Jack Pitcher

And we've seen the market respond positively to some developments like that.

Yeah.

So we've been tracking the prices of these big publicly traded software companies that are down a lot.

But there's a really big part of this industry that is privately owned.

Software has been a favorite sector for private equity firms over the past decade.

It's been the subject of a lot of leveraged buyouts.

And those are funded by debt.

Some of it's public debt, like these publicly traded syndicated loans we can track the prices of.

And we've seen those loans fall quite a bit this year, enough to show that some investors in those loans are stressed that there could be increasing defaults in the sector.

There's also all kinds of debt we can't see the prices of, private credit that funded these buyouts.

And investors and analysts we've talked to do have concerns about this sector specifically within the private markets.

A lot of the concern and also why investors were so excited about investing in software for so long and paid expensive valuation multiples to buy software companies.

These were businesses that had maybe high upfront expenses as you developed your software and hired an engineering team.

But then once you've got that in place, it's a very high margin business.

You're selling to other companies.

A company becomes reliant on your software.

They're going to re-up their subscription every year.

These companies have been able to increase prices year over year.

A lot of the concern now is

whether the pricing power these software companies have enjoyed for a long time, if that's going to go away, there's going to be pressure on what they can charge.