Friday, July 30, 2021

Which of the FAANGs stocks are most vulnerable to a hostile take-over?

Destroying stuff is good for profits

Predatory Venture Capital firms swooping in, buying controlling interest in a viable credit-worthy firm, borrowing to the hilt against that firm's business, transferring those funds to the mother-ship and then jettisoning the husk of the formerly viable company is a key characteristic of our "financialized" economy.

Our economy doesn't invent and make stuff any more. We shuffle numbers between accounts.

So let's stop screwing around with the penny-ante companies and go BIG. Hostile take-overs of these huge companies would have been unthinkable until the Fed pumped the economy to the bursting point with liquidity. That money is analogous to packs of wolves looking for places to go.

The key attribute for a good take-over candidate are sticky customers, solid profits and a business model that is not critically dependent on a very small cadre of people.

My list, in order of preference, follows:

Apple

Very sticky customers. They would buy Apple-branded etch-a-sketch pads for $2000. Music streaming and cloud business is "sticky". Hardware can be farmed out and rebadged.

Amazon

Sticky because of convenience. One-stop-shopping. Business model is inherently simple enough that loss of some personnel will not scuttle the business.

Facebook

Sticky because of penetration with businesses and Big-Data that can be mined for the next decade even if they never gain another customer.

Google (Alphabet)

Business model is like a middle-Eastern bazaar. Maybe more potential to part-out the businesses than the others but the complexity makes Google(Alphabet) less desirable than the others.

Netflix

Too many competitors. Do not touch with a ten-terrabyte pole.

Tesla

All sizzle. No steak. Dies if Musk walks.

8 comments:

  1. I would make a couple notes on these companies:
    - Amazon is now a software company that operates a retail business at a loss. Shutting down the retail side would hurt their reputation but make an immediate impact on the bottom line.
    - Facebook is set up with a "poison pill" feature that ensures Mark Z always maintains a controlling share. It can't be subject to a hostile take over unless he changes. Also, there are other companies with large stashes of data (see Google for a well known example), so I don't think that asset is as unique as it may seem.

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    1. Given the activist nature of courts, I assume that if the corporate raiders had last names like Pelosi, Biden, Feinstein and Romney that the poison-pills would be nullified.

      For the good of the country, of course.

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    2. I heard he has information that would lead to the imprisonment of Hillary Clinton.

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    3. You known, Contrarian, that is a joke for most people but is entirely likely to be true for Zuck.

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    4. Good points. The Courts change law when convenient, so it could happen anywhere, anytime... That is when having a low profile matters, and one thing Zuck doesn't have is a low profile!

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  2. I won't play in those games. I'm too little a fish...

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  3. I thought a takeover target had a big cash stash and decent bond rating, and maybe some cashflow, all of which the raiders can loot. Doesn't matter whether the business is even viable, since the raiders are going to loot it and run.

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    Replies
    1. Last I remember, Apple was sitting on lots of cash. Wouldn't be surprised if Amazon is also.

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