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Why Are Investors And Wall Street Picking Up Unprofitable IPOs?

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The IPO market has always been interesting. IPO investors capitalize on high growth companies and might strike a fortune in the long-run if they stay invested in successful companies.

And they’re the ultimate cash-out play for VC investors that came in early. But even getting in early in the IPO stage can be insanely lucrative.

Example.

Facebook [FB] debuted on the stock exchange in May 2012 at $38 per share. The stock reached an all-time high of $218.62 in July this year, providing investors with a return of 475% in just over six years.

But few companies are as successful as Facebook. The social media giant had already reported a net income of $1B in 2010. Last year, the net income rose close to $16B.

That said, the trend this year seen an overwhelmingly large number of private unprofitable company hit Wall Street to major fanfare.

Over 80% of IPOs unprofitable

According to this report from the Wall Street Journal, 83% of IPOs listed in the United States in 2018 have lost money in the 12 months leading to their listing.

This number is even higher compared to the dot-com bubble, where 81% of IPO listing firms were unprofitable.

There are some investors like Kevin Landis, the chief investment officer from Firsthand Capital Management, who are wary about investing in loss-making companies. “The lesson from 2000 is don’t chase what everyone else is chasing,” he’s said.

Translation: Don’t believe the hype. But is he right?

These IPOs have generated significant returns

The report highlights that investors have been rewarded for pumping money into loss-making IPOs this year. The stock prices of money-losing firms in the United States have risen by an average of 36% this year.

Surprisingly, this is higher than the average stock returns of 32% for profitable IPOs this year. Compare this with the 10% returns of the S&P 500 ETF [SPY] and you know that the difference is huge.

Exponential returns by IPOs

Investing in companies is not always about profitability. Sure, everyone would like to strike gold by getting an opportunity to invest in a high growth and profitable company like Facebook.

Amazon [AMZN] which is the second largest company as per market cap, reported losses several years post its IPO. Amazon now consistently reports profits after it expanded into other business segments such as Cloud Services.

So what is it that attracts investors to these stocks? Investors are buoyed with the total available market opportunity of certain companies. They value revenue growth over net income and continue to pump in capital.

Investors hope that companies will turn profitable over the long run. Spotify [SPOT] was listed in April 2018. The stock reached an all-time high of $198.99, gaining over 33%. Investors believe the growth in music streaming to drive company revenue over the next few years.

The cannabis market is also estimated to reach $32B in 2020, up from $9.5B in 2017. This has driven the stock price of Tilray Inc. [TLRY] by 550% in less than three months. Eventbrite [EB] had a price and of $21 to $23 per share and the stock rose 60% higher on its first trading day.

Not every bet is successful

There is, however, a serious downside for investors of these companies in case it fails to meet analyst and investor forecasts. Snap [SNAP] has fallen close to 47% this year driven by a declining user growth.

The loss-making IPOs are generally overvalued due to optimistic assumptions and come crashing down if they fail to deliver. GoPro [GPRO] and Fitbit [FIT] are two such companies that have burnt significant investor wealth.

The last time investors were this optimistic about loss-making tech companies, it ended in a horrific bloodbath with the dot-com bubble. Let’s hope Wall Street is proved right this time around.

Business

How Big Real Estate Moguls Avoid Taxes (And How You Can, Too) 👀

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I was looking around Google for an old article on tax strategies and this five-year old video of myself happened to pop up.

I’m interviewing a tax expert about how real estate investors avoid paying taxes in perpetuity—AND how everyday citizens can do the same thing.

(Real estate—our TEMPLE I and TEMPLE II projects included—has a number of tax benefits savvy investors have capitalized on for years, including Opportunity Zone breaks and 10-year tax abatements.)

There’s the 1031 exchange, of course, which I’ve shared with you guys before. 

Just to refresh your memory, the 1031 Exchange allows you to roll over gains from your last project into a new property TAX FREE—as long as said property is worth the same or more.

But there’s ANOTHER TAX LOOPHOLE that can take your portfolio to an entirely new level by splitting your capital gains into MULTIPLE properties.

So I thought I’d share it with you guys. 💎

You can check it out here.

Let me know what you think. 😎

PS: In our next update, I’m going to break down how real estate moguls get paid from their properties…tax free. 👀
PPS: If you want to learn how to implement generational wealth strategies like this one, you can join our NYCE wealth academy (TRIBE U) here.

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Business

How I run a $300M+ business from the beach…(and how you can TOO!)

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Yes, you read that right.

If there’s anything the pandemic taught us, it’s that the paradigm of “office” and “workspace” has been shaken to its CORE.

Universities are teaching via Zoom, court dates are done virtually, FULLY REMOTE businesses are valued at $1B+, and legitimate Inc. 5000 startups are run from…wherever. 📲

This is my office for the day…

I am actually running our business from the beach, typing this from here.

It’s 4:28 pm CET, which means it’s 10:28 am EST and I am CRUSHING my to-do list.

(And the team will continue to crush it while I’m asleep. That’s the 🗝)

So how did we get here? 

We launched NYCE and our mission to create 100,000 millionaires in March, 2020…just as the global COVID-19 lockdown happened. 😳

As a result, we shut down our main office and set EVERYTHING up to run remotely…

SMOOTHLY! And a system that allows us to outperform competition by 200%. (You can build this system, too. More on this in a second.)

Here’s what we were able to do since then:

  • Gained 6M+ followers across all platforms 📈
  • Add 1500+ new apartments to the portfolio 🤑
  • Grow to $300M in real estate 🚀
  • 105% investor returns 🎉
  • 700K+ community members 🤝

And here’s the best part…

Having team members in all the main time zones gives us a 24-hour work cycle vs. 9-5/eight-hour on-the-clock performance.

This means we get 3x the productivity of a similar company. 🔥

Let me repeat that…3x PRODUCTIVITY vs. our competitors.

Meanwhile our project management software grants us 24-hour TEAM-WIDE connectivity that tracks all tasks and lets us know if productivity dips even a little bit.

There is ALWAYS someone senior awake. It could be Martin in Barcelona…Nat in New York…Vineet & Arif in New Delhi.

All the while giving YOU GUYS wealth hacks and daily content. 🔥

OK, so how can you do it?!

Well, the first step is to have an actual side hustle you’re launching. Not just an idea, a validated business.

MAJOR KEY: Do NOT spend money until you’ve made your FIRST DOLLAR! 🗝🗝🗝🗝

(You can catch a replay Business Launch masterclass here and see TRIBE member Nessa launched her business on the spot and got her first $45K client shortly after.)

One of the easiest ways to start is with Airbnb—you can start that in 10 minutes. Literally. (Here’s a guide if you need it.)

Once you have your business, you build a virtual infrastructure (you really just need two softwares, which are FREE), manage the team accordingly and run the business from there.

I’m gonna put together a step-by-step video breakdown this weekend inside the new TRIBE U on the FIVE key things you need to do this for YOURSELF. 💵 💎

From what software to use, how to build a team, how to keep.

In the meantime, drop a comment if you’re ready to build some wealth and any questions if you want more…

Let’s get to work. 🙌

PS: If you can’t be bothered with video and just wanna get to work, we’re hosting a TRIBE U workshop that will help you get this process started on the spot. It’s $479 $49. 🔥

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Money

CHART: How Blockchain Powers Bitcoin

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Blockchain, Bitcoin. Bitcoin, blockchain.

The two terms go hand in hand—and have become almost ubiquitous with this year’s insane rise (and fall) of Bitcoin.

But what does it all really mean? How does it come together? In this week’s chart, our friends at CB Insights break down exactly how blockchain powers Bitcoin.

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