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: Neighbors Of Harrisburg Teen Charged With Supporting ISIS Express Disbelief « CBS Philly

Why is Twitter even something that people do? Why do people Tweet?  How did the world get along without this stupid app?  I’m not even sure of how to use the word.  I guess it’s a verb, as in I twit you, or I twitter you.  If in a bar, do you tell someone to twitter you? Would they twitter you later, after dinner perhaps? Is it a noun, as in he’s a twitter, or they’re all twitters? If it’s singular, does that make someone a twit?

This useless app was invented on the heels of the success of all social media phenomenon beginning of course with Facebook.  In the case of Facebook, the app at least makes some sense as social voyeurs and exhibitionists alike could satisfy their particular needs.  In the case of Twitter, it appears that the utterances of a few celebrities or personalities are so compelling that subscribing to their timely bon mots is a must do.  It’s a bit of an evolution from the days of gathering around Moses while he reads pronouncements from a stone tablet.  But you’d think that based on the popularity of the app, that the pronouncements made by present day social deities are no less sage.

Why can’t people wait until the 6 pm news to know what Kim thinks? Why do we need to instantly know that she just bought a tennis bracelet for her cat? Why would any sane person need to be piped in to Al Gore’s recent verbal discharge?  According to Google, the accounts with the largest followings include Katy Perry, Justin Bieber, Taylor Swift and Barack Obama.  Wait…Barack Obama?

Unless you’re a spy, the compunction to be a twitter user implies that someone else’s life is more interesting than your own. It actually accentuates the very human tendency to listen to those views that are already agreeable to their own.  The more people that are in that echo chamber, the more it reinforces and validates their own worldview.  As the top twitter personalities above indicate, this is the realm of 12 year old girls.  This is the constituency of those that wait breathlessly for every word from their idols.

It’s actually brilliant marketing, since they don’t stop making 12 year old girls which come with their natural need to be part of a popular mob.  It’s curious that some people never outgrow that though. That’s why they’re called followers.