Good Reads: Sensible Investing
Psychedelics 2021: A Year in Review. Here from Josh Hardman at Psilocybin Alpha. Fantastic overview of the sector covering everything from clinical trials to investment activity to policy actions. Overall, there is strong momentum, even if the high-flying, publicly-traded stocks fell in December 2021.
The hidden leverage of stock-based compensation: Live by the stock, die by the stock. Here from FT Alphaville (no paywall).
TL/DR version is that SBC was worked wonders for high-growth tech over the last ten years as stock prices have gone up significantly. It's a much different story, though, when prices stagnate or fall.
How have the 60 venture-backed tech companies that went public in 2021 done? Below is the analysis from this Twitter thread. My question here, and the one we will be figuring out in the quarters and years to come, is which of these have fundamentally flawed business models and won't be standalone companies in the future? Some now have market capitalizations that are close to or less than the total equity they have raised (and I look forward to seeing that analysis, too).
2U ($TWOU) went public in 2014 but might be demonstrative of the 'Is this a broken business model?' question. With poor growth prospects, the stock is down 43% this week. On SeekingAlpha, bloggers are suggesting This May Go To Zero. The market is, perhaps, beginning to show that narrative alone can not sustain a company. As of today, $TWOU is unprofitable with $700M market capitalization. They have $200 million in cash and $800 million in debt. Looks like Spruce Point's investment report from 2018 was prescient.
Sports betting has experienced rapid legalization in the US. If you are among those readers who listen to sports podcasts, the relentless advertisements made you well aware of this trend already. Here's the article in The Economist.
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