, the sustainable sneaker company, has recently fallen on hard times, with revenue down by more than 50% from its peak. To help right the ship, Allbirds is rebranding itself as NewBird AI. Allbirds closed all of its U.S. stores and sold its intellectual property for $39 million.
They are also raising $50 million in the effort to morph into an AI computing infrastructure company. It’s unclear how $50 million will help them, given that they are going up against companies with trillion-dollar market caps spending hundreds of billions on AI, but its share price, which rose 700% on Wednesday, argues otherwise
In rebranding, Allbirds to NewBird AI, its executives are taking a page straight from the crypto playbook — and before that, the dotcom playbook:
Struggling company – hot narrative – rebrand company – stock price surges.
Remember in 2017 when Long Island Iced Tea became Long Blockchain? The original template was envisioned during the 1998 dotcom boom. For example, Books-A-Million, a regional bookstore chain, announced that it had updated its website, and its stock went from $3 to $47. It did not launch a new business or even pivot to e-commerce.
Two weeks later, the stock gave up most of the gains. The underlying business was irrelevant to speculative investors. The words “internet” and “website” drove investors into a frenzy. Today, the word “AI” is magic. It suspends disbelief and sends retail investors into a speculative frenzy despite the lack of evidence that a name change and new direction will materially impact the bottom line.
Is Large Cap Growth Back In Vogue?
The first graphic below shows the stark outperformance of large-cap growth stocks over value stocks over the last five days. Further, it shows the technology sector is up nearly 10% over this period, while the former market leaders, staples, and utilities were down, despite the market surge. To help assess whether the value-over-growth trade is dead or just taking a rest, we share some longer-term perspectives in the second graphic.
The graph shows the price ratio between the Vanguard Large-Cap Value ETF (NYSE:VTV) and the . The trend over the last 15 years has been lower, ie, growth has greatly outperformed value. To the bottom right, we see the nearly 20% outperformance of value over growth, which started in November.
The recent outperformance of growth over value has erased about a third of the move. Will the current experience be like the temporary value outperformance during the Liberation Day events, or could it be more sustainable, as we saw in 2022? Before considering our questions, it’s worth noting that the real value sector is technology and mega-cap growth, as shown in the third graph.
Poor Breadth
The graphic below, courtesy of Jason Goepfert, shows that when the S&P 500 hits a record high, as it just did, and less than 5% of its stocks are at 52-week highs, the average returns tend to be slightly below average. Moreover, there have been more negative return events when this condition was met than positive.
Bear in mind that the bear markets of 1929 and 2000 drag down the results. This raises the question of whether the recent rally is a dead cat bounce with poor breadth or a continuation of the bullish trend existing before the Iranian conflict.
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