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This article contains Industry spoilers through season 3 episode 2.
With the arrival of Industry season 3 on HBO, audiences have embraced the fast-paced fictional world of Pierpoint & Co, and the decadent lifestyles of its young investment bankers. Ironically, however, that depiction of over-the-top drug-fueled nightlife might be more relatable to viewers than what these characters actually do (and say) during the day.
The world of investment banking is a self-contained microcosm of our capitalist society, complete with complex terminology and jargon that can make it seem as though investors are speaking a different language. The lingo of Industry is akin to when a Star Trek character technobabbles their way through explaining what’s wrong with the phase inducers or warp core. Audiences might understand the gist of what they’re saying, but only through context.
That’s where Den of Geek comes in. This article will be a necessary dictionary to clarify some of the financial terms and acronyms of Industry and help make you bilingual in banking.
Green Tech
Already in this early stage of the third season, the term “green tech” has been thrown around a lot and is likely to come up again and again. The new age aristocratic and egotistical “tech-bro” known as Henry Muck (Kit Harington), heads LUMI, a fictional company which boasts being the next big thing in the green tech sector.
Green technology investing revolves around any kind of company or technology whose business model is to reduce or even completely eradicate the negative impact humans have on Earth’s environment. It’s more than simply reducing a carbon footprint, these companies fabricate eco-friendly salt batteries, hydrogen fuel cells, and more, creating sustainable energy or even methods of recycling waste and used materials to heal the globe.
ESG
ESG, which is uttered a few times in the season 3 premiere stands for “Environmental, Social, and Governance.” It represents the elevated standards to which a stock holds itself, specifically in terms of policies promoting clean air and water, social justice, hiring diversity, and increased transparency for investors. ESG standards can help people feel better about where they invest, as they often represent the best practices for a prosperous future. A recently humbled Harper Stern (Myha’la) calls ESG stocks a “fad,” as she believes strongly in making money and thinks everyone will lose their precious morality and simply invest in what makes them the most money eventually.
EBITDA
One of the longer acronyms the industry offers, EBITDA stands for “Earnings Before Interest, Taxes, Depreciation and Amortization,” and it gauges a company’s financial performance (it is indeed an acronym, as the collection of letters is often pronounced as a word like “ee-bid-uh”). If a company has a positive EBITDA measurement, and low debt, then it shows the company can make money and is sustainable. In short, it’s a company that people would want to invest in.
When Muck and James Ashford (Tom Stourton) of Ashford Asset Management meet, James informs Muck he has some serious doubts about the transparency of LUMI’s numbers, and wants to pull at least half of his investment out. This is because LUMI’s accounting numbers, which just went public, seem a little too perfect and evoke fears they’re illegitimate. James accuses the company of “massaging” the EBITDA to make their earnings to debt ratio much more amicable to potential investors.
IPO
Muck’s company is ready to go public and our friends at Pierpoint & Co, most notably Yasmin, (Marisa Abela) are quite invested (no pun intended) in the success of it. IPO simply stands for “Initial Public Offering.” It refers to a process in which corporations make stock available to the public for the first time. This process is a manner in which many companies can obtain much needed capital. That new investment money can then push the company in a direction they need to go.
A company like LUMI would hire an investment firm like Pierpoint & Co to gauge demand, set the initial price for stock and promote the future of the company in order to seduce investors. In the second episode of this season, the IPO launch does not go well, which has Eric (Ken Leung) scrambling to maintain calm and control on the floor. Only through Yasmin’s intervention (where she arguably crosses a legal line), do the optics of LUMI change and the price of the stock goes back to a level that won’t destroy Muck’s reputation or his company before LUMI even gets off the ground.
Oversubscribed
An oversubscribed offering occurs when the public interest, (usually when it is time for an initial public offering) exceeds the available stock. Oversubscription can happen in any market where the available stock is finite, and isn’t necessarily a bad thing for the stock, as it shows there is high demand for it, and it may allow the company to reevaluate and hopefully see the price of the stock rise.
During that same meeting between Muck and James Ashford, Yasmin jumps in to reassure James that public interest is really high, and that they are in fact, likely oversubscribed. This is an attempt to reassure him that the stock is worth more than it is, and that Pierpoint has evaluated accurately.
Macro Headwinds
An easy way to remember what “macroeconomic headwinds” or “macro headwinds” are is to think of old Westerns when it looked like dark storm clouds were blowing into town. This rather ominous term deals with outside forces that are not in the control of businesses. These headwinds can have serious effects on the general economy, or a specific industry which naturally affects the finances of a company.
Some macro headwinds that are seen all too often are variables such as high interest rates or inflation. Granted, they don’t affect a company the same way they do the everyman, but like that cinematic storm, they can easily turn things within investment banking on its head. The Big Short provides a perfect example of how investors like Christian Bale’s Michael Burry could bet against the mortgage market once he discovered the flaws and corruption (specific headwinds) within the system.
Meme Stocks
In the 21st century, and especially in the last few years, financial trading apps like Questtrade, Wealthsimple, E*Trade, or Robinhood have absolutely exploded in popularity. This means that the public can now simply press their finger to their phone and buy and sell stock, no longer needing to go through a broker.
This has made “meme stocks” a modern trend. Think about some recent buzzworthy stories about stocks that became popular via subreddits and other social media channels. Companies like GameStop and AMC weren’t doing very well on paper, but then, almost jokingly, many people on the internet decided to buy up as much stock as they could. This drove the stock price for those companies and ended up costing massive hedge funds billions of dollars. It was an amazing David vs. Goliath story that showed how everyday people can truly affect the market. Now any time one of these stocks are discussed online and become the next popular rally, they earn the term “meme stock.”
Sell-Side
This term has been used for almost the entire run of the show, but it’s important for a few reasons. A “sell-side firm” is precisely what Pierpoint & Co is: it’s a brokerage or investment bank that provides services to other market participants. These banks are registered members of the various stock exchanges, and so can act as market gurus to provide trading services for their clients in exchange for a commission.
Often, it’s thrown around as a derogatory epithet more than a term of adulation. James Ashford screams at Yasmin berating her and her fellow “sell-side guys” for all the “smoke and mirrors” they spew. This is a common public perception of many firms as they are seemingly motivated solely to make money for themselves.
Industry season 3 airs at 9 p.m. ET, Sundays on HBO. The season does not yet have a U.K. release date.
The post Industry Season 3 Financial Jargon Explained: ESG, EBITDA, Meme Stocks, and More appeared first on Den of Geek.
