Back in days of yore (circa January 2017) I dared make the assertion that all that was “unicorn infatuation” in the Valley was much more akin to “the old gray mare ain’t what it used to be.”
In the article “Is 2017 The Year Silicon Valley Experiences The Dark Side Of ‘It’s Different This Time?'” I posed the following. To wit:
“Here’s the equation I believe will not only send shock waves, but will bring down many a valuation edifice within “The Valley” in 2017. And here it is:
“First: The Fed. And Second: Rate hikes.
Two very short sentences containing nothing more than two words each but their implications could have exponentially explosive results. For what they portend is that “It’s different this time” may indeed be exactly that.
What I hoped you may have noticed during this discussion is the one thing myself and very few others pointed out would happen if the hypothesis we’ve been articulating over the last few years was correct. That hypothesis has always been “Without the Fed. pumping in unlimited funds via the QE programs, and a “death-grip” to the zero bound (aka ZIRP) the first ones to show how much of a facade these “markets” where would be seen directly in the “tech” space.”
So what has happened today that should draw attention to those still believing in the “It’s different” meme?
Here’s how different. Remember the IPO last year that was supposed to save the IPO world? Hint: Twillio™.
This is what investors are waking to today. Again, to wit:
Twilio, as of this writing, if you had invested on any day other (as in you bought any of the dips) you are now underwater. For some, you are under by “fathoms” which as of just a few days ago, to even consider such a position – appeared unfathomable.
The reason for such a move (some 25% via the opening bell) is in a way hilarious to my eye. Why? (although I do offer my condolences for those caught in this debacle)
It was reported that Twilio reported an earnings report that was “strong.” But there were two issues. First:
Revenues guided lower. (e.g., $356 -$362 Million vs $364-$372 Million projected earlier)
Can I just make a point here? Why are the revenues for a company that is supposed to be at the forefront of the tech space revolution (e.g., the Cloud space), along with the title and much heralded panache of the “IPO to save the IPO world” is showing anything such as “revenue guiding lower?” Never-minding that a “beat” means losing less money than before therefore “it’s totally worth it!” Welcome to “The Valley” world of metrics is all I’ll say there.
But what caught my attention more than the revenue miss and guide lower is who the CEO is blaming for the results. Are you ready?
Uber™. (not a typo)
From CNBC™. To wit:
“Lawson said on Tuesday that he expects Uber’s “contribution to decline” because the ride-hailing company is “changing the way they do messaging.” He added that Uber is now “optimizing by use case and by geography” and “plans to move communications for some use cases in-app.””
So, an over valued (all in my opinion) unicorn that made it out of the IPO stables (making it as the article below states “Mightiest”) which was supposed to set the stage for the likes of all the awaiting unicorns, has suddenly been speared by the horn of the largest, and most valuable unicorn ever to be, and is still in those very stables.
I’m sorry, but if you can’t see the humor in that whole scenario I would have to imagine that you’re an investor in them. And if so, as I said earlier, “you have my condolences.” Because, after all, you were also told (and sold) to believe it was different this time.
The issue is, as I’ve warned too many times to list.
It is precisely that.
© 2017 Mark St.Cyr