By Charles Payne
Founder & CEO
Wall Street Strategies
Host: Making Money w Charles Payne
Stop me if you’ve heard this before but a privately held company is raising more money and in the process its valuation has increased. Yes, this week Uber announced its raising even more money from investors including $137 million from Microsoft that brings its current valuation to $51 billion. This makes the 12 round of funding for the company that went live on July 5, 2010 in San Francisco and raised its first funds in October of that year.
By the start of 2011 the company was valued at $60 million.
These days once a privately held company reaches a valuation of $1.0 billion it’s labeled a unicorn. Just think that that suggest these companies or their valuations might be unrealistic.
A mythical animal typically represented as a horse with a single straight horn projecting from its forehead.
Of course throughout antiquity the unicorn, while mythical, represented purity and grace. These days the Silicon Valley version of unicorns represents something else: dollar signs and greed. I have no problem with the private sector feasting on the hot names in technology but I think it’s time to stop seeing Silicon Valley as a cool place that cares about humanity versus Wall Street’s image as greed-driven destroyer of everything in its path.
Ever since the Facebook initial public offering tis been clear to Silicon Valley their incubation system that produces the hottest companies and products could also capture the lion share of profits as the company evolves. Even though the Facebook IPO was an initial disaster because it gobbled up all the money before the first trade it’s since been a stock juggernaut paving the way for more largesse and the herd is huge.
There are more than 100 unicorns lining up to go public.
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Thus far 2015 has been a year when lots of hot IPOs have lived up to the hype including names that have been around for more than a decade like Google and Amazon. But there have also been disasters like Twitter. So when do you buy the next hot IPO that will surely be a gadget or service or applications you use often or even on a daily basis?
It’s good to know if these companies are making money or are only one-trick ponies. But there’s another element I want you to consider. How many times have these companies gone to the well and you didn’t get invited to the party.
So what happens when you are invited?
It reminds me of the Groucho Marx joke about resigning from the club because any club that would accept him as a member he didn’t want to belong. By the time these unicorns become hot IPOs billions of dollars in valuation have been baked into the cake and much of it will come to fruition (read from paper wealth to real money they can bank and spend) at the expense of new buyers…you! Last year the super-hot IPO Alibaba established all kinds of records but very few individual investors that bought the stock made money- most are losing.
Consider how many rounds of funding Air BNB have gone through and there will be more before Main Street gets a bite at the apple. This could be a hot IPO but I doubt I will be chasing.
On the other hand I did recommend Fit Bit after it began trading even though the stock popped 50% on the first day of trading from the IPO price. Because management didn’t suck valuation dry in the private space there was opportunity left for regular folks also known as their customers? I respect management for that and the 56% return we made in a matter of weeks.
Consider Ground Floor Opportunities w/Out Hype
Of course there’s another option for individual investors and that’s really becoming early investors. There are so many small cap names that will eventually become giants including real life unicorns based on fundamentals and execution of management. It still takes work, due diligence and patience but not getting sucked into the hype machine that has become the marriage of Silicon Valley and Wall Street long term investors could find true purity and grace and make a lot of money along the way.
It’s no myth.
Wall Street Strategies, Inc.
CEO and Principal Analyst
Charles V. Payne is the Chief Executive Officer and Principal Analyst of Wall Street Strategies, Inc. (WSSI), which he founded in 1991. With less than $10,000.00 in start up capital and working from his apartment, he launched WSSI to provide a unique brand of stock market advice. Through this service, subscribers (money managers and individual investors) began to reap sizeable profits and the firm developed a national reputation as provider of timely and effective equity analysis. Today, WSSI provides information to over 120,000 registered subscribers, in more than 60 countries as well as several of the largest bank/brokerage firms. Charles oversees a team of stock analysts that cover specific industry groups, in addition to monitoring the entire market and individual sectors on his own.
Charles' passion for the stock market began when he was 14 years old. He told his mother then that one day, he would work on Wall Street.
Charles got his start in the industry in research at EF Hutton in 1985. After two years, he switched gears and accepted a position with boutique brokerage firm, Greentree Securities. It was there that he first saw a niche for independent and timely equity advice, which led to the creation of Wall Street Strategies. Due to the success of his guidance and stock selections, Charles has become well sought after by many highly respected finance-oriented radio, web and television programs. He is widely recognized in the media as a leader among the analyst community, and is routinely contacted for his market opinions by several prestigious news organizations.
On June 2, 2014, Fox Business Network launched Charles’ new show “Making Money with Charles Payne” which is featured daily at 6pm EST. He is a member and occasional host of “Varney & Co” and in addition, he is a guest-host on several shows including “Cavuto on Business” and “Your World”.
Over the years, opinions and articles on Charles Payne have been featured in prestigious news organizations such as Reuters, the Wall Street Journal, and the New York Times. He has been the keynote speaker at numerous investment conferences, grass roots events and educational gatherings worldwide.
Charles is author of “Act Fast, Be Smart and Get Rich” debuted in April 2007.
Charles was awarded the Congress of Racial Equality (CORE) Man of the Year Award in 2009.
Charles attended Minot State College and Central Texas College during his time in the Air Force and Majored in Criminal Justice.
Hobbies include drawing and painting along with reading non-fiction books.
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