Are stablecoins really overhyped?
And Stripe innovating new ways unicorns can avoid going public
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Wednesday! The earnings calendar is understandably light through Friday, with clothing rental service Stitch Fix reporting today, and Costco (consumer wholesale) and Jabil (contract electronics manufacturer) tomorrow.
In news that will cheer the tech industry, the White House is walking back its H-1B visa rules, seemingly making them far less biting. I suppose tech companies don’t like being hit with massive tax hikes? Who knew. Sequoia investor Michael Moritz thinks the whole saga is dumber than a bag of rocks, but his peers appear too afraid to speak up. To work! — Alex
📈 Trending Up: Methane emissions … global defense stocks (USA, Europe, Asia) … OpenAI’s compute footprint … at the cost of Oracle’s balance sheet … AI spending in China … cancel culture … We Travel … teamwork in data-land…
Quote of the Day: “Every day the Oval Office seems closer to becoming the equivalent of what the sidewalk outside Satriale’s Pork Store used to be for Tony Soprano: a place where a dubious cast of characters spawns brutish extortion schemes and hit jobs.” — Michael Moritz
📉 Trending Down: Academic freedom … AI source freedom … American manufacturing (one, two, three, four) … mortgage demand … social media independence … Section 230 protections? … Indian lending startups…
Things That Matter
Betting on the underdog: Last week Jason and I hosted Eric Jackson on the podcast. Jackson runs a small hedge fund, and has lately become Internet-famous for backing Opendoor’s shares and plans to rebuild. Yesterday, he announced a similar trade on Better Home & Finance Holding Company (Better).
Better raised $500 million from SoftBank back in 2021 and went public via a SPAC in 2023. The SoftBank investment generated massive paper wealth for the company, while the latter decimated it, and Better later had to execute a 1-50 reverse split — never a good sign.
Jackson told TWiST that he favors companies in which insiders execute the buys, which is pretty darn reasonable. In the case of Better, insiders have purchased more shares than they have sold over the last three months, but are net -105,010 shares in the last 12 months.
So, why is Jackson backing Better? Its shares are down 99% from its all-time high, but he sees a shot at long-term gains because the company’s investments in AI would let it handle more mortgages at a lower cost base, potentially addressing some of its historical capital issues.
Maybe. I bring up this little saga not to sell you on an investment — never — but to highlight an interesting trend in which active/activist/meme-ish investors are going long instead of short. This is an outgrowth of the memestock craze, but with more focus on fundamentals, such as they are. It’s a trend to watch, I think.
Here’s a fun quote from 2024: “Kathy Wylde, president and CEO of the Partnership for New York City (a nonprofit representing the city’s top business leaders) said Republicans have told her that they consider “the threat to capitalism from the Democrats is more concerning than the threat to democracy from Trump.” (Politico)
You don’t have to go public if your investors have no leverage: Payments giant Stripe is buying back shares from its backers at a new 409a valuation of just under $107 billion. The size of the repurchase isn’t known, but the move is important to think about even though we don’t have the details of the scale.
It’s common for late-stage startups to let some of their early investors cash out. This is usually done by selling to other investors who want to either extend or build their stakes in the company. Early backers, employees, and even founders might want a little pre-IPO liquidity, and as long as the key players remain aligned (read: retain the majority of their holdings), no harm no foul.
Stripe had done this before, both in 2024 and 2025. This time is different, however. Instead of letting its ownership structure be reshuffled, Stripe wants to purchase shares directly from its backers so that it can (presumably) retire them. It’s a traditional buyback move, but while private. But apart from Stripe pulling off a minor version of this last year, I can’t recall any unicorn doing something similar.
That’s partially because private tech companies tend to be unprofitable. Stripe turned cash-flow positive back in 2023, and is profitable today, per its own reporting. But it won’t go public because it doesn’t have to. The only flies in that ointment are the investors watching their IRR decline as their holdings sit frozen on the private markets.
So, Stripe is turning some of its positive cash flow back onto its original backers. Can Stripe buy out all its investors? Not yet, I reckon; it would be too expensive. But instead of paying a dividend (as many public companies do), it’s taking the buyback route so that its investors can return cash to their own investors.
Stripe is either doing something so weird it will go down in history, like Google’s auction-style IPO (so successful that you can’t summon an example of a company following in its footsteps). Or we’re seeing the advent of a new way for startups to avoid ever going public.
Databricks, another super late-stage unicorn worth $100 billion or more, could pull off the same gambit at will, now that it’s generating cash. But the data storage, analytics and AI giant just raised another $1 billion it didn’t need, so perhaps not.
Or, you know, these companies could just go public.
Full-stack state capitalism: If you put aside our concerns with the American government taking stakes in and directing the sales flows of domestic companies, get ready to worry.
The Trump administration is considering changing the terms of a Department of Energy loan worth $2.26 billion to Lithium Americas into a roughly 10% equity stake (GM also owns a chunk). A stake the same size that Uncle Sam took in Intel after demanding that future, Congressionally-approved grants convert to a stake of the same size.
Beware grants or loans from the government — they could be Trojan Horses that chain your corporate independence to D.C.
The chips stuff almost makes sense — if you squint. With a stake in Intel, the government now owns part of a domestic chip fabrication business, albeit a heavily unprofitable one. And with its forced share of part of Nvidia’s business, the government is also earning from the result of chip fabs. Even better, Nvidia just announced a tie-up with Intel that will see the two companies build data center inputs together. Nvidia will also take a stake worth $5 billion in the chipmaker.
So Nvidia and POTUS are now partial co-owners of Intel, of all things. The lithium situation fits more neatly next to the administration’s choice to take a chunk of MP Materials, worth 15% of its equity. Soon, the government will own parts of two mineral inputs necessary for modern technologies and new energy production.
Cool? Not really. We’re already seeing the government use its control over American Steel (which it required to allow the sale to Nippon Steel) to make economically boneheaded decisions. So get ready for American capitalism to become more intertwined with the state (bad) and less efficient (bad).
Congress’ ability to direct industry with carrots is now diminished; if all offered incentives can be converted post-facto into equity stakes, they come with many more strings attached. The Executive Branch has just arrogated power from the Legislative Branch.