R.O.L.L Call#16
Reddit IPO Update, Bond Market, IPL streaming...
Reading
Reddit’s IPO - A Sign of Future Tech IPOs
Reddit's shares surged 48% on their first day of trading in New York, indicating renewed investor interest in IPOs of promising yet loss-making companies. The IPO, priced at $34 a share, valued Reddit at over $9 billion, though this is a drop from its 2021 valuation. Advance Publications, Reddit's largest shareholder, stands to gain up to $1.4 billion from the debut. Other major shareholders include Tencent, Fidelity, and OpenAI CEO Sam Altman.
Reddit's success is seen as vital for the IPO market's momentum, however, there are concerns that Reddit would turn into a meme stock as the IPO aims to involve its community by reserving shares for loyal users, but this doesn't guarantee high retail investor engagement.
Reddit reserved shares for users who met specific criteria, similar to offers by Airbnb and Uber. However, the reserved shares represent a small portion of the total offering(8%).
These user offers are seen more as public relations moves rather than significant market influences. While it might mend fences with the community, it's unlikely to turn Reddit into a meme stock due to its relatively small size.
Reddit's share price dipped on its second day of trading, closing 8.8% lower at $46 per share. Despite the decline, it remained above its opening valuation at $7.3 billion. Reddit is seen as a promising investment due to its potential for growth in advertising revenue and AI-related sales.
I do feel bullish about this IPO and some of the other big tech IPO’s planned this year. With impending rate cuts in the fed funds rate, investors will be looking at opportunities to deploy capital. A market correction is priced into the valuations of the IPO making early gains more feasible.
State of the Bond Market
The issuance of U.S. Treasurys has surged, nearly doubling since the pandemic began, reaching a record $23 trillion in 2023, raising concerns among investors on Wall Street.
This rapid growth, combined with new trading regulations, has led to worries about potential instability in the market. Despite robust demand for Treasurys, particularly short-term debt, concerns remain about the ability of banks to absorb regulatory burdens and potential disruptions in markets tied to government debt. Foreign investors, particularly from Japan, continue to hold significant amounts of U.S. Treasurys, despite fluctuations in the dollar's strength. The prospect of inflation and the mounting pile of debt raise questions about the future trajectory of interest rates and long-term bond yields. Regulatory efforts aim to improve market conditions and resilience, but challenges persist in addressing the growing debt and ensuring market stability.
This possible market correction in the bond market is another example to me of how there is a change in investor mindset towards capital investment in securities, and away from fixed income that has been providing higher yields in the last couple of years.
Obsessing
How Reliance is Creating a Streaming Giant in India
The Indian Premier League(IPL) has kicked off another season which has been previously marked by fierce competition between two major broadcasters, Disney Star and Viacom18 (owned by Mukesh Ambani's Reliance Industries). However, on February 29th - Disney and Reliance announced a strategic joint venture to create one of India's leading media companies, aiming to challenge Sony's Zee TV and international streaming platforms like Amazon and Netflix. The deal, valued at US$3 billion, marks a significant decline from Disney's previous valuation of US$15 billion after losing Indian Premier League (IPL) digital rights to Viacom18. If completed, the joint venture will reunite IPL's linear and digital rights, creating a monopoly on top-tier cricket in India across all platforms. With India's large population and reluctance to pay for premium content, the venture aims to offer free live cricket to the one billion mobile connections in India, banking on expanded reach to make advertising more lucrative.
Viacom18's JioCinema recorded 147 million video views during the opening weekend, while Disney Star saw a 29% jump in TV ratings for the opening match. Ambani's strategy with JioCinema focuses on long-term market dominance and attracting advertisers, while Star Sports aims to reach 500 million viewers by leveraging digital features alongside traditional broadcasting. With smartphone penetration at around 460 million, much lower than TV penetration, the popularity of OTT platforms for IPL viewing remains limited.
However, while the IPL generates substantial revenue for the Board of Control for Cricket in India (BCCI) through broadcast rights and sponsorships, stakeholders like media houses are not seeing proportionate returns. Despite the IPL's immense popularity, broadcasters are reportedly facing losses, raising concerns about the sustainability of the business model. The current holders of broadcast rights, Disney STAR and Viacom18, are estimated to be falling short in revenue compared to the substantial amounts they must pay the BCCI each season. This situation is not unique to India, as sports broadcasting rights worldwide often operate as loss leaders, requiring significant investments and time to become profitable. The ongoing joint venture between Walt Disney and Reliance, with stakes in IPL broadcasting, adds complexity to the landscape. Despite uncertainties, the IPL's enduring popularity and potential for innovative monetization strategies ensure its continued relevance in the sports entertainment industry.
It is evident that the strategy that Reliance Industries had utilized previously with its rollout of the Jio sim card which allowed it to garner significant market share in the telecom industry could prove to be successful once again. It begs the question of whether regulators are viewing these pricing strategies as anti-competitive and if so, what can they do to regulate this?
https://swarajyamag.com/business/how-is-jiocinema-capitalising-on-ipls-high-viewership
https://economictimes.indiatimes.com/industry/media/entertainment/media/ambanis-ipl-streaming-playbook-goes-beyond-the-number-fight-versus-disney-star/articleshow/99230331.cms?from=mdr
https://www.sportspromedia.com/news/disney-reliance-star-hotstar-viacom18-streaming-cricket-ipl/
Learning
Regulation with Large Language Models(LLM) in India
India has reversed its recent AI advisory following criticism from local and global entrepreneurs and investors. The Ministry of Electronics and IT issued an updated advisory advising firms not to seek government approval before deploying AI models. Instead, they're encouraged to label under-tested or unreliable models. This revision contrasts with India's prior hands-off approach to AI regulation.
The advisory underscores the need to avoid unlawful content and ensure transparency regarding AI-generated output. While the original advisory required firms to identify message originators, this is no longer mandatory. India usually takes a firm stance on censorship, however, due to the nascency of the technology and huge growth potential - India might fear FOMO if they were to block AI innovation.