Margin Call.

For this potential acquisition, we have to start with the understanding that this is a one-of-one transaction.

Using questionable legislation to force the government-mandated sale of the most popularly used app, which happens to be owned by an adversary, in a country of 340mn people who happen to be the wealthiest user base in the world is… unprecedented.

With that in mind, some more adventurous analysts have given estimates of a fair sale price, mostly coming in the range of $40-50bn.

Finding financial data on a privately held Chinese tech firm is, intuitively, challenging. But, according to Business of Apps, the firm generated $16.1bn in revenue in 2023, with ~$10.1bn coming from ad sales.

Based on quarterly data and back-of-the-envelope growth assumptions, TikTok’s 2024 revenue likely came in no less than $25bn, implying ~55% growth in 2024, slightly down from the 67% estimated revenue growth from 2022 to 2023.

If anything, that’s conservative. A sale price of $40-50bn assumes a multiple of 1.6x-2x, below the average social media revenue multiple in 2024 of 3.3x.

To use the technical term, that’s batsh*t insane. Because TikTok’s sale is a government mandate, Bytedance is likely looking for a premium sales price.

However, if the other option is to completely turn off the revenue printer that is TikTok U.S., maybe they’ll take whatever price they can get.

That second line of thinking makes the $20bn acquisition price thrown out by a consortium of investors led by the self-proclaimed “Mr. Wonderful,” Kevin O’Leary, slightly realistic. 

O’Leary’s offer comes as O’Leary Ventures teams up with billionaire Frank McCourt’s Project Liberty, calling their joint bid the “People’s Bid for TikTok.”

But there are other players likely to bring slightly more firepower to the table. Some alleged bidders the media has floated include:

  • Elon Musk: Reports indicate that the Chinese government was actually the party first interested in Musk as a potential owner of TikTok. Tesla’s large, long-lasting presence in China engenders trust with the CCP that others don’t have (and probably don’t want). He’s also currently worth $440bn (or, as I call it, 2 Mark Zuckerbergs).

  • Jimmy Donaldson (Mr. Beast): Jimmy Donaldson, a.k.a Mr. Beast, is reportedly working with entrepreneur Jesse Tinsley to put together a bid, but nothing is official yet.

  • Perplextiy.ai: Yahoo Finance reported on January 18th that AI/LLM startup Perplexity.ai would submit a bid to merge with TikTok U.S. and create an entirely new entity.

  • Bobby Kotick: Former CEO of Activision Blizzard Bobby Kotick has been floated as a potential buyer, but like Mr. Beast, nothing official.

  • Tech Companies: These guys are a little better at working behind the shadows, but companies like Microsoft and Alphabet, which have dabbled in the social media space before, are almost definitely submitting bids. Apple is particularly compelling, too, given its large presence in China and a high degree of trust among Americans.

  • The Daily Peel: I have exactly $11 in my wallet and am happy to take it off their hands. But, if we can get every Daily Peel subscriber to donate a small $384,615.38, we can put together a $50bn bid.

The Takeaway?

Bytedance is valued at around $300bn, according to a buyback offer done in November. The firm reported $120bn in revenue in 2023, of which TikTok encompassed ~13.4%. 

$50bn seems low on a multiple basis, but considering it might be $50bn or $0 forever, it’s possible this is a fair estimate of the sale price. It just depends if Bytedance is willing to forgo a sizable chunk of its revenue and an even larger percentage of its valuation.

The creative juices are flowing on both sides of the Pacific, so don’t be surprised if by April 5th—the day the ban next goes into effect—the owner of TikTok is someone completely different.

Like I said, I’m happy to take it off their hands.

Career Corner

Question

I had a great chat with a portfolio valuation guy at HL and even got put in touch with another portfolio valuation analyst after the chat (always a good sign).

Do you think there is a respectful way to ask to be connected to actual investment bankers in a way that won’t offend the portfolio valuation guys?

Answer

Not sure what your exact circumstances are, but I strongly suggest following the process to ensure that you are getting the most value out of your networking.

If you go out before you are ready, you could end up missing out on what could prove to be good connections. Networking just to network isn’t super helpful; you need to have a strategy for when and why you are reaching out to maximize the outcomes.

If you are in an urgent situation, I would suggest setting up a time with a mentor to try to figure out how to best proceed.

Head Mentor, WSO Academy

What's Ripe

GE Aerospace (GE) 6.6%

  • Like signing up for Tinder after a messy divorce, GE Aerospace is having a lot of fun now that it’s no longer tied down by the rest of the old GE conglomerate.

  • The defense and aerospace firm reported EPS of $1.32/sh on $9.88bn in revenue vs estimates for $1.04/sh on $9.51bn. That’s 103% YoY EPS growth.

  • Revenue growth of 16% was the best in a long time, boosted by a 46% jump in total orders. The firm also plans to raise dividends by 30% and buyback $7bn in shares.

Union Pacific Corp. (UNP) 5.2%

  • The original autonomous vehicle (kinda), I bet Cornelius Vanderbilt would be amazed his railroads are still around at the same time as Waymo and FSD.

  • Not only are they still around, but they’re doing alright. Union Pacific, America’s second-largest railroad firm by freight volume, pleased analysts with its mixed Q4 results.

  • The company reported $2.91/sh on $6.12bn in sales, mixed vs estimates for $2.78/sh on $6.14bn. Lower fuel surcharge revenue, an unfavorable mix, and lower other revenue were the primary drivers of the 1% YoY sales decline.

What's Rotten

Electronic Arts (EA) 16.7%

  • Electronic Arts painted a masterpiece yesterday. Unfortunately, it was made out of the splattered remains of the company after the stock’s pre-earnings cliff dive.

  • Shares in the videogame maker behind Madden and other titles fell faster than a Boeing plane after drastically reducing guidance for Q4 bookings just 9 trading days before their earnings release on February 4th.

  • The classic mistake of being too honest. Management blamed weak sales in its Global “Football” (soccer) Division, but really, the blame is on whoever invented such a boring “sport.”

American Airlines (AAL) 8.7%

  • Plane companies need to figure it out. Sometimes they’re “Air Lines,” and sometimes they’re “Airlines,” and all I’m asking for is a little damn consistency.

  • Anyway, the airline with the most freedom, American Airlines, saw shares sink as the company apparently didn’t have a CrowdStrike to blame for their results this quarter.

  • Reporting revenue of $13.7bn and earnings of $0.87/sh, American’s Q4 results flew past estimates. However, weak guidance for Q1’25 stole the spotlight.

  • American said it expects to lose between $0.20/sh and $0.40/sh in Q1, far beyond the $0.04/sh loss expected. After rising 30% since the beginning of December, markets were looking for any sign of weakness to cash in.

Thought Banana

The Circus of Certifications

In finance, your quarter-life crisis is as inevitable as signing up for a Rogaine subscription at age 28.

There are infinite ways to cope with the crushing realization that you now have to decide what to do with your time. Drugs and alcohol are common solutions, but so is simply continuing the long march of education (or, if you’re smart, both).

Let’s dive in.

3-Letter Options

Congrats—you got your Bachelors and maybe even nerded your way to a Masters too, and mom is certified proud. But, unless she’s in the industry herself, you really haven’t “made it” in finance until your mom utterly cannot understand what it is you do everyday.

Luckily, there are plenty of ways to get there—and you don’t need to suffer through an entire MBA program.

Most employees in finance need some kind of license to do their jobs. Licenses are legal requirements to do certain job functions, such as the Series 7 allowing passers to sell securities.

But certifications are different. These are not legal requirements (for the most part) but industry standards that simply certify you’re GOATed at whatever the certification is.

The Chartered Financial Analyst (CFA), Certified Financial Planner (CFP), and Certified Public Accountant (CPA) are some of the most common. 

Usually, they come with some standard of ethics; holders of the designation must adhere to or face quasi-legal consequences, such as revocation of the designation, suspensions, or a myriad of other things.

It can be difficult to tell when you should take the time, effort, and capital (as most cost a few grand but way less than an MBA) to pursue a designation, so let’s review what they’re good for.

  • CFA: Anyone who wants to work on advanced financial analysis. This certification is best for those who want direct involvement in investment and portfolio management, such as equity/credit research analysts, and those who want to do security selection.

  • CFP: Anyone who wants to work in client-facing, personal finance roles. For financial advisors, getting this designation is table stakes. Wealth managers, retirement consultants, small business consultants, and more benefit greatly from this designation.

  • CPA: Anyone who wants to work in accounting, auditing, or tax. For almost any job that ends in “Accountant,” this is almost as table stakes as the CFP for advisors. Auditors, tax specialists, and any aspiring CFOs would benefit greatly from this, too.

They all have their own merits, but some carry a higher cross-over value.

As an example, for an investment analyst who holds the CFA and decides she wants to be an advisor, most advisory firms would view the CFA as a huge benefit, certifying her as an elite analyst who can help with managing client investments.

However, if you’re an advisor who wants to switch over to investment management, most investment management firms value the CFP only to the degree to which you’ll be client-facing.

The Takeaway?

This is a hot topic we could write an entire series (of books) about. So, if you apes like hearing this stuff instead of the news sometimes, let us know.

The CMT, CAIA, CIPM, CPWA, ChFC, FRM, CTP, and a billion others are common, too, but if you want to speed things up and figure it out sooner than most, we have the solution for you today.

A successful career in finance relies as much, if not more, on who you know rather than what you know. Kill two birds with one stone in the WSO Academy.

Our mentors will tell you which designations to pursue, which ones not to waste thousands of dollars and hundreds of hours on, and much, much more. 

The Big Question: What other designations do you apes want to hear about? Are you thinking about pursuing any? What other career topics should we discuss?

Banana Brain Teaser

Previous

What number is 108 more than two-thirds of itself?

Answer: 324

Today

A salesperson who had been driving at a speed of 100 kilometers per hour slowed down to a speed of 47 kilometers per hour. Approximately how many miles per hour was the speed reduced? (1 kilometer ≈ 0.625 miles)

Send your guesses to [email protected]

❝

Being a value investor means you look at the downside before looking at the upside.

Li Lu

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Happy Investing,
David, Vyom, Ankit & Patrick