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

Published on
December 17th, 2020
Duration
61 minutes


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

  • PB
    Patrick B.
    26 December 2020 @ 06:45
    The thing you have to remember - professionals would likely pay ~$1000 for an hour of Steve Clapham’s time. You can get an hour + an entire year of Real Vision for even less...
  • DS
    Dylan S.
    23 December 2020 @ 03:37
    Hope there are ongoing discussions about Mr. Clapham being a profession a Real Vision University.
  • IH
    Ian H.
    19 December 2020 @ 01:08
    Stephen could have his own dedicated corner of Real Vision. Always enjoyable and always learn a lot !
    • JF
      Jack F. | Real Vision
      19 December 2020 @ 19:07
      I’m with you, Ian! Steve is the man and has tremendous insights. Glad you enjoyed the interview.
    • HS
      Henry S.
      22 December 2020 @ 16:56
      I'd like to see this too. I'm on his analyst academy course and RV could really benefit from Stephen having a series of his own. He has an unbelievable ability to sniff out financial shenanigans.
  • DD
    Dmitry D.
    22 December 2020 @ 11:29
    Stephen is now probably my second favourite expert, behind only Mike Green. Very insightful and entertaining, can't wait to see him back again.
  • JS
    James S.
    20 December 2020 @ 22:09
    Glad to see Jack starting to take more of these one on one interviews with guest speakers. He did a fantastic job! Additionally, thanks for sharing Steve's new book. Will grab a copy off Amazon.
  • RK
    Robert K.
    18 December 2020 @ 14:31
    Brilliant, always one of my favorites guests. Bought his book, a bargain. Thx Jack.
  • PB
    Patrick B.
    18 December 2020 @ 02:19
    Anyone have an idea which Chinese stock Steve could be most worried about?
    • PP
      Patrick P.
      18 December 2020 @ 04:28
      my bet..... ...Alibaba Pictures Group
  • SS
    Shanthi S.
    18 December 2020 @ 03:23
    Loved this. Thanks to both of you.
  • SW
    Suzanne W.
    18 December 2020 @ 02:28
    What an interesting interview, Jack! I'd like to see more of SC on RV.
  • PB
    Patrick B.
    18 December 2020 @ 02:17
    Great interview. Top effort by Jack, but would be good to see further interviews between Steve and fund managers (e.g. Kyle Bass in the last one) who can really drill down on a few specific issues
  • DS
    David S.
    17 December 2020 @ 21:01
    Excelleny interview. In the US and many other countries a large percentage of the citizens are true believers - Erick Hoffer. This has gone to the level of cults of personalities. Both the far left and far right fall into this category. Mr. Musk, famous chefs, famous designers, sport heros fall into cult figures as well. The true believer and the cult of personalities are put into warp speed with fake news and conspiracy theories. These citizens are driven by a vision. They cannot let facts or ration thought destroy the thrill of the vision. I am a firm believer in emotional drives but the rational mind needs to provide guardrails. DLS
    • DS
      David S.
      18 December 2020 @ 01:02
      Paul B. - Thank you for the comment. There is so much humor on different levels, it brought a smile to my face. DLS
  • GF
    George F.
    18 December 2020 @ 00:40
    Great interview Jack!
  • NL
    Nikola L.
    17 December 2020 @ 22:32
    more of this please.
  • AG
    Adrian G.
    17 December 2020 @ 22:14
    Most tech companies stock compensation is in RSUs (restricted stock units) not options. How this works is they'll award say $10k at today's share price (whatever the # of stocks that would be) that vests over 4 years. Microsoft and Google do even vesting so 25% per year. Amazon does exploding vesting: 5% year 1 and 2 and then the rest at year 3 and 4 (because they have retention problems.) Source: job offers/employment.
    • AG
      Adrian G.
      17 December 2020 @ 22:16
      This is a significant source of total comp. Amazon salaries top out at $160k but it's not uncommon for an experience engineer to make ~$800k/year once vesting really gets going.
  • OA
    Oliver A.
    17 December 2020 @ 20:27
    Really informative and you guys kept it fun. Great stuff.
  • CB
    Clifford B.
    17 December 2020 @ 14:52
    Absolutely brilliant interview guys! Awesome job Jack!
    • JF
      Jack F. | Real Vision
      17 December 2020 @ 15:11
      Thanks Clifford! Steve is the brilliant one, I'm just glad I could tag along