Put Away the Spreadsheet, We Are Doing Psychology Now
You do not need a viable business if you can capture the attention of bored day traders.
This morning, Allbirds announced they are pivoting from making shoes to selling AI compute. The stock is up more than 500% in a couple of hours.
Let’s break this down…
Here’s a loose public company arc:
You decide to make a physical object, like a sensible wool sneaker.
You buy the wool, pay the factories, and make the shoes.
You sell those shoes to people for slightly more cash than they cost to make.
You take your spreadsheet of successful shoe sales to investors and go public.
Investors look at the spreadsheet and start trading your shares a valuation based on how many shoes they think you will sell next year.
Then, eventually, fashions change and people decide they have enough wool shoes.
Your sales dry up. The spreadsheet numbers go down.
Your cash reserves slowly drain away.
If you are a normal business, Step 8 is where you accept your fate, file for bankruptcy, and liquidate whatever you can. You are a shoe company, the world no longer wants your shoes, and therefore you must cease to exist.
But what if you just…decided not to?
If you are a public company, especially in a highly speculative bullish market, you possess a magic weapon. Your most valuable asset isn’t your wool, or your intellectual property, or your customer list. Your most valuable asset is your ticker symbol. You have the regulatory plumbing required to trade instantly on a public exchange, and that is a tremendously useful thing to have when there is a mob of day traders looking for a place to put their money.
So this morning, Allbirds looked at its roughly $22 million market cap and its grim, fast approaching death spiral (Step 8), and it announced a perfectly absurd solution:
They are simply done with shoes. They are selling the entire footwear business and its IP for $39 million. They are using that to take out a $50 million loan. They are renaming themselves “NewBird AI,” and they are pivoting their entire corporate existence to buying high-performance GPUs and leasing them out to artificial intelligence developers.
If you are an investor who bought Allbirds stock a few years ago because you believed deeply in the future of sustainable, carbon-neutral footwear, I have strange news for you. You are now…long AI?
And the market thinks this is the greatest idea in the world. The stock opened up 400% and is currently trading up over 600%.
If you try to use logic to explain why a failing shoe company is up 600% today, you are just going to drive yourself crazy. The math doesn’t work because buyers have decided that math is no longer required.
Rationality has been replaced by momentum. Financials are out the window. We are now trading entirely on mass psychology, and in today’s market, attention flow can be more valuable than cash flow.
No investor truly understands NewBird AI’s new business model. People are buying the stock because the stock is going up.
The fundamental mistake is assuming the crowd is analyzing the underlying business model of the pivot. They aren’t. The crowd is the business model. It is just pure, collective hysteria. And it turns out that is a heck of a lot more profitable than selling sneakers.
what a wild story!