The Razor’s Edge

The Archegos Capital blow-up at the end of Q1 marked the second huge non-fundamental market event, mirroring the GameStop/Melvin Capital/vintage investing short squeeze dynamics of January. While these can feel like localized events, making or spoiling GSX or VIAC investors' quarters, they at the very least offer important reminders of risk management and understanding your underlying investments. We break down how something like this might happen and what it means for bystanders and active investors.

• 2:30 minute mark - The Archegos and GameStop echoes

Bonus: Article from Michigan Radio on sewer issues

This week’s the Razor’s Edge takes a March Madness theme, as we break down a bracket of ideas. 

 We start off with PagerDuty, breaking down their very solid Q4 report and FY 2022 guidance, as well as the swagger management had on the call. Then we each pitch a new idea. Daniel talks up the favorable economics of Just Eat Takeaway (in the process of buying out GrubHub), and Akram pitches GoPro as a growing subscription business positioned perfectly for a reopening tailwind. We quiz each other on the theses and try to boil down what truly matters for each pitch.

• 3:00 minute mark – PagerDuty Earnings review – confidence, use case expansion, bundling, valuation, the point product vs. platform elements, and when is it worth talking to management

• 20:00 – The basic bull argument

• 54:30 – The GoPro case

Some related items to read:

• Not Boring on the beginning of the end.

One of our regular areas of focus on the Razor’s Edge is the streaming space, and there are few people who are following that space as closely as Andrew Freedman of Hedgeye. To the point where his name has come up on our episodes more than once. So it was long overdue to have him join the Razor’s Edge to share what he’s seeing.

We focus on what’s going on in streaming and whether all the new entrants will have the endurance to make it in the long-term. We then drill into the story around FuBo, a company that Andrew has been vocally bearish about. We wrap up streaming with a look at Netflix’s next act, and then look into the new emergence of live audio as a competitive opportunity, and wrap up with a few questions sourced from Twitter followers.

• 3:00 minute mark – What’s interesting about streaming right now, and the rise of the laggards

Andrew's work at Hedgeye: https://accounts.hedgeye.com/products/communications_pro/558!559

Hedgeye’s Terms of Service: https://www.hedgeye.com/terms_of_service

Definition of some terms:

• SVOD – Subscription Video on Demand

Just over a year ago, we released an episode of The Razor’s Edge called Correction City. As we lap the beginning of the pandemic, we also are starting to glimpse the end, and the market is starting to look like a long, strange trip. Bellwethers are moving lower, rotations are happening, and 40% revenue growth guidance isn't what it used to be.

We talk Zoom - one of the stocks that the market and we have been following most closely since last March - and then process the other major shifts in the market. We finish with a look at PagerDuty's upcoming earnings, which also leads us to Snowflake's imposing position.

• 4:00 minute mark - Initial review of the week that was

This week on the Razor's Edge, we speak with Karim Atiyeh, a serial fintech entrepreneur. He is the co-founder of Ramp, a fast-growing spend management fintech company. He talks about the company's positioning and alignment with customers, what he learned from his time at Capital One after the credit card giant acquired his previous company, and what it was like launching a product a month before the pandemic began, from a New York office no less.

• 3:30 minute mark – Ramp’s target market and the distinction between focusing on transaction fees and spend management

It's been a wild and, finally, fun ride for Twitter over the past 11 months. While everything feels like smooth sailing now for bulls, even as of our last episode on the stock post ex-President Trump ban in January, things weren't so clear. Despite that, the set-up was good enough for Akram's Razor to open an options trade into the earnings call (and for Daniel Shvartsman to open a small long position, which is a separate story).

We break down what happened with Twitter but also more of the mechanics of the options trade; why that trade, why Q4 and not Q3, whether to hold it into the call itself, and what's left for Analyst Day this week. All of this happens within the context of the broader macro environment and what growth investors might start extrapolating as we (fingers crossed!) round our way out of the full COVID environment this year. So we bring a dollop of that context into the discussion as well.

• 4:00 minute mark - How does event-driven trading of options fit into a broader portfolio strategy?

Amidst a year of web acceleration, changing habits, and questions about what legacy the pandemic will have on our day to day lives, it helps to go back to roots. One company that has both been through its share of web-usage cycles and has an interesting view on the state of the world is Meetup, and on today's episode we speak with their CEO, David Siegel.

The company, founded back in 2002, has seen a lot over the years, and saw several years worth of activity in the past 18 months - a divestiture from WeWork (which had bought the company a couple years prior), a pandemic that required reversing a fundamental business policy, and a pandemic that placed more urgency on the need to meet with others, even as it made it harder to do so. We speak with David about the past 12-18 months, the future of meetings, how much of our online meeting environment will stick around, what Clubhouse and the audio bubble might mean for meetings, and the importance and challenge of online moderation and community management.

Topics Covered

• 3:00 minute mark - Background on Meetup’s model

Check out David's new podcast here: https://www.meetuppodcast.com/

We haven’t covered artificial intelligence much on The Razor’s Edge, but it’s a theme that is only going to grow in market salience over the years to come. May Habib, this week's guest, has firsthand involvement with that theme. She is the founder and CEO of Writer, an AI business writing assistant. She explains her company's pivot to us, as well as sharing a little bit of Writer’s secret sauce, taking us through the COVID effects on the company and its end market, and casting light on the start-up funding market and where AI might go in the years to come. And given her background in wealth management and investment banking, we couldn’t let her go without asking for her take on the markets, especially semiconductors and SaaS, but also of course Twitter. 

• 3:30 minute mark - Background on Writer and its target userbase

We referred to In Defense Of The Pivot on the episode: https://upfront.com/thoughts/goat-in-defense-of-the-pivot

The 2020-21 bull market has seen many familiar themes recycled amidst a very liquid public market environment. The rare earths market, and its flag bearer Molycorp, may not have been the most obvious boom to re-emerge, but here we are. Molycorp's descendant, MP Materials, came public via a SPAC last year and is trading at a higher valuation than the legacy company ever did.

To break down the recent moves and what it means, we speak with Don Lay, VP of Corporate Development at Medallion  Resources, a rare earths technology company based in Canada. Don was previously CEO of the company and has a lot of firsthand experience to share. We go through the ins and outs of this story, including China’s market position, the import of electrification in cars, and how MP Materials is back on the scene.

• 3:15 minute mark - Background on Don as well as MP and rare earths boom

GameStop has become one of those rare market stories that has transcended the world of finance and entered pop culture; the most recent example might be the negative oil pricing last April. It's a fascinating and weird story for a number of reasons, and whether or not it has knock-on effects in the market it is an important story.

To break it down in an emergency episode, we speak with Jaime Lester, an experienced long-short professional investor who has been on the podcast before. He's done extensive work on GameStop, so we start with the fundamentals, before zooming back out to all the other factors. Those other factors all spin back to the start - do the fundamentals actually matter, and if not, why is that a problem?

• 1:00 minute mark - Gamestop fundamentally