Stephen Clapham on IPO Bubbles, Earnings Manipulation, and Balance Sheet Jiggery-Pokery

Published on
December 17th, 2020
Duration
61 minutes

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12

Stephen Clapham on IPO Bubbles, Earnings Manipulation, and Balance Sheet Jiggery-Pokery

The Interview ·
Featuring Stephen Clapham

Published on: December 17th, 2020 • Duration: 61 minutes

Real Vision editor Jack Farley welcomes Stephen Clapham, founder of Behind the Balance Sheet and author of "The Smart Money Method." Using the tools gained as a forensic accountant in the hedge fund business, Clapham analyzes the current ploys that companies use in order to flatter earnings, garnish cash flow, and hide risk. These hijinks include one-time charge-offs, stock-based compensation, and the widespread practice of listing "adjusted earnings" – the holy grail of financial chicanery. Clapham considers the flurry of IPOs and SPAC mergers, which he calls a "bubble," sharing his views on companies such as Nikola, Airbnb, and DoorDash. Clapham's article on stock-based compensation can be viewed here: https://www.behindthebalancesheet.com/blog-1/stock-based-comp-the-disappearing-expense. Filmed on December 15, 2020 Key learnings: IPOs and SPAC deals are in a bubble that reminds Clapham of the dot-com crash. Investors should be wary of adjusted earnings, but since almost every company in the S&P 500 employs that metric, research and prudence is required to separate the wheat from the chaff.

Comments

Transcript

Chapters

  1. 00:00:28
    Stephen's Background as a Forensic Accountant and Portfolio Manager
  2. 00:05:52
    Balance Sheet Hijinks
  3. 00:13:56
    Stock-Based Compensation
  4. 00:21:59
    GAAP Earnings vs. Adjusted Earnings: The Yawning Chasm
  5. 00:26:17
    Thoughts on Berkshire Hathaway, Cruiseliners, and Restaurants
  6. 00:37:13
    IPO and SPAC Mania: Nikola and Airbnb
  7. 00:43:33
    Tesla, DoorDash, and Monopolies
  8. 00:49:19
    Perception vs. Reality in the Investment Universe
  9. 00:54:21
    The Macro Picture

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