Making Other Numbers Up

Numbers In Private Markets

NY Attorney General Letitia James ran on a campaign of “getting Trump”. Two days ago, Joe Biden attacked his political rival with the full force and power of the Federal Government dispatching 30 FBI agents to raid his home in Florida.

The goal is to keep Trump off the ballot.

I don’t want to see the President run in 2024. I’d like to see the torch passed on to younger people. However, the more they attack him and the more unfairly he is treated it makes me want to see him run again and fully support him.

The “they” isn’t just the Democratic Party. It’s also the RINOs in the Republican Party that make a nice living off grifting with the government. I saw it destroy any competitiveness in the Illinois Republican Party and I don’t want the RINOs to destroy the national party. I’d prefer that small government conservatives get elected and destroy the bureaucracy, and kick the RINOs out.

Trump is accused of committing fraud by Letitia James in the way he ran his business. He is accussed of inflating the assets on the business balance sheet to get loans and conduct business with other entitites. I saw Trump’s statement, and predictably it was an attacking statement. People forget that the thing a lot of us like is he actually fights and fights aggressively.

Trump is right. She is a pure political hack no different than an apparatchik in the Stalin Administration.

But, I’d like to add some nuance to this and hopefully, reasonable people will see the light. People with Trump Derangement Syndrome will never see the light.

Private markets are just that, private. Trump’s hotel business isn’t public. It’s not listed on a stock exchange. There is no private marketplace where you can buy and sell Trump shares in his hotels. It’s 100% his.

He can value his buildings at whatever the heck he wants to value them at. He can say each one is worth $1B, $10B or a hundred million bajillion trillion. If he doesn’t have any outside equity investors, it doesn’t matter at all what he values them at.

The only time it matters is when he goes to a bank, or some other entity to get a loan. If he decides to sell equity shares to the public, it matters. It does matter to a counterparty that does business with him that has an accounts receivable due from him. The other time it matters is when he goes into the open market and sells the asset. He can ask whatever he wants but the market will price it for him.

The other time it matters is if Trump has to issue statements to equity investors. They want to know the real estimated value of holdings so they can record it for themselves. In a lot of instances, like the venture fund my partner and I ran from 2016-2021, we issue K-1s to investors so they know where they stand at one moment in time. Those K-1s go on their tax returns.

In venture capital, we value companies all the time. It’s not done by a classic discounted cash flow analysis. It’s a negotiation between the entrepreneur and the investors to come to a price. Rule of thumb is that an entrepreneur sells 15% to 25% of their company every time they go to get financing. The hope is they do it at higher and higher valuations. Sometimes it works. Sometimes it doesn’t. The VC industry just saw some huge writedowns in value with the 25% break in the NASDAQ.

Guess what? All those people are pros. They are professional and accredited investors. They have all kinds of financial tools at their disposal to analyze the Trump business and come up with their own independent valuation of the business so they can negotiate with Trump.

That’s why this effort by the state of NY to get Trump is full of bull. It’s meaningless. It’s political theatre. It’s a horde of mosquitoes attacking Trump. It should end.

So should the political attacks by the left. Someday, hopefully in November, there will be new sheriffs in town that will assume the power that the Democrats are using wontonly.

I don’t think Republicans should use it to target political rivals like Schiff, Pelosi, Schumer, Biden and the rest of the Democrats have done-with the full support of the entire apparatus and every candidate of the Democratic party by the way.

But, boy, it’s awfully hard not to wish they’d use it that way.

That’s how Civil Wars get going.