Good morning!

USA! USA! USA!

Now how awesome was that win vs. Iran! We made it to the knockout stage and now we are playing with house money and can just enjoy the ride. 

Check out this beautiful arial shot of the first USA goal breaking down just how great the build up was and how much of a team goal it was. 

Also, over the next few weeks over the holiday season, we will be moving back from two newsletters a week to one! You can expect next week's edition to be a little bit longer and a little bit deeper. Let me know what you think. Therefore, see you all on Friday!

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THE CORE FOUR

For a newsletter that breaks down the intersection between the public and private markets, there is one name that should probably come up more often but does not: Elon. This is a cognizant decision as I often feel that a lot of the Elon stuff is low hanging fruit (with all due respect to people that cover it) and it is everywhere. I like to be unique and a little out of the box, but this chart is awesome. 

As you likely know, Elon went after Apple earlier this week criticizing their "walled garden" of the App Store. Although Tim Cook and Elon met a couple days ago and fixed up their issues, Twitter was not the first company to come at Apple (Epic Games & Spotify). 

So just how much money does Apple make from their 15-30% commission fee?

In 2021, that number was between $13B-$26B. For reference, Apple did ~$111B in FCF in 2021 (yes you read that right) so they would have plenty of profits even if the company were forced by either companies or regulators to lower/rid of the commission fee. 

However, my perspective, the fee isn't going anywhere for a long time. 

Paul Cerro of Cedar Grove Capital has quickly become one of my favorite Twitter follows. Earlier this week, Paul brought back a write up from August he did on Build-A-Bear and how the stock was significantly undervalued. Yes Build-A-Bear is publicly traded! 

Since Paul's write up, Build-A-Bear has seen their stock increase by over 30%! What did Paul see? 

• Misunderstood business model and evolution away from its "foot traffic" dependent models
• New store layouts and rise of vending machines that produced more $$$ than traditional store models
• Shareholder activism pushing the company to get more aggressive with share repurchases and returning capital 

You can check out the full piece here about the $350M company that has been on a tear! 

One of my core theses regarding the stock market is that so many times the best opportunities are in the overlooked, misunderstood names and so often not the bluechip names/stocks. Build-A-Bear is a perfect example of this. 

The a16z FinTech team released an excellent article breaking down the impact that a rising rate environment has on various FinTech companies and the new found revenue opportunities that come along with it. 

Now that the federal funds rate is 3.8%, this has opened a significant opportunity for FinTech companies to play the float. 

For example, Robinhood as of the last quarter had $3.8B of customer assets in cash which enabled them to earn $128M in Net Interest Income representing 35% of total revenue. This is a stark contrast to the $63M in Q3 2021 which represented 17% of total revenue. 

What the a16z team points out is that many FinTech companies are actually using this new found income as a way to increase their spend on CAC.

For example, many Neo-bank/FinTech companies have been increasing the amount of APY that they are offering to customers for bringing cash into their account. I have seen a lot of advertisements from Robinhood offering 3.75% APY and now we know how they can pull this off. And no. It is not just because they are being nice. 

Another interesting thought as that maybe these FinTech companies that have historically been associated with more risk feel the need to crank up interest offers due to the recent collapse of companies like FTX. I don't know about you guys and gals, but having your money with a Fidelity or E*Trade makes it a lot easier to sleep at night. 

There are many other good golden nuggets in the piece including historical federal funds rate vs. interest revenue growth, spread between federal funds target rate and average national savings deposit rate, and so much more.

Earlier this week, our friends at Wander announced a $100M credit facility from Credit Suisse that will enable them to more than double the amount of vacation homes they own in the first half of 2023. 

After they deploy the $100M, Wander will now have their homes within a three hour drive of 80% of the US population. Some key stats regarding Wander displaying their traction to date include: 

• 2,000+ nights booked in 2020 alone
• ~95% customer satisfaction rate upon checkout
• $30M+ raised from the likes of QED, Redpoint, Susa Ventures, Kevin Durant among others. 

I continue to believe that Wander has found a really nice niche offering between a classic hotel experience and an AirBnB.

Also, COVID showed us all just how nice our beautiful country could be and there is so much to explore domestically. Domestic travel and remote work are rapidly growing trends at Wander is poised to continue to benefit from them.

CHART OF THE DAY

• As many unicorns raised serious cash over the past couple of years and are looking to scale back their burn, some of the best litmus tests for venture valuations will come from a 409a. 
• For those that are not aware or need a refresher, a 409a is an appraisal of the common stock of a private company by a third party. These appraisals are usually done when it comes to calculating stock based compensation of employees are different liquidation/share purchasing preferences. 
• As expected there was a significant fall in valuations, highest since Q2 2020 and there will likely be a continued decrease in these valuations over the coming months

PORTFOLIO

Note: The Crossover Portfolio is a mock portfolio of how I would be investing and not with real money. All trades are shared publicly @ The Crossover Twitter as they are recognized. 

• Some moves! As discussed in last newsletter, we picked up some Elastic, one of Mitchell Green's top picks which we will discuss deeper in the future
• We also picked up a starter position in $BWAY. This is a company I know extraordinarily well and is currently trading at a negative enterprise value. I think the stock has more downside in the short run, but we will be looking to pick up more on its way down. 
• Finally, we sold another slug of Paramount @ over $20 a share which we think is a good place to be unloading in the current environment. It is still more than 15% of the portfolio. 

MEMES OF THE DAY

JOBS

Here are some jobs that I’m curating in finance and tech. Use this link to submit a role to be featured if you’re looking to hire.

Risk Governance Manager @ Robinhood

Robinhood is looking for a new Risk Governance Manager with 6-8 years of experience. Bonus points if the person applying for this job has knowledge of brokerage, crypto, trading, and money services/payments.

Sr. Product Manager @ DriveWealth

Interesting opportunity for someone to help DriveWealth with their efforts for international expansion for their Europe and Asia Pacific business entities. If you know someone that would be interested, make sure to send this job their way.

Director of Corporate Development @ Robinhood

Robinhood is seeking a Director of Corporate development with 10+ years of experience investing. This position includes analyzing Robinhood’s strategic landscape and managing M&A transactions. 

GOLDEN NUGGETS

• Love this airplane pic of everyone being tuned into the USA game on their flight!
• Some very interesting churn statistics in the Streaming Wars!
• This pic of Cramer with Larry Fitzgerald is just adorable
• Sara Fischer broke the news that a Twitter alternative named "Post" raised some $$$ from a16z. Interestingly, a16z has a $250M slug of Twitter too!
• Check out how much $$$ Apple has spent on share buy backs over the past decade

Thanks for the read! Let me know what you thought by replying back to this email.

— Alan 

Disclaimer: The Crossover is not a professional financial service. All materials released from The Crossover are for educational and entertainment purposes. The Crossover is not a replacement for a professional's opinion. Contributors to the Crossover might have positions in the equities in the The Crossover Portfolio or mentioned in the newsletter.

Written by me, Alan Soclof.

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