Episode 223: Xero Gets Whacked, 4DMedical’s Meme Stock Moment, SEN Circles ARN, Uber's Loyalty Lock Up, and Adam’s Safari Business Lessons
Kindle funnels, Uber One, Marxism, social democracy, Xero’s CEO share sale, SEN circling ARN, Jackie O, 4DMedical, Pro Medicus comparisons and meme stock valuations.
H3: The Contrarians catchup
Adam is recording from a private game reserve in South Africa. He witnessed a rare lion attack on a water buffalo, followed by a thundering herd of 30 buffaloes arriving to rescue their mate. The guide said lions succeed only 20% of the time on buffalo.
England vs Argentina at the World Cup was a case study in not holding a lead. Thomas Tuchel switched to a defensive game at 1-0 up and paid the price. Adam: “Instead of trying to continue to play and potentially getting 2-0 up, they pulled all their attacking players off. And basically from that point, Argentina were always going to get back into it.”
Adam tested his LuxPlus+ subscription churn data against benchmarks from the streaming industry. Netflix real churn is around 25-30%, Peacock at the other extreme is around 70%. LuxPlus+ churn has dropped to the “high 30s,” which Adam called “surprisingly low given we’re not a high frequency purchase like Amazon or Uber.”
The pod debated the difference between a social democrat and a democratic socialist, in the context of Jim Chalmers’ budget and New York mayoral candidate Mamdani. Adir: “A social democrat, they are a Democrat, but their flavor of Democrat is socialist. What that means is that they fundamentally believe that society should be capitalist. They just want to apply a whole lot of socialist elements to it. A democratic socialist is a socialist, and their version of socialism is democratic. They want to get to socialism.” His verdict on Chalmers: “He’s not trying to dismantle capitalism. What he’s trying to do is stop wealth compounding for people, which is very bad for capitalism and I think might break the system.”
Adam’s quiz segment featured his kids testing the pod on collective animal nouns from the safari. Key results: a group of giraffes is a journey, crows are a murder (Mike got it), warthogs are a sounder, and zebras are a dazzle or a harem.
H3: Xero CEO sells every share she has
Xero CEO Sukhinder Singh Cassidy sold her entire holding of 30,000 shares, citing tax obligations, one month after selling more than $4M worth of stock for the same reason. In five weeks she sold $6.2M of shares. Chairman David Thodey is simultaneously trying to rebase her pay package to bring it closer to Silicon Valley benchmarks. Xero shares are down 61% in the past year, back to 2019 levels.
Adam: “What’s most sickening about all this is they’ve called Singh Cassidy some sort of incredible Silicon Valley CEO. This was a really well-run business. They had some incredible Australian leaders. They put this blow-in from Silicon Valley and said, oh we’ve got to pay her Silicon Valley amounts because she’s this incredible leader. There’s no real evidence that she ever has been an incredible leader. They’ve brought in this North American so-called superstar who’s proven to be the exact opposite.”
Adir: “I cannot think of one positive thing to say about this situation. The time to make a call on the strategy is now. We think it sucks, it was a mistake. If that’s your view, make the call and then decide whether to keep or fire the CEO based on that outcome. If the answer is we think the strategy is still good, then keep swimming. Don’t sell your shares. Don’t ask for more. Like, do that.”
Adir: “It feels like the board is asking the market to untether CEO compensation from a strategy they believe in. Those two things cannot be untethered.”
Adir: “One way or the other she’s not going to be in this seat in two years.” Adam: “I’d be shocked.”
Adam: “This business actually makes money. They just didn’t need to be stuffed around with. Just keep making more money and grow incrementally is what they should have done.”
Adir: “The best thing that can happen to them, probably not for shareholders today, is the Atlassian slide, let’s call it. Enough value is lost that the most intelligent thing to do with the business becomes run it as a really great profit machine with some growth. And I think Xero needs to go on the same journey so that they can actually do what’s best for the long term of this business, and that is throwing off big amounts of cash.”
H3: ARN vs SEG: the mouse eyes the elephant
Sports Entertainment Group (SEG), owner of radio station SEN, has reportedly bought 2% of ARN Media and is running the rule over the company. ARN owns 58 radio stations and the iHeart digital platform and was valued at $1.5B a decade ago. Its share price has collapsed to 25 cents, valuing it at just $76M. ARN is still fighting an $82M lawsuit from Jackie O. SEG, meanwhile, has rebounded from 18c in 2023 to 36c, is guiding EBITDA of $16-18M, and on a net profit basis is actually more profitable than ARN.
Adir: “I always wondered whether the attacks on Hutchy a few years ago were based on reality or wishful thinking by media rivals. I think what Hutchy has managed to do is figure out a way to run a very profitable small niche media business. And it’s another example of a founder outperforming hired executives.”
Adam: “Radio is never going to get valuations of mainstream media again. Everything is niche media. There’s kind of no mainstream media business except the main social media players now.”
Adam: “Hutchy is an old school media proprietor who understands his clients and wants his clients to succeed. I find that other radio stations just care about how do we maximise, how do we get the most out of our clients, rather than how do we get our clients a great result.”
On Jackie O’s lawsuit:
Adir: “I would rather be ARN than Jackie O today. I think there’s a lot of question marks over what that contract is. Kyle did not make her life easier, both on air, obviously, but also by settling in the way that he did. A judge is probably gonna be reluctant to bankrupt a company full of employees to enforce her contract.”
Adir: “She thought that she had $100M coming down the pipe over the next 10 years, and she has to emotionally let go of that before she can settle. Sometimes people do things to you that you can’t do anything about. You just have to survive it and go on.”
H3: A $2B medical company doing $6M in revenue
4DMedical, a lung imaging software company that came out of university research dating back to 2005, is currently valued at $2B on the ASX, down from $3B, and is trading at 250-400 times its $6M annual revenue. Adir applied his medical background to do a deep technical critique of its core product, CTVQ, which claims to replace traditional nuclear VQ scans using standard CT imaging.
Adir: “No one’s ever heard of this company that I spoke to in the emergency or respiratory field. And the VQ scanning that’s non-urgent, from what I’ve heard, it’s actually on the decline, not the increase. In a real emergency situation when this is real life and death, sudden death pulmonary embolus, I’m going to take whatever the gold standard is that lets me visualise if there’s a pulmonary embolus, not tells me that there’s a very high probability that there’s a pulmonary embolus, which I think is what this is going to come out as.”
Adir: “This is trading on, depending on what you use, 250 to 400 times revenue on $6M revenue, not the $250M revenue that Pro Medicus is on. And Pro Medicus is like a 20-year-old proven business. I’m very skeptical that in the next five years this business is going to be able to generate the kind of revenue and growth that’s going to justify this kind of valuation.”
Adir: “If part of your portfolio is binary investments that are VC, venture capital-like in character, then sure, you can invest in this. But you should be aware that you’re going to have the hell taxed out of you under the new tax system for any company that generates this kind of return, because the higher the return, the higher the tax rate.”
Adam: “This is a casino, this is a full casino now. It’s not a joke. And it makes a mockery of the entire market when stuff like this gets valued ridiculous amounts like $2B. I think best case this 4D business drops 90%. That’s probably my best case. More likely drops like 99%.”
Adir: “This is like betting on a roulette wheel, picking one number. And if it lands on that number, instead of getting 35 times your money, you get two to one. That’s what this bet is like to me.”
H3: Five other stories worth following:
FIFA is set to announce record $15B World Cup revenue, far above its $11B forecast, boosted by dynamic ticket pricing and secondary-market fees, as final tickets reached a median price of $10,835.
Christopher Nolan’s The Odyssey grossed $264.1M worldwide in its opening weekend, including $124.5M in the US alone, recouping its $250M budget and strongly validating Universal’s decision to grant the acclaimed director near-total creative autonomy.
Beijing startup Moonshot AI unveiled Kimi K3, which reportedly beat leading Anthropic and OpenAI models in independent tests while costing 40% less, sharply intensifying questions about US valuations, infrastructure spending, and global technological leadership.
London startup Popsa uses hundreds of AI models to organise existing photo libraries, remove duplicates, write captions, and surface forgotten memories, targeting the estimated 70% of thousands of annual photos that people never revisit.
Protein demand is driving startups to create powders from microbes, air, water, and renewable energy. Companies including Air Protein and Solar Foods promise amino acids using less land and water, though scalability remains uncertain.