My Roommate Was a Disaster, But My Portfolio Says Thanks For the Tip!

The Bad Roommate Story

Do you have any bad roommate stories? A bad roommate is basically a rite of passage for any 20-something adult who moves to NYC. I had one before that I posted about. Long story short–my first roommate Ping and I watched the peak of Linsanity together¹we were both Asian basketball fans, this was a huge deal for us! and I thought we were buds but then he stabbed me in the back. I didn’t think I’d get a worse roommate situation than him and his girlfriend, but the next guy one-upped them. I had this roommate, Jeffrey, who would constantly get into fights with his girlfriend²you’d think I would’ve learned to not live with another couple after this but I was in a bind from the former situation and had to move quickly. Too often I’d hear random shouting in the middle of the night.

“YOU DON’T COOK, YOU DON’T CLEAN, YOU DON’T WORK, YOU’RE FUCKING USELESS!“

His girlfriend Layla shouted back but it was more with more flailing desperation than mutual anger. Then there’s just more noise–something heavy fell or was thrown. The sounds of footsteps, a chair scraping, and muffled banging followed. Jeffrey would rage-fling objects around the room like I did when I had a horrible trading day. The argument sounded heated, teetering on the edge of violence, but I don’t think it quite crossed that line. I felt extremely uncomfortable.

I peeked my head out into the living room. I saw my other roommate, Ernesto, also peek out and we looked at each other with the same thought: this is getting bad and we need to seperate these two.

Just as we start a conversation about how to delicately approach the matter, Layla is suddenly shoved out the door and it’s immediately locked. GTFO!!! GTFO!!! he’s screaming from behind the door. She just looks us, all desperate and sad. I didn’t know what to do or know what to say. She leaves and I’m thinking there’s a good chance I’ll never see her again.

This kind of stuff happened far too frequently.

Months would pass and then I’d see Layla again. I wouldn’t believe my own eyes, I kept thinking: why the hell would she want to be back with him?³at this time in my life, I didn’t understand battered wife syndrome yet. They’d make up and play the perfect couple for a few weeks, but it never took much—some tiny bullshit happenmed—and boom, Jeffrey would snap. An explosive argument would breakout and last all night. 9/10 times, he was the one laying on the most nasty and hurtful words one could conjure.

He once threw all her clothes off a 5 story window and the management at 200 Water threatened to evict us.

Oh, I forgot to mention he was my roommate across two buildings and it wouldn’t have been the first time he got us booted out. We once lived at 21 West near Battery Park and then moved to 200 Water Street. The reason we were getting kicked out was that supposedly the lease manager claimed that Jeff’s dog had bitten an assistant manager. Jeff countered that the guy made this up because he wanted to jack up the price for a new tenant. That’s his story to me, at least. Now, I didn’t believe the dog had bitten anyone⁴I played with his dog–she was a friendly dog and I think that’s why he picked that as his cover story but I absolutely believe he’s hiding the real story where he fucked up.

He once took a can of hairpsray off the shelf at a Duane Reade and started fixing his hair. A staff member yelled at him and then he ran out the door. I had to shamefully apologize for him and leave.

Jeff was your classic finance bro—rocking a slick Italian suit, a $12,000 watch, a $120 haircut, and, of course, a drug habit to tie it all together. I once sold him a full bottle of adderall because his “usual connect” wasn’t texting back. He came back in less than week asking if I had another one.

And then came the final straw. Sometime in late 2016, he just vanished—completely M.I.A. for weeks. No calls, no texts, nothing. Me and Ernesto finally decided, screw it… we’re going to pawn his stash of luxury watches to cover his share of the rent. Except—plot twist—they were all fake.

The Cartier? Fake.
The Rolex? Fake.
The AP Royal Oak? Fake as a three dollar bill.⁵we should have known he wouldn’t just have left them there if there was any value but I didn’t know much about watches at that time–they looked super authentic to me!

We had to pay his share for two months. Then after several weeks, he waltzes back in, all casual, and hits us with “Sorry bros… I have no money.” It became this long-drawn out confession about how he was living a lie. His nice suits? Racked up on credit debt. The watches? He knew the best guy in Chinatown for replicas. He blamed his erratic behavior on his adderall addiction and promised he’d pay us back… eventually.

I had enough of Jeff’s impulsive behavior. I moved to Brooklyn to live on my own not too shortly after that.

The Investment Proposal

So that’s my “worst roommate” story… but let’s get back to that first night where he kicked his poor girlfriend out like a stray animal.

It’s 2am and I’m up playing video games. Jeffrey had been gone for a while—doing god knows what—but then he just strolls back into the apartment, sits down next to me on the couch like nothing happened. He smiles at me, says

Jeff: Pete, I want to talk to you about something!

To add some context, Jeff is a FINRA-registered broker at a small boutique investment firm called Meridian Investments. In the last few weeks he had been engaging in small talk with me about the markets. It’s likely that I got too comfortable with him and let it slip how much I made in a month. He then saw an opportunity: Pete could be my client!

Somehow he segues the conversation towards the recent IPO market. He says it’s his primary business and mentions that some of his clients were able to get into shares of TWTR and flip the stock out for a quick gain.⁶(this feels so long ago… then Twitter as a public company had almost a decade of futility, never climbing those first IPO highs ever again, until being bought out by Musk, which is a shitshow that requires a novel to write about) TWTR IPO’d at $26 but Jeff said his clients got stock from Meridian that was priced below $20.

This blew my mind. I had no idea that regular people could buy stock in private companies before. I always thought it was just venture capitalists and employees of the company who owned the stock. Meridian had been sourcing private stock from company employees and early investors that sought to diversify their holdings before the IPO. Once Meridian gets a hold of this supply, they then pool the stocks into funds known as Special Purpose Vehicles (SPVs), allowing individual investors or institutions to buy in. We continued discussing the lucrative opportunity of investing before the IPO.

Jeff: I’m going to bed but tomorrow, I’ll send you some stuff about our pre-IPO offerings. I think you’re really going to like it Pete.

Meridian had created an SPV called “Highly Advanced Super Technology (HAST)”–a fund that included four companies: AirBnB, Palantir, Square, and Jawbone. An accreditor investor can distribute any amount to any of the four investments within the SPV as long as that total amount surpasses the minimum ticket size of $100,000.

Of those four companies, I only knew what Airbnb did–that they were a marketplace for vacation rentals by hosts. The next morning, Jeff sent me the private placement terms for the Airbnb stock within the SPV. Details below:

• Price per share: $56.50⁷(just to note, ABNB had a private stock split in 2020 so the split-adjusted price would be 28.25)
• Shares outstanding: 258 million
• Implied valuation: $14.5 billion
• Upfront fee: 8% ⁸(this was incentive based, it started at 10% but every 250k invested could splice 1% off the upfront fee.)
• Management fee: 2%
• Peformance fee⁹(this is the profit split for Meridian, they take this % from the amount of profit made above the watermark of initial investment, which would be $500k. today, they often call this a ‘carry fee’): 10%
• Share delivery: upon IPO
• Lock-up period: 6-months after IPO¹⁰(once lockup expires, the SPV distributes the stock to your individual account after taking their performance fee)

The transaction fees are quite steep. For example, if you invest $500k, Meridian will take $50k off the top. Your investment starts at a basis of $450k. Then whatever you make after you recoup the $50k, they take 10% of that profitable return. To get a 100% return on your money after fees, the stock would have to appreciate by 111.12%.

Of all the companes in HAST, Jeff personally rated AirBnB the highest for a very simple reason that had nothing to do with financials–simply said, they passed the Brand Name Test.¹¹(this is also known as “genericization”, which is a word I just learned about)

The Brand Name Test is when the company name replaces the actual real word–usually it’s a verb. I will search something online becomes “I will google it”. I’m going to take a taxi home becomes “I’m going to Uber home”. It doesn’t always hold permanence–there was a time when the standard was “I’m going to Skype you” but then “I’m going to Zoom you” ended up replacing that. Nonetheless, it’s still a good rule of thumb. At this time in February 2015, it was becoming commonplace to hear “I’m gonna AirBnB in (major city of international country) for the weekend”. The safest bets for an IPO pop tend to be the companies with a household name.¹²Many reasons for the IPO pop but I think it’s because retail investors like to buy stock in companies that they use in every day life.

The Hot IPO Market

By this point in my trading journey, I had been keeping a close eye on the IPO market—more often than not, these stocks turned into big momentum plays right out of the gate. Here’s a table of some of the most high-profile IPOs from 2013-2015, along with a few random ones I remember, and how they performed at various timeframes.

You can observe that all these stocks got a nice IPO pop–sometimes as much as 100% return in a single day. I couldn’t really think of a highly visible IPO that just flat out busted immediately–which I define as trading at or under their IPO price within the same day. There was always going to be a period of hype that produced a strong demand imbalance. The terrible IPO markets of the past were now in the rear view mirror. Some of these companies, including SQ¹³one of HAST’s offerings that I didn’t invest in, became long-term compounders with much higher returns if held over many years. Some of them fell off hard like GPRO and FIT, declining 90% or more from their 6-month IPO highs and never recovering–but hey, I’m a competent trader who would know how to sell into the hype rather than greedily hold the bag for more¹⁴(and I’d also be in from BEFORE the IPO price, which would increase my %-gain even more) so even the most negative case studies didn’t concern me.

Even though I saw firsthand that roommate, and possibly future broker, could be a bit of a scumbag, I couldn’t ignore the opportunity that he was presenting.

The Decision

So now I had this big investment decision on my hand–do I want to commit to this and if so, how much money?

I reached out to one of my best friends from college, Andrew, who was working in Equity Research at Wedbush. He had used Airbnb frequently as a customer and knew his way around fundamental analysis way better than I did. Since I could be holding this Airbnb stock for years as an illiquid investment, I needed to feel more confident about what I was getting into. We had a lot of conversations about AirBnB, which I’ll break down into a quick bull case and bear case.

The Bull Case

• Strong macro tailwinds–hot IPO market, hot tech market in 2015
• Leading name in the surging ‘sharing economy’ theme of private markets along with Uber, Lyft, Instacart, WeWork, and Fiverr
• High name visibility–passes the Brand Test and was building brand loyalty among young people
• Room for expansion–business travel, local experiences, long-term rentals, becoming an all-in-one travel portal
• Huge sales growth — $900 million in revenue in 2015, projecting over a billion the next year. 1.5 million listings across 190+ countries
• Higher margins than hotels–asset-light model, didn’t own properties

The Bear Case

• Large regulatory risks — major cities like NYC had laws against short-term rentals
• Disatisfied communities — excessive partying, noise complaints, parasitic reisdents, angry neighbors
• Trust and safety concerns — horror stories of bad guests, bad hosts, damages, scams
• Unprofitable — $150 million in losses in 2015
• Trading at a much higher multiple to profitable hotel chains such as Marriot and Hilton
• Private market maybe a bubble
• Increasing customer acquisition and marketing costs

External risk factors: unknown IPO timeline, market tailwinds were strong at the time but could change any moment. Ideally you wanted both to align.

Andrew had concluded that, from a fundamental stand point, AirBnB was a screaming buy at our price point. He thought it could be worth $100 billion in five years. I put a lot of weight into his opinion because he had always been a conservative analyst¹⁵he’s a guy who practically parks his money in a mattress and lives in perpetual fear of tech’s increasingly rich valuations. Moreover, I had become enamoured with the current IPO market. Seeing El Pollo Loco (LOCO)—a random chicken chain I grew up eating at on Chapman Avenue—triple from its underwriting price gave me serious IPO Loco-Moco-FOMO.¹⁶It truly puzzled me that investors thought LOCO, which had been around for over twenty years and was just kinda okay, was going to become the next Chipotle and be on every block in every state or something.

I knew that in this market, any big-name IPO would double right out of the gate—and not only that, I would be getting in before the IPO price. At the time, I had about $500,000 in spare cash that I could invest and the rest of my cash had to be committed towards living expenses and my trading account. I decided to be aggressive and go for it.¹⁷It helped that I wasn’t the type of trader with a buying power intensive strategy.

I dumped the entire 500 grand into the AirBnB subscription of HAST. A huge chunk of my net worth was now tied up in one company—literally the exact dumbass move every investing book warns you not to make. This kind of recklessness was unlike me—I like to think I’m risk-averse, even though I trade for a living. But I had convinced myself that AirBnB was a “sure thing”, so somehow, in my head, it was not that risky.

I wasn’t the only one who got in. My friend Andrew bought some. I told Clockwork about this too and as he always does, he joined in with me. I must have given Jeffrey some pretty hefty commissions, that he probably spent on more adderall. I never revealed to my friends how he behaved as a roommate–I didn’t want to freak them out into thinking he was some kind of untrustworthy scammer.¹⁸I had done enough due diligence on Meridian and the SPV manager, via brokercheck.org and other channels, to believe it was on board and Jeff was just another broker for them, he wasn’t boss level

The On-Boarding

So, to invest in any of this stuff, there’s a pre-requisite that you had to be an accredited investor–which entails either high income or high net worth¹⁹it’s $200,000 in income for 2 years or a net worth of $1 million excluding primary residence. This is SEC regulation so there’s no way around it. They give me this questionaire to fill out. I remember this exchange with Jeff:

Jeff: You should write down that you have $1 million

Pete: but…why?

Jeff: trust me, just write that down.

Pete: okay then….

I don’t know why he thought that was necessary²⁰I already qualified via 2 years of income but I did what I was told to do. Nothing was verified via banking statements or paychecks. You can infer what you want from that.

The Wait

I’ll be real with you—when I finally signed all the papers and wired in the money, I was feeling euphorically high. I thought I was so brilliant to do this.

Here’s a silly reason that helped guide my decision-making. Back then, I held such a strong day trader’s mindset that even holding anything for more than a week felt impossible. The idea of watching a half-mil portfolio swing up and down in real time, five days a week, was too gut-wretching for me—I just couldn’t handle the constant mark-to-market PnL changes. Because of that, I felt reticent to invest my spare cash into index funds or tech stocks as they kept making new highs. I had this irrational fear of market pullbacks²¹becoming a rookie investor right after around 2008 will do that to you. But with Airbnb being private, I was spared from that stress. No daily price fluctuations, no tick-by-tick anxiety—just peace of mind.²²it’s much easier now for me to compartmentalize short-term trading with long-term portfolio swings. it takes awhile to develop that, via experience. It shouldn’t matter but it did.

Anyway. Now it was just the waiting game. AirBnB would raise at $1.5 billion in cash just 2 months later in June 2015, with the new round valuing it at $25.5 billion. My entry point had now already appreciated, at least on paper, by 75%.

I remember Jeff telling me that he figured they’d IPO within a year. Two years max. That was the whisper on The Street. I took it with a grain of salt. I was fine holding this company long-term because of the strong growth story, but I also knew the longer it took to go public, the greater the risk of a market shift that could disrupt the favorable IPO environment.

Every year, Meridian staffers would send me positive articles and rumors about a potential IPO, giving me hope that it was imminent.

2016: First year of profitability.

2017: Raised $1 billion at a $31 billion valuation in Series F round.

2018: New CFO hired–perhaps to prepare for IPO!?

2019: CEO Brian Chesky finally has an IPO timeline: 2020!

All this time, AirBnb appeared to be on the right track as they rapidly grew their userbase. We were getting wins in the regulatory arena, which Andrew considered one of their biggest risk factors. Heading into 2020, all I could see was this golden brick road leading into the most highly anticipated IPO of the year.

What could possibly go wrong?

2020

Then something bad happened. As you know.

The Coronavirus pandemic crushed the markets in March 2020, hitting the travel sector especially hard because nobody could go anywhere. You can survey the damage below.

March 2020 year-to-date performance²³(based on closing price on March 31 2020) on notable travel-related stocks:

• Cruise ships, Royal (RCL) and Carnival (CCL) down 75% and 71% respectively.
• Booking.com (BKNG) one of the best performing stocks of the last ten years, down 33%.
• Travel portals, Expedia (EXPE) and TripAdvisor (TRIP) down 54% and 43%.
• Hotel chains, Hilton (HLT) and Marriot (MAR) down 46% and 36%.
• Major airlines, Delta (DAL) and American (AAL) down 59% and 51%.

Global flights decreased by approximately 64% during the second half of March 2020 after mass travel restrictions. 4.4 million jobs were lost in the sector, accounting for nearly half of the total employment decline in the U.S. that year.

If AirBnb were public, it would have been a massacre.

I remember reading this Wall St. Journal article—Airbnb Bookings Plunge Amid Coronavirus Pandemic. Bookings were down 96%. My sweet, precious golden goose had fallen ill with a sickness.

I felt my soul shrivel inside my body.

Later on, the company would raise an emergency $1 billion in cash in April—its first-ever down round, dropping from a valuation of $31 billion to $18 billion. By then, I had already mentally coped with it—figuring, “well, at least it didn’t drop as low as I thought it would.” It’s not like I could do anything about it.²⁴and that ended up being a good thing because I have panic sold some smaller public investments during negative events before

The Recovery and The IPO

Somehow, the markets proved more resilient than my fragile psyche. It bounced back from Covid, and in the process, AirBNB managed to flip the script into a full-blown comeback story. Turns out, people were desperate to escape lockdown life, and Airbnb saw a surge in domestic bookings—families booking big houses, road trippers looking for fresh air, and city folks wanting a break from their tiny apartments. This unexpected boom and strong, feel-good narrative gave Airbnb the confidence to move forward with its IPO. They filed an S-1 in August.

On December 10th, 2020, after nearly a six year wait, the glorious day had finally arrived.

ABNB-a newly minted ticker symbol on the Nasdaq with an underwriting price of $68. It would close its first day of trading at $146.80–representing a gain of 115% for IPO holders.

The Exit

At the price point of 28.25, this already represented a tremendous multiple for me. The only question now was when should I sell it.

Even though my lockup expired in June 2021, I felt super attached to my position. The stock had dropped about 35% from its six-month highs, but I figured I’d hold on and see if it could bounce. In late November, they announced positive earnings and the stock went to a new all-time high of $212.58. I thought it was going to trade even higher from one of those classic post-earnings meltups. I mean, I had watched so many garbage SPACs and inferior IPOs explode the last two years so I thought: Why not Airbnb? Why couldn’t this thing hit $300? The momentum hedge funds like Tiger Global should be all over this.

Unfortunately the earnings breakout coincided right when the Nasdaq started to breakdown. The price started to wobble tumultuously and I felt in my bones that a tough decision had to be made. There came this “oh shit” moment, around February 2022, when I knew we were about to eat dirt in a tough bear market after 2 years of easy-money pandemic gains. I had to protect profits. I started to sell in tranches and trimmed half my position over a few weeks. Once it broke under $100, I felt dumb not selling all of it when I had known to sell it, so then I sold more on a bounce back over $120.

All in all, my average sale price was probably somewhere in the $150’s. That leaves my gains somewhere in the 4-5x range. Sure, I could’ve done better if I sold closer to the peak, but I was swinging for the fences and hoping to hit a life-changing payday.

I still hold 10% of my original position but the stock has since been a massive underperformer–it traded negatively at -3.47% for 2024 compared to the SPY trading higher 24.89%. It’s still below the debut closing price right now–so anyone who bought it first day is underwater.

The ABNB story doesn’t excite anyone anymore. Nowadays, investors don’t care about the sharing economy disruptors from the last decade²⁵they’ve all underperformed–see LYFT, UBER, CART, WeWork, FVRR–at best it’s well off the highs and lagging the market and at worst, it’s bankrupt, the wave of the future now lies elsewhere. What was once hot becomes yesterday’s news.

Would I ever be this reckless with my asset allocation again? Not a chance.²⁶I ended up transferring my ABNB profits into regular ol’ index funds–super boring But when you’re young, that’s the time to take a few big swings, isn’t it? I saw a hot market, spotted the best name in the best theme at a solid entry point, took my shot, and despite some unexpected bumps along the way, it paid off nicely.

And if you’re wondering whatever happened to my shady broker/roommate Jeff… He left Meridian Investments not long after we went our separate ways. Shockingly, he actually paid me back two years later. Now he’s got a family and landed another respectable finance job. I hope he found a good therapist. Absolute nightmare of a roommate, but without meeting him, I never would’ve made a couple million bucks on my best long-term investment ever. NYC is a weird place—you meet some terrible people, but somehow, they’re the ones who open doors you didn’t even know existed.

Or maybe I just got super lucky that he didn’t scam me. Who knows.

The Present Day

The once-underground SPV market has grown tremendously in the last few years. Between 2021 and 2023, investors formed and managed a combined 1,719 SPVs on Carta, marking a 198% increase compared to the previous three-year period. There’s been substantial growth in secondary markets as well. In 2010, the private equity secondary market had an annual transaction volume of $20 billion. By 2022, this figure had grown to $100 billion–a 5x increase.

Still… you don’t really hear anyone talk about it. I certainly don’t see it in real life and not a whole lot comes up even when I search online. For some of you reading this, it might be the first time you’ve even seen the term “SPV” or learned that regular investors can get in pre-IPO. I’m hoping this post could bring more light to the dark arts of private investing.

Between the time I initially invested in AirBNB and the time it finally IPO’d, I rarely ever checked in with Meridian for additional opportunities. Of the highly visible companies, I think they had some shares of Lyft–I didn’t love the price and passed on it²⁷LYFT ended up being one of the worst IPO’s ever, not even benefitting from the first six month IPO pop. The intraday high, $87.24, of the first day of trading is still the all-time high, yikes!. Then they later pitched me some less visible companies like Addepar, ThinkSpot, and Flexport in 2021–I didn’t know those companies in real life so I avoided them. None of them seem particularly hot nor have they IPO yet.

I now have multiple sources to find private stock and I continue to search for more. The secondary market is far more fragmented and opaque than the public market, so you have to shop around to find the best prices and lowest fees. If you haven’t heard, artificial intelligence (AI) is all the rage right now.

It wasn’t until Clockwork returned the favor in late 2023, referring me as a client to a brand-new firm he discovered from his trading network, that I found my next big pre-IPO opportunity—Reddit (RDDT), which eventually traded in March 2024. We attained shares at $29.64 and it popped nicely in the first week. We hedged for an 80% gain before the lockup date expired.²⁸As long as your shares are still held in an SPV, you can legally hedge by shorting the stock or buying put options. Now the stock trades north of $200 and yeah, it could’ve been an all-time gainer if we were believers, but we weren’t.²⁹remember when EVERYONE on Reddit.com HATED the IPO? Pepperidge Farm remembers! We just consider ourselves quick flippers–play the momentum and cash out.

About once a week I check up on private markets³⁰AGDillon is a good twitter follow I found for daily updates. The DeepSeek story was a big moment—I thought it would crush valuations on the Artificial General Intelligence (AGI) stocks because it exposed their lack of moat. I felt so proud for making a conscious decision to pass on AGI³¹OpenAI, Anthropic, xAI were all available to me at steep valuations… only to read headlines that OpenAI might still get a valuation bump in the next few months. God Bless Masayoshi Son, what a time it is to be alive. I don’t think the AI bubble will pop any time soon but nobody knows.

I still think there’s a lot of edge getting in before the IPO but it’s hard to tell what’s vaporware and what’s real.³²even if you know it’s vaporware… if it’s in AI and you know it’s going to IPO in 6 months and you can hedge any time, wouldn’t you still take a piece? I would Real information is hard to find. I once spammed LinkedIn messages to a bunch of former employees of a robotics company to see if anyone was willing to answer some of my questions in exchange for money. Admittedly, I kinda felt like I was LARP-ing as a deep research specialist. The most simple approach is the same approach I had on ABNB–spot some key heuristics (like the Brand Test for visibility, 50-100% annual growth, profitability, is it the leading name in the industry³³I recommend reading Scott Galloway’s “The Four” to understand what makes a leading tech name that can compound forever) that the company checks the box on, hope for a valuation within reason, and then pray for that IPO pop.

I’ve been reading more and trying to understand tech better. I’m not knowledgable enough to analyze AI itself but that hasn’t stopped me from investing in a couple of AI-adjacent plays³⁴if you’re wondering, I’m not going to disclose them. I have my reasons. Instead of 50% of my net worth, I now bet 1-2% at most. There’s no need to go crazy.

I’d like write more about private markets. There are other alternate products that I have been pitched: real estate funds, restaurant funds, private credit funds, crypto mining funds, tax loss harvesting funds, and many more. These private equity firms are getting more creative than Spielberg. I also have to write about one of my biggest investing failures–investing $25k into a summer basketball league that never played any games. Can you guess who talked me into that one?³⁵Hint: the same guy As far as the pre-IPO space goes, I continue to study to sharpen my edge–assuming I have any and I’m not just guessing and getting lucky. Onto the next.