10foot Scuttlebutt: December 2017 edition

10foot Scuttlebutt: December 2017 edition

It’s the holidays. Here’s some stuff in the markets I’ve seen or thought recently, and in place of analysis, I have inserted pictures. Enjoy.

Trimantium Growthops

I wrote about Trimantium Growthops a few weeks ago, an IPO which seems to have hit a snag – it was supposed to start trading on the 18th of December. I got an email about a week ago asking me if I was still considering units (I’m not/ never have been) which makes me wonder if they are struggling to raise capital.

A number of IPOs seem to have struggled this year, which is weird because investors are literally throwing money at companies that are already listed.

Blame it on all those shitty PE IPOs that hit the market over the past few years.

The total evisceration of journalism

I had a recent discussion with a journalist about journalism recently. Investors always like to bet on things that aren’t going to change and let’s be honest, people are always going to do stuff that they probably shouldn’t. That’s an unquestionable absolute.

I mean if there are Iranian farmers watching porno on USBs smuggled across the border from Pakistan – the punishment for pornography being rather more severe in Iran than it is in Australia – the drive to do shady things is pretty much a human truth you can bet the house on. It’s too bad you can’t usually invest in it.

In light of that, the total evisceration of journalism we’ve seen recently is a bit of a mystery to me. Taking a larger perspective, I do think we’ll probably see something of a resurgence, albeit in a different format, over the next 5-10 years.

Euro Blockchain:

I’ve been looking at a tiny <$40m Eurozone company that’s investing in blockchain (the shares haven’t spiked…yet). It’s got a tangled corporate structure, loads of affiliated parties, is capitalising expenditures (I can’t figure out which expenditures, but they don’t seem to line up with R&D), all its operating costs of sales etc are filed under ‘other’, and receivables to affiliated parties are $8 million and ballooning rapidly.

Here is a picture of me reading it:

I have read the occasional Eurozone balance sheet before but I don’t remember them being this hard to interpret. I’m sure it’s just a steep initial curve that will flatten out pretty quickly, but I think blockchain co is a really good candidate for getting left on the shelf.

Getswift and Commbank

Getswift provided an update on its partnership with Commonwealth Bank a few days ago. Rollout of the GSW system won’t take place until February 2018 and revenues aren’t expected until mid-2018. This means investors need to wait until at least the first quarter of FY19 (October next year) to get a proper look at the company’s performance. That rubs me the wrong way because it will have taken well over 12 months from the first announcement on the 4th of April 2017 for investors to get any idea of whether actual sales can live up to the forecast of $9 billion in sales over 5 years. I mean, $9 billion in sales. Getswift had a market cap of like $50m at that time that announcement came out.

I’m just a (un)paid basher though, so what would I know?

via the inimitable @bagholderquotes Twitter feed.

How long will it take to ramp up the agreements with Amazon, N.A. Williams, and other partners? Getswift’s shares have rocketed and the company has opportunistically raised a lot of capital. It’s raised $99 million across 2 cap raises in the past 6 months to invest in services, staff, R&D, support + IT infrastructure and so on. It looks to me as though the company has used the recent rocketing share price to raise enough capital to pull itself up by the bootstraps to the level of a true global IT business.

And maybe that’s good for shareholders, but I can’t help but thinking that the company would not have been able to raise enough capital to support its ambitions, without all these big announcements that juice the share price yet seemingly take 12-18mths to show first revenues.

Or to put it another way, the company has been raising capital well before it has become apparent that they can generate any kind of return on that capital. This is one I’ll be watching from the sidelines.

Fidelity International Limited

Also known as FIL, or Bagholder to some, Fido recently cornerstoned Getswift, and with the Big Boys having come to play at the latest cap raise, shorties better watch out.

via the inimitable @bagholderquotes Twitter feed.

I and others have often puzzled over why Fidelity cornerstones seemingly every dog stock on the ASX (I do not count Getswift among them).  I think Fidelity had positions in 1-Page, Resapp (they’re usually tech stocks), and Slater & Gordon among a stack of others that escape me at the moment. This appears to be the same Fidelity of Joel Tillinghast/ Peter Lynch fame etc and for sure some of these stocks don’t fit the criteria that Fidelity alumni have been known for.

The only explanation I could think of is that perhaps Fidelity has a large venture cap-like strategy where they buy a large basket of diverse stocks with seemingly revolutionary potential, and rely on the 100-baggers making up for the duds. I would be interested in comments if anyone knows a little more about that.

A mystery business

I tweeted about this business a few days ago but deleted the tweet soon after, deciding it deserved its own little write-up and some context instead. I was recently pointed towards Business XYZ, a curious (non-ASX) company. As far as I can tell, XYZ barely exists. It claims an obscenely huge number of customers; I couldn’t find any of them. It operates a (supposedly) multi-million $ business out of a very modest residential address and recently sold itself for $20m. The company is registered in a jurisdiction well known for opaque corporate disclosures. The holding company and major shareholders are not disclosed, and the company is seemingly not required to file reports with the regulator (or if it does, it’s via the holding co which I couldn’t find).  The business’ website is registered in the name of a person who is not a founder and seemingly not associated with them. XYZ’s website was registered only 6mths ago (yet this is apparently a multi-million $ customer-centric business).

from AFR’s coverage of the Westpac BBSW trader transcripts

The contact for the site appears to be a throwaway free email address. I couldn’t find any employees other than three founders. The person who registered the website seemingly doesn’t exist. The founders basically don’t exist on LinkedIn or any social media – except for one (now-multimillionaire) founder whose instagram tag is a variation of ‘@bitchesonthedick’ (not the real tag, but close enough) who mostly posts about his frequent sexual activity. Hey we all need a hobby, but…

Is XYZ a pig in a poke? Dog in a bag? Duck that looks like a chook?

I report, you decide.

Is Santa Claus real??

And hey, it’s Christmas. So I point you to this highly relevant video on Youtube. It’s a brief, Christmas-themed dubbing of the courtroom scene from A Few Good Men. It is my gift to you in thanks for reading my nonsense all year (and if you have children, I recommend watching until the end). Enjoy your break, and Merry Christmas.

I have no financial position in any company or IPO mentioned. This is a disclosure and not a recommendation.

No Comments

Add your comment