Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Equity Bottom-Up

<ul>
<li>Sales declines, margin compression, cuts in SG&amp;A and cuts in guidance and estimates feature in our Declining Businesses model. </li>
<li>Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.</li>
<li>Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.</li>
</ul>


Sales declines, margin compression, cuts in SG&amp;A and cuts in guidance and estimates feature in our Declining Businesses model. 
Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
Today we are flagging Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis.


Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

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That trade worked out well.
In my note <a href="https://skr.ma/eEB66" target="_blank" rel="noopener">Microstrategy (MSTR US): "Crypto Through The Tulips"</a> back on the 28 June, I recommended shorting <a href="https://www.smartkarma.com/entities/microstrategy-inc-cl-a" target="_blank" data-smartkarma-citation="entities:14717:1" rel="noopener">Microstrategy Inc Cl A (MSTR US)</a> and going long bitcoin.
MSTR is up 2.3% since, against 30% for BTC.
MSTR has a tendency to issue paper to buy more bitcoins when the stock is at a large premium to its Bitcoin holdings.  As per its <a href="https://www.microstrategy.com/content/dam/website-assets/collateral/financial-documents/press-release-archive/microstrategy-acquires-additional-bitcoins-and-now-holds-over-105000-bitcoins-in-" target="_blank" rel="noopener">21 June 21</a> announcement, MSTR said it held 105,085 bitcoins. That figure remains unchanged.
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MSTR's share price was US$123 prior to its initial announcement on the 11 August 2020 it was "adopting Bitcoin as a primary treasury reserve asset".
The current implied value for MSTR's stub ops - selling business intelligence software - is US$158/share, having touched US$141/share, suggesting value was emerging.
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Yet is MSTR the ideal proxy for bitcoin? And just how much legitimacy should be attached to El Salvador giving bitcoin the status of legal tender?
More below the fold.
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That trade worked out well.
In my note Microstrategy (MSTR US): "Crypto Through The Tulips" back on the 28 June, I recommended shorting Microstrategy Inc Cl A (MSTR US) and going long bitcoin.
MSTR is up 2.3% since, against 30% for BTC.
MSTR has a tendency to issue paper to buy more bitcoins when the stock is at a large premium to its Bitcoin holdings.  As per its 21 June 21 announcement, MSTR said it held 105,085 bitcoins. That figure remains unchanged.

MSTR's share price was US$123 prior to its initial announcement on the 11 August 2020 it was "adopting Bitcoin as a primary treasury reserve asset".
The current implied value for MSTR's stub ops - selling business intelligence software - is US$158/share, having touched US$141/share, suggesting value was emerging.

Yet is MSTR the ideal proxy for bitcoin? And just how much legitimacy should be attached to El Salvador giving bitcoin the status of legal tender?
More below the fold.


Microstrategy (MSTR US): Bitcoin's Mainstream/Fringes Balancing Act

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

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Our base case valuation of Wish is an implied EV of $12.3 billion, implied market cap of $14.4 billion, and implied price per share of $24.50 per share. This represents just a 2% upside to the high end of the IPO price range of $24 per share. Given such a low upside, we would pass on this IPO.
One of the long-term concerns we have about Wish is the fact that the number one priority of the company is price. This is a double-edged sword. By focusing on price as the number one priority, the company has been able to gain a tremendous number of customers that put price as their number one importance. Nonetheless, it may be difficult for the company to generate relatively high profit margins in the long run since Wish may have difficulties in gaining customers that value quality over price when purchasing products through mobile or online platforms.
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Our base case valuation of Wish is an implied EV of $12.3 billion, implied market cap of $14.4 billion, and implied price per share of $24.50 per share. This represents just a 2% upside to the high end of the IPO price range of $24 per share. Given such a low upside, we would pass on this IPO.
One of the long-term concerns we have about Wish is the fact that the number one priority of the company is price. This is a double-edged sword. By focusing on price as the number one priority, the company has been able to gain a tremendous number of customers that put price as their number one importance. Nonetheless, it may be difficult for the company to generate relatively high profit margins in the long run since Wish may have difficulties in gaining customers that value quality over price when purchasing products through mobile or online platforms.


Wish IPO Valuation Analysis: Focus on Price Is a Double-Edged Sword

<a href="https://www.nasdaq.com/articles/e-commerce-platform-bigcommerce-sets-terms-for-%24130-million-ipo-2020-07-28" target="_blank" data-smartkarma-citation="entities:29196:1" rel="noopener">BigCommerce Holdings Inc (BIGC US)</a> plans to complete its IPO next week. The IPO price range has been determined at $18 to $20. The company plans to offer 6.9 million shares. At the high end of the IPO price (excluding greenshoe option), the company would raise nearly $138 million.Our valuation analysis of BigCommerce suggests an implied market cap of $2.3 billion and a target price per share of $30.9, which suggests a 62% upside to the mid-point of the IPO price range of $19. We are also including BigCommerce in our model stock portfolio. Our valuation is based on P/S, using our estimated sales of $189.4 million in 2021 and P/S multiple of 12x. We used fully diluted shares of 74 million shares to derive our target price valuation. Our P/S valuation multiple of 12x represents a 20% discount to the average P/S valuation of the comps in 2021. It also represents a 67% discount to the P/S multiple of 36.7x for Shopify.

BigCommerce Holdings Inc (BIGC US) plans to complete its IPO next week. The IPO price range has been determined at $18 to $20. The company plans to offer 6.9 million shares. At the high end of the IPO price (excluding greenshoe option), the company would raise nearly $138 million.Our valuation analysis of BigCommerce suggests an implied market cap of $2.3 billion and a target price per share of $30.9, which suggests a 62% upside to the mid-point of the IPO price range of $19. We are also including BigCommerce in our model stock portfolio. Our valuation is based on P/S, using our estimated sales of $189.4 million in 2021 and P/S multiple of 12x. We used fully diluted shares of 74 million shares to derive our target price valuation. Our P/S valuation multiple of 12x represents a 20% discount to the average P/S valuation of the comps in 2021. It also represents a 67% discount to the P/S multiple of 36.7x for Shopify.

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

Following his bizarre revelations about his involvement in ongoing FBI investigations on August 12'th last, <a href="https://www.smartkarma.com/entities/overstock-com-inc" target="_blank" data-smartkarma-citation="entities:20930:1" rel="noopener">Overstock</a> CEO Patrick Byrne resigned his position on August 22'nd, severing all ties with the company, through still remaining its largest shareholder.Byrne's antics triggered a collapse in Overstock's share price, causing it to lose some 40% of its value over a three week period. Now, with a new (interim) CEO, and a new board member, the company is going on the defensive.In separate briefings last week, interim CEO Jonathan Johnson and blockchain subsidiary tZero CEO Saum Noursalehi addressed the events of the past month and outlined their plans for the future of the company. Their words seem to be having the desired impact. Over the course of the past three trading days, Overstock is now up some 33%. The saga, and the volatility, goes on.

Following his bizarre revelations about his involvement in ongoing FBI investigations on August 12'th last, Overstock CEO Patrick Byrne resigned his position on August 22'nd, severing all ties with the company, through still remaining its largest shareholder.Byrne's antics triggered a collapse in Overstock's share price, causing it to lose some 40% of its value over a three week period. Now, with a new (interim) CEO, and a new board member, the company is going on the defensive.In separate briefings last week, interim CEO Jonathan Johnson and blockchain subsidiary tZero CEO Saum Noursalehi addressed the events of the past month and outlined their plans for the future of the company. Their words seem to be having the desired impact. Over the course of the past three trading days, Overstock is now up some 33%. The saga, and the volatility, goes on. 

Blockchain Delusion. Overstock Volatile As Ever Despite Byrne's Resignation

United States

Overstock.com, Inc. offers discounted brand-name merchandise for sale over the Internet. Products include bed-and-bath goods, kitchenware, jewelry, sporting goods, electronics, and designer accessories.

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Overstock.Com Inc (OSTK US)

Declining Business Short Candidates: Corsair Gaming, Sinclair Broadcasting, Overstock, Ziff Davis

Declining business shorts pursue profit by following negative business momentum. Today we are flagging Corsair Gaming, Sinclair Broadcasting,...

Eric Fernandez, CFA

Microstrategy (MSTR US): Bitcoin's Mainstream/Fringes Balancing Act

But my preference would be cryptocurrency exchange platforms, as they capture all key digital currencies, plus dumb down some of the volatility of...

David Blennerhassett

Wish IPO Valuation Analysis: Focus on Price Is a Double-Edged Sword

Our base case valuation of Wish is an implied price per share of $24.50 per share. This represents just a 2% upside to the high end of the IPO...

Douglas Kim

BigCommerce IPO Valuation Analysis

BigCommerce Holdings Inc (BIGC US) plans to complete its IPO next week. The IPO price range has been determined at $18 to $20. The company plans to...

Douglas Kim

Blockchain Delusion. Overstock Volatile As Ever Despite Byrne's Resignation

Following his bizarre revelations about his involvement in ongoing FBI investigations on August 12'th last, Overstock CEO Patrick Byrne resigned...

William Keating

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