$724m is worth 35x more in the Metaverse

Coal and AI

I love my friends that invest in mining stocks. Lately it’s like they’ve resigned themselves to the New Order of things. Case in point, Peabody (BTU) just reported results. BTU reported $724m of free cash flow on an Enterprise Value of $2.8bn. That’s a 26% return on its Enterprise Value. Not bad for a company sitting on a massive net cash position equivalent to 20% of its market cap!

But my mining buddies are having none of it. “Results were meh” said one. “Thermal was great, met could be better” said the other. Bless.

On the same day, ARM Holdings, the semi-conductor AI AI stock, reported earnings. In a bizarre twist of fate and irony, ARM also reported … $724m of Free Cash Flow! But unlike the measly market cap of BTU, ARM has a market cap of $100 billion!

While my mining brethren are still debating the minutae of the BTU results that may move the stock up or down 2%, the AI-Tech monkeys are all cheering the ARM print unquestionably! The stock is up +30% in the pre-market as we speak, adding $25bn of market cap or the equivalent of 10 BTUs!

Now of course, I’m not questioning that BTU is Coal and ARM is AIAIAIAI, so ARM definitely deserves a much higher multiple. I just wonder if it should be 25x or 100x :/

The one little detail I wanted to throw now as a cherry on the cake is that ARM is 90% owned by Softbank, who bought the business in 2016 for $32bn.

Softbank’s great leader Masayoshi Son had the foresight to only list 10% of ARM in the IPO. This ensured that a) the monkeys couldn’t have enough of what they wanted, b) some hedge funds would be stupid enough to short ARM in expectation of many placings down the line, c) Masaponzi Son gets an expensive currency in the form of ARM paper to do what he wants with it (place it, use it as collateral, burn it on Nasdaq yolo calls like in 2020 etc). Anyway, the structure helps the share price move, lets put it that way. Meanwhile, Elliott keep selling their BTU shares to put the money in sexier stuff like Match.com.

So to my mining friends: Hang in there, it’s not all that bad. To my AI-tech friends: I want to be you.

PS. My friend Andy Constant was on CNBC last night and he delivered one of the finest moments of TV History here: "Tamagotchi goes Mainstream" . And he also put a Tamagotchi in the background. Chapeau Andy … Chapeau !!!

Disclaimer:

This isn’t financial advice. This is the equivalent of reading MAD magazine but for finance but worse: This is the trading blog of a shrub.

Don’t be Stupid. Seriously. How many times do I have to repeat this ….