Following reductions made earlier this month in one of his other holdings, Chase Coleman (Trades, Portfolio), founder of Tiger Global Management and a former “tiger cub” of the late Julian Robertson (Trades, Portfolio), revealed last week he trimmed his holding of Weave Communications Inc. (WEAV, Financial).
Having been an early investor in companies like Facebook parent Meta Platforms Inc. (META, Financial) and Spotify Technology SA (SPOT, Financial), the guru’s New York-based hedge fund, which was established in 2001, is known for concentrating on investments in small-cap stocks and technology startups.
This strategy, however, has not worked out very well for the firm so far this year. Reuters reported Tiger Global recorded a 50% decline in its flagship fund for the first half of 2022 as worries over rising interest rates and surging inflation punished many of the growth and tech stocks in its equity portfolio.
As shown in the chart below, the tech sector has suffered a 42.06% decline so far this year.
Due to the meltdown, Coleman severely reduced or completely exited most of the hedge fund’s holdings during the second quarter.
Weave Communications stake
GuruFocus Real-Time Picks, a Premium feature based on 13D, 13G and Form 4 filings, showed Coleman curbed the Weave Communications (WEAV, Financial) stake by 1.41%, selling a total of 99,007 shares of the Lehi, Utah-based software company on Oct. 20. The stock traded for an average price of $6.34 per share on the day of the transaction. It had an impact of -0.01% on the equity portfolio.
The guru now holds a total of 6.93 million shares, which represent 0.37% of the equity portfolio. GuruFocus estimates Coleman has lost 67.44% on the investment since establishing it in the fourth quarter of 2021.
The tech company, which provides an all-in-one communication and engagement software platform for businesses, has a $358.52 million market cap; its shares were trading around $5.49 on Monday with a price-book ratio of 3.88 and a price-sales ratio of 2.72.
After an initial pop, the stock has fallen around 70% since its initial public offering on Nov. 11, 2021.
Leadership change
Following the departure of CEO Roy Banks in August, whom the company disclosed stepped down due to health and family reasons, Weave Communications officially appointed Interim CEO Brett White as its new chief executive on Oct. 4.
Formerly the company’s president and chief operating officer, White previously worked as the COO and chief financial officer at software provider Mindbody.
In a statement, Chairman of the Board Stuart C. Harvey Jr. lauded his more than 30 years of experience, saying that White’s “vision and knowledge of the business make him a natural selection to lead.”
“His track record scaling and operationalizing verticalized SaaS and payments companies is exactly the profile the board desired when selecting Weave’s next CEO,” he said. “We’re thrilled to continue leveraging Brett’s leadership and strategic view of the business.”
As for White, he said he “could not be more honored” to lead the company into its next stage of growth.
“At its core, Weave is helping health care providers deliver more modern and meaningful patient experiences that deeply impact their local communities,” he said. “Weave’s opportunity to grow small businesses through our transformational platform is exciting and I’m proud to continue our executive team’s focus on bringing Weave to many more practices, patients and communities.”
Financial results and outlook
Weave Communications reported its second-quarter earnings on Aug. 3.
During the three months ended June 30, revenue grew 24% from the prior-year quarter to $34.9 million. The company recorded a net loss of $14.8 million, or a loss of 23 cents per share, which was a slight improvement from a year ago.
Banks attributed the company’s strong performance to making “substantial progress” in its new product delivery and Go-to-Market optimizations.
Looking ahead, Weave’s guidance for the full year called for revenue between $141 million and $143 million. It is also anticipating the non-GAAP loss from operations to range from $38 million to $36 million.
Weave Communications will post its third-quarter results after the market closes on Nov. 2.
Financial strength and profitability
GuruFocus rated Weave Communications’ financial strength 5 out of 10 on the back of a low Altman Z-Score of 0.66. Since this falls within the distress zone, the company could be at risk of going bankrupt if it does not improve its liquidity position. Currently, its debt-to-equity, debt-to-Ebitda and cash-to-debt ratios are all underperforming competitors.
The company’s profitability did not fare as well, scoring a 1 out of 10 rating. In addition to negative margins, the returns on equity, assets and capital are underperforming versus a majority of industry peers.
Guru ownership
With a 10.62% stake, Coleman is Weave Communications’ largest guru shareholder. Paul Tudor Jones (Trades, Portfolio) also has a small position in the stock.
Portfolio composition
Over half of Coleman’s $11.93 billion equity portfolio, which was composed of 73 stocks as of the end of the second quarter, was invested in the technology sector, followed by smaller exposures to the consumer cyclical, communication services and financial services spaces.
According to the 13F filing for the three months ended June 30, other software companies the guru was invested in included Microsoft Corp. (MSFT, Financial), CrowdStrike Holdings Inc. (CRWD, Financial), ServiceNow Inc. (NOW, Financial), Snowflake Inc. (SNOW, Financial), Atlassian Corp. PLC (TEAM, Financial), SentinelOne Inc. (S, Financial) and Toast Inc. (TOST, Financial).
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
