Newsletter: Published Tuesday, 26, June 2018.

  1. French lolcat;
  2. PushPay leverages churchgoers;
  3. John Malone and Liberty Global.

🌳 How's your week going?

Probably not as well as this French trader ($).

He accidentally made €10 million using what he thought was a demo trading platform.

He had placed €1 billion worth of orders before realising the platform was live (and he was in the red for more than €1 million).

He kept trading and ultimately ended up with a profit of more than €10 million.

The British platform has “voided and cancelled” his transactions, says he breached his contract and is trying to keep the money.

Now he’s suing them.

Naturally they would have had the same reaction if he’d ended up with €10 million worth of losses!

On to this week's update:

🇳🇿 SPACESHIP PORTFOLIO

PushPay joins.

Spaceship Voyager added PushPay to your Universe portfolio this month.

I’m going to surreptitiously open a can of worms here and suggest that churches make a lot of money.

And this clever Kiwi technology business is tapping into those revenue streams: it’s developed a platform that allows church congregations to donate money through an app.

And it turns out people are donating a lot.

PushPay facilitated $US192 billion in transactions last year across 19 countries. That’s around 12.3 million transactions processed over the year.

Churches and other non-for-profits pay an ongoing subscription fee for PushPay’s eChurch app (fantastic name?), which can process payments in less than ten seconds and facilitate communications between the organisation and its members.

PushPay is ultimately a SaaS business which, alongside its subscription fee, also scoops up a transaction volume fee.

Software-as-a-Service businesses are a breed of technology company that license software to customers on a month-to-month basis as well as run that software for them. This is instead of selling a perpetual license, where customers pay once for one version of your software.

It’s a unique business and because it specifically targets churches and their needs, it’s managed to sign on 54 of the top largest 100 churches in the United States.

Where church donation is really, really a thing.

It’s opened an office in Washington State (in addition to its Auckland headquarters).

As a broad pool, Ord Minnett points out there are still 19,000 medium to large churches still in the United States, where more than 500 people attend each week.

Despite having grown substantially in the last few years, PushPay says it still only has 2% of the total market share (for “faith payment apps”).

Extremely niche, but an interesting investment idea.

🌐 FUTURE OF BROADBAND

Why Liberty Global is out of Spaceship Universe.

Spaceship Voyager removed **Liberty Global **from your portfolio this month.

This is a bit of a bummer, because it was built and is now chaired by a discerning, interesting businessman called John Malone.

And as we describe in this post, Spaceship tends to follow the thinking of visionary founders quite closely.

John Malone spent an inordinate amount of time pushing the information superhighway in the early nineties and upsetting some very settled, very comfortable telecommunications businesses.

He diversified his media interests, struck some extremely aggressive and complicated corporate deals and was known over his career as the Cable Cowboy. (Al Gore once called him Darth Vadar).

Most CEOs want to grow revenues, but Malone was a shrewd and calculating capital allocator. If an opportunity for an excellent deal came along, that meant selling or downsizing? He was a very fast mover.

(We suggest reading The Outsiders to learn about smooth capital allocators.)

John Malone is now the largest individual landowner in America and is chairman of **Liberty Global **(while retaining the majority of the voting shares).

Now, I’ve awkwardly talked him up because he's an interesting operator. But ultimately Liberty Global is a company that relies heavily on providing broadband and cable TV services.

Where once you had a cable running under the ground, providing your business with internet access, powerful cellular towers are beaming internet to more places. This introduces sharper, more aggressive competition.

Add to that, cable TV is incredibly expensive and the shift to streaming means Liberty is losing revenue to cheaper players.

Liberty Global has acknowledged this fundamental shift, and recently sold their German, Hungary, Romania and Czech Republic divisions, for around €19 billion.

As it stands, Liberty is the largest pay TV and broadband service in Europe and the divestment of these divisions represent around 28% of the business’s cashflow.

The underlying theme is that broadband internet isn’t as defensive as it once was.

Getting cable in the ground is expensive and there tends to be a limited number of providers whereas mobile spectrum is more open, opening Liberty up to more competition.

Price wars are difficult in broadband but are much more common in mobile, meaning Liberty’s investment score at Spaceship has slipped.

🌳 OLD SCHOOL

The useless Dow Jones.

General Electric was removed from the Dow Jones Industrial Average last week.

There was a ripple of concern around this, but given the Dow Jones is largely a hollow Index, the ripple was mostly of the nostalgia americana vibe.

Established in 1896, before computers existed, the Dow Jones is indexed by share price rather than market capitalisation.

This means the Dow isn’t designed to calculate total returns, just compare what share prices actually are at any given time. McDonald’s might be trading at $160 and Disney at $104.

Comparing those two prices isn’t really helpful, given there is no benchmark showing gains or losses against any other metric.

Basically the Dow Jones just shows a 30-share average based on share prices and pretty much nothing else.

The index bumped over 20,000 points last year and, ironically, it elicited a flurry of news headlines about how unimportant that figure was.

Regardless, General Electric was one of the first companies included in the Dow Jones Industrial Average in 1896, alongside other nostalgia americana names like American Cotton Oil, American Sugar Refining and American Tobacco.

And a pretty fabulous business called The North American Company, which just sounds like it produced bourbon, wagons, plantations and reams of the red, white ‘n’ blue.

General Electric’s share price has slumped in recent times, as it tries to reorganise and innovate on its sprawling portfolio of businesses. But the slump has prompted a few voices calling for the possible break-up of the enormous conglomerate.

Many argue the historical identity of the company has stifled any innovative changes.