Matt Brice

Long/short equity, value, special situations
Matt Brice
Long/short equity, value, special situations
Contributor since: 2013
Company: The Sova Group
Blaze is actually more than 199, because the 199 doesn't include a band, which is either $30 at the low end of $100 for the nicer bands. The price differential is not that much, which is bad news for fitbit.
Terrier,
I have looked at this name a few times and coming back once again given the cash. However, each time (this time being no different) when I look at the products served up, especially on gov deals, I wonder why anyone would buy these items. Furthermore, given the low value of most items, it is to some extent still a local marketplace due to high transaction/shipping costs on a percentage of value basis. I am impressed with how much GMV they have been able to do in the past, but I imagine it is more from new customers trying their service and throwing everything at it. They sell some stuff, but in the end, realize it is probably not worth it.
Thoughts?
Giovinco:
The 50% split on the "next" 350m (after the payback of the loan proceeds) will go to payment of FXCM's convertible debt, which is approximately 155m, after which the next split will be 90/10, up to a total of 680m.
Brent,
I cannot predict what a re-cut deal would look like, but I would imagine it would be a simple equity piece to simplify the structure. Debt would be unwelcome to customers of FXCM as it would increase the risk of bankruptcy and FXCM's meager profits at current level probably can't support the debt. I continue to believe that LUK will not "give up" the economics of their deal (which was highly favorable for LUK) just to simplify the structure. In other words, any new deal will likely be just as punitive to FXCM equity holders as the previous. This is the basis for my assertion that this move in FXCM's equity over the past week is irrational.
John,
This is a well-written article and I appreciate your thoughts. My main concern with RBA is the idea that end-market weakness does not hurt their business. I worry this may be less valid than one might theorize. Additionally, competition from Iron Planet continues to heat up. Given Iron Planet's relationship with CAT, I think the prospect of competition is real. I think both of these points are weighing on the stock. If neither are valid, which is quite possible, the stock may be re-valued once these are discarded or proven invalid.
Buy 100 shares of SPXU and UPRO each.
For what it is worth, 60% is fairly typical in blockbuster movies. In fact, Sony's standard agreement is 60% for all of its movies.
The 900m of cash you reference on FXCM balance sheet is actually customer deposits with an offsetting liability.
This is a good point re: growth potential. I find it very difficult to truly "pay up" for growth potential given the obvious risks that the growth may not come. There does appear to be a lot of room to grow, especially in the single-serve potential for Lacroix, however, brands that have a cult following sometimes just don't translate into the broad based consumer. Lacroix could go either way at this point. Will be interesting to watch...Thanks for commenting.
Nitin: Thanks for the comment.
In terms of CACC, I believe CACC's use of the asset-backed securitization market provides them with a lower cost of capital and therefore a continued competitive threat to CRMT. Their operating model attempts to lower the risk of the end market user by requiring the dealerships to take a "first-loss" like position in the loans. CRMT, on the other hand, mitigates this risk by being the direct lender to the end user and having a more direct relationship. Although I think there are advantages to both, I lean more towards the CRMT model. That being said, CACC has performed well over the past 5 years.
I think the ability of a company to "outperform" during a tightening is dependent on how aggressive they were prior to the tightening. I suspect CACC may be slightly more aggressive right now (however, my study of CACC has not been as robust as CRMT).
As for gas prices, I agree with you, that lower gas prices have most likely caused consumers to trade up, but that is also a result of loose lending practices, so I am unsure which aspect is more impactful.
Lastly, I also agree that the used car market has become much softer, either due to the absence of cash for clunkers program or due to the number of slightly used cars coming into the re-sale market. The sentiment is also echoed by CoPart (CPRT). I suspect that another tightening will not see the floor in used car prices that we saw during the credit crisis, thus impacting the eventual recovery of repossessed cars.
I hope these comments at least touch on some of your questions...
Thanks for the comment 909. John and I actually discussed this exact point. I believe CRMT has overestimated how long the "easy" financing would last. On the last call, the indicated that they would curtail any new store openings for this reason. The analogy to insurance is apt, but given the fixed store base, the operating costs are harder to slim down quickly.
In other words, I think you are right, that they should have done this and mgmt is beginning to move in that direction.
I generally agree that the faintest improvement will cause a big jump or a large incoming shareholder. However, my feeling on that thesis is what happens in the meantime to the stock could prevent you from making a profit. For example, you could have bought this stock at $44 after the revised guidance and it may fall to $30 before that improvement or new shareholder come. If there is a 30% jump on that news ($39), you could still be underwater on your original purchase.
The public float on this stock is substantially lower than the total float given Artal's large ownership. Hence the very substantial rise after the Oprah deal (although a portion of that rise is no doubt due to the fact that the Oprah deal was a big positive, which took bankruptcy risk off the table for at least two more years).
Puts are available, but very expensive. Thanks for reading.
Adib,
Although I have been slightly negative on OUTR (but never been short or long), do you think you would revisit your hit and run investment strategy at a certain price?
Although a lot of people chalk up the box office excuses as just excuses from mgmt, I am inclined to see that OUTR can change valuations drastically if movie releases are poor and people misinterpret those rental demand as a result of secular decline instead of box office issues. OUTR doesn't create its own content, so there is only so much that they can do. I am not sure that explanation is applicable here in Q4 of 2015, but it is a possibility.
Thoughts?
Alphacashy: I appreciate your thoughts. I think we are in total agreement regarding management and their efforts at making the business model succeed. Two points:
1. Low Cost Provider: I don't think CRMT is currently the low cost provider of an auto to their customers. Given the aggressive financing available, their competitors are providing a better car, at a better rate, with longer terms (i.e. lower monthly payments). This may or may not change in the future if the auto financing market tightens, but CRMT is not the currently the low cost provider.
2. I agree that there is a lot of pessimism surrounding this name or this segment right now. I share some of that pessimism. My concern is the following: given how well auto loans held up during the 2008-2011 period, has the auto financing market permanently changed such that securitizations of auto loans will provide cheaper funding than CRMT can provide with its own balance sheet and prudent lending standards. I am very weary of saying "this time is different" but until I am waiting to see signs that the auto financing market is tightening before investing in CRMT. I hope that I am able to see those signs before the market realizes how beneficial a tight auto financing market is for CRMT.
Thanks again for your thoughts.
I think you make a lot of great points. It is interesting to see how well Nutrisystem has responded with the roll-out to Wal-Mart and other retailer distributors. Additionally, finding a better way to target the under 48 crowd is a missed opportunity. It appears that WTW is continuing to bypass that customer segment in choosing Oprah as their spokeswoman.
Dslower, thanks for your thoughts. The value proposition, especially for the online-only version, is very difficult for the consumer. I believe this is the biggest hurdle WTW has and I am just not sure there is a good solution. Please update us in the next few weeks with what you decide to do.
Richard, this is a good overview of the capital structure dynamics for EMES. Thanks. It is interesting how lenders have on an individual basis been extending terms and loosening covenant restrictions, however, such actions are prolonging the glut and low oil prices since very few O&G companies have went bankrupt. Instead, they are over-producing in order to meet the interest demands of their lenders.
909:
I think the term length, down payment, quality of car, and interest rate are all four factors in leading people to pick competitors.
Their competitors are able to offer these loans because they are securitizing the loans, providing them with access to lower costs. In essence, their competitors are the low-cost producer selling a commodity product.
I have doubts whether their competitors will be able to continue to access the securitization market in such an easy way, but until auto financing tightens, I believe CRMT will continue to be at a competitive disadvantage.
They could potentially package their loans and sell them to gain access to that lower cost of capital, but I don't think that is in their DNA as a company.
It is a good company to watch and I doubt it is a "fatal flaw", but it is very painful in the near term.
Recent disclosure from large holder, 22%. They have purchased shares in the open market since IPO. Formerly of Chieftain Capital.
http://1.usa.gov/1INCXws
Good article Vince, agree with your thoughts.
MatthewNY: I assume your comment about rounding the corner was regarding Jeff's previous articles, correct?
I still see no light at the end of the tunnel for ARO.
This reminds me of GTIV and KND. I deal is good for both parties, just a function of price. ANGI is really getting bailed out here, so if I were a shareholder there, I would want mgmt to accept the deal before it disappears.
Thanks for your comment Jeff. I appreciated reading your articles on MM. Despite continued attempts at improvements in fashion product, I believe ARO has simply become "not cool" with their primary customers. I am not sure if any specific products can change this sentiment before ARO runs out of time, i.e. cash. It is an interesting one to watch from the sidelines.
Deal with Eastman, but terms not disclosed, most likely significant price cut to keep Eastman.
Good original research and good call on the cover.
That's about 20k guys, don't get too excited. Basically a drop in the bucket in comparison to his total compensation.
I think this is people hoping for a short squeeze like what occurred with Tiger Global stake and DOJ settlement, both spiked and then faded. This will probably fade even faster as the numbers were truly bad. 6 months after the 60 Min episode, the numbers continue to get worse. The CEO change is a complete joke. A board member throughout the sourcing issues with China and a veteran banking executive? That decision only makes sense if they couldn't get anyone else to do the job.
Probably a mistake....checked the wrong box.
The sales decline is horrible. It shows that the customers are not coming back. This is probably the best short in the market right now, especially as day traders push it up today....
this is a huge miss on sales, customers just are not coming back....