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Did I do a stupid?
Old 01-11-2022, 01:56 AM   #1
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Did I do a stupid?

I feel like if I have to ask, then I probably did. I mainly lurk rather than post, but morbid curiosity is temporarily overpowering my social anxiety.

I should start by saying that up until now we've been 100% index funds, VTSAX and a little VXUS. I like the simplicity of 100% equities. I'm in my early 30's and only started investing in 2019, but I'd hope I've gained some wisdom from all my reading. I held (and bought!) through the 2020 crash, both my husband and I contributing 50% towards retirement while we lived on beans and rice in an RV, so I feel that has to count for something. We're now in some version of baristaFI or just taking a break, working just a few flexible hours from home and enjoying our baby.

Alas, I recently decided to throw some "play" money into stocks in a company I personally believe in but is currently....tanking big time. I might have fooled myself into thinking I had some extra knowledge in their field informing my choices. Now I'm doubting myself, but am loathe to sell. Opinions?

The company is Owlet. There's drama with the FDA that I believe will work itself out if the company is persistent. The main thing causing me to doubt is this recent SEC filing, that apparently (to my ignorant eye) indicates that a financial advisor and parent holding company recently went from having more than 5% of shares to having 0% of shares. Am I understanding that correctly? Is that a gigantic glaring red flag?
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Old 01-11-2022, 05:43 AM   #2
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There is really no way to know what is the best thing to do now. Play money is supposed to be money that you are willing to lose. If you aren't, then don't play. Experience is usually the best teacher. When in doubt, consider closing half of the position.
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Old 01-11-2022, 06:06 AM   #3
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It’s a SPAC. Do you know about SPACs?

Probably was a stupid, to use your words.

Sounds like you are underwater. Either sell for a tax loss or hold it as long as your special knowledge about the company informs you.

IPOs are rarely good investments for retail investors in the early days.
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Old 01-11-2022, 06:22 AM   #4
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Only a stupid if your "Play" money, wasn't really play money you could afford to lose.



Better than a lottery ticket as the odds are probably a bit better and you can write off your losses.
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Old 01-11-2022, 06:24 AM   #5
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Only time will ultimately tell if you pulled a stupid or not. But, if it turns out that you did, don't beat yourself up over it. I'm sure everyone here has done something that seemed like a good idea at the time, only for it to turn out stupid. I know I have!
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Old 01-11-2022, 07:09 AM   #6
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If you're new to investing and have years to go, keep play money so small that you an afford to be silly and go "eh, win some, lose some!" - or your play is too big for you.

In this case, a scan of the headlines say that you might look into joining a class action.
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Old 01-11-2022, 07:10 AM   #7
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We've all done "stupid". Learn, move on & expect to repeat many times if you mess with tiny, very niche companies like this.
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Old 01-11-2022, 07:14 AM   #8
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We've all done "stupid". Learn, move on & expect to repeat many times if you mess with tiny, very niche companies like this.
Exactly. I had a so called hot stock go from $5 to $0.05 and had 200 shares sitting in my account, of which it was not salable at that price. It's embarrassing to call your broker and ask that they remove them because you don't want to look at them anymore.
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Old 01-11-2022, 07:25 AM   #9
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I looked at their financials and they are doing ok. Extremely well funded, so someone really believes in them. Not profitable yet, but not doing terrible. From a value standpoint, they are on the right track.

The reason their stock tanked is the FDA classified them as a medical device. They are now working on getting FDA approval to sell in the US. If that happens, they will pop right back up to $10 or more. If not, they will do ok in the rest of the world, but will never get the US market.

Unless you spent a significant portion of your savings on this stock, I would say you are ok. Do your research on their SEC filings. If you believe in their product (which has been around for a while) and their company and leadership, I might consider buying more. I have seen a lot worse companies that people have bought into.

I don't see the change of ownership filing as a red flag. Mostly because of the muddied relationship of all the principals. General partners, partners, owners, lions and tigers and bears, oh my! I don't see any red flags in their financials, but they need the US market to make it big.
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Old 01-11-2022, 09:27 AM   #10
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I've "had a stupid" a few times, with crypto and individual stocks. Not always, I picked a few buy-and-hold winners, but often enough to reinforce that it's fine for play money, but my bread and butter should be index funds. And those winners looked good, but when I ran the numbers they weren't necessarily outperforming the S&P, or if they did, not by a lot. It was just that I remember putting aside that $X 10+ years ago, and seeing $5X or $10X in that stock that I hadn't touched was exciting.
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Old 01-11-2022, 10:08 AM   #11
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Like throwing good money after bad...LU, 2000...that was my husband's stupid.

Also, selling houses in down years, and buying them in up years; but sometimes that's beyond our control.

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Only time will ultimately tell if you pulled a stupid or not. But, if it turns out that you did, don't beat yourself up over it. I'm sure everyone here has done something that seemed like a good idea at the time, only for it to turn out stupid. I know I have!
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Old 01-11-2022, 10:14 AM   #12
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Also, selling houses in down years, and buying them in up years; but sometimes that's beyond our control.

There is another way?! Although I am glad I bought my current place when I did even though I thought it was a lot for what it is... location, location, location though.
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Old 01-11-2022, 10:32 AM   #13
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Maybe not a "stupid" as much as a victim of fraud.

https://www.prnewswire.com/news-rele...301456589.html

Lawyers are looking for Class Action leads.
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Old 01-11-2022, 11:24 AM   #14
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I invested play money in a stock I thought was a sure thing. There was an article I read in the WSJ on "real Solar" and the upcoming Solar explosion and why it should be a buy

I bought some of it and watched it tank to where it went out of business

Every other Solar company did well, this one was mismanaged and overly leveraged.

My lesson is I put too much faith in what I read in an article and knowing the Industry and didnt do the investigation to make sure it was a good investment

Fortunately I went into it understanding I was OK to lose it and only invested $10K

Probably worth the lesson as I put more investigation into future buys and have done fairly well since then
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Old 01-11-2022, 11:29 AM   #15
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Don't beat yourself up too bad, most of the market right now is stupid, people are just getting lucky that it is being flooded with money.
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Old 01-11-2022, 01:05 PM   #16
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Originally Posted by aja8888 View Post
Exactly. I had a so called hot stock go from $5 to $0.05 and had 200 shares sitting in my account, of which it was not salable at that price. It's embarrassing to call your broker and ask that they remove them because you don't want to look at them anymore.
I have a 1,000 shares in a company, that went to zero, had to cease trading. I feel it was basically a promoted scam.
I left the shares untouched to remind me of my silly action.
My broker sends me notice now and then that I can donate the shares to them to remove them, but I don't.

After about 8 years, I suddenly get in the mail a shareholder notification, so I think the original owners/scammers/poor businessmen got some $$ and want to revive something.

Must peeve them to know I hold 1,000 shares
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Old 01-11-2022, 01:27 PM   #17
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I hope you did not buy at 10 Dollars watching the stock going down to 2.
Regarding 2020.
Compared with the dot com bubble and the credit crunch bubble it wasn't a crash.
Rising interest rates and inflation is poison for stock markets.
But this time inflation is the result of supply chain disruptions.
Rising interest rates will not "open" closed harbors in China.
We are closer to Stagflation than Inflation.
Stagflation is a known problem.

https://www.investopedia.com/terms/s/stagflation.asp


What was your motivation to invest into Owlet?
Could you describe their business model with your own words?
Whenever I cannot describe the business model of a company, I won't invest into his stock.
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Old 01-11-2022, 01:30 PM   #18
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Maybe not a "stupid" as much as a victim of fraud.

https://www.prnewswire.com/news-rele...301456589.html

Lawyers are looking for Class Action leads.
I first bought in after the initial plunge. Honestly I don't think the class action lawsuit has a leg to stand on, because it was well known in my circles that because of the FDA letter they would probably be forced to remove their Smart Sock from the market. All the moms were advising each other to get it before it disappeared! If it was such common sense knowledge to us, how can investors claim to have been kept in the dark about it? Owlet disclosed the FDA letter.
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Old 01-11-2022, 02:41 PM   #19
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I hope you did not buy at 10 Dollars
Nope!

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What was your motivation to invest into Owlet?
Could you describe their business model with your own words?
Whenever I cannot describe the business model of a company, I won't invest into his stock.
Honestly, no clue about their business model.

But I seriously believe in their products, and I have three specific examples.

First, had a high risk pregnancy, which requires going in for half an hour of monitoring twice a week for months on end, as well as an ultrasound once a week. It's a huge inconvenience not only for me, but also from a medical standpoint takes up a room for a good period of time. I kept telling friends and family that in the future, this would be monitored at home which would not only be more convenient for everyone and allow that hospital space to be used for other purposes, but would also literally reduce stillbirth rates. It was drilled into me that if I feel any decrease in fetal movement, to come in right away. Usually by that time the fetus is already in distress, and it can be either too late to save them or they can have an oxygen deprivation injury that impacts them the rest of their lives. I cannot tell how much anxiety goes into monitoring your baby's movements, because babies are not constantly active in the womb. Is he just sleeping or is he dying? That's the game I played with myself about 3x daily.

Owlet had a belly band to monitor fetal movements at home in the beta testing phase back in June 2021. I don't know what happened with that, I applied to be a tester but got an automated response that all spaces were taken. But I'm not seeing any other company currently working on a product like this, and it is desperately wanted. If they manage to bring it to market with approval, it would be a massive game changer. Once you have one high risk pregnancy, all others after that are typically considered high risk, which means from about 20 weeks to delivery (often 38 weeks or so) you're going in for the monitoring. It's a huge drain on our health care system and seriously inconvenient, and questionably effective since once the baby is in distress you have minutes, not hours or days until your next monitoring appointment.

Second, their Smart Sock, which was their flagship product. I am in a *lot* of parent groups and everyone who tried the Smart Sock 3 were huge fans. The main reason others didn't was simply cost and from hearing bad things about false alarms (that was the previous generations of the product). People were so desperate for it that charities were buying them for folks who needed them but couldn't afford them.

We did not initially get the smart sock. My baby had a birth injury that deprived him of oxygen long enough to cause brain and multiorgan injuries. He had hypothermic cooling, a high oscillating ventilator, his kidneys completely shut down, seizures, a stroke, the whole nine yards. They offered to remove life support. It was bad.

He's doing amazing now, though. <3

Anyway, during his NICU stay he had desats, where his oxygen dipped too low, which are common for nearly all NICU babies but his were more dramatic than usual, going down to 40's and 50's dozens of times a day. After 5 weeks we got to take home our miracle baby, they said he didn't need O2 monitoring anymore. Instead, they gave us infant CPR classes.

As a parent, you watch your baby turn blue over and over again, you see that it can happen while they're literally on your lap and if you happen to be in conversation you don't realize it until the alarms are blaring and you look down and they're blue. You have the option to buy a device at home that would alert you if that happens. Wouldn't you get it?

But it's not just NICU parents who want it. I'm in sleep groups where parents desperate to sleep are agonizing over safe sleep guidelines because their baby is only sleeping well on their stomach, or with the heat turned up, or in bed with them. That was us, too. It sure gave us peace of mind to know it would alert if his O2 dipped.

Not only that, but the third product, the Smart Sock Plus, was for kids up to age 5. When that came out it was being shared all over my brain injury groups. Some kids with brain injury have seizures that show up with desats or elevated heart rate. Others are so severe they can't communicate, and an elevated heartrate is a useful indicator they're uncomfortable. Still other simply worry about a seizure happening when they're out of the room and their kid happens to be suffocating themselves during it based on how they fell. The simple "peace of mind" aspect goes way beyond babyhood for these parents, and Owlet was jumping in to fill that need/desire.

I just don't see any other company blazing this trail yet, so since Owlet has the biggest head start, I feel they have the best shot of dominating the market on these products. The moment the Smart Sock was taken off market there were petitions circling my mom groups for the FDA to grant temporary approval to bring it back, because of how important it was for parents to monitor their baby's wellbeing. Most products do not have this level of customer demand!

Owlet just released the "Dream Sock", which is basically their Smart Sock with a different app geared more towards sleep tracking. This is a wise business move because a *lot* of moms in my group said they ultimately just used the Smart Sock for sleep tracking. It tracks light and deep sleep cycles, but the Dream Sock goes a bit beyond to monitor wakings and give recommendations. They're getting pushback at the moment because people want the Smart Sock, but they will still get some buyers for the Dream Sock once the dust settles.

Also. The FDA approval process for medical devices is way easier compared to drugs. They might only need to do one fairly small study. Of course they first tried for premarket approval, which is basically telling the FDA "hey you don't need us to prove it to you because this device is essentially the same as this other device you already approved that's already on the market." That's the fastest way. But even though this way might take longer, it shouldn't be super drawn out.

I'd say at the end of all this they'll come out with an even better Smart Sock 4. The Smart Sock 3, which we still have and use, does have some drawbacks. The main issue I see is they need to have different alarm parameters and customer education about what the numbers mean, which definitely requires it to be classified a medical device. One person claimed her baby was blue and the Owlet wasn't alarming, and the issue is oxygen levels could be at 81% continuously and it would be very bad, but a temporary dip to the 80's might occasionally happen and as long as it shoots back up again then it's no big deal. I learned way more than I ever wanted to about this during my NICU stays, and as such I am able to use the device while recognizing its limitations. They need to make it a bit more foolproof for the average customer, IMO.

So, I know nothing about this company's business model, but the types of products they're releasing show me that they know their market and are making smart business moves.
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Old 01-11-2022, 03:43 PM   #20
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Only a stupid if your "Play" money, wasn't really play money you could afford to lose.
That's probably the crux of my issue. We could afford to lose it and still be okay, which is why I went ahead with it. But I still agonize over a $20 household item purchase feeling like we can't afford it, so in that sense no amount feels like "play" money.

But it had been budgeted as fun money for a while and my husband was bugging me to do something I enjoyed with it, so this is what I came up with.
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