WEBVTT 1 00:00:07.505 --> 00:00:10.375 Hello and welcome to this film which is devoted to 2 00:00:10.895 --> 00:00:14.455 Snapchat, a star of the social network world. 3 00:00:15.485 --> 00:00:17.705 The story starts in a very nice way. 4 00:00:17.765 --> 00:00:21.025 The capital is doing extremely well and even bigger. 5 00:00:21.405 --> 00:00:24.385 23 years old at that time is going 6 00:00:24.385 --> 00:00:27.345 to reject Nora coming from Mark Zuckerberg. 7 00:00:28.155 --> 00:00:32.385 Zuckerberg wants to buy the company for $3 billion. 8 00:00:32.565 --> 00:00:37.105 We are in October, 2030. The offer is rejected. 9 00:00:37.805 --> 00:00:39.905 It would have generated a wealth, 10 00:00:40.165 --> 00:00:42.865 an increase in their wealth for even Speaker 11 00:00:43.085 --> 00:00:47.465 and Bobby Murphy, $750 million for each of them 12 00:00:47.655 --> 00:00:51.385 because at that time they owned something like 25% each 13 00:00:51.645 --> 00:00:54.425 of the company and they rejected the offer. 14 00:00:54.605 --> 00:00:56.505 Why? Because they thought that they were going 15 00:00:56.505 --> 00:00:59.105 to do much better by themselves 16 00:00:59.885 --> 00:01:01.785 as Snap was doing very well. 17 00:01:02.625 --> 00:01:04.345 Facebook wanted to defeat them 18 00:01:04.535 --> 00:01:06.865 with a new service PO publication 19 00:01:07.005 --> 00:01:09.345 of ephemeral photo pictures. 20 00:01:09.765 --> 00:01:11.505 It was a fear of Facebook 21 00:01:12.125 --> 00:01:16.025 and it was interestingly a kind of ad 22 00:01:16.045 --> 00:01:19.665 for Snapchat showing the interest in this 23 00:01:19.895 --> 00:01:21.065 very new business. 24 00:01:21.405 --> 00:01:22.985 The target is the teenagers. 25 00:01:23.205 --> 00:01:25.465 The teenagers don't like Facebook anymore 26 00:01:25.765 --> 00:01:29.705 and they are very much attracted by this new social network, 27 00:01:30.645 --> 00:01:33.545 so it's going to be rejected, which is extremely glorious. 28 00:01:33.885 --> 00:01:35.105 It seems that Google 29 00:01:35.445 --> 00:01:39.985 and Tencent also made offers probably around $4 billion, 30 00:01:40.455 --> 00:01:44.825 both rejected by Speer and the co-founder of Bobby Murphy. 31 00:01:45.625 --> 00:01:49.385 Facebook was not unsuccessful with all its acquisitions. 32 00:01:50.085 --> 00:01:54.705 The year before in 2012, the company had quite Instagram 33 00:01:55.405 --> 00:01:59.865 for teenagers and for $1 billion a year later it's going 34 00:01:59.865 --> 00:02:02.385 to be WhatsApp for $16 billion. 35 00:02:02.965 --> 00:02:05.425 So the company wants to make acquisitions 36 00:02:05.655 --> 00:02:07.985 with a strategic intent behind that. 37 00:02:08.605 --> 00:02:12.025 We want to keep the monopoly, we want to keep the control 38 00:02:12.025 --> 00:02:15.105 of the market and what is the financial rationality 39 00:02:15.245 --> 00:02:19.705 behind this strategic intent, recurring financial result? 40 00:02:19.885 --> 00:02:22.105 If we control the business, it's going 41 00:02:22.105 --> 00:02:25.665 to be about recurring cash flow, much less sensitive to 42 00:02:26.265 --> 00:02:28.145 fluctuations in the macro economy. 43 00:02:28.935 --> 00:02:30.945 What does it mean less fluctuations? 44 00:02:31.005 --> 00:02:34.105 It means less risk, less lower beta, 45 00:02:34.255 --> 00:02:37.185 less systematic risk than a reduction in the cost 46 00:02:37.185 --> 00:02:39.265 of capital which discount the cash flows. 47 00:02:39.645 --> 00:02:42.105 You should reduce a discount rate, you increase the value. 48 00:02:42.485 --> 00:02:45.345 So there's a lot of value behind this strategy. 49 00:02:45.835 --> 00:02:48.625 Let's go back to STA at the very beginning. 50 00:02:48.625 --> 00:02:52.585 2011 pbu the first service which 51 00:02:52.585 --> 00:02:53.705 is offered by staff. 52 00:02:54.205 --> 00:02:57.785 In fact, PBU is written in a different way as usual, 53 00:02:58.125 --> 00:03:01.325 and as you know, Phu means games with a baby. 54 00:03:01.655 --> 00:03:05.185 Hello, hide and seek or whatsoever, forget it. 55 00:03:05.185 --> 00:03:08.625 There are three founders, Reggie Brown, Bobby Murphy, 56 00:03:09.015 --> 00:03:11.905 even speaker, even speaker was is still 57 00:03:12.285 --> 00:03:13.465 the chief executive officer. 58 00:03:14.105 --> 00:03:17.905 Reggie Brown is the inventor of the mascot Go face chiller. 59 00:03:18.125 --> 00:03:20.625 He is going to be ousted by the other two 60 00:03:20.965 --> 00:03:23.345 and then there will be a legal battle, which is going 61 00:03:23.345 --> 00:03:26.785 to start and it's going to end in 2014. 62 00:03:27.445 --> 00:03:30.665 Now he has a right to be named a co-founder of Snapchat 63 00:03:30.685 --> 00:03:35.105 and he received $157.5 million out 64 00:03:35.105 --> 00:03:36.665 of this uh, legal battle. 65 00:03:37.205 --> 00:03:41.905 And the last news about Regi Brown are quite disaster. 66 00:03:42.805 --> 00:03:44.865 That's it. What are the products which are 67 00:03:44.865 --> 00:03:46.145 so attractive for teenagers? 68 00:03:46.205 --> 00:03:49.265 The abilities to send instant photos. 69 00:03:49.815 --> 00:03:51.105 There's a kind of cultural 70 00:03:51.365 --> 00:03:54.825 and historical reference to the J of the photography 71 00:03:55.455 --> 00:03:59.305 Eastman Kodak, but what makes a difference between Facebook 72 00:03:59.605 --> 00:04:04.105 and Snaps is the ability to make them quickly disappear. 73 00:04:05.205 --> 00:04:08.505 For some people, they show some pictures on Facebook, 74 00:04:08.505 --> 00:04:10.585 they are not so happy about these pictures 75 00:04:10.885 --> 00:04:12.065 and they want to get rid of them. 76 00:04:12.285 --> 00:04:13.705 That's not so easy. 77 00:04:14.125 --> 00:04:17.385 That's strictly organized in Snapchat, 78 00:04:17.835 --> 00:04:19.145 rapid disappearance, 79 00:04:19.645 --> 00:04:21.705 so it's much more a favorable than Facebook. 80 00:04:21.775 --> 00:04:24.545 Obviously. At the very beginning the picture 81 00:04:25.245 --> 00:04:29.265 was surviving one second, then 10 seconds and 24 hours. 82 00:04:29.315 --> 00:04:30.465 Today you have the ability 83 00:04:31.045 --> 00:04:35.065 to make them sustainable on the system with incident loop, 84 00:04:35.805 --> 00:04:40.025 but the segment which is very much targeted by Snap is 85 00:04:40.545 --> 00:04:44.665 teenagers and young adults, 13 to 35 years old. 86 00:04:45.535 --> 00:04:48.305 Then the new service starts in May, 2012 87 00:04:49.245 --> 00:04:52.625 and at that time 25 pictures are posted 88 00:04:52.925 --> 00:04:57.265 and sent per second in November, the same year it's going 89 00:04:57.265 --> 00:05:00.385 to be 270 pictures per second. 90 00:05:00.525 --> 00:05:02.465 So it's a fantastic success. 91 00:05:03.005 --> 00:05:05.705 The users, they really like the service. 92 00:05:06.205 --> 00:05:07.305 Of course there will be plenty 93 00:05:07.405 --> 00:05:09.705 of evolutions from this period today. 94 00:05:09.705 --> 00:05:13.745 Today and now the company is a social network with 95 00:05:14.515 --> 00:05:18.865 multimedia messaging, app, audio and video calls. 96 00:05:19.245 --> 00:05:22.505 You can send photos, you can send short videos. 97 00:05:22.835 --> 00:05:25.825 There are plenty of features, augmented realities, 98 00:05:25.935 --> 00:05:27.585 very important filters. 99 00:05:28.245 --> 00:05:30.225 Uh, the ability to create stories 100 00:05:30.805 --> 00:05:33.865 and the ability to delete even though it's a little bit 101 00:05:33.865 --> 00:05:38.785 limited by the fact that the user may register, may record 102 00:05:39.055 --> 00:05:40.225 what you sent. 103 00:05:40.805 --> 00:05:42.905 Now, what is a business model for Snapchat? 104 00:05:43.525 --> 00:05:46.895 You understand that you really have an access to a young 105 00:05:47.115 --> 00:05:48.615 and creative segment. 106 00:05:49.115 --> 00:05:51.135 The so-called Generation Z, 107 00:05:52.475 --> 00:05:55.495 the service itself is absolutely free. 108 00:05:55.995 --> 00:05:59.815 You can have additional features investing, paying 109 00:05:59.915 --> 00:06:04.095 for Snapchat plus, and then you pay $4 per month. 110 00:06:04.435 --> 00:06:06.375 If you multiply that by 12 months 111 00:06:06.375 --> 00:06:08.375 and if you multiply that by the number of users 112 00:06:08.915 --> 00:06:12.815 it represents today something like $240 million per year, 113 00:06:13.645 --> 00:06:16.775 it's only 5% of the total revenues of the company. 114 00:06:17.815 --> 00:06:21.335 Advertising represents 95% of revenue. 115 00:06:21.955 --> 00:06:26.375 So it's about ad placement, it's about service snap ads, 116 00:06:26.525 --> 00:06:30.455 it's about augmented reality access to this generation. 117 00:06:31.445 --> 00:06:33.255 Obviously it's our competitors. 118 00:06:33.315 --> 00:06:36.135 The main competitors are Instagram 119 00:06:36.795 --> 00:06:39.975 and TikTok as the services of good quality 120 00:06:40.235 --> 00:06:42.775 and very attractive for these young people. 121 00:06:43.115 --> 00:06:44.415 The number of users is going 122 00:06:44.415 --> 00:06:46.095 to grow at least during the first years. 123 00:06:46.835 --> 00:06:50.305 Three regions, north America, Europe, rest of the world, 124 00:06:50.755 --> 00:06:53.985 north America growth and then maturity. 125 00:06:54.535 --> 00:06:58.785 It's a bit like Facebook, Europe, same story growth 126 00:06:59.125 --> 00:07:00.585 and maturity because a number 127 00:07:00.585 --> 00:07:02.985 of users is limited by the population. 128 00:07:03.645 --> 00:07:05.025 Now what about the rest of the world? 129 00:07:05.025 --> 00:07:06.145 There is no limitation. 130 00:07:06.695 --> 00:07:09.945 It's lower at the very beginning because it started later 131 00:07:10.165 --> 00:07:11.985 and then skyrocketing. 132 00:07:12.335 --> 00:07:15.665 Then you understand that the number of user is growing 133 00:07:15.935 --> 00:07:17.745 because of rest of the world. 134 00:07:18.015 --> 00:07:20.905 It's at maturity for the rest of the story, 135 00:07:20.905 --> 00:07:23.145 which is North America and Europe. 136 00:07:23.725 --> 00:07:26.745 Now what about the total revenues by geographical area? 137 00:07:28.005 --> 00:07:30.585 You observe here something which is absolutely 138 00:07:30.605 --> 00:07:31.745 the same as Facebook. 139 00:07:32.055 --> 00:07:33.905 It's a seasonal business. Why? 140 00:07:33.905 --> 00:07:35.705 Because based on advertising, 141 00:07:36.045 --> 00:07:40.145 so Q4 is structured stronger than Q1, 142 00:07:40.465 --> 00:07:41.545 Q2 and Q3. 143 00:07:41.805 --> 00:07:43.505 You have this seasonality, 144 00:07:44.045 --> 00:07:47.785 but what you observe is definitely same as Facebook. 145 00:07:48.155 --> 00:07:51.705 North America is the leading source of revenues, 146 00:07:53.015 --> 00:07:55.655 skyrocketing and stabilizing, 147 00:07:55.825 --> 00:07:59.535 maybe declining except maybe some kind of bouncing back 148 00:08:00.115 --> 00:08:02.895 at the end of Q4 2023. 149 00:08:03.315 --> 00:08:05.775 But it's not that glorious in North America. 150 00:08:06.005 --> 00:08:09.935 What about rest of the world and what about Europe? Exactly. 151 00:08:10.495 --> 00:08:14.895 Centric parallel evolution seems to stabilize a little bit, 152 00:08:14.995 --> 00:08:17.175 but no worries about that, 153 00:08:17.555 --> 00:08:20.375 but much lower than North America. 154 00:08:20.995 --> 00:08:23.655 Now if you divide the second right by the first one, 155 00:08:23.795 --> 00:08:27.095 you get revenue per user as a very well known 156 00:08:27.675 --> 00:08:29.975 rpu average revenue per user. 157 00:08:30.315 --> 00:08:31.615 And then what do you observe? 158 00:08:32.115 --> 00:08:35.695 You observe the seasonality for each and every region. 159 00:08:35.955 --> 00:08:38.055 Of course it's strong work for North America 160 00:08:38.055 --> 00:08:40.255 because it's easier to observe that on the graph, 161 00:08:40.635 --> 00:08:44.735 but basically the RPU is now stable in North America, 162 00:08:45.345 --> 00:08:49.095 maybe declining except maybe Q4, 20, 23. 163 00:08:49.535 --> 00:08:53.415 A bit up back to growth, but limited growth. 164 00:08:54.005 --> 00:08:57.935 What do you observe for Europe and rest of the world growth 165 00:08:58.315 --> 00:08:59.975 and then maturity for Europe. 166 00:09:01.035 --> 00:09:04.655 But what is really a concern is that as far as rest 167 00:09:04.655 --> 00:09:05.815 of the world is concerned, 168 00:09:05.925 --> 00:09:08.255 it's absolutely not the same case as Facebook. 169 00:09:08.615 --> 00:09:11.255 Facebook is growing in terms of our pure rest of the world. 170 00:09:11.275 --> 00:09:13.695 It is absolutely not the case for snap. 171 00:09:14.395 --> 00:09:17.655 So the growth in rest of the world is not RP, 172 00:09:18.075 --> 00:09:19.135 it is number of users. 173 00:09:19.755 --> 00:09:22.615 So you understand that there is really a problem in terms 174 00:09:22.635 --> 00:09:25.855 of generating more revenues out of each 175 00:09:25.955 --> 00:09:28.295 and every daily active user. 176 00:09:28.635 --> 00:09:29.895 Now as you forget about the quarter 177 00:09:30.195 --> 00:09:32.735 and you observe your on year, 178 00:09:33.475 --> 00:09:35.455 you see the gross in the revenues, 179 00:09:35.455 --> 00:09:39.585 which is absolutely fantastic up to 2021. 180 00:09:40.175 --> 00:09:42.825 Then 2022 shows some beginning 181 00:09:42.825 --> 00:09:45.905 of the plateau in 2023, no gross at all. 182 00:09:46.565 --> 00:09:50.265 So if you look at the growth rate year on year, 183 00:09:50.965 --> 00:09:53.705 it was absolutely stratospheric at the very beginning. 184 00:09:53.815 --> 00:09:56.825 Then it stabilized around the listing of the company 185 00:09:57.685 --> 00:09:59.785 2022, 10%, 186 00:09:59.885 --> 00:10:04.225 20, 23 0% growth it out of the picture. 187 00:10:04.525 --> 00:10:07.825 If you make a quick recap about the revenue model, number 188 00:10:07.965 --> 00:10:12.465 of users, revenue per users maturity in terms of number 189 00:10:12.485 --> 00:10:14.825 of users in North America and Europe. 190 00:10:15.485 --> 00:10:18.025 The only growth comes from the rest of the world. 191 00:10:18.805 --> 00:10:21.425 But if you look at the revenue per users, rest 192 00:10:21.445 --> 00:10:24.705 of the world seems to be at maturity, the IQ stable 193 00:10:24.765 --> 00:10:28.825 for Europe and for rest of the world for North America. 194 00:10:29.685 --> 00:10:33.545 We gross maybe if we are optimistic when we look at the 195 00:10:33.705 --> 00:10:36.185 graph because there was a trend which was downward 196 00:10:36.245 --> 00:10:39.065 and it seems that there is a little bit of kind of recovery, 197 00:10:39.525 --> 00:10:42.745 but if you compare Q4 23 as opposed to 22, 198 00:10:43.445 --> 00:10:47.905 the increase is just by 2.2%, which is very weak. 199 00:10:48.885 --> 00:10:51.705 Now if you are growing your revenues, you have to invest 200 00:10:52.285 --> 00:10:55.105 growth consumes financial resources, you have 201 00:10:55.105 --> 00:10:58.305 to invest in infrastructure, your network, you have 202 00:10:58.305 --> 00:11:00.385 to invest in research and the roadmap and sales 203 00:11:00.385 --> 00:11:02.305 and marketing and so on and so forth. 204 00:11:02.685 --> 00:11:05.945 And if you consume financial resources, you need investors. 205 00:11:06.805 --> 00:11:08.345 So there will be investors up 206 00:11:08.345 --> 00:11:10.145 to the IPO, which is venture capital. 207 00:11:10.415 --> 00:11:11.425 Then will be IPO 208 00:11:11.425 --> 00:11:15.105 and post IPO first you have the founders' contribution, 209 00:11:15.125 --> 00:11:17.985 the early stage series, A, B, C, and so on. 210 00:11:18.095 --> 00:11:22.705 Okay? Now the serious story is going to start with series D 211 00:11:23.235 --> 00:11:25.265 where in December, 2014 212 00:11:25.365 --> 00:11:26.865 and Ider packings is going 213 00:11:26.865 --> 00:11:30.545 to invest almost half a billion dollar by itself 214 00:11:31.205 --> 00:11:33.505 for a premo evaluation of 10 billion. 215 00:11:33.645 --> 00:11:36.865 $10 billion is the premo evaluation, which means the value 216 00:11:36.865 --> 00:11:39.825 of the company before firms are raised. 217 00:11:41.125 --> 00:11:43.105 The primo evaluation is going 218 00:11:43.105 --> 00:11:47.025 to be almost $15 billion just a few months later. 219 00:11:47.445 --> 00:11:52.425 Series E, March, 2015, Alibaba very well known it's going 220 00:11:52.425 --> 00:11:54.485 to provide $200 million. 221 00:11:55.065 --> 00:11:59.725 The premium evaluation is going to be 14.8, so you have 10 222 00:12:00.275 --> 00:12:02.605 plus 0.5 is 10.5. 223 00:12:02.745 --> 00:12:04.365 Now it is 14.8. 224 00:12:04.745 --> 00:12:07.685 So it's an increase of $4 billion of the value 225 00:12:07.685 --> 00:12:11.125 of the company just in a few months, a year 226 00:12:11.305 --> 00:12:15.125 before the listing in May, 2016 series F. 227 00:12:15.265 --> 00:12:18.525 Now 1.8 billion, not one investor 228 00:12:18.525 --> 00:12:21.125 but 18 investors led by Glad Brook 229 00:12:21.865 --> 00:12:25.805 and the primo evaluation of that I is 17.5 billion. 230 00:12:25.825 --> 00:12:27.605 So you understand that it's quite a success. 231 00:12:27.905 --> 00:12:31.725 The companies in the momentum, it's a successful momentum 232 00:12:31.825 --> 00:12:35.245 but the value is growing from one fundraising to the other 233 00:12:36.145 --> 00:12:40.005 and then there is a listing in 2017 at the price, 234 00:12:40.005 --> 00:12:41.925 which is $17 per share. 235 00:12:42.505 --> 00:12:46.525 The stock price go to immediately go up from 17 to $25. 236 00:12:46.865 --> 00:12:48.325 The market value a day, 237 00:12:48.485 --> 00:12:51.445 the capital was listed in $33 billion. 238 00:12:51.545 --> 00:12:54.725 So significantly more than the 17.5. 239 00:12:55.305 --> 00:12:58.125 The capital is going to take the opportunity to raise funds, 240 00:12:58.175 --> 00:12:59.725 $3.4 billion 241 00:13:00.185 --> 00:13:04.085 and Tencent to wanted to get into the capital a few years 242 00:13:04.085 --> 00:13:07.525 before is going to use the open market to buy 243 00:13:08.185 --> 00:13:12.085 146 million shares, $2 billion invested. 244 00:13:12.395 --> 00:13:13.685 It's not money for the company 245 00:13:13.905 --> 00:13:16.725 but it is buy shares from the open market so 246 00:13:16.725 --> 00:13:19.805 that Tencent has a role, plays a role in the company. 247 00:13:20.305 --> 00:13:24.555 The rest is going to be a bit less glorious, 17 248 00:13:24.615 --> 00:13:28.875 to 25 and then down and then collapse. 249 00:13:29.645 --> 00:13:32.595 There will be a kind of recovery of the stock price 250 00:13:32.735 --> 00:13:36.955 for some reasons, which are epidemic reasons I would say. 251 00:13:37.015 --> 00:13:39.795 But then the stock price is going to go skyrocketing 252 00:13:40.635 --> 00:13:44.195 collapse again and today it's definitely $12 253 00:13:44.375 --> 00:13:48.915 and it does move very much if you compare SNAP with nasdaq, 254 00:13:49.305 --> 00:13:53.035 what you observe is that NASDAQ went up again and again. 255 00:13:53.735 --> 00:13:56.115 In the meantime, snap was down the lowest 256 00:13:56.855 --> 00:13:58.675 was about $5 per share. 257 00:13:59.405 --> 00:14:02.295 Then thanks too. Quotes covid. 258 00:14:03.025 --> 00:14:05.255 There will be an increase stock price 259 00:14:05.255 --> 00:14:08.775 because at that time all the stock prices 260 00:14:09.155 --> 00:14:12.095 of these companies which are providing services which you 261 00:14:12.095 --> 00:14:13.895 can use without leaving your home, 262 00:14:14.795 --> 00:14:18.615 the stock prices are going to go un reach the sky, zoom, 263 00:14:19.135 --> 00:14:20.135 Facebook or whatsoever. 264 00:14:20.595 --> 00:14:23.655 We all know that. Then the stock price of SNAP is going 265 00:14:23.655 --> 00:14:25.455 to reach $80 per year. 266 00:14:25.805 --> 00:14:30.295 It's going to collapse again, it's 12 up 12. 267 00:14:31.075 --> 00:14:35.415 The company is quite opportunistic in terms of stock prices 268 00:14:35.795 --> 00:14:37.215 and and and fundraising. 269 00:14:38.075 --> 00:14:41.695 The prices are rising because of COVID-19. 270 00:14:42.425 --> 00:14:43.775 Let's take the opportunity 271 00:14:43.885 --> 00:14:46.415 because the stock price is up to sell shares. 272 00:14:46.435 --> 00:14:48.775 Uh, if we sell shares they will be delution 273 00:14:49.155 --> 00:14:51.445 and we don't want to lose the control of the company. 274 00:14:51.585 --> 00:14:54.925 So what do we do? We sell convertible bonds. 275 00:14:55.205 --> 00:14:58.165 A convertible bond is a bond which is going to be tomorrow 276 00:14:59.025 --> 00:15:02.085 if everything goes right, converted into shares. 277 00:15:02.345 --> 00:15:04.285 So basically you get the money now 278 00:15:04.905 --> 00:15:07.925 and the investors, they have the option to convert 279 00:15:08.225 --> 00:15:11.125 as they hold an options, they have to pay for it. 280 00:15:11.185 --> 00:15:12.245 How do they pay for it? 281 00:15:12.435 --> 00:15:14.085 They receive a coupon on interest, 282 00:15:14.085 --> 00:15:16.845 which is less than the coupon of a straight bottle. 283 00:15:17.785 --> 00:15:19.315 Basically the day you do that, 284 00:15:19.335 --> 00:15:22.075 you are strengthening your cash situation. 285 00:15:22.615 --> 00:15:24.035 You're reducing your cost of that 286 00:15:24.035 --> 00:15:26.395 because the coupon is lower and you're delaying 287 00:15:26.395 --> 00:15:29.475 and reducing dilution because dilution is cost postponed. 288 00:15:29.705 --> 00:15:31.715 Convertible bond is absolutely perfect. 289 00:15:32.325 --> 00:15:35.195 There will be three main issues in 2020. 290 00:15:35.415 --> 00:15:40.075 The company is raising $1 billion coupon point 25%. 291 00:15:40.075 --> 00:15:42.355 Of course the interest rates are quite low at that time, 292 00:15:42.375 --> 00:15:44.035 but it is significantly less than 293 00:15:44.035 --> 00:15:46.875 what the company should pay for a straight debt. 294 00:15:47.735 --> 00:15:50.235 The exercise price, the exercise price is the price 295 00:15:50.235 --> 00:15:51.675 as the stock price should reach. 296 00:15:52.415 --> 00:15:57.275 So conversion is more attractive than getting cash back at 297 00:15:57.275 --> 00:15:58.955 the end at the maturity of the bond. 298 00:15:59.105 --> 00:16:00.475 This is a bit technical stuff, 299 00:16:00.475 --> 00:16:03.475 but basically it means that the convertible bond will be 300 00:16:03.475 --> 00:16:07.955 converted if the stock price exceeds $21.70 301 00:16:08.255 --> 00:16:09.315 for the first book. 302 00:16:10.015 --> 00:16:12.115 At that time the stock price is $18. 303 00:16:12.255 --> 00:16:16.115 So 21.7 is just 21% more than 304 00:16:16.115 --> 00:16:19.595 80 20, 21, the stock price is 62. 305 00:16:20.175 --> 00:16:24.155 The company is raising one point 15 billion, zero coupon, 306 00:16:24.415 --> 00:16:28.955 no interest at all, and the exercise price is 89. 307 00:16:29.495 --> 00:16:32.195 So the stock price should be more than 89 so 308 00:16:32.195 --> 00:16:33.755 that the conversion is exercised 309 00:16:34.095 --> 00:16:37.795 and 89 is 44% more than 62. 310 00:16:37.825 --> 00:16:39.315 It's quite aggressive issue. 311 00:16:40.305 --> 00:16:45.035 Same aggressive issue in 20 22, 1 $0.5 billion 312 00:16:45.295 --> 00:16:47.035 At that time the stock price is down 313 00:16:47.175 --> 00:16:49.155 but it's still $40 per share. 314 00:16:49.775 --> 00:16:50.515 The point is 315 00:16:50.515 --> 00:16:54.955 0.125%, very close to zero. 316 00:16:55.335 --> 00:17:00.035 The exercise price is 56. 56 is 40% more than $40. 317 00:17:00.815 --> 00:17:03.235 But you understand that today the stock price is 318 00:17:03.235 --> 00:17:04.755 $12 per share. 319 00:17:05.285 --> 00:17:07.315 There is no conversion so far 320 00:17:08.255 --> 00:17:10.915 and there will be probably no conversion at all. 321 00:17:11.455 --> 00:17:13.835 Now why is the stock price so gloomy those days? 322 00:17:13.835 --> 00:17:17.435 Because the financial metrics are absolutely not positive. 323 00:17:18.215 --> 00:17:21.475 You remember that value comes from financial performance 324 00:17:21.495 --> 00:17:24.315 and financial performance is return capital. 325 00:17:24.825 --> 00:17:26.315 Your return capital should be 326 00:17:26.315 --> 00:17:27.475 greater than the cost of capital. 327 00:17:27.535 --> 00:17:29.835 Return. Capital is how much you earn divided by 328 00:17:29.835 --> 00:17:33.595 how much you invested, how much you earn is very much EBITDA 329 00:17:34.215 --> 00:17:36.835 and how much you invested is very much capital expenditures, 330 00:17:36.835 --> 00:17:39.355 working capital requirement and so on. 331 00:17:39.615 --> 00:17:41.475 So let's have a look at ebitda. 332 00:17:42.415 --> 00:17:45.835 EBITDA is cash, operating revenues minus cash. 333 00:17:45.835 --> 00:17:48.275 Operating expenses, something which looks like cash. 334 00:17:48.825 --> 00:17:51.525 It's nearly cash, it's quite important. 335 00:17:51.785 --> 00:17:54.005 You can calculate the EBITDA directly 336 00:17:54.465 --> 00:17:57.565 or you can calculate indirectly who the operating comes 337 00:17:57.565 --> 00:18:00.365 with the ebit and then you calculate EBITDA 338 00:18:00.985 --> 00:18:04.365 as EBIT plus depreciation, plus amortization, 339 00:18:04.475 --> 00:18:06.685 plus stock based compensation. 340 00:18:07.555 --> 00:18:09.325 Then the weight works. So at the end 341 00:18:09.325 --> 00:18:12.765 of the day you calculate the ebit, you calculate the EBITDA 342 00:18:12.945 --> 00:18:14.125 and you calculate the roof. 343 00:18:14.745 --> 00:18:17.685 You remember that the campaign is growing in terms of sales. 344 00:18:17.755 --> 00:18:21.085 When you grow in sales, you generate economies of scale. 345 00:18:21.555 --> 00:18:22.765 Economies of scale means 346 00:18:22.765 --> 00:18:24.685 that fixed cost per you need are down. 347 00:18:25.065 --> 00:18:27.885 As a consequence, if your costs are down as a percentage 348 00:18:27.905 --> 00:18:31.725 to revenue, your EBIT as a percentage to revenue is up, 349 00:18:32.175 --> 00:18:33.645 which is absolutely mechanical. 350 00:18:34.185 --> 00:18:37.485 So we see the growth which is there in terms of revenues 351 00:18:37.545 --> 00:18:40.605 and the EBIT as a percentage to revenue, which is going up 352 00:18:40.825 --> 00:18:45.045 and it's going to be significantly positive in 2021. 353 00:18:45.825 --> 00:18:48.645 In 2022, abro is slowing down 354 00:18:49.065 --> 00:18:52.805 and as you have to invest in fighting against competition, 355 00:18:52.805 --> 00:18:56.365 which is Instagram and TikTok, EBIT dies down to zero 356 00:18:56.985 --> 00:19:01.165 and in 2023 revenues are stable, EBIT dies zero 357 00:19:01.745 --> 00:19:03.285 as a percentage to revenue. 358 00:19:03.995 --> 00:19:06.605 That was for ebitda. Now let's have a look at ebit. 359 00:19:07.255 --> 00:19:09.545 EBIT is revenues minus operating expenses. 360 00:19:10.545 --> 00:19:12.565 You can observe the same economies of scale. 361 00:19:12.565 --> 00:19:16.045 There is a fair virtual period up to 2021. 362 00:19:17.145 --> 00:19:19.685 All the costs are up in absolute terms, 363 00:19:19.825 --> 00:19:24.205 but relative to revenues, it's down cost of sales, search 364 00:19:24.205 --> 00:19:26.365 and development, sales and marketing general 365 00:19:26.465 --> 00:19:28.765 and then me as a percentage to revenues. 366 00:19:28.765 --> 00:19:30.245 They are all down and then 367 00:19:31.075 --> 00:19:34.685 there's a point from when it starts getting up again. 368 00:19:35.385 --> 00:19:38.925 So in any bit you understand that there is a nice period 369 00:19:39.055 --> 00:19:43.325 where you can observe the potential positive return on sales 370 00:19:43.665 --> 00:19:44.885 and then it's out of the picture 371 00:19:44.885 --> 00:19:48.045 because costs are up as a percentage to revenue. 372 00:19:48.675 --> 00:19:51.125 When you observe and capital difference between EBIT 373 00:19:51.125 --> 00:19:53.725 and ebitda, there is an item which is obvious, 374 00:19:53.725 --> 00:19:55.445 which is depreciation, 375 00:19:55.925 --> 00:19:58.885 amortization, a non-cash item. 376 00:19:58.925 --> 00:20:02.485 There's another non-cash item which is quite interesting 377 00:20:02.485 --> 00:20:04.805 to observe, which is a stock-based compensation. 378 00:20:05.745 --> 00:20:08.525 So you pay a salary to people managers 379 00:20:08.525 --> 00:20:12.325 and for key people you are transforming them from employees 380 00:20:12.325 --> 00:20:15.405 to employees and core investors in the company. 381 00:20:16.185 --> 00:20:18.645 So you give them equities, shares, 382 00:20:19.045 --> 00:20:21.365 restricted stock units which are vested 383 00:20:21.515 --> 00:20:23.885 because of service as time goes on 384 00:20:23.985 --> 00:20:26.165 or when there is an event which is happening 385 00:20:26.425 --> 00:20:28.605 and you give them also stock options, 386 00:20:29.145 --> 00:20:30.845 employ stock options plan 387 00:20:31.465 --> 00:20:34.125 and that's about options on the stock 388 00:20:34.385 --> 00:20:36.645 or absolute shares which are 389 00:20:36.865 --> 00:20:39.125 to be in your pocket year after year. 390 00:20:40.125 --> 00:20:42.485 Interestingly, there's a huge debate about 391 00:20:42.545 --> 00:20:44.925 how you should account for these SC. 392 00:20:45.465 --> 00:20:48.170 Uh, the accounting authorities say it should be accounted 393 00:20:48.170 --> 00:20:49.365 as operating expenses 394 00:20:49.545 --> 00:20:51.365 and should be written off in the p and l. 395 00:20:51.905 --> 00:20:55.685 Um, I am personally absolutely against that opinion 396 00:20:56.145 --> 00:20:59.925 and I published a blog and the academy on this topic. 397 00:21:00.345 --> 00:21:03.605 Uh, when people are investing in a company, 398 00:21:04.555 --> 00:21:07.085 when venture Cap is investing in the company, 399 00:21:07.705 --> 00:21:10.325 you don't treat its investment as an expense. 400 00:21:10.745 --> 00:21:12.205 And so if managers 401 00:21:12.205 --> 00:21:14.525 and key employees are investing in the 402 00:21:14.525 --> 00:21:16.325 company, it's an investment. 403 00:21:16.835 --> 00:21:20.175 It's not a cost should not be opinion. I stop there. 404 00:21:20.435 --> 00:21:23.095 Now, SPC is something which is quite 405 00:21:23.095 --> 00:21:24.615 important in some companies. 406 00:21:25.155 --> 00:21:29.775 If you remember as example of Snowflake, it represents 50% 407 00:21:29.795 --> 00:21:31.015 of the operating charges. 408 00:21:31.955 --> 00:21:33.615 As far as SNAP is concerned, 409 00:21:33.635 --> 00:21:36.895 the figure is $1.3 billion in 2023. 410 00:21:37.245 --> 00:21:39.215 It's not 50, but it's small than 20% 411 00:21:39.215 --> 00:21:42.255 of the operating expenses quite significant. 412 00:21:42.795 --> 00:21:46.495 Now, if you divide this together 1.3 billion by the number 413 00:21:46.515 --> 00:21:49.895 of employed at snap at that time you get upset, 414 00:21:49.895 --> 00:21:54.095 which is about $250,000 per employee. 415 00:21:54.635 --> 00:21:56.815 Of course there are huge differences from one employee 416 00:21:56.815 --> 00:22:00.415 to the other, but it's quite interesting to compare that 417 00:22:00.415 --> 00:22:03.895 and contract it with the media salary Million means 418 00:22:03.895 --> 00:22:06.255 that there are as many people who receive more, 419 00:22:06.355 --> 00:22:07.855 as many people who receive less. 420 00:22:08.325 --> 00:22:12.095 It's $346,000, which is quite high 421 00:22:12.115 --> 00:22:13.575 as a media salary by the way. 422 00:22:13.915 --> 00:22:17.415 And you understand that SBC is a very significant part of 423 00:22:17.415 --> 00:22:20.735 that 250, 350. 424 00:22:21.155 --> 00:22:24.135 Now, if we consider that SBC should not be treated 425 00:22:24.235 --> 00:22:26.615 as an expense, let's calculate the cost 426 00:22:27.285 --> 00:22:31.055 excluding stock based compensation quarter by quarter 427 00:22:31.485 --> 00:22:34.015 what you observe, you observe this virtual phase 428 00:22:34.045 --> 00:22:37.095 with declining costs as a percentage to revenues 429 00:22:37.095 --> 00:22:39.095 and stabilize shallow the Yellowstone so far. 430 00:22:39.515 --> 00:22:42.615 But even though you exclude SBC, what do you observe? 431 00:22:43.075 --> 00:22:46.615 If you make a sum of cost of sales and r and d and sales 432 00:22:46.635 --> 00:22:51.065 and marketing and GA, you get a sum, which is more 433 00:22:51.065 --> 00:22:52.305 or less 100% 434 00:22:52.525 --> 00:22:56.585 or more than 100%, then it's going to be very difficult 435 00:22:57.325 --> 00:22:59.905 to be a positive in terms of p 436 00:22:59.905 --> 00:23:01.745 and l in terms of EBIT and ebitda. 437 00:23:02.005 --> 00:23:05.145 If your costs are exceeding your revenues as far 438 00:23:05.145 --> 00:23:06.385 as the rose sales concerns 439 00:23:06.385 --> 00:23:08.985 and the narrator is EBIT is negative, 440 00:23:09.365 --> 00:23:11.705 but the denominator, the denominator is 441 00:23:11.705 --> 00:23:13.785 how much we invest in your business operations. 442 00:23:14.655 --> 00:23:16.705 It's about fixed and current capital. 443 00:23:16.895 --> 00:23:18.305 It's about capital expenditures 444 00:23:18.645 --> 00:23:20.225 and working capital requirement. 445 00:23:20.475 --> 00:23:23.145 Let's start with the cash conversion cycle. 446 00:23:23.605 --> 00:23:25.865 The operating working capital requirements made 447 00:23:25.865 --> 00:23:29.065 of inventory, but cash receivable bonds, accounts payable. 448 00:23:29.565 --> 00:23:31.785 Of course, in a business like snap, there is no inventory, 449 00:23:32.325 --> 00:23:35.265 not in manufacturing are retail distribution. 450 00:23:35.645 --> 00:23:37.745 So it's about receivables minus payables 451 00:23:37.745 --> 00:23:38.825 and it's quite significant. 452 00:23:39.045 --> 00:23:42.105 The cash conversion cycle is about 80 days of sales 453 00:23:42.125 --> 00:23:45.605 and revenues, but the non-operating working capital 454 00:23:45.605 --> 00:23:48.885 requirement incorporate a few things like CHA fund revenue 455 00:23:50.365 --> 00:23:52.125 advertising agencies are paying up 456 00:23:52.125 --> 00:23:53.285 front and so on and so forth. 457 00:23:53.305 --> 00:23:54.365 So as a consequence, 458 00:23:54.945 --> 00:23:57.765 the actual working capital requirement is less than the 459 00:23:57.765 --> 00:23:58.805 cash conversion cycle. 460 00:23:59.195 --> 00:24:02.645 It's about a most, it's not negligible, 461 00:24:02.825 --> 00:24:06.085 but it's not very high when you create the company. 462 00:24:06.185 --> 00:24:08.165 You have to invest a lot in infrastructure, 463 00:24:08.905 --> 00:24:10.845 IT network and so on and so forth. 464 00:24:11.625 --> 00:24:14.485 So basically in the early years of the company, 465 00:24:15.185 --> 00:24:17.845 the CapEx two revenues ratio is quite high. 466 00:24:17.875 --> 00:24:19.165 Then it's going to go down. 467 00:24:19.675 --> 00:24:23.125 Then it's about maintenance productivity and so on so forth. 468 00:24:23.565 --> 00:24:25.645 A bit up during the last years probably 469 00:24:25.645 --> 00:24:26.925 because you have to improve the quality 470 00:24:26.945 --> 00:24:28.165 of service or whatsoever. 471 00:24:29.215 --> 00:24:32.325 CapEx is not very low, but it's not very high. 472 00:24:32.385 --> 00:24:33.805 The assets turnover is going 473 00:24:33.805 --> 00:24:36.125 to profit from the increase in the revenues. 474 00:24:36.355 --> 00:24:38.565 This is part of the economy's skill by the way, 475 00:24:38.985 --> 00:24:42.805 but that is going to plateau and today it's 1.5. 476 00:24:43.105 --> 00:24:46.405 The 1.5 is not explained by onlay capital expenditure 477 00:24:46.665 --> 00:24:47.965 and cash conversion cycle. 478 00:24:48.035 --> 00:24:51.725 It's also explained by acquisitions, intangible assets, 479 00:24:52.285 --> 00:24:55.325 goodwill, capitalize or the expenses or whatsoever. 480 00:24:56.025 --> 00:25:00.045 So basically the assets turnover is 1.5. What does it mean? 481 00:25:00.625 --> 00:25:03.005 It means that there is some capital 482 00:25:03.355 --> 00:25:05.085 intensity in this business. 483 00:25:05.745 --> 00:25:08.325 The capital intensity comes from infrastructure 484 00:25:08.985 --> 00:25:10.445 and it comes from acquisitions, 485 00:25:11.225 --> 00:25:12.445 but it's quite interesting 486 00:25:12.445 --> 00:25:14.285 to observe the consequence of this figure. 487 00:25:14.985 --> 00:25:17.565 You remember that return capital is return on sales 488 00:25:17.645 --> 00:25:18.925 times assets turnover. 489 00:25:19.355 --> 00:25:22.525 Imagine that for any reason, return on sales turns positive. 490 00:25:22.835 --> 00:25:25.165 It's not going to be very much amplified 491 00:25:25.165 --> 00:25:26.325 by the assets turnover. 492 00:25:26.785 --> 00:25:28.085 If a return on sales turns 493 00:25:28.185 --> 00:25:31.685 to 10% return capital would be 15%, 494 00:25:32.175 --> 00:25:33.245 which is not that much. 495 00:25:33.305 --> 00:25:36.125 So the company is fighting in order 496 00:25:36.305 --> 00:25:39.285 to transform the negative into positive return on sales, 497 00:25:39.705 --> 00:25:43.085 but it's not going to profit from asset light business. 498 00:25:43.475 --> 00:25:45.485 It's quite capital intensive 499 00:25:46.025 --> 00:25:49.565 and return on sales is going to be amplified by only 50% 500 00:25:49.585 --> 00:25:51.725 to create the return on capital report. 501 00:25:52.585 --> 00:25:54.365 That's quite difficult for the future. 502 00:25:54.825 --> 00:25:57.845 Now let's go back to the stock based compensation. 503 00:25:58.615 --> 00:26:00.125 Stock based compensation is 504 00:26:00.325 --> 00:26:03.805 provided in the 10 care report for each and every function. 505 00:26:03.865 --> 00:26:06.805 So you have the amount, stock based compensation for r 506 00:26:06.805 --> 00:26:09.085 and d, for general admin and so on, so forth. 507 00:26:09.385 --> 00:26:13.895 Who is the winner? The winner is r and d because for r 508 00:26:13.895 --> 00:26:17.655 and D stock-based compensations represents 50% 509 00:26:17.675 --> 00:26:18.815 of the r and d costs. 510 00:26:19.315 --> 00:26:22.655 So your developers, your engineers, your et cetera, 511 00:26:23.105 --> 00:26:24.295 developing the service 512 00:26:24.955 --> 00:26:27.775 and developing the features, they receive quite a lot 513 00:26:27.775 --> 00:26:32.055 of shares, restricted stock units and um, stock options. 514 00:26:33.175 --> 00:26:36.155 Second with 20% sales and marketing 515 00:26:37.175 --> 00:26:38.235 and general and admin. 516 00:26:38.235 --> 00:26:41.235 General admin includes the general management, uh, 517 00:26:41.295 --> 00:26:43.645 who receives plenty of uh, this kind of stuff. 518 00:26:44.075 --> 00:26:48.125 Cost of revenues, cost of sales, production, knee 519 00:26:48.385 --> 00:26:51.565 or almost so this remuneration, 520 00:26:51.695 --> 00:26:54.165 which is about the price of the company. 521 00:26:54.385 --> 00:26:56.005 The value of the company is going 522 00:26:56.005 --> 00:26:59.165 to be concentrated in the hands of research and development 523 00:26:59.785 --> 00:27:03.525 and sales and marketing general mean general management. 524 00:27:03.905 --> 00:27:06.525 If you observe, when cost 525 00:27:06.525 --> 00:27:09.445 of sales received some stock based compensation, it was 526 00:27:10.155 --> 00:27:11.525 when the IPO took place 527 00:27:12.225 --> 00:27:16.445 before the IPO, everybody received stock based compensation. 528 00:27:16.945 --> 00:27:19.765 And then what you observe is the number one 529 00:27:20.145 --> 00:27:21.245 is general and admin. 530 00:27:21.385 --> 00:27:23.485 Why? Because it's a general manager. 531 00:27:23.865 --> 00:27:27.445 The CEO is going to receive tons of SBC. 532 00:27:27.745 --> 00:27:30.965 You're never better served than by yourself. 533 00:27:31.755 --> 00:27:34.125 When you receive this kind stock based compensation, 534 00:27:34.465 --> 00:27:37.245 you receive a plan which is going to be vested 535 00:27:37.745 --> 00:27:40.325 as a consequence of service time. 536 00:27:40.905 --> 00:27:44.645 So the shares, the restricted stock units are vested quarter 537 00:27:44.865 --> 00:27:48.925 by quarter or, and it's vested because there is an event. 538 00:27:49.785 --> 00:27:51.645 The IPO is part of the event. 539 00:27:51.705 --> 00:27:54.765 So even bigger received just 540 00:27:54.765 --> 00:27:59.165 before the IPO, plenty of restricted stock units, 541 00:27:59.975 --> 00:28:03.845 which were supposed to be immediately vested by the IPO. 542 00:28:04.545 --> 00:28:09.205 It consists in 37.4 million C shares seven, 543 00:28:09.275 --> 00:28:14.165 4.7 B shares 612 million A shares. 544 00:28:14.355 --> 00:28:18.885 This is a total of 724 million shares which were 545 00:28:18.885 --> 00:28:20.965 immediately vested by the IPO. 546 00:28:20.965 --> 00:28:23.445 The IPO took place at $17. 547 00:28:24.105 --> 00:28:26.925 So you understand the amount of money which is going to be 548 00:28:27.585 --> 00:28:30.645 vested immediately in the pocket of the CEO. 549 00:28:30.935 --> 00:28:33.725 There are three classes of shares. 550 00:28:34.545 --> 00:28:38.325 The A shares are non-voting. So you receive the dividend. 551 00:28:38.325 --> 00:28:39.365 Of course there's no dividend 552 00:28:39.365 --> 00:28:41.885 because there is no profit and that's it. 553 00:28:41.885 --> 00:28:44.885 But you have no voting right in the shareholder meeting 554 00:28:45.605 --> 00:28:48.525 B shares, they have one voting right to share 555 00:28:49.125 --> 00:28:51.605 C shares stand voting right to share. 556 00:28:52.385 --> 00:28:55.405 Now the question is where is the capital located? 557 00:28:55.945 --> 00:28:59.325 Who is the owner of the A versus B versus C shares? 558 00:28:59.985 --> 00:29:02.005 The answer is provided in a 10 care report, 559 00:29:02.005 --> 00:29:03.285 2023 of the capital. 560 00:29:03.835 --> 00:29:06.605 What you can almost read on the extract 561 00:29:06.665 --> 00:29:11.165 of the 10 care report is that 99.5% 562 00:29:11.165 --> 00:29:14.485 of the voting right are concentrated in the hands 563 00:29:14.665 --> 00:29:17.245 of even people and Bobby Murphy. 564 00:29:18.415 --> 00:29:23.205 These guys, they own 100% of the C shares 10 voting rights 565 00:29:23.425 --> 00:29:26.645 and they own 52% of the B shares, 566 00:29:26.865 --> 00:29:28.525 one voting right per share. 567 00:29:28.985 --> 00:29:32.645 So at the end of the day with 52% of the B shares 568 00:29:32.825 --> 00:29:35.125 and all of the C shares, 569 00:29:35.705 --> 00:29:38.445 it represents 21.6% of the capital, 570 00:29:39.025 --> 00:29:42.085 but 99.5% of the voting rights, 571 00:29:42.195 --> 00:29:44.085 they completely control the company. 572 00:29:44.775 --> 00:29:47.125 Their friend Mark Zuckerberg 573 00:29:47.785 --> 00:29:49.445 is almost in the same situation, 574 00:29:49.705 --> 00:29:52.165 is about 13% of the capital. 575 00:29:52.305 --> 00:29:53.645 He sold some shares recently. 576 00:29:54.185 --> 00:29:57.805 Uh, and more than 50% of the voting rights, you are the boss 577 00:29:57.805 --> 00:30:00.805 because you hold the majority of the voting rights. 578 00:30:01.425 --> 00:30:03.605 Of course, a number of shares you hold has 579 00:30:03.605 --> 00:30:04.765 an impact on your wealth. 580 00:30:05.705 --> 00:30:08.845 If you look at the evolution of the net worth of Mr. 581 00:30:09.155 --> 00:30:12.605 Spiegel as it is published by Forbes, the list 582 00:30:12.625 --> 00:30:14.965 of the billionaires, you understand 583 00:30:14.965 --> 00:30:18.485 that there was a peak when the stock price reached something 584 00:30:18.595 --> 00:30:20.365 like $80 per share. 585 00:30:20.945 --> 00:30:23.965 At that time, his net worth was $11 billion. 586 00:30:24.465 --> 00:30:27.725 Uh, it went down, but it is still $3 billion. 587 00:30:28.685 --> 00:30:32.425 So you can maybe compare $3 billion today versus 588 00:30:32.515 --> 00:30:36.265 $750 million 10 years ago invested in 589 00:30:36.265 --> 00:30:37.545 nasdaq, doesn't matter. 590 00:30:37.695 --> 00:30:40.865 With $3 billion, you are reasonably well off 591 00:30:41.365 --> 00:30:45.905 and that what is absolutely important to remember, of course 592 00:30:46.295 --> 00:30:47.625 with a great sense of humor, 593 00:30:47.805 --> 00:30:50.025 the capital is publishing on a 10 K report, 594 00:30:50.245 --> 00:30:53.865 the evolution stock price, and they start in December 18. 595 00:30:54.775 --> 00:30:56.265 When it was at the low point 596 00:30:56.775 --> 00:30:59.505 when the company announced the 2023 result, 597 00:30:59.765 --> 00:31:01.665 the stock price collapsed. 598 00:31:02.205 --> 00:31:03.665 It was very bad news. 599 00:31:03.665 --> 00:31:07.265 Even though the RPU was a bit betterer in North America, as 600 00:31:07.265 --> 00:31:11.225 of course to Q4 2022, it collapsed because there's no growth 601 00:31:11.645 --> 00:31:12.985 and there's no performance. 602 00:31:13.645 --> 00:31:15.665 And so at the end of the day what happened, 603 00:31:16.245 --> 00:31:18.185 NASDAQ was going up smoothly. 604 00:31:19.045 --> 00:31:20.065 It went down. 605 00:31:20.205 --> 00:31:22.345 It went up a little bit when the company 606 00:31:22.485 --> 00:31:25.025 and now that they were buying bags convertible, 607 00:31:25.645 --> 00:31:27.705 of course you can buy bags of convertible 608 00:31:27.705 --> 00:31:28.865 because the probability 609 00:31:28.865 --> 00:31:31.505 of conversion is now absolutely zero. 610 00:31:32.485 --> 00:31:34.225 The coupon is close to zero one. 611 00:31:34.225 --> 00:31:36.185 In the meantime, the HRA rates went up. 612 00:31:36.445 --> 00:31:38.865 So the value of the convertible bonds is down 613 00:31:39.245 --> 00:31:42.425 and then you use your cash to buy back convertible bolts. 614 00:31:43.285 --> 00:31:45.825 Wow, that's a great value creation process. 615 00:31:46.525 --> 00:31:48.585 In the end, if you look at the return investment 616 00:31:48.805 --> 00:31:51.625 for all these investors, the market cap today 617 00:31:52.165 --> 00:31:54.225 is a bit less than $20 billion. 618 00:31:54.725 --> 00:31:59.225 You remember series D, the premo valuation was 10 billion. 619 00:31:59.435 --> 00:32:01.305 Today it's twice as much, 620 00:32:02.125 --> 00:32:04.705 but in the meantime there were other equity issues, 621 00:32:04.705 --> 00:32:06.225 so you've been a bit diluted. 622 00:32:06.225 --> 00:32:09.905 And the meantime, the NASDAQ was multiplied by 2.5 623 00:32:10.565 --> 00:32:14.825 and there is no dilution in Nasda series A, uh, 624 00:32:14.935 --> 00:32:17.265 plus 35% in nine euros. 625 00:32:17.805 --> 00:32:19.225 So it's a positive return, 626 00:32:19.285 --> 00:32:22.065 but it's value destruction, obviously series F 627 00:32:22.575 --> 00:32:24.785 plus 11% in eight euros. 628 00:32:25.155 --> 00:32:26.785 Again, positive return 629 00:32:26.885 --> 00:32:30.345 and value structure does not pay the cost of capital by far 630 00:32:31.145 --> 00:32:35.785 IPO from 17 to 12 minus 30% as a retail university 631 00:32:36.245 --> 00:32:37.585 and the convertible bolts, 632 00:32:37.585 --> 00:32:40.005 they are all non-convertible anymore, 633 00:32:40.305 --> 00:32:41.965 and so the return is negative. 634 00:32:41.965 --> 00:32:44.045 This is why the company can buy them back 635 00:32:44.625 --> 00:32:47.045 at the price which is lower than the price 636 00:32:47.045 --> 00:32:48.125 at which they were issued. 637 00:32:48.545 --> 00:32:50.605 So for the investors, it's a disaster, 638 00:32:51.345 --> 00:32:53.805 but for the founders, it's a success story 639 00:32:54.315 --> 00:32:56.725 because they receive plenty of stocks 640 00:32:56.725 --> 00:32:58.325 and so on and so and so. 641 00:32:58.325 --> 00:33:02.765 At the end of the day, the founders are much more well off 642 00:33:02.795 --> 00:33:07.605 than the investors, and by far that's true for the investors 643 00:33:08.105 --> 00:33:09.405 and that's true for the founders. 644 00:33:09.745 --> 00:33:12.925 But for us, all of us, it raises a question 645 00:33:13.625 --> 00:33:15.765 and it's a question about governance. 646 00:33:16.665 --> 00:33:19.645 How should you structure the governance 647 00:33:19.825 --> 00:33:24.245 of these companies putting 99.5% 648 00:33:24.265 --> 00:33:27.885 of the voting rights into two people 649 00:33:28.545 --> 00:33:30.205 who are deciding everything? 650 00:33:30.875 --> 00:33:32.885 This raises a question of governance. 651 00:33:33.555 --> 00:33:35.605 Okay, thank you very much.