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  • I Told You So: Facebook's Ugly IPO Debut [View article]
    That's exactly right...the i-banks can't let themselves look like goats after bringing this company to the public markets. They'll support the stock (by buying aggressively) with the enormous fee they received from FB once the deal closed.

    What's more interesting is the share lock-up. Facebook employees have tons of shares that they want to dump in order to turn their paper fortunes into real fortunes. Most companies set a 6 month lock-up post-IPO, but FB's is less...likely around 3 months. So what happens when all those employees have their chains removed? Good-night FB.

    The stock's intrinsic value is somewhere around 18x earnings, or around $7.50 per share. Have a nice day.
    May 18, 2012. 05:13 PM | 11 Likes Like |Link to Comment
  • Facebook Investors: Your Nightmare Has Just Begun [View article]
    Investors Mosaic (Mack)...30x year-forward EPS is not "fair valuation." 30x EPS is a sell trigger for most companies, and considering that '13 estimates are likely inflated, it's even more reason not to classify $18 as fair value. Fair value for a company like this is around 18x FB's real 2013 EPS, whatever that may be.

    Otherwise, I totally agree with you on the looming lock-up dump. It's no stretch of the imagination to think that FB could hit the $10-12 range...which is what it's worth on an intrinsic value basis.
    Jul 31, 2012. 11:14 PM | 4 Likes Like |Link to Comment
  • Don't Be A Facebook Sucker [View article]
    I never pay more than 25x earnings for a young company no matter how fast it's growing because the growth will inevitably slow and growing pains will inevitably arise. For a more mature company, such as Facebook, I'll never pay more than 18x, which would make an attractive buy at $18 per share. I'd sell at 30x (or $30).

    Justifying valuations on industries or other nosebleed comps is silly. $X in earnings and X% growth is worth exactly the same whether it's a .com or a rock company. To bring this point home, I bet that if a niche industrial company with precisely the same numbers and growth projections as Facebook were to go public, people would say $100 per share is a pipe dream.

    Individual investors buying this IPO will get a lesson in reality. Institutional managers buying this IPO (as an actual investment rather than as a flip) should be fired for fiduciary irresponsibility. No rational argument can justify this valuation.
    May 5, 2012. 09:28 AM | 3 Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]

    It has been true for 2 years, but perhaps the market wasn't confident of Obamacare's sticking power back then. When concepts or expected events get closer in time, they seem to become more of a reality to people.

    I know very little about this story, so I can't comment on CMG's competitors, but I would certainly pose these questions to the CEO. I've always found that my highest conviction ideas arose after gaining industry insights from top management. Personally, I couldn't make a recommendation on this story before hearing the logic and conviction of the CEO's answers to these (and other) pointed questions.

    While your fundamental, company-specific thesis makes clear sense, I'm concerned about the industry. Using pure intuition, restaurants seem to be faddish. Remember when Quiznos was the craze? Krispy Kreme was a drug-fueled bonanza. Even Cheesecake Factory, which still packs every seat, has returned 50% in 5 years. That's long-term market return (of 8% annually)...nothing special at all. Your other favorite, Rackspace, makes much more sense to me. Their product is great (I'm a customer), and their customer service is the best of the best...those are true lasting advantages which are very difficult to emulate.

    Then there's valuation. I get queasy at anything above 20x. At 26x '13 EPS, Chipotle better deliver breakfast burritos to my bedside. In all seriousness, earnings can't evaporate overnight. An earnings multiple can. If this thing were trading at 15x or even 18x, then I'd be much more interested.

    But, again, I know nothing about this story beyond what I read in your article and what I've witnessed in the restaurant industry, so my comments summarize an initial skepticism rather than a high-conviction investment thesis.
    Oct 15, 2012. 04:28 PM | 1 Like Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    IMac...curious to hear your response to this Einhorn comment:

    Chipotle will have to offer health insurance coverage to its employees under new insurance laws that are part of the Obamacare legislation. And the company's issues with undocumented workers have attracted the interest of the U.S. government.
    Oct 12, 2012. 02:48 PM | 1 Like Like |Link to Comment
  • Facebook Investors: Your Nightmare Has Just Begun [View article]
    Ah! Financial it! Well everyone will have his/her own opinion when it comes to this, but here's my take: different companies have different valuation ranges based on their Rev growth, EPS growth, cash flow, debt load, etc. Growth companies always have high valuations at first, driven, obviously, by the company's perceived ability to "grow" into its valuation, which subsequently contracts.

    In my experience, I've found that tech companies matching FB's profile (on a growth basis, not absolute dollar amount), bottom out around 15x earnings and top out in the low 30s range. Of course, multiples get stupid and the sky's the limit, but the "average" pricey range is around 30x. Thought of another way, one can ask, "am I ok making a 3.3% earnings yield on a stock with significant multiple contraction risk?" For me, no. On a bond, yes...on a stock, no. I demand a higher return for my risk.

    18x is the magic number for me b/c, given the lack of true EPS visibility, I want a low enough multiple that compensates me for the risk I'm taking. Again, thought of another way, a 5.6% earnings yield with limited downside and potential upside makes me comfortable. The market may not let the stock get to 15x, and 20x still seems a bit pricey, knowing that max downside is another 25% lower. So 18x seems right.

    Bottom line, this is all art, and that's my painting...

    Now let's hear what the Mosaic portrays...
    Aug 1, 2012. 02:33 PM | 1 Like Like |Link to Comment
  • How The Media Is Wrong About Facebook's IPO [View article]

    Your first two points are spot-on, but your third, respectfully, misses the mark.

    On #1 and #2, yes, IPOs must be viewed from the perspective of the issuer, the early investors, and the i-banks. They all have every incentive to juice up the issue price as high as possible. No one can blame them them for their greed, no matter how egregious it may be at a 100x P/E ratio. The only ones to be blamed are the people who participated in the event--those who bought into the ridiculous hype and those who don't understand the basics of valuation. The ignorant get burned...c'est la vie.

    On point #3, yes, the best investments are determined over the long-term, but every rule has exceptions, and FB is one. An investor may buy an expensive stock, say at 20x, 25x, or even 30x earnings if it's a phenomenal company that never gets cheap. But 100x earnings? One-hundred times? On a company that hasn't come close to proving itself? The "long-term perspective" line doesn't work at 100x or even at 50x for a mature company like FB. And then you use another generalization by saying that because FB has 900m users, it therefore must be valuable. Baloney. Value is determined by income streams. If FB can't monetize--if it can't create income streams--then it is not valuable at all...even if it captures all 7 billion people on Earth.
    May 21, 2012. 10:07 AM | 1 Like Like |Link to Comment
  • I Told You So: Facebook's Ugly IPO Debut [View article]
    Snoopy1...I couldn't find any source stating whether MS exercised the shoe. It's true that most shoes are exercised, but this IPO was priced so aggressively, that that weak demand upon float may have prevented the exercise.

    If you or anyone else knows an ibanker at MS, then ask and then let us know.
    May 19, 2012. 12:01 PM | Likes Like |Link to Comment
  • I Told You So: Facebook's Ugly IPO Debut [View article] this first:

    I doubt that MS exercised the shoe because the demand (once the stock began trading) was too low to justify it. MS started buying shares back once the stock approached $38.

    As I said in my earlier comment, they prevent the stock from dipping below the issue price in order to avoid looking foolish in front of potential clients. They don't want other companies who are looking to go public to say, "MS has no idea to price an offering, so we'll hire its competitors."

    What happens with the shares once MS buys them is a delicate issue. Contractually, they likely have the option to sell them back to FB at the issue price (reverse greenshoe). But it's possible that in order to save face, MS will hold them on their own books and try to sell them at some point in the future when (if) the price strengthens.

    This entire IPO process is arguably more art than it is science.
    May 19, 2012. 09:23 AM | Likes Like |Link to Comment
  • Don't Be A Facebook Sucker [View article]
    My fault...18x would be an $18b valuation...not $18 per share. 30x would be a $30b valuation. The share price at 18x would be almost 1/6th of the eventual IPO price.
    May 17, 2012. 08:14 AM | Likes Like |Link to Comment
  • The Way Out For Greece, The EU And Global Markets [View article]
    Markos, it is in Greece's best interest to remain in the euro, and it is in the eurozone's best interest to remain unified. All these bailouts and foolish programs are temporarily treating symptoms while the underlying problem gets larger. I wish the european government had more financiers among its ranks.

    A euro breakup will negatively affect the global economy, so we are all in this together. There is only 1 clean way out of that mess which allows for long term growth and stability of all eurozone nations.

    For those interested, I wrote a paper devoted to this issue which offers a clear and logical solution:
    May 10, 2012. 06:30 PM | Likes Like |Link to Comment
  • Billion Dollar Problems Haunting American Tower [View article]

    You bring up interesting points.

    On issue #1, roughly what % of the top 5% of AMT's towers leases have actually been secured by the aggregators; roughly what % of those leases have expired; and what is the expected decrease in AMT's lease revenue as a result of those renegotiations? These numbers could make or break your argument.

    On issue #2, Since we don't have access to the lease contracts, why should we assume that AMT hasn't protected itself from this issue? Logic would suggest that their contracts pass (at least partially) any unforeseen property taxes onto the tower owner. Have you asked management about this? What's their answer?

    On issue #3, definitely a risk.

    On issue #4, do any of your accounting experts (such as Antar) have an opinion on this?

    Thanks for the articles...
    May 1, 2012. 07:35 AM | Likes Like |Link to Comment
  • General Maritime: A Solid Buy [View article]
    All true, coprophagous, but you're not taking into account the tanker scrapping mandated by the IMO. It started years ago, and it will continue years from now. Ship owners who were once hesitant to scrap their single-hulled ships during the boom you mentioned are now scrapping ahead of their mandated date due to the negative cash flow. This will accelerate the scrap schedule. So two questions remain: 1) how will the scrapping (ship supply) ultimately look vis-a-vis the demand?; and 2) what happens in the Middle East? If there's a flare-up, oil producers, as always, will store an enormous amount of oil offshore in VLCCs. Not only will this decrease supply, but tankers will also be prevented from making their regular short routes. Once routes are affected, route lengths will increase and this will decrease supply even more.

    Bottom line, the outlook is not as clear as either you or the author make it seem.
    Apr 27, 2011. 04:06 PM | Likes Like |Link to Comment