Matt Levine and CoreWeave (separately)

Matt Levine is the finance-nerd-famous Bloomberg writer that writes “Money Stuff” and he recently reminded me how niche this world of late-stage private companies and secondaries is. Apparently Yahoo Finance just partnered with Forge to show some not very good charts of private companies and that turned into his main headline. First of all, Notice.co has much better charts on private companies and they have been available for over a year (maybe even 2 years). Second, Matt concludes with something I strongly disagree with.

Details on that and some thoughts on why public market guys seem to be missing the boat.

Also, CoreWeave went public and everyone is shitting on them for having funky financials so I have to say something.

Matt’s conclusion that seems way off to me:

“If you are a private company, is this annoying? It used to be that large private companies’ stocks traded on secondary platforms, sure, but their stock prices were not readily available and nicely charted. Investors in private companies might keep track of those prices, and everyone else might occasionally read news articles mentioning things like “SpaceX shares recently traded on private secondary markets at prices implying a $408 billion valuation.” But now there is a widely available public version of that; any time you like, you can go look at a SpaceX stock chart. Does the chart reflect SpaceX’s actual market capitalization? Ehh, one could quibble, but the important point here is that it is a line on your computer screen. If one reason to stay private is to avoid the public pressure and spectacle of a stock price — to avoid focusing too much on day-to-day fluctuations in the stock price — then this undermines that case. Not that Stripe has much in the way of day-to-day fluctuations, yet.”

Nice to see “quibble” get used. I do indeed quibble. Not just with this bit about the chart representing the SpaceX market cap, but with the idea that this “line on your computer screen” equating to anything close to the “public pressure and spectacle of a stock price.”

SpaceX obviously (I thought) doesn’t care about what Yahoo Finance has to say about the market cap.

They don’t care because the big shareholders know what the actual market cap is and/or what their opinion of what the market cap is based off of their own data sources. Including the company itself and the tenders they run twice a year.

The core difference that Matt seems to miss here is that the “line on your computer screen” only matters if the meaningful shareholders pay attention to it. This is also true in public markets - the lines are just much more reliable most of the time and big shareholders do tend to pay attention to it.

The broader thought that this seems to bring up for me is:

Public market investors seem to feel entitled to buying and selling whatever they want whenever they want and fuck you if you don’t like it Mr. Founder.

This is both the beauty and the demise of public markets.

It’s great for investors, but it very heavily tilts the balance of power away from founders.

This is the type of baked in entitlement that is so pervasive in public markets that even very smart people - like Matt - might think that this line on their computer screen would mean something to SpaceX management.

In a world where there’s a lot more capital than there is good companies this will never be attractive.

The point of being private isn’t to be sneaky about how much you may or may not be worth.

The point is to know who owns noteworthy amounts of your company.

This isn’t about keeping people captive or not having to perform. It’s about not having the door to your house wide open for swarms of people you may or may not know to walk in and out as they see fit. Private companies keep the door closed and locked the same anyone would with their own house - it’s not that you can’t be let in - you just have to knock and ask nicely to be let in.

Bit of an awkward day. We’ve had a front row seat to a lot of CoreWeave’s growth and it’s an important IPO for tech generally. Not the cleanest debut, but I think a few things are worth saying:

“With money, it’s never as good or as bad as you think.” - The Psychology of Money (which I read recently because I read Shogun Part 1 before that and felt the need to be “productive”)

We saw people getting a bit too excited in private markets and now we’re seeing people get a bit too bearish in publics. CoreWeave is good at compute. The world needs more compute.

Semianalysis knows more about this than me (and than you) and they wrote about it here.

This business is very complicated financially - maybe overly so - but they also just scaled from $15M to $2B of revenue in 2 years.

What you thought the kid who grew 2 feet in 12 months was going to be coordinated? Come on. You know better.

I’m not saying it’s an excuse and I agree that there’s a lot for them to execute on still, but they have met unprecedented demand for compute with unprecedented solutions (both physically and financially).

Nvidia and Microsoft are way too rich to run an actual ponzi. They just want more compute yesterday.

Microsoft is a massive customer of CoreWeave. Nvidia sells CoreWeave a ton of GPUs and also invests in the company. I think it’s fair to scratch your head about it a bit.

However, you think Jensen or Satya give a hoot about making a buck on a $20B company? It’s a rounding error. CoreWeave is literally 1/100th the size of either one.

The point is that I don’t think there’s some secret plan to create fake market value. They just want more compute to exist in the world and supporting CoreWeave has been a great way to do that.

End of rant.

Talk soon,
Adam