Doug Casey's Take

HOW PORTER STANSBERRY TRANSFORMED BIG IDEAS INTO BILLIONS IN THE INVESTMENT NEWSLETTER INDUSTRY On August 2, 2021, @porterstansb joined the billionaire club, his MarketWise stock surging to $979 million, aided by a $44.5 million dividend just a year prior. But, rough waters lay ahead, as he soon grappled with major losses and a painful split from his closest colleagues. Porter's path to finance began when a childhood friend, Steve Sjuggerud, hired him to assist in transitioning from mutual funds to investment research. But a dispute with another manager led to Porter's firing at just 26 in 1999. Out of other options, Porter launched his own investment newsletter with a pitch centred on fiber optic stocks: 'There's a New Railroad Across America and It's Making Some People Very Rich.' He sent it to Bonner, the owner of his former employer, offering a 24-hour ultimatum to buy the newsletter. To his astonishment, Bonner proposed they start a new business together. Bonner invested $36,000, granting Porter a 25% stake over a handshake. The company that became Stansberry Holdings, later renamed MarketWise, was born. Over 22 years, MarketWise achieved remarkable growth, with Porter noting an annual increase of approximately 30% in revenues and profits. The company distributed over $500 million in dividends and reached a peak valuation of $4.75 billion. By August 2021, Bonner's $36,000 bet on Porter was worth over $2 billion on the NASDAQ stock market, not including dividends. In a content-saturated world, MarketWise's formula to turn words into wealth is theoretically simple but exceptionally challenging in practice. They don't just tell you what happened, they tell you what to do about it. Their newsletters blend gripping stories and expert insights, providing education and investment ideas with a transparent track record. Targeting wealthy investors over 50, newsletter publishers attract customers with affordable 'front-end' newsletters like Stansberry Investment Advisory, priced at about $99 per year. For existing customers, niche 'back-end' products like options trading strategies or resource speculations, priced in thousands, are upsold. Lifetime memberships, fetching tens of thousands, are the ultimate profit centre. Stansberry's success lies in seamlessly merging research and marketing in 'Big Idea' sales campaigns. These narratives focus on vital issues and investment themes. They capture attention and add value to audiences while promoting research products. For example, the '99 railroad letter sold a tech stock newsletter, while a recent campaign, 'Two Men Destroying America,' delved into the impact of ESG policies on oil and gas firms. These sales letters exemplify the fusion of persuasive advertising and research, blurring the lines between the two. MarketWise copywriters follow the principles of ad legend David Ogilvy, who believed that big ideas spring from an informed unconscious mind. According to Ogilvy, a big idea should elicit a gasp upon first encounter, make you wish you had conceived it, and have a timeless quality. Big idea sales letters, much like gold prospecting, are risky ventures. While most don't hit the jackpot, from time to time, they yield remarkable success. A prime example of this phenomenon occurred in 2010. Following the financial crisis, Stansberry faced a challenging business landscape. Porter, who foresaw a decline of the U.S. empire and weakening U.S. dollar, harboured deep scepticism about the government, particularly regarding foreign wars. In October, Porter and copywriter Mike Palmer launched a sales letter titled "End of America," which became the genre’s most significant promotion ever. Specifics about its success are closely guarded, but insiders speculate that "End of America" attracted over 500,000 new premium subscribers and eventually doubled Stansberry’s revenue through upselling. This campaign achieved tenfold more sales than what was previously considered a major success. "End of America" exemplified how investors were still haunted by the crisis, focused on past problems instead of future opportunities. As readers absorbed Porter’s pessimistic narrative, the stock market was emerging from a generational low. Yet his research's conclusion was accurate: the best way to combat inflation was by investing in exceptional businesses. MarketWise's triumph went beyond marketing. Porter prioritized research quality, invested heavily in expert talent, and focused on service to grow lifetime customer value. Parallels with Canada’s venture stock market and the investment newsletter industry are easily drawn. Both exploit emerging trends and rely heavily on track records and marketing. Both target independent minded investors. For a small listed company, the holy grail of promotion is to be featured in a MarketWise publication, whose influential audiences can move markets and ease access to capital. But, MarketWise strictly prohibits its analysts from holding positions in the stocks they cover, building a reputation for integrity. Due to their illiquidity and high-risk profile, penny stocks rarely earn a mention in MarketWise pages. A legion of other investment gurus fill the void, often at their subscribers’ expense. During the 2010s stock market boom, MarketWise launched more businesses and made strategic acquisitions, like Casey Research, which grew revenues from $12 million in 2015 to over $111 million 2018-2022 according to a MarketWise presentation. In 2021, MarketWise went public through a $2.9 billion SPAC. However, just before finalizing the IPO, some investors behind the deal pressed Porter to step aside over past controversies. These included a 2003 SEC civil suit, which Stansberry defended up to the Supreme Court, resulting in a $1.5 million fine. In the 2020 Netflix premiere of Unsolved Mysteries, Porter was linked to the 2006 death of his best friend Rey Rivera, who fell from a Baltimore building in an apparent suicide. One of Rivera's final phone calls was made to Stansberry's offices. “It's horrific. You can't even imagine what it's like to tell people I had nothing to do with my friend's death,” Porter told the Baltimore Sun. With mixed feelings, he reluctantly agreed to resign from the CEO and Chairman position at MarketWise temporarily. His hand picked replacement, Mark Arnold, had promised Porter $100 million in cash, but that promise was never fulfilled, according to Porter. Porter lost control of the company, profits plummeted, and dividends were suspended. Executives involved in the deal walked away with over $200 million in free shares, Stansberry alleged. In January 2023, after an $800 million plus hit to his stock holdings, Porter called for MarketWise's board to step down, sparing only Van Simmons. By September, he returned to the board, and on October 18, after a contentious dispute, he reclaimed the CEO and Chairman roles, as three board members departed. At the same time, MarketWise announced an internal review to boost the business. MKTW stock has climbed 14% to $1.71 per share since Porter’s reappointment, for a current market cap of $558 million, still 85% below its 2021 highs. Porter is also planning to sell the research business he founded last year, Porter & Company, to MarketWise, taking a page from Apple founder Steve Jobs's playbook.  When Jobs returned to Apple in ‘96 after famously being forced out in ‘85, Apple bought NeXT, Jobs’ computer startup. MarketWise is building from a much more solid base than where it began in inner city Baltimore 24 years ago. Its assets include roughly 17 million free members, 750,000 paying customers, $187 million in cash (at June 30, 2023), and a unique talent roster. But problems are looming. MarketWise is less nimble than it once was and its culture has arguably suffered in the turmoil of the past few years. Plus the outlook for the stock market is hazy, with Porter himself stating the possibility of a further crash on October 19. The question remains: Can MarketWise regain its strength, and will Porter Stansberry rejoin the billionaire club? If you enjoyed this, please like, repost, comment and follow @TommyHump. TheBigScore dot com is based on publicly available sources and conversations with industry insiders. It may contain errors.