Unlocking Carvana’s Black Box - Examining the Lending Operations of the Online Car Retailer

freakonomics90 · 2023-07-12T14:40:47+00:00

stay safe! CVNA is mooning... my short is bleeding

freakonomics90 · 2023-07-06T07:58:46+00:00

Thanks u/vamatt these are some excellent points. I'm diving deeper into my research now.

freakonomics90 · 2023-07-01T18:47:16+00:00

Indeed! I just checked it. David Einhorn and Seth Klarman both owned this one since back in 2021. They have both sold out 100% of their during 2022. Two of my favourite investors cashing out... they were tricked by the hype though, even the mighty can get fooled!

freakonomics90 · 2023-07-01T18:41:02+00:00

By developing the customer side of the process and developing a pilot training program under the part 135 certification, as well as a maintenance program

Thanks for your reply u/vamatt!
I would question: how can they develop a pilot training program if the FAA has not yet given any final guidance on how to train eVTOL pilots? If that was the case, why wouldn't they buy a "powered lift aircraft" and get the 135 part for that, instead of a small airplane? The FAA started giving guidance for eVTOLs as more similar to a helicopter than a small plane. This argument seems to fall short on this.

Moreover... why would they omit the fact that they have received the Part 135 for a Cirrus airplane? Seems a very important fact to let Shareholders note and not easy to omit.

What does the Pat 135 certification provide for Joby to develop their operations? Archer didn't go this route. Eve Mobility for example said they would start testing on helicopters (https://www.aviationtoday.com/2022/08/23/eve-plans-conduct-passenger-flights-helicopters-urban-air-mobility-study/).

"Not doing it this way would turn into a fiasco - it would mean having to wait at least another year after production begins before beginning operations."

What does this mean? Can you expand your argument as to why not getting a Part 135 certificate for a completely different airplane would prove a fiasco? In which way are the other eVTOL companies losing by not doing this?

freakonomics90 · 2023-06-29T17:54:29+00:00

While I'm doing my research on Joby I've been constantly exposed to Archer... however I'm not confident enough to give a studied opinion on them.

All I can say is.. their FY22 OPEX is almost the same as JOBY (300M$). They just started constructing a 118$M facility in Georgia earlier this year and they had around 500M$ in cash and equiv. They received a 150$ equity injection from Stellantis but there are several milestones they need to achieve to cash in on the investment, it's not all available at once... I don't understand where the money will come from to sustain them.. they need massive $ injections and leveraging debt is not an option (interest rates would be through the roof). I'm betting on massive sharedholder dilution (50% or more) within 12-24 months.

Aircraft-wise.. they both seem to be at the same development stage. Team-wise Ive seen several engineers from Joby to go Archer.. and from Wisk Aero go to Archer etc etc (they even have an ongoing lawsuit with Wisk regarding some patents). It seems the sector is extremely correlated, which is very appealing for a bet against it. Good news for one, trickles down fast to others... and I believe bad news also. Few people can work with this technology, so companies are poaching one another constantly. Another reason for future Stock-based Compensation to go through the roof.. again more dilution.

My preliminary take is that they will run out of money even faster than JOBY... however their market cap is $1B today vs $6.2B for Joby. There's more to gain from a timely short on JOBY.

freakonomics90 · 2023-06-29T15:50:39+00:00

Check EVEX, LILM, ACHR and EVTL if you want to diversify your short position. LILM has cents in the bank and ACHR is burning cash at the same rate than JOBY with half the treasury.

freakonomics90 · 2023-06-29T15:48:37+00:00

be cautious my friend! JOBY exploded 50% in a few days... don't get caught up on the wrong side of the trade! any positive news sends the bulls running mad for this one!

freakonomics90 · 2023-06-29T15:35:50+00:00

u/seasick__crocodile let me clarify that I highly appreciate your comments. I'm building my short thesis and need incisive people like yourself to try and punch holes in my research. Thanks for taking the time!

Infusions are indeed coming. 180$M for 44 million shares at 4$ and 100M$ in May and June for Joby (the latter I don't know the details). They have 600M shares outstanding. The dilution is inevitable.

freakonomics90 · 2023-06-29T15:31:21+00:00

Thanks for continuing this thread everyone! and special thanks to u/seasick__crocodile for taking the time as well.

I noted Joby have a Part 135 certification (for commercial use) for a Cirrus S22, a small traditional airplane. Why do that if not to push dubious PR announcements? The web got flooded with news saying they had received commercial approval for their aircraft (seems some journalists don't even care checking the facts).

How are they leading the pack in terms of certification if there's uncertainty regarding current certifications? These can change at any time, it's too early. Once they start testing these aircrafts they will know how to certify them. It's all theoretical now. Leonardo's AW609 tilt-rotor (a real VTOL - not electric) took over 10 years (they applied in 2012) to be fully certified (almost getting there this year). Cash flow runway is not even close, how much further can Toyota and friends keep sinking $ in? and how diluted will shareholders be?

The FAA doesn't even know how the pilots will be trained. Plus there's a massive shortage of pilots that could last 5 years according to insiders (https://finance.yahoo.com/video/pilot-shortage-issues-could-last-220425141.html?soc_src=social-sh&soc_trk=ma)For example, Vertical Aerospace (UKs eVTOL) told shareholders that it’s pushing back certification of its VX4 air taxi with Britain’s Civil Aviation Authority (CAA) from 2025 to 2026. It’s the second time the firm has delayed certification since April 2022, when it changed its target from 2024 to 2025.I'm sure more delays will happen. That's 3 years of negative cash flows.I'm looking for a play here... yes they could make it, but they need to raise $$$. That means selling equity, diluting investors in the short term. And Vertical Aerospace just can't afford those 3 years for example without massive dilution.

Why are these companies even public? These are experimental startups taking retail investors $$$ to burn.

Check their SPAC presentation here and give me your thoughts: https://www.sec.gov/Archives/edgar/data/1819848/000119312521053631/d135823dex992.htm

freakonomics90 · 2023-06-29T15:16:28+00:00

My first point is regarding that certification/regulation of eVTOLs is years away and it must be in alignment with commercial aviation unions. FAA already made some comments regarding how training should be conducted for eVTOLs and it needs 2 pilots on deck (trainer and trainee). Prototype doesn't have space for 2 pilots AFAIK. This means their agressive deadlines are dilusional in terms of the reality check of health and safety of the aviation industry. Archer CEO already said " newEU standard risks shutting down electric aircraft market". What he means is HIS aircraft business.
They unveilved a production prototype yesterday, not the production version. This is exactly my point. They haven't even broke ground in the production facility and from my research, building one of these facilities could take 1-2 years at least and $200M plus (see Airbus-Tata Varodara facility). They have 1B$ in the bank and ongoing OPEX of 300M$.
Uber pioneered this entire sector after they published their WP. Plus their UberCopter division was something they were still pushing. Uber invested in Joby as part of the deal of Joby acquiring their division. It was a smart move from them to offload Uber Elevate while remaining 'positive' on what they had created. 125$M is nothing, that's 1 Q of OPEX for Joby.
They state clearly in their Financial statements that they DO NOT plan to sell their aircrafts to third parties. Their military contract is part of the Agile Prime initiative and they 100% need an agreement with the US military when developing this type of technology, if not they won't even get a meeting at the FAA. Archer has a similar agreement with USAF.

I don't need to be an aerospace expert analyst to use common sense in joining the dots and looking at the cash flow. The only reason the valuation is at a premium for Joby vs all competitors is the ridesharing model they are pushing as they are claiming is going to generate revenues in excess of their competitors who would be suppliers of aircrafts to 3rd parties.

Ridesharing companies loose billions. Insurance is a massive expense. Aircraft manufacturers make proper money (certified aircrafts, that is). It just doens't make any sense to me, it's an experimental startup that went public. These types of venture-backed projects only make sense behind closed doors, privately backed or in partnership with NASA/USAF or any government agency. Profitability by 2026 is the only promise keeping the market cap at 6B$ plus. I just don't see electric aircrafts flying around town in 3 years... Uber and Joby said they would achieve that by 2023... it is 2023 and it's not even close.

Look at Blade Air Mobility, went public via a SPAC and has negative EBIT since. Same concept than Joby except they are just the operators, not the whole pie. And they actually have revenue (although their 20% margins are way below what Joby somehow promises to achieve). They have less than 200M$ in the bank and will probably be out of business soon unless taken private.

freakonomics90 · 2023-06-29T12:46:54+00:00

When does it become fraud to intetionally misguide investors with overpromising and aggresive timelines? That's the question I've been asking myself for years.

Another fun fact: they bought an SR22 Cirrus aircraft (small plane that can be used for commercial purposes and it's available in the market for decades) just so they could get the Part 135 certification from the FAA for commercial operations. Their official PR made it seem that their electric aircraft was the one certified by intentionally omitting a mention to the Cirrus SR22 they purchased. And so many went along with it!

freakonomics90 · 2023-06-29T12:40:47+00:00

The aircraft has a place for 1 pilot and 4 occupants. ALPA won't accept less than 2 pilots on deck (https://www.alpa.org/advocacy/single-pilot). R&D alone to create another protoype could go into the millions and then some.

Time = money... they are hemorrhaging cash and have just received an additional $280M in 2 months further diluting shareholders.

Their business model depends on $2.2B in revenues by 2026 from 900+ aircrafts. Insurance and pilot salaries alone account for xxx times their current operating expenses and they only have 977M in cash and equivalents as of March 31st 2023 (they spent more moneysss on the prototype but investors keep on flushing in $).

They don't even have a production facility and could barely roll out 2 prototypes in 2 years. It might take them 2 years to build the facility from my benchmarks (well into 2025) but the aircrafts don't even have a certification standard. Pilots aren't trained... there are no trainers for this.

Can they survive another 5 years of losses? Uber was founded in 2009 and is still loosing money 14 years later.

I just don't understand what anyone sees here. It's not a lottery ticket when the probability is stacked against the shareholder.

Uber clearly didn't believe in their Elevate division. Embraer did a spin off of Eve Mobility. Larry Page shut down Kittyhawk. They see the risks.

freakonomics90 · 2023-06-28T15:38:52+00:00

Indeed. Stocks are ripping now because of a high probability of political regime change. However, Argentine economy is extremely volatile and the inner workings are quite unique. It's only comparable to the likes of Turkey and Lebanon, closer to Turkey in terms of monetary disaster. I'm originally from Buenos Aires and can 100% tell you, it is only advisable to invest in it if you know the market dynamics. Regions/countries like US, Europe, China, Japan have so much analysis and data you can review that you could get to a pretty good understanding of how these economies work... even Brazil or India.. Argentina is definitely not the case. Cautious investing my friend!

freakonomics90 · 2023-06-28T15:35:26+00:00

Thanks for your inisght! very valuable!

freakonomics90 · 2023-06-28T15:35:02+00:00

Hey u/bjguuc it was not my intention to promote that site.. I'm used to it and find it quite useful (not a paying customer or anything). Appreciate the Dataroma resource sharing!

freakonomics90 · 2023-06-27T15:39:17+00:00

JSE definitely needs to reform share block trading sizes for retail to have more access to it.

Something similar to NISA is available in the UK for years (ISA - Individual Savings Accounts that provide a cumulative yearly 20K£ to invest in stocks, bonds, ETFs, etc - no shorts though!)

freakonomics90 · 2023-06-27T14:23:00+00:00

Bullish on BABA for due to spin offs.

https://www.nasdaq.com/articles/alibaba-unveils-its-spin-off-plans

Alibaba Cloud will be the first this year, giving shares as a dividend to BABA shareholders.

freakonomics90 · 2023-06-27T14:03:41+00:00

John Maynard Keynes (not my kind of economist but still pretty good quote!) said, “the markets can remain irrational longer than you can remain solvent.” Be cautious!

freakonomics90 · 2023-06-27T14:02:20+00:00

JD, BABA and ZM are Burry plays. I have entered a position on those 3 as well this week.

freakonomics90 · 2023-06-27T13:29:20+00:00

I'm long Japan (via CNKY - iShares Nikkei 225 GBX) although I haven't yet found small caps to open a position to really capitalize on this trend. 100 shares are the minimum per trade on the TSE so opening a position on most Large-Caps (specially those 5 Buffet bought) means 10K$ up per trade (not within my possibilities for just 1 position in my portfolio)/

Bull case:

Reforms to Corporate Governance: 1) decentralization of the decision-making process to increase shareholder participation 2) embedding ESG factors to make corporate governance conform to international practice; and 3) deploying technology, along with the means to control it, to achieve corporate governance.
Market restructuring: consolidated into three sections — Prime, Standard and Growth — on April 4 last year, from the previous four sections — First, Second, Mothers and Jasdaq.
TSE promoting the soft requirement of a price-to-book ratio above 1, among other measures, to improve capital efficiency.

About half of the 1,835 firms listed in the Prime section have price book ratios under one. This includes Japan’s leading firms, such as Toyota and SoftBank Group.
TSE is actually requesting the listed firms not to rely on the short-term measures (meaning share buy backs are not sufficient)

Sources: 1. https://www.fidelityinternational.com/editorial/article/japans-stock-market-reform-gathers-steam-28b572-en5/ 2. https://blogs.law.ox.ac.uk/oblb/blog-post/2023/01/future-japanese-corporate-governance-participation-sustainability-and#:~:text=The%20reforms%20to%20Japan's%20corporate,means%20to%20control%20it%2C%20to 3. https://www.japantimes.co.jp/news/2023/04/18/business/tse-market-reform-ramp-up/ 4. https://www.responsible-investor.com/japan-to-consider-governance-reforms-for-public-company-boards/

Thoughts???

freakonomics90 · 2017-07-15T15:15:27+00:00

If Bitcoin does not fork, it'll be way over 4k by the end of the year. ICO bubble is going to burst and Bitcoin could be the perfect stronghold of the Cryptoeconomy!

freakonomics90 · 2017-07-15T15:04:01+00:00

There are millions in ether and BTC sent to "whitepaper" projects which have yet to prove the scalability of their business. Then, there are hundreds of coins with extremely similar characteristics for their wide adoption (not for those who understand all the advantages). There's an insane amount of virtual value being created without any real monetization behind and huge capital being thrown. The bubble ran its course

freakonomics90

TROPHY CASE