In today’s briefing:
- Reddit IPO Valuation Analysis
- TDCX (TDCX US)’s $7.20/Share Short-Form Merger
- Portfolio Update: February 2024
- Reddit IPO: The Right Time To Go Public At A Reasonable Valuation
- Gold Miners: Refuge From the YOLO and FOMO Frenzy
- Commodity Hedge Fund Positioning & Red Sea Update
- Reddit IPO Valuation Analysis: $1B+ Revenue and Profitable Company in 2024
- Crypto Crisp: Two Scenarios
- Mining Monthly: February Edition
Reddit IPO Valuation Analysis
- Reddit plans to price its IPO between $31 to $34 a share, which would suggest equity value of US$6.0 billion to US$6.5 billion on a fully diluted basis.
- Our base case valuation of Reddit is implied market cap of US$7.9 billion or implied price of US$41.2 per share.
- Given the moderate upside relative to the IPO price range, we have a Positive view of the Reddit IPO.
TDCX (TDCX US)’s $7.20/Share Short-Form Merger
- On the 2 January, TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, announced it had received a preliminary non-binding proposal from Laurent Junique to be acquired at $6.60/ADS.
- On the 1st March, TDCX entered in a definitive agreement by way of a short form merger at US$7.20/ADS, a 48% premium to undisturbed.
- As Laurent Junique holds 98.4% of the voting power, there is no shareholder vote on the merger. This is done. The Offer should close in the 2Q24.
Portfolio Update: February 2024
- Recently, a friend of mine asked me why I own positions in Markel and Brookfield, as they do not align with my typical investment style of small niche companies trading at attractive free cash flow yields.
- I consider both companies as alternatives to index funds, benefiting from the expertise of two exceptional capital allocators, Tom Gayner and Bruce Flatt, at no additional cost.
- Over time, if my investment process proves itself as sound, the positions in Markel and Brookfield should naturally decrease in size.
Reddit IPO: The Right Time To Go Public At A Reasonable Valuation
- Reddit, an American social news aggregation, content rating, and forum social network, filed to go public. The company plans to trade on the NYSE under the ticker “RDDT”.
- Reddit was founded in 2005 by Steven Huffman, Aaron Swartz and Alexis Ohanian. The company is forecasted to surpass $1B in total revenue in 2024.
- They chose the right time to go public. I have a positive view of the upcoming Reddit IPO and looking forward to seeing them trade as a public company.
Gold Miners: Refuge From the YOLO and FOMO Frenzy
- If you are concerned about the YOLO and FOMO frenzy in the stock market, you may wish to consider gold and gold mining stocks as refuges.
- The technical pattern for gold is constructive, but not unabashedly bullish.
- Gold miners appear to be washed out against gold and present the best opportunity for gains in the next 6–12 months.
Commodity Hedge Fund Positioning & Red Sea Update
- CTA Positioning Update According to UBS’ biweekly CTA momentum study, CTAs bought oil and sold precious metals in size in February.
- The investment bank expects ⅔ of those flows to reverse in the next two weeks.
- CTA’s have meanwhile built a decent short position in agriculturals, and flows should remain negative there.
Reddit IPO Valuation Analysis: $1B+ Revenue and Profitable Company in 2024
- According to Pitchbook and their S-1, Reddit has raised ~$1.5B in equity financing. Their last private round, a Series F led by Fidelity in August 2021, was around ~$10B valuation.
- I derive a target valuation for Reddit using a ~8x EV/Revenue multiple on my 2024 estimates. The multiple represents a top-range multiple of the peer group.
- I arrived at my ~$9.6B target valuation, which implies 50% upside to indicative IPO valuation at the midpoint. I expect Reddit will trade above their last round valuation of $10B.
Crypto Crisp: Two Scenarios
- Last week was notably positive for the cryptocurrency market, particularly for Bitcoin and Ethereum, which both experienced impressive gains.
- Bitcoin’s price has surged to $65,000, marking an increase of over 25%, while Ethereum has increased to $3,510, up by approximately 15%.
- This puts Bitcoin close to its highest ever price, just below $69,000.
Mining Monthly: February Edition
- Gold held flat in February, continuing a long period of consolidation, and most other metals were down modestly.
- The precious metal equities further sold off in February, compounding the losses in January, highlighting to the market this industry is still out of favour.
- We had several significant updates from companies within our coverage.
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