Salto Partners

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Amazon Upgraded by Morgan Stanley

Interview with E-Commerce Times on Amazon which continues to be Wall Street’s darling. Morgan Stanley justified the upgrade by pointing towards Amazon’s growth potential in emerging markets such as China and Brazil as well as its strong fulfillment network. Indeed Amazon has been aggressively investing in BRIC countries implementing a “winner takes all” – strategy. It will continue to do so in 2013 and beyond. Last year the company made headlines by building out same-day delivery capabilities here in the US. Presumably these capabilities will also find their way into international markets. Once the build out is complete there will be no other company that is commanding a global ecommerce infrastructure of that magnitude. Amazon will operate in its own class.

There are a few watch-outs. First, making big bets by entering new markets as well as building out expensive warehouse infrastructure requires a lot of money. This strategy will impact Amazons ability to produce meaningful profits in 2013. Second, there is a high level of execution risk associated with such a strategy too. Brazil. Russia. India. China. These are vastly different markets, ecosystems and cultures. It takes a high degree of confidence to go to these places and make it happen all at once.

Amazon has proofed critics wrong in the past. The markets like its chances to capture a significant portion of the world’s ecommerce sales. Morgan Stanley predicts this number to hit $1 trillion in 2016. Amazon’s market share is projected to be well above 20%. Now, that would be exciting.

See the full article with E-Commerce Times here.

 

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Lessons Learned from the Facebook IPO

After months of media hype we sobered up rather quickly. The Facebook IPO revealed some surprising lessons learned about the US stock market system.

  1. We learned that the NASDAQ, a trading platform that is in business since 1971 and that supposedly has more trading volume than any other electronic stock exchange in the world, can be overwhelmed. And it was.
  2. We learned that a social media company is in the end not that social. Facebook optimized their short-term gains. They leveraged the hype maximizing both the share price as well as the number of shares sold in the market place. They got a premium for their IPO shares. They also traded their short term gains for a publicity disaster.
  3. We also learned that apparently after ten years of Sarbanes-Oxley there is still room for clubby information exchanges among the few true insiders. In the aftermath of the Facebook IPO Morgan Stanley (MS), Goldman Sachs Group (GS) and J.P. Morgan Chase along with other underwriters and Facebook were sued by investors who claimed they were misled in the purchase of the social network firm’s stock. The courts will have to decide about the appropriateness of any pre-IPO disclosures.

Now the JOBS Act is supposedly making it easier for companies to raise money and to file for an IPO. We are officially in the Grace Period after President Obama signed the law on April 5, 2012. Lawmakers and regulators alike will have to deal with the fall-out from the Facebook IPO. While innovators and entrepreneurs want less bureaucratic hurdles in their business pursuits, nobody has an interest in an ill-defined process that creates mistrust, public uproar and law-suits.