The idea that American capitalism is simply all too woke (NYSE: BUD employing Dylan Mulvaney) is a common enough complaint out there. Equally so – and rightly so – is the idea that consumers, that’s us, we, can do something about it. Capitalism means folk are hungry for our money, free markets mean we get to spend as we wish. So, we can bend the capitalists to our wish by directing out spending (see NYSE: BUD stock price having hired Dylan Mulvaney).
OK, enough with the economic theory – that this is true means that folk will try to get our spending, our money, by appealing to our ideas and morals. Which is what PSQ Holdings is doing. It’s a SPAC merger, one that didn’t go all that well to be honest. They hoped to be raising north of $100 million (well north) and got a handful of tens of millions. The SPAC structure allows those who funded the shell company to withdraw when the merger deal is announced – many did.
Nothing wrong with non-woke businesses in capitalism
OK, more fool them. NYSE: PSQH rose from the normal SPAC $10 to $21 and then fell back – there was money in staying in then selling that is. But that’s just IPO excitement, a boom, a fall back and then….well, that’s the point, the and then. So, what happens now?
Take a step back from the share price for a moment and think about what a business needs. One thing is an actual customer base. If you can get that without having to spend then no, you’re not golden. Not yet at least. But you have avoided one of the vast costs of being in business, building a customer base.
This has always been the case for Trump’s Truth Social (and the potential merger with another SPAC, DWAC). No, no, leave aside whatever is thought of him. It’s just obvious that he can deliver that first thing a social network needs – people. Maybe not the billions of Facebook, the hundreds of millions of Twitter, but enough that there are some folk there to social media with. OK, so there’s a value to Truth Social, therefore to DWAC. How much is interesting, but that value is positive.
If you’ve a crowd you’ve at least the start of a business
PSQ Holdings is, in one sense, very like this. They’ve shown as a private company (And Trump Jr backed, at least in part, he gets this point) that they can build an online community of the like minded. Thousands of businesses, millions of sign ups. The idea being not just social media, but actual commerce. We, who hold these views, should buy our stuff from those who espouse our views.
You know, the thing Anheuser Busch thought it was doing with Dylan then found out it wasn’t. Another way of putting this is a MAGA marketplace.
No, no, don’t reject this as an idea because of the politics. Anything at all that creates a buyers’ group makes a business potentially viable. Being able to corral Swifties’ purchasing power would make a fortune – for a bit, at least.
So, there’s a value to the grouping, that’s obvious enough given the above. But that’s not enough. There are many ideas that produce value but it’s not possible to capture that value. And that’s where PSQH might have a problem. Presently they run the grouping, the online site. Great. But to run the business you’ve got to be able to take a slice of the transactions. Which they currently don;t do but are going to try.
So, how will PSQ take a slice of the trade?
Well, OK, so that’s one valuation of PSQ Holdings – they have a community, they can take some sort of slice of the transactions between the group and that’s great. But they’ve also said they want to go further. Which is to become the alternative to Amazon. And that’s a hugely larger undertaking.
Amazon isn’t, in fact, a website. Nor is it a community. Amazon – like Walmart, Costco and the rest – is in fact a logistics business. And logistics isn’t something relies upon having a buyer group, it’s something that relies upon being shit hot at, well, logistics.
It’s also possible to think that the MAGA crowd isn’t, in fact, large enough to be able to develop nationwide logistics. Some tens of millions across the country? Perhaps that’s not enough trade to support being able to deliver quickly all over the country? You need a couple of hundred million to support that cost base?
It’s entirely possible to differ with that last point. But this is I think, the important question about PSQH. They’ve a crowd and good for them. Now, how are they going to be able to take a slice of the trade between that crowd? And logistics, well, that’s going to require so much capital that perhaps that’s not a real ambition?