Moral Redemption at the Roulette Table

Image Credit: Plan B Entertainment

Going to bed means listening to something that makes me laugh.

One podcast I listen to weekly is “The Jeselnik & Rosenthal Vanity Project.” Link

The podcast is hosted by two college friends, one of whom is comedian Anthony Jeselnik.

I first watched Anthony Jeselnik perform at the “Comedy Central Roast of Donald Trump” back in 2011.

My favorite line from that entire roast of the pre-President was Jeselnik’s closer:

“And Donald, I’m not even sure if you’re aware of this, but the only difference between you and Michael Douglas from the movie Wall Street is that no one’s going to be sad when you get cancer.” Link

But my second favorite line, also from Jeselnik, was:

“Donald, you’ve got a great sense of humor. You’ve been so happy to embarrass yourself on Saturday Night Live… and the casino business.”

This morning, Donald Trump’s first casino, Trump Plaza, was demolished:

[Atlantic City mayor Marty] Small said that in his first state of the city address last year, “the thing that got the biggest applause when we put the slide up was a bulldozer going through Trump Plaza.” He initially proposed a charity auction, where the winner would get the chance to hit the button that would bring the building down. That was scrapped last month due to safety concerns, but Small said Icahn matched the highest bid and donated $175,000 to the Boys & Girls Club of Atlantic City.

It seems fitting the casino’s last act would be to help a city where Small said Trump had a history of “stiffing so many small businesses, mom-and-pop shops.” Link

I don’t gamble in a casino because I am not good at any form of gambling.

But to quote Danny Ocean in “Ocean’s Eleven”:

Because the house always wins. Play long enough, you never change the stakes, the house takes you. Unless, when that perfect hand comes along, you bet big, and then you take the house. Link

In my context, the house is the public and private market, and sometimes betting big works out.

When The Wall Street Journal reported that “Visa Abandons Planned Acquisition of Plaid After DOJ Challenge,” I sent out an email six minutes later trying to obtain private shares in Plaid.

Did those shares cost a lot and at a high valuation?

Yes. And yes.

Hence, it’s a big bet:

The new wave of fintech innovation may come far away from the world finance.

At least that’s how Plaid CEO Zach Perret sees it.

From his vantage atop a firm that builds many of the data connections between financial institutions and technology startups, Perret has observed a growing trend of non-financial services companies plugging financial services into their platforms and products. For example, Uber drivers can use the ride-sharing app to access banking services or save money in a retirement account.

It’s what Perret calls “embedded finance,” and this trend “could be much larger than we expect and maybe even larger than” previous iterations of fintech innovation, he said in a recent webinar (Link). Link

For context, buying Stripe’s private shares almost four years ago carried a $9.1 billion valuation price tag.

Today, the company might be valued at $115 billion:

Investors are valuing Stripe at a $115 billion valuation in “secondary market” transactions, where shares of a private company’s stock are sold after they were first issued. That valuation is up more than threefold from the $36 billion Stripe fetched when it raised money in April 2020 from venture firms including Andreessen Horowitz, General Catalyst, and Sequoia.

Stripe is also planning a new primary funding round at a valuation north of $100 billion, according to a person familiar with the matter. A spokesperson from Stripe declined to comment.

The San Francisco company was founded by Irish brothers Patrick and John Collison in 2010. It helps businesses small and large — including Peloton and Canadian e-commerce platform Shopify — accept online payments, taking a fee on every transaction. While Covid has accelerated consumers’ shift to online shopping, Stripe and its peers have seen demand for its services swell.

Netherlands-based Adyen is Stripe’s closest competitor and counts Netflix as a customer. It has seen its stock jump 150% over the past year, reaching $66 billion. PayPal’s stock has risen just as much, and it competes with Stripe through its Braintree payment processing service that it bought in 2013. Stripe’s business is likely a similar size as Adyen’s and Braintree’s, estimates Lisa Ellis, a partner and senior analyst at investment research firm MoffettNathanson. But Stripe is likely growing faster, and its partnerships with Shopify and Amazon give it a competitive advantage, she says. Link

Of all casino games, I never understood roulette.

I mean, of course, I understand how the game works.

But I don’t understand why anyone would waste money that way.

I guess I also never understood why people trusted Donald Trump… with anything:

Trump Hotels & Casino Resorts lost money every single year that Trump ran it as a public company. Net losses of $13 million in 1995 ballooned to $134 million by 1999, and $191 million in 2004. Not even his chosen accounting firm, Arthur Andersen (of Enron fame), could have hidden all the red ink. In total, from 1995 through 2004, the company booked total losses of $647 million.

Trump had complete control — both as the chairman and as the owner of a special class of stock that carried many more votes than those he sold to the public. He even gave the company his initials, DJT, as its stock ticker symbol.

Its debts mounted, the stock collapsed — and in the end, the creditors had had enough. The courts stepped in, the company had to go through a Chapter 11 bankruptcy reorganization, and The Donald ended up with a largely ceremonial role — sort of like the guy in the costume welcoming you to Caesar’s Palace. By April 2004, someone who had invested a notional $100 in the IPO was left with about $10. Link

Considering the CEOs of Plaid and Stripe are both in their early 30s, owning their companies’ private shares is a good bet on the future.

In the public market, their competition in the form of PayPal ($PYPL), Adyen ($ADYYF), and the like are still going strong.

Being invested in tomorrow’s fintech leaders is almost like playing with house money.

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