Snap Grows By Acquisitions


Snap spent cash of $206 million on acquisitions during the quarter ended June 30, 2017. Most of the cash – $196 million – went towards the acquisition of Zenly SAS which was instrumental in the launch of Snapchat’s social mapping feature. 

In addition, Snap will also pay $17 million in “future employment services”. So in the end, Snap will eventually pay $213 million for Zenly SAS.  Snap also made the purchase of $10 million for part of an undisclosed “social advertising software company” that was added to the Snapchat platform.

Another reported Snap acquisition did not closed until after the end of quarter. In recent SEC filings, Snap disclosed it paid $132 million in cash for advertising technology company, Placed, in July 2017. With the Placed acquisition, Snap still has $2.8 billion in cash and marketable securities.

Snap’s penchant for all-cash deals still leaves lots of dry powder for growing, at least, through acquisitions.


Facebook Buys More Class A


If you are counting, Facebook just bought more shares this quarter; in fact $150 million more of its Class A shares, per the most recent statement of cash flows.

That’s in addition to the $278 million in shares repurchased in the first quarter. Still, Facebook is far away from completing the $6 billion stock repurchase plan announced last fall.

Facebook surprisingly retired all the repurchased Class A shares making it impossible to reissue the shares for future acquisitions. Voting stock, like the Class A shares, is attractive since it can minimize the tax bill due in acquisitions.

Often founders selling out their appreciated stock in an acquisition would rather receive voting stock rather than cash to delay any tax bill.



Reconsidering Altaba


It’s time to reconsider Altaba. Back in June, Yahoo became Altaba, relocated to New York City, and hired new Chief Executive Officer, Thomas J. McInerney. Yahoo is no longer a real business, but a registered investment company with a depressed stock price, that still may be worth something.  

If you own Altaba stock, then you own a collection of investments: lots of Alibaba, some Yahoo Japan, patents, and cash. And for various reasons, Altaba’s stock price does not reflect the value of its underlying assets and causes the stock to trade at a discount. New management knows this and told shareholders what it wants to do, but there is not much they really can do.

Altaba’s discount exists mainly due to the tax bill that would be incurred if the Yahoo Japan and Alibaba investments were sold. That tax bill may decrease if tax rates change under a Trump Tax plan. If capital gain tax rates come down, then the discount would narrow, and Altbaba shares would appreciate.  Given the uncertainty, some Fools say stay away from the stock.

Even without Trump, Altaba stock price could eventually appreciate if Alibaba merged with Altaba. In this scenario, Altaba shareholders would receive Alibaba stock, tax-free, in exchange for their Altaba shares. A merger of Alibaba with Altaba is one way of getting rid of the tax bill currently depressing the Altaba stock price.  

So if you currently own Altaba, may the best thing is to hold on?


Blue Apron’s Bad Recipe

As it soon goes public, Blue Apron needs more online sales to meet investors’ growth appetite. New York-based Blue Apron currently sales its meal-kits in 48 states that reach 99% of the US population, as disclosed in its recent regulatory filing.

Much like early Amazon, Blue Apron has the advantage of selling meal-kits without collecting sales tax, but that could change. In the ten states where it has a physical presence, Blue Apron must collect sales taxes from its customers.

Amazon, in its beginning, did everything to dodge collecting sales tax from customers to maintain competitively low prices. Blue Apron collects sales tax in states where it has offices or distribution centers, such as New York and Texas.

Blue Apron may need to collect sales tax if it expands operations into more states. Additionally, the S-1 warns that Congress could require companies to collect sales tax on Internet Sales.

Besides rising food prices, potential investors should consider the impact of sales tax on Blue Apron’s bottom line.

Vision Fund Goes to India?

Softbank incorporated SB Investment Holdings, Ltd. in England on May 11, 2017. What’s notable is the company was first called SVF India Holdings (UK) as of May 15th when the name changed to the current one.  

Once decoded, the old name, SVP India Holdings, hints at the Vision Fund’s future plans.

First, SVF is an abbreviation for the Softbank Vision Fund. Secondly, India may be another place for investment besides the developed countries such as the United States and United Kingdom.

It may also be Softbank’s intentions to contribute some or all of its existing India investments – Ola, Snapdeal, Paytm – to the Vision Fund.

No: Twitter Remains the Same


Twitter shareholders just voted against studying the feasibility of turning Twitter into a company owned by its users rather than investors.

At Twitter’s shareholder meeting, held on May 22nd, shareholders considered Proposal No. 4 to investigate whether Twitter should be reorganized as something else, such as a cooperative or an employee owned company.

Citing the Green Bay Packers, REI, and the Associated Press as examples, the site,, thought the change would make Twitter more “democratic”.

Unfortunately for, in this election, 323,830,975 Twitter shareholders were against the proposal while 15,978,718 were in favor.

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Snap discloses a mostly all cash acquisition after yesterday’s earnings call. Released today, Snap’s first 10-Q details the $20 million purchase of a company operating a “cloud-hosted platform for building content online”. Acquisition of the undisclosed company occurred in March 2017. Snap hopes the acquisition will enhance its own platform.

Buffett Wrong about TECH


“I was wrong” were words spoken by Warren Buffett about IBM at the Berkshire shareholder meeting attended by investors, the press, and the ignorant.

Each year people make the pilgrimage to worship the Oracle of Omaha. As with other idols, Buffett can cannot help you, but he can hurt you if you listen to him. There is the Buffett, who says he doesn’t understand technology, and then the other one who buys the former tech icon, IBM.

His reversal on IBM is the latest example why piggybacking on his trades won’t work. Forget that Buffett also deals in the private markets and that time has long passed for his Graham, Dodd, and Fisher strategy to work. Another reason Buffett can’t help you is he often says one thing and then does another.

While equating derivatives with mass destruction, Buffet sold, to the now defunct Lehman Brother, over-the-counter (OTC) equity index option contracts. (You can read more here on page 55). OTC options contracts sold by Buffett where the type of custom derivatives that Big Banks bought and sold before the 2008 financial crisis.

Warren Buffett obviously knows what he’s doing, but you may not. Other than Buffettology, Buffet doesn’t detail his investment approach. So save yourself a trip and follow Dalio or Soros who do share their strategy; then you can only blame yourself if you are wrong.

More Snap Exclusives


Snap is really good at exclusives.

On Thursday, Scripps announced its deal to bring shows to Snap’s Discover Platform. On the same day, the Wall Street Journal reported on the media companies – Disney and NBCUniversal – that are already producing content for Snap along with potential new ones such as Fox and CBS.

The Wall Street Journal even quoted Snap VP, Nick Bell, that Evan Spiegel was involved in the media companies’ efforts. News of media companies working with Snap isn’t really new: NBCUniversal parent, Comcast, is a late, but enthusiastic investor in Snap.

And it’s not unusual for the normally silent Snap to speak exclusively with the Wall Street Journal. In September 2016, the Wall Street Journal Magazine featured a piece on Snap’s newly released Spectacles that were modeled by Evan Spiegel.

Ahead of Snap’s earnings call next week, it’s also not strange that news comes of exclusive shows coming to Snap; proprietary content is something Facebook can’t copy.

Yale Pays for Access

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Yale recently defended its payment of high investment fees at time when other larger investors are using low cost, passive equity strategies. While Yale’s use of illiquid assets is partly the reason for the high fees, the debate really illustrates the rise of the private over public equity markets.

Despite having $26 billion in assets, Yale said in its latest annual report that it could not negotiate lower fees because…

“Venture capital and leveraged buyouts present the greatest challenge, as the overwhelming demand for high-quality managers reduces the ability of limited partners to influence deal terms”

Said another way, the demand for talent (managers) exceeds the supply of money (investors). Some have argued the demand for venture capital and leverage buyout investments is driven by performance which has surpassed that of hedge funds since the 2007-2008 financial crisis.

Andrew Lo of MIT said:

“Fee negotiations really depend on the leverage that the parties have. Hedge fund managers have not been producing tremendously attractive returns, they are not going to have much leverage to negotiate better fees….

On the other hand, very successful venture capital companies and private equity companies have produced very attractive returns, and will have much more negotiating power.”

The demise of hedge funds signals the decline of public equity markets. With the rise of information, technology, and hedge funds, public equity markets have become so liquid that there is little chance for most to outperform the market.

Kenneth Griffin of Citadel reflected this week on the state of the hedge fund industry…

“It’s harder to create alpha today, there’s more competition, there’s a lot of very sharp people trying to find opportunities in the market place. This is causing some of the second-tier players to fall by the wayside.”

Unlike public markets, it is difficult for most to access the illiquid, private markets. Rather than paying for performance, Yale could be paying high fees simply to access the deal flow of venture capital and leverage-buyout firms.