Watch on YouTube above, or wherever you get your podcasts (Spotify link below).
The Contrarians catchup
Adir wore his DEF CON t-shirt into the episode. Getting it required blending into a six-hour merch queue at the world’s largest hacker conference. His hack: join the queue four hours in and pretend you’ve been waiting. “I inadvertently just blended into the line. And that’s how I was able to get the t-shirt.”
Tanssu update: the luggage brand had a strong first week with no marketing at all. The TC20 promo code (free $290 tote with any purchase) sold out almost instantly. Adir has reactivated it: go to tanssu.com and use code TC20 to get the tote free with your case. The first run of 1,000 individually numbered cases is selling fast.
GTA 6 is creating an all-time high share price of US$44B for parent company Take-Two Interactive. Will revealed he went to school with founders Sam and Dan Houser. “Were they stealing a lot of cars at school?” Adir asked. Will: “Uh, mostly prostitution (JOKE!).”
A Nobel Prize laureate called Leo Esaki, 101 years old and the world’s oldest living Nobel prize winner, gave five rules for succeeding in any field: don’t allow yourself to be trapped by your past experiences, don’t become overly attached to any one authority in your field, don’t hold on to what you don’t need, don’t avoid confrontation, and don’t forget your spirit of childhood curiosity.
Eureka Pet Co, a private Australian business doing $16M in revenue and losing $2.8M, leaked a Street Talk piece projecting $79M revenue and $10M EBITDA by FY28, seemingly trying to attract a Lyka-type buyer at a $40M valuation. Adam: “I presume there was probably not much news that day and they need to write something.” Adir: “I’d be very cynical about it. I mean, I’d also take $40M for that business on the sell side.”
Australia’s greatest hardware miss
Amazon acquired Zoox, the autonomous vehicle startup co-founded by Australian Tim Kentley-Klay, for US$1.2B in June 2020. The company had raised approximately US$1B beforehand from Grok Ventures, Blackbird, Lux Capital and others, leaving essentially nothing for the founder. Today, Adir believes Zoox is worth $100B+, compared to Waymo’s US$180B valuation, based on superior vehicle design and a more advanced product.
Adir: “So Australian VC could have had a better than Canva outcome if they would have been prepared to continue. Even better, this business will continue to get better and Canva continues to get worse. So we’re talking like multiples better than Canva actually.”
Adam: “A real tragedy for the Australian ecosystem as well. Could have been an Australian leader in AV and we’ve got no one now. We don’t even have AVs in the country other than Tesla.”
Adir: “What separates a momentum investor that just backs whatever everyone else is backing, and an investor that makes a genuine bet on a thesis they believe in, like autonomous cars, is that they know that whatever time horizon anyone thought was the case at the start is going to be out by between two and ten times. And so if they believe it, they have to keep backing it. And I think this was a huge loss for Australian investment.”
Adir: “Hardware is making a comeback as an investment class and as an innovation catapult. I think we’re entering a phase of an era of really a lot of hardware stuff.”
The turnaround case at Canva gets harder
Following the growth downgrade announced last episode, Canva’s customer community has turned sharply. Adam wrote a LinkedIn article calling for the founders to sell the business and found the overwhelming comment theme was “I used to be a subscriber and now I just use other stuff.” The founders appear trapped: unable to sell at prior valuations, unable to IPO, and watching the product narrative collapse.
Adam: “I don’t recall seeing a company being turned on as quickly as this ever. So fast.”
Adam: “The counterposition that got counter-positioned is the problem. That’s what happened. They used to be the cool counter positioning Adobe. Adobe is this big corporate thing. We’re the cool young upstart. We’re so much better, we’re really cheap. It’s free for most people. And that narrative, they just got counter-positioned.”
Adir: “The time to sell is when people are buying. I know that sounds ridiculous, but it’s the time that people least want to sell, generally speaking. If you think the price is X and people are buying, most people have got this loss aversion of like, if I sell now it goes to 5X, I’ll be a moron. But the problem now is it’s very hard to sell and you’re not going to be selling at X now. I suspect you’ll be selling at one-third X if you want to get out of this business.”
Adir: “This would be a terrible moment for Canva inside the company, especially for the founders. Like they’ve spent their whole lives from day dot. But they’re such good operators. They were one of the most loved software businesses on planet Earth. Absolutely. Everyone loved them. And now everyone’s turned on them. Yeah. It’s happening.”
On the bull case:
Adam: “Get the AI cost to close to nothing in their own models. That’s the bull view. And they effectively have another freemium model again that competes really well with Claude Design. Claude Design isn’t the panacea that some people might think it is.”
71% vote against remuneration, board and CEO must go
Shareholders delivered a 71% against vote on Xero’s non-binding remuneration report at the AGM, up from 49% the prior year. Despite this, the board increased CEO Sukhinder Singh Cassidy’s pay from US$15M to US$18M. One shareholder captured the mood at the AGM: “I do not understand why on earth would the chief executive sell all her shares if she believes the company is doing well.”
Adir: “The argument is: if the share price was going well, you wouldn’t care. I mean, I think that is a good summary of business in general. When you’re making money for us, we’re broadly happy. When things are going badly, and then you go and pay the person who’s making them go badly a huge amount of money, that makes us sad.”
Adam: “Not only are they paying her too much, they’ve actually just said to the shareholder, stuff you, we’re gonna give her even more money in spite of bad performance.”
Adir: “The worst thing about this from a shareholder point of view is the REM Committee Chair is literally gaslighting the shareholder base. And so they’ve had two strikes. An Australian company would have to get rid of the whole board and have them re-elect. They have no consequences. None. Zero.”
Adam: “It’s a pretty easy solution here. You reduce her salary, you don’t increase it. And if she leaves, let her leave. Like I don’t think anybody’s gonna be disappointed when this person, who’s really done only a disastrous acquisition, leaves.”
On whether Thodey should stay:
Adir: “If I was David, I’d be looking for a very good-looking exit out of this situation. He’s a guy whose personality and ethics are very different to what’s going on here. And of all the people you might meet in upper echelons of corporate Australia, he cares at least as much about Australia and the outcomes for Australia as anyone I’ve ever met. So I just think this is not the right place for him. Is he too nice for this role? Is he being played by this Singh Cassidy character?”
A rabbit out of a hat
Corporate Travel Management announced a US$175M lifeline from PEP Credit, Blackstone’s credit arm, carrying a 4% fee on market cap plus high interest, buying the company enough runway to avoid liquidation. Free cash of only $100M remains after the raise. Despite the chaos, the company is still alive, audited accounts have finally been released, and the new CEO and CFO have been credited for keeping the business breathing.
Adam: “Credit to the team of CTM for keeping it alive. The fact that they’re not dead is a huge win. And so why do you think I owe you a lunch? I certainly can’t claim victory here. This is a credit to the team of CTM, and this is a rabbit out of the hat if I’ve ever seen one.”
Adir: “I did not know how this would play out. I was just confident that too many people had too much of a vested interest. Being early is as bad as being wrong.”
Adam: “For every dollar of TTV, this business makes half a cent of profit. Even for a travel business, that’s pretty bad. Look at Flight Centre. They’re about two percent net profit margin. So they’re four times better than these guys.”
Adir: “If somehow CTM turns around and is a billion-dollar business over a five year period, they could double their money on this investment. It’s equity-like returns. The downside risk feels somewhat mitigated by the underlying asset that could be sold.”
Five other stories worth following:
OpenAI plans to end Cursor’s access to its models after SpaceX acquired the coding agent, citing concerns over terms compliance. The decision escalates tensions between Sam Altman and Elon Musk, who dismissed the move.
Iceland narrowly voted against restarting European Union membership talks, with opponents fearing threats to the country’s valuable fishing industry. Supporters argued membership could strengthen the economy and geopolitical stability, while boosting Europe’s Arctic presence.
NASA launched the $4.3B Nancy Grace Roman Space Telescope, whose vast field of view will study dark energy and Earth-like planets far faster than Hubble. Congress preserved the ambitious mission after proposed cancellation.
French startup ArcSpace raised funding to develop an electron-beam system for repairing satellites in orbit. Its technology aims to cut, join, and weld spacecraft, extending satellite lifespans and reducing the amount of space junk.
Generation Lab is expanding its study of a blood-rejuvenation treatment to more than 100 people. The two-injection therapy aims to mimic blood exchange and slow aging, with participants, including founder Irina Conboy, reporting benefits.