Episode 136: OpenAI a $500B Ponzi? Canva Breaks Hearts, Latrobe Crunched by ASIC, StubHub IPO, Adir's Worst Airline and is Australia the Red Tape Capital of the World?
The guys discuss Nvidia's $100B OpenAI "investment", Canva's profitability conundrum, Latrobe, StubHub's IPO, Adir's travel troubles, and Australia being the red tape mecca of the world.
The Contrarians catchup
Adir is in Tel Aviv but arrived without his trusty microphone to record the podcast, so used Wolt (“groceries and more in 30 minutes”) to get a new one delivered (which, you’ll find, isn’t the greatest).
Adir recommended ‘The Story of Absolutely Fabulous’ to which Adam responded with silence. “You don’t know that show. Well, that’s going nowhere, that conversation.”
Adam poses the question whether it’s better when a streaming service drops a whole season in one go, or drip feeds each episode.
Adam’s two latest complaints: the paper card you have to fill out when you land on an international flight in Australia (“it’s the first thing you do when you come to this woke nanny state country”) and the process for signing up to a free Kayo account that comes with an AFL membership (“This is a complete wrought by the AFL in association with this Ukrainian Russian billionaire to fleece Australian consumers”).
Adir: “On my travels, I believe I discovered the single worst quality European full service airline.” Listen in to hear who Adir flew with.
Adam quizzes Adir on the top five LLMs by market share. No surprises that ChatGPT is first on the list, but you might be surprised at its market share percentage.
StubHub’s “rubbish” IPO
StubHub’s IPO raised $800M, valuing it at $8.6B, but shares have fallen below issue price. The company shows strong cash flow yet ongoing losses, slow growth, regulatory risks, and stiff competition. With industry expansion and global potential, StubHub remains a speculative investment hinging on live entertainment’s long-term strength.
Adir: “That business is rubbish. It’s been around for 20 plus years and still doesn’t make any profit and I think never has made any profit. How long do you have to wait to make any money as a business like that?”
Adir: “I wonder if I’m wrong about all the negative things I’ve just said about this business.”
Adam: “I don’t think you can say an IPO price is reflective of a business. That’s as reflective on how greedy the banks were or how non-greedy they were. If you’re a vendor or the business, the last thing you want is an IPO pop because it means you’ve undersold what you’re selling the shares for. It’s just such a myth.”
OpenAI a $500B Ponzi?
Nvidia will invest up to $100B in OpenAI, co-building massive AI data centers running on its Rubin GPUs, and helping OpenAI’s valuation rocket to $500B. The staged deal guarantees OpenAI scarce compute, while securing Nvidia long-term demand. Benefits include global scale, faster model releases, and deeper integration, though antitrust scrutiny and energy bottlenecks loom over the partnership.
Adam: “This is Nvidia saying, you buy $100B of our chips and we’ll invest $100B in you. This is not investment, this is vendor financing. And this is exactly what happened in the dot-com bubble when companies were giving heaps of vendor financing to their alleged clients, only to find that these clients were completely dodgy and that just went away and all the revenue went away and these businesses essentially all went away. So this feels like 1999 all over again.”
Adir: “What is occurring with generative AI, I use it every day for business. It is so good and so dramatic that I would pay five or ten times the price to be able to continue using this every day. Every person that’s not doing it, I hope they compete with me because I will shred them”.
Canva breaks hearts
Canva’s long-delayed 2021–22 accounts reveal statutory losses despite public claims of years of profitability. The company posted a $222M loss in 2022 on soaring $962M revenue, though it remains cash flow positive. Using Atlassian-style metrics, Canva cites $3.4B annualised revenue, 240M users, and 27M subscribers ahead of a likely IPO.
Adam: “In my view, you can’t say you’re profitable and ignore a bunch of employment-related costs. You can’t just say, “Oh, I’m gonna ignore 50% of my employment costs. I’m profitable. Look over there.” That’s not profitable. It’s just a lie, is the problem. And they don’t need to lie. It’s a good enough business without it.”
Myer shares plunge after profit slump
Myer’s annual profit slumped 28.6% to $36.8M, sending shares down 28% in one session. Rising costs, weak sales, and intense competition pressure margins. Despite digital investments and cost cuts, growth remains uncertain. Investor confidence has plunged, with Myer’s holiday season performance seen as pivotal for restoring stability and credibility.
Adir: “I don’t think Myer’s going to go broke. If you wanna make a bet on Solomon Lew succeeding again, then you can bet on this. Either you believe that he can do something magical with it, because he is the guy that has demonstrated a lot of magic in the past, or you don’t, but that’s the five-year bet that you’re making on this.”
Adam: “I’m not sure why they’re wasting their time on a business that basically has no powers left. I think department stores around the world have the same issue, only a handful manage to still do well. But it’s an incredibly hard business because they’ve lost all their scale economies.”
Latrobe crunched by ASIC
ASIC lifted its stop order on La Trobe’s $12B funds after the lender revised its Target Market Determination (TMD). Key changes cut allowable investor allocations, broadened exclusions from “investible assets,” and added distribution safeguards. The dispute highlights ASIC’s new powers under the design and distribution regime, prompting industry-wide scrutiny of fund documents.
Adam: “These financial businesses trade on trust. When you lose the trust of depositors, you have what’s called a run on the bank. ASIC almost caused a run on the bank here. And they actually admitted the shock action was intended to make an example out of Latrobe.”
Adir: “I just cannot understand this idea that says we’re going to allocate this group of investments and not let regular people get access to them because they’re too so-called risky but a lot of them are these great opportunities. But there’s this other group of stuff where we’re going to let them invest and there’s no evidence that this other group is any less risky. I just hate the whole idea of restricting regular people and treating them like dummies and not letting them invest in a whole series of good asset classes.”
Five other stories worth following:
Katalyst won a $30M NASA contract to push the aging SWIFT Observatory deeper into space, preventing its fiery demise and extending its utility for docking experiments.
Mindstate Design Labs developed an AI-designed psychedelic aiming to treat mental health without hallucinogenic trips. Early tests show no serious side effects, but FDA approval remains distant.
Electronic Arts, valued at $42B, may go private in a record $50B leveraged buyout backed by Saudi PIF, Silver Lake, and Affinity Partners, prioritising live-service revenues.
Walmart CEO Doug McMillon says AI will reshape every job while maintaining 2.1M employees. Corporate roles hit first, customer-facing roles later, as “workslop” productivity issues emerge. Casual boys are back, baby.
Europe beat Team USA 15–13 in the Ryder Cup, despite hostile fans. US players face criticism over payouts, while Luke Donald secured consecutive captain victories.