Actual Reports Report
Our subjective account on how we ended up covering Actual Reports the way we did.
This is an unplanned publication. We felt that we cannot explain our views in detail on Twitter, so we took it to this channel. We’re working on much more interesting stuff to which you can subscribe here:
We covered Actual Reports direct listing on Funderbeam which resulted in some controversy to the point somebody bothered to create a Twitter account just to troll us.
We guess some people might use the argument that Nugis is also an account for anonymous trolling, so let’s get that out of the way first.
Yes, we’re anonymous.
But the way we treat facts is 100% the same as if our real names were associated with Nugis Aino account.
We created this account because some other coverage of Funderbeam was just plain bad and we didn’t feel like Funderbeam discussion board was the right place for many of the things we say.
We also allow us to use some foul language, but that shouldn’t interfere with the facts. Don’t read us if it offends you to the point you can’t distinguish facts, opinions and jokes. Be happy we don’t use video format, otherwise it would look like this.
Act I - Listing Announcement
Twitter is not good for explaining the context and nuances, so we mostly react to news and discussion board posts. Meaning - there’re times when our posts don’t make sense without reading Funderbeam news feed first.
Our first tweet on Actual Reports was a reaction to reading the listing announcement and the following discussion here: https://www.funderbeam.com/company/actual-reports/update/32705, specifically to the part where they said they sold stake to four individuals at 2,5M market cap and the public listing will take place at 3,5M mcap, and then there was some criticism about that.
We’d very much prefer the initial amount to be fixed, but more on that later. If it’s not fixed, no one can blame you if you sold small amount at 2,5M (share unit price of 7,92€) and more later at 3,5M (share unit price of 11,08€).
We’re claiming that the approach where the public listing price started at 7,92€ and went smoothly to 11,08€ would create much less friction and negative publicity than seen on the discussion board. It’s a hack, using borderline bad practice of direct listing, but completely realistic, as at that moment, it’s a seller’s market.
As a sidenote: in our subjective view - they ended up doing much worse than this.
Also, “the Nugis way” is a hint we’re not completely serious about it, but we feel there’s a tiny opening to change the course of this listing. Imagine how many happy investors they’d have by now. Way more the 29.
We also distance ourselves from the guy on discussion board who is asking which qualifications are needed to be among the 4 individuals (we refer to them as star investors - it’s a bit tongue-in-cheek reference, but fits Twitter as it’s short).
Let’s repeat here - we don’t see anything wrong with getting those “star investors” on board at whatever price the founders please. If the founders think they benefit the company, it could be 1M mcap by us. These are founders shares, nobody is even getting diluted.
Our personal view is that we’re much less hostile than some of the people on discussion board, but that, of course, can be argued either way. If you just look at our profile picture in Twitter, you can’t think we take ourselves very seriously. But we’ll not turn this whole thing into a joke either.
Act II - Before Open
This followed by us reading thru the listing materials and tweeting our understanding of the company:
If they’ve been on the market for such a long time, it’s obvious to ask why they’re still so small. We’ve made those “first impressions” comments about every campaign we’re covered. No big deal.
In the same thread, we also announce our intentions once the trading opens:
Act III - Trading Opens
An hour and 10 minutes (12:10 EE, 9:10 UTC) into trading we tweet:
This is where we get the WTF feeling first time - the announced opening price was 11,08€, yet very obviously nobody is selling at that price. Let us even include some screenshots here:
And then the first trades go like this:
This feels like a broken promise at best (we don’t know what the contracts state). But, imagine being the buyer at 14€ or 16€ when the announced price was 11,08€
If we were among those buying at 14€ we’d consider it as borderline scam.
11,08€ is also the fair market value as explained by CEO:
After a while we notice that 2 trades came it at 12:10 at the announced price of 11,08€ (and one later at 12:14 for the matter of fact):
At this point we have a strong feeling that had there been a couple of big orders waiting at trade open at 11,08€, there would be many more willing buyers. Which is, of course, good for later liquidity to the founders themselves.
So we go on to say:
Regarding “engineered scarcity” - remember, at this point there’s no price discovery whatsoever. The price is dictated by just 3 (7 - 4 star investors) sellers who can easily agree between themselves at what price point they’re selling.
This brings another interesting question - when does “listing” end and the real market start?
Yes, at the start of listing it’s close to impossible to follow these guidelines. This begs a question - when do they come into effect?1
Act IV - The Article
To be honest, given the context explained earlier, we went completely ballistic when we saw Actual Reports posting this media coverage, specifically the article from rikas.geenius.ee:
We immediately knew that none of the public investors from Funderbeam couldn’t have made 60% and had earlier noticed that Funderbeam is using the OTC trades’ price of 7,92€ as last price before open. A quick calculation lead to this:
It’s important to note that we criticize the article, not Actual Reports here. We don’t have any issues with however much the star investors made (or how much SWG made or how much the founders made).
But the article gives a wrong impression like Funderbeam investors made 60%. They didn’t. As we point out next, the first investor actually lost money due to sellers not following up on the promise that the public trading will start at 11,08€:
We don’t care about the amounts, it’s a matter of principle.
We also noticed that after almost 2 trading days, only 1,1% of the public float had traded at 11,08€. That is 1,1% of the listed 20% aka float, not 1,1% of the whole company. That’s 0,22% of the whole company.
By the time we already had a feeling that we might be misunderstood, so we tweeted in the same thread (now we also direct some of the anger towards AR for quoting such an obviously flawed article to the to-be-buyers):
Again, we quite clearly state where the issue is. It’s wrong media coverage and boasting with it to the retail investors - the same people to whom Actual Reports wants to sell their stock - is a sign of massive disrespect.
WE STILL STAND BY THOSE STATEMENTS.
Act V - The Troll
What happens next is interesting. Someone creates new Twitter account and starts not arguing against any of what we said, but randomly praising Actual Reports (and suggesting we wrote all this because we were not among star investors). This account is relatively uninterested in anything else, the only other company it cares to comment on is Brightspark (found it later, so it’s not on the screenshots).
Well, what can we say?
We thought about it for a long time.
We understand the irony that we’re writing anonymously too and sometimes we’re not saying the nicest things and using the nicest words.
But we do our best to serve the facts. If we’re wrong - point it out and we’ll issue a correction. This happened when we discussed revenue and taxable revenue - search “(pöördmaksustamine) (from:nugisaino)” and read the whole thread. Also in case of Change valuation.
Yes, our opinions are sometimes strong and contain strong words.
Yes, there’s probably room for improvement. We also strongly feel that we have improved a lot since starting this coverage.
Many people have commented and made suggestions to us in Twitter direct messages. Feel free to use this option if you think we’ve been unfair or wrong.
We’re reasonable people.
To Actual Reports - welcome to public market. We wish them a lot of liquidity and business success. If the troll account is deleted, we take it as an apology of sorts. We intend to cover them as neutrally as we possibly can.
The Pointless Part
We've said it before and will say it again:
In order for the public market to work, everybody needs to win. And by everybody we mean: Funderbeam, companies and investors.
If things go south, everybody loses. And we consider lost money to be the lesser loss. It’s easier to earn money than trust. We’d prefer to take some loss (or not make any gains) to eroding trust from whole the marketplace.
In case of Actual Reports:
Funderbeam has lost, because there's close to no market
Actual Reports (and SWG) has lost, cause there's (almost) nobody to sell to
Retail investors have lost an opportunity
We have some suggestions, but we don’t have any hope they’ll be implemented - that’s why we call it The Pointless Part.
Funderbeam should negotiate realistic terms for the listing.
We strongly feel there should be initial price and initial amount (of course this doesn't have to be someone's whole stake).
Say 20% of float (in case of AR, 20% of float is 4% of the whole company, which is less than dilution usually) is sold at initial price or fixed ladder (11€-12€-13€).
The sell orders should be present at open.
There should be a defined window during when we’re in “listing mode” and the usual manipulation rules don’t apply. And there should be an end to this window. Say, when we’ve reached 20/30/xx independent investors.
Companies should best think of listing in terms of campaign.
If founders are willing to accept dilution to raise money, make peace with accepting fixed price for fixed amount (which you set!) to create market. There’s a huge difference (in everything, not just your future liquidity) whether you have 1000 investors or 30 investors.
AR could’ve had 100+ investors by now and way better publicity if this listing was managed differently.
Dear retail investor - vote with your feet.
There'll be next opportunity and the one after that.
This is quote from Äripäev. We honestly have no idea what the Singaporean law (under which the marketplace operates) says regarding market manipulation.