Update on Global-e and me

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This is just a little update on Global-e and me. I had had a full-sized position, although it was my smallest full-sized position, but after looking at the results and reading the conference call, I sold out completely on Thursday, Friday, and yesterday (Monday). Please don’t follow me though. It may go straight up from here. It’s just the way I looked at it and I’m often wrong.

Why did I decide to sell? Well I’ve had doubts for a long time, especially about their Shopify arrangement. First of all, with Shopify having 14% of Global’s stock, would they be unduly influenced by what Shopify wants.

I may have misunderstood, but it sounded as if they were turning over all their companies who were on both Global and Shopify to run on Shopify’s new platform, which is copied from Global’s or integrates some of Global’s abilities. That didn’t sound good to me. To me it meant less revenue to Global from each of these.

In addition I was afraid they were going to pull a Bill.com, who got a large number of new customers from the banks but very little revenue from each. I worried that Global was going to do the same with Shopify. A large number of new customers but very little revenue from each.

And then I looked at their results in what I had expected would be an outstanding quarter. Sure they have seasonality and their quarter starting in January naturally always has less revenue than their Xmas quarter because their customers sell luxury items… but their 3rd quarter was always up sequentially from their 2ndquarter. In 2022 it was up 21.0% sequentially. This year it was flat, up from $133.3M to $133.6M.

Then their year over year results. In 2021 revenue was up 77% in this quarter. In 2022 revenue was up 79% in this quarter. In 2023, revenue was up 27% this quarter. That was terrible.

Then their GMV year-over-year gain went from 86% to 77% (no complaints with that), to 35% this year. Again terrible.

In the Conf Call they said that they’ve spotted a little pick-up in the last few weeks. Well duh… we are in the Xmas season.

Yes, their adjusted EBITDA and their gross margin both did fine, but I just was worried about this company, and disappointed. I decided to sell. I got out at prices roughly from $30.00 to $32.70. They were at $31.75 last I looked.

Again, they may do just fine! They are way down from their highs. Make your own decisions.

Saul

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I also didn’t like that they’ve had to revise down annual revenue guidance for the 2nd time in 2 years. The last time was in Q1 2022. It perhaps shows that the business is more volatile (on the downside) than management expects it to be. I don’t like guidance that I cannot trust. I too exited my stake following the results.

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hi Saul: any idea what you will do with the Global-e proceeds? thanks.

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I’ll discuss that probably in my end of month summary

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I felt that the market reaction was overdone. I’ve held my position. So far, it appears that my assessment was correct in that GLBE has had only one losing day since the beating they took after earnings. While most assuredly I will sell, I don’t have a specific number in mind as to when I’ll exit. It may not even be at a dollar level. Time is another consideration.

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If you’ve already decided to sell, is there a reason to wait? Saul had posted this a while back, I saved it and regularly review as I have a tendency to wait for a better time to buy and sell. Although this talks about buying, it’s same for selling but in reverse.

"For those who want to know, it’s up 24.7% in three days. There’s a message in that. That’s why you don’t want to get scared out at the bottom by all the value people and trolls who always show up at the bottom. Just imagine trying to judge when to get back in. If you were out, you might not even have noticed the first day’s rise. After the second, you would have said to yourself “Oh, this is a dead cat bounce. I’m not going to enter here, I’ll wait until it’s back down to where it was two days ago. But you would starting to worry, (“Wow… up 15.5% already?”) Then after today’s close you’d start thinking the market had turned, but you don’t want to buy on such a large three day rise and you’d say “It will probably settle back a little tomorrow” (not a bad surmise, actually), but if the market was down a little you’d wait another day to see if it continued down. It might not and then you’d be kicking yourself for not having bought tomorrow. But if it was up tomorrow you’d rush back in with part of your funds at maybe 33% off the bottom, and then it would drop the next trading day, and you’d be kicking yourself for having given in and bought, and then you’d start wondering “Do they still have a way to fall? So-and-so thinks so. Did I make a mistake, should I get out again?” All those decisions are crazy-making! What I do is take positions of ownership in great companies, and stay in them. It’s sooooo… much easier.”

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Let me start by saying though I have enormous respect for Saul, we are not the same. I don’t always agree with him. Maybe we don’t fully agree on what things are crazy-making.

Moving on, I said I felt the market reaction was overdone, but I didn’t say why. Right off the top of the Q&A a question was asked about the impact to revenue and how it informed the Q4 outlook. Amir’s answer initially just reiterated stuff he had covered in the prepared remarks, weakness in same store sales due to consumer sentiment and a drift of merchants to multi-local which has a lower take rate. But he then went on to say that they recently saw signs of a reversal of those trends and an improvement in same store sales. He said they very much felt that this would continue in the coming quarters and that growth will accelerate. Further, while they lowered GMV and revenue guidance, they raised EBITDA guidance.

There’s been some comments in this thread that there’s evidence that GLBE management is not totally trustworthy. I don’t agree with that. I do think of all the companies we follow, maybe not “all,” but whatever GLBE has a one of the most difficult jobs when it comes to forecasting. Even though their business is B2B, everything is driven by cross border consumer sentiment. They somehow have to unpack myriad geo-political influences across different economies, currencies, cultures and so forth. In addition, I think when the Shopify relationship is fully implemented it will be a net benefit. That is coming in the near future. There’s more that I find encouraging, but that’s enough.

I never have a price target in mind when I buy a stock. The decision to hold a stock is pretty much the same as the decision to buy a stock. My position in GLBE is about 5%. Given my risk/reward assessment, I think that’s about right sized.

And there’s another thing, I always struggle with the decision to sell. This is especially true when I don’t have a target in mind for the funds. I’m not very good at holding cash. It’s idle funds. Yes, sometimes idle funds is the best thing, but I’m just not good about knowing when to do this. So for now anyway, I’m sitting on this one and will continue to do so until I have a compelling reason not to.

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To be very brief, I am of the opinion GLBE will benefit significantly from the partnership with Shopify that is just getting started after quite some time in development. My position is rather small at this time, but am considering increasing it although it won’t end up being significant until the thesis is proven out (or not at which time I’ll discard).

AJ

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GLBE only lets their service into Shopify, just an option in Market Pro, so they will have two incomes, one from their own customers and the second from Shopify. Saul said it was correct, GLBE will pay a fee equal to a percentage of the GMV, but it will expand overall GLBE’s GMV, and don’t forget Shopify owns GLBE shares of 13.56%, in this case, they will support each other. if one day Shopify it don’t partnership agreement is renewed we need to worry.

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Second, this quarter was not good not too bad, and no one talked about it.
In my understanding it is a D to C business, D is GLBE’s customers, and " to " is GLBE. In this quarter C had some problems, but D didn’t have any problems, because in CC the management talked about it, if D has problem someday we need to worry.

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