Friday 3, December 2021

Docusign ($DOCU:NSQ)

Docusign “puked” today. It was down 32% pre-market. Dr Patel joked about it:

Docusign stock price down 30% after analysts discover that the entire business can be replaced by pen and paper

— Dr. Parik Patel, BA, CFA, ACCA Esq. 💸 (@ParikPatelCFA) December 2, 2021

but the reason the stock went down was that the results confirmed what everyone knew: that lockdown stocks are usually chronically lossmaking. The publishing of the figures was the trigger, but we all knew this was not a great business. Nobody wants to go first, but there is safety in numbers. Exactly how the crowd follows is difficult to model, but it’s definitely not entirely down to the underlying economics.

$AAPL — the last domino to fall

I have been wrong about Apple for a long time.

this article makes the case that the idea that nobody ever lost money by buying Apple shares is going to be proved wrong. The argument is that inflation will be the catalyst to re-rate the stock. The article also makes a compelling case that, like $TSLA and other meme stocks, the price is being manipulated higher by gamma squeezes. I believe that there are active parties buying short-dated call options to drive these stocks higher, but I have no idea whether this is some sort of concert party of human buyers or it’s simply that some AI algorithm has worked out that this is a way of making money. Scary? You bet!

Stock Exchanges

This is a wonderful account of the competing forces which interact in the case of stock exchanges.

I have to declare an interest: I used to work for the London Stock Exchange, a long time ago. In those days, I just saw it as a natural monopoly: unit costs did not appear to me (admittedly, with no management role whatsoever) to be increasing with scale, but it seemed to me that liquidity, which was what I imagined that exchanges sell, is a function of size.

It appears that it’s more complicated than that. Mark Rubinstein explans.

Unlike in the 80’s, when I worked for the exchange, the boring business of matching buyers and sellers is now easy: Jeff Sprecher, the CEO of ICE, which owns the New York Stock Exchange, said (emphasis Rubinstein’s):

I mean, we may lose money on execution if we were to really allocate cost. And how do we make the money? Data, listings, connectivity, information, catering, we print banners, I mean, everything around the execution is where we make money. And so that helped inform us that execution is probably in a digital world is going to go to zero. I think over time finding a buyer and a seller in a world where we have the Internet is really the most simple thing in the world, and networks can form up overnight to find buyers and sellers believe that execution is not particularly valuable. about and it was helpful to buy the New York Stock Exchange, because I think the New York Stock Exchange essentially is at zero. We don’t run it that way because it’s a whole big business. We don’t break out execution, but I don’t think there’s any money.