The RoCoup: Platform Businesses And The Future Of Entertainment
Roku successfully positioned itself as a key participant connecting consumers and their content in a rapidly evolving entertainment economy.
So successfully, that the $1 billion IPO doubled to well over $2 billion as it freed to trade.
If the bull thesis is Roku's "platform" business, what would the company be worth if it executes, grows platform revenues and becomes profitable?
As a former Wall Street guy, I’d live for moments when the market set itself up to present an almost perfect trade opportunity. Typically, this would happen in the format of a “pairs” trade: you’d see the price of one thing take off, while something very closely related to it – a comparable – would stay stuck, for whatever reason.
Then you’d hit the phones and breathlessly call a customer, and say, “Look, John, I am watching the price of Company A trade through the roof, and Company B is in the same sector and in the same line of business and makes more or less the same money and is, right now, worth half as much.”
If I was lucky, John would either sell me A (and I’d make a commission), or buy some B (and I’d make a commission) or – and this would be ideal – John would simultaneously sell me A and buy some B because regardless of what the “right” price for either company was, since they were so similar, the gap between the two valuations had to close.
So, I would make two commissions, and buy John a fancy dinner.
That said, where am I going with this, and how is it related to Roku (NASDAQ:ROKU)?
Let me come right out and say it: I spend a lot of time at my day job thinking about the future of entertainment, which represents a problem that very few market participants have yet figured out. And right now, the uncertainties in this market are creating a pretty remarkable pair.
Entertainment is simultaneously fragmenting and expanding across multiple devices (your TV, laptop, tablet, phone, and potentially even your watch) and via multiple channels (linear vs. OTT). As legacy participants compete with emerging platforms for dominance, the only thing we know for sure is that not even insiders know how exactly to play their cards.
sources: https://seekingalpha.com/article/4112110-rocoup-platform-businesses-future-entertainment
So successfully, that the $1 billion IPO doubled to well over $2 billion as it freed to trade.
If the bull thesis is Roku's "platform" business, what would the company be worth if it executes, grows platform revenues and becomes profitable?
As a former Wall Street guy, I’d live for moments when the market set itself up to present an almost perfect trade opportunity. Typically, this would happen in the format of a “pairs” trade: you’d see the price of one thing take off, while something very closely related to it – a comparable – would stay stuck, for whatever reason.
Then you’d hit the phones and breathlessly call a customer, and say, “Look, John, I am watching the price of Company A trade through the roof, and Company B is in the same sector and in the same line of business and makes more or less the same money and is, right now, worth half as much.”
If I was lucky, John would either sell me A (and I’d make a commission), or buy some B (and I’d make a commission) or – and this would be ideal – John would simultaneously sell me A and buy some B because regardless of what the “right” price for either company was, since they were so similar, the gap between the two valuations had to close.
So, I would make two commissions, and buy John a fancy dinner.
That said, where am I going with this, and how is it related to Roku (NASDAQ:ROKU)?
Let me come right out and say it: I spend a lot of time at my day job thinking about the future of entertainment, which represents a problem that very few market participants have yet figured out. And right now, the uncertainties in this market are creating a pretty remarkable pair.
Entertainment is simultaneously fragmenting and expanding across multiple devices (your TV, laptop, tablet, phone, and potentially even your watch) and via multiple channels (linear vs. OTT). As legacy participants compete with emerging platforms for dominance, the only thing we know for sure is that not even insiders know how exactly to play their cards.
sources: https://seekingalpha.com/article/4112110-rocoup-platform-businesses-future-entertainment
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