Reboot: Is a shift in investor focus from growth to profitability underway?
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Here it is — your fortnightly tech stocks wrap.
2 years ago, when SoftBank CEO Masayoshi Son last spoke at the Saudi Arabia Future Investment Initiative, Softbank’s newest fund raised nearly $100 billion.
After skipping 2018’s summit (following the murder of Jamal Khashoggi) Masayoshi returned and spoke in front of…no one.
WeWork was going to IPO before investors realised just how overvalued it was. Now, the IPO is off the table, several executives have left, and the business is struggling to stay afloat. Uber did list but has lost 25 per cent of its value — and we have no idea when, or if, it will be profitable.
US tech commentator Scott Galloway said this earlier in October:
” …We are seeing the mother of all shifts from a focus on growth to margin.”
“Inspired by [Amazon]…firms saw a shortcut: paint a compelling vision and offer $10 worth of service for $5,” he said.
But Amazon had eventually had positive margins and reached profitability. WeWork raised more money from one fund ($11 billion) than the total sum of venture capital in 1996.
Galloway said SoftBank would “sober up, acknowledge the laws of physics and confirm some sort of pre-pack restructuring/bankruptcy [for WeWork] before Thanksgiving”.
As for Uber, he said it had some time to avoid a similar fate but would have to move to margins by raising prices and exiting unprofitable markets.
For months, analysts have been warning us the rise of tech was a bubble that will bust. Should they be boasting “we told you so” yet?
Industry wide it’s still too early but investors have begun to worry about a handful of stocks, while continuing to invest in others.
Here’s how ASX small cap tech stocks have performed in the past fortnight and year:
Swipe or scroll to reveal the full table. Click headings to sort
Some tech stocks’ investors have been ringing alarm bells. The most notable was one of Australia’s tech darlings logistics software stock WiseTech (ASX:WTC) which was attacked a short sellers.
It has not collapsed like WeWork but shed $2 billion of its market cap in a week.
Another stock was energy intelligence company BuildingIQ (ASX:BIQ) which fell after a quarterly left investors frightened it was short on cash.
But other stocks had positive news this quarterly season. Registry Direct (ASX:RD1) led the gainers up 60 per cent in the last fortnight. It gained 44 new fee-paying clients.
After an average start to listed life, communications software stock Whispir (ASX:WSP) has had a good fortnight since its own quarterly. It made $34.5 million in Annualised Recurring Revenue (ARR), up 10 per cent from last quarter and ahead of its prospectus.
Online screening company CV Check (ASX:CV1) is up 23 per cent in the last 2 weeks. It made record revenue and ARR of $9.6 million.
And then there’s IT services business CSG (ASX:CSV), which received a takeover offer from Fuji Xerox. The share price jumped 30 per cent last week and it has held its ground since.