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Lyall Taylor Profile picture
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26 Feb, 4 tweets, 2 min read
Wtf kind of option deal is this (part of PBH AU's advertising deal with NBC)! NBC has been granted 66.88m options at A$13.00, but also has the option to cancel the option deal for cash consideration of A$105m reflecting "fair value of the options" at the time they were granted!
NBC has managed to negotiate an option on their own options. Definitely got the upper hand in these negotiations & perhaps demonstrates where the real market power/value lies in this relationship.
Context on deal. PBH committed to spend US$400m on marketing with NBC including granting significant equity & options to NBC, as well as the aforementioned "option on their options".
PBH's S&M costs rose faster than revenue & gross profit, with EBITDA margins at circa -100%. But hey they're growing right? Why not pay 20x revenue.

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Lyall Taylor Profile picture
26 Feb
If what we are witnessing is the beginning of a "real deal" inflation & rate cycle (far from assured & way too early to call), DM markets will see carnage on par/worse than what happened in the 1970s and global markets (DM) will probably fall 50%.
Central banks are complacent. Inflation is stirring, and yet Powell is promising low rates for a long time & more stimulus, as are other governors, while govts ready more fiscal stimulus even as economy recovers. If inflation starts printing 4-5% markets are in serious trouble.
IF vaccines work to end covid (a very big if given ongoing mutations), the recovery will be very rapid not gradual. Travel demand for eg will not slowly recover - it will go vertical to record levels almost immediately as years of pent up demand/deferred travel is unleashed.
Read 8 tweets
Lyall Taylor Profile picture
26 Feb
There is a popular notion hot fast-growing software companies that are losing money are doing so because they are "investing through the income statement", spending $ to acquire customers, & R&D on new product features. Investors believe losses reflect investment not competition.
In some cases, that's genuinely the case, but in many others it is not. The impact of competition on margins/returns can manifest in multiple ways. It doesn't just have to be price competition. It can be competition for features, or S&M competition to acquire and keep customers.
In the online space, anyone can acquire more users by being willing to spend more money on performance marketing (paying for clicks, installs, etc). The fastest growing companies will therefore be those willing to spend the most money w FB, GOOGL etc, paying to acquire users.
Read 14 tweets
Lyall Taylor Profile picture
26 Feb
"Stocks are overvalued". "Value investing is dead".

Grange resources - +169% over LTM and nearly 4x off its lows, just reported a A$200m FY20a profit. Has c$200m in net cash. Tangible book value up from $530m to $720m. Even after today's +25% its market cap is still only c$600m.
Their ASP was only US$137/MT in 2020 (albeit on a lower AUD of 69.55c). Spot 62pc is US$165/MT and typically pellets attract a sizeable product premium to 62pc Fe fines.
Net cash of near $200m is after investing A$50m in working capital (unnecessarily). Inventories & receivables up, payables down. At least $50-100m of hidden cash in excess working capital - particularly unusually low payables. And also significant investments in mine development.
Read 8 tweets
Lyall Taylor Profile picture
24 Feb
GMO's forecasts are based on an assumption stocks mean revert to an expected return in line with historical averages (6.5% real) within 7 years. But there is no law of the universe that says investors are entitled to 6.5% real and stocks will always generate that level of return.
GMO has now consistently undervalued the market for 20-30 years running. They have done this because they continue to make an unsound assumption the cost of capital is fixed through time, when in reality it evolves/changes, and has a tendency to decline over time.
I'm not saying certain markets are not expensive. They are. But a much better approach is to work out what return is implied by current valuations on an IRR/DDM basis, not what the return would be if asset prices declined so as to offer a much higher return in the future.
Read 4 tweets
Lyall Taylor Profile picture
18 Jan
A month or so ago, I expressed concern about what would happen if someone died from vaccine (i.e. we might shut down vaccination). I seriously misread this. It seems everyone wants to move past covid badly enough that we are prepared to largely ignore it.

nypost.com/2021/01/15/23-…
Norway has prioritized vaccinating the elderly first (something I tweeted earlier was probably a bad idea). 23 deaths from 30,000 shots. That's a fatality rate of about 0.08%. The overall covid fatality rate is about 0.5%, but higher amongst the oldest demographics.
It still makes sense to vaccinate, although it might make more sense to target herd immunity & avoid vaccinating the most frail. People don't understand statistics though & demonstrated that throughout covid. When you have a very large n, a lot of people will die from anything.
Read 5 tweets
Lyall Taylor Profile picture
18 Jan
One of strongest arguments for crypto is libertarian-dream idea of a store of value beyond govt seizure. But you need an onramp/offramp to convert to fiat, like Coinbase. Coinbase needs a relationship w a bank to offer that capability, & banks insist on KYC/AML to bank exchanges.
If you want to evade KYC/AML etc, you have to trade on dodgy unbanked crypto exchanges without such onramps/offramps (i.e. you can only trade crypto for other crypto). But you can't convert your crypto to fiat. And if you can't convert it to fiat, you can't access it/spend it.
KYC performed by banked crypto exchanges will link all your personal identification details to the public key, so authorities know exactly who owns the coins. And if they know that, they can in fact seize the coins via court order. They can regulate & require exchanges to comply.
Read 5 tweets

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