Longhorn Investment Team Weekly Insight: Roundup Edition (3/31/19)

3 minute read

Welcome back to Longhorn Investment Team’s Weekly Insight, a place for you to catch up on key market news and trends. Nursing yourself back to health after Roundup? Well when your friends start trading party stories, it’ll be the perfect time to impress everyone with your “intellectual horsepower.” Keep reading to discover some finance-related party tricks.

Lyft goes Public

Overvalued? Maybe.

“We have a history of net losses, and we may not be able to achieve or maintain profitability in the future” – Lyft investor prospectus

Despite gaining market share over the past few years (up to 39% from 22% in 2016), Lyft reported a net loss of $911 million last year because investors keep subsidizing their “grow first, profit later” strategy. High investor demand despite no current earnings may sound reminiscent of the dot com bubble. At the time of its IPO, Lyft received a $24 billion valuation (props to JPM for advising). Let us know if you think this valuation is baloney or not.

The Big Picture: Lyft marks the debut of the widely anticipated tech IPO class of 2019. While most of the hottest tech companies were content as “unicorns” (unicorn = private startup worth over a billion dollars) for years, the wait for common investors is finally over. Other IPOs on deck include Slack, Pinterest, Airbnb, Postmates, and Uber. We’ll be giving more analysis on the new wave of IPOs over the next few weeks.

An Update on Space Warfare

On Wednesday, India PM Narendra Modi announced the country’s first successful test of their anti-satellite (ASAT) missile test. In other words, they blew one of their own satellites up with a ground-based rocket. What does this mean?

  1. Space is getting hot. India is just the latest country to jump in the global space race, which is currently dominated by China, Russia, and the US. Satellites are the name of the game in space warfare, as successfully jamming or destroying another country’s key satellites can send their military back to the stone age, which can be pretty scary. Space Force jokes aside, V.S. Vereshchetin, Director of the International Institute for Space Law wrote in 2010, “[U]p to now outer space has remained free from weapons as such. The situation would radically change should the plans for space-based weapons go ahead and trigger a new spiral in the arms race both in outer space and on earth […] which is not formally and specifically prohibited by any treaty in force.”
  2. Space is getting dirty. Ignoring the warfare aspect, ASAT weapons themselves – even their tests – create massive amounts of space debris. India’s test created 250 pieces alone, and China’s notorious 2007 ASAT test single-handedly increased the likelihood of a satellite collision by 37%. The takeaway: keep space clean so our satellites don’t crash and create more space debris. Also stop shooting satellites with rockets.

Blackberry (BB) Shares Soar on Q4 Earnings Beat

Not saying we called it, but four of our members pitched a long position on Blackberry two weeks ago. Check it out below to get a glimpse of their new business model.

Other News:

The US government is trying to force the sale of gay dating app, Grindr, from a Chinese corporation, Kunlun Tech Co., based on concerns that Chinese officials can use app data to blackmail US officials or contractors. There is no public evidence of privacy abuses or extortion actually occurring.

Krispy Kreme, Keurig, Dr. Pepper, and Panera Bread used to be run by Nazi’s who used forced POW slave labor during World War Two. That’s a bad look for the Reimann family, the owners of JAB holdings who recently pledged to donate $11 million to an undisclosed charity following their exposure.