Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.

Today, we’re looking at the Kraft Heinz split, Apollo’s new sports fund, and Klarna’s IPO preparations. 

But first, our number of the week…

$150 billion

That’s how much the Trump administration could be on the hook for if courts order the US government to refund previously collected tariffs. The notion of a tariff refund is now a real possibility after an appeals court declared many of Trump’s tariffs illegal. 

Sidekick Takeaway: Questions over the legality of Trump’s tariffs now fall to the US Supreme Court, the highest appeals court in the country. If the Supreme Court finds the levies unlawful, the scale of the potential refund could further strain America’s public finances. 

Only have a minute to read? Here’s the TL;DR:

• Kraft Heinz announced plans to split into separate companies, reversing a 2015 merger backed by Warren Buffett. The $57 billion deal has been widely viewed as a strategic failure, with shares dropping nearly 70% over the past decade.
• Private credit giant Apollo is launching a $5 billion sports investment fund after a series of smaller deals in previous years. The fund will both lend to sports organizations and take direct stakes in teams, capitalising on a market underserved by banks.
• Buy-now-pay-later giant Klarna announced plans for a September IPO targeting a $14 billion valuation. While that valuation will make Klarna one of the largest listings this year, it's down significantly from a $46 billion peak following continued losses.

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

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Not Cutting the Mustard: Kraft-Heinz Unwinds Merger

Ketchup and hot dogs are usually quite a successful pairing. Except, apparently, when it comes to business.

This week, food giant Kraft Heinz announced plans to split the company into two separate firms.

One of the new entities will focus on food and grocery staples, while the other will focus on condiments.

The split reverses a 2015 merger that brought the two halves together. The $57 billion deal has widely been seen as a strategic failure, with share prices dropping nearly 70% over the past decade.

That performance is a rare blemish on the record of investing giant Warren Buffett, a principal backer of the original merger.

Buffett deviates from playbook, pays the price

Warren Buffett‘s ‘value investing’ strategy is well known. 

As a value investor, Buffett seeks to buy underpriced businesses and wait patiently for their share prices to appreciate.

But the original Kraft Heinz merger represented a significant deviation from this playbook:

• Buffett, along with private equity giant 3G Capital, backed the merger in the hopes that cost-cutting measures and corporate synergies could improve performance.
• But amidst shifting consumer preferences toward healthier options, as well as declining product quality, the expected growth did not pan out.
• Buffett would later admit that he ‘overpaid’ for his shares in the merger, a rare statement from a value investor.

Surprisingly, however, Buffett has not been supportive of the decision to split.

While Buffett recognizes the flaws of the original merger, he does not believe that splitting the company will resolve the firm’s underlying issues.

Sidekick Takeaway: Even at the time, the Kraft Heinz merger was somewhat unusual, with large conglomerates long having fallen out of favour among investors. While Buffett may have misgivings about the move, the market tends to prefer more streamlined entities, as evidenced by recent high-profile corporate splits (such as GE). 

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Net Gains: Apollo Launches $5B Sports Fund

Sports are about more than just championships and trophies – they’re also big business. Globally, the sports market is worth over $2 trillion.

But historically, this market hasn’t been well-served by traditional lenders.

Sports investing can have idiosyncratic risk factors, including player injuries. What’s more, many team owners are more interested in winning matches than turning a profit.

That hesitancy has created an enormous opportunity for alternative lenders – including private credit giant Apollo.

This week, new reports indicated that Apollo is preparing to seize that opportunity, eyeing the launch of a fresh $5 billion sports investment fund.

Apollo tests the waters before diving into sports

Over the past few years, Apollo has engaged in a series of one-off sports deals, including with names like Nottingham Forest and Atlético Madrid.

After those initial tests, the firm is now prepared to dive deeper into sports financing:

• Apollo’s permanent capital vehicle will deploy billions in both lending to sports organizations and taking direct stakes in teams.
• Paradoxically, the unique risks that make sports financing so challenging can also make it an attractive alternative investment.
• Factors like player injuries or playoff performance have little to do with broader economic conditions – which can make sports financing a valuable source of diversification.

For a firm with over half a trillion dollars under management, Apollo’s sports portfolio will remain a small part of the overall company. 

But this new fund shows how private credit continues to grow at the expense of traditional banking.

Sidekick Takeaway: For now, Apollo’s fund will likely remain limited to institutions and ultra-high-net-worth investors. In the future, however, vehicles like this could allow for greater retail participation in the burgeoning sports financing market. 

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List Now, Invest Later: Klarna Prepares for Mega-IPO

After a relatively frosty few years, the IPO market is once again showing signs of life in 2025.

Mega-listings this year include Circle, CoreWeave, and Figma. 

In September, one hotly anticipated name is expected to be added to that list – Klarna.

This week, the company announced its intention to undertake an IPO after years of on-again-off-again plans. 

Klarna is targeting a $14 billion valuation, which could make the firm one of the biggest listings of the year.

Analysts see the level of demand in Klarna’s shares as a key test for the market’s interest in fintech firms.

Still, even a $14 billion valuation would be a significant drop from Klarna’s peak years.

Klarna has fallen from heights on business model concerns

As recently as 2021, Klarna was valued at an astounding $46 billion. At the time, that made Klarna Europe’s most valuable startup.

But investor concerns about Klarna’s business became more pronounced during the economic uncertainty throughout Covid.

Klarna’s ‘buy now, pay later’ (BNPL) model can expose the firm to credit losses during downturns. Fears of mounting losses led Klarna’s valuation to drop to just $7 billion.

While the company proved more resilient than many investors expected, Klarna has struggled to turn a profit.

Still, the coming IPO could provide Klarna the capital it needs to boost profitability – and institutional demand for the company’s upcoming listing has proved robust.

Sidekick Takeaway: Klarna’s resilience during a recession has been discussed for years, and continues to be a point of contention heading into the company’s IPO. One consistently overlooked aspect, however, is that BNPL usage tends to rise during downturns, a trend that can often help mitigate any rise in credit losses. 

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Notices

Sidekick Money Ltd is a company registered in England and Wales (No. 13882980). Sidekick Money Ltd is authorised and regulated by the Financial Conduct Authority (FRN 984829). Our address is 21-33 Great Eastern St, London, EC2A 3EJ.

𝘗𝘭𝘦𝘢𝘴𝘦 𝘳𝘦𝘮𝘦𝘮𝘣𝘦𝘳, 𝘪𝘯𝘷𝘦𝘴𝘵𝘪𝘯𝘨 𝘴𝘩𝘰𝘶𝘭𝘥 𝘣𝘦 𝘷𝘪𝘦𝘸𝘦𝘥 𝘢𝘴 𝘭𝘰𝘯𝘨𝘦𝘳 𝘵𝘦𝘳𝘮. 𝘠𝘰𝘶𝘳 𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘪𝘴 𝘢𝘵 𝘳𝘪𝘴𝘬 - 𝘵𝘩𝘦 𝘷𝘢𝘭𝘶𝘦 𝘰𝘧 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘤𝘢𝘯 𝘨𝘰 𝘶𝘱 𝘢𝘯𝘥 𝘥𝘰𝘸𝘯, 𝘢𝘯𝘥 𝘺𝘰𝘶 𝘮𝘢𝘺 𝘨𝘦𝘵 𝘣𝘢𝘤𝘬 𝘭𝘦𝘴𝘴 𝘵𝘩𝘢𝘯 𝘺𝘰𝘶 𝘱𝘶𝘵 𝘪𝘯.

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