Laughing Water's THRY Exit: A Smart Money Signal or a Late Realization?

The real signal here isn't in the headlines about Thryv's business, but in the filing from January 2018. Laughing Water Capital LP sold its entire stake in the company that day, a move that wiped out a $19.6 million position. That's a definitive exit, not a tactical trim.

The fund's own commentary, released in November 2025 for the third quarter, tells a telling story. The letter made no mention of Thryv at all. This is a critical detail. If the position was still held, it would have been a top-5 holding and likely discussed in a letter that emphasizes transparency about "what we own and why." The silence speaks volumes. It strongly suggests the sale was completed well before the letter was written, meaning the fund had already exited the stock while the broader market was still talking about it.

Contextualize that sale with the stock's performance at the time of the letter. Shares were down 18.64% over the last 52 weeks. For a fund that prides itself on long-term value creation and patience, that kind of sustained underperformance is a red flag. The fact that Laughing Water chose to sell entirely, rather than hold through the drawdown, is a powerful vote of no confidence. It signals that the "structural problem" they look for in mispriced businesses had become too entrenched, or the fundamental improvements they were waiting for simply weren't materializing fast enough.

This wasn't a late realization. It was a calculated exit. The fund's actions-selling the entire position in 2018 and then omitting the stock from its 2025 letter-show a clear pattern of smart money moving on. When the fund's own skin in the game is aligned with its public thesis, and they choose to sell while the stock languishes, that's the kind of signal that matters.

Decoding the Fund's Stance: Skin in the Game vs. Performance

The fund's own performance in the third quarter of 2025 adds a crucial layer to the Thryv sale. Laughing Water's portfolio declined approximately -1% for the quarter, bringing its year-to-date returns to approximately -2.7%. That's a stark underperformance against the S&P 500's 14.8% gain for the year. The fund's commentary frames this as a temporary market mispricing, blaming "violent move downward" on short-term traders. Yet the silence in its letter is telling. The fund emphasized a "silent portfolio" and the long-term nature of its strategy, yet it sold a position entirely.

This creates a tension between the fund's stated philosophy and its actions. The strategy is built on patience, waiting for "clear fundamental improvements" to be recognized. But the sale of Thryv, a stock that had lost 18.64% of its value over the last 52 weeks, suggests the fund decided the wait was too long. The fund's own 2025 performance was the worst September in nearly a decade, adding pressure to its concentrated holdings. In that context, exiting a position that was already deeply underwater and not discussed in the letter looks less like a minor trim and more like a decisive call that the thesis had failed.

The fund's claim that "our interests are aligned" because "almost the entirety of my and my family's money is invested in our strategy" is a powerful statement. But the smart money signal here is the action, not the words. When a fund that prides itself on skin in the game and long-term value creation sells a position while the stock is in a multi-year downtrend, it's a vote of no confidence in the timeline. The fund's commentary about "trees, fundamentals, and patience" rings hollow if the trees are already being cut down.

What the Sale Tells Us: Alignment of Interest and Institutional Accumulation

The fund's decisive exit tells us more than just a single fund's opinion. It's a signal that the alignment of interest between a patient, value-oriented fund and a struggling company had broken down. Laughing Water's strategy is built on finding businesses with "operational, optical, or structural problem[s]" that are mispriced. The sale of a position held for over seven years suggests they concluded the problem at Thryv was structural, not a temporary blip. The fund's own commentary, released in November 2025, highlighted the stock's 18.64% loss over the last 52 weeks. For a manager who writes about "trees, fundamentals, and patience," that kind of sustained underperformance is the opposite of a fleeting market mispricing.

The silence in the Q3 letter is the critical detail. The fund emphasized transparency about "what we own and why," yet omitted Thryv entirely. This implies the decision to sell was made after the fund's last public commentary, not as a planned exit. It was a reaction to deteriorating fundamentals, not a pre-arranged move. When a fund with "almost the entirety of my and my family's money" invested in its own strategy sells a position while the stock is in a multi-year downtrend, it's a powerful vote of no confidence in the timeline for a turnaround.

This exit adds weight to the broader narrative about institutional behavior. The fund noted Thryv was not on its list of "30 Most Popular Stocks Among Hedge Funds," and that hedge fund ownership was stable at around 17-19 funds. This isn't a case of a whale wallet dumping shares. It's a value fund, the kind that typically accumulates during downturns, choosing to cut its losses. The lack of institutional accumulation suggests other smart money isn't seeing the same fundamental improvements that the company's public narrative might suggest. In a market fixated on AI, Thryv's story of digital marketing tools for SMBs may simply be out of favor, and the fund's exit confirms it's not a temporary mispricing.

The bottom line is that the smart money is moving on. A fund that prides itself on skin in the game and long-term value creation sold its entire stake in a stock that had lost nearly 19% in a year. That action, combined with the silence in its letter, signals that the structural problems at Thryv may be more entrenched than management's optimistic outlook suggests. For investors, the real signal isn't in the company's press releases, but in the filings of those who have the most to lose if they're wrong.

Catalysts and Risks: What to Watch Next

The smart money has spoken. Laughing Water's full exit and its silence in the Q3 letter are a clear signal that the fund has lost faith in Thryv's turnaround timeline. The forward view now hinges on whether other institutional players see the same structural issues or if this is an outlier move.

The most direct counter-signal to watch is insider activity. Any significant buying by Thryv's executives or board members would directly contradict the fund's exit and suggest management still has skin in the game and confidence in the near-term path. Until such activity appears, the fund's action remains the dominant institutional signal.

More broadly, monitor for institutional accumulation. The fund noted that hedge fund ownership in Thryv was stable at 17-19 funds, with the stock not on its list of top 30 popular holdings. This lack of broad institutional interest is telling. Watch upcoming 13F filings from other major funds. If Laughing Water is the only major holder cutting loose, it could indicate a tactical, opportunistic sale. But if other funds also trim or exit, it would confirm a broader loss of conviction and validate the smart money's call.

The key risk to the smart money signal is that Laughing Water's sale was opportunistic, not a fundamental breakdown. The fund's own commentary frames its recent underperformance as a "violent move downward" caused by short-term traders, not a deterioration of business fundamentals. This creates a plausible alternative narrative: the fund sold to lock in gains or rebalance into other areas, not because Thryv's story is broken.

However, the fund's poor recent performance makes this less likely. Its year-to-date returns of approximately -2.7% were the worst September in nearly a decade, adding pressure to its concentrated portfolio. In that context, exiting a position that had already lost 18.64% over the last 52 weeks looks less like a minor tactical move and more like a decisive call that the thesis had failed. The fund's claim that "our interests are aligned" because its own capital is invested alongside clients' money only strengthens the weight of its action. When a manager with that skin in the game sells a position while the stock is in a multi-year downtrend, it's a powerful vote of no confidence in the timeline for a turnaround.