Silicon Valley: From Rarified Air To Exhaust Fumes

To paraphrase from the movie “War Games”: Sometimes, the only winning strategy is not to play. Even if not playing makes you appear (and scorned) as the one who “doesn’t get tech.” On an aside, people forget the public scorn via the investing class for Warren Buffett’s refusal to invest in the tech space during the late 90’s when fortunes were being made overnight. Then to be declared an investing genius by this same cadre when he had no direct exposure to the following dot-com crash.


Today, one can clearly see the “bubble” has indeed popped. The issue for those currently blindsided is that they were (and some still are) clinging far too fiercely to their “fairy tales” of IPO-stock option riches, than a child still wanting to believe in Santa.


Snapchat’s IPO perfectly fits that analogy. The only current unknown is: was that coal that was left behind? Or something else?


To all this I argued the case back in May of last year, “If Everything Is So Great, Where Are The Unicorn IPOs?” Once again, to wit:





“Over the course of the last week it seemed no matter where I turned in the business media one meme was being pushed above all others: It’s still a great time to be a private tech unicorn. Implying, that funding rounds were still “robust.”


 


What wasn’t said, so I will, is this: It’s a great time to be a private “unicorn” rather, than take the chance and become the poster-child for the IPO apocalypse. For it’s better to be assumed a $BILLION dollar success story rather, than IPO and officially open the books to the market and remove all doubt – that you’re not.”



This was right before Twilio™ announced it was going public and bringing forth its own IPO to the then (and still) barren IPO market. This event (for I have no feelings about the business itself) was used as the foil to put all the naysayers (yours truly in particular) back under the rocks they envisioned we crawled out from as to dance upon our heads with the prancing hooves of the resurgent unicorn IPO market and meme.


Hint: The above chart shows you just how all that “its different this time” was greeted via the new reality of: it surely is – different.


As you can clearly see from the above charts (or “pictures” as they say in “the Valley”) what once took well over a year to develop (as I warned would take time to develop via the initial lingering effects of QE) as witnessed through the Twitter IPO and resulting share price; took the same resulting actions to appear in Twilio’s only a few months.


And now Snap’s appears to have followed the same pattern. The problem? It’s been only 12 trading days. Yes – days.


So now let me end with these questions:


What happens if (or when) Snapchat’s next headline reads: Share prices fall below $17? And where do investors go to get their “lousy T-Shirt?” Or should I say “crying towels?”







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