By J.D. Durkin
Henry Ward, the CEO and co-founder of Carta, spoke with TheStreet at Web Summit in Lisbon this week about the one part of business activity where he expects to see significant movement in 2023, despite the overwhelming macro environment headlines.
Ward, who founded the investor-facing software and cap table resource Carta in 2012, told TheStreet that while bankers overwhelmingly expect next year to be slow for IPOs, he believes the environment is ripe for high-profile mergers and acquisitions, aided in part by the challenge of smaller companies to raise money.
“I think you’re going to see M&A explode next year,” Ward said.
He explained, “I think we’ll start to see a lot of these companies that have raised big balance sheets – private and public – that are looking for opportunities to acquire other companies. Then you’re going to see all these smaller companies that didn’t raise enough money [or] can’t raise more money become distressed, and sell at a decent price."
The Carta CEO’s views of a likely recession are also in line with the most popular chatter about the short term economic outlook; Ward told TheStreet, “I do think if we aren’t [in a recession] today, it’s coming.” Ward pointed to a recent conversation with a trucking CEO who cited plunging demand, which Ward believes is, “a great proxy for inventory and a great proxy for the supply chain,” before pivoting to his own company’s navigation of the headwinds at play.
Delayed Reaction to Earnings
“Our earnings are still good right now. You won’t be able to see it in our financials until next year till Q1, Q2,” Ward added. “We’re going to see a lot of that next year. And so as earnings and profits start to go down, as demand goes down, I think you will see more correction into that corporate profitability and that will continue. So that’s why I think this will take a long time to seep into the system.”
Henry Ward was at Web Summit in part to discuss the state of employment equity deals, which he believes is the future of labor negotiations. “We’re trying to make equity as cheap, simple, and easy as payroll. Fifty years from now people will think it’s weird that we joined a company and all we did was work for cash and not ownership,” he said.
Why a Recession Would be Healthy
Carta’s policy team also provides a weekly brief to help investors better make sense of the deluge of daily economic headlines; Ward spoke to TheStreet about the Central Bank’s ongoing tightening cycle to combat inflation.
“I’m on the side that the Fed is going to have to be more aggressive to cut down on inflation,” he said, adding, “I actually think a recession will be a little bit healthy for the overall economy.”
Ward’s view on the years of easy money predates the era of COVID and government-backed stimulus, however; he said, “We’ve had twenty years of low interest rates that have seeped into the system. Inflation is a reflection of a twenty-year cheap money program versus a two-year cheap money program. I think it will take a long time to unwind.”
Ward added, “Our view is that this is a slow-motion recession.”
