Calling the past few months a rational experience for investors in technology stocks is a massive overstatement. An epidemic of fear of missing out (F.O.M.O) seems to have gripped the markets. Granted, there’s an enormous amount of capital around for good ideas.
But too-much capital floating around seems to be distorting valuations. In fact, I think there is a form of inflation rampant in the high-tech community—inflated expectations, inflated egos and inflated stock prices.
Who said scale is the panacea? And are zombie unicorns truly unicorn? How do we rationalise 100 percent annual compounded growth for some incredible number of years?
Today’s package spotlights on this madness. High-profile cases of overhyped and overvalued businesses. Here’s a collection of excerpts from their S-1 filings.
“…since we were founded in 2012, we have not been profitable on a consolidated basis. We incurred a loss for the year of Sh1.5 billion in 2017 and a loss for the year of Sh1.5 billion in 2018. As of December 31, 2018, we had accumulated losses of Sh7.6 billion...” From Jumia: A Pan-African e-commerce platform valued at Sh130 billion for its initial public offering (IPO).
“We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future. We incurred net losses of Sh68 billion, Sh68.8 billion and Sh91 billion in 2016, 2017 and 2018, respectively.” From Lyft, a ride-sharing app business, valued at Sh.2.4 trillion in its recent IPO.
“We have incurred significant losses since inception. We incurred operating losses of Sh400 billion and Sh300 billion in the years ended December 31, 2017 and 2018, and as of December 31, 2018, we had an accumulated deficit of Sh790 billion.” From Uber, a ride-sharing app business, valued at Sh9 trillion.
“For all annual periods of our operating history we have experienced net losses and negative cash flows from operations. We generated net losses of Sh13 billion and Sh63 billion for the years ended December 31, 2017 and 2018, respectively. As of December 31, 2018, we had an accumulated deficit of Sh84.5 billion.” From Pinterest’s, a social media web and mobile application company, whose IPO was valued the company at Sh1 trillion.
“...we incurred net losses of Sh14.7 billion, Sh14 billion, and Sh13.9 billion in fiscal years 2017, 2018, and 2019, respectively.” From Slack, a collaboration communication hub, whose IPO was valued at Sh1.7 trillion.
If this is not a definition of madness, I do not know what is. This is my conclusion. If markets will still be driven fear, greed and the folly of its overly courageous members, then a repeat of 2000 “dotcom bubble” is eminent.
In the meantime, we pray for this irrational exuberance to subside. Indeed, these markets are in great need of a priest to exorcise demons of a buying panic.
But well, this remains to be seen. In the end, you know, all we really have is our faith. Faith, as ever, is the most rational stance of all.