Comment by Retric
3 years ago
Alternatively, the rapid failure after IPO is a suggestion that their customers weren’t happy, but the plan was short term pump and dump.
It’s not always easy to say if something is stupid or fraudulent, but sometimes it really is just a scam.
I find it so weird to look at the stock market to approximate this kind of metric. Stock prices have more to do with things like the ebb and flow of the risk profile of institutional investors, than with customer satisfaction with specific features.
Institutional investors care a great deal about metrics like customer retention indirectly because it influences customer lifetime value which then impacts profitability all of which is dependent on customer satisfaction.
Groupon for example has decent consumer metrics, except they couldn’t keep the business partners happy which resulted in their ultimate collapse. Finding weaknesses in companies businesses models like this can both be extraordinarily profitable for institutional investors directly and create an aura of competence to attract more investors.
Theoretically. But then sometimes they're just switching from equities to bonds or whatever. My point is just that there is no simple function from customer satisfaction to stock price.
There's a joke on econ twitter whenever there is a big move in some individual stock, that the explanation is that the move clearly happened because the expected value of future cash flows changed. The joke is that under the efficient market hypothesis that's always the explanation, but in reality we all know a bunch of other stuff is going on all the time.
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We'd need a lot more information about this one particular case but I'd bet almost anything that a 90% drop in share price was caused by something a lot deeper than customers being unhappy at some unfinished features. I intentionally didn't address that half of his comment for that reason.
That’s reasonable, though I am not suggesting a pump and dump is only going to show up in the code base just that it would also look like they described.