Quote:
Originally Posted by rccardr
My understanding is that financing sales and selling off loan tranches is a significant component of their financial problems. Loan tranches issued at a lower % than commonplace today are being discounted, like bonds, in order to satisfy buyers looking for a higher return.
At one point I read that their business model was really the whole loan dealio, and that the buying and selling of cars was just a way to get there.
And yeah, the prices they were offering for used cars a couple months ago
was beyond beyond.
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Let's see, the business model is 'whole loan deals'. This is what we call in the VC world a hand wave. I wave my hands very fast, and presto new business model.
The 'lending' component of the sale should be off loaded to the financing company at close of sale. They do not have a finance arm.
They raised 3.25 billion in the bond market to shore up their capital in May. The coupon was 10.25%. The bond is now trading 42 yielding 32% YTM.
Their expense base is too high @ 4,500 / vehicle for SG&A. Add the cost of acquiring the vehicle, and the math doesn't work.
At the November quarterly earnings call, management was trying to sell the pivot from growing as fast as possible, to becoming profitable as fast as possible. The analyst community was not buying it. Their math doesn't work.