Remember our lengthy discussion on negative interest rates in the Fintech class? In these unusual times, so many truisms about finance are becoming untrue. In Denmark, a country with a long history of negative interest rates, the central bank announced 20 year home mortgages at a fixed interest rate of zero percent. A 20 year, $100,000 mortgage at 3% APR would cost a homeowner $33,000.00 in interest. But this begs many important questions. Will the rental market be impacted badly? Will home prices not appreciate? Click on the image below to read further.
I said in the class I will explain how options differ from SPAC. Here it is.
SPAC (Special Purpose Acquisition Company) is a shell corporation with no current business operation but has identified/is identifying potential targets for acquisition/merger. Upon completing the M/A, the SPAC goes public and those who invested in the SPAC get IPO shares allotted by the company. Whereas options are contracts between two parties (the company is not involved) either to buy or sell shares at a particular price within a specific period. The shared are moved from one investor to another if the options are exercised. SPAC issue warrants to the investors to begin with. To read more about SPAC click on the image below.
Hi IIT-J students, In the class I discussed that while creating hosted platforms that bring demand and supply together to transact, entrepreneurs may restrict their roles solely to developing the platform and hosting it, to functioning exclusively as Subject Matter Experts who hire third party software developers, or to acting as both SMEs and software developers. Which option an entrepreneur picks depends on his/her background and other exogeneous and endogenous factors. I agree it may be argued that certain types have inherent disadvantages/disadvantages and that’s up for discussion. Click the image below to download the slides I used in the class. Hope you had some takeaways and points to ponder from this class. I admire your entrepreneurial drive and enthusiasm. I didn’t spend much time on monetizing APIs and if you have questions, please contact me in my Stanford email ID.
Remember our discussion on how call and put volumes are used by some investors to measure sentiments? Investors who buy ‘out-of-the-money’ call options anticipate the underlying stock price to spike. Recenly Softbank bought $4B worth call options on its holdings AMZN and MSFT. Many investor interpret this move as a buy signal on these equities and this may have led to spike in prices. This ends up escalating the valuation of these companies even though the underlying business models don’t justify these levels of valuation. Click on the image below to read an interesting article on this topic.
It’s here finally! It has been my dream that a reputed school in India offer an online undergrad degree in Computer Science and now IIT-M is doing it. Now it’s open to all. Well, almost to all. I wish IIT-M opened it to all, not solely to those who completed 12th grade! I see a big demand for this course and wish IIT-M success. This is going to open doors to so many poor, bright students. Please send me your views to my Stanford email ID.
WeWork was valued at $47 Billion in January 2019. In April 2020, it’s valued at $2.9 Billion. CNBC also reported ” Prior to the IPO filing, the coworking-space company was expected to seek a valuation as high as $100 billion”. Imagine that! As I said valuation is an art and a science. Looks like I should have said “foresic science”! Read on by clicking the image below and send me your views to my Stanford email ID.
Something bizarre happened on April 20th! Yes, some oil futures contracts went negative and it has never happened.
What does a negative oil price mean? Drillers have extracted oil from the ground and they are out of storage capacity. So they would pay wholesale buyers money to take the oil off their hands. Imagine that! We discussed negative interest rates in the class and I explained that it’s like charging you storage/safe-keeping for your money. This is a similar scenario. This can lead to another problem. In our PE and CEO 2030 classes we discussed how when the underlying price of the collateralized assets crash may lead lenders ‘calling the loans’. The Loan Calling is an industry jargon that describes a demand by the lender for loan repayment even though it’s not due. Those companies that used their oil in the ground as a collateral may be receiving Loan Calls since the collateral has lost value due to crash in oil prices. Click the following article and send me your views to my Stanford email ID.
The heading in one of my slides was ‘How to take over a country peacefully?’. My answer was ‘by taking over the vital companies in that country’. I hope you remember that discussion in the PE/CEO 2030 class. The COVID situation may make scuh scenarios a reality. India is addressing this issue. Please read on. As usual send your views to my Stanford email ID.
In our Entrepreneurship class, we discussed how long one can wait to obtain funding and the factors influencing the timing. In the following piece, a founder is discussing how his decision not to prioritize funding cost him heavily. Please read the part about what to and what not to outsource especially. Click on the image below. As usual please send your comments to my Stanford email ID.
Remember our discussion on how low interest rates are PE friendly and PEs use them? This bloomberg opinion piece concluded “Using cheap debt to pay themselves dividends isn’t such a savvy investment model after all”. Please click the image below to read the full article. It addresses so many points we discussed in the class.
Remember in the CEO-2030 class I discussed how companies that save cash for a rainy day can make go bargain hunting? I also discussed why ‘resource allocation and deployment’ must be taught as an elective. Here is an example of how cash comes handy. Click on the URL below.
Private Equity firms have more than 1$ Trillion in cash! This could be the beginning of a once in a lifetime investment opportunity for those in waiting. Remember the discussion in the CEO-2030 class how the 2007 financial crisis opened up opportunities for acquistions and thus a spike in demand for new CEOs? CNBC had an intetresting article on this topic. Please click the image below. Should companies take PE’s money or not? Do they even have an option? What if the PE firms go hostile? I’m interested in what you have to say on this.
Should large corporations assume that governments have their back? I said in the class that when interest rates are low, companies take on debt and often put it to good use. Remember our discussion on overdoing it? Some aspects of what we discussed are addressed in this CNBC article. Click the image below to read further.
These articles in Bloomberg and CNN discuss how the airlines in the US spent their free cash flow to buy back their shares. It raises so many points we discussed in the class. But, did the money really disappear? Where did all the money go? CNN reports “The Big Four Airlines, according to Baldwin’s office, spent $42.5 billion on buybacks between 2014 and 2019. That nearly matches $50 billion the industry is now asking for”. What a coicidence! I Would like to hear from those who disagreed with me. Click on the images below.
In PE class we discussed how PEs can play both a positive and potentially negative role. I couldn’t play this video in full. Please click on the link below to watch it in full.
The slides I used in this presentation can be downloaded from the links below. Please credit appropriate authors when you reuse the content. As usual, if you have questions, please contact me through my Stanford email id.
I have addressed this in detail in the CEO-2030 lecture. Read on!
While at Mumbai recently, I had a conversation with IIM-A alum about Fintech, CEO-2030, Entrepreneurship, and B-school pedagogy.
In this course I plan to cover items 1 through 5. I’m flexible with the level of participation from students in programming exercises in step 5 (ML). Depending on backgrounds and goals, students may choose not to program (why learn programming if you can hire a developer for 10$/Hr?) or actively program in R and/or Python.
0) How much ‘Fin’ and how much ‘Tech’?
1) How banks’ reluctance to innovate/adopt led to Fintech. Banks! You can’t bank on them.
2) The ultra-personalisation of financial services through technology – the driver behind Fintech
3) Case Studies – Peer-to-peer lending, Crypto-currencies, Robo-advisers, online-only digital banks
4) My Money Karma
5) Machine Learning using R (or Python)
Wall street’s stronghold on IPO market is being questioned finally! I have been writing for years about how Wall street’s monopoly is not good for both the listing companies and investors. Looks like Wework’s IPO fiasco is waking up VC firms to consider alternatives.
“Powerful figures are gathering 2,500 miles from Wall Street to redesign one of its oldest and most lucrative businesses — but few from the industry will have a seat at the table. Attendees plan to discuss alternative strategies including direct listings, which replace financial underwriters with cutting-edge computer code.”
Read the Bloomberg article below.
I don’t like it, but the four of the 6 top skills required are IT skills! Please read on. Analytical reasoning is not exclusive to IT and I haven’t considered it as an IT only skill! Others are.
1) Cloud Computing
2) Artificial Intelligence
3) Analytical Reasoning
4) People Management
5) UX Design
6) Mobile Application Development
Click the URL and read on……
You will find the slide deck I used in the class in this blog. I know the class was short in duration and one core issue everyone wanted to discuss was finding a tech co-founder. While this is not easy, it’s not impossible. This requires efforts from your side to meet people outside your network and establish connections. Over time you will meet tech experts who you can trust. But you need to be relentless.
The slide deck I used the class can be downloaded from link shown below.
Please contact me at my Stanford email ID.
I’m an entrepreneur and a researcher. I enjoy bringing my field experience to the classroom.