As IF Times

Source: Shares of Twitter Are Hitting New Lows – Bloomberg Business

Almost 2 years ago, we discussed the valuation of what we described as ‘gossip stocks‘, which referred to publicly listed businesses capitalizing on people’s insatiable appetite for social media applications. This included Facebook, Linked In, Zynga and of course Twitter.   Over the past  year, many other newly minted stocks in the new technology space have been dubbed “unicorn” stocks. This is a reference to the fact that while commanding laughable valuations in the private market and creating gobs of paper millionaires, actual revenues fall woefully short of expectations once they are publicly traded. So while the bankers and venture guys talk about future earnings gushers; like unicorns, no one ever sees them.

This great deflation of expectations on  social concept stocks has been masked by the general buoyancy of the overall markets in the past year.  Market nerds will point out that even as markets ratcheted higher and higher, there were fewer and fewer stocks making the move up.  Now, all of a sudden as the general market looks creakier, the enormity of the losses incurred by holders of these unicorn issues are coming to light. Here is a short list of market capitalizations of some selective unicorn stocks as of the close today:

Issue                          Market cap Jan 2014      Market cap Jan 2016       Peak market cap

Twitter                      $48 billion                         $13 billion                        $ 51 billion

Facebook                  $122 billion                       $215 billion                      $ 250 billion

Zynga                        $n/a                                    $2.2 billion                       $ 4.8 billion

Linked In                 $23 billion                          $23 billion                        $ 30 billion

GoPro                       $n/a                                     $2 billion                          $ 10 billion

Tesla                         $ 20 billion                        $ 26 billion                        $ 35.3 billion

Alibaba                     $ n/a                                   $ 17.5 billion                     $ 30 billion

As we note, Twitter has been one of the major losers in the valuation shrinkage metric, but other established technology stalwarts have also turned sharply lower, such as:

Apple                        $430 billion                        $ 537 billion                     $ 742 billion

Yahoo                       $ 38 billion                          $ 28 billion                       $ 49 billion

While this list is selective, they represent some pretty big write downs from their respective peak valuations. In the case of stalwarts Apple and Yahoo, they are considered bellweathers even though they are well past concept stage.

Once stocks become public, there is a lot more scrutiny on the enterprise’s viability.  There’s only the hard reality of  the next quarter’s earnings to justify valuation, not the extrapolation into infinity used by MBA whiz kids during the initial private to IPO stage.

Inexperienced market players may attribute the collapse in valuation as a function of an inability to execute on the part of the companies. The truth is actually much simpler.  In the case of newly minted issues, they may be surprised to find out that the original valuation and extrapolated cash flows were simply made up out of thin air.   That’s right, completely fabricated.  As long as backers are willing to fund the companies and the bankers agree to subsequently float at an agreed upon valuation, virtually any valuation can be had; especially with new concept companies having no history.  Makes sense. If you’re going to make up a number, make it a big one.  Who needs Powerball, when you can just write your own ticket?

The basic premise of most unicorns is that novelty and market share are more important than profitability…which will come…eventually…they hope.   In fairness, that actually did work for Amazon, a survivor of the last dot com bubble.  Amazon however, actually does have a business model and it’s not entirely based on selling ads.  As in all market cycles, the excesses and fluff eventually disappear, to be replaced by different versions of fluff in the next cycle.  As the general market begins what looks to be a longer term retracement, there may be more than just unicorns that people should be leery of.  The creature that people should really be afraid of…is the bear.

Update: Uber

Update 2: Crash of Tech Stocks

Source: Vizio Smart TVs Track Watching Habits To Work With Advertisers « CBS Sacramento

I get that this is a great idea for advertisers, but I’m unclear on why it’s a good idea for anyone else.

It all started with caller ID.  When this little feature was offered on phones, it was a godsend because you could ignore telemarketers, your in-laws, your boss and of course pesky boy or girlfriends.  Stalking people became more problematic if the name of the guy breathing heavily on the other end of the line had his name clearly displayed on your phone screen.

Of course the reverse of this is an advertiser’s dream.  Using modern computer technology, they can now tell who has been looking at their ads, or browsing on their sites.  To make it even easier for them, people actually volunteer not just their names and addresses, but their likes, dislikes, travel activities, lists of friends and their likes and activities by having them posted online via Facebook, Instagram and Linked-in to mention a few of the most popular social media sites.

The proliferation of apps that people download to their smartphones are widely accepted as convenience tools to help make peoples’ lives easier and more convenient.  It’s hard to imagine how we lived before we knew the identity of the plane flying overhead just by pointing our phone at it.  Or the position of the dog star in the sky.  Or the most recent astrological update.

There are apps now that will send notifications of sale items to your phone as you walk through retail stores.  A coupon will flash and point you to the product.  From here, it’s only a step away from the app ringing up the purchase if you swiped left or right.  This notion is supported by Apple’s Tim Cook declaring that cash will be unknown within a generation since all transactions will be done virtually.  As readers may know, I am not of that opinion, How Do You Tip The Girls .

So now it’s reported that ‘smart tv’s’ will be monitoring peoples’ viewing habits.   If you happen to binge watch The Golden Girls on a rainy weekend, ads will pop up showing walk-in tubs and medic alert amulets.  If you happen to watch a lot of Cesar Millan dog shows, you may get deluged with dog food ads.  Same thing if you happened to watch The View.

In essence, information on where and how you spend your money, who your friends are, how you pass  your entertainment time and where you go as mapped by your car’s GPS is on a database somewhere for someone to use for whatever reason they may wish. What could possibly go wrong?