Bestsellers go bust
Private equity gets into publishing
Good morning, my studious bookworms. This is your Stock Market Rundown for August 7th, 2023. Thanks for joining me for another week of hijinks. Let’s dig in:
TODAY’S TOP STORY: NEW CHAPTER FOR A BELEAGUERED INDUSTRY đŸ“–Â
Private equity firms are famous for swooping in on distressed business to slash costs and punt assets. That can mean big paydays for the PE partners, but if you’re the employee of a company poised to fall into private equity hands, you may want to update your resume.
Storied private equity firm KKR is primed to buy book-publishing behemoth Simon & Schuster for $1.65 billion. The scene was set for this transaction when a federal judge blocked a previous potential deal for Simon & Schuster to merge with fellow publishing giant Penguin Random House.
The strategic combo would’ve seen two behemoths banding together. But writers whined that a combined company would be disastrously anti-competitive—letting one player control half the market for top-selling books—and a federal judge agreed.
Why now for these deals? Big publishing is desperate to cope with brutal industry realities. Just 4% of the books the publishing industry puts out account for more than half of the profit. Even worse, fewer than 1% of books sell more than five thousand copies. Kinda tough to succeed in an industry where 99% of everything is a flop.
Problem is, reading books is in decline as a spare-time activity. Most kids these days would rather stream an Adderall-addicted gamer with eyebrow piercings playing Fortnite on Twitch, than flip through Encyclopedia Brown.
Look, no judgment here. When I’m at the airport I’m happy to grab a book at Hudson News with a title like How To Get Along With The Assholes You Work With and read it on my flight to Fort Myers until I fall asleep with my mouth hanging open.
But on a normal Saturday afternoon I’m more into faffing around on my riding lawnmower than diving into the latest Stephen King, and my most folks are with me on that: the average American reads four books a year.
Social media has nuked our attention spans to the point that curling up with a book is about as likely as whipping up a jellied veal ring. Good luck, KKR—you’ll need it.
SO WHAT ELSE IS GOING ON?
The SEC says a crypto promoter misused millions of dollars of investor funds to buy a giant black diamond. Looks like a polished lump of coal, sorry. Should’ve gone to Harry Winston instead.
The CEO of Coinbase, a top crypto trading platform, says the SEC pressured it to delist every asset other than Bitcoin. Coinbase pushed back in court, and rightly so. Look, if people want to risk blowing their brains out on shitcoins, let them—caveat emptor (buyer beware) is the American way.
Next stop, capitulation station: amidst surging markets, a top Morgan Stanley strategist has admitted he was wrong in calling for the S&P 500 to weaken. When bears are throwing in the towel, can a reversal be far behind?
Gucci is suffering a growth slowdown due to its ultra-trendy designs turning off older shoppers. Boomers may be uncool, but they’re the wealthiest demographic—woe to marketers who alienate them.
The SEC is fining some Wall Street firms for not doing enough to nab money launderers. Apparently walking a bank branch wearing a fake mustache and proffering a backpack full of crumpled bills isn’t enough to open an account anymore? Sad.
That’s it for today folks, see you bright and early tomorrow. Yours in capitalism, The Axe