If someone at the silver donut heard that appen was struggling...

If someone at the silver donut heard that appen was struggling in terms of losing a major customer to a competitor or to that customer going in house, perhaps through a casual conversation with an employee, they could use that information to build a short position then release this report to start the short attack.

they wouldn’t admit they had heard rumours from inside the company, so using the ‘lack of a November trading update’ as their supposed insight into an impending down grade sounds a bit like a convenient cover story for the gullible so they don’t look suspicious.

I bet they heard something and have thrown many millions on the short side, and they wouldn’t be so cavalier as to do that just because there hasnt been a trading update, given there is no regular scheduled trading update.

the only reason for an update usually is to upgrade or downgrade, so traditionally when a company doesn’t provide one at that juncture it means they are on track for guidance.

i have been assuming that no news is good news in that they are on track, and that they are being cautious given their revenue visibility has been less clear and they dont want to risk misguiding the market.

gven the last update was only a couple of months ago at the time of the earnings call, I doubt they would have seen a major drop off compared to guidance, although the revenue and earnings skew was always going to be towards q4 so there is a risk it has been lower.

I have noticed in my reading that the number of players in this space is increasing eg in autonomous driving and image labelling and that alphabet are now selling their own native data annotation service using AI and human annotation of image, text etc.

so I agree with others that we all have to consider the possibility that the business model is broken, such that revenue could stagnate or shrink, margins could compress etc.

I remain overweight appen and have equipoise on the stock at present. Where there’s smoke from macquarie, there’s usually fire in the short term, and short term revenue misses suggest that appen is losing their long term industry leadership position.

I’ll hold my overweight holdings for now as a 20% drop pretty much bakes in a lot of bad news medium term. If appen comes out next week with a slight but only small miss / downgrade, and it leads to another 10% drop then it could actually be a good entry point, but it would also introduce a risk that the entire story is broken due to losing major US tech clients, which will mean a massive pivot is needed and will be a drag on growth for years as they rebase the revenue/ earnings to smaller clients.

interesting times as a holder, requiring a cool head, a heart of stone, a rock solid conviction to stand against the tide but also the mental agility to explore, research and consider with an open mind that the thesis may have changed and the prospects may be under threat.

will be fascinating to see how these crucial next 6-12mo for appen play out, it will be make or break for the credibility of management and loyalty of the LT shareholder base.