Den eneste formelen en gründer i internett-økonomien må kunne utenat

Som de fleste leserne som følger meg vet, er jeg veldig skeptisk overfor enhjørning-kulturen som har utviklet seg de siste årene. Havet av likviditet som sentralbankene har oversvømt de finansielle markedene med etter finanskrisen har skapt en surrealistisk situasjon. Selskaper som taper milliarder av dollar hvert eneste år – og deres gründere – blir hyllet som helter og verdsatt utover all logikk basert på forventninger om uendelig vekst og et antatt komponent av disrupsjon i deres forretningsmodell. Dette er spesielt bekymringsfullt når mange av disse selskapene er nesten ti år gamle og ikke er i stand til å kommunisere engang når de i det hele tatt kommer til å tjene penger. Fra Spotify til Uber eller Xiaomi, listen med blødende enhjørninger er så lang at det gjør vondt å tenke på tapene for samfunnet som de representerer. Kroneksemplet er den uforståelige børsnoteringen av SNAP, som var nesten designet for å stjele pengene fra småinvestorer.

Les også: Snapchat – The pigs get slaughtered

Hvilken er hovedgrunnen for at disse selskapene ender opp i denne situasjonen? Svaret er at de fleste enhjørningene er skapt og lider under den dødelige kombinasjonen av plattformøkonomien og mangel på inngangsbarrierer.

Plattformøkonomien impliserer at bedriften må investere i plattformen før den i det hele tatt er i stand til å koble brukere til den og dermed begynne å generere kontantstrømmer. I seg selv er dette ikke nødvendigvis et stort problem, Forutsetningen er at marginen som hver kunde eller bruker i gjennomsnitt  genererer blir høy nok til å både finansiere investeringene og generere positiv margin for aksjonærene.  Et eksempel er telekomoperatører. De har drevet med plattformøkonomien og har vært i stand til å vokse og levere sunne marginer samtidig i mange år.

Det er mangelen på inngangsbarrierer som er problemet. De fleste enhjørningene er basert på enkle ideer og teknologi som er lett tilgjengelig eller lett å kopiere. Konkurransen kan dermed komme fra overalt og fra hvilket som helst sted i verden. Dermed blir den eneste måten å sikre sin egen overlevelse å vokse ekstremt raskt for å kunne oppnå en global ledende markedsposisjon. Dette konkurranselandskapet driver dermed prisen på tjenesten under kostnadsnivået som plattformøkonomien krever. Tapene akkumuleres år etter år.

Les også: Five business development mistakes that Unicorns can afford, but you can’t

Enhver gründer og investor i internettøkonomien må være klar over denne mekanismen, fordi investeringene som å spille enhjørning krever er altså enorme. Det er dermed ekstremt viktig for gründere og investorer som satser på plattform-baserte tjenester å kunne forutse  på hvilket tidspunkt en bedriften vil bli lønnsom.

Heldigvis finnes det en formel som forklarer dette, og den er (i teorien) ikke vanskelig.

Formelen lyder:   CLTV > (CAC + CRC)

CLTV = Customer Lifetime Value, eller verdien som en kunde eller bruker i gjennomsnitt genererer for selskapet i løpet av alle de årene han eller hun betaler for tjenesten.

CAC = Customer Acquisition Cost, eller gjennomsnittlig kostnad ved å vinne en ny kunder eller bruker.

CRC = Customer Retention Cost, eller gjennomsnittlig kostnad ved å beholde en kunde eller bruker i løpet av de årene han eller hun betaler for tjenesten.

Ulike selskaper kan ha ulike definisjoner for alle disse tre faktorene. Det er akseptabelt så lenge de forblir de samme over tid. Generelt sett:

  • CLTV er målt i dekningsbidrag (gross profit)
  • CAC bør inkludere alle reklamekostnadene adressert til nye brukere
  • CRC inkluderer alle reklamekostnadene adressert til eksisterende brukere

 

Noen nyttige konklusjoner:

  • Kun når CLTV er større enn de to andre faktorene til sammen er man på vei til å bygge opp en finansiell bærekraftig plattform-basert virksomhet, med lønnsom vekst.

 

  • Denne formelen forklarer hvorfor «Freemium» forretningsmodellen er så sårbar. Når bare en liten andel av brukerne betaler for tjenesten blir CLTV veldig lav. Dette er en av grunnene hvorfor Skype aldri klarte å tjene penger før selskapet ble kjøpt opp av Microsoft i 2011. Skype hadde også nettogjeld i balansen på 686 millioner USD på det tidspunktet. Spotify på sin side prøver på alle mulige måter å konvertere «freemium» brukere til betalende kunder.

 

  • Tatt i betraktning hvor nådeløs konkurransen i internettøkonomien er, og den furiøse utvikling av stadig nye tjenester, bør CLTV ikke estimeres for mer enn 7 år.

Interessant? Del gjerne!

 

5 questions to test whether your project is innovative for your company or not

Suppose a team comes to you with an initiative that it claims is innovative for the company. How would you test if it is true in order to invest the resources it may deserve? Should it on the contrary be put under current operations? Five questions do the job for you.

Lately I have been reading the book «The end of competitive advantage», by Rita McGrath.

The book has some good chapters. Chapter 5, «Building an innovation proficiency» is one of those. There you find the case of Brambles, a  company founded in 1875 that circulates and commercializes pallets around the world from its headquarters in Australia.

The case is interesting in itself. How do you transform a relatively immobile company into an innovation powerhouse? There are of course a lot of activities leading to the desired output, but one of the first obstacles the upper management had to face is the definition of innovation itself.

This is not a trivial issue. In order to being able of pursuing a new business opportunity any management has different tools at its disposal. However, if the management doesn’t correctly identifies the opportunity as an innovation as opposed to, say, a new exercise in operational efficiency, the wrong set of tools will be applied. The new offering will be trusted to silos and regular operations. It will then most certainly die there. The people that should have exploited the opportunity will be busy aiming for the operational parameters they are measured upon and will not invest enough time and effort in anything else than that.

I have written before about the importance of identifying the right type of innovation in order to match it with the strategic goals and resources of the company. You can find the classification matrix beneath and the blog post describing it in detail here.

 

Innovationstrategies
The four types of innovation at corporations

 

The following questions will reveal whether the new initiative presented to the management is an operational issue within the boundaries of organic innovation or a project that should be put under the governance of the innovation team. At Brambles, an affirmative answer to two of them classifies the new initiative as innovative for the company.

  1. Does the proposal represent a new operating model or business model? 
  2. Is it something that would open us up to new or different customers?
  3. Does the idea expose us to potentially new competitors or different competition?
  4. Would it require new skill sets  – do we need to recruit or train people to do it?
  5. Would it require new technologies or types of resources or facilities or whatever that we don’t know how to manage?

Concerning business models, from my experience any initiative that changes a box in the Business Model Canvas represented below is definitely suspicious of being innovative. In addition, the management has to be very aware of the power of this decision. To change business models is extraordinary difficult for any potential follower. Chances are that they will react too late and the first mover will dominate the market for a long period of time.

Read more about how some companies made it here.

 

7-selskaper-som-endret-internettokonomien
A simplified version of the Business Model Canvas featuring some companies that destroyed their competition by changing a single block of the model

 

Any initiative that will open your company to new customers or competitors is most probably innovative for your company and maybe the industry you operate in. You should however be aware of the implications. Changing customers and competitors imply potential new revenue models, billing and IT systems. It also implies challenging the value of your Key Account Managers for the company and even their incentive models.

Finally, new technologies, and therefore new skills, are an almost sure sign of innovation. However, in my opinion, the management should pose one more question in such case: Is the technology already known for some competitors in the industry? If it is, we are dealing wth organic innovation and the initiative should be transferred to the operative core of the company.

Innovation is not easy. Top managers have many other tools to increase shareholder value in the short and medium term that are far less risky. The management may hesitate when confronted with it. It is therefore imperative to have tools like these five questions to identify whether it is indeed an innovation and in such case act decisively upon. If not, chances are that an opportunity for  new growth and revenue will be wasted.

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Samsung is becoming everything Apple once was…and more

Samsung is creating a new and potentially unique ecosystem in the internet economy. Huawei is probably trembling in its pants. For Apple, the challenge is on.

Wednesday 29.3 Samsung launched its latest mobile phone, the Galaxy S8. The phone is by all means impressive in itself. It includes a myriad of new features and a new form factor that made people attending the event live (and me in Oslo) wanting one asap.

I commented my expectations on the launch of the Samsung S8 in the Norwegian economy site E24. 

However, the launch wasn’t about the phone. It was about the transformation of Samsung into becoming the new ecosystem of the internet age,  joining Amazon, Apple, Google and – stretching the concept- Facebook. If everything Samsung promises is true, now you can put your S8 in the center of a world that allows you to control all appliances at your home, make an appointment with your doctor, pay at merchants, watch and create videos and movies in VR… Samsung aims also to replace your desktop with your phone and a monitor and keyboard. It is called DeX. In addition, all these elements can be controlled by Bixby, the new AI powered digital assistant acquired by Samsung from the same entrepreneurs that created Siri.

The most interesting issue is, however, the way Samsung is creating this new ecosystem, because it is a blueprint of the original Apple recipe.

First of all, Samsung has taken all its products and bonded them together to work with each other. Apple did the same with the iPhone, the iPod, the Mac and finally the iPad and the Apple Watch. They work seamless in their closed ecosystem ensuring customer satisfaction and loyalty. However, in the case of Samsung the implications may become even bigger, because of the vast amount of appliances and electronic devices that Samsung produces. From washing machines to TVs to desktops and VR devices, Samsung has almost everything you need at home for domestic work, job and entertainment.  The company is even putting together a list of partners, from virtual health care centers to IBM  and movie studios in order to integrate great quality to proprietary apps in those devices.

Don’t be surprised if Samsung installs Bixby in its own line of living room assistants, similar to Amazon Echo or Google Home, partnering with Amazon for voice-activated online purchases.

Second, Samsung isn’t afraid of disrupting itself, as long as it can challenge its competitors and steal their profits. The DeX desktop will partially disrupt the Samsung line of desktops, but may steal market shares from Dell, Lenovo and HP, increasing revenues for the Korean giant. This is also a tribute to the genius of Steve Jobs. The iPad disrupted partially the Mac, but it also disrupted all other Windows PCs, stealing their much bigger market shares.

Indeed, Samsung is becoming the new Apple, furiously innovating and creating its own closed ecosystem of hardware and software on the shoulders of the open Android operative system. The consequences can be devastating for manufacturers of smartphones and household appliances alike. Few of them, if any, can match the product range and technological know-how and innovation power that Samsung has exhibited. Even Apple is rumored to include a curved glass too in the iPhone 8… that will be manufactured by Samsung. Huawei is probably very worried by now.

Success is still not granted, though. Smart appliances have been available for a while, but most users don’t see the utility of them. Desktop PCs are an industry in decline. Samsung will have to partner with many more movie studios and on-line heath care centers in order to give its ecosystem real value. Most of the job is still to be done. In addition, to create an ecosystem based on appliances is much more difficult than one based on apps solely. The development times are longer and the purchasing frequency lower. If Samsung wants to create this new ecosystem, the company will have to stick to this strategy for many years.

If it succeeds, it can build a competitive advantage for all its consumer divisions that may last for decades. 

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Slik kan telekom og 5G oppfylle drømmen om digital vekst i din bedrift

Forrige uke ble jeg invitert til å holde foredrag hos Telia i Norge. Arrangementet kan ikke beskrives på en annen måte enn en suksess. Over 300 mennesker i salen og en klokkepresis timing gjorde at dynamikken mellom foredragsholderne og publikum fungerte perfekt. Utvalget av foredragsholderne var dessuten imponerende og jeg følte meg glad for å være i så godt selskap.

telia-programmet
Foredragsholderne

Mitt foredrag hadde som overskrift «How telecom can scale your business…dramatically» 

Mitt poeng var at å skalere fort og med besluttsomhet betyr i de fleste tilfellene å ha sterke partnere ved ens side. Telekomoperatører har, også gjennom eksplosjonen av 5G, mange av de egenskapene som enhver business med vekstambisjoner bør være interessert  i.

For det første er telekom en industri som er vant til å investere enorme summer med lange pay-back horisonter. 

Figuren under viser magnituden av disse investeringene.  Realiteten er at telekom investerer hvert år ca. 350 milliarder dollar i CAPEX (capital Expenditures). Til sammenlikning er dette ikke mindre enn halvparten av redningspakken den amerikanske kongressen brukte da de største bankene i USA holdt på å gå under under finanskrisen i 2008. Det er også en mye større beløp enn NATO (ex USA) bruker på å forsvare våre grenser og våre barn fra eksterne trusler.

Telia2
Fig 1 – Globale telekom investeringer sammenliknet med andre CAPEX- intensive virksomheter

 

Bedrifter med behov for skalering leter vanligvis etter en partner som ikke er redd for å investere og samtidig kan være tålmodig med tanke på resultatene. Hvis business caset er godt nok, er telekom en mulighet å ta i betraktning. 

I tillegg har det fleste telekomoperatørene lokal tilstedeværelse i de landene de opererer. Dette er en enorm fordel for alle bedriftene med ambisjoner om rask skalering. Grunnen til det er at selv om en digital tjeneste er designet for å være global i sin natur, er salget nødt til å forekomme lokalt. Det gjelder selvfølgelig spesielt for B2B. Det er derfor både Google og Facebook har kontorer i lille Norge, for eksempel. Figur 2 viser tre utvalgte representanter av digitale globale internettaktører. Markedsføring og salg utgjør mellom 25% og 50% av alle operasjonelle utgiftene. Telekomoperatører, med sin «local presence» er et legitimt partnervalg som kan optimere den berømte CAC (Customer Acquisition Cost).

telia-local-presence
Fig 2 – Salg og markedsføring er de største operasjonelle kostnadene for internettaktørene

 

Endelig er 5G nå rett rundt hjørnet, og det vil endre alt. I Europa vil utrullingen begynne allerede i 2020 (2019 for USA) . Med det vil uante muligheter åpne seg når der kommer til digitalisering. Grunnene til dette er tre:

  1. Nesten ubegrenset kapasitet (hastighet)
  2. Forsinkelse (delay) mellom sender og mottaker på under 1 millisekund
  3. Slicing

Hastigheten som 5G vil bringe til våre mobiler eller alle andre apparater koblet til internett (altså alle) vil være nesten umulig å forestille seg.  Med en teoretisk hastighet på 10 Gbps finnes ikke grenser lenger for hvor mye innhold som kan overføres over mobilnettet. Til sammenlikning: Å strømme en film på TV-skjerm i 4K kvalitet krever ca. 25 Mbps. I teorien vil altså en 5G kapabel mobil kunne strømme ned 400 filmer i 4K kvalitet samtidig. 

telia-speed.jpeg
Fig 3 – 5G og datahastighet

De grensesprengende karakteristikkene til 5G stopper ikke der. De fleste har hørt om selvkjørende biler i det siste. Både bilprodusentene og internettgigantene som Google eller Uber har vist fungerende eksempler.  Realiteten er at slike prototyper fungerer bra dersom det finnes bare noen få av dem. Et samfunn der millioner av selvkjørende biler, busser og lastebiler må kommunisere med hverandre og med sentrale kontrollenheter for å maksimere trafikkflyten er ikke mulig uten delays på under 1 millisekund. Alternativet er en mismatch mellom virkeligheten bilen allerede befinner seg i og det forsinkede bildet som driftsenhetene må bruke for å ta beslutninger. Konsekvensene kan være katastrofale i antall ulykker og tapte liv. Realiteten er at 4G ikke kan levere så små delays og at selvkjørende biler må vente til implementeringen av 5G for å kunne endre samfunnet som vi drømmer om.

Bedriftene verden rundt kan begynne å tenke seg allerede nå hvilket som helst produkt eller tjeneste uten å tenke på hverken hastighet (båndbredde) eller delay. Disse vil aldri igjen være en begrensning for bedrifter med innovasjon i deres DNA.

Endelig vil 5G levere en radikal ny karakteristikk: Slicing. Dette betyr at operatørene vil være i stand til å velge ulike karakteristikkene som hastighet, tjenestekvalitet, delay, og til og med sikkerhet og databehandling.  Disse karakteristikkene kan deretter kombineres i pakker som kan tilpasses ulike industrier og – spørsmål om tid – til og med enkelte kunder. Selvkjørende biler, fjernkirurgi  og fjernstyrte havnkraner vil kreve høy hastighet og lav delay, men kanskje ikke så mye computing power fra operatørene. Selvkjørende traktor vil derimot antakeligvis ikke trenge så lite delay. Noen kunder vil være villige til å betale ekstra for beskyttelse mot cyber-angrep, mens andre vil være mindre bekymret for det.

Dette åpner ubegrensede muligheter for enhver bedrift med digitale ambisjoner. Disse vil være i stand til å pakke  egne produkter og tjenester sammen med skreddersydde telekom-tjenester. Samme produkt eller tjeneste vil kunne dermed prises forskjellig til ulike kunder basert på pakkens tilkoblingsmuligheter. Marginene vil  sannsynligvis øke for de som mestrer denne nye form for product enhancement.

Vi har foran oss en ny bølge med digitalisering. De karakteristikkene som telekomoperatører allerede besitter og utrullingen av 5G kan gjøre operatørene til en ideell forretningspartner for mange virksomheter. Samtidig vil sikkert IT gigantene, integratorene og internettøkosystemene ta en ledende posisjon de også ved å pakketere tilkoblingstjenester som en del av deres tilbud. Nye allianser og forretningsmodeller kan fort dukke opp.

5G vil bety en ny og allmektig digitaliseringsbølge. Er din bedrift klar?

Interessant? Del gjerne!

«Digitalisering: Det viktigste er å kunne forutsi brukermønstrene»

Denne måneden har vi intervjuet Torbjørn Teigen. Han er Administrerende Direktør i Norkring, selskapet som eier og driver en av landets mest samfunnskritiske telekommunikasjonsinfrastruktur.

Torbjørn deler med oss sine tanker om:

  • Utviklingen rundt TV- og medievaner og perspektiver fremover
  • Hvilke muligheter som han ser innen innovasjon og digitalisering for selskaper med betydelige investeringer i infrastruktur
  • Hvorfor innovasjon og digitalisering er kritiske faktorer selv når virksomheten befinner seg i en dominerende markedsposisjon
  • Hvilket ansvar og rolle som ledelsen har overfor organisasjonen ved implementering av nye forretningsmodeller

Enjoy!

 

Video: Intervju med Torbjørn Teigen

Podcast: Intervju med Torbjørn Teigen

Interessant? Del gjerne!

Alexa – The end of retail as we know it?

After telecom, media, energy and banking, retailers are facing the far reaching implications of the brutal internet economy. This is what the rise of Artificial Intelligence and Alexa means for the retail industry.

Retail, once a boring appendix in the digital game, is becoming more and more interesting.  Only some years ago, the most important transformation taking place was that every brick and mortar retailer was opening a webshop.

Then we got omnichannel, with the clear aim of coordinating all contact moments with the customer across webshop, customer service, social media and the physical store.

Payment became suddenly an issue too. As soon as Apple launched Apple pay In USA, the biggest retailers, with Wall Mart leading the pack, went DEFCON1 and developed their own payment NFC system: MCX. It didn’t work though, and yesterday it got sold to yet another desperate bank: JP Morgan Chase.

Then we got home delivery of groceries. Here in Norway services like Godt Levert or Kolonial.no are growing at astonishing rates.

Finally, digitalization is opening for the possibility of unmanned checkout, like we have seen examples here in Norway. 

However, all these changes are still characterized by one common element: They are based on a local environment and the core value chain remains intact. Will the digital Four Horses (Amazon, Google, Facebook and Apple) let it be that way?

They won’t.

Enter Alexa, the trojan horse into your shopping wallet. Launched in 2015, Alexa is the artificial intelligence assistant from Amazon that powers the Echo, a tubular device that can be set anywhere in your home. It is ready to listen to your orders and execute them.

So how could this be a game changer for retail? A personal assistant will of course be used for the normal stuff? Ask for directions, recipes, play music, maybe read the newspaper for you, some cute smart home applications… just like Siri, right?

Not quite.

The point with Alexa is that you do not need to grab your phone. You just have to talk freely. This eliminates a friction in the customer journey that an increasing amount of consumers are clearly eager to pay for. Five million units had been sold before last year’s Christmas season.

The removal of this friction leads potentially to a huge difference in behavior when it comes to shopping: The user voluntarily sacrifices additional information for decision making for the sake of convenience. Thus, Alexa (and Amazon) acquires a great power as the gatekeeper trusted by the consumer.

This opens indeed for an alarming scenario for retailers, but also for producers and manufacturers. Specially those with fairly undifferentiated goods that relay on the power of their brands to achieve customer loyalty should be specially worried.  Products like  detergents, milk, batteries etc. are an easy target. Say a user wants to buy more toothpaste. In how many cases will the user ask for a specific brand or type? For a segment of the population, it would take too much effort to check the brand they use or grab the phone to go online and search. They will just say «order a new tube of toothpaste».

From that point in time, the decision power is now in the figurative hands of Alexa. She can decide to order the same product you ordered last time. She may also do a quick search in order to find an equivalent product but cheaper and suggest it to the user. Or she may order the product from the producer or retailer that has paid the most for being the preferred one on Alexa’s product list.

Therefore, the implications of Alexa can be huge for all players in the retail value chain.

First of all, it will put a massive pressure on prices. The power of the brand may be minimized to the point of quasi- irrelevance. Houses of brands like P&G or J&J will see their margins erode and face a difficult decision: Should they spend even more resources on brand building hoping that the user will ask Alexa for their specific brand or should they focus on cost cutting and operational efficiency?

Retailers may face a similar challenge. Over time, their role can be reduced to a simple logistics distribution hub. Nor they will decide which products to sell either. Amazon, through Alexa, will optimize their product portfolio for them, along with a maximum admissible purchasing price. Their role may even be erased totally, as the biggest producers and manufacturers may decide to sell directly to Amazon from their warehouses. As a reminder, only 10 companies control almost all consumer goods in the world. They won’t necessarily need the aggregator role of retailers if Amazon organizes the distribution to the consumer for them.

AMZN-fresh
Amazon has launched Amazon fresh for perishable groceries in several countries

In addition, producers and manufacturers may reduce their advertising efforts and channel those resources to buy a top position in the Alexa shopping list instead.  Search advertising may lose in such case much of its appeal. Google understands the potential disruption that this means for its business model. The search giant has therefore launched its own version of Alexa: Google Home together with the delivery service Google Express. The consequences for the rest of the advertising industry, from TV to Facebook can be far-reaching.

Alexa may create some winners as well.

White labels may acquire an even more prominent role and enjoy the best of times. The rise of white labels at grocery stores has been a trend for years now. However, the dawn of Alexa will give them an obvious opportunity to increase their market shares, as brands will see their power undermined by rational purchasing decisions taken by an Artificial Intelligence powered assistant.

The small convenience stores around the corner of your street may also benefit. Their role can be enhanced as a gap-filler between deliveries for very basic or exotic items.

After telecom, media, energy and banking, it is now the retail industry that faces far reaching technology-driven changes. These changes will of course take time, but once a critical mass of users is reached, there will be no way back. Those players that don’t want to see or are willing to understand the challenges of digitalization may be the first ones to disappear.

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Snapchat – The pigs get slaughtered

The Snap IPO looked like designed for luring incautious retail investors and speculators. If it was, it definitely worked. It took only three trading days to rip them off their money.

Last Thursday we witnessed the IPO of Snap and its tremendous share price increase during the day. Snap shares ended more than 4o % up, putting the value of the company at the astonishing level of 33 bn USD.

From a rational point of view and based on the facts that we know from the company, this was nothing short than an exercise in lunacy drowning in a sea of ZIRP. Snap is indeed a company that, from the fundamentals point of view, is a gigantic operational and financial bet.

First of all, the operational model is almost designed for never earning money. The company doesn’t´t have its own data centers, making it difficult to achieve the economies of scale that Facebook, Google or even Twitter pursue. As a result, more that 100% of all revenues went to Google Cloud in 2016.

Secondly, the company faces stiff competition from, at least, Instagram, owned by Facebook. Since the launch of Instagram Stories, the growth of the Snapchat app has indeed come almost to a halt.

Taking these two factors into account only (there are more), it is not strange at all that the company lost 514 million USD in 2016. Even worse: The more the company has achieved in revenues, the more money it has been capable of losing. Completing the surrealistic joke of what an IPO should be, we can read a statement in the IPO filings explaining that the company “may never achieve or maintain profitability”.

As I explained in a comment published by the Norwegian financial news site E24.no, there could be three reasons for this bizarre market behavior.

  • The market was expecting the Average Revenue per User (or ARPU) to explode somehow. A true exercise in faith.
  • The current ultra-low interest rates environment is still luring investors into taking irrational risks.
  • Institutional and big investors were selling their shares acquired at IPO price to less informed retail investors, desperate for owning the stock. This was of course the most cynical hypothesis. However, we should take into account that the new shareholders will not have voting rights, which is difficult to accept or any institutional or long-term investor. This IPO seemed indeed designed for misinformed retail investors and speculators.

The hypothesis in my comment was that if the cause of this irrational first trading day was the latter, we should see an abrupt fall of the share price in a matter of days or weeks.

It has taken 96 hours.

Today Snap Inc. erased all the gains from the IPO opening. And as the analytics of the online brokerage platform Robinhood confirm, the median age among Snap buyers at the IPO on Thursday was 26, hardly a group of seasoned investors capable of assessing the high risk of a complicated case like Snap.

Snap-stock
Snap gave up all post IPO gains on Monday

The fact is that, once again, hype seems to have chosen to ignore fundamentals, and the retail investors have paid the price of their naiveté and recklessness. As Gordon Gecko said: “Bulls make money, bears make money. Pigs? They get slaughtered.”

Expect a bumpy ride for Snap shareholders in the future. The share price may go up and down like a yo-yo based on rumors and promises of new products and new growth, even if the company eventually becomes profitable. Investors may end up praying for an acquisition, like Twitter already has tried and failed.

This course of events may also have profound implications for other mass-losses Unicorns like Uber or Spotify. They have been waiting for their own pig-slaughtering IPO and may not try it now. It will definitely complicate their financials and/ or growth ambitions and thus their value as private companies.

With a FED rate rise coming soon, we may soon learn what Unicorn blood looks like.

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