Hacker News Reader

Comment by rdslw | Hacker News Reader

I don't buy "creating a billion-dollar business".

Ive read a Bloomberg story on the IPO and saw there two hilarious sequences "MongoDB has 4,300 paying customers. MongoDB employs 820 people in 29 offices" - that does not compute (for me) so I started analyzing their financial report (btw funny is nobody in whole HN discussion quoted numbers from the report so far, but a lot of 'im buying their stock' talks here).

In the report, scroll to the bottom where they put some cream: they show for last year 91m rev from subscriptions plus 10m from services. While at the same time they show operating LOSS of 85 millions (due to cost, people, marketing, sales, services etc). Khem khem, I know they are growing (holy world) but no, that does not compute.

Of course it is just mine opinion, and looking on the IPO results, rather unpopular one :) but I will stand by it. Especially in next 3 years. Caveat emptor.

I will short them soon.

View on HN

Make sure to look at the revenue growth rate before you short (or encourage HN to do so). What happens if that growth rate continues for another year or two, and they have a standard growth multiple? You’ll lose your shirt.

It seems like you’re trying to value the company in a manner that doesn’t make sense for this stage of a company, and you could lose a hell of a lot of money.

For the uninitiated in the stock market: you shouldn’t really be shorting anything, especially not growth stocks, and abso-freaking-lutely not immediately following an IPO.

So long as you're making a loss, there's a lot of ways to "creatively" grow revenue. In the limit case (which would be fraud), you and I can just trade out expensive invoices, declaring each as a loss. This puts a lot of revenue on our books, with no value exchanged.

Mongo don't have to be committing fraud, of course. They could be doing any number of actual business activities that make legitimate trades --- but trades optimised at revenue growth, not profitability.

The major metric for companies used to be profit growth. When companies were optimising for that, it was smart to look at revenue growth as a leading indicator. But Goodhart's law ruins everything: now companies know to optimise for revenue growth, and so its value as a metric is much diminished.

Companies optimize for future cashflow, because that’s how value is created.

Mongo's current cashflow is negative, and the trend is increasingly negative.

I had a look at their prospectus, which describes the bulk of their revenue as subscriptions. Subscriptions sound like good unit economics. It's instructive to compare their pitch to investors to the pitch they make their customers: http://s3.amazonaws.com/info-mongodb-com/TCO_MongoDB_vs._Ora...

When Mongo talk to their customers, they describe the license cost as $0 --- they fold that into support. That sounds more like a service.

In other words: customer fires $100k of staff, pays Mongo $80k in "subscription", Mongo hires $120k of staff, which they tally up as "customer success". There's no expense category for support in their prospectus, so clearly the support personnel are filed under "sales and marketing".

It's the same old story. They're just selling $1 bills for $0.80 a piece.

How can one short it efficiently?

I mean this in the kindest way possible: If you don’t know the answer to that question, you shouldn’t be shorting anything. Especially not at IPO.

Outside the US, you can do OTC derivatives via Spread Betting. Eg, give me/take from me a pound for every point this stock moves for/against my bet. Most spread betting providers in the UK carry NASDAQ stocks.

Note the downside is unlimited when you short via spread betting. Eg, there's no maximum value of a stock, so you might get proper f'd.

The downside is not unlimited when purchasing put options.

It will be optionable soon. Buy out of money puts.

You could buy the stock of a competitor if you can't get any stock to borrow for short sale.

What's their main competitor? Oracle?

Most online brokers don't have lending inventory available yet. TD won't let me short.

Of course they don't. Settlement time is T+3. Unless you are MM, until the first IPO + 3 days no shares can be located. At T+3 it will go into hard to borrow list.

TIL

you have to buy with borrowed money, sell the stock and then buy the same amount at a lower price to make money shorting, I do not believe you will short them or have the capital to make significant money doing so but it is interesting to see the value you place on your analysis

Reply on news.ycombinator.com