Levine on Wall Street: Investing in The Smuggler Didn't Pay Off
What is App?
Here's a very nice post by Aswath Damodaran on WhatsApp's valuation. Damodaran is the internet's leading valuer of companies, but this post is not really about WhatsApp. It's about investing psychology, and the differences between trading and investing. It also has what I submit is the best reason to go around saying things like "Facebook is buying WhatsApp at a valuation of $42 per user," which is a correlation matrix followed by this:
The key variable in explaining differences in value across companies is the number of users. While the value side of you may be telling you that you cannot pay dividends or buy back stock with users (you need cash flows), remember that the pricing game is not about what you or I think makes sense but what traders care about.
Meanwhile Felix Salmon and Matt Yglesias have thoughts about what the purchase of WhatsApp says about Facebook's governance. Salmon views the acquisition as "textbook" "large-stack poker" and a vindication of Zuckerberg's tight control of the company. Yglesias points out that Zuckerberg owns 28 percent of Facebook's economics but has 100 percent control of its decisions, making him more likely to empire-build than to have, you know, the sort of shareholder discipline that Facebook explicitly said it was going to avoid.
Here you can ponder frequent batch auctions.
If you don't like high frequency trading, you probably don't like continuous limit order books in equity markets, which more or less enable HFT. Frequent sealed-bid batch auctions to buy and sell stocks seems to me like not the worst idea to replace the continuous limit order book, and here is an article about an academic who is proposing them.
Business Wire has stopped selling traders direct feeds for press releases.
If you don't like high frequency trading, you probably don't like Business Wire selling HFTs direct access to earnings releases, though I'm not really sure why you hate it so much. But you do. You're in luck, Business Wire has said they'll stop doing it. Eric Schneiderman is pleased.
This SEC case alleging movie-industry fraud is ... somewhat less amusing than I'd hoped? Still it's not bad:
The SEC alleges that Los Angeles-based attorney Samuel Braslau was the architect of the fraudulent scheme that raised money through a boiler room operation spearheaded by Rand Chortkoff of Encino, Calif. High-pressure salespeople including Stuart Rawitt persuaded more than 60 investors nationwide to invest a total of $1.8 million in the movie first titled Marcel and later changed to The Smuggler. Investors were falsely told that actors ranging from Donald Sutherland to Jean-Claude Van Damme would appear in the movie when in fact they were never even approached.
"Rand Chortkoff" is a good name for a Hollywood (er, Encino) scam artist (allegedly!). Also I like the idea that the lead character was going to be played either by Donald Sutherland or Jean-Claude Van Damme, whichever.
Here you can look at some early hedge fund ads.
But probably don't. Actually it is interesting to see what the new rules for hedge fund advertising allow: not just actual hedge fund ads, which I cannot recommend, but things like a YouTube video of Ray Dalio talking about the economy for half an hour, which I can easily recommend though perhaps not to everyone. "The JOBS act rules have permitted investment managers to feel more comfortable about branding their business more generally," which is not all bad; some hedge funds' brands are interesting so getting them out there might be a good thing.
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Matt Taibbi is leaving Rolling Stone to "start his own publication focusing on financial and political corruption." I don't know about you but I am excited to finally learn what Taibbi really thinks about Wall Street.
Trading desk prank goes ... wrong? Right, probably.
"A City broker who was shot in the leg by a balaclava-wearing gunman ended up in hospital again after a cruel joke on his first day back at work. Robin Clark, 44, needed hospital treatment after pranksters sneaked up behind him and shouted 'bang!'. He fell over and re-opened his leg wound from the shock." Pretty much.
To contact the writer of this article: Matt Levine at firstname.lastname@example.org.
To contact the editor responsible for this article: Tobin Harshaw at email@example.com