Bending Spoons: The Company Behind Vimeo, Evernote and AOL Is About to Go Public | Stock Club 318

0:29This episode is brought to you by Google Chrome. out there right now. It's just filed for IPO. It's looking to go public in the next few weeks. And I'd be really, really impressed if anyone of our listeners have heard of it before, but they're almost guaranteed to have used some of their products.

0:48Welcome to Stock Club, the podcast where we find and discuss stocks that anyone can buy, many of which we believe will go on to grow your wealth. Well, folks, Investicon is coming up 27th of August, Dublin, and that's just under two months from now. And our big media push is coming very soon. And the theme of this year's event is Top 3 Investing Ideas for 2027 and Beyond from Investing Masters. And I can't overstate how privileged I feel to have Motley Fool co-founder David Gardner as our VIP guest. David has picked more 100 baggers in his career than anyone might expect. And he will shoot for the stars at Investacon, as indeed will all of our guests.

1:38And you will leave this event with a new network, new ideas, and above all, a short list of new ticker symbols to add to your watch list or portfolio that very day. So get in before everyone's talking about it. Prices have gone up, depending on when you're listening to this. We may still have a few early bird tickets on reserve. get in touch if you're interested by emailing my colleague brian whose address is brian at my wallstreet.com that's m-y-w-a-l-l-s-t.com brian is the ceo of the event and he and only he can give you one of the few remaining discount codes but join us you'll have a fun you'll have a laugh you'll have some food you'll have a few beers you'll get some great investment ideas and above all else you'll get first refusal and joining us for the next event as well so that's that mike how are you this week i'm good i'm good it's the first time we've been on uh podcast together in ages i know to our listeners we were on last week but that was uh pre-recording the magic of pre-recording yeah trip to japan uh it's been over a month i think since we've been sitting across from each other that's right i have at last holidayed in asia and boy oh boy it's something else it's a sight to see and a country to behold yeah i was on my own holidays down uh i went across the south of france during france's hottest heat wave in history which was a lot of so what was the hottest day by on the centigrade scale i got a bit lucky actually so where i am now where i live it was actually worse um so i think it got up to i took a photo of the one in the car 39 um yeah just around the southwest it got up to 43 i think which was a record for france that's good not good um yeah you can imagine a big pasty irish man trying to go around and then like because you're on holidays you still do all the touristy stuff like we were going on hikes and flipping visiting roman ruins i was in bits sweating through about three shirts a day like it was nuts oh no that's horrible One of the many lovely things you learn by being a parent is that when you have a baby and they're running in temperature and you stick a thermometer in their ear, that it's all good.

3:58It's all good up until 39.9 degrees centigrade. But once it hits 40, you've got to get that kid who went to a hospital. So any experienced parent knows, even at 39.9, you're kind of managing temperature with ibuprofen or equivalent. but once it hits 40 you're in trouble all of that is to say the human body really starts to malfunction from 40 upwards which is why you start to see waves of uh unforeseen deaths at that temperature it is really the human body is not designed for processing 40 degrees or more yeah they're saying there was over a thousand avoidable deaths in france this last week you're hitting yeah yeah and actually this is a very i know we're drifting here but in ireland one of the things you and i know mike and a lot of our listeners know is nobody has air conditioning it's not done you do not we do not have homes with air conditioning historically it was never done and even on new builds it's a very very rare thing but beyond even no ac is that the houses are built to retain heat so it's a double factor it is we we love houses with southwest facing rear gardens believe it or not folks so like where the sun sweeps across the sky and warms the back of the house where historically by architectural standards that's where the kitchen and living space is um but i have a neighbor who for the three weeks a year that he's going to need it has installed air conditioning and you know what he got me thinking because while it might only be utilized for less than seven percent of the year it is horrible seven percent of the year so um there is definitely a market in the kind of anglo-saxon cities uh all across the uk and indeed over here in beautiful ireland for for air conditioning and i think it's just going to grow because unfortunately i think this is a one-way trend at the moment so well done in surviving south of france i did are escaping the ritz actually it's great uh it's great hardship isn't it going on holidays across the south of france but look we're drifting uh too much so i am going to talk about i'm actually going to talk about another ipo i feel like all we've been talking about is ipos recently which is great we were we were in a desert speaking of temperatures i mean we we didn't have many ipos to talk about and you being as we're only warming up back to real weekly cadence of podcasts i looked at you yesterday and i said mike i have nothing to talk about and you said sit back boss relax we're going to talk about a company with a great name and you told me and i already liked it so tell us what's the deal yeah the great name and a great story so it's this italian company um and yeah one of the more interesting stories out there right now uh it's just filed for ipo it's looking to go public in the next few weeks and it's called bending spoons and i'd be really really impressed if any one of our listeners have heard of it before, but they're almost guaranteed to have used some of their products at one point or another in their lives.

6:53Oh, unquestionably. Almost. Bending Spoons is a serial acquirer of like kind of beaten down internet brands. So its tagline is we acquire and improve beloved brands. So it goes after these struggling businesses that have built up huge user bases over the years. So some of the subsidiaries include AOL, Vimeo, StreamYard, we're on StreamYard right now. So that's the platform we're talking on. So good, so good, so good. New summer arrivals are at Nordstrom Rack stores now. Get ready to save big with up to 60 % off brands like Rag & Bone, Levi's, Adidas, and Free People. Join the Nordi Club to unlock exclusive discounts, shop new arrivals first, and more.

7:35Plus, buy online and pick up at your favorite rack store for free. Great brands, great prices. That's why you rack. Oh, that's interesting. I didn't know there was StreamYard. great yeah and i know who's a subscriber to horizon is used for me all because they host our videos isn't it exactly yeah yeah uh evernote we transfer eventbrite and i'm sure loads of people have used eventbrite at one point oh yeah sure it was its own company on the stock exchange until recently eb and and uh anyway yes eb keep going this is loads loads more like that which um aol aol exactly yeah i mean anyone who's at my age and lives in america will absolutely have used a bending spoons asset in the form of aol yeah so it so it's built up it's accumulated over a billion registered users through all these acquisitions 400 million monthly active users and then over 7 million monthly paying customers so it's pretty clear where the opportunity lies and that there's 993 million potential paying customers right there in front um so it kind of reminds me it reminds me a bit of iac or toma bravo and the in the sense that's been able to ferret out great deals for these software names.

8:45A lot of the names we mentioned were funded by huge private equity IPOs and like private money before their IPOs pumping like hundreds of millions or even billions into that wave of software startups that were obsessed with growth and didn't really care about profits. You know they were trading at 20, 30 times sales. We were all there pre and post COVID for that kind of I suppose it was a bubble in a sense and it certainly did pop and it took out an awful lot of these businesses with them so what's interesting about bending spoons is that they went after these businesses and bought them on the cheap and so they get the benefit of that huge uh growth spend but at a dead cheap valuation so vimeo is a good example it peaked at 49 bucks a share in 2021 bending spoons bought it for less than eight bucks a share last november event bryosh similar story peaked around three billion in market cap and was bought for 450 million.

9:37So they kind of come in. And I wouldn't describe it as the Michael Burry Cigar Butts value investing, but it is taking advantage of what I just said about these companies have spent hundreds of millions, if not billions, on buying growth. And the growth was the obsession. And they kind of did that in a sense, at least even for a free user, like, you know, Spending Spoons has a billion registered users now. But obviously the economics didn't really play out and the stock price took a hit. So by coming in and kind of timing the bottom nearly, Benning Spoons has built up this portfolio of businesses with huge followings that obviously need a lot of improvement but have huge potential there.

10:20So it is... Let me click pause on you for one second. I just want to back up the bus. Did you say they're Italian? Yes. That in some light is really interesting because, you know, you and I, Mike, along with our colleagues, Design Nexus and our international stock picking service. And we, as a consequence of that, and our advisors and our algorithms and our filters, have looked at a lot of businesses. But so rare do you find an Italian business get through the toll gates, as it were. When I think of Italian businesses that are floated on US exchanges, I think of Brunello Cruccinelli and Ferrari and luxury brands that are...

10:58Luxury and booze is my idea of Italian companies. businesses that were in existence 50 years ago whereas this is a for me is at odds with the with um all of the italian businesses i've looked at for a couple years with probably one exception which was called cyberoo which was like a crowd strike uh of italy and that's being very kind um so where are they located in italy just out of curiosity in milan in milan uh yeah my the industrial capital very very okay i just find that interesting in its own right because it's not a center to my knowledge like of serial acquisition excellence like if you'd have said they're in stockholm i'd be like yeah along with all the other ones but the fact that these guys are sitting in milan to me in its own right it's like wow that makes the story interesting and we'll talk about the name in a minute for sure and i think as well it's a very unique story in that you mentioned Sweden where there's an awful lot of these roll-up acquisition companies or Constellation Software is kind of the north star of it and Bending Spoons is taking a very different tactic whereas Constellation will see these profitable, boring companies in certain industries do a quick bolt on acquisition, let it run like normal, quite a decentralized leadership structure, tack on a few synergies but not much.

12:19Bending Spoons are kind of doing the complete opposite so they'll lie a beaten down company lots of users recurring revenue lots of potential and they essentially come in and upend the whole thing so aggressive cost cuts within a couple of weeks of the deal closing they'll cut as much as 90 of the workforce they've done that before all they want are the user base and recurring revenue everything else so when the union shop steward kind of sees the acquisition coming in the door from benning spoons they know they're going to be they're going to be busy because this ain't going to be pretty i don't think there'll be any unions at these companies i'm so it's a big you know the big red fly preventing spoons is any term of uh collective action well i mean i always carry this kind of duopoly in my mind i'm a capitalist and a socialist all in one i'm a complex character just my own personal belief set is is one where education and health care should be free for all and after that capitalism should be the rule of the of the world but when when you describe that business so far and i don't mean to break your flow um i find it very appealing with staying though sensitive to the fact that you know they come in with a flamethrower but if they're going to save these businesses and turn them around some of the brands that you just limited like eventbrite and vimeo uh indeed aol and and i think they own evernote does that ring about and all these other ones like they're they are brands that aren't just um dead in the water in the consciousness like i could i looked at a business years ago i forgot what they're called but they they had bought umbro who are the sports brand but that's a brand that existed in the 70s and now is dead as that is a duck whereas the ones you're talking about are very much alive and that to me sounds like a really interesting roll-up machine but even more so than a roll-up machine it it it does more than just you know cut costs it actually concentrates all the tech assets under one its global operating system which it calls the spoon engine so this like takes care of all of the kind of shared core services so like you think of think of you know what these applications will have in common so user authentication like payments a b testing frameworks that analytics ai inference all of that stuff then comes under one entity essentially which is why these companies are able to cut so much in terms of staff really because they essentially will do it themselves so it's not the typical roll-up in that sense they don't just kind of see a bit of quick cash they're in it for the long term now obviously this is a big job like they'll completely rewrite a company's code base to make it easier and cheaper to run you mentioned Evernote just there so like most companies you build up this massive kind of legacy architecture year over the years a load of tech debt um which at least some of our users will know all about so bending spoons with evernote just completely gutted it they broke out they kind of broke the whole tech system into modern microservices is what you said so it let the tiny team in milan they only have 500 people in milan that's the entire company uh they shipped something like 75 product proven product improvements in the first year of buying evernote even though they gutted the company's tech stack complete.

15:35Now, obviously, how does a small team of code managers manage all this? I'll give you one guess. AI. AI. It's been a while since you made it. Did I win? You did. You won 10 points. So it's got internal AI systems to automate roughly like 80 % of workflows within the company. So all of the software building detection architecture is pretty much done with its internal AI engine. and actually first line of customer support as well. So it's interesting. We've been talking and been waiting for a company that is not profiting from the build-out of AI, but truly profiting from the application of AI. And this is an early example, I think, of that where it comes in and makes material improvements in these companies.

16:23It's able to streamline these businesses incredibly bare, you'll have to say, obviously, if you're cutting 90 % of a company's workforce. and still being able to improve both the service and then obviously the financials as well. So it's an early contender for one of those companies that is truly applying AI as its competitive niche, which is exciting. And then obviously the last piece of the puzzle is the monetization story. So I mentioned that 993 million gap between subscribers and then paying customers. So it's aggressively going after that and essentially trying to convert freeloaders to paid users so everyone knows the sas model always starts with some for some form of freemium subscription um so bending spoons comes in cuts out all that forces casual users to make a decision of converting or leaving essentially they'll introduce like mandatory subscription price hikes um because you know the users of these legacy apps they could have been using this for years if not decades um so it it does mean that an awful lot do end up sticking around even though if they double or triple the price because it's for many not starting out with a huge price to begin with as well um so they're they're perfectly happy if 30 of the user base quits tomorrow due to these price tags because the remaining 70 are going to stick around and pay double and then if you combine that with reducing costs by 60 78 even 90 it's a seriously lucrative business it's a seriously lucrative business model and something that works very evidently just like on paper you can see straight away yeah that's one for me so obviously that's not the whole story uses a lot of debt oh yeah i think it's net debt but even it is like 4x or something and then the one concern you could have then is the the short-termism of it all you know if you fire an entire engineering team for vimeo say or a technical support team how is that product going to progress and move forward just from the small base of you know 500 people in the lab like so there is that obviously a software roll up in this day and age has question marks as well is the need for a product like vimeo going back to vimeo um which you just spent 1.4 billion on last year is that going to be as prominent a need moving forward when we have the ai tools we do at our disposal so there are definitely risks it's not a guaranteed home run but i like the story i like the business model however ruthless and like first and foremost it's working do you know what i mean it went from shy of 400 million in 2023 to 1.3 billion last year in quarter one of this year so first quarter it hit 600 million and it also turned a profit of 28 million for the first time compared to a net loss of over 100 million for the same year last year so So it's a really exciting business.

19:21It's a very clear business model that looks to work. And yeah, it's looking to IPO in the next few days or weeks. Aim to raise about$1.6 billion on an$18 billion valuation, all going well. And yeah, it's a European success story. That's really interesting to come to US markets. So I am quite interested in getting sprints. It's really interesting. I mean, I did have a peek at their S1, the filing that goes into the SEC before IPO. and they said that they had identified more than 1 000 businesses that could be attractive acquisitions uh for the future which i speak i presume speaks in part of what they're going to uh going to to use the funds from the ipo to address uh 400 billion in aggregate estimate revenue as of 2025 from their targets so like there's there is a vast ocean of smaller and diminishing businesses that they can go in and do this 90 discount sorry the scorched earth acquiring than firing 90 % of people.

20:17One of the things you said to me that actually, my head was in the opposite corner of the room to you. You said there's only 500 people where, if I heard you correctly, and my head was, wow, there's that many. I was actually quite surprised to hear there's 500 people, especially as they leave, if you're like a skeleton crew and all the required companies. It's not like that the center is doing everything. It's doing something. Well, I think 500 people for a company that, being if you think of like i would imagine there would be 500 people at vimeo alone yeah this company has 50 vimeos and you're essentially taking all the operations and internalizing them in this center in milan and obviously you are utilizing all your tech advantages and the spoon engine and the internal ai tools and everything else but it does feel like that's an incredibly efficient workforce um so that's right well when so off topic when i heard the name i smiled because i thought that it was in reference to uri geller did you ever hear of uri geller mary geller yeah yeah i remember that he was a tv illusionist when i was a kid i was going to say mentalist but yeah i think he was an illusionist uh he was a friend of michael jackson's as well i think he he was like this guy was a total a-lister in the world of bending spoons because he uh he had a complete monopoly on television on this side of the world where he'd go on tvs and chat shows and hold the pen or something you'd say a spoon and very gently rub the neck just below the head of the spoon and it would bend and then he'd tell everyone go and get a spoon do this from home and ring in and tell us if you succeeded and of course i was about seven years of age when this kind of carry-on was going on and i remember running to the drawer and occasionally getting a spoon every time your gala was on tv i'd be sitting there trying to bend the spoon with my mind and indeed that's not whom the company is named after it's actually named after the movie the matrix did you know that mike no you're just making this up you're very disappointed jerry geller wasn't ceo i was kind of like wow brilliant that guy really did have a cultural impact longer than bending spoons on tv but it's a reference to a scene in the matrix where in the film a young boy tells neo do not try and bend the spoon that's impossible instead only try to realize the truth there is no spoon and the idea that the spoon doesn't physically bend because of force it bends because the apparent limitations of reality are an illusion which when you think about the business uh it kind of it's kind of cooler than the uri geller thing and once neo changes his perception of what's possible he starts to transcend those limitations for those people who know the movie so the founders have actually said that they chose the name because it reflects the mindset of challenging assumptions and achieving things that initially seem impossible um as they put it the scene is about looking at problems from completely different perspective rather than accepting all the conventional limits and i guess if you walk into a business because with 100 people all doing something that someone in there figured we need someone to do this and you tell 90 of those people to get out you're gone uh you that does seem like an impossible an impossible task as you already said so um that's where the name came from that's where the company is located in milan and that's what they do folks very interesting so without looking at We didn't really dive into the valuation because the market has yet to speak.

23:51But based on just what you know, Mike, and we shouldn't ignore valuation, but based on what you know, are you red, amber or green on your attracted? How attracted are you to the business on the rag status? Tomorrow morning is knocking. Stock your fridge now. How about a creamy mocha frappuccino drink or a sweet vanilla? Smooth caramel, maybe. Or white chocolate mocha. whichever you choose delicious coffee awaits find Starbucks Frappuccino drinks wherever you buy your groceries I would say it'd be a flashing amber yeah that means it's a flashing amber flashing amber is like getting ready to go yeah yeah I think it's a good European success story and we need more of them and though you know it is kind of doing all its business in America and going public in America maybe it's not that European but maybe as European as life but uh no it is a very interesting business model it's quite ruthless business model you know you shouldn't be celebrating people losing jobs but i think it's indicative of how much bloat and cheap money was going around around that pre and post covid time i think there was a real real rush into software names um that had probably more money than they knew what they was good for Do you know what I mean?

25:14Like more money than they ever deserved and they were going public at crazy valuations. And so this business almost seems like the aftermath of that period. Most of our listeners will have invested through that at some point or another. And we saw the kind of irrational exuberance around software names at that time. It's companies pre-revenue going at 50, 60 times sales. And it was kind of just nuts. But I think, and I kind of repeat myself again, I think what Bending Spoons has done is taken all the benefits from that crazy period. It's a bit like the dot-com bubble. They're coming in and building applications based on the fiber-octaic cables that were laid.

25:57you know are crazy valuations and they're doing it on the cheap so that's a comparison I like and I just think it's a very interesting strategy that could prove very successful but then again some of this stuff maybe is superfluous to requirements in terms of the AI age it still is these software companies even though it is being powered by AI you know the AI native tools they aren't their legacy to it so you may bet the return on investment per uh per product or per company is very short they probably realize that we get all our money back within two billing cycles even if our net retention is only like 60 i bet you they're going with extremely harsh maths to make sure that even if it's a if they've bought a dog the dog pays itself back well it's something crazy like uh 65 percent uh expected internal rate return that's with leverage so with the debt they take on to buy the company that's what they expect and that's where they're like um their goals are which is crazy and it explains why it's so extreme the measures they take when they come in and buy in by a company but uh it also it's also you know confidence in its model it's confidence in the i wouldn't even call these synergies uh like because it's beyond synergies it's not really working with you know a stream yard it's taking over a stream yard and running it much much more efficiently but being able to take care take advantage of the existing customer base and the recurring revenues there so yeah it's definitely a good business model for sure i'd love to know the um what's the factor that's most appealing to the founders or the people running a business that that bending spoons have walked through the front door on because you know you're sitting there you've built a business and a culture and an opportunity and event bright wasn't dead by any stretch of the imagination as just one example they weren't doing great but they they managed their own ipo and and the ceo and and her husband had built a good business so why was it that bending spoons made them attractive because effectively you know the grim reaper of sorts has walked through the door from a cultural perspective forget about your culture it's dead because 90 of those people are going um so you want to i mean money talks so i wonder what is it that the founders are hearing well i'd say and this is just me speculating but an awful lot of these companies are private equity funded so founders might be not might not have a lot of control yeah in the say of this yeah i think the original investors could be like okay this is the only exit i see for the for the near future so we'll give it up on a cheap like there's an awful lot of there's an awful lot of founders that like will make no money from exits oh yeah depending on timing depending on the circumstances and how they fall and and like how how the company performs on the public market so yeah yeah it reminds me i mean that their mo reminds me of twitter and elon musk walking in and acquiring it and i don't know what percentage of the workforce he laid off it was well documented and reported at the time but being as they have a big office here in dublin it was not only world news but local news and it was clear that was just an unforgiving amount of layoffs and the way it was done was very abrupt short it was and and the conversation was sure twitter can't survive without these people but it certainly did and um it's it suppose speaks to your point about the bloated factor of businesses companies it's so easy to recruit someone when you need them it's so difficult to get rid of them when you've realized you've overdone it a bit and i'm speaking from experience i mean my wall street at 36 people at one point um you'd recruit someone to be in charge of something and then they tell you sure after they've started sure i can't do it without someone and they can't do it without a helper and then next thing you have this scope creep on your recruitment budget i'm talking about a small company so when you talk about big businesses you just see it it's it's everywhere all of the time and not only that but they're big businesses that have just received you know whatever it is here's 500 million from yeah duquesne partners go grow me expect you to spend it which is yeah it's like roosters like so yeah yeah it is very interesting so when is that happening mike uh so it's expecting the first couple of weeks in july and i know exact dates but very soon i am and we're going to watch that one closely um i find it to be an interesting story an interesting model and an interesting warehouse of brands that we've all interacted with in various degrees like our love so um not only that after this call or after this show i'm going to dive in and inspect what is their full list of assets because i bet you there's a whole load of gems in there i didn't even realize right mike i have a feeling it's time for following profit what do you think too long without a following profits better bring it back yeah let's bring it back and we still need to get the jingle so following profit is for you or i generally i uh talk about profits current 10 stocks it's a 10 stock portfolio that is just tell me what to do it always holds 10 stocks it rebalances every fourth friday so once a month you got to do two to three minutes of work with profit and the returns are face melting to the point that we are upping our game a little bit on profit on my wall street um and news of that will follow shortly but as usual before i do our following profit section i need to caveat that we are talking about companies in the knowledge that profit may sell in a couple of weeks we don't know that's the whole thing about profit it's not sitting on an analyst's desk who has made an almighty decision so uh we had a rebalance 11 days ago so about we're approaching halfway through the current profit cycle and it bought two companies it sold two and it bought two that's how easy it is the two it sold um on 18th of june was where med pace which had made 6.33 on it was only in the folio for 27 days but who wouldn't take 6.3 after 27 days and wesco international which was in the folio the profit folio for 83 three days but it made 39.3 percent so it got rid of two and by virtue of the service it bought two and the two one of the two i'll tell you one of the two it bought because in fairness folks just sign up it is absolutely miraculous service hence the main profit uh one of the two it bought was powell industries ticket ticker p-o-w-l a company i don't even know what they do i know all about it you know all about pal why do you know all about pal there are stock of the month uh late last year last year yeah so what's it like drills and routers and scooters and stuff like that no a bit more technical they're about connecting um they have machines that connect uh sites to the energy the electricity grid uh which you can imagine ai data centers quite topical at the minute.

33:32So yeah, that's been on fire. I think it was up as much as 200 % in the space of a couple of months. I got lucky with the timing there. But yeah, you can imagine profit is definitely going after it. It's a momentum based system. So it's going after these hot stocks. In the last 12 months, profit is up 45.5 % as of this minute in time. and its performance in 2026, a half year so far, is up 33.49%. In the last five years, profit is up 183.6%. Over the last 10 years, it's up 640%. And since inception, which was December 2009, when we put down the first code base, only launched as a product there less than two years ago, since we first codified profit December 2009, it's up 2 ,394 percent that's any 25 bagger now um the thing about profit is it's still only two grand a year so like come on if you're getting those kind of returns and we believe we can over the long term sustain those you can subscribe at useprofit.com or email frank at mywallstreet.com that's f-r-a-n-k at m-y-w-a-l-l-s-t dot com so so excited i'm catching my own breath so if you want a ticket to investicon email brian on my wall street if you want to see if there's a deal on profit email frank at my wall street and yes they're both real people folks they both exist they're not a little bit of a startup special what other name have we not used oh we haven't used um paco i'll make a paco at my wallstreet.com no we don't do that if there's a name that person exists that's what you get the in real life promise okay mike as your mic has failed i think i'm going to do the outro this week and i love this this is like talking at you not with you so folks thank you for joining us on stock club this week we thoroughly enjoyed the conversation we hope you did too we're looking forward to speaking to you again next week we're both back from our holidays.

35:49We're reengaged, reinvigorated, and ready to tell you about more great stocks in the weeks ahead. Stay safe. Talk to you next time.

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