Odd Lots Howard Lindzon on What’s Really Going on in the Tech Plunge
Feb 17, 2022
Howard Lindzon, a general partner at Social Leverage and co-founder of StockTwits, dives into the recent turmoil in the tech market. He explains why growth stocks, including the once-mighty SPACs, have plummeted and discusses the implications of rising interest rates on both public and private investments. Lindzon highlights the contrasting dynamics between private investment flows and the public market downturn. He also emphasizes the need for responsible investing amidst the evolving venture capital landscape and the challenges new investors face.
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Tech Plunge Factors
- Tech stocks experienced a predicted pullback, influenced by factors like the WeWork-SoftBank implosion and excessive supply.
- The current environment involves a race to index private markets and overvaluation in tech, exacerbated by COVID-19's impact.
Impact of Rising Rates
- Rising interest rates negatively impact tech stocks by lowering discounted cash flows in valuation models.
- This effect is amplified by readily updated spreadsheets and analyst adjustments, leading to rapid valuation changes.
SoftBank's Investment Strategy
- Howard Lindzon recounts SoftBank's aggressive investment approach with Wag, offering substantial capital with ultimatums, impacting early investors.
- This strategy, now copied by others, creates binary outcomes for seed investors, limiting their options to IPO or zero.