Quick Easy and Lazy. To get to buy sell and too hard.
Eventbrite Quick Quantitative Analysis (Abridged)
To get a good view of what happening, the long view implied by the market i read two write-ups on VIC. Then read all the 10-Ks and a few of the 10-Qs. Some of the industry news. I decided to simplify the problem with the use of the Four Filters. Here is the broad scope of four fillers.
(1) A business that we can understand,
Eventbrite offers event management software for low to midstream event creators.
The business of the company has changed as the company grew, At its start-up stage, it provided services to low stream event creators with the potential of capturing a bigger share of the market as the company grew. At the current stage capturing the high stream of the market is too capital intensive and the low stream has limited business economics.
(2) with favorable long-term prospects,
Management Claimed high addressable market
The product side of the business has a high fix cost and low variable cost characteristics
A high rate of growth in revenue
(3) operated by honest and competent people
Run by one of the original founders. They had successfully raised money and build this company from the ground up. With wide connection across the valley.
(4) available at a very attractive price.
Most of the story before the crash was that it was growing fast and it stopped due to the reorganization of the Ticketfly acquisition. It will hit some kind of a tipping point. The long also believe that self-sign on part of the business is very profitable it is worth more of the market cap.
After reading these two write-ups on the value investor club. I thought this sounds good, feel like an easy slam dunk let’s model this and make some money.
After looking at the 10-Ks and 10-Q I realized it was impossible to model this company based on the numbers. There was no evidence of improvement in business economics, margins remain the same or got slightly worse. here are the numbers I have if you want KPIs and Financials
All the costs increased in line with growth there is no way to tell improving economics. Even with taking out the cost of money-losing acquisition and possible one-time write-offs.
On top of that two other red flags is that the company borrows money at very high rates given low recent low-interest rates. It is starting to financial engineer and moves things off-balance sheet and things do not seem to be improving.
The value investor club writes up although filled with industry background had limited justification of business economics on margin improvement for Eventbrite.
Overall it had a Weak Long thesis and Weak justifications for value.
The justification for value where weak, one of the models on value investor club was toilet paper and the other was based on transaction value. Transaction value in an immature business makes the data point unreliable and highly volatile since the full life cycle of the business has yet to be revealed.
All this is Implying that no one really knows how much Eventbright is worth. The valuation of this stock highly depended on the voting system of the market.
Short answer no one knows what this thing is worth, It is a thing tho, it was growing quickly, could be a good momo trade and it is too hard. pass.
If i ended here this will be a low value write up. Since we are value investors let’s go deeper down into the business economics and fundamentals. Part 2 Qualitative Analysis. Where the fun starts for me.
By the way, since the time i started this the stock has doubled. Miss the momo. I wish i cared about making money more.