Thursday, May 11

Today we saw continued drops in FTR/PR, and at this point there are only two conditions that could make this issue a bad buy – if Frontier Communications folds. It’s continuing to do damage to our unrealized losses, but if that’s the worst it ever does we’re perfectly fine with that. We’re still considering growing that position, but it’s already at the limits of acceptable risk and we’d hate to grow the position and then hear next quarter that they blew all their cashflow from the dividend cuts on faster jets and more Verizon territory they weren’t prepared to handle.

In other misguided spending news – our position in Snap, inc (SNAP) the fresh IPO of the biggest tech IPO in five years took a bit of a hit after earnings last evening. SNAP posted losses of $2.2 billion, a full $2 billion of which was just down to IPO costs – epic level commission and brokerage fees. Another $750 million went to the founder and CEO as an IPO bonus, which I absolutely didn’t like to see. SNAP posts revenue around $150 million per quarter, and while that is expected to grow it really didn’t send a great message to investors about priorities in this newly public company. Unfortunately for us investors quickly sent a message back – SNAP shares tumbled 25% in post market trading and ended today’s session 22% down. Our option position safely limited our exposure, but we lost our absolute maximum (fortunately for us that maximum in this case was $150, but we missed out on what could have been a fantastic short position – many analysts are now saying that the first quarter drop is common among tech IPO’s, but that sounds like some excellent hindsight to us).

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s