Howard Lindzon on What’s Really Going on in the Tech Plunge

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

So Tracy, there's obviously a lot going on these days in the world of macro and markets. But one thing that we've seen distinctly, particularly since middle of November, is tech stocks have just been getting absolutely hammered.

Tracy Alloway (0:33)

Yeah, so I was actually away last week, I guess we should say we're recording this on February 7th.

And apparently I missed a massive sell-off in tech and then a little bit of a rebound. Is that what happened?

Joe Weisenthal (0:47)

Yeah, I think that's fair to say. I think it was last Monday. I'm sort of losing track of the days. We've had some really brutal sessions and we had weakness in, I think it was like two Mondays ago or something like that. Tech stocks just got killed anyway, but we've had some brutal sessions.

Everything that's sort of like growthy, like people like betting on the future, big time got hammered. Also had some specific names, like Netflix really got wrecked after earnings, Facebook in a lot of trouble.

And a striking fact that I saw from Bank of America is that in January, like so-called value stocks had their best outperformance relative to growth since 2001 So we're talking like two decades, a two decade historical reversal here.

Tracy Alloway (1:32)

Yeah, so the thing I find weird about all of this is this is kind of what everyone predicted would happen, right? For many, many years, everyone complained about valuation of tech stocks. And once interest rates start going up, the air is going to get kicked out of their tires. And that seems to be exactly what's been happening. But part of me also thinks the explanation can't be that simple.

Joe Weisenthal (1:57)

Well, the other thing is like, okay, you can predict it, but it doesn't even know good. You could say like, oh, look at all these overvalued tech stocks and look at the multiples, et cetera. But meanwhile, you're like stuck at value for three years and all your clients have deserted you. And then finally, January, 2022 comes across.

But what good did that do you? And I don't think anyone has some like great way of like timing these things. So what good do these predictions do?

Tracy Alloway (2:23)

Absolutely right.

Joe Weisenthal (2:24)

So anyway, I'm very interested in what exactly happened, whether this is the end of a sort of era, like for years, anything cloud, anything software as a service, anything growth just absolutely crushed it.

So A, I'm curious whether this is the end of that for the time being or whether it was a blip. And B, what is happening on the private side? Because we know that, you know, it's like, would you pay as much for a late stage round or even an early stage round if the IPO window is much worse? And we know that recent IPOs got killed. We got a lot of SPACs that despec in 2021 got killed. And so also what does it mean for private markets in growth and VC, et cetera, when we see such eruptions in the public market?

Tracy Alloway (3:07)

Yeah, it might be a situation where, you know, an illiquid asset like a private share turns out being like a better bet in this environment just because it's harder to get out of, whereas you can press a button and sell down, you know, Google or Facebook slash Meta or whatever, but it's harder to get out of a private company. So, yeah, I'm curious to see what's going on with valuations there.

Joe Weisenthal (3:30)

I love that, and it's totally true, this idea of like the illiquidity premium, because you can't, you can't, the psychological impulse to sell doesn't exist. Anyway, I'm very excited about our guest.

He is an active investor in public markets, private markets, he's an entrepreneur. We've had him on before, and he knows everything that's going on in this world. He is all the conversations with all the movers and shakers that can tell us what's up. We're going to be speaking with Howard Lindzon, who is the general partner at Social Leverage, he's the founder of Stocktwits, a crossover investor of public and private markets, always has a finger on the pulse. Howard, thank you for coming back on Odd Lots.

Howard Lindzon (4:08)

Hey, kids, how are you?

Joe Weisenthal (4:11)

We're doing great. So what happened? Let's start, like, what happened over the last month? What happened in January, in your view?

Howard Lindzon (4:18)

What happened in January is, obviously, prices went down, but what Tracy was saying, this is the most, other than 2008, is the most predicted pullback in history, right? I mean, if we really look, it's easy in hindsight, and I play an incredible corporate dev person on Twitter, 247365 I do free corporate dev work for every tech company. I think there's a couple private market, let's call them Big Bang.