Member Info for sageoflondon

Are you serious? I need to read that - 15% of prior valuation?

I'm not saying they won't be a business that has a place or that they are going to go bust etc. I just don't think the size of the opportunity reflects that valuation. That's subjective and how I feel - Softbank obviously felt differently. The 2021 Financial Statements won't really provide any certainty with respect to whether they will have a business that supports a $33bn valuation - it will show direction of travel, but it's still going to be very small. Even if it does a $1bn in revenue that's still 33 times revenue for a business that operates in a very competitive capital intensive sector. I'm not saying I think it's going to collapse, just that (today) based on what it's doing business wise the valuation doesn't stack up. I have very close knowledge of a similar fintech business. It's already turning over more than Revolut, from a standing start in 2021, should grow 100% in 2022 (almost a given). It's worth nowhere near $33bn. The market opportunity is v big, but not as big as Revoluts.

So Revolut valutions:
- April 2018 - $1.7bn
- Feb 2020 - $5.5bn (3 fold increase on prior round)
- July 2021 - $33bn (6 fold increase on prior round

I question how they increase revenue enough to cover what is an increasingly large fixed cost based - compliance and regulatory costs are big - huge, that's why most banks need significant scale to operate effectively, albeit there are some smaller savings banks offering a niche product range that are very successful. I also question why the business is worth 6 times what it was only 15/16 months before, or indeed 20 times what it was 3 years prior to that. What changed so much in that period (apart from the uptick in valuations in the technology marketplace).

Where did I say they were going to need funding in 2 years? What I wrote does not say that? It's a direct quote from a newspaper...

It's interesting. Nikolay Storonsky said 'the payments firm was now profitable' - I ask at what level is it profitable? Is that Gross, Operating or actual net profit after all costs taken into account ? He also says it has enough funding for at least two more years - it's almost like this is saying this is a good thing as we won't need to come back to market at a lower valuation - like say Klarna. That's fine and I understand all of that, but the fact is the value has decreased based on current market conditions - does anyone have any idea if we reflect that in our NAV?

I'm not anticipating any dip to 3 on Grow specific news, rather a large pullback on the Nasdaq. Given our current level we would likely fall slightly less than the Nasdaq but it would still impact heavily. That's my key concern. No one can predict where the market will move however, but it's certainly a risk. There aren't really any near term drivers for significant increases in market levels - most of the news will be negative - to be clear this is why I am negative on Grow - I don't see any scope for it de-coupling from the wider economy, recession, interest rates, inflation, war. For me, at present, it's about maintaining / protecting wealth rather than trying to spot growth etc. Anything growth related will be more volatile in this market, higher beta etc.

I did expect 6 - but I didn't at that point expect things to be so bad from an economic perspective. Most investors won't wait for market to be price tested - the will estimate that themselves through the discount if it isn't done for them. In all honesty if there were another 10-20% off the Nasdaq we could well see £3. I'm not saying that will happen but it isn't out of the question and more likely than a return to £8. I don't think this deserves to be much higher at present. There needs to be a substantial discount to what is essentially an out of date NAV.

I still stand by my belief that this could fall further. Have no idea how much, but could go sub £4. It's certainly more likely to go sub £4 than it is £8 plus in my view. At £11.90 the price was really frothy and it will be a long journey back to anything like that share price - many years. I think there will be a slew of generally awful economic news over the course of the next 6 months which could cause the market overall to fall further back. Before I consider investing more here I would like to see another 6-12 months of NAVs, including going through the annual audit process. Will also give me a broader feel for private valuations elsewhere - but with relevance to this. Right to focus on the earlier stage investments - that's where both the returns (but greater risk) are likely to be. It is however also suggestive of the likelihood that the team themselves believe a lot of the valuations at later stages are somewhat full.

That's all great. It does however mean that the last (prior) funding round valuation (prior to achieving this level of revenue) was in excess of 10 times revenue - that's high using any measure. That basically means it needs to grow at 45-50% per annum over the next 5-6 years to achieve a valuation of 1 times revenue. Will be interesting to see what the next 2-3 years growth looks like along with the net profitability / cashflow dynamic. Ocado has grown over the last 20 years but still hasn't made a profit and has come back for constant debt / equity financing with a promise that it's not far away - so far with Ocado you will be waiting 25 years! Maybe.....in my view at a valuation in excess of 10 times current revenues there is no real uncertainty baked into the valuation - there is an assumption that everything will happen as stated - where is the risk premium in terms of the return profile.....

If I want to cut my meat / fish consumption I will use Cook! They are online, deliver but I can also pop into a shop nearby..

Nature of the market I guess. I think this could move around a bit until the next set of results. If they are solid (not expecting out performance) then we will likely rise a little as nerves calm. This share is one to stick away and pick up more cheaply if you get an opportunity. The market can throw up some silly prices for things at times.

I have to admit I didn't see this at 400p. The Nasdaq actually went up yesterday but for whatever reason we have fallen with the rest of the market.

Revolut will be growing to scale - there losses are almost as big as their revenues at present. It costs an awful lot to get compliance, risk, operations, technology in place in a large financial services organisation. A lot. In 2020 revenues for Revolut were £222m - losses were £207m. Not sure what the 2021 figure is I will admit....? Anyone? Either way it has a long way to go to justify its current valuation.

The banks will often all invest together to avoid one bank owning (and hence licensing a successful technology) - it doesn't mean it will win. There have been similar examples which have ended in disaster. Monitise was an example from way back in 2014 ( I recall it well). That was listed on AIM in 2007, named as one of the UKs top 15 fastest growing technology businesses in 2011, 2012 and 2013. In 2016 it repored heavy losses, shares went down around 96%. Visa was a 5% shareholder, Norges Bank, 3i Group etc. At the start of 2014 it's market cap was £1bn, but by May 2016 it had dropped to £66mn.During this period Monitise built a mobile banking, payments and commerce ecosystem - the future of banking then, and still used in some areas today. Just because the banks invest doesn't mean it will be the winner - think Wirecard, Yahoo, AOL, Lovefilm, Nokia etc. Winners one day, also rans soon after, technology moves fast. The amounts to them (banks) are peanuts. They have to invest in banking technology case it becomes the leader - they can't not or they are beholden to another competitor - licensing technology and enriching a competitor. On the other hand it might be a success - even if it is, it doesn't mean they haven't overpaid. Monetise is still doing things and not defunct completely - it's not worth what it once was however and was sold cheaply. Blackberry is still very successful in software, but not hardware - that wouldn't have helped if you bought the shares at the top however, but it will continue to be successful software / security provider in it's space. Cisco is successful - current m cap around $180bn - but it has never regained it's 2000 peak. In 2000 Cisco had a market cap more than the whole Canadian market. 21 years later Cisco is still down around just under 50%.

The problem was (is still in some areas) that everything is priced as if it will succeed - a lot won't way more than half, some will fail completely, some will be niche companies, some will have moderate success and a really small number will become the next google - really minute. If something say like Revolut is already priced at $33bn is that really valuing the risk / chance of success accurately? It's priced for complete success in a very competitive market with lots of other cash generative profitable companies copying the good bits.

I think Grow has a few investments with real promise and those are the ones that will return well. A lot won't though. Klarna (not Grow) is a great example - how will that fare if Apple starts to take market share?

They can - bigger question is will Cazoo still be here in a couple of years full stop. They made £143 per used car in the first quarter of 2021. I believe a normal dealer makes in the region of £1,250 per car - more recently. That period post Covid has been one of the most profitable in history for traditional used car dealers (most of which have an online offering). If you can't make money in that period it's going to be a struggle. Dealers like Vertu, Lookers etc have done very well over that period. Like it or not Cazoo has been a bit of a disaster since listing particularly if you were an investor in the listing itself. Basically in excess of 85% of capital destroyed based on today's market capital.

Guessing when they were priced at $13.60 a share back in Feb 2021 they never expected to be anywhere near a dollar a share - as is though they are at 0.92 USD a share. They can do a consolidation or delist from Nasdaq......there will be other indices. If the SP recovers a bit they won't have a problem.

Where did I refer to market capital? I was referring to share price...

What is Nasdaq's compliance process for companies failing to meet the $1.00 minimum bid price requirement?

If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company, advising that it has been afforded a "compliance period" of 180 calendar days to regain compliance with the applicable requirements. Thereafter, if such a company does not regain compliance with the bid price requirement a second 180-day compliance period may be available. A company listed on the Nasdaq Capital Market may be eligible for an additional 180-day compliance period if it meets the market value of publicly held shares requirement for continued listing, all other initial inclusion requirements for the Capital Market, except
for the bid price requirement, and provides written notice that it intends to regain compliance with the bid price requirement during the second 180-day compliance period, by effecting a reverse stock split if necessary.

There might not be a rule on NYSE - there is to be listed on Nasdaq......take a read and inform yourself it's pretty clearly set out. Nasdaq don't want penny shares basically!

We have also had VC / PE acting like a pyramid type arrangement in many cases - one buys from another at an ever higher valuation - at some point that stops and someone is left holding what remains - i.e. the SPAC shareholders in the case of Cazoo etc. VCs and PE have had so much surplus cash / dry powder they have needed to deploy so they have made sure that they do. Some deployment will be profitable, some will have paid too much and will take hefty losses - who has done what we will only know when the values crystallise.

So roughly:
- Aiven - 131% up on 31/3/2021, TM 353%, Ledger 99%, Revolut 359%, CoachHub 482%, Aircall 73%. This is where most of the increase in FV is concentrated. That's £284.4m of increase in FV out of £347m. Those increases look 'frothy', sure they are based on last funding rounds but that doesn't mean they won't go down as quickly. Even if half of the increase reversed that is £142m of NAV decrease. That doesn't even represent an actual decrease since 31/03/2021 values- not saying that will happen, but if say the value of those 6 were to half from 31/03/2021 values that would be a very large hit to NAV. It's easy to see how things turn ugly very rapidly indeed. The portfolio doesn't move 10-20% at a time. The valuations can move massively - Cazoo down 90% since it's peak, Trustpilot down 83.5% since it's peak. Things can reverse very quickly indeed. It only takes a reversal in sentiment - hang on we have had one. I think it's a little beyond what was intended to suggest we will go up 20% per annum when we see increases like this - there will also be decreases. They won't all be winners everytime - that just doesn't happen. In fact nearly everything we have listed recently has gone south - significantly!!!

without being dismissive of the bright young and old who work for them, broker targets are always 6 months behind or prepared with an element of self interest in my opinion - i.e. house broker etc. reiterating a target of 1300 in this market. Will be interested to see the update with the breakdown. Revolut rose 340% in H1 22. That could easily be re-valued at a third of that price now (circa $10bn) - it wouldn't take a lot - what has happened in that 6 months to justify that valuation change - someone was persuaded to pay more for a smallish stake. I would like to see Revolut list at that price - $33bn. $10bn would be back to around 33 times revenue, rather than 100 times. Again a crazy valuation. That's why investors don't believe in the numbers and we are so far below NAV. Trustpilot has fallen 45% since that broker note. Form 3 - listed as increasing 480% in H1 2022 - if things can go up that much in 6 months, they can also fall just as quickly. This is the problem - the valuations are highly susceptible to the market mood, how much someone wants to pay at a particular given time. They have little basis in actual return on capital / equity / cashflow / dividend returns etc, hence very subjective indeed. In reality it's difficult for an auditor to challenge significantly. Valuations are so subjective that we will always trade at a huge discount the market is stressed. Where the market is really stressed (liquidity as well as overall level) the discount could widen further still - we aren't however in a liquidity stress position as most of the portfolio appears to be well funded. I think it's really important to recognise that things can turn negative very quickly with these vehicles (positive too when things are going well). If Revolut comes out and secures a $100bn float I will take it all back..........the percentages purchased are often small in funding rounds and it's really difficult to base an entire market cap on what one person / corporate was willing to pay last time.