“CeeV-TV is an excellent example,” this panelist is saying, “of low barriers of entry into this business. It should be worth nothing because competitors will pop up everywhere.”
This speaker is a stocky man, a manager from the pension funds of the State of California. State employees receive about one grain of the bushel of compensation the others in this room get. They tend to not like anything and I wonder if some are mad at themselves for not starting their career on the private rather than public side. My attention deficit subsides as the conversation ratchets up. Then I do what I do best—lob a question that is insightful, provocative, and intelligent.
“So, Liam, do you agree?”
I have no idea what Mr. California has just said. The one thing I do know is that by simply asking someone to agree, the discussion will keep moving while I fumble to get my brain in gear.
“I think this CeeV-TV should be worth about one dollar per share,” says the Californian guy. He doesn’t like all these new, growth-fueled companies. “This thing is a flash in the pan. If content is free and barriers to entry to stream that content are low, I’m not buying the stock. That’s a loser’s game.”
Many state funds are managed more cautiously, preferring value rather than explosive growth. They tend to be more careful with the money entrusted to them so they want to feel something tangible, to touch the bricks and mortar under their feet before they’ll invest in a company. They don’t buy dreams. People who believe the positive stuff about the CeeV-TV story like growth. They’ll pay big multiples for ideas and intangibles about companies with no profit. My third panelist is one of these growth investors and he finally wakes up.
“I disagree,” he says while clearing his throat. He’s a smartly dressed British guy, about my age though some balding makes me unsure. “If you sell content that is provided free, how can you be anything but profitable?”
“Because, young man,” growls California State Fund Guy, “every Tom, Dick, and Harry can do the same thing, which makes your company worthless.”
But I know they can’t. I’m tempted to interrupt, to tell him why, but the Brit is fired up.
“You cannot implore your target market to think you are cool: you either are or you are not. It’s called branding. You can’t just go get an image or change your image overnight. CeeV-TV has established itself as cool. Like with people, it’s hard to become cool when you’ve been quite uncool your whole life. CeeV-TV is the coolest thing out there.”
British Guy seems to be talking about more than stocks here. I think he’s just insulted the nerdy, older pension manager and to me, that was very uncool. I need to calm things down but he continues to speak. “In fact, I think the multiple that CeeV-TV is worth is about double where this deal talk is. Google is lowballing these guys. Google is getting a bargain and I’m a buyer of both stocks.”
I hear the room wake up. This is where I’m supposed to say something, to inflame the conversation and get us to new territory. I lob another killer question.
“Why?” I ask, even though I can answer this question better than anyone in the room.
“Why?” snooty British Guy asks me sarcastically.
He’s irritating as hell now. By picking the one stock I know more about than him, he has met his match. I ready my tirade of facts about CeeV-TV, about to bring the house down. I try to let him finish so we aren’t speaking over each other. In other words, I am polite, which in business can also be interpreted as being weak.
“Right. Well, for one, Google is getting a deal. And if Google is getting it at a fire sale price, the public stock of Google will trade even higher. This also means that if Google is getting a deal, others will come to play. This means a bidding war for CeeV-TV.”
I listen, thinking this means more money for the McElroys, as the stock is sure to go higher. I envision the CeeV-TV spreadsheet in my mind. I’m about to spew the facts I know so well about this company, but then get interrupted.
The voice comes from the audience and it’s not even question time. It’s a commanding voice, a voice of authority from a person also able to spew the facts, facts that I’ve given him.
“Liam, we see other content providers paying triple the CeeV-TV bid multiple. Why did Google go in with such a low offer?” It’s Henry.