Budget Destroys Gen Z Hope, Xero Calamity Continues, Atlassian Rebounds, Lime to IPO and Temple & Webster Crunched

29:25And you know I think I pick on autistic kids, but this is just such an absurdity. We're going to destroy start-ups. Well, you don't pick on – I always correct you because I know you so well. Like you don't pick on autistic kids. You pick on kids that are not – not autistic that collect money for being autistic. But the kids are not pretending to be autistic. Some provider is defrauding the NDIS by convincing a parent to say their kid is autistic through a doctor that doesn't exist to go and fleece the system. And I don't even blame those criminals or the dodgy doctors or the parents who think they can get 30 grand.

30:01They're all doing, as Charlie Munger says, show me the incentive, I'll show you the outcome. I blame the government and both parties for creating a system that incentivises people to do the wrong thing. That is who the – it's not the fault of these people getting 30 grand a year. They're doing it because they can. It's the fault of the idiot government. Although I'm not a big fan of people who commit fraud. Well, I don't know if they're necessarily committing fraud. They're going – they're going within a system that's been created for them. Well, they're committing fraud within a system that facilitates the fraud, but it's still fraud.

30:27Well, the doctor – I don't think – I actually don't think that the parents are. They go to a doctor and ask him for a diagnosis and the doctor's probably committing fraud. Well, actually – But I don't think the parents are. Well, let me tell you one thing that's happening that you may not be aware of. So there's these, I don't remember what they're called, but they're the intermediaries that manage all of the NDIS. And what they're doing is going to families within communities and they're saying, go to this guy, Dr. Whoever. He's not a doctor. He might not even exist, but there's someone there.

30:54And like, go and get this. Dr. Chalmers? It's a good one. I like that. Go and get this NDIS. Go and get this NDIS paper and I'm going to take a chunk of it, but you'll still get a few thousand dollars. Like there's a lot of that fraud that I hear that's going on. So there's genuine, genuine A-grade level fraud that's going on inside the system. And I actually had someone this week even say to me that they know someone who you and I would both say absolutely qualifies for the NDIS in a very significant way, but even they think the system gives them way too much money than what they need. Oh, I think a lot of people think that.

31:32I think someone's giving you money, you're not going to say no. I don't blame these people at all for the gold-plated wheelchairs. Like, take it. If an idiot government's giving you this, take it. But I blame the government 100%. So the other thing that drives you crazy, that I know you've raised about the NDIS, but you could raise it more broadly, is that the government is actually forecasting that, like, this is not neutral in terms of how much tax they're going to be collecting over what's called the forward estimates, which is four years, I think. Actually, in four years' time, the government is going to be collecting$50 billion more tax than they collect today, predominantly from income tax.

32:12That means you're going to work hard and after you work hard, we're going to take$50 billion more from you than we did this year. That's the biggest issue with international debt. It's the debt bond they're putting into it. So they create this inflation with all this spending that goes towards often older people. And who bears the brunt? It's younger people through this bracket creep as well because obviously as inflation happens, people's wages go up but everything costs more than that. So everybody's paying more taxes because there's incredible inflation in everything. Well, you know there's this$300 payment or something that's going to be made to everyone.

32:49You know people like us will qualify for that. Everybody does. Like the only people that don't qualify are people that don't get any PAYG income, zero. and so basically it's not men's tested like it is the i don't want to say it's the single dumbest thing because actually it's only the 11th dumbest it's kind of irrelevant it's kind of an immaterial but it burns it burns a lot of billions of dollars for no benefit whatsoever like it's actually crazy so there is another thing hidden in here i mean there's two things i want to talk about so okay one is another thing hidden and i do want to say what we think does need to be done and maybe there's a couple of things in the right direction that would actually be good for australia but like it's not that nothing needs to be done as you said at the beginning so let me tell you something else that's in here that no one maybe has noticed which is um there's a they wanted to look like i guess they wanted to look like they were helping growth in australia especially young innovative business growth so there's something that they've slotted in that says for the first two years of a company you can claim back some tax from the ato if you're loss making did you know that they put that in i saw that yeah do you want to know what you can claim back and then i'll tell you the the what i think is going to be the law of unintended consequences no what can you what can you claim back you're obviously kept you can't claim more than you lose obviously but let's imagine you lose half a million dollars in a year so how much of that half a mil can you claim back it is the sum of the amount of PAYG you've paid that year plus the amount of fringe benefits tax you've paid that year.

34:28So it's not terrible. It's good for startups. Basically, you employ people, you lose money and you get back the PAYG that you paid. So that's pretty cool. And the fringe benefits tax. Although it's pretty cool. What is also though is a bit weird. It's the government effectively almost taking an equity stake in startup. So we're effectively going to say all these dud startups, we're going to give you money back and the successful startups who employ people, we're going to actually disincentivise this and send you offshore. So we're going to keep all the shit businesses and send all the good ones to New Zealand.

34:58That's true. But this is not just for tech. This is for any business. Let's say this is for the cafe, okay? So the cafe runs at a loss. They lose 100K. Maybe they paid 200K in PAYG so they can claim back their whole 100K. But I said because you can't claim back more than the loss and you can't claim back more than the sum of PAYG plus fringe benefits tax. But I also said fringe benefits tax. So fringe benefits tax. So a fringe benefit is I'm going to give you something instead of paying you that's not cash. For example, maybe instead of giving you$20 ,000 of cash, I'll try and get around that because you have to pay tax on that$20 ,000.

35:37I'll just pay your kids school fees. Then you don't have to pay tax. And then the government woke up a long time ago and said, well, that's a fringe benefit and we're going to tax the hell out of that. and the amount they tax is variable. It's variable based on different things. Actually, I think education is 1.8 or 1.9 times the value. But let's call it two, okay? And so they double it. So I pay you 20K, then I have to pay 20K tax because it's as if I paid you that money on the top tax bracket. And that is kind of fair enough in a sense because they want to discourage that behavior. They're trying to discourage fringe benefits.

36:11Everybody realized fringe benefits are a bit of a rort. It's a rort. It's a total rort and it's hard to track and it's outside the system. So they want to discourage it. And so how do you discourage it? Well, I tell you how you don't discourage it. You don't say you can claim back all of the fringe benefits tax you paid. And so now I'm not going to pay anyone$100 ,000 a year because then I think they'll only get to take home 65K of that. And then it will cost me 65K because I'll get the difference back. But they'll get to take home 65K. But like actually if I just pay their kids' school fees for 100K, they get the whole 100K.

36:42And so, like, I just think there is going to be a massive rorting. Just to explain, so what happens there is the employee is not paying any tax on that stuff. And the business is getting whatever it paid back. So nobody's paying anything. It's just outrageous. There will be a lot of private school fees, car expenses. First class tickets to holidays. By the way, if you want to do that, Luxury Escapes is open for business. Put your fringe benefits on Luxury Escapes, guys. Come one, come all. It's actually a great policy. So, Mike, we're going to start a new company and it's going to be no days old, one day old.

37:17And unfortunately, all of your pay is going to be in luxury escapes vouchers because we get all of the fringe benefits tax back on it. And so, I mean, can you believe what's going to happen? Surely they overturn this. This is just the dumbest thing I've ever heard. This is the most open to rorting concept I could ever imagine. It's preposterous. Speaking of open to rort, did you also see how they've changed the instant write-off rules? I think they've increased them. I'm not sure if I thought they increased the two, but you can now claim an instant write-off up to, I can't call it 50 grand, whatever.

37:47I thought it was 20K. Oh, it was 20K, whatever it is. But you know what you can do. So you go and buy a bunch of tools for 20K. You sell them to your mate who was going to buy them anyway, and you've just got this write-off, you've just got this instant write-off for nothing. Like, so you've got the same amount of money you pay, the guy's got his tools, and you'll be able to deduct it. You can probably split it half-half with your mate. I will say that might be into what one might call tax fraud, just to be clear. It's impossible to track. I know. It's literally impossible to track. Well, before we talk about the things I try to do right, since you've segued me into things that are impossible to track, if you remember, Adir's got his rules.

38:21Rule one, be lucky. Rule two, don't get caught. My daughter gave me a rule three, which I thought was really good. Be worth more alive than dead. That's my rule three. Think about that. Like people said to me, oh, if you disappeared, like a whole lot of people would have some problems. We should all get key man insurance on you. And I'm like, yeah, that would be good. and then I said, oh, one of you would definitely kill me. That's for sure. Collect on it. And so I thought, yeah, it's very important to be worth more alive than dead if you want to have a long life. Let me tell you things I think they tried to do that were good.

38:51So they try – when I say try to, I understand that they may have had bad intentions and done it terribly. But targeting negative gearing is absolutely a reasonable thing to do because it does create a significant externality in the property market. And other assets as well because you can share. So no one does because it's just hard with margin lending, but technically you could. Yeah, you're absolutely right. And so with property, yeah, it pushes up prices. But also the flip side is it's tricky because it also keeps rents down. And so it's this like double-edged sword. And so I think they were right to do that.

39:34And that is what they flagged early on, right? And they got some support around it. Well, the problem is they didn't do it properly. They didn't take it away completely. That's the issue. I know. Well, they'd do anything properly. But what did they try? I'm talking about things that they targeted that they should target. And now I'll say something that is painful for me to say. But these discretionary, typically family trusts, where you go and pull all your money in a trust and you distribute it out to different people instead of having one person earn it all because you don't get a lot of a tax benefit.

40:02You get a bit of a tax benefit by doing it. so they've massively overkilled solving that problem in the ridiculous culture wars way that they do but like I think everybody knew that that was a pretty sweet deal for people that got to bring their money into a family trust as opposed to having to earn payyg and so I don't really mind that they've got issues with that I just they did it terribly as well and um and then let's talk about the things they should have addressed and didn't address like they did nothing to try to reduce australia's dependence on income tax this country basically runs on income tax and so people get the hell text out of them in this country and inflation is very high which means wages are going up and they did nothing to try and um we didn't nothing curb spending the spending's massively increased here which is almost the biggest issue of them all like and we talk about ndos that's just one of many issues of spending overspending there's overspending They're giving Victoria billions of dollars, this SRL thing, that nobody in Victoria even wants.

41:04There's just so much ridiculous spending that you've got to attack both. So we understand that maybe there's issues with the tax system. They've probably made it worse, but we understand there are issues. But there's bigger issues with this spending side of the equation, which is now at record level. The Australian government's never spent this much, including during World Wars. Which is, if you want to say I liked Paul Keating and Bob Hawke and the way what they did, one of the key things they did is they really slashed spending. That's one of the key things they did. And so, yeah, they didn't address bracket creep in income tax.

41:33They can't, obviously. They didn't cut spending anywhere, full stop, actually increase spending, let alone brutally cut it. Massively increased spending, not just a little bit, they massively increased spending. They massively increased spending. They didn't even bother talking about what was going to happen with the family home, which is the most efficient way to avoid taxation and pass wealth onto the next generation. I mean, if anything creates an aristocratic class, it is a grandmother who bought a home for$25 ,000 dies. It gets sold in Vaucluse for$10 million and two kids get$5 million each tax free.

42:11Absolutely. And you could very easily just charge like an inflation adjusted tax on that. That would have been fair. Yeah. There's anything. There's anything you could do. Say any gain over$5 million. Start with that and then kill us by a thousand cuts. As I said to you, I would hate that. But I understand that that is one of the things that is creating a rich class of people and a struggling class of people in Australia. And that is like what the country needs to avoid. What else do you think they should have been addressing? That's a really big one. I haven't actually taken time to write down a list because I'm more focused on the stuff they did actively do wrong, let alone the stuff they haven't done.

42:51Well, obviously, I've got no list. I'm just ranting on about stuff. like I mean I wouldn't have written down one word frankly but like I think the other thing is though with this government is that I believe that the fact that young people can't get into housing is a real issue like I'm a big believer that that's an issue I know you are as well like we really think that's an issue and ultimately I know this government is really not in favor of economics but ultimately economics 101 is supply and demand and 24 percent more people live in single dwelling properties than 20 years ago and there's lots of immigration and so and there's just population growth and so we just need more houses and the thing is this every time you try to you can't build just more houses because houses take land and land is expensive and it's finite in a given area and so if you're going to grow you probably have to build apartments and there's a big nimbie not in my backyard movement in this country including me i'm one of them i'm a nimbie don't don't build don't build apartments next to me but like the thing is and why don't I want apartments next to me because I want things to keep feeling like a village or a country town in my area and I think the thing is this if you want to live in a village or a country town move to the country and if you want to live in a growing city live in a growing city but we can't have both and if it's going to be a growing city there's going to be apartments in areas where people don't want them and there's going to have to be zoning changes it sucks but no government could do it more easily than this government.

44:16It's no state government thing or federal government thing. It's a state government thing but the federal government could take all sorts of steps to try to stimulate supply. Other than this, we're going to build 75 ,000 more somethings in somewhere. And I think ultimately there is no way of getting around lending from banks, as you are a big advocate against. Lending from banks drives up prices and constrained supply drives up prices. And I will say this, this idea that says negative gearing will still apply to new construction, this is a huge problem huge problem because new construction does not change in price just because you make negative gearing available but the demand goes through the roof and it's very hard to get supply because the costs are so high and so how do you drive supply to match the demand because that is the market and my worry is we are going to see a whole lot of really low quality cheap new builds for the negative gearing market that renters are going to be forced to live in because there's not going to be enough to rent and that is the rort that is about to hit this country in the next few years i think i think the actual the thing i'd argue against that is the reason why i don't think the negative gearing on new houses that impact for us because they've taken away the capital gains tax benefit actually much less incentive to negatively gear something because the whole point of negative gearing requires two things.

45:42Yes, negative gearing during the earlier years while you're losing money, but you're also then converting that into a capital gains discountable gain. Yeah, that's a great point. So without that, I actually don't... So I think the other thing will happen is people just stop investing in property at all. Well, absolutely. And prices up further. So again, let's screw over young people even more. Well, I went and spoke to some real estate agents today, as it happens, to ask them about what the vibe is. and I tell you some interesting things that are going on. So I can talk about Victoria in particular, Melbourne in particular.

46:16The rental stock in Melbourne apparently has already fallen through the floor because of the land tax changes. There's a whole lot of people that have put their properties on the market and are selling them because after you pay for the land tax increase, the rent is not worth collecting. You basically don't make any. Like the negative gearing is too deep. And so that's the first thing that's happening. I actually don't have an issue with land tax, by the way. I think that's probably a good tax because the landowner is the benefit from always infrastructure spending. So it's basically just a circular round robin of cash, essentially.

46:47Yeah. So, yeah, that's fine. But I'm just telling you the consequence of the increase in land tax in Victoria is a whole lot of properties that were available for rent are now being sold because you can't hold them vacant because you can get hit with another tax. That's even worse. Yeah, that's true. So they've hit the market. Again, I also agree with that tax. I also agree with the vacant property tax. Yeah, I'm not opposed to it. I'm just saying these are the consequences of taxes, right? And so because there are lots of people who are looking to rent and now there are fewer rental properties because of land tax.

47:13That's fine. But then how about this for an unintended consequence? It's quite bizarre. Well, the consequence obviously of that is rental prices go up significantly. Yes, and now this is what's just happened though. And this is what's so bizarre. So a whole lot of these people that were about to – were trying to sell these properties, they have – as of this week, they've given up on trying to sell those properties because of the uncertainty. And they've put them back on the rental market because they can still keep the negative gearing if they rent them out. And it is just these, my point is not that it's good or bad.

47:47My point is the law of unintended consequences runs deep. And it is unpredictable. And when you make a little change, it's scary because of the law of unintended consequences. But this government has come along, And this is why I say I think they've done a Gough Whitlam level thing, which is let's just go and break everything and see what happens. And I think a whole lot of this is predictable and it's all bad, but there's a whole lot of really unpredictable stuff that's going to come through the system as well. Yeah, I think we've talked about this enough. It's a dark day for Australia. Tim Jim's done a real number on us, Grifter Elbow.

48:21So this is – I think everybody listening to this show gets it. I don't think we need to talk anymore. We'll go to a super quick break. We've got some actually some real business stuff to talk about after this.

48:37And we are back. And of course, a friend of the contrarians, Templin Webster, had a bit of announcement last week. And in a shock update, the former market darling stated that underlying earnings in the 2026 financial year, I think this is EBITDA, were between 20 and 22 million. This is below analysts' consensus of 30.2 million. Sales forecasts are between 6.65 and 6.75, which is about 6 % lower. So it wasn't, that part of the announcement wasn't great. Analysts certainly didn't love it. So friend of the pod number one, Sydney analyst Sam Teager said, the magnitude of weakness in EBITDA is a surprise and likely function of elevated promotions in Q3, which arguably doesn't make sense in the current environment.

49:15And he was sceptical due to the company's recent management changes. Of course, Mark Coulter's retiring and my friend Susie Stockton taking over. Friend of the pod number two, RBC's Wee Weng Chen said, the worst unexpected guidance meant Temple's revenue target will be difficult to retrieve, describing it as a very soft update. I don't know why they don't listen to the – do these people listen to the podcast? They shouldn't be surprised. Don't Sam and Wei Wang absolutely listen to the podcast because I've talked to them about Temple. Well, four weeks ago, like I was ultra explicit on what I thought was going to happen with Temple and Webster in the next four weeks or five weeks.

49:47I mean, it's played out exactly as expected. A new CEO was going to change the narrative away from growth at all costs. That's what's happened. and the market is really tough for revenue, but I heard they're squeezing their suppliers and they're going to try and pivot to EBITDA, to more profit, I didn't say EBITDA, but more profitability, but the lack of revenue is not going to make up the profitability hole that they're going to have. Well, this is not what they're claiming. So what the company said is that new measures to grow margin, which includes new promotional cadence, repricing, supply.

50:18I just want to say what these things mean. Say them slowly. I'll say what they mean. Okay, so new promotional cadence. That means we're spending less money burning through marketing at the same amount of gross profit we're making. Yeah, so less discounts. Repricing. Lifting prices. Yeah. Obtaining supplier support. Forcing suppliers to give us better terms and probably sell us stuff more cheaply. I know some of the stuff they're doing to suppliers. I don't want to talk about it, but like some of it's pretty aggressive. Yeah, and slow to fixed cost growth. We finally realised we shouldn't be spending so much additional money every year.

50:51On people, essentially. And so this led to the most profitable April in the company's history. I think it made 2.5 million. When you say profitable, that's not Adam Schwab profitable, is it? This is EBITDA. But these guys don't, in fairness, they don't do a huge amount of dodgy stuff with EBITDA. There's not a huge amount of capitalisation. So, yeah, there definitely is a difference between EBITDA and net, but it's not as gross as some people. Yeah, it's not software style. But there is definitely some, remember, we've talked about this in the past. It's not, it's certainly not super clear. EBITDA is not EBIT.

51:21There's definitely a difference. But the company is claiming that EBITDA will be$40 million in FY27, which is 13 % above current consensus. Even in the low-growth scenarios, that's really pulling all those levers we talked about before. As you notice, the contrarians were a couple of years ahead of what pretty much the entire market thought. We both said this, I think, at least two or three years ago. We said it was a brilliantly run$300 million business, and this is when the business is worth$3 billion on the bourse. Of course, since then, the share price has slumped by 80%, and it's now worth just under$600 million.

51:51So it's a big decrease. But we should note Mark Coulter, who's departing as CEO and taking on the exec chair role, when Mark took over, the share price was less than 40 cents. I think it was like 25 or 30 cents. So even with this big drawdown, it's still been like a 12-bagger under Mark's guidance and Conrad's guidance. So we can talk about it should never have been$3 billion. But this has been a great story from where he took it. But obviously going forward is a different story. Well, I think this played out exactly as we've been saying for three years. There's still a bit to play out. We know how it's going to play out.

52:25Three years ago, we said, this is a company that keeps its valuation by keeping massive top line growth and tiny EBITDA margins, and it never grows its EBITDA margin. And eventually, they're going to not be able to grow at this rate. And then the story is going to fall apart. And then they're going to try and pivot to being much more profitable, and probably it's a$300 million business. And I think that's exactly the road. This is going down and it still has to halve to get to a$300 million business. It might not halve because like enough time might pass that it's worth more than$300 million. But ultimately this is…

52:55No, I think it still halves. I think it gets like caught 25 a bit and you get a 10, 12 multiple because the growth isn't huge and it's$300 million. That's very possible. It depends on growth. It depends on growth of what multiple you get. But they've talked about we're going to smash growth and we're going to do all this stuff. This year. But the problem is, the problem with all that stuff, you can really only do it once. You can only squeeze supply out if you're really dominant. No, no, you're right. You do it once. I know what they're doing. They can do it once. Yeah. Yeah, so you've got the sort of supplier thing, the discount promotional cadence, well, then your top of funnel and your bottom of funnel sort of shrinks.

53:28Repricing, where you can only increase the pricing so many times. Like there's limits to all this. So I think you get one kick out of it. Maybe they get to 40 next year. It's not impossible by any stretch. But then EBITDA, EBITDA. But let's talk about NPAT multiples because that's what this is going to be valued on. But then the question is what happens after that because then you're not growing. So you're probably not growing EBITDA either again. So you're sort of stuck at that level. Well, I think they can grow. That's maybe where you and I disagree. So I think this business should happily grow 15 plus percent.

53:56But not when you're really driving EBITDA like that, is not my point. No, I think it will. I think they can do it. But they don't even think that. They're saying they won't do that, I don't think. I know. And also this revenue miss is not their fault. Like this is why it was so obvious. this revenue miss is the market's fault now as it happens a lot of stuff i see like is also like it's a tough market across everything that's consumer discretionary and the more expensive it's home like we've seen home home sales drop and so yeah it's tough and the and the more expensive it is the more discretion you know like the more the difficult it is if it's discretionary and they're still growing right like they still manage to drive growth in their revenue so i just think um this is uh what we thought it was just took a while to get there god i wish i would have shorted this in actuality all the way down uh let's move on uh australia's highest paid and possibly worst performing ceo zero boss sakinda singh cassidy can you do her nightmare run uh atop the embattled sass giant after being forced to personally apologize to customers in australia and globally after the accounting platform was hit by five days of outages the one accountant has described as nothing short of a shit show.

55:10Xero customers started reporting errors on Thursday, September of May, and Xero website showed reports continued through Monday, May 11th, when customers received their personal apology from Sing Cassidy, which I doubt was written by her. I should note, we were one of the companies impacted the most. We still use Xero for now, although we are switching off it, thankfully. Well, you're not too big for Xero. I don't really understand how big it goes. We are. We're moving to NetSuite this year. So we live with it for as long as we do. Good luck on that migration. Enjoy that. We tried it once and we were a much more complex business but hopefully this time we'll get it.

55:44I've got a good team working on it so fingers crossed we can get it right. Talk to me in six months. Yeah, we will. Obviously the record of people who have had challenge integrations is long and wide. Whatever it costs, it doesn't cost that. So Sincassidy claims zero is working hard on determining the root cause of these issues and most importantly what must do to avoid this in the future. And the business had contacted the ATO about any imminent deadlines and allegedly the ATO were understanding the situation. A dog ate my homework stall set up for Xero users, it sounds like. Ironically, a highly paid SingCast, I think she's paid$25 million a year, was arrogantly...

56:20Yes. So SingCast was arrogantly talking down the impact of the cesspocalypse in February, claiming that Xero core products cannot be easily replicated by AI because data gives an edge over new arrivals. As it turns out, Xero's base products don't even seem to work. Well, that's a bit right. This week did not work during the tax week, the most important week of the year. The software went down. Well, it's unfortunate timing. What do they say happened? They haven't explained it. It's just obviously something went wrong. We couldn't get our numbers done for like three or four days because the APIs weren't working.

56:51I'm absolutely not minimising it. It's like days is hopeless. Think of all the poor accountants who like working massive hours trying to get stuff done and zero go. This is catastrophic. and this would be a long-term damage to Xero's brand. We talk about the competitive advantages it has that they're doing the best to destroy, but this is pretty horrendous, Adam. Well, you think it's easy to get off it? I mean, I forget about you going to NetSuite. You're doing that because you've outgrown it. But for someone who's running a$3 million business, let's say, they're probably using Xero. You think it's easy to get off it and get onto something else?

57:24How hard is it? I don't know. But I would have thought that MYRB, for example, would have some products to make it transferable. Like, without having – maybe we can tell us. But, like, obviously people do. And the market really seems to hate St Cassidy and embattled Chairman David Thodey, who is obviously also Chancellor of the Antisemitic University of Sydney, with zero shares down 36 % in the past six months. And this is back to share price levels last seen in 2019. And bear in mind, this is a company that doesn't pay dividends. So this has been an unmitigated disaster for shareholders who have not only seen their share price being smashed, They actually have the ignominy of paying St Cassidy$25 million a year for the privilege.

58:02So could it get any worse for these shareholders? Well, on the extreme downside, this is bad timing for a share price fall because if you buy it or you're only upside down, it's going to be on the higher tax rate. It's actually pretty tempting to sell it and buy it back or something. Well, in fairness, not many people are nursing capital gains here because if you bought after 2019, you ain't made a brass razoo off this dog. Look, so... You're too harsh on David Thodey, by the way. I'm just going to quote it. I think you're too soft on poor old Thodey, who was an okay chairman of Teltrum. He's had a disastrous time since he left.

58:35Yeah, and he has... Like, this has not been great. Yeah, and this is on him. He hides in Cassidy. He paid her the 25 million bucks. He oversaw them... He's in the Mille... What was the DUB acquisition they did in the States? That overpaste... I can't remember. The Israeli acquisition. Yeah, Milleo. Milleo. It was called Milleo. It was just grossly... They paid it. They couldn't have bought it at the worst time. They literally bought it a week before the Saspocalypse. So this is a company that's firing on literally zero cylinders that should be one of the great Australian New Zealand businesses.

59:02Terrible. This is just a debacle. Well, it is one of the great New Zealand businesses. The thing is this. So we're very critical or you're very critical, but I totally agree with you, about a whole lot of things to do with the way this business is run. And I would just say the software outage affecting you definitely didn't warm your heart towards this business. but it's still an incredible business. I think I'm going to say we have to have a category of business that Templin Webster is on the fringes of it and Atlassian is very much inside it and maybe we put zero inside it as well which is you're a really good business making lots of revenue, stop spending it, generate profits and give it to your shareholders and by the way in the age of CGT-pocalypse or whatever you want to call it, it's going to be very nice to give dividends because we have the worst CGT system in the OECD, but the most generous dividend system in the OECD.

1:00:00And so make some money, stop spending, start paying it out. Your share price will keep falling to an appropriate level. And then you can build from there as a great company making lots of money and reconsider your global expansion plans. Speaking of Atlassian, Atlassian had a pretty big couple of weeks. I had an announcement. We touched on it last week. Mike Cranenbrooks, who must be a listener of the Contrarians podcast, because he told an investor briefing at the Alassian's annual conference in California that the software giant will make a profit next year, ending a run of losses that dated back to 2016.

1:00:33A week earlier, Alassian announced its quarterly financials. We didn't talk about this, but it's worth touching on. Actually impressed the market with revenue growth of 32%. Margin expanded, so tick, tick. The loss expanded to$9.8 million, but there's actually, when you look at it, there was actually a bunch of redundancies in there. So it basically broke even for the quarter. So tick, that's for them. relative to the sort of$71 million loss last year. And a lesson trumped revenue growth. But one sort of point to note, and this was sort of buried deep, and that's – we've talked about this a lot.

1:01:06They have a graph on customers paying – how many customers they have. And in this case they use customers paying$10 ,000 a year or more. What do you reckon happened to that this year, this quarter? Well, I would have said it went up, but you're making me be very suspicious about why you're asking this question. Well, it's always gone up. In the history of the business, numbers never dropped. And I think it dropped a tiny bit, effectively flat, quarter on quarter, which means all that growth came from expansion revenue. So we don't dislike expansion revenue. We love expansion revenue. But it's problematic when you can't grow customers, when your customers are starting to churn.

1:01:41Do we know they might have grown customers that spend less than$10 ,000? I think that that stopped growing years ago, which is why they stopped reporting it. Right. So they started going, and the 10 ,000 one was some sort of growth. So there's clearly strong, like all that revenue uptick was expansion revenue. So I've got real doubts on how long they continue pushing this, especially in the Sasspocalypse times where people are, yeah, we know that Lassian's sticky and it's cheap and whatever, that's great, but eventually you just keep pushing your customers. We talked about Temple a few minutes ago.

1:02:10There's only so long these guys can keep pushing customers to pay more. Well, I was going to say they need to focus on the three Cs and then I realised the first word is actually a K. It is keep cutting costs. That is what they need to do. Keep cutting costs. You'll get there. The share price is low enough now that they can't be punished for making profits. Yeah. So you saw the share price bounce significantly after the announcement a couple of weeks ago and it's really dropped back. It's still a little bit higher than it was, but it's still 50 % down in six months. So it's still been the worst hit of pretty much every NASDAQ company, I think, is Atlassian.

1:02:46So it's still in disaster zones. If you're an Atlassian shareholder, 80 % is 2021 drop, which is back at 2018 level. So if you invested in Atlassian eight years ago, you've literally made a zero return while the market's absolutely ripped. So it's been a not disaster. What's their market cap? Mark cap's$22 billion US. Okay. Okay, so what's that 30 AUD? Not even anymore, probably 27 or 8 AUD? Yeah, call it 30. And how much AUD have Mike and Scott taken off the table? Five each? About 10, yeah. So their IR index score, so insider relative exit, is a third. It's a third. Yeah, it's a third. That's pretty high.

1:03:29That's good. So they have taken, sold down now what is one third of the value of the company? It was almost a half at one point. It's obviously rebounded a bit since absolute lows, but that's pretty significant. And they've obviously kindly stopped selling shares now. It's gotten so cheap. They rode it all the way down and then they've had enough. So they're pretty shrewd investors, these two guys. They certainly know when to sell. Yeah. Well, that's very interesting. Let's move on to our deep dive for the week, which is actually a pretty cool one. Obviously, our deep dive is brought to you by Terium Capital.

1:03:56They acquired tech companies that grow sustainably over decades. Thinking of selling, discuss how it might work at terium.capital.com. contrarians. And the company I want to talk about today is a business that a lot of people, listeners will have a bit to do with, I reckon, which is called Lime. So, you know, Lime, a famous friend of Lime, bikes and scooters. And after years of speculation, the scooter and bike rental business, and one of my favourite products, is going public filing an S1 last week. Now, when do you reckon Lime was founded? 10 years ago. Yeah, 2017. That's right. How many cities do you reckon it operates in?

1:04:27Or how many countries? How many countries? 50. 29. Not bad. How many cities? 100. 230. Oh, there you go. What percentage of its revenue comes from the UK? Well, is that its biggest? I wouldn't have even known that's its biggest market. Biggest market. Is that its biggest market? Oh, UK or US, but I think UK is its biggest. 15. 22%. Not bad. So revenue has grown from 521 million to 686 million last year to 887. It's in the last three years, which is pretty strong growth. We'll start talking about its losses, but this is a bit murky as always. with losses, but it's net losses after tax, after interest loss, went from$33 million last year to $58 million this year, but that's really on the back of higher interest costs.

1:05:09The operating profit of the business went from$24 million loss in 2023 to$47 in 2024 to$70 last year. There is a lot of stuff in there, and the big one in there is depreciation, because this is obviously a business that buys assets. Well, I don't believe in depreciation. I don't know if you noticed that. I'd actually had a look at this horrible, disgusting American filing. Have you had a lot of these to look at? They burn your eyes out. But I don't know if you noticed this, but they don't believe in depreciation. They depreciate for$20 million a year, so it's in there. Yeah, yeah, they have to do it because Gap.

1:05:41Gap, they have to do it. But they don't believe in it. They don't believe in it. It's like you put the Christmas tree up and you sit on the Santa lap, but that doesn't mean you believe in Santa. You just sit on his lap because that's what you do at Christmas. That's how they feel about depreciation. It's their Santa Claus. Because when they report their gross profit margin. Ignore it. They also report such a thing as adjusted gross profit margin, which means imagine if we got to make a gross profit, but imagine we didn't have to buy the actual bikes. That would be real gross profit, wouldn't it?

1:06:19It sounds a bit like Adam Newman's WeWork community earnings. Remember that? Which ignored like marketing costs. It was pretty important stuff. And the problem is if you're a scooter and bike business and you decided not to have scooter and bike, it would be probably difficult to earn the rest of the gross profit as well. And so that is – and I looked at that and I just thought there's a whole lot of problems with this business of the economics and financial front, but you have just undermined your credibility with me completely with that single action of saying our real gross margin, our adjusted gross margin, is actually doesn't include any of the cost of the bikes and scooters because of course…

1:07:00I just ignored that whole margin thing. I don't think it was worth looking at. Well, I had issues. Well, you'll get to it because you'll do your talk but like when you get to gross profit, it's a bit depressing and a bit confusing as well by the way But I just thought, you know, sometimes just weird things happen and like, I don't know. I think that's very good. I've got to think I'll be more positive about this business than you, but let's keep going. So if you go through the history of Lime's most recent capital raising, in 2019 it had a massive round, raised$300 million at$2.4 billion valuation.

1:07:32This is sort of a pretty boom time valuation. Had a huge down round in COVID, which I didn't realise actually. So 2020 in May, so this is sort of peak COVID. but imagine this business was just smashed by COVID because obviously an outdoor bike and scooter business. They raised$170 at 510 mil value, just to obviously keep the lights on. That's a huge down round. And this is back up to$2 billion. So obviously this is not back to peak valuation, but obviously a big increase on that down round in 2020. Major shareholders, obviously Uber's a big shareholder at 10%. Andreessen Horowitz owns about 5%.

1:08:05Elfbert and Bain came in in that 2020 round and basically managers and founders own 58%. So the CEO is a guy called Wayne Ting, who was actually chief of staff at Uber. So he wasn't actually, he didn't found this business. A guy called Brad Bauer founded him and he was replaced by Ting in May 2020. And Ting's actually done a great job effectively saving this business. A big reason for the timing of the IPO is Lime's pending debt bomb. And the business has two major issues. According to TechCrunch, Lime has a billion dollars in current liabilities with 700 million due at the end of 2026. I think there's 846 million dollars in con notes.

1:08:38and I think Lime's got$260 million. So clearly that's problematic. So they really have to float so these condos can convert to equity to survive. And they've got$250 million in debt, I think, which is interim debt, which they'll basically pay back with the proceeds of the IPO. So this is why they need an IPO now. It sounds like time really is of the essence. They don't know an IPO now. They've got some real issues. So we could maybe say let's find some equity suckers in a hurry to get rid of our scary debt holders. I mean, that's really what this IPO is. Well, clearly I want to get rid of debt holders.

1:09:12It sounds like I'm a lot more bullish on this business generally than you are. Well, you're welcome to have this business for$2 billion. Enjoy every last share. So why don't you tell me your thesis on what you think of the business before I talk about mine? Well, first let's talk about this little picture that they've drawn. You see their nice picture? I can tell you what page it's on. I can't tell you what page it's on because it's American. I don't know if page numbers. it is early on because you know what they do is they have this like ugly report and then but the first like eight pages are like the nice thing that we would put out yeah and so they've got a picture of someone two people one person riding a bike one person riding a scooter that of course don't exist from a gross margin perspective and then they have their mission statement build a future where transportation is shared affordable and carbon free that's good i like that then more photos of people riding bikes that don't exist on the income statement then lime is the largest global shared micro mobility business with the number one that is next to it a footnote which says some weird stuff that says that might or might not be true i know i'm joking that is that is true it's too small i can't read this like footnote what is i'm very interested in this footnote we define okay this is good this is good i like this so they say we are the largest global shed micro mobility business now the good thing is micro mobility no one knows what that means and then their footnote is we define global operators as businesses with micro mobility solutions available in cities on at least three continents well that doesn't sound arbitrary at all which is good about that and so um and then we come to our nice diagram on the page number that doesn't exist limes platform creates and supports a durable network effect and so i'll stop making fun of them.

1:10:53They want to ask you your real view and I'll summarize it as this. They say we have local network effects and economies of scale. So that's good. We like talking about these things. And so do we think they have network effects and do we think they have economies of scale? And so let's start with network effects. So I don't think they have network effects because a network effect means every new person that uses it, every new customer, makes it better for the other customers as well as it being it's better for them as well because all the other customers are there. Now, if I go and use Lime bikes, how is that better for you?

1:11:30Is that a question? Or have you finished your soliloquy? Yeah, that's a question. That's my soliloquy over, monologue complete. It's kind of an abrupt end, that monologue. Yeah, because I wanted your opinion. It's like a car just slammed into a wall. I tried to create a safe space for you to speak. So Hamilton Helmer's got two powers. One's called Seven Powers, one's Network FX, and one's Scale Economies. And the two are almost always confused. So we know Scale Economies is classic cases. As you get more people, you can lower costs for everyone. And Network Benefits FX is, as you said, extra people on the node make the network stronger.

1:12:07And the classic example of that is the telephone. If all me, you and Mike all have a telephone, it's much more beneficial than if you and Mike have a telephone because if just the two of you have a telephone, we can't organise a podcast because I'm not involved. No, but even better, even better, if now my mum gets a telephone, that makes it better for all of us, especially or maybe least of all me, depending on the day. But not only is it better for her that we're all on it, but it's now better for us that she joined because now we can call her as well and I get better food. So that's a good example of network.

1:12:40What do you call it? Network effects or network effects. And very few businesses have real network effects. So it is a really misused power, or probably the most misused power. I think this business does have some network effects. And let me just talk about quickly, before I talk about network effects, let's talk about a couple of the numbers. And this is why I kind of like the business. And clearly, if you look at it now, there's some issues in the business. It's not really making money, but it's growing nicely. Let's go back to 2023. And they have gross profit of$169 million. Then they have, of course, sales expenses, operations expenses, and R &D expenses.

1:13:13And so total expenses of$193. So that was making what's called an operating loss. Then you go back, let's go to this year, the skip over 2024, go straight to 2025. GDP has basically doubled, exactly doubled. It's now$345 million. Sales, general and administrative expenses are up about 30%, from$114 million to$169 million. Operations support, pretty flat. And R &D, up a bit, like 40%, but flattish. So their expenses have gone from$193 million to$275 million. So the expenses have gone up about 37 % while gross profits doubled. So what we're seeing there is as this business grows, it becomes significantly more profitable.

1:13:51That's a really good thing. We talk about a lot of businesses in the reverse, that they grow and they become less profitable. That's very, very bad. This is a good business. I'm completely supportive of everything that you've just said about this business. So now going back to your court powers, so the court first principles. Well, it's very lovely to call them my powers. Thank you. I appreciate that. Your adoption of powers. This is Hamilton Helmand's powers. So look at these powers and do we think this has a network effect? So I'm a massive line bike user. So I think there's a couple of things.

1:14:23So I think the scale benefit is very clear. As you get bigger, so look at what they've got some, they use battery technology. So as they have more and more bikes, they can get much better scale that you can get one guy replacing 30 or 40 batteries in one hit. You can invest much more in batteries, get better batteries and use your scale to have a better product. You can buy bikes much more cheaply. So instead of paying$1 ,000 a bike, you pay$100 a bike because you're buying a lot more bikes. So pretty clear scale benefits here. And even another scale benefit, which they incorrectly put in network effects benefit, is utilisation.

1:14:57So the more people that are using the platform, the more likely it is that the bike, the usage of any given bike will head towards 100 % usage because the worst thing for them is bikes that they've paid for sitting there unutilized. So I just want to say, Lime has put utilization in network effects, but utilization has actually economies of scale. That is scalable. I think there is a bit of a network effect. And you'll probably disagree, but I think... I already disagree before you even said it. This will be interesting to hear because I want to have my mind changed on this because I do agree it has good jaws where the growth of gross profit is accelerating faster than expenses.

1:15:39And that's scale. That's pure scale. and a bit of brand. And this is, don't forget, this is a sticky business. Once you use Lime, so I use Lime in Melbourne and Sydney. So when I go to London, I just open my Lime app. I've got all my stuff on there. I've got this Lime One thing. So I've got my Lime Bucks. I know what's, I know look for the green bike. So it's actually really hard for another competitor to displace. That's a scale effect. That's scale. Again, I'm still on scale. And that's also brand, scale and brand. But they've clearly got scale powers. They've got, I think, a chunk of brand powers.

1:16:09I agree they've got brand power. I'll tell you how they've got brand power because when I'm on the beach in Melbourne and I want to get a bike, if there's a Lime bike there and another one, whatever the blue one is, I'll always get the Lime bike. Yeah, the purple one. Not just because I have the app but because I'm like Lime, yeah, I kind of know that thing. Yeah, exactly. So definitely they've got brand. Yeah. And two powers is good. And they've got a bit of counter positioning against taxis as well. So the question is do I also have a network effect which really puts them in the stratosphere?

1:16:38You can get four powers. That's a really good business. Well, if you can get four powers and if you believe the counterposition power, I didn't bother arguing with you. But I think, you know, if they would have given you an outage for four days, you wouldn't be speaking about them this nicely. They'd be in the zero category. Very hard to have an outage when you're a business. I'm not sure they are truly counterposition. But I take your point that they are a form of transportation that didn't exist previously and provide an alternative to everything that people were using before. Yeah, they count a position against public transport, against taxis, against Ubers, against your own car.

1:17:15They count a position big time, I think. And they also increase the market because I used to go to London and have to get a tube. I used to get the tube or walk. Now I'll get Lime bikes everywhere in London. So here's my network argument. I'm going to move on to the network argument, which is the core, the hill to die on. London's the biggest city for Lime globally, I think. And you can go anywhere in London and there's bikes. There's bikes everywhere. And Melbourne is getting a bit more bikes, but Melbourne, there aren't that many bikes. Like I often have to walk for like five, six minutes to find a bike in Melbourne.

1:17:43London, there's a bike of like every corner. At least you can walk around 20 metres, there's a bike. So why are there so many bikes? Because there's lots of people who use limes. The more people use limes, the more bikes they buy. Because these bikes aren't utilised 100%, they're certainly utilised 80%. As you increase the number of bikes, you can have more bikes unutilised because you've got more people using them. because you've got people paying this call, this Lime One fee, and you're a member of Lime One. So as your Lime network grows, they can afford to have more bikes on the street. You have more bikes on the street, it's easier to find a bike.

1:18:16So where the network effect kicks in is if you're using Lime and Mike's using Lime and I'm using Lime and we all live in the same little town, they're going to put more bikes in. Versus if just me, if I was just using Lime, they're going to put less bikes in. So I actually benefit from you guys using Lime. So Lime has more utility in a city with more people using it. So London's got more utility for Lime bikes than Geelong because there's less people who use Lime bikes in Geelong. Hence, that is a great example of a network effect. More nodes improves the utility of each node and that is what is happening with Lime.

1:18:46It's more persuasive than I was expecting. I mean, for the first 90 % of that soliloquy, because you called me a soliloquy, for the first 90 % of, yeah, soliloquist exactly, for the first 90 % I was digging your grave on top of that hill. prepared to die on um but and like especially when you started talking about utilization because i think that is really an economies of scale thing but i i do think there's validity to your point and the point is a bit it's it's a bit of a stretch but i think you possibly get there because the thing is this me using it does not make it better for you but lots of me's using it in the same place as you using it will let them make it better for you.

1:19:32If you look at all their metrics, like every metric is looking good. Like the gross profit margin we talked about before is significantly higher. They actually don't spend – I'm looking – they've got this uneconomics breakdown in the S1, which you may have noticed. So for every$100 revenue, they spend$23 on labour, which actually sounded pretty low because they've got to go around and switch all the batteries constantly. They spend only 6 % –$6 on parts, which is really low,$3 on permits, whatever,$3 on facilities,$12 on local councils, and then you get to your adjusted profit, and then you've got DNA after that.

1:20:04And you've still got a price-to-profit margin notwithstanding that. So the uniconomics look okay. Like, it's not – obviously, you've got interest in all that kind of stuff now because of all the debt to take out because you've got to build this network. But this is – once they are the global leader, they've kind of got that Uber effect. obviously that part owned by Uber. They've got kind of that Uber benefit where, like why does everybody use Uber overseas? Well, not everybody. Obviously, people use Diddy who are in China, et cetera. But most people who live in the US or Australia or UK, Uber's the default because there's nothing else really.

1:20:33And I go to the UK, I'm using Uber. I go to the US, I'm using Uber. Lime has that very similar thing. Once you're on, you're kind of on. And as it grows, it's got to be really hard. Whether or not you're on network, we can argue about that. But we all agree they've got huge scale benefits. and that's untouchable. Like no one can get these scale benefits that they have. So if you think this segment of shared mobility, bikes and scooters is a good segment, I think it's a great segment, then this is the one to back because there's only been one winner here. Yeah, that is possibly true, but there is a few issues.

1:21:07The first thing I'd say to that is, that's fine, but at what price? $2 billion? And so how are they going to get to a valuation that justifies$2 billion? dollars like and maybe i'd say how fast can they get to 50 or 100 million dollars profit and the concern i've got is like this is net profit you're talking about well that would be good but i'd kind of take anything i mean something with depreciation in it would be good but like when i look at that so their net loss went up in um 2025 the thing that and this is a very seasonal business and And the reason I say it's seasonal is because the net loss in 2025 was$59 million, but the net loss at the end of Q1 2025 was$56 million.

1:21:57And so obviously they claw a whole lot of this back at some point because this is obviously their worst quarter, the first quarter. It's the first calendar quarter. That's when it's least utilized. probably because it's the middle of winter in their key markets would be my guess of why it's the least utilised. But the thing that worries me about this, I hear all the things that you're saying about operating this and that and whatever else, but the thing that worries me is like you look at their maybe adjusted EBITDA and you see it. No, I'm not. I'm looking at the net loss. I'm not looking at adjusted anything at all.

1:22:33Which number are you looking at? Look at net loss, which was negative. That's everything. That's got interest in it. It's got tax in there. It's got everything. There's like depreciation in there. But the net loss went from$34 million in 2024 to$59 million in 2025. And the three-month net loss went from$56 million in 2025 to$61 million in 2026. That number's weird. If you look at the 24 number, depreciation went from$109 million in 23 to 93 in 24 to 128. So it's a really weird – if that depreciation stayed the same and you've got$7 million,$8 million in IPO costs, they're pretty flat year on year actually.

1:23:14So that difference, yeah, virtually exactly flat, give or take a few mil. So you can argue they haven't improved their net margin but they've certainly improved their cash flows significantly better. Like this is an improving business. I don't think you can disagree with that. No, I agree it's improving. I agree it's improving. What's very weird, like because, you know, they've got, I keep saying they've got a full year and three months. the gross margin as a percentage of revenue, not the adjusted gross margin, is 39 % for 2025. It was actually down from 41 % in 2024 but putting that to the side.

1:23:52So it was 39 % for the year of 2025. That's because that weird depreciation thing though that we've had depreciation was so low. This is my more better point that you're going to like and it's weird but also you'll like it because it's better. So it was 39 % for the whole of 25. But for the first three months of the year for 2025, it was only 22%. So that's a weird – and so if we take that number and we compare it to the first three months of 2026, that number goes up to 26%. So definitely even their gross margin is improving. I definitely agree with you that this is a business that with scale does get better and better.

1:24:29And I agree with you that this feels like it's going to be the winner in the space. and if it's not winner takes all, it's winner takes a hell of a lot and you don't want to back number two. So the question is this. If we take, I would take EBIT earnings before interest and tax, which is everything except the tax and they have a big interest bill, okay? So let's take out the interest and let's take out the provision for income tax, which is a gain because they actually lose money. so their losses before income tax in 2025 was 49 million dollars up from 30 but just forget about that for a second was 29 mil and take out the interest expense so it's 49 mil so take out the interest expense of 21 it was 28 mil so that's how much they actually lost in earnings before interest and tax EBIT and so i'm paying two billion dollars for a business there's also $8 million in public company costs, obviously.

1:25:29Where is that? It's in one of the – there's one table. It's hidden somewhere? It's in a table. A different table. All right. So take that out and let's say it's a$20 million loss, okay? So I'm paying$2 billion for a company that loses$20 million. Now, that might sound ridiculous, possibly because it is, but also if it was going to make$2 billion next year instead of a$20 million loss, that would be a bargain, right? I'd be paying one times four earnings. That'd be good. Obviously, it's not doing that. But my point is what it's doing today is kind of less important in a way than what you think it's going to do in future.

1:26:06Yeah. Yeah, that's the Amazon argument. Amazon lost money for 25 years and you would have better – had you invested 25 years ago, you'd own extremely well. I believe that's called survivorship bias when one – Yeah. Amazon's a bad example to use. But it's more the point is one year of – you need to look at the trend. And that's why this trend, 24 is weird because of the whole depreciation thing, but 23 to 25 is a significant improvement in pretty much every metric. So it's the right direction. And so they grew their revenue by 30%. And so that's good year on year. And the question is, can they keep growing by 30 %?

1:26:42Let's say yes. Let's say they can keep growing by 30%. They'll grow, let's say,$250 million of revenue this year. and the question is how much of that 250 mil do you think will actually flow down into profits and how many and i'll call it ebit yeah and how many years forward you need to go to get to a number that justifies a two billion dollar valuation which is your starting point now you might say a 30 million dollar a 30 percent growing business if we just use the simple price to earnings growth should have a 30 % sort of a 30 times price to earnings ratio so it should be valued at 30 times its after-tax earnings and that would mean roughly 65 to 70 million dollars of after-tax earnings let's call it let's just be simple and call it 90 million dollars of EBIT so do you think they can get from minus 20 million dollars to 90 mil positive 90 mil of EBIT yeah I think they can how many years do you think it will take let's say i think it might take two to three so i think they're going to get to a fair valuation in two to three years it might be faster it might not i just don't think i want to pay that valuation today that's my issue i don't think it's a problem i think this is this is feels like very remember uber lost money lost money lost money then bang started making heaps of money i'm sure like i'm on much bigger revenue yeah i'm very confident this is one of those businesses, and this is different to Uber because the problem Uber has is you've got to pay the driver per hour anyway.

1:28:13You don't have to pay, you've got to change the batteries, but 6 % labour cost is lower. Uber's got like 30 % labour cost. So this is much better economics than Uber actually. It just needs to, and what we don't have is data on specific cities. So I suspect they're making a heap of money in London, but probably not making money in the small cities. And as the cities grow, they did a case study in Seattle in there, it's pretty interesting. But as the city grows, this is what we saw with Uber, it becomes far, far more profitable. So I think this is a business that, say it lists the$2 billion, it may drop to a billion.

1:28:41I think people see what you're saying now and get disillusioned. But as long as it survives, this is, I think, a$10 plus billion business. I think it's a great business if it survives. And I think it will survive. Oh, I think we are sadly in total agreement on this. I think compared to Uber, this is a much lower TAM, totally addressable market, but much better long-term economics until the driverless cars come. Well, can I add one more thing that I love about, and you just mentioned it inadvertently. I think this is a much even better business when we've got widespread driverless cars. And you want to know why I think this?

1:29:16Because people aren't going to knock these people off their bikes. Yeah. I think one of the big reasons people don't use these is they're legitimately scared about being hit by idiot drivers because there are a million idiot drivers out there. Once you've got driverless cars, suddenly these bikes are a hell of a lot safer. So I think it actually increases the time again. So I think you said my thesis, which is you don't have to buy this at a$2 billion IPO. You can buy it when it halves or it might go to less than half. If the market crashes, a company like this is going to be absolutely slaughtered.

1:29:46And so I know you don't have to time markets. Like timing markets is not a great game. But I do think two bill is expensive for this. If it was one bill, I'd say it feels pretty reasonable to buy this at one bill because I do think this will survive and will become very profitable at scale. I just think it's about twice as expensive as it should be. And the reason it's that price is because that was probably a previously anchored price, right? Yeah, Con Notes. Well, I think the Con Notes have a cap of 1.5, 20 % discount. There's some external reason for this. I actually don't think the$2 billion is unreasonable.

1:30:21Will they get this away or not? I suspect they will. I don't think it's a good enough business. They have to raise a lot of money. Yeah. Well, actually, they only have to raise$250 because the Con Notes just convert and they just don't loot. but they have to raise the$2.50 to pay down some of that external debt. Yeah, well, we can say though if the con notes convert, that means they issue more shares and that means either the share price falls or you're paying even more for the business if the share price doesn't fall. You're paying more for the business is what happens. And so you're now getting me to pay even more than two bill.

1:30:52This is like, what are you, an auctioneer? I thought two bill was too expensive. I think if you look at the fundamental, This is an amazing business fundamentally. What I argue is bad valuation at this point in time. I think I see this being a$10 plus billion business. No sweat. Somebody will, private equity might clean it up if the share price struggles. Somebody will buy this and make a fortune because it's a great business. Like, I've got an e-bike in Melbourne, but I'm a heavy line bike user everywhere I go. I go in Gold Coast, I use it. I go to London, I use it. I go to Sydney, I use it. I'll ride from the city to our Bondi store on a line bike.

1:31:25I'll see hundreds of people on these bikes. That's literally everywhere. It's such a great, and you say never short a religion. I think these are somewhat of a religion. I think that's an incredible product. They've got unbelievable unmatchable scale that I don't think anybody short of somebody willing to just burn billions of dollars can actually match. Well, firstly, I call this a cult, not a religion, because it's niche, right? You know, you think it's a religion because people in cults think they're religions, but actually it's a cult. By the way, I'm a bit in this cult as well, I just want to say.

1:31:55Do you use them? I use them, yes. Oh, cool. Mark, do you use them? You know what? I used to use them a fair bit more, but then I think they actually got banned from my, where I was living. And then I'll. Scooters did. Not bikes, only scooters. I think they both did. Because I used to use them both a fair bit. I'm pretty sure. Which common towns do you live in again? I lived in Richmond at this point and I think the scooters and bikes. No, Richmond. Richmond I'm pretty sure you can use them. I'm using them. Okay. Adam's going to make a phone call to the local council enrichment. That wasn't to me.

1:32:33They're very good on the Gold Coast. I love them on the Gold Coast. Oh, amazing on the Gold Coast. That's the world's best location for them because everything is – oh, that's true. But Tel Aviv, if you want to get knocked off by something, that's the place to go. But this is what I think. Let me ask you this on a – what's your answer, Mike? Are you scared of getting knocked off or not? Yes or no? It's a long-winded answer about your council. What's your answer? No, I was answering just Adam's question of do I use them. Don't worry about his question. Are you scared of getting knocked off the bike, yes or no?

1:33:05No, I'm not. Okay. And question number three, if they're available in your area, would you use them once a month? 100%. So you have to have to ask questions to this guy, Adam. You can learn a lesson there. You give him two words. You make them direct. Close-ended. Exactly the kind of questions they teach you not to ask in medical school. Like you just hit them with that, right? Well done, Mike. three out of three give yourself a clap and so let me this is my i'll give you the the financial thesis on this do you think this business can 11x in size from what it did in 2025 yes right eventually yeah it can 11 it can 11x so that's 10 bill that's 10 billion in revenue and do you think they could make a 20 margin probably and so that's two billion dollars in impact they could achieve in the future and so that is much more than your 10 billion dollar valuation if this thesis plays out this could be a 50 billion dollar business and so i i do i think you've persuaded me that my general hatred for the way that they report pretending that they don't have to pay for bikes is is not good but actually there's a better business sitting behind here and i think this is not going broke like this business will be crazy to go broke totally mismanaged and they probably have a shot at a very substantial return.

1:34:21And don't forget, as technology gets better, the batteries get better, the margin improves, again, more people use them, utilisation goes up. So everything gets better with this extra, extra scale. So they've kind of cracked the hard part and they've just got to survive, get this IPO away, survive. And suddenly it's a – and they've got some smart investors here. You've got Google in there, you've got Andreessen in there, you've got Bain in there, obviously Uber. Why didn't Uber just give them$2 billion? I don't know. No idea. It does make sense that Uber buys them out, but there's other shareholders in there.

1:34:49I don't know. So if they get a two-bill IPO, Uber pays them three-bill, whatever. Like it's 2 % of their market cap. Is there a more logical fitting business for Uber than this? No. And obviously Wayne Ting is ex-Uber. He worked for Travis. It's a super logical business for Uber. I 100 % agree. If I was Uber, I'd be buying this tomorrow and paying$3 or$4 billion. But there are smart people at Uber. Yeah, our friend Jodie runs Strategy there, doesn't she? Yeah, she runs Strategy and Daruk. I can't say his name. but like he alright, Cosrashahi yeah, he like he's smart he's a smart guy yeah, he's a smart guy and so they've thought of this they've done a lot more research than us they've got a thesis on why they're in there they've got a thesis on why they don't want to buy this or maybe they said we heard Adam Schwab I mean there's a bit of a time machine issue if this is the case because you only said it now but like we've got Adam Schwab's thesis which is yeah, we got an IPO at 2 bill because of these con notes but we think this is 10 bill and we want to run to 10 bill and Uber says we're not paying you 10 bill and they said alright, well just stay in and like we'll see how it goes.

1:35:46Yeah, that could absolutely be what happened. I love this. I actually love the business. Like when you talk about the financials not being the most unbelievable financials but we go back to powers. Like if you believe in powers and if you believe in business with strong and if you've got a business with three and a half powers as we have here, like it's pretty rare when you've got three and a half powers that the business doesn't do well. Three powers because I give you half for the counter positioning as well. You maybe got some process power in there. if you got some oh come on what are you doing you can't catch every fish in the ocean like don't google google what did we say about google we said this is the greatest no there's no it's a team there's no me and you there's where on the up on the ups and on the downs which is bad news so so like google i don't know whatever we said four months ago it's probably the greatest business in the world right now.

1:36:45If you had to just buy one business, it would be Google. It would be Alphabet. And now, is it the most valuable business in the world and it's overtaken Nvidia? It will be, right? And so let's not compare to Google because like we all knew Alphabet's going to be it. But these guys have got – But I think to your point, as you said, you said three months ago, Google's business and Google has pretty much every power. So that's the – you look at powers and Hamilton was no fool. Like he said, you look at these powers and this business has a lot of powers. Before you dump me and shut this podcast down, are you still, would you still buy Alphabet today or not?

1:37:19It's getting expensive, but it's probably better than most things on the market. Gemini is dominating. Like it's Google Cloud business is going really well. It's search business up 19 % year on year despite everybody saying it's going to die. That's what's the most crazy thing of all. The most crazy thing is like two years ago, I'm like, well, search is over. where everyone's just going to AI the answers to everything, you know? And like their search business is growing at 20%. Well, remember what I said probably a year ago? I said people are AI-ing a lot of stuff, like a lot of information-seeking stuff, but shopping stuff.

1:37:52Yeah, not monetized. Not the shopping stuff. Like shopping stuff, you can't. You can sort of half. I was doing some research for Japan in January. And so I look at AI, I look at Gemini, obviously Google-owned, and I get some information there. And I take that and I put it into Google search. And I use Google search for the transaction part or for the looking at Google hotel ratings. So Google is – and I think that's what's happening. I think people are actually expanding their number of searches because of AI. Yes. Well, you know, I'll tell you something interesting. I was doing some research and I typed in like what is the safest mattress, hybrid mattress to buy, right?

1:38:23Because I was seeing what AI does on different things and where it gets its data from because I was doing some EVA research. Obviously EVA came up as the top answer on most LLMs for that. And I don't say that just as a marketing pitch, although it's nice to help them out with a bit of a pitch there but um yeah but um i'll say like this recommendation coming through these ai platforms they will definitely be shaping buying behavior i've got doubts about how much they're shaping buying behavior today but there's no doubt that when when one of these ai models tells you that something is the best people believe it with a level of trust that is actually completely inappropriate generally speaking because when you go into the detail i picked i picked a bad one because that detail was actually based on a ton of reviews and a bit of technical stuff that it had pulled in but on a lot of other things it's very thin the information that's pulling in to tell you which one you should go for it was often one website that's right yeah and like we i know there's a bit of a joke but like like chat gpt is basically wisdom built on reddit posts and so that is a bit of a there's a bit of truth to that.

1:39:31Yeah, that was a great episode again. Thank you, Mike and Adia. We will, of course, be back on Saturday for our Ask Us Anything episode. Thank you again for listening, our amazing listeners. Can't wait to see you next week.