Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
How to Make a Few Billion Dollars is the new bestselling book from the American entrepreneur Brad Jacobs. Jacobs, conveniently, happens to be a billionaire. He is known for putting together such industrial roll-ups as XPO, GXO, RXO, United Rentals and United Waste.
His latest venture QXO may be his boldest wager yet. QXO has in recent months raised more than $5bn, including $900mn from Jacobs himself. Most recently this week another slug came from Donald Trump’s son-in-law Jared Kushner. Jacobs wishes to make QXO a platform to acquire building products distributors, an industry he believes is fragmented and ripe for consolidation.
His approach looks like a special purpose acquisition company or Spac in reverse. Rather than launching an IPO of a cash-rich shell to later acquire a company, Jacobs has injected the $5bn of raised cash into a microcap company, SilverSun Technologies. To be clear, SilverSun’s existing business has no future with Jacobs, who will spin that off to previous shareholders. The infrastructure of an already public company is all he wants
Jacobs struck his investment at $4.57 per share. Other investors bought it at twice that, $9.14. The rebranded SilverSun, now officially known as QXO, has 740mn shares outstanding accounting for warrants and convertible stock. Yet its traded stock price is now above $100 per share, implying that the $5bn pot of cash has an equity value of $75bn.
Part of the discrepancy may be the confidence in Jacobs to find great acquisitions at good prices in a way that will turn the $5bn into something far greater over time.
But ultimately, QXO stock price is currently a meaningless signal. The shares from the old SilverSun add up to less than 1mn in total but are the only QXO shares that really trade — the institutional money that has come in is supposed to be contractually or in effect locked up. QXO has not sold any fresh shares to the public, leaving ordinary investors who want exposure to Jacobs only one option: to chase those few SilverSun shares outstanding, creating the massive supply/demand imbalance.
Jacobs and the other institutional investors have thus on paper made far more than “a few billion dollars”. QXO stock price is, however, bound to only fall as it does deals and more shares become freely traded.
