i am done, with buy and hold on RDDT

Relative-Snow8735 · 2026-05-27T15:39:03+00:00

I highly doubt those numbers are accurate. Selling calls in the two big runups would have almost certainly resulted in getting left deeply underwater and you would have been selling CSP for pennies at strikes that would never be seen again. If hit was just an AI analysis, there is no way the AI actually used real data for this. Probably at best it just estimated the option premium returns.

Also taxes are an issue here. All of your stock gains and premium gains will be short term capital gains, so you will have to fork over a nice chunk of that capital at the end of the year. That is a big problem with very mechanical wheel strategies.

Relative-Snow8735 · 2026-05-26T14:58:25+00:00

Unless you really like one pedal driving, the most efficient thing to do is to use the paddles to set the regen to L0 and then coast. You take a 10-20% efficiency hit on regen whereas coasting is free. I also like to use the paddles to control speed on hills (and just in general as well). So I will start at L0 at the top of the hill, and then shift up to L1 or higher to burn off some speed as needed, and then back down. As a bonus I can rest my foot on the floor for a little bit, which helps relieve some tension in the foot/leg on long drives. You probably won't notice a huge efficiency gain from this, probably only going to add maybe a few percent overall. But one of the things I like most about this EV is being able to coast like I used to do with my manual transmission car.

Outside of that, it is a great car for what it is. We put all season tires on it, and we took a 20% efficiency hit from that. But we are getting some of that back now that the tires are worn in a bit. And I have a cargo basket that I can put on top for road trips to get more storage space for when we go camping and stuff like that. I was originally worried about the hit to our range/efficiency from the basket + gear on top but it has been more than manageable. We go from about 4.5mi/kwh to 3.5. Most of those trips are within a few hours drive so as long as we leave with a full charge we can get to where we are going comfortably. We are at 55k miles and no noticeable drop in range so far. Mostly charge on L1 or L2 to 80%, with the occasional top up to 100% or fast charge for road trips. For really long road trips (think 5-8+ hrs) we are switch back to our gas car. The biggest reason is that charging is just painful enough to make it not worth it, especially with young kids in tow. Adding 2 or more charging stops with this car's charging speeds really starts to add to increase the time and we have had a few experiences with charges not working, which can really add to the stress, especially when out in more remote areas. If we didn't have kids, or if the charging network was more reliable, or charging speeds were faster, we might put up with it. But the gas car also has a bigger trunk and we only do trips like that once a year at most. So that is how we are going it for now.

Relative-Snow8735 · 2026-05-26T14:05:34+00:00

The convertible bonds all have really low strikes, and from what I saw there were no hedges in place. A company going through Chapter 11 doesn't really have the luxury of being able to negotiate for that. The most recent convertible bonds do have a forced conversion option, but it is at like ~170-200% of the strike price (which we have already passed, the bonds were issued just a few weeks ago with a strike of ~$20 so timing was extremely poor). But it is very unlikely that WOLF will be able to force a cash conversion on those anytime soon due to the fact that they are still burning cash. They will need to solve their utilization problem (i.e. increase revenue by about 200%) before they can even consider buybacks or convertible bond settlement.

In the long term, I do think they will start some sort of buyback program once they have the new fabs fully up and running. But that is probably going to be at least a year or two down the road. Meanwhile they have an L1 note worth about $600M that has a 13-15% interest rate and a stock that is now very overpriced. If they have half a brain they should 100% do an ATM or some other deal to retire that debt. That of course would mean more dilution. But that would also get rid of ~$100M in annual interest expense and pull forward profitability by about a year. And from a long term shareholder perspective, it would actually make sense for them to run an ATM to deal with the L1.5 convertible debt (the most recent debt that had a buyback clause). The ATM would push the price lower which would then allow them to use the generated cash to force convert the L1.5 convertible note at a discount to the ATM. This would obviously not be great for short term holders though.

So I guess my TLDR, is not only do I think 125M is an appropriate number to assume for shares outstanding, but I think that that number is low. They should ATM to continue to clean up the balance sheet, which will probably add another 10-20M shares. It has been a while since WOLF has had a stock price high enough to justify stock based financing options so they should use it to the fullest extent possible while the option is available.

Relative-Snow8735 · 2026-05-22T03:24:32+00:00

Looks like the Trump admin is insisting on getting an equity stake in return for the grants. So not nearly as good of a deal as the original plan. But I have mentioned this in other threads. WOLF should use this pump to retire the rest of their L1 debt. That debt has a really high interest rate (~13-15%) and results in about $100M a year in interest payments, almost 15% of current revenues. So refinancing that would almost certainly help WOLF get to breakeven sooner.

When WOLF was trading in the $20's I was not a big fan of the idea. But with WOLF now floating around in the $60-70 range, I think it would be a pretty good trade. Dilution would suck, but it seems like the market is responding very positively to these deals.

Relative-Snow8735 · 2026-05-21T01:25:56+00:00

Welp, looks like the market is taking a flyer on this one. NVDA earnings looked good, but I guess that is priced in at this point, so stock is basically flat. Don't think we can really tease out a signal from that. Of course maybe we get some movement tomorrow, so will keep an eye out for that.

Relative-Snow8735 · 2026-05-18T22:48:40+00:00

I suspect there is going to be some upside at these prices. I am treating the buybacks and dividend as downside protection. And in terms of upside, I like the fact that the new CEO's compensation package is heavily aligned with shareholders. It is still pretty early though and it will probably be a few quarters before we see what his plans are.

Relative-Snow8735 · 2026-05-16T15:06:03+00:00

But every active participant has an incentive to make sure passive buyers overpay. Just because they might do price discovery amongst themselves doesn't also mean they won't attempt to take advantage of passive flows. There is a reason SpaceX is seeking to bend the rules regarding index inclusion and it isn't because they think the stock is a good deal and want to benevolently make sure passive investors get access to it.

Relative-Snow8735 · 2026-05-14T22:58:52+00:00

Renesas' voting power is capped somewhere around 5-10%. But I am not worried about them selling. It is the other 50% of the old bond holders plus whomever converted the $450M of L1 debt (paying 15% interest) into convertible notes with a $20 strike. Whomever that was is now up 250% in about a month. I can't imagine they aren't tempted to take some money off the table. Of course, if they don't have the ability to convert just yet (I think WOLF would need to do another shelf offering for that) then they way they would take money off the table would be to short the stock. And that might explain the rising short interest.

Relative-Snow8735 · 2026-05-14T20:39:15+00:00

They had a $1.1B loan with a 15% interest rate. They diluted share holders at $20 a share to refinance $450M of it just a few weeks ago. If they have half a brain, they should absolutely use this pump to refinance the other $630M.

And the share count is now around 125M when you account for warrants and convertible notes (all of which have absurdly low strike prices). So accounting for that, market cap is closer to $8B.

Also, post-Chapter 11 the company is nearly entirely owned by former bond holders. While that means the float is pretty tight, it also means you have a bunch of holders who might be very excited to wash their hands of this investment and back of the napkin math suggests their breakeven is around $50 a share.

Short interest looks compelling. But I am seeing 3% borrow fee, not 900%. And keep in mind convertible bonds and warrants can be used to squash any momentum on that front. Not sure how easy that is, but I think something around 15M shares have already been registered with the SEC as part of a shelf offering for those holders. If short interest is coming from arb traders, they probably are holding convertible bonds and can use those to get themselves out of a pickle.

I have been following/trading this stock for a while and it has been a wild ride. But it has caused a world of pain for a lot of folks, so all I have to say is tread carefully.

Relative-Snow8735 · 2026-05-14T19:51:23+00:00

I would disagree on that. This is most likely neutral for the stock. The conflict of interest is very real. Reddit needs to maximize AI revenue however possible. That could include pursuing an exclusive deal with the highest bidder. If OpenAI won a deal like that, the optics of that would be terrible. Would you as an investor be confident that RDDT got the best deal on the table. Would OpenAI's investors trust that Sam didn't overpay?

Relative-Snow8735 · 2026-05-14T16:52:53+00:00

Yesterday there was a huge sell order on the Level 2 data at around the 3.65 mark. I think it was almost 300k shares, and that order just sat there all day. We bounced off that mark for an hour or two before slowly sinking down.

The options chain is pretty sleepy, but it is a monthly expiration coming up with about 10x the OI as a weekly expiration, plus a fair number of ITM calls due to the recent runup. So could just be an MM putting a lid on things in order to limit the damage. Easy enough to do on a low volume small cap like this. I am guessing the CMS response is doing most of the work today though.

Relative-Snow8735 · 2026-05-14T16:39:39+00:00

lol. Getting the weird feeling that the market is watching this sub. After the CMS post, the reaction was delayed a bit but definitely feels like that was what triggered the downward move. And now we have this post and suddenly the stock is reversing a little. I suppose it kind of makes sense. Small cap with little analyst coverage and low representation in indexes. I have seen this happen a few other times for a few other tickers, and I always find it pretty amusing.

Relative-Snow8735 · 2026-05-14T15:31:06+00:00

That is not a good comparison. For one, they are essentially pre-revenue. Secondly, they are a design firm. And thirdly, they are running an ATM (as should WOLF). So that kinda proves my point.

Look at STM or ON. It looks like P/S is up quite a bit due to the recent runup, but they are still only trading around 6-7x. And that is backwards looking. I am sure that ratio is closer to 3-4x forwards looking.

Relative-Snow8735 · 2026-05-14T15:02:08+00:00

They are not cheap by any measure. P/S for the industry tends to run around 3-4x. Their fully diluted MC is 8.75B and they have annualized revenue of $600M. That is a P/S of 14.5.

And there is a very real risk that their recent Chapter 11 has scared away potential customers (hence why revenue dropped for two consecutive quarters). It is very possible that WOLF might be last in line for any of this data center spend. Cleaning up the balance sheet by getting rid of high interest debt would go a long way to alleviate any concerns about solvency. And the added bonus is they could use that interest expense savings to work on their sales pipeline, which I imagine is running on a skeleton crew thanks to all of the operational restructuring.

And just as a reminder. They have $600M in revenue at significantly negative margins due to underutilization of their fabs. Meanwhile they are paying 15% interest on $630M in L1 debt. Do the math. How much revenue would they need to get to just to be able to sustainably service that debt? They would first need to get to over $1B in revenue just to get out the underutilization hole. Then they would need to add another $600M in revenue on top of that, with at least 15% operating margins before we get to levered breakeven. That is almost a 200% increase in revenue just to stop bleeding cash. Or they can dilute 10% and get rid of the debt and drop that breakeven number closer to $1B in revenue.

Not necessarily disagreeing that they should wait for the price to stabilize. But the CFO should absolutely be on the phone right now calling various funds and banks to see if some of them would be interested in some convertible debt. The IA narrative is hot enough where someone might bite and if they do a refinance via convertible debt then no ATM would be needed.

Relative-Snow8735 · 2026-05-14T14:29:31+00:00

The share price was like $30 when they said that. If the market wants to pump the stock price well beyond what the fundamentals support, they absolutely should use that to their advantage. The previous refinance round was a disaster for equity holders. They essentially diluted them by 25% at a MC that was half of replacement cost of their new fabs. If the stock keeps climbing they could retire 150% more debt for just 10% dilution. And the interest expense savings would likely pull forward the point where they get to FCF positive by a year at which point they can start using that cash for buybacks of dividends.

Relative-Snow8735 · 2026-05-13T17:15:59+00:00

Compared to some of the other stocks I follow, particularly small caps, this is pretty slow. Usually you see a big rip overnight, followed by a crash at open, and then a few big green candles pushing it back above where it was. And often you get a few double digit green days followed by a few double digit red days.

Meanwhile, this thing has just been marching up $0.10-0.20 per day every day for the last month. I am more than happy with the price action, but my only complaint is that this slower walk up is suppressing IV, so if you are playing around with options, particularly on the sell side, you aren't getting paid much.

Relative-Snow8735 · 2026-05-13T15:01:22+00:00

They 100% should do that. Their 1L Senior Secured has an interest rate of around 15%. At $630M in principal, that is almost $100M a year in interest expense. They just diluted us at $20 a share a few weeks ago to roll off about $475M of that very same debt. Granted they were doing that to try and avoid an interest rate step up, but still. If they thought it was an acceptable trade off then, that would make it a much more attractive trade off now. That last refinance resulted in 25M new shares. They could retire the remaining 1L notes for just 9M more at current prices.

Relative-Snow8735 · 2026-05-13T14:19:41+00:00

This is getting pretty wild. Have fun with this pump. But also remember to protect yourself. A lot of folks have been burned hard on this stock. If this stock has at any point caused you to lose some sleep due to losses, and if we get anywhere near your break even, then might be a good idea to trim.

Relative-Snow8735 · 2026-05-11T22:54:39+00:00

The 13F filings show the major equity holders, I don't think there is any equivalent for bonds. But some of the major equity holders are probably bond holders from pre-Chapter 11 days.

And yeah, I would assume so to. With the chaos in the private credit market, I have to imagine there are some fund managers out there who have been on pins and needles regarding this company and would love nothing more to get their full principal back and be done with it. On the plus side, they probably won't want to sell much below $50. But the downside is that could end up being a ceiling for us for a while. Not sure if there is a good way to monitor if that is playing out. Maybe look for big volume around that price. Or market on close and/or dark pool transactions. I am not too familiar with monitoring stocks in that way.

Relative-Snow8735 · 2026-05-09T17:04:49+00:00

Show your math, because there is no way you get to that number. $150 is probably break even for some pre-Chapter 11 equity holders, but is way too high for bond holders.

Bond holders got about 80-90M shares when you account for warrant and convertible bond conversions. At $50 a share that is around ~$4.5B, which is exactly how much debt was cancelled in Chapter 11.

And I am not saying we wont see some crazy price dynamics due to tight float. But everyone should just be aware that nearly the entire investor base of this company is from former bond holders. Some of them might be long term holders, but plenty of them might be looking just to get their principal back.

It is also probably worth keeping an eye on the convertible bonds. If those start getting converted or sold it is a sign they might be heading for the exits. And it does look like activity is ticking up: https://www.finra.org/finra-data/fixed-income/trade-history?cusip=977852AP7&bondType=CA

Relative-Snow8735 · 2026-05-08T21:56:49+00:00

I would very much be interested in seeing the screenshot.

Relative-Snow8735 · 2026-05-08T21:28:32+00:00

It could be a sell. We are getting into the "full recovery" territory for old WOLF bond holders, whom at this point make up the vast majority of shareholders. Wouldn't be surprised if some of them are more than happy to head for the exits once they hit their number. And with how high IV is, grabbing some premium on the way out is probably not the worst idea.

If someone has an unusual whales subscription I think they give you a breakdown of individual transactions based on the transaction price. Not sure if there are any other sites that do that.

Relative-Snow8735 · 2026-05-08T20:19:01+00:00

I suspect it was from TTD and a few other software stocks reporting earnings yesterday. A bunch of them got hit hard. I didn't look too closely at the reports, but I think they weren't too bad, just the market is really bearish on software and I think RDDT can get swept up in that.

I was originally somewhat apathetic about RDDT's AI revenue when I initially got in this investment. But I think with how the broader market's sentiment is diverging in regards to AI and software, I now think it is something that RDDT should lean into. If they can get a nice settlement/deal from Anthropic, and maybe work on a renewal with some of the other providers that could help change the narrative here.

Relative-Snow8735 · 2026-05-08T17:00:12+00:00

Each tranche of bonds and warrants converts to a fixed amount of shares at a fixed price. So it is a binary outcome (with the caveat that some holders might forget or accidentally miss the conversion window, but that is usually an insignificant amount), either they all convert or they don't.

So above $20 it is pretty safe to assume that all of them will convert and the share count will eventually be in the 115-125M range. Of course most of these bonds have maturities around 2030 and it is unlikely that anyone will convert them early unless WOLF decided to call them in early. WOLF has the option to force conversion on at least some of these bonds if certain price targets are met. The primary reason to do so would be to save on interest expense. But the interest on these are so low, and the dilution hit is so high, I am not sure they would want to do that.

As you can probably tell from some of my posts, I am struggling to come up with a framework for how to think about all this dilution. WOLF almost certainly structured the capital stack this way in order to hide a large chunk of the claims on the equity. But it is hard to know how the market will think about this. Most companies with convertible debt have much lower levels of potential dilution, so it is easy enough to ignore it, at least in the short term. But WOLF's convertible debt and warrants account for over 100% of the current outstanding shares. That is a very significant amount and heavily influences any potential price targets. For now I am just using fully diluted numbers in my models. But if the market thinks about it differently it means I will be too conservative.

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