What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing. Today, the qqq technology index has recovered almost all of its losses from the omicron sell-off and is within two percentage points of its all-time highs. But this strong performance is masking a lot of market turbulence under the surface. The qqq is market cap weighted, so it is dominated by the mega cap tech companies like apple microsoft, amazon and tesla.

These are well-established companies with strong profitability to support their valuations. However, a lot of the more speculative disruptive technology companies have had their stock prices hammered over the past couple of months, kathy wood's, flagship arc. Innovation etf is down 38 from the highs and almost all of its holdings are in bear market territory. These same speculative stocks were the biggest winners in 2020 in early 2021, as investors were willing to pay just about any price for up-and-coming technology companies, regardless of how much money they were losing in a lot of ways.

This is analogous to the inflation of internet stocks during the 1990s com bubble when asset bubbles inflate to levels beyond what can be justified economically they're sitting on a nice edge and are vulnerable to pop. At any time, we may be experiencing the bursting of the disruptive tech bubble right now. Perhaps the most pointed example of this is the high flying software company everbridge at its peak just a few months ago. It was up more than eight fold since its ipo in 2016, and had a market cap in excess of 6 billion investors loved their high revenue growth and overlooked the fact that they made net losses every single year and that the losses have actually been expanding.

However, just this past friday december 10th, the stock fell by 45 on the abrupt news that ceo, david meredith was resigning. Everbridge has over 1300 employees. How is it possible that the firm can lose almost half of its value? Just by the ceo leaving and the ceo? Wasn't even the founder to make sense of what's happening, you have to consider the broader market set up a couple weeks ago. Docusign lost about 40 of its value overnight, as they missed.

Analysts expectations for revenue guidance. This draconian share price action happened despite the fact that the guidance only missed expectations by a few percentage points. It appears like all the high growth money losing companies have been winners over the past couple years, are finally near their breaking points with valuations. So high they're, like a powder keg in one misstep, consider stock prices get crushed like a souffle under a sledgehammer in this video, we'll look at what everbridge does why their ceo abruptly resigned and whether or not the 45 one day decline in stock price was justified.

So, first off what is everbridge founded in 2002 they're, a software company that makes a critical event management or cem system to understand what cem is? Let's listen to this short clip of the now former ceo david meredith. Where are my assets? I've got a supply chain in china or i have people that are traveling to another country. Where are those people and where is the threat and when those two overlap? That is a critical event. So we start with 22 000 data elements and then we take all the assets of a company, so a goldman sachs or a microsoft and we're mapping, here's all of your supply chain, here's all of your employees and then we're able to keep track of the employees.

Even when they're traveling, and so if there's active, shooter detection system is triggered, that's automatically going to trigger a digitized set of protocols for what happens when, when you're in that situation, and then the system kicks in and does it in an automatic way and you get A message right away: basically, they make a software solution that notifies managers and employees when a critical event happens, such as a natural disaster pandemic or even more mundane things like a power outage. With almost immediate notification, companies can respond more quickly to resolve the issue. This reduces downtime, which for big corporations, can cost tens of millions of dollars per day and with both natural and man-made disasters having skyrocketed over the past decade, everbridge has seen demand soar for their product since 2015, ever bridge's revenue has increased at an astounding 35 percent. Compound annual growth rate and almost a straight line up into the right, however, to achieve this growth they've invested heavily in hiring salespeople to land, new customers, increasing sales and marketing expense has led to steepening losses.

Despite the strong top line performance, but wall street was enamored by the growth and bid the stock price up to a high of 166 dollars per share. This past november, that gave the company a 6 billion market cap, which is more than 17 times projected 2021 revenue. That's an extremely rich valuation, even for a high-flying software company on november 9th, they released third quarter earnings where they beat revenue estimates with 36 year-over-year growth. They also raised their full-year forecast.

Despite this, the stock sold off over the following month losing more than a quarter of its value with the stock price already so high going into earnings. Anything less than a massive beat would probably have seen the stock falling. They were also hurt by a broader selloff. In the software sector, however, the real pain was still yet to come after market closed on thursday december 9th, they made an unexpected announcement about their ceo, david meredith.

They put out a press release that ceo, david meredith has notified the board of directors that he intends to resign as ceo. He will be replaced by the current cfo and chief revenue officer on an interim basis as they search for a permanent replacement in the same press release. They also said they expect revenue to grow between 20 and 23 in 2022. That's a few percentage points lower than the 26 percent forecasted by analysts.

They also stated that david meredith's resignation had nothing to do with everbridge's financial condition or reported financial results. This statement was meant to quell potential fears that the ceo resigned due to accounting fraud or anything else of that nature. The guidance being a little bit below forecast is not enough to warrant a 45 moved lower in the share price. The majority of this move to the downside can probably be attributed to the abrupt and unexpected ceo resignation wall street analysts, who had previously been extremely bullish on everbridge, were quick to turn their backs on the company with a slew of downgrades.

Coming that same day, for example, the investment bank stifle downgraded their rating on the stock from buy to hold. They said the ceo departure brings about too much uncertainty for them to continue recommending their clients to buy the stock. But does this really make sense? The company lost more than 2 billion dollars of market value on the news. Is david meredith really so important to be worth 45 of the company? We can look back in history to other instances when public company ceos resign.

Unexpectedly. First off we can look at steve nguyen the founder and former ceo of the massive casino company wynn resorts in january of 2018, the wall street journal published a bombshell report documenting alleged sexual misconduct from dozens of women. Steve was eventually forced to resign as ceo, when resort's stock price immediately fell by almost 20 percent. Despite the negative headlines, the casinos continued to operate as usual, and the company's operations were not materially impacted.

Within a few months, the stock price had made back substantially. All of the losses. Another such example is former intel, ceo brian kazanich, who was forced to resign in june of 2018 over an inappropriate relationship with an intel employee. The stock price fell as much as eight percent on the news but similar to win resorts.

It quickly made back those losses in the case of everbridge's ceo. We have no idea why he resigned. There are plenty of legitimate reasons to resign. It's possible.

He just wants to spend more time with family, or maybe he wants to pursue different career opportunities at other companies and in the press. Release everbridge clearly states that their resignation had nothing to do with the company's financials. The point is the 45 move to the downside seems like a significant overreaction. They already have an interim ceo in place and within a few months they should find a permanent replacement.

Also david meredith was not the founder of the firm. He was an external hire and has only held a position for about two years. There's no reason to believe that everbridge's board of directors won't be able to find a suitable replacement within the next few months. Based on previous examples, it appears that the stock market tends to overreact to unexpected events such as these.

The selling pressure for everbridge was probably compounded by the fact that it was a high-flying tech company. These types of stocks have fallen out of favor in recent months, so investors were probably looking for any excuse to dump their shares, but despite this, it looks like the selling may have been overdone. While this video is not financial advice. I plan on buying a small position in this stock this coming monday, so long as it's not up a lot at the open.

This is a shorter term trade for me that i plan to hold for a few weeks or months at most. I think there's a good chance. This situation could play out similarly to win resorts or intel, and we could see the stock claw back a good portion of the losses once the dust settles and they announce a new ceo, alright guys that wraps it up for this video. What do you think about? Everbridge, do you think the 45 decline in share price was justified? Let us know in the comments section below, as always.

Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.