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by schlumpf
3807 days ago
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> almost all of the value capture takes place way before a company is worth it Then almost all of the investment risk must similarly take place way before a company is "worth it". Unless you are proposing the divorce of expected risk from expected return. |
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* There are a shitty companies that are getting funding say raising ~20m in an A round.
* There are publicly traded companies that are in bad shape, GE, Twitter, Dropbox, Evernote can't even make it to the IPO and Yahoo.
* In between this, is where public markets were useful. They provided large scale liquidity for companies that needed to expand (often globally). Similarly, public investors needed to deploy excess capital to save for their futures.
* Now, the stock market is full of failing legacy companies and the pipeline of good companies is diverted. I am pretty bullish on Uber for example. While technically the IPO wouldn't touch the >7-10 trillion in the s & p, do you notice anything odd about this graph?[0] Bad companies are going public and failing, the pipeline of good companies are mostly staying private. Pricing, risk and market calibration are so out of wack that the last decade looks like this ^V^v so, not really sure how to make a risk
tl;dr I would feel more comfortable participating in Ubers previous funding round than buying apple, one of the s&p toip 50.
I was going to break down risk adjusted return, but I am not phenomenal at math nor finance, but again I found it pretty fucking insane. The sharpe ratio is like
"Risk Free Rate"
( 0-0.3 - "average return" ) / stdDev
So basically, in my super (likely incorrect) view, you have a pool of shitty assets that are largely correlated in a massively volatile timeperiod. This number is your control.
Then you measure against the degree you will beat the risk free rate, a negative number basically. Seems insane, but never was top in finance.
https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S%...