Treasury Network
Following the secondary market has its pros and cons.
On the one hand, you might come across a young MIT dropout whose young company is getting high praise:
“A three-year-old startup called Scale AI Inc. has been trying to improve [API for training data] on behalf of both man and machine. It’s built a set of software tools that take the first pass at marking up pictures before handing them off to a network of some 30,000 contract workers, who then perform the finishing touches. Scale has attracted big-name customers in the self-driving car field, including Alphabet Inc. Waymo ($GOOGL), General Motors Co.’s Cruice ($GM), and Uber Technologies Inc. ($UBER).”
And on the other hand, you could end up reading puff pieces or sarcastic takedowns of WeWork before its IPO:
“Also, WeWork has big goofy plans for the future. It’s raising a real-estate fund to get into owning its own buildings but in a structured way. It has sold bonds. ‘It’s a multifaceted financing arbitrage,’ I have written. A lot of big tech companies have a post-IPO business model that goes roughly like (1) use your big-equity raise to achieve scale, (2) become enormously profitable, (3) the end. Once your company is a gusher of money from zero-marginal-cost products, there’s only so much an investment bank can do for you. Facebook and Apple and Alphabet will sell bonds or do structured stock buybacks from time to time, but they are not, for their size, particularly big users of the capital markets.
WeWork looks different. A successful public WeWork will constantly be doing stuff in the capital markets, weird stuff, structured stuff, complicated and interesting stuff. Lucrative stuff: Complicated financings are where the money is for banks; WeWork’s deals will be competitive but still probably more profitable than boring commoditized financing. Also fun stuff, though: If you’re a banker, wouldn’t you want to work with a company that is always willing to try strange new ideas and push the boundaries of the possible, rather than a company that just wants to do standard vanilla transactions? You got that broad humanistic education for a reason; don’t you want your work life to be challenging and creative too?”
Maybe the opposite of a WeWork in business model and principle (and principal) is Berkshire Hathaway ($BRK.A, $BRK.B).
In its latest quarterly report, the company announced, in the most low-key manner, that it has $122.4 billion in cash (and equivalents) on its balance sheet:
“At the end of the second quarter, Berkshire Hathaway held $122.4 billion in cash and equivalents on its balance sheet, an increase from $114.2 billion at the end of the first quarter. This is the highest the company’s cash hoard has been and indicates that the company once again had trouble finding attractive ways to deploy capital in the second quarter, both in terms of the stock market and acquisitions. Buffett likes Berkshire to keep $20 billion in cash at all times, so that translates to over $100 billion in usable cash.
We already know that Berkshire significantly raised its Bank of America ($BAC) stake, but it’s unclear whether that investment took place before or after the end of the second quarter. And Berkshire committed $10 billion to invest in Occidental Petroleum ($OXY), but this deal is yet to close.”
I admire Warren Buffett for his digital well being of not having a computer in his office and reading a lot.
That Dale Carnegie certificate he earned years back proved valuable as he continues to win friends and influence people (and the markets).
But even though Buffett’s legacy has been portrayed as being an oracle, he hasn’t made any earth-shattering investments apart from Apple ($AAPL), which he did so only very late in the game and mainly for the dividends and Apple’s own stockpile of (unused) cash.
There’s nothing wrong with having a lot of money, i.e., plentiful U.S. dollars.
If anything, that’s the ultimate goal for some people.
At least for security reasons.
But the risk-reward that comes with investing in equities (in the public or secondary markets) requires reflection on what’s next for the world.
In the secondary market, I love singing the praises of Stripe.
Stripe’s co-founder and CEO, Patrick Collison (an MIT dropout), is what Mark Zuckerberg ($FB) would be if the latter were smarter, more social, better read, athletically fit, and generally liked [insert thumbs up emoji].
Today, Stripe announced that it is opening an office in Mexico City as its company continues expansion into a valuable region:
“Internet penetration in Latin America is growing rapidly and the region will soon have more than 500 million internet users. Latin America’s e-commerce growth is outpacing any other region of the world. By the end of 2019, the number of Latin Americans buying online is expected to reach 155 million, up more than 23% since 2016.
Stripe is already working with some of Latin America’s most innovative technology companies, including Platzi, Rappi, Cornershop, Urbvan, and Parafuzo. However, we’re just at the start of our journey here. With our office in Mexico City, we’re going to hire across a wide variety of roles, including engineering. Our initial focus will be expanding and adapting Stripe’s global payments and treasury network across the region. Over time, we expect teams in Mexico to build entirely new products in order to accelerate the growth of Latin America’s internet economy.
As a software industry, we’re still in the early stages of figuring out how global technology products should be built. Geographic concentration (especially on the West Coast of the US) has been the predominant model. Mexico has a strong engineering culture and a lot of highly-trained local talent. By hiring in Mexico City, alongside the 14 other countries, Stripe is hiring in today (including our remote hub), we plan to continue to adopt a truly global development model. Our aspiration is to build a world-class team here — tightly integrated with our global engineering organization to build products for entrepreneurs and businesses in Latin America and the rest of the world.”
Anyone with cash wanting to put it to work over the next year will someday find it a wise bet to look at Stripe.
Maybe its IPO (or direct listing) will take place by the end of 2020.
In the meantime, prepare to read more about it in the press.
Better to be early in this case.
