Three Things (July 29th)
Jul 29, 2021
1) Nikola founder allegedly misled investors on ‘nearly all aspects’ of business, including fake truck demo, highlighting the importance of investing in high integrity management teams
Electric vehicle start-up (and would-be Tesla challenger) Nikola’s founder Trevor Milton has been charged with securities fraud by the Southern District of New York. The indictment alleges that Milton used a staged video to suggest that the Nikola One truck could move on its own power, when it was actually simply rolling downhill. Accusations of fraud have plagued Nikola since its swift rise of prominence in 2020: days after minting a $2B deal with GM, a short-selling firm published a report alleging similar claims to SDNY’s indictment. Caveat emptor applies for all investments; however, only allocating capital to companies we believe to be led by great people, determined through our research process, may provides further risk protection. Our concentrated strategy at Titan allows us to be highly selective of the investments and people we invest in.
2) Facebook details vision for ‘metaverse’ while warning of slowdown ahead, indicating investors should continue taking the long view with Facebook
Titan Flagship holding Facebook beat earnings expectations for Q2 2021, with revenue growing 56% YOY in the second quarter: the company’s steepest growth since 2016. In line with our thesis, revenue from advertising is up, as is revenue from Oculus. FB warned of a slowdown ahead, which ended up being more modest than the Street expected , but also doubled-down on its recently-revealed ambitions to establish a ‘metaverse’ where individuals can meet and interact virtually. Zuckerberg stated that he believes FB will come to be known as a metaverse company rather than a social media company. We believe the metaverse is a logical evolution of the digital transformation, with people expected to spend a larger portion of their time in digital environments than in physical ones. Our long-term thesis holds the view that Facebook will have a prominent role in future computing platforms.
3) Didi denies rumor that it will go public, amidst a high noise-to-signal news environment relating to Chinese public companies
China’s Uber, Didi, denied yesterday’s Wall Street Journal report that it is considering going private, amidst broad regulatory concerns across the Chinese tech industry. The report initially sent DIDI stock up over 14% this morning. Readers of Three Things will recall that Didi went public in June, but was swiftly plagued with cybersecurity and antitrust investigations by the Chinese government. We view Didi’s rebuttal to the WSJ’s report as indicative of a continued trend of unreliable reporting causing a volatile investment landscape. At Titan, we are reducing this noise-to-signal ratio by only following news sources that have demonstrated consistent accuracy and speaking with experts that have vast experience and boots on the ground.
Cash Management
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