When it comes to the entire disruptor category there have been far-and-few that have raised investor dreams for IPO cash-out riches than Uber™and AirBnB™. These two were once thought to be the “Perfecta” or “Exacta” of Unicorn IPO racing using the parlance of horse-racing.
Uber, was thought, would be first. Then, right behind it, AirBnB.
Taking the bet (i.e., investing) had been seen as a “sure-thing” across the Silicon Valley landscape. In fact, not wagering if one had the means when “post time” (e.g., IPO hard date set) had still not yet been called has been looked upon with “not getting it” type scoff.
After all – why would you not invest a few $Million, to then have it said you’re now with $Billions, to then be worth multiples or $10’s of billions once these mythical equines cross the proverbial line in a photo finish for the post dot-com ages?
And then – Uber came up lame, had its #1 jockey suspended, and its backers are looking to sell out before the race even begins. The problem for AirBnB is – it needed a strong Uber to set the pace and keep the interest in this race front-of-mind. Now, AirBnB stands alone, with the weight of that “exacta” failure now clearly front-and-center.
And there’s no IPO race scheduled (only rumors) for even itself to prove its worth. But that’s not the worst of it.
Now, that once impeccable IPO track is in complete disarray, from being poorly maintained, awash with puddles, mud, and over grown weeds. Stocked with fewer and fewer of its once prized stable mates for potential IPO champions. And the once crowds that once filled the grandstands seem to have lost interest. For every race that’s been run since 2015 has left not “riches” but rather, nothing but road-apples as prize rewards. Leaving once glorified ticket holders feeling more and more like bag-holders.
I’m of the opinion, just as I was when I said it back in early 2015: it’s not only not going to get any better. But rather – worse, much worse. For here we are, and yes, it is worse, and it ain’t over.
The reason for all the above is to bring back-to-mind that when the “markets” were still receiving Federal Reserve largess via the spigot known as QE (quantitative easing) for all that speculative betting, combined with those “markets” being at record highs. The aforementioned (not to mention all the others that have since flamed out) were seen as the inevitable pair of IPO darlings, just awaiting their chance to show the world that “it’s different this time” really was just that.
Problem was/is – the race now seems over before it ever started. For once the speculating gambling spigot known as QE was turned off – the IPO racing circuit came to a screeching halt. Where now only the “jockeys” emblazoned with an approved central bank bullseye would now be supported. (i.e., Think FAANG stocks)
Just for a little more context: the NASDAQ 100™ closed (closed is important, as opposed to only have spiked) last month for all intents and purposes at a record 6000 points (actual 5988.6). The reason why this figure is important is for this: That puts the NDX some 20% higher than the highest monthly close of the entire dot-com bubble.
So now it begs this question: It’s not the right time to IPO today for any once deemed the “best of the best?” What, no money to be made in tech stocks?
And there lies the rub. Because no, unless there’s free money to buy all that “free lunch” it would seem that answers itself, does it not? Below is chart to show just where we currently are. To wit:
The reason why the above chart and more was important for context is this: the space between where QE ends, and where we are, has been the absolute equivalent of a glue-factory for most of the once IPO unicorn stabled darlings. All, as the tech stock “market” has rocketed higher, over some 20%, in less than a year.
So I ask again: What, it hasn’t been the “right time” to IPO because of market concerns, or money available?
Think through that question and your own answers too it thoroughly, for there’s a lot there when you do. So now I’ll go back to my original point…
Back in June I reiterated the following when making the argument about Uber facing a “Theranos Moment?” To wit:
“But once the term “law suits” and more get thrown across a unicorns saddle? Let’s just say – viewpoints, and valuation metrics begin to change, and change quickly.”
Did that happen? You bet – and in spades. Where the current valuation thinking now starts (again starts!) in and around $40 Billion. And even that is openly being questioned as possibly being too high, when only a few months back $68 Billion was still seen as “not yet fully valued.”
Now – It’s AirBnB’s turn in the lawsuit spotlight. And in my opinion, it shows just how vulnerable this “disruptor” model is in jeopardy of having its valuation metrics disrupted. Via CNBC™, again, to wit:
The above article is well worth the read for two reasons that jump out at anyone with any business acumen, here’s a just two:
“In Miami Beach — as in New York, San Diego and many other U.S. cities — short-term rentals of the kind facilitated by Airbnb, VRBO, Tripadvisor and others are strictly limited. Laws, fees and taxes vary regionally, but fines for violations are typically high. In Miami Beach, the fines run at $20,000 for a first violation and rise from there.
When the first notice arrived on Jan. 19, Grewal thought the city of Miami Beach must be mistaken. He hadn’t used Airbnb as a host in years. Then it dawned on him that his long-term tenants might be responsible, despite a clause in their lease barring them from using his place for transient occupancy.”
But here’s the kicker in my view…
“First, he had to figure out where the listing was, since Airbnb’s site doesn’t let users search by address to check whether properties they own might be listed illegally.”
The story goes on to report how it took some 11 days to even get some form of response, and that only entailed how they would “reach out” to the tenants that listed his property and inform them of their “obligations.” i.e., not help him, as in the owner of the property that is being listed on this site illegally, but will reach out to the offending tenants wit the listing not coming down nearly a week later!
I know business lawyers (I know mine would) who would be chomping-at-the-bit readying legal proceeding if this was one of their clients.
Again, what can’t be lost here is the seemingly intentional, obstructing nature as to not allow property owners to find out if their properties are being illegally listed on a site that makes money via that illegal activity. And again, because it really is germane to the point: seemingly showed little, to no regard, for the property owners plight.
In other words (and in my opinion) the lack of response, time, and resolution is far-below anything thought to be nearing even the minimal of ethical business standards or practices. And I’ll add – may well be proved out in a court as well. I’ll bet $20K in fines gets those questions to lawyer, and soon. After all: Wouldn’t it you?
To reiterate: Why was it so laborious, frustrating, as well as nearly impossible for this home owner to get his house removed from this site in any “reasonable” time frame? All while he is sitting with $10’s of thousands of dollars in fines and who knows what else for repairs. Here’s one possible answer, and I made it before only using Facebook as the prior example. To wit:
“Management from Mark Zuckerberg on down have been professing when it came to anything “fake” it wasn’t of their doing. And gee-whiz-by-golly they’re going to do whatever it takes to make sure anything “fake” never sees the “like” of day again.
Sounds great, in theory. But there’s a very real fact that must now be considered…
If “fake” news was so wide-spread, and so devoured on FB that it had the ability to not only influence, but rather, to overturn political norms and ruin the election of what everyone in media on down believed; that this election was merely a formality on paper because, it was clear to all of them, Mrs. Clinton would win not just walking away, but running?
That would mean FB now has to alienate (i.e., by now not delivering “news” these people wanted to see) millions, upon millions, upon millions of now current users. What does that imply to their now “real” (ooopsy, again!) metrics going forward?”
The possible answer? Here’s an inclination via a passage from an in-depth study done by John Lanchester titled, “You Are The Product”
“Facebook is in essence an advertising company which is indifferent to the content on its site except insofar as it helps to target and sell advertisements. A version of Gresham’s law is at work, in which fake news, which gets more clicks and is free to produce, drives out real news, which often tells people things they don’t want to hear, and is expensive to produce. In addition, Facebook uses an extensive set of tricks to increase its traffic and the revenue it makes from targeting ads, at the expense of the news-making institutions whose content it hosts. Its news feed directs traffic at you based not on your interests, but on how to make the maximum amount of advertising revenue from you.”
So with the above for context, the question almost asks itself…
Why was it so hard for this homeowner to get his legally owned property off of AirBnb’s website? Especially when he was amassing fines and other possible legal retribution for his property being hosted? All while these transactions were facilitated, as well as profits made by them and/or others? All without his consent.
If Uber is any clue, I believe the legal woes for this other unicorn IPO dreamer are just beginning. Why?
Well maybe because…
It’s different this time.
© 2017 Mark St.Cyr