The AI arms race is here, and it’s shaking up the cybersecurity landscape. Is it time to panic, or is this a buying opportunity? We dive deep into the AI doomsday fears and how it could impact our portfolios.
Plus:
🧠Axon’s stock-based comp problem: a great company, TERRIBLE stock? $AXON
📊 Wise’s Nasdaq listing is imminent: what does it mean for investors? $WISE $WIZEY
💊 Krzysztof’s selling Coherus for a NEW biotech play: $CHRS $NKTR $ABCL
Segments:
00:00:00 Cold Open
00:01:47 Subscriber Growth Slowdown: Are We Boring?
00:03:57 Mama Monkey’s Patreon Offer
00:05:51 Claude Mythos & Cybersecurity Apocalypse?
00:11:06 Is AI a Tailwind or Headwind for Cybersecurity Stocks?
00:11:46 $CRWD CrowdStrike: Time to Buy?
00:22:26 $NKTR Nectar Therapeutics: Krzysztof’s New Biotech Pick
00:28:05 $AXON Axon Enterprise: Great Company, Terrible Stock?
00:30:52 Stock-Based Compensation Explained
00:42:37 $WISE Wise PLC: Nasdaq Listing Incoming!
00:45:19 Investor’s Mirror App Update
00:50:54 Closing
WSW – EP 128 – Video –
[00:00:00] Luke: And if Claude Mythos is real and if it starts to do like cybersecurity stuff itself, well it will be, it will be like a matter of weeks before There are Chinese models, frankly, and open source models that have been cross-trained against mythos as soon as it’s in the wild.
[00:00:15] Krystof: And there is a way to, to invest in hard times that you can, you can practice and get better at instead of panicking and making bad decisions.
[00:00:24] Luke: ’cause look at the share price.
[00:00:25] Luke: You can’t gimme the same options as last year. The share price is in the toilet. So what is Axon gonna do?
[00:00:30] Krystof: Unless folks forget we are holders of wise. Here at the, uh, wall Street Wildlife in the community portfolio, though monkey’s life is gonna be made much easier when he could actually buy the thing
[00:00:45] ​
[00:00:45]
[00:00:57] Luke: Welcome for Deep Investing Jungle with your hosts, Luke the Badger Hallard, and Christophe the Monkey Pikey. This week on the show we are chatting about Wise PLC’s latest trading update and why there’s some quite exciting news for wise shareholders. Plus, we’re going a bit deep on the anthropic.
[00:01:15] Luke: Clawed Mythos, doomsday Fearmongering. What does this mean for cybersecurity? What does it mean for tech companies everywhere? Christophe’s gonna tell us why there really are no AI shortcuts in life or investing, and he’s gonna touch on two biotech stocks. Prompted by a YouTube listener question, we can hear a little bit about.
[00:01:37] Luke: Nectar Therapeutics and ab abara. Plus, I wanna close out today with a conversation about Axons stock-based compensation problem.
[00:01:47] Krystof: Speaking of problems, badge, you know, we’ve been crunching the numbers. We’ve been checking our subscriber growth and our Patreon growth and so forth, and we’ve been going up like. Like, what, what’s the rocket Ships launching us to the moon and back, right? Until somewhat recently where we’ve kind of slowed down.
[00:02:05] Krystof: So the only correct, uh, implication is that we are no longer worth listening to. We suck, we’re boring, we’re no good. And people don’t like us no more. Right?
[00:02:16] Luke: I think so. Or could it possibly be the fact that you, I and all of our listeners are probably losing money hand over fist with every day that passes in the chaos of 2026 year to date.
[00:02:32] Krystof: Oh, that’s an interesting, that’s an interesting theory. Or maybe it has everything to do with, uh, the, the algorithm on the YouTubes and people not pushing the subscriber buttons. Anyway, if you’re listening to us. Do us a favor and, and subscribe because we’re, we’re trying to make the show a lot better, so we can’t do it without your help.
[00:02:53] Krystof: And to those of us already with us, thank you. Who, who are the, who have pressed the subscriber button?
[00:03:00] Luke: And we’ll just say like, we’ve got getting close to 300 Patreons now, but like a third of you guys are on our free tier. And like, that’s awesome. ’cause you’re, you’re seeing the conversation. But if you’re on the free tier, you can’t get involved in the Jungle Lounge and you can’t see the Badger and Monkey Trades channel where we reveal our trades in real time.
[00:03:21] Luke: Like for me. Usually before I actually do them. So, uh, there’s a lot in the Patreon if you’re on the free tier that you don’t have access to right now. So why not think about checking out possibly our dolphin tier where you get all the things apart from these fancy mugs. You’ve gotta be a jungle cat to get.
[00:03:39] Krystof: That’s right. We’re a fashion brand now, actually. He said, look at this. We are, we are. We are dressed in as Anthony Burgess and Clockwork Orange said, in the height of fashion Speaking of.
[00:03:50] Luke: We’re gonna pin our, we’re gonna pin down our subscribers and like hold their eyeballs open and then do like drills and things.
[00:03:57] Krystof: You looked, you looked exactly like the dude, Malcolm Mc, what’s his name? Alex from, yeah. Speaking of wild shenanigans happening over on Patreon. There I am monkeys minding his own business on an early Sunday morning and what pops up on his feed. But a comment from Mama Monkey. It’s not every day that mama monkey, you know, uh, pipes up. Uh, what, what did she say? Badge.
[00:04:22] Luke: Well, I’m not sure what the implication is. Maybe it didn’t translate great from, uh, Polish, but we we did have a couple of our Patreons on stage at Absent doing lap dances for each other, pretty much for their wives, not for each other. Uh, so, uh, mama Monkey has offered to jump on stage with our Patreon, Aaron.
[00:04:45] Luke: When we all come to Warsaw in 2027, so looking forward to that.
[00:04:49] Krystof: Bring more Euros or says Mama Monkey. Oh, I love it. You know, it’s, uh, it is generally true that there’s a lot of people that love this show, uh, and they’re, um. It’s, it feels good to me to help family and friends, I think is what I’m saying. I mean, it’s great that our subscriber base is growing, but anytime you get the cousins involved and the, and the mothers and the fathers and the brothers and the close friends, you know, you could feel the, the difference happening.
[00:05:20] Krystof: So I guess to our listeners, I, I would encourage anyone who has not yet had the conversation, and I don’t mean about the birds and the bees, but you know, uh. You know, what’s your investing angle? Do you just do indexes? Are you scared of the stock market? Have some of those conversations with the people close to you and then, you know, onboard them to us so that we could teach them the right principles.
[00:05:49] Krystof: As, as you guys know, we do so.
[00:05:51] Luke: yeah, like we’re trying to be good actors in a world of, uh, like dubious financial advice, so just point ’em at our YouTube channel. That will be hopefully win, win, win.
[00:06:02] Krystof: Yeah. All right. Badge, some AI stuff. You know what I heard? I think you and I were, were, were tuning into similar kind of thing. There’s the whole, um, I call it well. On the fact the facts are, Claude has internally developed a next generation model, although next generation, these things are coming out so fast.
[00:06:27] Krystof: It’s like that allegedly is so powerful that all security or known security or many known security vulnerabilities were exposed at a rate higher and more, I guess. On, on a dangerous level than before, so that the Anthropic folks said, were we to release this to the public, the hackers would potentially devastate a lot of major infrastructure.
[00:07:02] Krystof: That’s how I understood it. The story on the ground level. The thing that was I, I got to thinking as I read some commentary around this, is that. A lot of these vulnerabilities badge have already been diagnosed some time back that we knew that LLMs, were going to do this kind of thing. And it’s curious to me, I guess the question is to what extent is this some sort of like marketing Andro doing some marketing around doomsday scenarios? That are obviously serious, but they benefit from it somehow versus, yeah. This is now par for course, and we’ve been dealing with this stuff for now two years.
[00:07:51] Luke: I think probably a bit of everything. Um, like there probably is a bit of like marketing shenanigans going on and like, this is so powerful, we can’t release it. You know, even Sam Alman was spouting those kind of lines a couple of years ago about previous versions of chat GPT. And now you’ve got Dario saying the same thing about Claude.
[00:08:12] Luke: Um, but I think there’s probably some truth in it too. Uh, the fact that they have launched Project Glass Wing I think is a really, really good idea. And even if the actual capabilities, the true capabilities of Claude Mythos, that’s like the sort of brand name for this new, new kind of iteration, new evolution, even if they’re not as powerful as is being set out.
[00:08:39] Luke: I think Anthropic have set out actually quite a, a sensible roadmap and what they’ve said with Project Glasswing is they’re engaging before they release it to the public. They’re engaging a number of like the world’s biggest tech companies, including a couple of cybersecurity companies, and they’re giving these organizations like hundreds of millions of dollars worth of free credit, I believe, so that they can privately like figure out.
[00:09:07] Luke: Issues in their own infrastructure. So things like AWS and like Google, um, Microsoft, you know, all of the, um, uh, the, like the guys who, who provide like the infrastructure for the internet, they can at least identify and fix. There’s like zero day issues, essentially, like bugs that are, that could, that haven’t, they haven’t made it into the wild, the, you know, the.
[00:09:33] Luke: The, the, the existing kind of cybersecurity infrastructure, can’t detect them, can’t fix them, and it’s giving these guys like a home, like a head start on hackers and bad actors, being able to use these same tool sets to create, um, like, like serious vulnerabilities in the world’s infrastructure.
[00:09:53] Krystof: Yeah. So this does seem like, uh, one of these moments where humanity really has to get its act together and work together because to get, you know, together, I mean. We know the hackers are gonna do what they’re gonna do. But if you have these major corporations, and for at least in this domain, they say, let’s pull our resources together.
[00:10:15] Krystof: Let’s get all heads at the table. You know, trying to preempt, some of these major potential attacks. It seems like that would, I don’t know. I, I, I don’t know. Now I, I feel like I’m about to say something. I have no idea about it. But if you have all that capital, all these resources, all these people trying to solve the same problem, seems like those problems might get solved a lot faster than if everybody was kind of siloed and trying to figure things out on their own.
[00:10:41] Krystof: So this could be an interesting moment of, of, you know, the, the, um, the thing Musk has been warning people about with AI all the time, that this should not be a for-profit. Enterprise because there’s too much at stake. Open ai, blatantly disregarded all of that. And maybe we’ve come full circle to say no. Yeah. It’s like, get together on this or die. Okay.
[00:11:06] Luke: so there’s, there’s something I want to dive into specifically on this topic and it’s the cybersecurity industry. ’cause I’ve been saying for some time cybersecurity will be largely immune from like the, the widespread rollout and commercialization of ai. Like, I would like to dive into cybersecurity in particular, I’ve been saying for some time I felt cybersecurity stocks in that sector would be largely immune from like the widespread rollout of ai. Um. And the cybersecurity companies have kind of fallen off a cliff in the last couple of weeks on the back of this Claude Mythos announcement.
[00:11:46] Luke: So I’d like to explore, like I’ve got some thoughts on why I think actually this is gonna be a tailwind, like supporting these companies, not damaging them. So I’m getting really close to starting to add to my CrowdStrike position. So I’ve been trimming for some time ’cause the valuation got a bit crazy.
[00:12:05] Luke: And now it’s, it’s looking reasonably valued again. You got any initial thoughts though, on like tailwind or headwind before I dive in?
[00:12:13] Krystof: I mean, uh, this is interesting because one of our patons said something along these lines and very, uh, and my response to that was the brilliant tension that I think all investors thinking about this right now face, like you’re saying, the valuations are better than they’ve been in a long time. And yet my response was.
[00:12:35] Krystof: The technical analysis does not support adding yet. And that’s the weird thing because, um, maybe if we zoom way out from a purely investing strategy point, it’s still an unknown, right? We still, I mean, let’s say I even side with your thesis, I think I’m re resolving to say patience grasshopper, because the price.
[00:13:03] Krystof: Continues to say that the market as a whole is not sure that that thesis will play out, and I would rather be safer and start adding to these companies when there’s more tangible proof that in fact some major disruption won’t completely obliterate some of these models. You’re saying if I, I think it’s not that you’re saying the opposite, but you’re saying you already believe in your thesis.
[00:13:29] Krystof: Right. And the valuations are good enough, so it doesn’t matter that the price action is telling a different story, and there lies in a little bit of the rub.
[00:13:38] Luke: pretty much I haven’t, but I haven’t done like the detailed valuation work to say that with any surety. And I’ve, I’ve got that on my to-do list for both Palo Alto Networks and CrowdStrike. But directionally, what you said is exactly right, like I think the market has got it wrong. It’s in panic mode, overcorrecting on those stocks.
[00:13:56] Luke: And I think these companies are gonna benefit if, you know, if, if Claude Mythos isn’t real, well the comp, these companies will just reset. ’cause the market will be like, oh, okay. You know, we were, we were kind of, you know, barking at the moon. And if Claude Mythos is real and if it starts to do like cybersecurity stuff itself, well it will be, it will be like a matter of weeks before There are like Chinese models, frankly, and open source models that have been cross-trained against mythos as soon as it’s in the wild.
[00:14:25] Luke: And then we’re gonna see like a proliferation of cyber attacks at a scale that we’d never seen before. And so, you know, you need more cybersecurity, not less cybersecurity. Um, so yeah, like, kind of like not, I’m not gonna say valuation be damned because CrowdStrike was egregiously valued for some time. I wanna do my valuation work, but I’m not gonna sweat the price.
[00:14:50] Luke: Like if I determine it’s a reasonable price, I’m gonna start. I, I dunno, I’m backing up the truck, but I’m gonna start adding to that position irrespective of price action.
[00:14:59] Krystof: So maybe this will take us too far down to the, uh, maybe this will take us too far into the weeds, but badge, the main counter argument I think I have is holistically we need more cybersecurity check. Who’s to say right now that some company that might not even exist or maybe anthropic themselves or maybe uh, data who knows, will actually provide the better cybersecurity solution Because let’s say they’re the ones to better diagnose it, therefore they have the better AI tools to solve it.
[00:15:41] Krystof: And that’s something, it’s weird to think that. A company like CrowdStrike might appear to legacy, you know, to uh, uh, old to solve the new kinds of problems. Now, I, I’m picking on CrowdStrike, even though I don’t think I believe that, but, but a company may be like Palo Alto that’s like, you know, patched together from older companies.
[00:16:05] Krystof: Maybe they’re in greater danger. And if I really look at the stock chart of Zscaler, that’s the one that’s been most precipitously. Selling off kind of a la monday.com, where the market at the moment is saying, yeah, you used to do really good work, but we’re not sure anymore.
[00:16:24] Luke: I think CrowdStrike’s gonna emerge from this stronger than ever. Palo Alto, I could give a little bit of ground on because yeah, I don’t know. Although they are transitioning to like a much more modern, uh, re-engineered. I think the companies that are in trouble are like the Sentinel ones and the smaller cybersecurity vendors and the, you know, here’s a really kind of wild projection, like maybe, ’cause let’s not forget, Palo Alto and CrowdStrike are inside Project Last Wing, so they have access to these tools already.
[00:16:58] Luke: So already they have a massive headstart over every other cybersecurity vendor in the world. Because if these capabilities of mythos are real. Well, they’ve, they’re seeing it and no one else has seen this stuff yet. So all the minnows cybersecurity vendors, they might suddenly find that they have technology that is completely redundant.
[00:17:17] Luke: Um, they don’t have that advantage, they don’t have that close partnership with Claude, with Anthropic, if assuming Anthropic does prove to be the guys that kind of knocked down the wall on this stuff. Uh, so, you know, maybe this is an opportunity for CrowdStrike and Palo Alto to go on an acquisition spree and like buy up.
[00:17:34] Luke: Essentially buy up like these smaller companies, maybe even for their, you know, their client list as opposed to their technology.
[00:17:42] Krystof: I hate to put you on the spot. Uh, it’s, I’ll put myself on the same spot in terms of having confidence on a more granular level of what’s actually happening, you know, on the, call it engineering level, on the, like, you know, the stuff that, I mean, I’m, I’m certainly no expert. You know, quite a lot, but I don’t know if you’re an expert, you know, and so, uh, we both love CrowdStrike, but how can we be confident in this moment of what’s happening, what they, you know, what the engineers themselves are seeing versus what’s happening and philanthropic beyond that, we believe the narrative, you know what I’m saying?
[00:18:25] Krystof: I, I, I could easily be convinced by you that yes, CrowdStrike is a forward thinking company. They do have brilliant engineers, and, but we don’t know, like, we don’t know what we don’t know. Right.
[00:18:36] Luke: If you, if you were to try and tell me that you are confident and you knew with absolute anything about any company that you’re invested in, I’d be calling bs. Right.
[00:18:46] Krystof: Well, well, okay. Let me, let me give you a, a, a counter, uh, counter, um, analogy. Yes, to some extent that that’s true, but if I’m thinking of a company like Costco where you know they’re selling, uh, I know, I know their model. They sell food. I understand why their model works, because they curate and they have good margins and so and so forth.
[00:19:11] Krystof: I might not know. With some de, you know, some details, but I’m, I’m confident that that model, because it hasn’t changed over 25 years, is more or less gonna stay the same in the world of ai. CrowdStrike though, I, here’s what I’m trying to think. Pick at, I know there’s a fallacy lingering here, and it seems to be, I don’t know if it’s confirmation bias, but I like CrowdStrike.
[00:19:38] Krystof: I believe in the thesis you’re telling me. I know they’re going to. They’re not just sitting on their hands, but in ai, cybersecurity stuff, when the world itself, when the leader lead thinkers are being outfoxed week to week with new things and emergent behaviors coming up, how can we, I mean, that level of unknowing seems to me wider than ever.
[00:20:06] Krystof: So putting my money here feels a little bit more dangerous. Then let’s say. Back when you were telling us about Google, right? Your thesis there not only made sense to me on the narrative level, but I could see on the execution level why it was also more knowable. So that’s what’s giving me the willies about the cybersecurity stuff.
[00:20:28] Krystof: I just don’t know.
[00:20:28] Luke: I kind of said this before, but if I approach this like a poker player and just think about humans and incentives, in some ways my thesis for CrowdStrike is stronger than the thesis I had for Alphabet when it was in the doldrums, like a year and a half ago. ’cause it, to me, it still comes down to like accountability.
[00:20:47] Luke: If I’m, you know, if you are my chairman or my CEO and I’m the CTO and I go, oh boss, we’re gonna use Mythos and we’re gonna like chuck out all of our like, world leading cybersecurity vendors and we’re gonna use like AI to protect ourselves when we get breached. Like, or when a, you know, when another company in our industry gets breached ’cause it will happen.
[00:21:08] Luke: Um, that’s gonna look like a particularly dumb decision. So, you know, the. The, the outsourcing of blame, I think, ’cause these are individuals, these are humans who get paid a salary. The outsourcing of blame is quite a powerful incentive here to continue to buy the leaders.
[00:21:27] Krystof: Alright. Yeah. Maybe, maybe. We’ll, we’ll say at the moment you are starting to get more interested in adding. I’m still restraining myself and letting price action lead, and I’m gonna maybe follow you at a higher price point once I feel a little more secure.
[00:21:46] Luke: now we winding the clock back. I can’t remember if it’s like one or two years, but we had that like comedic. Thing where you sold CrowdStrike and I like pulled my hair out and started yelling you on the podcast. So. And you currently don’t own CrowdStrike, is that right?
[00:22:00] Krystof: That’s right. I own No, no cybersecurity firms. Yeah.
[00:22:04] Luke: Alright, well, I, I will do some
[00:22:05] Krystof: remember what I, I know I sold it kind of at the bottom. I know that was one of my, my worst time trades of, uh, but anyway, yeah, I’d like, I’d like to be a share owner again
[00:22:17] Luke: right.
[00:22:17] Krystof: possible,
[00:22:18] Luke: It’s now, It’s now, essentially flat over the one, over the last one year. So if that decision was a year ago, you got another chance.
[00:22:26] Krystof: So, uh, opportunity knocks if we’re, if, if what you’re saying is is directionally correct and I think it, I think it has a good shot. Speaking of price and charts badge, so I have a pop quiz for you. Uh, originally I wanted to, or we want to talk about absera to C symbol A, B, CL. But I’m going to table that conversation for a future episode because there’s another biotech that I’m much more interested in that’s much more timely, and I’m going to do a deep dive on it, uh, in the coming days.
[00:23:07] Krystof: But first, your pop quiz. and Badge without. I’m not gonna tell you which one is which, but take a look at both of these charts, and this is without getting fancy. Which one of these appears to you the stronger.
[00:23:23] Luke: I, I can’t see the, I can see the name if I really zoom in. So ab. Uh, has this sort of downtrend and so if I just go by your mantra of, you know, buy, buy when stuff is going up, then Nectar Therapeutics appears to be going up with like a big jump, whatever that was in March.
[00:23:46] Krystof: Yeah, and this is, I mean, it’s as simple as that in some ways. But here’s why I want to point this out, is because as I was preparing work for this episode, uh, I thought, what is the more, let’s call it, uh, I want to prioritize the more timely biotech. And so the first thing I’ve taught myself is always go to the charts first, because I just wanna see what the objective price is telling me.
[00:24:11] Krystof: And in Celera, what you could see when you’re looking at that chart, if you see those pink lines, those are the volume weighted average price lines, and the current price is basically below those, which means that the selling pressure is higher than the buying pressure. And there’s a little bit of the sideways MO momentum.
[00:24:33] Krystof: It’s a weekly chart. So over the last month and a half, the price has kind of stabilized sideways. And so from, from the technical standpoint, that’s a, that’s a medium to week-ish looking chart, so I did not sense any urgency really to get at this. Whereas when I look at the nectar chart, obviously something big happened there was that massive volume spike, and now the price looks very clearly up into the right.
[00:25:05] Krystof: The pink line is that again, volume weighted average price. So the buyers are, are coming in and sweeping and, and sucking up all of the demand. And that yellow line is the 200 day moving average. This is weekly. The fact that the price is now above that is another classic sign that this is a stock that the market is very interested in.
[00:25:28] Krystof: Obviously the better question for us fundamental investors is why, and that’s what my deep dive will take care of. But out of those two stocks you wanna be buying the one that has the, the strength, because I don’t know when the deep dive on Nectar will actually come out. At this point. I do wanna alert our listeners to one important fact.
[00:25:53] Krystof: Uh, you will learn in my deep dive. That Nectar basically has two indications for the same drug, and that data is going to come in for one of them sometime in April. And based on what we’re looking at so far, I believe that that data will surprise to the upside. And currently from these levels. Nectar is supremely undervalued.
[00:26:19] Krystof: So I just wanted to put it to our listen in our listeners’ ears that you may wish to really get serious about looking into Nectar Therapeutics. There’s a lot of good dd out there already existing on the interwebs. Um, I have a couple slide decks already prepared to talk about, uh, don’t, don’t wait on this to get your research game on.
[00:26:44] Luke: Great. Yeah. Looking forward to that. I know you flagged Nectar to us maybe a month or so ago, so yeah, keen to see your deep.
[00:26:51] Krystof: Yeah, there’s, there’s, uh, you, I haven’t talked about biotech in quite a while, but I will say actually, uh, thanks for, remind me, badge. I did recently sell coherence. Uh, the, the lots that I sold, most of them were up above a hundred percent gains. But there was a massive thesis drift there, and it became known some weeks ago that they had an extra cash expense that really depleted their cash runway.
[00:27:22] Krystof: So all things considered, I thought, Hmm, this, the risk went up. The reward was still high, but when all of a sudden I have something like Nectar that now I, you know, I think the risk is lower and the reward is just as high. To me, it was a very easy, uh, portfolio reallocation move. So in King of the Jungle, I sold my coherence and I bought, uh, I think it was three shares of Nectar, two or three.
[00:27:51] Luke: Good stuff. Alright, let’s, let’s try and do that maybe in the next episode, and we can all get our teeth into Nectar Therapeutics and understand it and figure out why you’ve bought some.
[00:28:01] Krystof: Awesome. Happy to do it. Excited I have all the goods.
[00:28:05] Luke: shall I tell you about another stock in my portfolio that has also been sliding pretty hard?
[00:28:10] Krystof: I’d love to hear about this, especially because this was one of your most beloved companies. I think maybe this is the one of the few that you really talked my ear off about, and it’d be, my sense is that you’re not gonna have as, as, uh, glowing praise for it in, in today’s segment. So what do we need to know?
[00:28:34] Krystof: Badge about Axon Enterprises.
[00:28:37] Luke: Stock based compensation problem. Now we’re hoping, we’re hoping to connect with Drowsy and Bear, uh, who have their own podcast and we are great friends of, we’re gonna do a podcast crossover with them we hope in the next couple of weeks. And I know we’re gonna get our teeth into Axon ’cause those guys are big Axon fans.
[00:28:54] Luke: And I used to be. I still am, I still own it. Like let’s be clear. If I really, if I had to summarize what I’m gonna talk about in like one sentence, it’s like Axon Enterprise, great company, terrible stock. Um, I recommended this one for seven investing way, way back. I talked your ear off about it around two years ago.
[00:29:16] Luke: I think it was like running in Austin in early April, and if you bought it then you are up about 20%. So, you know, it hasn’t been complete disaster. But if you’ve owned this stock over well, year to date, that’s when it’s really falling apart. Down about 30, nearly 37% year to date, I’ve got a picture here I snapshotted just a few days ago where it was down 34% year to date, but it’s got worse since then. Now this is, I don’t want to like go on too much about this company. Uh, but they are, they have an incredible moat, possibly one of the strongest moats of any company I’ve ever looked at.
[00:29:55] Luke: Like their embeddedness with, um, policing and like security services, particularly in the US is incredible. They have amazing technology. There’s no way they’re getting displaced. Like my whole thesis around this years ago, it hasn’t changed, was. Like this is so predictable in terms of revenues because they have like 10 year plus contracts with tens of thousands of police organizations in North America.
[00:30:21] Luke: Just a large bulk of their revenue. Like they can predict their revenue out a long, long way, but revenue and everything else bid and they’ve always had a stock based comp problem. And I wanna talk about this now because I think this becomes actually really interesting. When the stock starts to slide, and this could be any company, and this actually arguably will be many companies, but I think Axon was such an egregious stock-based comp situation that it’s gonna hit them hardest.
[00:30:52] Krystof: Actually badge. Uh, before, before we go on, I think there must be some listeners out there that don’t even know what stock-based compensation even is. Do you mind doing just a very basic primer, maybe addressing the gap versus non-GAAP uh, accounting, which is kind of the bread and butter of why, you know, uh, in, in the plainest terms as as you can.
[00:31:14] Krystof: What are we talking about when we say stock based compensation?
[00:31:17] Luke: There’s so many worms and complexity here, but if we really pare it back to the simplest possible thing, and we forget all of the adjusted BS that companies try to sell to investors, naive investors, the reality is if you have like a big organization and you are, let’s say, even if you’re not a public company, you’d have shares in that company.
[00:31:38] Luke: Like people own bits of the company. And if you want to retain like the best talent, the best people to work for you, well you pay them a salary, but you probably give them shares as well. And typically you can just give them real shares and say, you know, here’s like a hundred thousand dollars plus a hundred thousand dollars worth of stock.
[00:31:58] Luke: But that doesn’t really serve a great purpose. What you really wanna do is give your employees share options. ’cause then you’re like, if you’re still here in. Five years time, your options will vest and then uh, you know, you, hopefully the company is worth much more because of your efforts and, you know, your, in practice, your comp might be worth, you know, many hundreds of thousands because the shares you, the options you’ve got have appreciated.
[00:32:23] Luke: So like on the face of it, it’s really good and like companies should do that. You do want to align employees incentives. With essentially shareholders incentives. ’cause you know, if the company wins and shareholders win, everybody wins. And you get to retain those employees because they’re not gonna leave if they’ve got an absolute crap ton of their comp, which is still yet to vest.
[00:32:45] Luke: So you hang on to your best people. So on the face of that, that’s a really good idea, but the problem is how you account for that. Companies try to pull the wool over investors’ eyes and they say, well this is like a one off expense. So in, because it’s a one off thing, you know, we’re not gonna. We’re not gonna really put it in our accounting, we’re gonna adjust because, oh, you know, I gave a hundred million dollars worth of options this year, but I had to give that this year.
[00:33:11] Luke: You know, I’m not planning to do that next year. So it’s a one-off expense. So then it gets adjusted out and it’s treated like a non-cash expense. And in some ways it is non-cash. Like I gave you a bit of paper that said you have the right to buy options in the future. But that may or may not vest depending on the, the criteria on those options.
[00:33:32] Luke: So, but the reality is you’ve, you’re essentially giving away equity in the company. And again, maybe they won’t vest, but that’s a bad outcome for the company and for shareholders. They say the share price just like collapses, all these options are worth nothing. Um, and so he didn’t like dilute the company, but typically.
[00:33:51] Luke: You know, comp good companies who are leading their industry are gonna appreciate and value these share options are gonna have true value. And if they didn’t have true value, well they’d be worthless anyway. It’d be like a irrelevant thing at the compensation conversation. So the employee’s gonna believe these things have real value.
[00:34:09] Luke: So investors should too. And it’s not one off, ’cause companies do it year after year, after year, after year. Um, and Axon, let’s just look at an example of why, how this really impacts investors. You know, the sort of bottom line of it. So just very simply, here is the fully diluted share count for Axon over the last 15 or so years.
[00:34:33] Luke: So the green bars of a number of shares in issue, um, and the blue line is the percentage change every year. So. In 2022, we’ve got like a peak where the company diluted nearly 10% of its share capital by issuing new stock. And that wasn’t just for, that’s what that was tied into, like acquisitions and other stuff too.
[00:34:59] Luke: But you don’t wanna get diluted as a shareholder, you know, if you own a thousand dollars worth of Axon. But if they dilute by 10%, then essentially you then only own like, uh, $900 worth of Axon direct or thereabouts. Um. So you don’t wanna get diluted, but that then that was a, that was like a peak, that 9.6%.
[00:35:19] Luke: But Axel have been running for the last few years diluting at about 4% annually, um, 4.9% in the last full year. That is a, that’s a big hurdle to overcome as an investor. You know, your investment has to compound at a rate that means, you know, the risk based return still makes sense even though. We’re getting diluted on top of everything else by about four to 5% a year.
[00:35:46] Luke: So that’s, that hurts investors. I’ve got more on this, but I wanna give you a bit of air time.
[00:35:52] Krystof: this was always an issue.
[00:35:53] Luke: Yeah,
[00:35:54] Krystof: Right, but now you’re saying this is more of an issue. Correct.
[00:36:01] Luke: it is so interesting. Right, because we’re now in that scenario, I half started describing when I was rambling where the share price has now gone south. So we, the company has essentially like t tranches of shares that are going to vest over every year over the next probably 10 years. And a number of those trenches are now underwater.
[00:36:23] Luke: So they’re not, those share options in theory aren’t worth anything unless as an employee you believe the company will turn around. Um. So they’ve got now like a retention issue. So their best employees might start saying, well guys, you need to give me far more options this year. ’cause look at the share price.
[00:36:42] Luke: You can’t gimme the same options as last year. The share price is in the toilet. So what is Axon gonna do? They’ve, they’ve created this horrible problem for themselves in a declining valuation environment that we’re in right now. ’cause they either have to. Dilute the hell e even more out of the company to retain their best people, or they’re gonna lose those people to competitors.
[00:37:06] Luke: And if they dilute even more, they issue even more stock based comp at these lower valuations. If the company recovers, which investors want, you know, that’s like, we want to, you know, we will make a return on investment. Well, the company had to give away much more stock at the lower price. So they’re kind of this rock and a hard place situation.
[00:37:24] Luke: And again, it’s only because they have had this history of paying so much stock base comp, even compared to like SaaS companies who did it badly anyway.
[00:37:33] Krystof: Hey, badge. This might be a little bit of a baboon ish question for you, but why can’t they pay more employees higher salaries?
[00:37:44] Luke: Great. Yep. They haven’t had a history of doing that, but yes, that’s exactly how they would have to navigate this.
[00:37:49] Krystof: but why so, why I, I’m, I’m no SBC expert, but. Just because you’ve done things one way when it was working, when it didn’t make sense with a higher share price. Now things have changed a little bit. So why would management not pivot since.
[00:38:08] Luke: Because you’ve got this other factor in Axon, which is the founder, CEO, Rick Smith, who. Pays himself. I haven’t got the numbers in front of me, but has paid historically himself a frankly ludicrous level of stock-based compensation personally, that has presumably driven employees to say, oy rick. We want a slice of the pie too.
[00:38:28] Luke: So their compensation committee has then, you know, had to, they did, they did a, a sort of a special adjustment in May, 2024 to issue a whole bunch of additional stock options to employees. And I’m not, you know, I’m not an employee, I’m not inside those conversations, but I imagine some part of it might have been how come the boss gets so much stock base comp and we get none.
[00:38:52] Luke: We’re doing all the hard work. Um, so is Rick gonna stop paying himself? I dunno, it doesn’t seem to be in his DNA.
[00:38:59] Krystof: it, you know, as I’ve listened to this, I keep thinking about, uh, a little bit back to my Vegas presentation, why investing is so hard. It’s because it’s never about one thing, is it? It’s like, it’s just, you have like all these variables and it’s, it is sometimes you have a. Shitty company and it’s a great valuation.
[00:39:21] Krystof: So you make a lot, but then, but then that’s more dangerous because it’s a crappy company, might not make it. Then there’s, you know, great companies with these amazing moats that are just kicking ass, taking names. But lo and behold, management is sort of screwing the, you know, equity investors by, I don’t know. I don’t know what you would call this, but is it some kind of greed where they’re just not being shareholder friendly because they can, because, and so it’s like, uh, all these nuances you gotta pay attention to. And even something like buy and hold, right, which is your bread and butter. You’ve done it so successfully with intuitive surgical, but in this case, that would’ve been an error.
[00:40:07] Luke: I saw, I mean, I’m not gonna blow my own trumpet, but I saw this coming. I made, I made bank five or six x on my investment in Axon, but I’ve been selling like steadily for the last six months plus. ’cause I can see this problem coming.
[00:40:21] Krystof: Yeah, so it’s not so in poker terminology, you were not lucky. You were reading the table correctly and you folded. What was, I don’t know if this is, you folded a good hand because you saw trouble coming in the future, future cards and so you, you sort of, um, you didn’t break any rules, right? You, you didn’t break the rule of you must hold for some period of time.
[00:40:49] Krystof: That’s arbitrary. You looked at the valuation, it was excessive. You saw these problems showing up and you pivoted.
[00:40:58] Luke: Yeah, and I’ve still got a holding, like I’m not out of the company. I’ve still got a 1% allocation.
[00:41:03] Krystof: See that’s interesting too though. That’s interesting too. I’m not sure had I sold, made, saw what you saw, whether I would justify holding even 1% because what is your justification for holding the 1%?
[00:41:20] Luke: So that thing I said the other week about the, the benefit of living in the gray, living in the nuance, if I had sold all of my acts on stock, so that, and today I was not a shareholder, it’s emotionally. Quite difficult for me to become a shareholder, even if I was buying like a de minimis, you know, couple of thousand dollars worth of stock.
[00:41:40] Luke: Um, ’cause I’m going, oh, I’m not a shareholder now I am a shareholder and I’ll be, I’ll be trying to, my emotions will be saying, try and time the bottom, catch the bottom. But my emotions aren’t saying that to me ’cause I’ve still got 1%, which is still relatively substantial allocation for me. Um, and if I want to take that 1% back up to one point half, 2%, well it’s just emotionally less of a hurdle to cross.
[00:42:01] Luke: It’s just like I can add a bit more money to it. And so I might feel at some point, like if they can successfully do what you were describing, which was pivot away from stock based comp, get a handle on dilution, maybe start doing some share buybacks, albeit that may not make sense ’cause they bought like acquisition monsters.
[00:42:19] Luke: Um, but maybe paying, like retaining people by paying more fixed comp rather than this sort of options in the variable comp. Well, if they can do that and they can demonstrate that for a year in the market and they can keep their talent. Then it’s easier for me to start buying again than if I was like a 0% allocation.
[00:42:37] Krystof: That makes sense. Excellent. You wanna tell us, uh, you wanna bring us home? Telling us about Wise? You have some updates there? No.
[00:42:46] Luke: yeah. Well, Barry, on our, um, Patreon today reminded me that, that that Wises had their quarterly update coming out, so. Uh, yeah, just good news from the company. Why, so why is, like, why is PLC currently WISE on the, on the UK stock exchange? Well, um, soon to be, they’re calling it a dual listing, but essentially it’s a relisting, like their primary listing will be on the nasdaq.
[00:43:16] Luke: And so they reminded us in their quarterly update today that they’re on track and they’re expecting to list on the Nasdaq. On the 11th of May, so it’s time of recording that’s less than a month away. And that’s quite exciting for the company because it’s gonna give, uh, it’s gonna give them much more exposure as an investment.
[00:43:35] Luke: Um, and it could attract a lot more institutional money. I don’t think this is gonna be like, dropping into any big indices anytime soon. But it’s then, you know, potentially could be part of the, like the s and p and the, uh, like the, you know, like some of the bigger NASDAQ indexes at some point. So, um, so that’s like more inflows and the company meanwhile, like the valuation has stalled for quite some time, but the company meanwhile has just been like plowing away, just doing really good work.
[00:44:04] Luke: All of its numbers moving in the right direction. Number of active customers, personal business customers is up nicely. The number, the, the volumes they’re transacting is up nicely. The take rate is down nicely, which might sound counterintuitive, but that is like Wise’s mission. Is to essentially make money transfers eventually free.
[00:44:25] Luke: Um, so the take rate will come down as they do that and they’ll make money in other ways. Uh, so yeah, I’m just really pleased with this one, like super solid, steady holding. I’ve been adding to it as recently as a few months ago. And then let’s see what happens when they relist in the us.
[00:44:40] Krystof: Unless folks forget we are holders of wise. Here at the, uh, wall Street Wildlife in the community portfolio, though monkey’s life is gonna be made much easier when he could actually buy the thing on a ticker that exists on the Nasdaq instead of mucking around with, you know, the London, London versions that may or may not be hypothetical or mythical creatures.
[00:45:06] Krystof: So, yeah, very, very exciting. Uh, I just used Wise yesterday to transfer some, some bananas to. To the honeypot jar for monkey’s upcoming, uh, trip across the ocean.
[00:45:19] Luke: Great. Yeah, love it. Uh, badge. If I may do a little self-promotion, uh, I’ve been speaking of monkeys, I’ve been a coding monkey pretty seriously and I made some, some important updates to investors Mirror.
[00:45:35] Krystof: Uh, I’m, I’m. Getting ready to start showcasing it more on upcoming episodes because when I stand back and I see what all I’ve built, I think it’s really fantastic. So, um, I, I would like to say that if you have not seen the Investors Mirror App, uh, check it out on the App Store. Type it, it’s investor apostrophe s mirror.
[00:46:00] Krystof: ’cause I, I think there’s some search engine, uh, shenanigans. And I would encourage you to find the journal module and try it out because as you were saying, the act of journaling, writing down your thesis and gauging your emotional state it, if nothing else, beyond say being a record of. Of your thinking at a particular moment, it slows you down. And I think when I look at what I’ve built in the investor’s mirror, when I open up that app before I make a trade, I have a, and go through the steps. Uh, my sense of odd or ought I not make this trade really, really increases because there’s just built in systems and checks and balances. It’s really crucial for the way we’re teaching you to invest.
[00:46:57] Krystof: So I’m glad I ended up making something to, to help myself and hopefully help you. And badge. I, I swear the Google port is also gonna happen, uh, soonish, but before the Google Port, there will be a desktop version that I still have to integrate a few, few pieces, but Apple folks go check it out.
[00:47:19] Luke: Great stuff. Yeah. In the iOS app store today and it’s investors mirror and we’ll drop a link to it in the show notes this week.
[00:47:26] Krystof: Yep. And, uh, give it the old five star rating. If you know, if, just don’t give it a one star rating. One star rating’s, bad. Five star rating’s. Good.
[00:47:38] Luke: like the way stocks are trading at the moment and you know, the valuations of our growth stocks, probably everyone’s hurting. So we probably all could use an investor’s mirror right now just to like get a handle on our emotions and try and act with our head, not with our hearts.
[00:47:53] Krystof: Yeah, I mean, there’s so many features in it. I, I, I will do a deeper dive through many of them in the upcoming episodes, but yes, one of the, the things is a daily dose of wisdom. So anytime you hear. You know, wisdom passed down generations. It tends to have something to do with mindset and our general, uh, comfort with life’s, uh, pitfalls and alligators and all the things.
[00:48:19] Krystof: And there is a way to, to invest in hard times that you can, you can practice and get better at instead of panicking and making bad decisions.
[00:48:29] Luke: Alright, very good. Well done. And before we close, I wonder if I can get a little thought in as well. I would like to give a shout out to Sheila. ’cause Sheila called me uh, a week ago. In the middle of the night and she’s like, Luke, tell me about this company and this company and this company. ’cause I posted like my mid month portfolio update.
[00:48:48] Luke: So I ended up like I’d had a glass of wine, I was watching a movie, I put the movie on pause, and then I described, you know, the business model of a couple of companies that had caught her eye. So Sheila, thanks for checking that out. I hope you’re listening to the podcast. But it did remind me that we are probably overdue in doing like a top to bottom portfolio review, king of the Jungle Review.
[00:49:09] Luke: We did this nearly a year ago, maybe nine months ago, where we just went through every stock that we own and we gave you guys like the two minute, three minute headlines on what this thing is. And then we tried to like debate each other and pick apart the thesis and like bull and bear, uh, each other’s holdings.
[00:49:27] Luke: So, um, yeah, I think we should be thinking about doing that again sometime soon. Tick, we’ve also got the community portfolio now voted on every month by our Patreons. There’s a whole bunch of stocks in there that are quite exciting that. You and I hadn’t really talked about before.
[00:49:40] Krystof: Oh yeah, that’s right. And to pull back the curtain yet again. Uh, badge and I are working on a very deep dive, uh, about, uh, a particular company that at this moment is shared across all three of the Wall Street Wildlife community portfolios. I, I don’t think it, it takes a magician to figure out what that company is, but I can’t wait.
[00:50:05] Krystof: I really can’t wait for this because I know you’re doing your own due diligence from a specific angle. I, I’ve, I’ve been swimming in it for months now. And, uh, we’re gonna try this very long format of, of telling the story about one of the world’s most exciting companies. Hint, a STS. Hint, hint, if you’ve made it this far.
[00:50:29] Krystof: So, uh, we got a lot of stuff in the, in the pipeline for, for y’all. We really appreciate your, your patronage.
[00:50:36] Luke: Yeah, it’s, it’s good actually. You’ve forced me to go down the rabbit hole in a way I haven’t before with A-S-T-S-A-S-T Space Mobile. Um, and I’m a shareholder, but I’m learning a lot more about the company in doing this research. So yeah, looking forward to recording what’s going to be a marathon episodes with you sometime in the next couple of weeks.
[00:50:54] Krystof: Yeah, right on badge. Before we close, let’s thank our friends at fiscal ai. Uh, you just used them, uh, this episode. It’s our essential stock research platform. So we use it all the time. It’s where we start. It’s got all the KPIs you would ever need. It has, I mean, all kinds of customizations and pretty colors, and it’s now transcripts and international companies.
[00:51:22] Krystof: It’s the one stop shop for, for where investors should begin.
[00:51:26] Krystof: So you, you you know what they’re doing. Like if you use Google Finance, um, you might go, oh, this is getting better. They’ve got that much better data in Google Finance. That’s fiscal ai powering Google Finance globally now. Like, well on guys, like you’re plugged into the biggest of the biggest. Plus they’re plugged into.
[00:51:45] Luke: Clawed chat, GPT, um, perplexity, so you can actually start to have real finance data in your AI tools if you have the right, uh, tier of plan from fiscal ai.
[00:51:57] Krystof: Yeah, fantastic. It looks like they’re setting themselves up to be the standard, which is, which is absolutely great. So use our link fiscal.ai/wildlife. You get two, three weeks of the pro version of the tool, no credit card needed, and a 15% discount if you upgrade. That’s fiscal. AI slash Wildlife badge. Are you ready?
[00:52:24] Krystof: Are you ready to become a beast of an investor?
[00:52:30] Luke: What a weird way to say it, but yes, I am.
[00:52:33] Krystof: Well, because you are already a beast. You are already a beast. I gotta, I gotta quantify.
[00:52:39] Luke: Our journey starts here. Until next week,
[00:52:42] ​
