In this week’s newsletter, impact of Trump’s deportation moves, Brightcom Group’s accounting tricks, Snapchat, and more.
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“Be fearful when others are greedy and greedy only when others are fearful.” — Warren Buffett
On February 5, 2025, a military aircraft from Texas, USA, landed in Amritsar, Punjab, carrying over 100 undocumented Indians back home. Looks like Trump wasn’t kidding about his promise of mass deportations of illegal aliens residing on American soil. Or, as he calls it, “the largest deportation effort in American history.”
And this is just the beginning. The US immigration authorities plan to send nearly 20,000 Indian nationals back soon. Plus, children born in the US to undocumented immigrants should no longer get automatic citizenship.
It’s not just Indians, though. The US has sealed deals with several South American countries like El Salvador, Venezuela, and Colombia to take back deported citizens.
At this point, you might think, “Well, that’s fair. People entering a country without appropriate permissions and immigration documents are bound to be deported.”
But Trump isn’t just focusing on legality; he’s framing deportations as a crackdown on crime by targeting migrants with criminal records — his way of saying it’s time to clean up American communities. Plus, he’s framing illegal immigration as a strain on resources and jobs which could otherwise be taken by Americans, pitching deportations as the magic bullet to fix it all.
So, let’s look at each claim independently.
Claim 1: Illegal immigration imposes a massive strain on resources and jobs.
This is undoubtedly true. Any kind of immigration will impose some strain on resources. For instance, the city of New York alone reports it has spent or expects to spend $12 billion over the next three years on housing, food, health care, and other services for recently arrived illegal immigrants. And to cover these costs, they expect to cut budgetary allocation for services like public education and the police department. Also, across many states in the US, illegal immigrants may also be eligible for welfare programs.
Source: www.cis.org
These are assistance programs sponsored by governments for needy individuals and families, including schemes such as food stamps, health care assistance, and unemployment compensation. And as you can see, illegal immigrants generally have a higher dependence on welfare programs.
Finally, even though illegal immigrants contribute to the economy in myriad ways (which we will discuss soon enough), the net financial impact of illegal immigrants throughout their lifetimes is positive only when these individuals hold a college degree. If they don’t hold any degree (which is usually the case with most immigrants), they can cost the American economy upwards of $50,000 over their entire lifetime.
That is expensive!
Claim 2: They take away jobs and add to crime
On the jobs front, the data is less clear. It seems that they do offer some long-term benefits for the labour market as illegal immigrants become active participants in the economy. But in the short term, this may come at the cost of native-born workers. For instance, a famous study finds that when a lot of immigrants enter a certain skill group (like construction workers or factory workers), wages for that group tend to go down. This is because more people are competing for the same jobs.
The only problem is that this relationship breaks over longer time frames. So it’s a bit ambiguous.
However, with crime, the data is much stronger. While there is some research to indicate that in specific border areas, there may be an uptick in certain crimes (like smuggling or minor offences related to illegal entry), it seems there is no strong link between illegal immigration and crime.
So, despite what Trump may want the US public to believe, these are the hard, cold facts.
Okay, so these are the problems with illegal immigration.
Now let’s look at what happens when illegal immigrants make their way into the US anyhow, stay there for long periods of time and add to the American economy.
For starters, illegal immigrants aren’t just passive recipients of aid; they are also active contributors. Agriculture, construction, manufacturing, hospitality, care and food services rely heavily on migrant labour. These jobs are physically demanding and pay less, and many Americans don’t want them. And employers, too, benefit from hiring undocumented workers because they can pay lower wages and don’t have to offer benefits like health insurance or retirement plans.
And the astounding fact is that these illegal aliens form nearly 5% of the US workforce, with undocumented households having a combined income of $330 billion and paying almost $100 billion in taxes.
If all these immigrants were suddenly sent to their home countries, it would not only create a labour shortage in the US but also reduce billions in taxes paid to the American government. The economy could shrink by up to 6.8%, according to the American Immigration Council, and that’s a hit almost as bad as what happened during the Great Recession.
And it’s not just the US that would suffer because many of these immigrants send money back to their families in their home countries. For instance, in 2024, India received a record $111 billion from the Indian immigrant population. While most of this money came from legal workers, illegal immigrants also sent back a share. And if they all get sent home, India and other countries would lose out on remittances.
So for all the talk about immigration’s importance, why hasn’t the US simply fixed its policies?
Well, because immigration reform is stuck in a political tug-of-war. It’s a highly polarising issue among voters. Politicians don’t want to take a strong stance for fear of losing support. So, even though every government talks about fixing immigration, meaningful reforms remain elusive.
Also, despite his aggressive stance on immigration, Trump’s first-term deportations sit at 3.13 million, slightly lower than Obama’s 3.16 million. Meanwhile, under Joe Biden, deportations surged to 4.44 million in just two years: 2021 and 2022.
So yes, while leaders may portray immigration as a crisis, their actions don’t always match their words.
Coming back to the issue, even if Trump pushes ahead with his plan, there’s a big problem: the cost because mass deportation is both a logistical and financial nightmare.
As of 2024, the average cost to deport a single individual was nearly $14,000, up from $10,070 in 2015. So, the cost of removing 11 million people (as per Trump’s ambitious deportation plan) would exceed $150 billion. In addition, detention facilities cost thousands of dollars per bed. If the government scales up these efforts, mass deportation could become an economic trouble for the US itself.
But what about the Americans? What do they support? Well, according to the Pew Research Center, upwards of 60% of those surveyed believe illegal immigrants should be allowed to stay under certain conditions. That’s because mass deportations don’t just impact immigrants—they also affect businesses, tax revenues, and communities in the US. And that’s something even Trump might have to think twice about.
Brightcom Group Ltd (BGL) has been a master of disguise. It has changed names four times, flipped business strategies, and managed to stay in SEBI’s crosshairs without ever really getting caught. And while doing so, it also managed to attract well-known investors, drew the ire of retail shareholders, all while spinning a grand narrative of global dominance in digital marketing (through its three divisions: media marketing, software services, and future technologies).
Yet, despite its shifting identity and red flags, many investors remained hopeful. We even wrote about it a few years back…
But despite all this, there’s a steady group of people who still believe in the gospel of Brightcom — some 7860 members of the “Brightcom Group Investors Group.” They continue to hold great conviction in the company’s prospects and we hope that their conviction pays off.
So, did that conviction pay off?
Well, the stock sits at ₹10 flat (languishing from its high of over ₹100 in 2021), with about 6 lakh retail investors holding over 80% of the company today. And the kicker here is that most of them aren’t invested by choice. The stock is suspended from trading on both the BSE and NSE. And now, SEBI has confirmed what many suspected all along, issuing a final order detailing multiple violations by BGL.
So, let’s break it down.
Violation #1 – Hiding impairment losses
Brightcom’s promoters had a simple trick up their sleeve: tweak numbers, hide losses, and keep the stock price flying high. And from what it seems, they pushed things under the carpet for as long as possible.
Take impairment losses, for example. When a company realises an asset has lost value and won’t generate the returns it once expected, accounting rules require it to recognise the loss immediately (under Ind AS 36 – Impairment of Assets). These losses should be recorded in the Profit & Loss (P&L) statement to reflect the true value of an asset on the company’s books. And it helps in preventing any inflated valuations on the books that could mislead investors.
Brightcom however had a different approach. From 2016 to 2019, there were signs that assets were turning into dead weight or impaired losses. Did it recognize these losses? Nope. It waited. And waited. Until, suddenly, in 2019-20, it dropped a bombshell: an impairment loss of ₹868.3 crore. Its defence? That it only recognized them when they became ‘permanent’. Or basically saying that ‘we didn’t hide losses; we just didn’t think they were losses yet.’
And instead of placing this loss in P&L (where it would impact the net profits), the company conveniently parked it under “Other Comprehensive Income” (OCI).
Why does this matter? Well, any profit or loss directly affects the reporting net profits—the number investors obsess over. After all, net profit figures are the foundation for key financial ratios and valuation metrics that analysts and investors rely on.
So, had the impairment loss of ₹868 crores been subtracted from net profits of ₹440 crores, the company would have reported a net loss of ₹428 crores instead. And stock prices would have dropped, and investors would have started asking tough questions. But by slipping the loss into OCI, Brightcom managed to keep up appearances. On paper, it still flaunted an after-tax profit of ₹440 crores instead of exposing crores in losses, all thanks to its creative accounting at work. And to an average investor looking at Brightcom’s financials, nothing seemed amiss.
#2 – Misleading shareholding patterns
Now, while these impairment losses were being quietly swept under the rug, BGL’s promoters were also quietly cashing out.
Think about it this way. The promoters knew the books bled losses, not profits. So, before the truth surfaced and the stock crashed, all they wanted was to sell their shares at high prices as quickly as possible. And that’s exactly what they did.
Between 2014 and 2022, promoter shareholding fell from 40% to just 3.5%. Ouch.
Normally, such a massive sell-off would trigger panic. But Brightcom’s stock remained unaffected. Why? Well, because promoters managed to keep retail investors in the dark by misreporting its shareholding.
For instance, as of June 30, 2022, the company reported promoter shareholding at 18.47% on stock exchanges. But SEBI found that the real number was a mere 3.51%:
So what this did was create the illusion that promoters still had skin in the game. And SEBI discovered that Brightcom misrepresented its shareholding pattern in 31 out of 34 quarters between 2014 and 2022. That’s nearly a decade of deception!
But the shenanigans didn’t stop there…
Because there’s also a violation #3 – wrongly capitalising R&D costs
Seems like Brightcom had a knack for playing around with accounting rules. For example, let’s talk about its ₹504 crores worth of Research & Development (R&D) costs in question.
Typically, when a company spends money on R&D, it’s supposed to record it as an expense—unless, of course, that research actually results in a clearly defined product that will generate future revenue. But Brightcom chose to classify its ₹504 crore R&D spend as an asset instead of an expense.
So, instead of reducing profits by ₹504 crore (as it should have), Brightcom boosted its balance sheet with a shiny new “asset” by capitalizing it. Profits were up by ₹504 crores. Assets went up by ₹504 crores. But in true sense, it should have been ₹504 crores in expenses subtracted from profits.
Investors looking at the financial statements thought, “Wow, this company is doing great! Profits are strong, and their assets are growing!” But in reality, it was just shifting expenses around to make things look financially healthier.
And that brings us to another similar violation that BGL pulled off which is…
#4: Incorrect reporting of intangible assets
When a company develops an intangible asset, like a new technology or patent or a proprietary software, it must decide whether to treat this cost as an expense or capitalise them as an asset.
And accounting rules have a clear say here – if the asset isn’t generating revenue yet, the costs should be expensed immediately in the P&L. But if it’s already generating revenue, it can be capitalized on the balance sheet as an asset. And misclassifying these costs (i.e. either recognizing them too early or too late or treating an expense as an asset) can distort the true financial position.
For instance, if you spend ₹100 on developing a software today which isn’t ready yet, it should still be recorded as an expense in the P&L. But if you call that ₹100 an “intangible asset”, it sits on your balance sheet instead, making it seem like you’ve built something valuable which is already generating revenue.
And what did BGL do with its intangibles? Well, it delayed recording them as expenses and instead lumped everything into “intangible assets” at the end of each year or even the next year.
As the order states… For example, in FY 2015-16, the additions to “Intangibles under Development” and “Capital Work in Progress” were INR 102 crore and INR 70 crore respectively and this was reflected in FY 2016-2017 “Intangible Assets” as addition of INR 172 crore. (This pattern is seen across all financial years except in the case of FY 2014-15)
And this changed things by giving promoters complete control over when and where these assets appeared on financials. Instead of letting costs impact profits as they occurred, they could show them as assets at key moments…say before raising funds from any investors or during quarterly result announcements.
So yeah, by now you would know that anyone glancing through BGL’s financials was being taken for a ride, year after year.
And while SEBI pointed at these violations, Brightcom had an explanation for everything. On fudging shareholding data, it claimed that the transfers were done legally and just part of corporate restructuring. On R&D costs, it insisted that it was simply following industry norms. And regarding intangible assets, it brushed it off as a timing issue for operational alignment.
But well, SEBI wasn’t having any of it and slammed them all with detailed explanations.
And that brings us to the question – What happens now?
Well, the company and its promoters are barred from the stock market and have been hit with penalties. However, many believe the penalties seem oddly light—the promoters allegedly misrepresented hundreds of crores and benefitted from it while facing just ₹34 crore in fines.
But as the order points out that the promoters are at more stringent penalty than the company itself…
Finally, in my view, Noticee No 1 (BGL) deserves comparatively lesser penalty and period of restraint for the reason that it is now largely owned by public shareholders who have borne the brunt of the fraud perpetrated by the promoter directors.
And it has also outlined for what might come next…
SEBI shall determine the quantum of illegal gains/ benefit made by way of the fraudulent scheme as established in this Order and action may be initiated in accordance with law.
As for retail investors stuck with Brightcom shares, the stock remains untradeable, and there’s no telling if or when it will relist.
In response, BGL recently held an AGM and offered some vague assurances. As per the AGM minutes…
“The company’s legal team is reviewing the order in detail.” … “The company remains committed to transparency and will continue to provide regular updates as and when appropriate.” … “The exchanges will notify the company and shareholders as soon as they are ready. We will keep the community informed as soon as there is clear visibility on the relisting timeline.”
Uh oh. In short, it’s asking investors to sit tight and hope for the best.
And there’s also a bigger issue at play here. You see, Brightcom was once a part of the Nifty Alpha 50 index. Meaning many mutual funds and ETFs had exposure to it. And as a result, this simply means that countless passive investors unknowingly held its shares through these funds.
Nevertheless, this story also is for anyone who isn’t a shareholder in the company.
Despite numerous warning signs, many investors held on, convincing themselves they had found an undervalued gem backed by big names. But when a stock is littered with fraud allegations, it pays to question every assumption before betting small or big.
And perhaps the biggest takeaway? If you ever find yourself thinking “Why am I so lucky to have found this once-in-a-lifetime opportunity?,” it’s worth considering that you might just be missing something.
For Brightcom investors and shareholders, that moment of realization came far too late.
Now, all they can do is wait, hoping the stock will trade again someday so they can finally cut their losses. And we can only hope that day comes sooner than later.
Say hello to Mario. He’s a plumber. One busy Monday he had quite a lot of customer bookings. And when he got home after his hectic day, he realised that one of his best hammers was missing from his toolkit.
Now, Mario prefers to shop online and gets most of his equipment from the Mushroom Kingdom shopping app. They just deliver quite quickly and have great discounts. So he bought one hammer of the app immediately. The next day he got his new plumbing tool delivered.
While at work, a customer called him to inform him that he’d forgotten his hammer at their place on Monday. He quickly collected it and decided to return the new hammer that he bought online.
When he dialled customer care, the executive Mr. Goomba convinced him to receive his refund in his shopping wallet. It would be easier for him to shop next time. No card details or OTPs. Mario agreed. After all, he’d lose nothing.
And that’s probably what most of us might be tricked into thinking too. But a Harvard Business Review research suggests that when you choose to opt for a shopping refund back into your wallet, it reminds you that you’ve already lost your money. So, it’s more likely that you’ll use that refund to buy something else that you’ve been eyeing.
But what happens when that refund comes back to your source of payment? It just feels like money you have to spend again to buy something. So you may be less likely to buy something with that money.
And this weird shopping psychology is called the refund effect. Well, in a couple of days, Mario bought a new pair of overalls with the money lying in his Mushroom Kingdom wallet. And Goomba got a pat on the back for his smooth indirect sales trick.
So, don’t be like Mario.
And beware of the refund effect.
Back in 2013, Facebook did what it does the best—spot a potential acquisition.
Zuckerberg offered a $3 billion dollar acquisition deal to Snapchat’s CEO, Evan Spiegel and it appeared to be the dream exit for a 23 year-old. But, he did something unexpected.
He rejected the deal.
And people called this move reckless. But, why?
Snapchat was just two years old and was up against a giant that had a history of crushing competitors. And the same was bound to happen with Snapchat.
During the time, Snapchat had clearly become a trendsetter with innovative features like 24-hour disappearing stories and filters that had totally hooked the younger generation.
3 years later, Instagram launched a similar feature with stories and filters. But here’s the catch—they made it better. Instagram added Snapchat’s main feature right on the top, with better navigation and accessibility, leaving no differentiation for users to go back to Snapchat.
Despite this, Spiegel had a different vision. Snapchat continued to innovate with features like AR filters, Bitmoji, and ephemeral content—all of which reshaped social media.
In 2021, Snap Inc. reached a peak valuation of over $70 billion, making Spiegel’s decision one of the boldest moves in tech history. Although market shifts post then have led to struggles and intense competition, it still sustains.
Looking back, Evan Spiegel’s decision wasn’t just about money—it was about vision. He wanted to build something lasting and bet on himself, and that’s all that mattered.
What do you think?
And that’s all for today folks!
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