Discussion
According to the Crunchbase News article Private Unicorn Board Now Above 600 Companies Valued At $2T, “The latest additions bring the list (unicorn list) to over 601 companies–the highest count to date that are still private.” Despite turbulent macroeconomic conditions, so far over 65 companies have gone public. However, as many companies weigh the pros and cons of entering the public markets, the ones that are, may consider more creative methods such as a DPO or a SPAC.
Famed venture capital Investor Bill Gurley has been very outspoken against the traditional IPO process citing investment banks are “way underpricing the shares, and that the market cap would jump by $70 [million] to $80 million the first day” all while they also “were going to deliver their prized customers gigantic instant gains at the expense of owners.” Mr. Gurley has advocated for more direct listings and an algorithmic approach to pricing IPO’s. Most recently Mr. Gurley stated “they are ignoring demand when they price. On purpose” when referencing the Lemonade IPO. The stock price rose 139% to $69.41 on its 07/02 debut.
Meanwhile hedge fund manager Bill Ackman and his firm, Pershing Square Capital recently registered a new special-purpose acquisition company that could raise up to $6.45 billion for an acquisition. This is one of the 38 SPACs to IPO this year, however, much larger than the $320.6 million average. SPACs have been increasing in popularity hitting a record of $13.6 billion in fundraising in 2019. SPACs can be an attractive IPO route for many smaller companies offering liquidity, a faster IPO process, partners, and higher valuations.
Ultimately, we would like to see more companies go public and believe a diverse and competitive business environment can help create a stakeholder economy. Embracing untraditional IPO methods like DPOs and SPACs could help achieve just that. Public markets can be great liquidity and wealth-creating instruments which is why we believe the current incentive structures involved in the traditional IPO process are misaligned and should be reconsidered.
Portfolio
Portfolio Overview
As momentum investors, our entire strategy changes on a week to week basis. Last week, we were nearly 100% bearish, but ending the week, we are nearly 100% bullish. We expect to close most of our positions this week if the current trends continue. The market has been pinballing between the $298 level and $315 level, so we are just about to hit that $315 level this week again. That is more than likely when we will close our positions.
Weekly Trade Spotlight
$SPY is the benchmark that we use most at Meera and we believe it is one of the broader market indicators. So, before we go into a day or week of trading, we gauge the $SPY chart to help form our opinion for the week in our top-down approach. $SPY has been trading within a tight 5% range between the 298 and 315 level, indicating that some bigger broader move is going to happen. Whenever the market is consolidating like this, think of it as a rubber band. It keeps getting stretched and stretched until it eventually snaps in one large direction.
Looking at the screenshot below, we saw a gap down in early June where a -5% day brought this range into play. We are watching this 315 level closely and are positioned to gain if we break the $315 resistance level, but if we get a rejection of this line, we are going to liquidate our options positions and play the downside until we hit the lower resistance level.
The chart below is our playbook for how we will trade over the next few weeks. This consolidation is brewing up a big move coming in the next few weeks.
Watchlist 07.05.2020
Private Company Spotlight
Play One Up: Website | Funding
Play One UP is an e-sports mobile app offering the operating system for on-demand e-sports tournaments. Gamers can currently compete against each other for money in NBA 2K20, Madden 20, FIFA 20, Fortnite, Call of Duty – Modern Warfare, and NHL 20 across the Xbox, PlayStation, and PC platforms.
Anyone 18 years of age and older can sign up to play on the platform. Once signed up, an on-demand assistant matches you with an opponent. Action is governed on the front end to guarantee funds while winnings are placed in an escrow account that can be cashed out at any time. Founder Brandon Pitts described his company as a service that “helps gamers earn income through video game skills through the tap of a button.”
As of June 2, 2020, Play One Up has over 130,000 registered users (nearly a 7.5x increase YoY), facilitated 30,000 head-to-head matchups in April, and is doing over $1 million in wager volume a month. Play One Up charges a 15% booking fee for all activity booked on its platform. The company has seen a surge in volume during the COVID-19 pandemic helping the company raise $4 million from investors including NBA star Victor Oladipo and NFL standout Denzel Ward.
The company seems primed to be a player in the head-to-head e-sports marketplace. Play One Up is operating in a dynamic space including parts of the gig-economy, e-sports, fintech, streaming, sports betting, and more. We believe a young company with so much potential should consider the following;
Don’t lose sight of your core offerings – in this case, Play One Up needs to solidify their head-to-head interface and make sure they are the “go-to” marketplace for competitive gamers
Prioritize integration – With so many viable opportunities for expansion, users should be able to access and use the Play One Up easily from congruent industry platforms (sports betting app, streaming app, etc.)
Get users – market places are only as valuable as the people who use them, leverage celebrity influence
Doodle
I love music. This past weekend, I was listening to some classic mid-2000s songs and reminiscing on the nostalgic time and memories associated with those songs. When doing this, I began to think “Is This What My Kids Will Think of When They Think of “Old School” Music”?
It appears that there are new types of music created every year that begin to become mainstream, but what is here to stay? What does the future of music look like?
One thing that immediately popped in my head was the thought of EDM music or electronic coming to the scene, while this is not my cup of tea, it seems to be the big new thing for the younger generations. Hindsight is 2020, but assuming Rock is the baby-boomers genre anthem, what will be the millennials signature genre? What are our kids going to think of when they think of this kind of music, and has it even been created yet?
Just the thought of music and the way it brings people together is what really makes me think long and hard about this. With the rise of technology and the barriers to entry almost demolished with the streaming platforms making it easy for new artists to upload, will there even be an entire genre associated with our generation? The availability of music and intensely different styles, the unfortunate part is that there more than likely will not be a “Millennial Genre”, but only a few classic songs that span genre. In a highly specialized world, we live in a highly specialized musically talented world.
Learn Something
SPAC
Definition: A special purpose acquisition company (SPAC) is a company with no commercial operations that is formed strictly to raise capital through an initial public offering (IPO) for the purpose of acquiring an existing company
Best Resources: SPACInsider | SPAC Attack
Going Public
IPO Definition: An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance
DPO Definition: A direct public offering (DPO) is a type of offering in which a company offers its securities directly to the public to raise capital
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