$UPWK- Why I Sold My Position!!

Summary

In this investor update, the speaker discusses their decision to sell their Upwork shares due to concerns over the company's lack of transparency surrounding a major acquisition. They express dissatisfaction with how the acquisition of Objective AI was announced and the potential risks involved. Despite Upwork's healthy balance sheet, the speaker doesn't trust the deal’s impact on the company's future growth and margins. The speaker also mentions raising capital for other investments and reflects on the importance of organic growth in business models. Overall, the video highlights a cautious approach to stock investment and market strategy.

Takeaways

• 😀 The investor decided to sell their Upwork position due to concerns over the company's acquisition of Objective AI.
• 😀 The acquisition was announced in Upwork’s Q3 earnings, but no press release was issued, which raised red flags for the investor regarding transparency.
• 😀 The investor dislikes when companies make major moves like acquisitions without properly communicating the terms and potential impacts to shareholders.
• 😀 Concerns were raised over the potential use of debt or stock issuance to finance the acquisition, which could negatively affect Upwork's financial stability.
• 😀 The investor prefers organic growth strategies over acquisitions and noted that acquisitions, particularly in the AI sector, are inherently risky due to high valuations and low profitability of AI companies.
• 😀 Despite the acquisition concerns, the investor recognizes that Upwork has potential and may be successful if the deal is structured well.
• 😀 The investor sold their 400-share position in Upwork, realizing a 50% short-term gain, and decided to redirect the capital to other investment opportunities.
• 😀 The investor mentioned that while Upwork's stock price has been rising, the company's valuation seems high, especially considering the merger's uncertainty.
• 😀 The decision to sell was also driven by the need to raise capital for other positions, specifically targeting Navatos stock for potential growth.
• 😀 The investor highlighted the importance of assessing market sentiment and fundamentals when making investment decisions, rather than following short-term trends.
• 😀 The investor emphasized the value of their Patreon community, where they share updates, analysis, and educational content for investors interested in similar strategies.

Q & A

Why did the investor decide to sell their position in Upwork?

The investor decided to sell their position in Upwork due to concerns over the company’s recent acquisition of Objective AI. The lack of transparency and clarity regarding the deal, especially the terms and financing of the acquisition, raised red flags for them. They felt that the manner in which the acquisition was announced and handled negatively impacted their confidence in the company’s future.

What were the key issues the investor had with Upwork's acquisition of Objective AI?

The investor had concerns about the lack of transparency surrounding the acquisition. Upwork did not issue a press release to notify shareholders in advance, and the acquisition was revealed in the Q3 earnings report. The investor also felt uncomfortable with the potential impact on Upwork’s balance sheet and whether the company would use debt or issue new stock to fund the deal.

How does the investor feel about acquisitions in general?

The investor prefers organic growth models over acquisitions. They are particularly cautious about acquisitions in sectors like AI, where multiples are high, and the acquired company may not be profitable. They believe that mergers and acquisitions carry significant risks, especially when the details of the deal are not fully disclosed.

What factors contribute to the investor’s negative view of Upwork’s acquisition?

The key factors include the lack of press release or clear communication from Upwork regarding the acquisition, the potential financial impact on the company (whether through debt or stock issuance), and the overall high-risk nature of AI acquisitions at a time when AI multiples are still elevated. The investor also expressed discomfort with the company’s decision-making process.

What is the investor’s opinion on Upwork’s future stock performance post-acquisition?

The investor anticipates that the stock may face downward pressure after the acquisition is completed. They expect bears to target the stock, as the high PE multiple and the potential risks of the acquisition could lead to volatility. The investor believes that the stock could revert to lower levels, particularly if the deal negatively impacts the company’s balance sheet or profitability.

What were the investor's specific actions after selling their Upwork shares?

After selling their 400 shares of Upwork at a price of $6.89, the investor raised capital for other investment opportunities, particularly for increasing their position in Navatoss. They also mentioned they needed more capital to support future investments and take advantage of market conditions.

What was the investor’s rationale for wanting to increase their position in Navatoss?

The investor wants to increase their position in Navatoss because they believe the stock is undervalued based on its intellectual property (IP) and patent approvals. They feel the market has not fully recognized the true value of Navatoss’ IP and that geopolitical factors and interest rate changes have artificially inflated the stock price.

What does the investor mean by 'the setup is not good' for Upwork?

When the investor says 'the setup is not good' for Upwork, they are referring to their negative view of the company’s current position, particularly with the acquisition. They feel that the lack of transparency, the potential impact on the balance sheet, and the uncertain effects of the acquisition create a risky environment for investors.

What does the investor think of the CEO of Upwork?

The investor acknowledges the CEO’s background as a skilled entrepreneur, particularly in raising technology companies. However, they remain cautious because the CEO’s handling of this particular acquisition and the lack of transparency raised doubts about the future direction of the company.

How does the investor view their role in making decisions about investments?

The investor views themselves as someone who makes decisions based on instinct and analysis. They prioritize transparency and clear communication from companies. In cases where they disagree with management decisions or feel that a company is not aligned with their investment strategy, they are willing to sell their position and reinvest the capital elsewhere.