NEWS | IPOS | OPPORTUNITIES | READING
Clubhouse
The audio-chat social networking app has quickly become the fastest-growing social media app in the world. The mobile app, which is still invite-only and requires to use an iPhone, has over 6 million subscribers, over 900,000 of which installed the app in the last week of January alone. One catalyst for this meteoric rise was a discussion between Elon Musk and the Robinhood’s CEO, Vlad Tenev, in a room on Clubhouse. The two discussed Robinhood’s decision to limit trading in GameStop as the Clubhouse room’s 5,000-person limit was soon maxed out and users had to switch to a YouTube stream to listen in.
In May 2020, the company raised its $10 million Series A round at a valuation of $100 million, while 8 months later in January 2021, the company raised its $100 million Series B at a valuation of $1 billion. a16z, participated in the Series A, led the Series B and is working hard to fuel the momentum of the company.
On Monday evening, Chinese authorities blocked users from accessing the platform, bringing a timely end to the rare possibility for Chinese internet to freely discuss politically sensitive topics. Beijing-based users trying to access the platform were shown a message that reads “an SSL error has occurred and a secure connection to the server cannot be made”.
Renaissance Technologies
Billionaire Jim Simons’s hedge fund posted its worst-ever returns across its public funds, leading to redemptions of at least $5 billion since December. Renaissance’s Institutional Equities fund, the largest of its public funds, lost 19% in 2020 and also suffered the highest redemptions. The Institutional Diversified Alpha fund lost 32% and the Institutional Diversified Global Equities fund lost 31%. Renaissance explained to clients in its September letter that losses occurred due to under-hedged positions in March and the fund missed out on gains after over-hedging during the rebound in Summer. However, at the same time, its fund for employees and insiders increased by 76% last year. More here, and here.
Bitcoin
In an SEC filing, Tesla today disclosed that it has purchased $1.5 billion worth of bitcoin. Additionally, the company announced that it considers accepting the cryptocurrency as a form of payment for its cars sales. TechCrunch has more.
Softbank Rebound
For the quarter ending December 2020, Softbank reported a record net profit of ¥1.2tn ($11.1bn), vs ¥55 billion previous quarter and ¥98.5 billion market consensus. Shares in the group have increased almost 240% since the Covid-low in March 2020. Performance was driven mainly by significant stakes in Uber, which increased 76% over the last 6 months, and DoorDash, which went public in December 2020. The numbers reflect a significant turnaround of a company, which had a volatile year characterized by restructuring efforts and aggressive US equity bets. FT has more.
Australia’s next search engine
After Australia put forward draft legislation to force Google and Facebook to pay domestic media companies whose content drives traffic to their platforms, Google threatened to pull its search platform from the country. Microsoft stated it would willingly participate in Australia's media code and invest in its Bing search engine to make it competitive. Reuter has more.
NEWS | IPOS | OPPORTUNITIES | READING
Bumble (BMBL), is expected to start trading this week. At the top end of that range, $30, Bumble would be valued at approximately $6.5 billion. With estimated revenues of $300 million in 2020, the company would be valued at a LTM multiple of 21.7x. Based on its user growth rate of 33%, the company’s growth-adjusted valuation would be slightly higher than that of Tinder’s parent company Match Group (MTCH).
Last week was the IPO market’s busiest yet, with 14 IPOs raising $3.9 billion and 27 SPACs raising $9.2 billion. Another 3 IPOs and 38 SPACs submitted their initial filings for IPO.
NEWS | IPOS | OPPORTUNITIES | READING
Active
Appian (APPN) - Target price: $80 (Short, Analysis)
The PPS fluctuates between $200 - $220, but overall not much has changed. Short interest is still very high at 22% of float. This means that as the price decreases there will be increased buying from short sellers who exit their positions. As a result, the PPS can stay at elevated levels for quite a while. I will closely watch the developments around the company and its upcoming earnings call on Feb. 18th.
Wix.com (WIX) - Target price: $350 (Long, Analysis)
The company’s PPS has increased ~12% over the last 2 weeks and is now at the same level where it was 6 months ago. At a valuation of currently 13x NTM revenue, market consensus sees 20% additional upside, but let’s see what their earnings call on Feb. 17th brings and then re-evaluate.
New
There are no new opportunities this week that fall inside the parameters of my investment framework. Several companies with a small upside/ downside potential, but not enough to qualify as good opportunities. Let’s see what next week brings.
Other
Clubhouse was created using Agora (API), a Chinese software company that offers real time communication solutions. Since the company went public in June 2020, its share price went strictly sideways until mid January, when it started an almost 3x increase in 2 weeks. I looked at the company more closely as a potential investment and I think there are valid arguments on both sides. If you invest in Agora you may buy because you believe that momentum in Clubhouse is just getting started or because of the potential of the Chinese & US communications software market. If you short Agora, you might sell because you believe Clubhouse is a temporary hype, revenues are too concentrated around a single customer and Agora’s growth will not be sustainable given the current intervention of the Chinese government. Personally, I decided to pass because both the long and the short investment theses fall outside of the framework which I follow and are too speculative, so I will be watching from the sidelines. Nevertheless, wanted to briefly share this here.
NEWS | IPOS | OPPORTUNITIES | READING
BVP’s healthcare predictions for 2021.
Ray Dalio’s perspective on Bitcoin.
Apple’s planned VR headset, which features 8K displays on each eye and is expected to cost $3k, notably higher than other VR headsets, like the $299 Oculus Quest 2.
100 Trends and changes to watch in 2021.
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Disclosure: I am long WIX and short APPN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it other than from paid subscribers of my newsletter. I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: I am not a registered investment, legal or tax advisor or a broker / dealer. All investment / financial opinions expressed by me are from personal research and experience and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.