A Birdbrained Rebrand

By 2018, the Wool Runner from Allbirds (BIRD) had become a craze in Silicon Valley.

As the name implies, it was made from merino wool and marketed as “sustainable” footwear.

The Wool Runner circa 2018 | Source: Allbirds

Allbirds sold 1 million pairs in just the first two years after its launch in 2016. By any metric, it was a massive success as a direct-to-consumer brand.

Allbird’s seed round in 2016 valued the company at a mere $7.3 million.

By the time of its Series E funding round in September 2020, the company was valued at $1.7 billion – an astounding 232X increase in value in just a few years.

The company conducted its IPO a year later in November 2021 with the share price more than doubling on its debut to a stunning $4.1 billion valuation.

What happened next was a disaster…

Chart of Allbirds (BIRD) Since November 2021 IPO

Despite the wild success of the IPO – and the company’s ability to raise such a large amount of capital to get there – the “sustainable footwear” company never had a sustainable business model.

Strictly for the Birds

After the IPO in November 2021, Allbirds aggressively opened brick-and-mortar stores in major cities, promising to boost profitability.

That profitability never came.

Sales started to decline in 2023.

And by last year, sales were about half of the 2022 peak.

Allbirds had been bleeding cash every year, with no path towards generating free cash flow.

So it came as no surprise when Allbirds announced this February that it was closing all of its stores in the U.S.

The company said it would focus on its e-commerce business and international distribution.

Source: Allbirds

What came next, however, was a surprise.

Just a couple of weeks ago, on March 30, Allbirds announced that it had entered into an agreement to basically sell its “sustainable” sneaker business for just $39 million to American Exchange Group.

That transaction raised a peculiar question…

If a sneaker company sells its sneaker business to another company, what’s left?

What’s the business?

Well, we just found out, and it’s kind of unbelievable.

Birdbrained

Yesterday, Allbirds announced that it raised $50 million in convertible debt from an institutional investor.

The purpose of the funds is to pivot Allbirds’ business to “AI compute infrastructure,” with a long-term vision of becoming a “fully integrated GPU-as-a-Service (GPUaaS) and AI-native cloud solutions provider.”

The company will change its name to NewBird AI.

I wish I were making this up.

And would you believe it? Here’s what happened to the share price of Allbirds (BIRD) after the announcement…

One-Month Chart of Allbirds (BIRD)

The stock rocketed higher as much as 781%. Ridiculous.

A failed sneaker company, not a tech company, with absolutely no experience building or operating AI compute infrastructure, wants to pivot to become an AI-native cloud solutions provider.

Yeah, sure… and I’ve got an iceberg off the coast of Florida that I’d like to sell to you.

I’m having flashbacks to the Long Island Iced Tea company changing its name to the Long Blockchain company.

Or the SkyPeople Fruit Juice company pivoting to the Future FinTech Group.

Or how about BiOptix, a biotech company, pivoting to Riot Blockchain, a cryptocurrency miner.

These are nothing more than opportunistic pivots from bad, failing businesses into something considered hot.

Please don’t fall for it.

The game these companies are playing is that they hope the name change might generate attention from unknowing retail investors or might raise capital from fast money, just trying to keep the company alive.

We saw a lot of this in the dot-com bubble, as well as the earlier days of the crypto boom. And it has already begun when it comes to AI.

Knowing who the opportunists and the fakers are is just as important as knowing where the best investments are.

There will certainly be cries that this “pivot” by Allbirds to NewBird AI is a sign of a bubble.

While it’s definitely a warning sign, it isn’t the first…

And it won’t be the last in this massive trend, which is the largest infrastructure buildout in history (i.e., AI data centers).

Bye Bye, Birdie!

Since at least December of last year, there have already been many rumors that artificial general intelligence (AGI) was in the lab at a few leading AI companies.

And just within the last four weeks, both NVIDIA CEO Jensen Huang and venture capitalist Marc Andreessen have publicly proclaimed that AGI is already here, it’s just not widely distributed.

I couldn’t agree more. AGI has arrived. And the companies that don’t have it yet will work feverishly until they do.

And of those that have it already, they are working even more aggressively towards building an artificial superintelligence (ASI), which I predicted many years ago would arrive no later than 2030.

That was a crazy prediction at the time…

Today, however, I’m feeling I was too conservative.

Everyone wants on the bandwagon now.

My point is that we aren’t in a bubble. Not yet, at least. The arrival of AGI and the race to ASI guarantee that trillions more will be invested in this technology – a technology that will transform the economy, as well as our lives.

It also all but guarantees that there will be a lot more opportunists, snake oil salesmen, and fakers looking to raise capital and get rich at the expense of those who don’t understand what’s real or not.

We’re going to need some nice sneakers to keep up with the pace.

So much for Allbirds…

Sneakers for GPUs,

Jeff

P.S. Hello, Jeff’s managing editor here.

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