New Capital
Contrarian, deep value, long/short equity, special situations - Crazy Growth Assumptions Necessary To Justify Valuation - At Least 55% Downside With Clear Catalyst (NASDAQ:COUP) is a 16-year-old company that is currently trading at P/S=10 and continues to produce losses. It also trades at 50% premium compared to its IPO price of $16/share just 4 months ago. The company seems to trade at post-IPO hype levels and crazy growth assumptions are necessary to justify its valuation. I am short stock and long November puts. This article will clarify the rationale behind my trade. Key items of my short thesis are: business model does not offer anything revolutionary that could justify sky-high valuation. There is no operating leverage despite fourfold increase in revenues; Total addressable market is limited, measurable and not growing. Only shift from offline to digital coupon ...
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