7 Jan 2022

Who said new ATH’s (all time highs) were relegated to the stock, crypto, art, property markets. It’s no fun if all asset classes can’t play the same bubble game. This second hand 2005 Porsche Carrera GT has just made a world record for the V10 supercar with a price tag of $US1.9 million. I did some surfing and a brand new car sold for $440,000 in 2005. I wonder what I will get for my 2007 Honda CRV?

Let us spare a thought for Singapore’s richest man who lost $11 billion in the space of 3 months. How did Forrest Li, Chairman and Chief Executive of Sea Ltd, no relation to Forrest Gump, lose a boot?

Below you see Forrest looking rather excited at his 2017 NYSE listing. Sea is a Gaming and e-commerce juggernaut.

Before we take out the Kleenex lets take a look at Sea’s maiden journey. The market is suddenly spooked why? I went straight to the financials of this company I had never heard of to see what its PE ratio was. Ahoy there, there is no PE because you need E to complete the formulae. Folks there you have it, a doting shareholder base is suddenly worried about its profitability.

I am probably going to hate myself in the morning but I couldn’t resist.

The mother of all bubble stocks is none other than our home blown Afterpay. I have never in all my life seen anything like it, I guarantee you there will be more books written about this than Newscorp, Atlasssian, BHP combined. And a movie of course.

There is the obligatory messianic tone espoused by the founders, doing Gods work for millennial’s. If you are not part of the Australian scene you might have missed Afterpay’s meteoric rise since 2016 with its coronation sale for $US39 billion to Square now known as the Block. So far we are 55% down from the highs (see below chart).

Topping the Aussie list of capital raised in 2021 was Afterpay with something like $1.1 billion raised. You might be wondering why such an amazing company needs to raise so much money.

I went racing to look for their latest financials, the full year results to end of June 2021 had this to say. You will see they have lots to say what they delivered in FY21, what they don’t say is anything about profits. What are those, who needs profits this a millennial world?

Ok drumroll lets get to the bottom line. A loss of $159 million which is 597% worse than the previous year. I am not saying this company will not be profitable in the future. However this is a company that has orchestrated a growth at all costs strategy to perfection. It is however a flaky business model using innovation from the old ages, buy now pay later, otherwise known as Laybuy. This is a business model firmly under the scrutiny of the regulators. The sale to Block may be its greatest transaction ever.

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