Cash Drawer

From Tom Dyson in Tom’s Confidential: Another Silicon Valley company just saw billions evaporate from its market value…

We wrote about the absurd valuations among public and private Silicon Valley companies in the June issue of Tom’s Confidential. We told you cracks were starting to appear.

We found six overvalued public companies. And we recommended buying put options as a speculation on their fall.

We booked 221% gains in Yelp, 95% gains in Twitter, and 97% gains in Pandora. (The other three companies still present great opportunities to profit.)

  We also wrote about how the initial public offering (IPO) market was beginning to crumble—a bad sign for private tech companies looking to bring their stocks public through an IPO.

Evan Spiegel, CEO of disappearing-message app Snapchat, rushed to take his company public.

In May, Spiegel said, “We need to IPO… I think that people are making riskier investments… and there will be a correction.”

His fears came true…

Snapchat had been valued at $16 billion through its private-round funding. On November 10, Fidelity lowered its valuation of Snapchat by 25%—putting the valuation at $12 billion.

That’s $4 billion erased overnight. Had it been a public company, we could’ve seen the stock drop further… just like the investor sell-offs we saw in Yelp, Pandora, and Twitter that made us huge gains.

We still hold actionable positions in three companies we think are bound to fall soon. None of these companies earn any profit. Yet each is valued well over $2 billion.

These valuations are unsustainable. They’re due for a major pullback. The Fed’s interest rate decision may be the catalyst.

Bottom line: The “unicorns”—private tech companies valued at more than $1 billion—will continue to fall. Snapchat’s write-down means our open options positions still present good opportunities to triple our money.

For subscribers who bought these recommendations from inception, continue to hold.