Abdiel Capital & Cricut
Abdiel shows 4 clients and discretionary assets under management (AUM) of $5.6B in earlier days:
Abdiel Capital Advisors, LP
Abdiel Capital, LP ($164m)
Abdiel Qualified Master Fund, LP ($5.6B) in
Abdiel Qualified Offshore Partners, LTD
Abdiel Qualified Onshore Partners, LP
One of Abdiel’s large holdings, and the one I find most interesting, is Cricut (CRCT). It is an old company-lots of history-it IPO’d on March 24, 2021 at $20. Ballooned to mid-$40’s stock briefly, was heavily shorted and it’s been downhill since then.
Abdiel started buying Class A shares on May 19, 2021 (2.3 million shares by that month-end, when the price was $42). Abdiel has bought heavily and weekly since then into a steadily declining market, ending with around 2 million shares in March-May at $12 down to $10. Abdiel now owns 14.5 million Class A shares. Rough estimate the 14.5 million shares estimated cost $384 million - average price of around $25 per share per back of the napkin estimate. At 6-9-22, short interest was 4.3 million, 11.8%, days to cover 11.3 days.
Constantly eroding price. Huge apparent losses on Long positions. What gives? Abdiel is still holding. Average 3mo trading volume is only 317,000, but can spike higher. Tough for Abdiel to get out of 14.5 million shares together with 4.2 million shares short. No idea about short options numbers.
Large number of Class B shares have 5 voting rights per share vs 1 vote per Class A- so Abdiel’s A shares have little effective voting power. Most B are controlled by some Companies/large owners or officers who are owned and/or have been affiliated or very loosely associated with Ross Perot companies (Petrus) who apparently purchased into Cricut in years prior to the IPO. A significant number of officers/directors have a Perot connection.
Why has Abdiel bought so heavily into Cricut knowing the control issues. Cricut stock is still being shorted pretty heavily.
The accumulation of cricut shares does not appear to be reckless. I’m not smart enough to figure it out. Abdiel has a history of heavy accumulation in others stocks also (APPN, FND, GLBE, BILL, SHOP, AFRM, AXON, ZM, FSLY) but the Cricut connection is unique?
Maybe Abdiel aren’t very good investors
If helpful, read below. I’m not saying Abdiel is right or wrong. I’m sure they looked like visionaries a year ago and absolute fools today. But they have been very consistent in philosophy and true to their discipline at least.
Abdiel buys public equities with a look-through permanent-hold private equity approach. Their investment approach is even more “myopically long term” than your tiger cub / VC bogeys- they view each investment as an “at xyz share price we can buy and hold the entire company into perpetuity” transaction. This is very much the control-minded PE mentality except you just don’t have control on float or on company operations at all as a passive stock investor. So you can see why the approach becomes flawed and backfires at times.
If you are holding this company forever then you really care for a few things: product market fit, management team know-how, and pace of product development. Unfortunately the market in the short-term is intractable and so Abdiel has taken an unrealized drawdown YTD on Cricut.
It is clear they view Cricut simply as a blade and lock model with a recurring software business on top- what an academically beautiful concept but unfortunately they’ve neglecting a lot of issues with the hardware business.
All said- Abdiel’s investment approach is basically what would happen if you took a consumer/TMT growth PE fund and let all of its portcos trade mark to market daily as if they were public stocks. Take the latest General Atlantic growth fund and IPO its portcos- this is basically what Abdiel is.
As for Cricut- they didn’t give up on this one as they did on Fastly and many other bets. At this point where they own 30% of shares I think their plan and the eventual outcome is pretty obvious to everyone…
Thanks for your comments, very thought provoking!
I wonder about your last comment.. “At this point where they own 30% of shares (of Cricut) I think their plan and the eventual outcome is pretty obvious to everyone...”.
I hate to admit it but even after reading the above it’s not obvious to me yet. I read this to be that Abdiel is most likely a very long-term hold, with an expectation of much greater return than their $25 a share cost.
Cricut is trying to be a vertically integrated platform that encourages continual engagement. An analogy I would use is Youtube. When it first came out most people did not see the mass appeal. As YouTube Scaled, human imagination took over and the product reached new heights. Cricut is trying to do that with its cutting machine.
Ashish is also the type of CEO Abdiel loves.
you're...serious?
If you listen to the earnings calls or attend a conference with Ashish, he talks about what they are trying to build. Not saying I agree or disagree with his vision.
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