#88 - Uber Competitor Grab Goes Public, Coinbase SWOT and Canadian Real Estate Pulse
CMHC tightening lending rules is going to make a lot of Real Estate Agents Mad BUT This is great for the Canadian Economy Long Term.
In this week's episode of Reformed Millennials, Broc and Joel kick it off with a quick market update then they quickly transition to a discussion about today’s hottest SPACs and IPOs. If you want to learn a little about Masterclass, Coinbase and Grab you gotta tune in.
If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.
👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
A plethora of stocks popped, and the cryptos climbed to new all-time highs! 🧗♂️
The Nasdaq Composite Index ran 1% as the S&P 500 sailed to another all-time high. The Russell 2000 and Dow barely budged.
Utilities, consumer discretionary, and tech all dashed ~1%. Financials flopped 0.9% as we await earnings from JPMorgan, Wells Fargo, and Goldman Sachs early tomorrow morning.
The Nasdaq-100 ETF $QQQ cruised 1.17% to an all-time high. The Qs closed above its highest tick of February. Here’s the daily chart:
Bitcoin broke above $63K for the first time ever. Ethereum surged 7.5%. ⚡ See the crazy crypto charts below.
The NYSE FANG+ Index advanced 1.76% to close in positive territory for the 12th straight session.
Coinbase is expected to make its trading debut sometime today! see an update below.
More detailed notes on Coinbase and the crypto economy can be found in this amazing article by Tanay Jaipuria.
Coinbase is a leading cryptocurrency exchange and will be going public via a direct listing on April 14th. Its shares last traded hands at a ~$100B valuation in private markets.
Question RM asks - “can the economics improve long-term?”.
Coinbase serves three main sets of customers:
Retail users: Coinbase offers its 56M retail users a safe, trusted, and easy-to-use platform to invest, store, spend, earn, and use crypto assets.
Institutions: Coinbase provides 7000 institutions such as hedge funds, money managers, and corporations a one-stop-shop for accessing crypto markets.
Ecosystem partners: Coinbase provides over 115,000 ecosystem partners such as developers and asset issuers a platform with technology and services that enables them to build applications that leverage crypto
Coinbase’s financials and metrics are truly mind-boggling.
In Q1 2021, they made ~$1.8 billion in revenue, more than all of 2020 and 2019 combined. And they had ~40% net income margins and over 60% Adjusted EBITDA margins.
They essentially grew ~850% y/y while generating 50%+ EBITDA margins
Over 95% of the revenue that Coinbase generates comes from transaction revenue, i.e., commissions on trades from retail and institutional clients.
They have 56M retail users, over ~6M of whom transact every month. Their easy-to-use UIs and interfaces as well as their trusted brand make it the go-to onramp platform for consumers for crypto. This is evident in the fact that over 90% of users were acquired organically, and Sales and Marketing spend as a cost of revenue is under 10%.
The take rates on retail transactions is a lot higher than institutional ones, meaning that retail revenues make up the bulk of revenues, even though they make up only 40% of transactions by dollar volume:
the take rate on retail transactions is ~1.25-1.5%
the take rate on institutional transactions is ~0.05%.
I’ve noted before that Coinbase itself has different take rates for different users based on the “UI” you use (3-4% in the regular flow vs 0.5% for Coinbase pro).
This “tax” on unsophistication is a big driver of Coinbase’s revenue. If everyone used Coinbase pro (or paid the equivalent of Coinbase Pro rate), Coinbase would make ~60%-67 less money.
Read more at Tanay’s substack linked above…
One thing about the biggest SPAC deal ever is that it doesn’t involve a particularly big SPAC. Grab Holdings Inc., the Southeast Asian tech unicorn, is merging with Altimeter Growth Corp., a U.S.-listed special purpose acquisition company. The deal gives Grab about a $40 billion equity value, and Grab will raise $4.5 billion. That is sort of in the normal zone for companies going public: In a typical initial public offering, a company might sell 10% to 20% of itself to new investors; here the number is about 11%.
But the SPAC itself — Altimeter Growth — is only a $500 million pot of money. That’s a big pot of money, but not all that big in the context of the modern SPAC boom. Altimeter’s $500 million SPAC will buy just 1.3% of the public company. The remaining $4 billion will come from other big investors — including the sponsor of the SPAC — who will invest alongside the SPAC in a PIPE, a private investment in public equity. From the press release:
Proceeds include more than US$4.0 billion of fully committed PIPE led by US$750 million from funds managed by Altimeter Capital Management, LP
Investors in the PIPE include funds and accounts managed or advised by BlackRock, Counterpoint Global (Morgan Stanley Investment Management) and T. Rowe Price Associates, Inc., as well as Fidelity International, Fidelity Management and Research LLC, Janus Henderson Investors, Mubadala, Nuveen, Permodalan Nasional Berhad and Temasek
Altimeter Capital Management, a venture-capital and public-tech-equity investing firm, is the sponsor of Altimeter Growth Corp., the SPAC. It will put in $750 million from its private funds alongside the $500 million that it raised from public investors in the SPAC. And BlackRock, Morgan Stanley, T. Rowe, Fidelity and other big public-market investors will also buy into Grab alongside the SPAC pool; their combined investment will be much bigger than what’s in the SPAC.
With Grab – it combines the best of Uber, DoorDash, Square, and Ant Financial - with a tremendous opportunity ahead
Southeast Asia is home to 670M people, one of the fastest-growing economies, and still in early innings in digitizing.
Online GDP penetration remains single digits in the region – a fraction of the US and China.
Grab is THE daily super app used by 25M people – and touches everyday lives across transport, food, and payments.
They have built the clear market leader w/ 70%+ share in ride-hail and 50% share in food delivery
Their super app results in a flywheel that drives superior economics - Consumers use Grab to order breakfast, commute to work, shop for groceries, and pay their bills.
Lower cost of acquisition + higher lifetime value
Cohorts by Year 5 are spending 3.6x more
They provide flexible employment to millions, fuel entrepreneurship in the region, and democratize financial access
Grab is just scratching the surface in financial services – a massive opportunity
70%+ of the population lacks access to traditional banks
They are the leader in payments, insurance, lending, and investments - with the most licenses across 6 diverse countries.
🍄Creator Economy & Masterclass
The Masterclass website got ~10m visits in March w/ 61% of traffic coming via search (nearly all of it organic)
Masterclass appears at the top of Google searches for: “what are pretzels” “types of poems” “how many teaspoons in a tablespoon” “song structure” “how to write an autobiography” These five key search terms combine for 500k+ monthly Google searches.
💡MBA IN A TWEET THREAD
Our favorite 5 points from the thread:
Find the real root cause or causes of a problem — and do real root fixes. So then, when you fix it, you’re not just fixing it for one customer. You’re fixing it for every customer.
Risk aversion limits innovation and long-term value creation.
The path to success isn't straight. Success often comes through iteration: invent, launch, reinvent, relaunch, start over, rinse, repeat, again and again. Remember that failure is part invention. So better to fail early and iterate until you get it right
Outsized returns come from betting against conventional wisdom. Given a ten percent chance of a one hundred times payoff, you should take that bet every time. But you're still going to be wrong nine times out of ten.
Be an owner - Many investors are short-term tenants, they turn their portfolios so quickly that they are really just renting the stocks they temporarily "own." Owners aren't so short-sighted. Long-term thinking is both a requirement and an outcome of true ownership.
🌊Best Links of The Week☔
Semiconductor Red Hot Performance Tests 20-Year Breakout Level - Kimble Charting Solutions
Chris Kimble shows that the Semiconductor Index, $SOX, is testing a key long-term Fibonacci level.
Gucci Teaming up with Balenciaga for Next Collection: Market Reports
Who Owns Stocks in the United States?
US proposes a standard for global (tech) taxation. This has been building for years: a giant US tech company has a building in London full of people who sell UK ad inventory to UK advertisers, but books the revenue in Ireland or Luxembourg, and so pays no corporation taxes in the UK or the USA. And an iPhone is designed in California, assembled in China with Taiwanese, Japanese and Korean parts, and sold in Germany by an Irish subsidiary, so where is that profit taxed?
Apple versus Epic - Apple and Epic both filed ~350-page arguments in their app store court case. About 1/3 legal debates, 1/3 interesting points, and 1/3 really terrible arguments (Apple: 'you can use a web app!' Epic: 'Apple didn't make iMessage for Android!') Epic really does nail what a mixed job Apple does of curating the store, though. Meanwhile, the EU's Spotify case rolls on - and Apple is about to use that same-store control to push through a radical reset of smartphone app privacy, so what do we want?
Apple could allow (or be told to allow) 3rd party stores, preferably from trusted companies. That would make Epic happy, but not Spotify, which has to be in the default, preloaded store as a route to market. This would also change Apple's ability to make those kinds of privacy moves. On the other hand, cutting the take rate to (say) 5% in Apple's own store or allowing 3rd party payments would satisfy Spotify but not Epic. (Sideloading, incidentally, solves no mass-market problem - it's not a viable route to market). Note: Apple had $15-$20bn of revenue from app store commissions last year.
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