Longreads + Open Thread
Ride Hailing, Portnoy, Bridging Finance, Insecure Chips, Bad Trades, Failing GPA
Philo from M&DA asks if ride hailing is sustainable. This post is an absolute tour de force. It's a demonstration of how you can use public data to assess a variety of claims—from whether or not ride-hailing companies compete purely on price to how much they expanded the market compared to taking share. Very much worth reading as both a data-driven response to a low-effort criticism and as a demonstration of how deep the investment research process can go.
Reeves Wiedeman of NY Mag profiles Dave Portnoy. Portnoy's company was acquired by Penn National Gaming because Portnoy is a PR machine, but it turns out that publicity is a vector, not a scalar, and a multi-billion dollar public company has more to lose than a smaller private one. That said, he wouldn't be the first person to cycle from famous to infamous and then back again.
Greg McArthur and Tim Kiladze in The Globe and Mail have the story of the up to $1bn collapse of Bridging Finance ($). Alternative lenders can achieve above-average returns by participating in deals that other companies can't touch, but they can also more easily fake returns since there's so much opacity in the lending book. Bridging pitched itself as a low-risk lender, but it turns out that its largest investment, $317m, was in a planned railroad with $1m in cash and no assets other than intellectual property.
Ed Sperling in Semi Engineering: why it's so difficult and costly to secure chips. The most interesting point here was that at a certain level of complexity, giving chips unique security features to address known vulnerabilities may introduce more unknown vulnerabilities in the bargain. There are limits to security driven by human error and unpredictable changes in what attacks are possible.
An anonymous retail trader details losing $400,000 in a single trade. (The trade was Alibaba $200 calls when the stock was over $250; it's at $112 now. ) Retail investors tend to be pretty binary in their risk tolerance; this writer previously had all of that money in a high-yield savings account before getting into equities. Any time there's a new investment tool, it will open up new opportunities, but for people who switch from minimum risk to maximum, the result can be that they lose everything.
Crash Landing: An Inside Account of the Fall of GPA: Most business books about big disasters get written in the aftermath, when some of the participants are eager to tell their side of the story and skeptics are happy to take a victory lap. This book takes the form of a journal written during the collapse, giving it a very different flavor: there's still a sense of inevitability, but much more uncertainty.
Drop in any links that would be of interest to Diff readers.
A common cycle in finance is that a newly-popular financing tool a) enables good but odd companies to raise money they otherwise couldn't, and then b) enables companies that are unfundable for a good reason to temporarily get access to cash. There are plenty of well-publicized SPACs in column B right now, but what's interesting from column A?