There comes that moment when you need to decide precisely how, where, and why you’re going to deploy business capital, of any type. That “moment” is usually a three-part process.
First: The decision of “why” is made.
Second: The decision of “how.”
Then finally: When any vehicle that fits the “how” criteria is found – either acquire it immediately in as much cover-of-darkness as possible, as to not allow any competitive bidders to enter the fray. Or, openly shop any-and-all potential acquisitions as to allow for others you may not have even contemplated prior, to allow themselves to be bid on, by you. i.e., Remember the adage, “Nothing attracts a crowd like a crowd?” Apply that same rationale only using a “big fat wallet.” You’d be surprised how many “deals” suddenly appear on what was once considered a “blank radar.”
Now, with the above for some context. Let’s apply this today, to any hypothetical company looking to invest as to expand its reach or presence, for what ever the reasoning.
So with the above now in mind, here are few headlines as of Wednesday morning of this week. Ready?
Unicorn? To wit:
“In another major blow to Uber’s ability to operate profitably within the European Union, the EU’s highest court ruled on Wednesday that the ride-hailing app company is, in fact, a transportation company, and its drivers should be subjected to all pertinent regulations for taxi and livery-cab drivers. The decision opens the US ride-hailing app up to tougher national regulation in Europe’s 28 member states. The judgment effectively shifts Uber’s legal status from a digital company to a transportation company, giving it less freedom from regulation in the EU’s single market, according to the Financial Times.”
ICO? (aka the “Bitcoin” crytomania) Again, to wit:
“Charlie Lee, the creator of the world’s fifth-biggest cryptocurrency, Litecoin, announced shortly after midnight that he was cashing in his profits after a torrid, 9,300% rally in the past 12 months.”
Or, because there is so much “mania” that people are willing to throw money – ask questions later. What appears at first glance to be a warning sign to investors, what can not be understated is the reason why.
Why, you ask? Fair question, yet better if you derive the answer for yourself, rather than me trying to convince you. Ready?
“The Securities and Exchange Commission cites concerns regarding the accuracy and adequacy of information about compensation paid for promotion of the company, and statements in Commission filings about the plans of the company’s insiders to sell their shares of The Crypto Company’s common stock.
As Bloomberg reports, through Monday, Crypto’s market value had surged to more $11.9 billion. The company invests in digital assets, and is developing source code for managing them, according to its regulatory filings.”
For those not seeing the answer? Let me spell it out for you: Eleven… Billion… $Dollars… near overnight.
Now to be fair, since that surge that “valuation” has been purged, because the CEO himself went on-air and openly admitted (paraphrasing) “They didn’t deserve that kind of market cap.”
Obviously this was a once-in-a-lifetime type aberration, right? Au contraire, once again, to wit:
“…all that is necessary – and sufficient – is a press release mentioning the company’s name and throwing in the word “blockchain” in the same sentence (see Riot Blockchain and LongFin Corp), other public microcaps have decided that if that’s all it takes, then by all means they will gladly take investors’ money.”
Now that “juxtaposition” moment comes. i.e., You’re a company with a “big fat wallet” and you’re simultaneously, openly looking for “deals.” Do You…
Unicorn, and wait for a possible IPO that may never pay off, with more and more regulatory issues possibly forthcoming?
Or, do you…
Blockchain, and its current regulatory issues only because people are throwing money at these entities so fast, and in such vast amounts, they’re just having a hard time trying to keep up. For the sole reasoning that many of these new entries are creating $10’s of BILLIONS of wealth overnight, literally ex nihilo, to the point central banks themselves are blushing.
So, as I stated in my article over the weekend…
On Monday morning, I would have had the conference room booked with the CEO and the Board as to make this case. And If I’m thinking it, you know there must be others as well – and that should scare the daylights out of anything toting a “unicorn” moniker.
Again, how this all ends is anyones guess. But as I once heard Seth Godin remark in describing a different topic, “There will be crying.”
I believe any remaining Unicorn tears will be the first to again moisten the gutters as good-of-a-first-bet, as any.
We shall see.
© 2017 Mark St.Cyr