Vice's High Valuation and Disruption Based Trades

If you missed it last week, Deal of The Week covered Vice’s most recent valuation of $5.7 Billion.

TPG’s latest $450 million investment values Vice Media at a whopping $5.7 billion. That’s about double the size of the New York Times. One explanation: Vice’s access to millennials, according to Bloomberg media reporter Gerry Smith and Bloomberg Intelligence analyst Paul Sweeney. Still, it’s hard to make the numbers add up without taking a giant leap of faith.

In the podcast, they talk about a few possible causes for the ridiculously high valuation, and settle on its access to millennials and thus are using Vice as a proxy to invest in the future of media. To me, this makes me think of investors using Tesla as a proxy for electric cars. As I’m am sure everyone who might be on WSO is aware, Tesla took a huge hit last week for a number of reasons, but one I haven’t seen talked about and most curious about is Volvo announcing to get rid of the combustible engine, thus taking away the “mini-monopoly” Tesla had in investor’s portfolios as a proxy for the future of automobiles.

However, Vice is not the only company that is viewed to have the millennial audience captured. Some of its competitors in this aspect include Viacom, Buzzfeed, Vox, and perhaps Mashable once they pivot to online video. While none of these companies are currently public, Vice could be considering an IPO soon, which could be followed by its competitors.

This leads to a few questions: If Vice IPO’s first and keeps a high valuation, could it be a short play with the expectation to profit once another millennial-aimed online video website announced IPO, thus bursting the mini-monopoly of being the future of media? What do you think of this strategy of finding a company that is being used as a proxy for the future of any industry by investors to short?

Another question: would it be considered insider trading if and executive at a company like Volvo that knew they would be announcing plans that would disrupt such a mini-monopoly like Tesla had and shorted that company?

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