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  • Veeva: Sanofi's Pass On Veeva, Collapse Of CRM Businesses Growth Rate, ASPs, Customization, Fanboy Sell-Siders - Many Reasons We Are Short Again [View article]
    The reality is what has made Veeva one of the more attractive shorts around is that it is not a buyout target. That's the problem of being an ISV crm in a vertical. Forget the multiple which just makes it absolutely a ludicrous suggestion at this point, but even at 5x sales they don't have a suitor. The crm business which is 90% of sub revenue is on sfdc's platform. SFDC alredy gets 20$ a user on that and is free to sell their service clouds and other products into that customer base. So what would they be buying? Veeva's add-on revenue like approved email or territory management? Not exactly a growth story. And strategically sfdc would have zero interest in vault/network. Maybe 3x sales is max they'd pay for the biz here.
    Dec 10, 2014. 08:26 AM | 1 Like Like |Link to Comment
  • Veeva: Sanofi's Pass On Veeva, Collapse Of CRM Businesses Growth Rate, ASPs, Customization, Fanboy Sell-Siders - Many Reasons We Are Short Again [View article]
    Malthusian?

    We have spent over a year on this on it is pretty clear. Veeva has done exceptionally well selling a call reporting tweeked sfdc product into the siebel install base. What they have offered is better and far cheaper than what was being paid for a largely neglected siebel product, and they did a good job of founding the company at a time that big pharma was looking for more flexible crm product for their large but readily shrinking salesforces. However, there are considerable limiations when you white label a product, and so far veeva has skirted those concerns. They have also skirted the concerns related to the trends in the industry. A move away from share/voice, particualrly in north america, is not in the interests of their present model. Competition over kam business is much more fierce, and their offerings in 'multichannel' leave much to be desired. This is plain as day and has largely been disregarded by mgmt as far as investors are concerned.

    However, we do agree the saas opportunity is broad, but you;d have to be a fool to disregard the platform players and their ambitions as well as the quite obvious threat that sfdc's force.com offering provides to large pharma which controls a disporpotionate portion of the install base. There are plenty of players spending billions on mkt automation, big data crm, analytics, etc. These costs can be spread out across multiple industries and aree critical to the future growth of these platform providers. An isv cant get around this.

    That being said valuation here is the biggest problem. What was sfdc down last two days at one one point? 10%? If we were to update this piece we'd literally re rate veeva by same amount. The only difference here is veeva is still largely owned by insiders why sfdc is liquid and much more properly priced.....we feel really bad for all the institutions that got caught taking up veev insiders new supply last week.

    Consider that veev at their penetration has the HIGHEST VISIBILITY of any saas listed with respect to customer penetration, revenue opportunity etc. The fact that the very same people who own the largest % of the stock choose to provide the most limited disclosures and guidance while they off load shares says all you need to know here as an equity investor. This is w/o doubt egregious, and we say that from plenty of exp on the short side.
    Dec 9, 2014. 04:23 PM | 1 Like Like |Link to Comment
  • Did GT Advanced Technologies Mislead Investors? [View article]
    Actually, their disclosures were pretty good. The 10-k clearly adressed the risk of solvency related to the Apple prepayments. This author is wrong in assuming that they would have started paying Apple back in 2015 as originally agreed upon. What clearly happened here is the entire amount advanced to them by Apple was accelerated and due immediately because of their failure to hit the minimum production timeline/feasibility. This caused a cross-default with their 2017 and 2020 notes. They have probably been running around looking for financing for the past month to cure this, but whose going to invest here? Apple is now owed roughly $600 million and at the same time is entire story customer wise. If they have chosen to go another way why put money in that simply will be used to pay them back? Meanwhile if apple wants to go this route, as the largest creditor, they now will own the assets themselves. So why do anything other than call a breach and sit back and wait for them to hand over everything. These guys bet the ranch and failed, but it was clearly disclosed. Naturally they will say up until the last day they were working on financing arrangements that would have plugged the hole, and that it all seemed resolvable so their stock sales are fine as a cross default due to ambitious production/timeline failure was always disclosed.
    Oct 7, 2014. 01:14 PM | 8 Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    Have to say these comments are amusing. Is this a yahoo finance message board?

    EPL eventual stock collapse is not a matter that is up for debate. It is a sure thing. Forget the fundamental case for a second and simply focus on the trading dynamics. The stock is turning over its entire float on a regular basis two months after listing. We figure the holding period on this name is being measured in seconds. Day Traders clearly have gravitated to it and that has brought it in HFT crowd. This is why its not like your typical low float paper overvalued ipo despite the fact that the pe owners here have not yet had the opportunity to exit. The stock cracks the $100 million value level multiple times on a weekly basis. Velocity driven trading like this sows the seeds of its own destruction. Fiesta Restaurant group trades 1% of its float daily and thats with 90%+ of its outstanding shares floated. Loco's daily volumes should be at least sub 500k with the current float if not closer to 100k by now that is of course assuming anyone actually was willing to 'own' the stock at these levels. Make no mistake that element and not the 'growth' story etc is what has the stock up here. The fundamental debate is what applies to whether you think this is a $5 or $15 stock. This means the ride down to $20 will be rather uneventful as far as news flow and simply a function of inevitable collapse in daily scalpers as the computers providing this liqudity for day trading on this level move elsewhere . So, if your investment thesis is predicated on day trading loco every day with a flat exposure overnight thats great. However, if you actually go to bed long this stock for swing trades and scalps, well, don't be shocked if you wake up one day to a 25% decline that effectively decapitates your entire strategy. We are on the other hand quite comfortable with our margin for error here.
    Sep 16, 2014. 08:22 PM | 2 Likes Like |Link to Comment
  • Welcome To The New El Pollo Loco: 2010 And 2011 Are Ancient History [View article]
    The valuation argument which is overwhelming and left unadressed in this piece is what investors obviously need to focus on first. If EPL was priced based on its growth track record it would be sub $5. At $15 it is getting a huge benefit of the doubt with respect to future expansion. At $30 plus you have paid for five years of flawless execution today which in the market is generally how you guarantee yourself a near impossible chance of making money over any decent measurable holding period. But to get even more specific in the restaurant business with volatile comp trends you are 100% assured that you will be reaching for antacids very soon in this name.

    Now, that aside some key points in this article which are flat out inaccurate:

    1)Their avg check per person is not $5.83. This is per person spend. As recently as 2006 avg check at epl was disclosed in their filings at $8.9. Considering price increases since then the avg check is probably north of 10$. They chose to change the metric disclosure for this ipo probably for the very reason that some people would assume there is plenty of room for avg check growth. Reality is a 1/3 of their business is family meals which in the new 'per person spend' metric are being adjusted based on people served by such a meal vs the actual single transaction ticket.

    2) Their traffic is nowhere near Chiptole. Population density is a big factor here with 80% of their stores located in the US 2nd largest city. What do you think the cmg's in nyc are doing in annual sales? This is apples to oranges.

    3) We did not criticize increasing check size, we merely said it is highly discountable because it is not being accompanied by commiserrate traffic growth or improving brand equity from significant store expansion into new markets.

    4) The failure to go east over 25+ years considering they hit 200 stores in 1990 is very notable, but its not the end of the world. The more recent failure however jumps out at you because it tells you about the roadmap you are buying into. Everyone of these failed geographies involved 'development' agreements for 15-50 stores with established franchisors. Once a brand has recently failed your portfolio the odds of going back to it are a year or two later are slim to none. And other franchisors in the same region are likely to be just as skeptical. This means you have to do the hard work opening company owned stores in those markets and building out your infrastructure before you have franchisors lining up. That is much higher risk and also much slower growth trajectory. Hence the focus on a market that is easy to sell on the surface to investors. But like the recent houston expansion which was already alluded to in the s-1, you are not exactly getting anything guaranteed. If i have 200+ restaurants in a region a 30k development fee for my first unit is not a big risk. But if it doesn't catch on, I won't be opening new units. For the most part that was the story of the past several years. Why should houston be any different? Why was it not a focus before? Reality is its an easy sell to the market because of the demographics, but it is also highly suspect that little to no progress has happened there yet. What would be more interesting would be a disclosure on the price per store sold to this franchisee in san antonio. We are guessing this numbers don't comport with anything close to what anyone long this stock is thinking.
    Aug 24, 2014. 06:26 PM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    Buy them with what? Burritos? FRGI has $1.3 bil cap.
    Aug 23, 2014. 07:21 AM | 1 Like Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    Thanks but we have plenty of experience taking the other side of a trade on sentiment. We can also tell you that sometimes obvious is just plain obvious, and that doing a countersentiment trade then simply leaves you looking like a complete moron.

    We are short comfortably over 35 and already more than doubled our money on the options we traded. But thanks for the headsup, and we will track your article ratio market strategy going forward.
    Aug 23, 2014. 07:12 AM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    And on a side note after just a few weeks cynk lost 99%.
    Aug 22, 2014. 07:57 PM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    CYNK is a horrible comp it had literally two sessions where it traded more than $1mil in value. LOCO avg's at least $70mil a session.
    Aug 22, 2014. 07:56 PM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    You hit on something we were very curious about in our analysis. Some of the older epl 10-ks as well as their 2006 s-1 disclosed average check size and it was at $8.90 in 2006. For some reason they have chosen to drop that metric and replace it with and average spend per person which we can only imagine has a lot to do with the family meals making up a 1/3 of sales. So we bet with all the price hikes since 2006 avg check per transaction is somewhere north of $10. They clearly have chosen to adjust the family meals based on estimated people served to get at their per person spend. Changing metric disclosures is by our experience never a good sign. Our guess is it has something to do with how they'd rather be positioned as qsr+ without having to explain their avg transaction being maybe lower income family meal driven.
    Aug 22, 2014. 11:06 AM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    We actually view the houston selection as the 'next target mkt' as the ultimate example of window dressing. This is a market that should have had 50 epl's 15 years ago. It's also a market that has church's everywhere, and tons of other similar choices. If it was so attractive you'd think there would have been franchisors clawing over each other to sign 40+ store development agreements by now. So, really what this is about is the fact that on paper to the clueless its an easy sell...same demogrphic...natural extension....blah blah. We'd have been more interested if they picked a market like georgia or south carolina because it would say they spotted some gap and have extreme confidence vs selling us on texas which they have had plenty of time to penetrate.
    Aug 21, 2014. 02:42 PM | 2 Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    Sure. The increase in revenue is not exactly notable. What is notable is the increase in operating income. When you see a chain that is not growing and with this history put up such numbers you take a closer look. That's why the traffic/check mix is important. Everyone in f&b has up until this quarter been on a solid 2 yr run, so you want to put it in context and see what are the drivers. Here the pricing element is very important because of the store location concentration and target demographic. Its significant because it has serious limitations and is generally non recurring, at least to this extent. Add in the minimum wage increase it is preceeding, and well you take a company whose ebitda grew close to 40% over two years which is likely to see low single digit growth over the next two even if they expand a bit and traffic is stable. Also, it is always more helpful to look at how brands perform in weak macro scenarios. EPL was literally at the bottom of the list in 2009/2010. Macro strength masks brand weakness especially if the comparables being examined come off that weakness. Basically, you have a rebound element which you also have to discount. Store closures, pricing hikes, underinvestment, stable labor, regionally concentration overhead etc all support margin expnsion but can be huge traps if they have nothing to do with growth....that's the story here.
    Aug 21, 2014. 02:28 PM | Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    Over 80% of hedge funds are domiciled in cayman so frankly have no idea what that has to do with our el pollo loco report. A wolf in a suit makes money recommending something when in fact he's been already paid by the company he is recommending ordoes a deal with investor money and extracts deal fees and mgmt fees regardless of whether the investment works. Our fate is decided by the market thank you. And everything in this report is verifiable. We simply did the work.
    Aug 21, 2014. 02:14 PM | 16 Likes Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    We could have published a week ago, and to be clear we didn't think sharing our internal analysis on this. We figured with the speed of things these days and the existence of seekingalpha someone else would get something good out on this because it is so obvious. We also doubted this stock would continue to trade with the volume and interest it has gotten. Thats where we were wrong. So, we figured we'd let the bankers say their part and share our work.

    On a side note we probably should have put a section in here on execution, but considering peoples varying risk profiles we prefer not to get so granular on positions or for that matter exposure size. We will say that we are not blackrock, and that being able to find half a million to a few million dollars worth of exposure on this is something that works fine for us and was out there in pieces spread out over about 7 sessions. Options however were without a doubt worth the price despite how expensive they were. It was one of those rare instances where you say damn thats expensive, but more than worth it.
    Loco has traded 180million or so shares in 19 sessions which tells you a lot about the ownership base. Considering the sliver that is out there the worst thing that is going to happen to this stock will have little to do with comps, fundamentals, chipotle comparison, cnbc etc. It will simply be velocity dying down and illiquidity setting in.
    Aug 21, 2014. 10:56 AM | 1 Like Like |Link to Comment
  • El Pollo Loco: PE 'Bust-Out', 20+ Years Of Failed Domestic Expansion, Pre-IPO Window Dressing Make An Ideal Short [View article]
    The point here is you in fact can dismiss it. Its being driven by pricing not traffic, and its about to see some cost offsets. All chains break this out especially when its this meaningful, and go look at EPL Intermediate's 10-ks and you can see they would break out when they took price increases in the past as a private company. The fact that it doesn't make it into the prospectus is quite convenient. We did a pretty thorough job of looking into pricing in LA over past 4 years and its impossible to ignore especially on the popular family chicken meals, sides, and value items.

    And if you want there are some spots on the web that have good capture of menus at chains over the last decade. This link compares epl 2002 and 2013 http://bit.ly/XCR8DX

    Suffice to say if you look at rev growth over that period as well as unit growth its clear traffic/mkt share for them has been a problem and samestore sales growth is just keeping up with inflation.

    But yes management has done a excellent job though rates coming down and rebounding economic activity are 95% of the story here. That can btw be said for many names which is what happens in such an environment. The fragile models start to look robust and as soon as the tide pulls back you see just how fragile they were. EPL is about as obvious as it gets with respect to being able to identify that.

    And to be clear at the IPO price this was 14-15x ebitda..run through every single dining/fast food/fast casual listed name out there and you will quickly get how at that level it still looks like a disasterously priced stock.
    Aug 21, 2014. 10:39 AM | 1 Like Like |Link to Comment
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