Yet Another Value Podcast - Creek Drive Capital's Kevin Mak on why $PGY has been largely ignored by the AI hoopla

Episode Date: June 20, 2023

Kevin Mak, CFA, Founder of Creek Drive Capital and Teacher at Stanford University of a course called, Financial Trading Strategy, discusses his thesis on Pagaya Technologies (NASDAQ: PGY), a company that uses big data and AI to look at people's credit scores and look at people's different credit factors to determine whether or not they are more credit-worthy than what would be otherwise seen in this traditional lending system. Link to Kevin's $PGY articles on Seeking Alpha: https://seekingalpha.com/author/kevin-mak-cfa Twitter: https://twitter.com/KevinLMak Chapters: [0:00] Introduction + Episode sponsor: Stream by Alphasense [1:42] Business overview of Pagaya Therapeutics $PGY and why is it interesting? [7:31] What is unique about $PGY's business model [10:11] $PGY valuation [14:30] Why is the short interest high? [16:21] $PGY capital requirements and addressing red flags [21:16] $PGY business quality [31:38] $PGY bull case scenario and what the company is projecting / Upstart comp [38:08] Making sense of $PGY's recent financial performance [44:00] Does $PGY have a data advantage compared to their peers / Acquisition of Darwin Homes [49:34] Single-family home business [51:26] Oak HC/FT investment in $PGY [54:50] Kevin's background and his Stanford course Today's episode is sponsored by: Stream by Alphasense Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts, powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced buy-side analyst conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts 1-on-1 and get your calls transcribed free-of-charge—all for 40% less than you would pay for 20 calls in a traditional expert network model. So, if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. For more information: https://www.streamrg.com/

Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform. With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced by-side analysts conduct the calls for you.

But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge, all for 40% less than you would pay for 20 calls and a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you.

Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. All right, hello, and welcome to yet another value podcast. I'm your host, Andrew Walker. If you like this podcast, I mean a lot, If you could rate, subscribe, review it, wherever you're watching, you're listening to it. With me today, I'm happy to have on Kevin Matt. Kevin is a portfolio manager at Creek Drive Capital.

Kevin, how's it going? Great, Andrew. Thanks for having me. Hey, been trying to get you on for a while. Really excited to have you on. Let me start this podcast the way to do every podcast. That's with a quick disclaimer. Nothing on this podcast is investing advice.

Neither of us are financial advisors. Please do your own work. And, you know, every podcast, it's true. Nothing's financial advice. But today we're going to be talking about it's not quite a penny stock, but it's approaching. there. Actually, the company has a pretty solid market cap approaching a billion dollar market cap, but it is a low dollar price stock. So people should just remember that probably comes with extra risk. Please do your own work, not financial advice. Anyway, let's turn to the company we're

going to talk about. The company is Pagaya Technologies. The ticker there is PGA. And Kevin, I'll just toss it over to you. I guess I'll mention you wrote two articles up on seeking alpha, which will be included in the show notes for anyone wants to see that. But I'll toss it over to you. What is Pagia and why are they so interesting? Sure. Let's start actually, uh, reverse a little bit, which is let's start with a bit of a process and exactly what you were leading to in the beginning, which is, you know, why am I looking at this company in the first place? And from a process perspective, what I've tried to look for is I look for situations that are structurally going to allow for mispricing. So it doesn't matter how much I'm interested

in a specific situation called like Microsoft Activision. I'm like, there's no way I can compete here. And Pagaya is one of those where the more I looked into it, the more weird things that happened to the company where I'm like, okay, well, this is the reason why a mispricing is possible. And so, as you said, it is a company that has a stock of price of a buck 20, and it was below a dollar just a couple months ago. And it was an international company, so it's a foreign filer, and it is a ex-spack. And it also works in a space that people generally find icky and opaque.

And so for all these reasons, it doesn't matter how good the company is or how bad the company is, a huge swath of the, I guess, investment realm is going to just absolutely categorically ignore it. And that is what creates an opportunity here. I don't disagree with you because when I looked at it like born, D spec, like I vomited in my mouth a little bit. We'll probably talk a little bit more. But their most recent earning calls, they had a, the end of it was they asked chat GPT to form a question and then form the answers to that question. They said, we're an AI company. And when they did that, I didn't just vomit in my mouth.

I, like, vomited on my computer a little bit. It was crazy. I get it. It's sort of a little cringy. They're definitely trying to lean into the AI world a little bit. And that's actually an interesting one there alone, which is like they are an AI company. They haven't an AI company for a while. They're an AI company that uses AI actively today to make money, yet they're largely ignored

by the AI, you know, hoopla for a few reasons. One is they have revenues. So, you know, pre-revenue companies are always more fun than revenue companies. And also, you know, it's the, it's, I wouldn't even say the older style. but it's not large language models you know it's still a statistical inferencing it's still all of that that AI does with big data it's just using numbers instead of words instead of trying to predict the next word that ascendance which by the way like large language models do fantastically well it's trying to predict whether or not somebody's going to be able to pay their

their next payment on their auto loan or their consumer loan so let's take a step back what is big guy do ultimately um they use big data and AI to look at people's credit scores and look at people's different credit factors uh to determine whether or not they are are more credit worthy than what would be otherwise seen in this traditional FICO score lending system. They're called a second look loan provider. So to boil it down as simply as possibly, they'll go to an auto dealership and say, hey, you currently get 1,000 applications every week.

You approve 25 of them and they walk away with cars. You have 975 of them that you decline because your current underwriting system, your current bank, whoever it is that you're working with, doesn't want to give the loan to the person because their credit scores, you know, below 675 or 640 on FICO or whatever, we're willing to look at that as a second look and say, yeah, your credit score might be a little bit lower than what the cutoff is, but you have these other factors that we believe, or our AI believes, our AIS figured out make you, you know, credit worthy and worth bumping you up, you know, into a place where we can lend to you.

Maybe we need a slightly higher interest rate, maybe not all that kind of stuff. And so ultimately what it means is that they're sourcing these loans through, there, what they call the partners, and then they're helping the partners out because the partners are getting incremental revenues via their sales or via a loan channel or whatever you want to call it. And Pagaya is, you know, getting a loan out to someone who otherwise would be ignored by the traditional financial system, giving the traditional scoring system. Just one question on that. And I want to dive into a lot of things like tangential to that, but just one question.

You mentioned, hey, if you're an auto lender, an auto lending is a big piece of what they do. if you're an auto lender, you know, you put in someone's credit score, you put in someone's info, initial loan gets turned down, Pagai is basically a second look, which they are second look. But are they, are there partnerships? Like, they mentioned so many times on their call, we just had in 2022, we formed a partner with Ally Financial, who I believe is the largest auto lender in the country. Is the partnership Pagai is forming, is it with the, are they trying to go out and form the partnership with the auto dealership or are they just getting the second look from Ally? Because I thought it was the former, not the latter.

Sorry, the latter, not the former. So the latter or not the... Sorry, ally or the dealership you're saying? It's with ally. I thought it was with ally. It's with ally, yes. I'm skipping a step just to make it more straightforward for... Yeah, okay.

And so, yeah, that's their system. And ultimately, you know, the value add at all the channels is that the person who wants to get a loan is getting some money. The person who wants to sell a car is making able to sell an incremental car. And then the investors are being able to underwrite that. Importantly, and then this is where things start to get kind of messy, right? You have a lot of 2008 vibes where, you know, you're no income, no job, mortgages that were just being predatorily given out to people.

You collect a ton of fees at the front end, and then you get screwed to the back, but you've already taken your bonus and moved away. And that's a world of credit in general, which is these tails are hidden. You are completely unaware of them. You kind of just have to go ahead and trust the company. And to this day, I would say that's probably one of the biggest problems that exists with Begaya, which is it's always going to be a situation where you just have to, to trust that they are doing their right job with their underwriting, which certainly less

people be a little bit uncomfortable. No, it's a great point. And certainly, a lot of the podcasts recently have been focused on financials and banks. And the scariest thing, as we learn over and over again, the scariest thing in finance is they quit growing financial because, you know, it used to be just because, hey, if you're a fast growing financial and your loans go bad in two or three years and you can pay for that over with a lot of growth. But it also became if you're fast growing financial and you take on a lot of deposits.

it's there's risk there too. And so let me break you out. Let me cut into there, which is, so what's unique about Pagai's model is that they don't take on much balance sheet risk with what they're doing. They do something called a pre-funded model, which is pretty uncommon. And so what they'll go out is they'll go to the ABS market, asset back security market, and they will go to their investors and say, we're raising an asset back security of $5 million.

And I'm not going to go into the tranching and all that stuff for your listeners. Some of them understand that some of the don't, but they'll collect $500 million from hedge funds, banks, and, and, uh, and, uh, sovereign wealth funds, all those people, they'll dump 500 million notes into Pagaya, and then the guy has that money, and then they'll go out and make the loans with that money. And so a typical lender is going to put it on their own balance sheet. Maybe they will securitize it after and get it off their balance sheet, but maybe they'll keep it on their balance sheet. Pagaya specifically keeps it off their balance sheet, with one exception, which is they need to keep 5% on their balance sheet as the Dodd-Frank regulatory risk that they need to keep. However, what's really funny about that is they, there's a, this isn't in any way legal.

This is just kind of a funny, weird loophole. They have a non-controlling interest that's like invested directly into Pagaya that is essentially taking the risk of that 5%. So although the goal is to have 5% of it on the balance sheet so that there's some incentive for the company and equity investors not to do underwrite bad loans, they've actually managed to offset a large portion of that risk through the NCI. And now, a quick word from our sponsor. Are traditional expert calls in the investment world becoming obsolete? According to Stream, they are, and you can access primary research easily and efficiently through their platform.

With Stream, you'll have the right insights at your fingertips to make the best investment decisions. They offer a vast library of over 26,000 expert transcripts powered by AI search technology. Plus, they provide competitive rates on expert call services, and you can even have an experienced by-side analysts conduct the calls for you. But that's not all. Stream also provides the ability to engage with experts one-on-one and get your calls transcribed free of charge,

all for 40% less than you would pay for 20 calls and a traditional expert network model. So if you're looking to optimize your research process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. I think there are three questions that's going to jump to anyone's mind here

when they research it. And look, they're the three questions that jump to my mind. And the questions are going to be a combination of valuation, business, and macro, right? And I guess that's probably the questions that jump out to everyone. But it's particularly true here. And I think we'll detail why. Let's set macro to the side. I'm sure everybody knows a little bit about what's going on in macro. We'll talk about it at the end. And it does really matter here. But I just want to start by talking because this is important as people think like AI play, the growth, all this. It is important to baseline. I think one of the reasons you're interested in it. One of the reasons I've heard from other people that are interested is like, hey, man, forget all the growth things,

forget everything else. This is just really damn cheap on an asset basis. We can walk through the math where they think they can get to 700 million EBITA and everything, all this or stuff. But why don't we just start by talking about the cheapness on just an asset baseness? Because you're probably not paying more than liquidation, much more than liquidation value as you put in your article. Yeah. And that's what's interesting. I've been, I've getting deeper into this company over the last two months. It's my first article. And you can kind of see the evolution of my knowledge and the way I'm collecting that information over time. My first article, I had effectively very little fundamental view on the future of the company.

It was stock was at 80 cents. And the primary part of the article was that, look, this thing is trading roughly at liquidation value. This 5% regulatory risk thing is scary for anyone who isn't looking into the company because it could be worth 700 million. It could be worth 200 million. I have no idea. But when you talk to the company or read what the company is written in the reports, First of all, most of that $700 million has been pushed off onto the NCI.

And second of all, what's left is kind of like double A rated, like tranche ABS that is pretty much good as cash. And so that was that 80 cents. And so to me, it was something you could just buy for basically free upside. And then the even more extreme was the ones in the trading dynamics of the stock. The vol was 120%, which meant the puts were really, really expensive. And the borr rate is 40% still, which means that if you just hold the stock, you're collecting a huge yield for holding something at cash with tremendous growth as well, which is in the last three years, the company's three X its revenues.

So with one of those screaming trades for me was just selling one of those puts. And it's one of the, I would say I haven't seen another situation before ever where you can sell a put if the stock goes to zero versus if the stock stays flat, you make 25, 30%. It was over two months. It was just a really wonky situation. Now, I will stress that we're at $1.20 now, not $0.80. And this is another part where people sort of don't give penny stocks credit. I don't care about the leading digit. I care about percentages. And we went from $0.80 to $1.20 to $0.50, we're 50. We're 50% higher. The risk is, and as a result, you need to be much more careful. This goes on the upside, too, which is when I tell people that I think the stocks go to $2, they kind of shrug. They're like, $1.20, going to $2, whatever. But that's the same in saying a $60 stock's going to go to $100. And that usually gets people really excited. And so I'm, excited about it just as the upside in this thing. I don't even think two is the right number.

I think 253 is the right number. It's absolutely immense. But yes, it was trading near liquidation value. And most likely for mainly for the same reasons that I mentioned the very beginning of your podcast. And also because we have seen that Tiger basically aped into this stock in the 2020, 2012 days took on a huge, huge like $300,400 million position and has taken an absolute blood. bloodbath on it and has been liquidating their position. Not obvious they've liquidated 100% of it, but they filed that they liquidated 20 million shares out of their 65. And there's plenty of press reports saying that, you know, Tigers constantly being hit by redemptions and

needs to keep trimming their portfolio. So it wouldn't be surprising. You said, it's just funny you said, hey, they had a three or four hundred million dollar position because this is a eight or 900 million market cap company right now. Sure. Yeah. Yeah. Very upset down in the position. It was a it was an $8 billion valuation at one time during during the crazy times. And that's another interesting one, which is the stock looks ridiculous. It went from $10 or $30 to $1. 10 was probably wrong. I mean, probably wrong.

It was wrong, but it was comped correctly against Upstart, which we can talk to later. So 10 made sense in the context of the market at the time. And then obviously things kind of went to shit. And other financials, FinTechs also took a fair chunk of hits there. There's a lot of questions. But let me just start, you know, A, I guess I should remind everyone, Kevin mentioned puts in intrinsic volatility, again, not financial advice, puts and options and everything. everything, absolutely carrying added, added risk factor.

So please consider that if you're looking at those or anything. B, I do just want to ask, like, you mentioned short interest off the chart, right? For a company that was trading around liquidation value, there is, it's a chunky shareholder base here, but it's not like the free flow to zero here. So what, why is the short interest so high? Like, what was the short interest itself is not high at all. That's, that's the weird part. The short interest itself, even if you look at a free float adjusted basis, it's,

tiny. There were back then, and even right now, there's about eight or nine million share shortings. On a dollar stock, that's a $10 million notional size of trade. Like any tiny hedge fund can be short $10 million of this thing. The borrower rate being 40% is what doesn't make any sense. And I can tell you, I'm watching reports every day. I collect that a good chunk of that 40%. In fact, not only do I click a good chunk of that 40%, at least with my broker IB, they round the collateral up when they calculate borrow rates. So if you're lending a stock that's worth $1.20, you collect collateral based on a $2 $2 price.

So a 40% borrower rate is charged at $2, it's not at a dollar. So you double, which is great economics. And I know I might be boring some people.

Some people, but like we, our fund, we care about every 10, 20 bibs here and there and we're like, we're playing this trade for three or four months when we originally just looked at the math on it.

We're like, on the ball or on the borrower rate or whatever you want to say, alone, you know, we're picking up 17% of which we think is pretty close to alpha, never mind, you know, what it happens after that thing. So let me, so let me transition. Like that covered the interest of value. Let me transition to, I guess this starts to transition to business quality,

but you mentioned how, hey, at 80 cents you were paying barely above liquidation value. You know, the company has come out and they've said, hey, they're adjusted EBITDA, break even guiding to adjusted EBITDA profitability for this year. they were profitable in 2021, but that was probably like, you know, a little bit of best of all times. 2022, they were just below just the EBIT. Obviously, there's a stock comp and everything, but I'm just referring to this because, hey, you've got a company that's trading barely above liquidation value. You've got a company that is break-even or growing.

And they raise, I think it was $75 million of prefers that will convert, that will flip over to common after shareholder approval. I think they might have already got shareholder approval, but they raised $75 million of equity at about today's prices, basically. And, you know, as an investor, I look at it and I see, hey, you've got a management team that's out here saying how cheat they are, how quick they're growing, how good their asset base is. You've got Kevin who's out here who's saying, hey, this is a cheap company. They've got growth potential. There's a lot of optionality here.

And then they're going out, they don't have a debt problem. They don't have any problems. And they're going out and they're issuing stock pretty aggressively. And I look at that and say, hey, it all sounds good, but they're going out and issuing stock. Like, what the heck is going on here that they would, like, are they really shareholder focus? Are they trying to build an empire? Maybe it doesn't super matter from today's prices with, as you said, the borrow you're collecting and the volatility, everything. But from a fundamental case, I look at all that, and I say, that is, that is just really funky.

Sure. So, I mean, doing the Convert, I think, I wouldn't call it that aggressively. I mean, at the time the market cap was around $60 million, they did a $75 million convert. I will note that the company is capital hungry because of that retention requirement, which is, you know, if they want to underwrite a billion dollars worth of new loans or new ABS, they need to keep. keep $50 million of debt on their balance sheet. Now, that recycles the capital. So right now they have, you know, a huge bunch of their older loans that are coming back. But growth will require balance sheet space, kind of like on a working capital basis.

They have revolvers. They have that kind of stuff. And, yeah, and then also that was a convert. So it's kind of like a debt issuance, but at the same time in equity issuance. It was a convert, right? Yeah, it was a preff convert. Yeah. So it's going to convert to equity.

I think that you can, for all intents of purpose, you can think of it as equity. Yeah. And then, you know, they did it at a pretty good rate. The stock was like 95 cents at the time and the strike was a buck 25. So it wasn't overly predatory. It was also done with a pick on the interest side of things. So it wasn't going to hurt them. You know, they say that they want to do M&A.

I've been in touch with management multiple times now. I've told them that I don't think the market would be supportive of them doing M&A. I know what they're saying, which is they're like, we're valued at crazy levels. And some of our peers are valued at crazy levels. So we would love to be able to take advantage of these extremely depressed multiples by someone else that's trading in the basement like us because, you know, we're going to ride the wave up in the next year, two years, three years, now that rates have stabilized or now that rates are heading lower and things like that. Let me just go back to, you mentioned they were capital hungry, right? They've got the risk retention portion and everything. And I certainly hear that.

But it's, you know, as a lot of investors like to say, it's not free cash flow growth. It's free cash flow growth per share or value growth per share, whatever you want to call. right? And I certainly hear you, hey, they've got a lot of growth opportunities. They have to retain 5% even though they can like kind of get around it with the, uh, the, uh, the non-tillion issues and everything. But I hear, hey, we want to grow a lot. We're going to, we're going to grow issue a ton of equity. And they're telling you, hey, we know we're valued at crazy prices. And I hear that. I say, I see a company more interested to me in empire building than a company interested in creating shareholder value. Or they say, hey, we want to go buy our peers at crazy

prices, and I believe they said on their Q1 call, we raised this money in advance of going to buy it here. It's like, well, okay, but you raised money. You locked in shareholder dilution at what you're saying are crazy prices for the optionality of maybe doing M&E. Like, it just kind of concerns you. And for a normal company, blah, whatever, but I do think it's kind of like, it's got the foreign company, it's got the SPAC wrapper.

And then you see them issue next year, you're like, oh, just another red flag, you know? Yeah. No, I think that the criticism is totally valid. I do think that from a growth perspective, if they do want to grow their loan book significantly, you don't want to have to rely on the NCI. You don't have to rely on being able to get the money there. So I think that the extra $50 million as a buffer is nice. I agree.

It does dilute. And there is some mixed signals there. But if they want to raise, if they want to be growing at 30, 40%, which is what they arguably are implying, they are absolutely going to need that. And the Ivedo coming from those billions of dollars of loans that they plan to write should make up for it. But yeah, it would have been nice to do a straight debt offering. And I would like to see that happen in the not so distant future versus doing something like this preferred. Let me ask, turning to the business, right?

So the business is, as you mentioned, and they do it for all sorts of things. They do it for buy now, pay later. They do it for personal loans. They do it for all sorts of thing. But I'll use ally financial because that's the example I shared. the business is, hey, I go to Ally and I go to a dealership that's got a relationship with Ally. I apply for a loan. I get rejected by Ally Corps for some reason. Ally gives Pagaya a second look and Pagaya for one reason or another. And they mentioned

some like one they mentioned is ally might require seven years worth of credit history and I only have six and a half. So that's not that big of an increase in loan, but Ally just flat rejects it. Pagaya would approve it. They mentioned a few others. So Pagaya gets the second look. Pagaya approves it. They funds it with ABS they've got and then I get the loan. And I guess my, My question here is, like, look, Ally is enormous, right? And a lot of their partners are alarms. Ally, I looked this morning, $200 billion in assets and assets on their balance sheet. Every year, they spend over $400 million in tech investment.

They are definitely familiar with the ABS market. They do some ABS. They're the largest car loan. And I guess when I look at Pagaya, getting the second look at approving it, I just look and say, hey, how can Pagaya like actually approve a loan that Ally, approve and fund a loan that Ally has looked at and said, I can't approve and fund this loan properly. You know, like, it just seems like, I have trouble believing Pagaya's technology is this much better, that Pagaya has like this much better AI, all that sort of stuff.

So how does that work? Yeah, I think you might be conflating size with competence. And my experience is that just because you're bigger doesn't mean you're better at being sharp. You often use that size as to your advantage in market power. But when it comes to something like credit ratings, You know, you have to actually, you know, ultimately pay the type of kind of thing. We're talking about ABS side of things.

Pagaya's number one and ABS issuances in the consumer space, not the auto space, but the consumer space, right? So I think it's one of those things that these banks, they don't, you know, banks need to be very low risk. Taking risk is something that banks do not want to be seen as doing, especially in today's climate. And it's just they're, they've decided that we want to do what we're used to doing, which is using the same scoring system that's, you know, decades old. Pagaya has recruited people from these big banks that work on these loan desks or these personal loans or auto loan desks, presumably because these people, you know, have seen how they work at the larger tier one institutions and said, hey, you know, I know we're leaving money on the table, but at the end of the day, you know, we don't. I do think that it would make sense for these guys

to reach down and increase the credit box to include some of these loans. And then the question is, what do they then do? Do they build or do they buy? I arguably, one of these guys can just buy up Pagaya, and that's going to be cheaper than building your own thing. And you could apply it to your own massive loan funnel and immediately print more from that than you paid for Pagaya, because, you know, as you said, these guys are absolutely massive. You know, even in the integration process, you know, when they sign some of these dealers, they only send a portion of their flow to Pagaya. I don't know exactly why.

I'd like to probably clarify that with the company, but it takes time for them to sort of fully send all of their flow to Pagaya. They have no balance sheet risk. It's purely incremental at that point in time. It's something you were to throw away into garbage or send across the street. Why you would basically send 100% to Pagaya on day one, I don't know. But that's also the math that the guy is using, which is like we signed three massive partners last year.

We're only seeing, you know, 20, 30% of their flow right now. And in the next year or two, assuming that we're still doing a good job, they're all going to convert to 70, 80, 90% of their flow coming our way. And we're going to, you know, immediately have 3x, 4x,000. of applications which we can improve and collect fees on all kind of stuff. And also they show that their partners are sending more of their loans to Pagaya, which is that they're like, hey, these other loans, they're kind of borderline for us. We used to take them.

But now we're going to start sitting them that way because we would rather just collect the fee and not have a balance sheet utilization or risk and keep capacity for other things. So all of this is kind of the reasons why. I will say that, you know, this stuff is somewhat qualitative hand-wavy. I've never been a loan officer. I've never been a loan strategist of these things. So it is very much secondhand. And this is also what makes, you know, your questions are totally valid.

And it's what makes equity investors, like myself, nervous, which is that we are investing into an equity. But this equity has this massive exposure to the credit market and the nuances of how the credit market works, which is very much of a black box to me and to other people, unless you've been in it for a long time. So I have been trying to collect a list of people who have been in that market to talk to them more about, does this make sense? Is this something that you would have done? And why does it make sense for the exact same questions that you're bringing up?

I mean, also, part of the question is, like, they've done it and the numbers have shown it. So the existence of this market, you know, isn't really a question, isn't really a question. I just, I do agree they've done it. But I just, I guess I worry because every bank, like I've been looking at a lot of banks recently, and every bank I see is pulling back. back and they're specifically pulling back in auto market, right? Like I was just reading Ally at they were at Morgan Stanley literally two days ago. And they said, hey, all of our peers are pulling back from autos broadly. We're pulling back from a lot of autos and we're really focusing on the super prime space because

that's where we're actually seeing the best risk adjusted returns right now. And I look at like every bank pulling back and even Ally who is like very focused on it, pulling back. And I say, oh. And then, you know, also banks are funding with largely deposits. Right. Whereas Pagaya is funding with largely hedge fund and sovereign money, which obviously has more cost of capital than a bank. And I look at those two and I'm just like, look, either Pagaya right now, like the loans they're funding are going to be some of the best in history, right? Because everyone's pulling back and they're kind of leaning into and they do have smart money funding. Or like it goes back to the fast growing financials where yeah, but guys out here like we don't have tons of we don't have tons of data on how Pagaya grew up. Pagaya. does through all cycles because they really ramped up their business in the past two or three years. Yeah, like maybe they're just doing tons of loans right now. And 18 months from now,

they're going to say, hey, hands up. Like, all the banks pulled back for a really good reason, like used market went down. Recoverys were awful. A charge us. Like, they pulled back. We didn't and our, like, we didn't blow up, but our ABS investors did. But guess what we can't fund like ABS loans anymore? Yeah. No, I mean, like, yeah, there's definitely a situation where all the low their balance sheet isn't terribly at risk. If the, if the, if the, it doesn't work the the business is broken. Um, and so, So there is a very big X-factor that you got to trust there. You know, you're talking about everyone pulling back.

And I think that that also goes to like everyone's pulling back because everyone's like, we kind of indiscriminately approve based on, you know, relatively older, you know, style systems. We haven't invested in the tech to get this stuff to be really sharp. And the guy is like, hey, we can jump in and we can pick the, cherry pick the loans that you guys are not approving and take it. It is definitely a fair, you know, either they're great or they're shit. And unfortunately, time will tell. And there's no other way around it. I do think that the equity investment, you know, does give a pretty good, does give a pretty good risk reward and view on that, which is if they do grow massively and if their AI does work, then you are going to anywhere between three and eight X the stock.

because you know if you start getting that size in then you're going to then you're going to be able to use market power get more data be able to get sharper and everything like that um so i would love to learn more about the inner workings of of pagai's competitors and how their credit box works and how their credit scoring works um the the tangent the the the stuff i've heard so far uh is that it's not it's not terribly terribly sophisticated and the reason why is because once again you have so much market power you know so much basis that you can just you have a cheap cost of funding you can kind of just you know write loans based on some system that that isn't terribly sharp that will still do well i'm i do hear i am just very skeptical i want to also throw on something andrew which is i am not a macro investor uh very explicitly so i absolutely see all the stuff right now but you know we're we're we're absolutely overextended we're absolutely over extended we're absolutely whatever i used to play that game uh nowadays i generally i generally really play the game that I don't know. You don't know. We don't know. And so I try I try to

avoid taking too much of that. No, I certainly hear you there. I just I do think like to me, I look at the guy and I say great skew, right? Like you're as you said, you're probably trading 50% above like kind of liquidation value. But I just like ally capital one. I'm really skeptical that they're only funding on FICO scores or this. Like I think they're really sophisticated and I just have trouble in my mind being like, hey, Pagaya's got a better box that is just like so much better at underwriting loans that they can profitly fund these loans. But you know what? They've been doing it.

I guess I just worry like the history was 21, 22, like used car values are ripping. The consumer is super strong. But as soon as you have a little bit of stress, like I'm worried that the legacy guys, I just, I'm skeptical that they're this bad at underwriting that you can get this much. But I don't think it's this bad, by the way. Andrew, I want to throw that in, which is I think the conversion rate that Pagai takes on their second look is somewhere in, I want to say 1 to 2%. And then they've cut that by half. So it's not like these guys are leaving a lot on the table.

It's that they're able to jump in and be very opportunistic about out of those 100 loans you're throwing away, I'm going to take two of them. And, you know, Ally doesn't care about, you know, getting that sophisticated on that. As you said, they're so big. Yep, I hear you. No, it's just something. I like it. I like it because this conversation is something I have regularly. And then this is what I identified at the beginning.

It's in a space where you, there's a ton of opakness. And not only is that opaqueness in, you got to trust the company's AI, but you also have to, you know, trust all of this ABS credit market inner workings that most people have no idea about how it works, myself included for the most part. Let me go somewhere else. So the ultimate bull case, and they laid this out in their Q1, I believe it was the Q1 call. Maybe it was the JP Morgan Conference there was. But the ultimate bull case is, hey, we right now we do, I think we're funding about $3 billion in annual.

No, sorry, network is $8 billion. They want to take that up to $25 billion. And they say, look, we take it up to $25 billion. We get $3 to 4% gross margin on that, call it a billion of gross margin, $300 million in op, that brings us to $700 million in EBITDA, right? And right now, the company's like under a billion dollar market cap. So you're kind of talking one-time's EBITA at that point. What do you think about that, that bull case scenario that they're projecting there?

Yeah, I think anywhere in 30, 50% chance, probably I'd be serviced to 30. And more importantly, what I would say as well is if they get the $25 billion, then there's nothing stopping them beginning for $40 billion or $50 billion kind of thing, which is if they get to those levels of growth now. And then how do you get there from seven or $8? eight. I mean, if you look at the previous growth, it went sort of one, four, seven. And then at seven, they very intentionally pivoted down to eight, which was last year. They saw the Fed raising rates. Raising rates environment is not necessarily bad for them per se, but it's as a lot of volatility, right? And so I would say that they were very cautious. They purposely cut their conversion rate massively, tightened up everything that they were doing. And they fared through that quite well relative to their competitor. Like Upstart sort of did the, traditional thing that you're saying, which is, hey, things are going well. Let's crank it. And they had 800,000% growth in one of the quarter of a course. And that's sort of what

pushed the stock to like $300 for share or whatever. And then right after they're like, holy crap, like we under row way too much. Now we have this huge problem. They immediately had all of their investors pull off and they couldn't get any external funding. And then they had a bunch of losses on their on their books. And now they're recovering. And so their revenues went way above Pagayas and now they're way below Pagayas. And so, you know, when you talk about the stereotypical fintech that's fast growing, that is, you know, throwing caution to the wind. I think that that's a perfect example of it, at least the numbers show that,

versus Pagaya has been more careful. And then I think or hope, you know, once we get through this current climate, we're going to pull, you know, when they're going to 1,47, 8, I could see us jumping to 11, 14, 25 kind of thing in the next two, three years, assuming they turn up. on all the dials and assuming that they're okay with everything. Just two things are that. I guess just to my points earlier, I was really focused on the car loans and ally,

but we should note like they do a lot of other lending as well. They do a lot of personal loans. They've got a partnership with Klarna. So it's not like it's only auto lending. I actually think you've probably got better. I think they've got a better edge in underwriting small dollar personal loans than autos would keep my higher loan. But just so people listening,

it's not just ally. Right. And the other thing, you mentioned upstart. I do just want to mention, you know, upstart is the there's the famous CNBC thing where he's somebody's like I'm bullish I'm bullish they're like what do they do and he's like uh upstart is a good comparable and I'm just looking

at Bloomberg you know upstart three or four billion dollar market cap and enterprise value still burning money they're trying to get to EBIT off break even this year but guys already at EBITA break even or profitability all that's adjusted obviously but I I guess just are you considering like comping the two do you see any similarities differences anything else other than what you mentioned where Upstart just grew like crazy and crashed and burned, but is there anything else people should be thinking about comparing this to kind of a little bit buzzier, well-known, Nathan? I mean, the bulk case is that Pagaya isn't well-known, as I said, and once it becomes more well-known, it'll trade up and comp with Upstart. I think that's a great bulk case. I would love

if that happened. I'm skeptical, which is, you know, people asking, you know, they asked on Twitter as well, you know, why is this happening? I mean, upstart is a meme stock, you know, and I don't mean to say that in a disparaging way whatsoever. It has a huge retail following. And when you have a huge retail following, it does a few things to your stock. First of all, it adds a lot of volatility to your stock because the retail investors flow their money in and out really fast. But also, what it does is it adds a really large market cap floor on your stock because

a lot of shares get sort of abandoned by people who held the stock for a while and it's gone down. And it's sort of reminding them that it's there. And when it starts showing signs in life, they jump back in. Quantitatively, best way to look at it is just look at stock. Twits, there's 37,000 followers on upstart versus Pagaya has something like 2,500. So it's more than a 10 to 1 ratio. And at the end of the day, on stock twits, probably the first 1 followers are bots.

So it's really more like a 20 or 30 to 1 ratio. And so when good news happens on Upstart, there's a lot of people that are cheering it on. And that's great for Upstart, great for Upstart investors. Upstart's also a massive battleground stock. Short interest was huge when the stock was $10. We can talk about that later on as well, which is there's a lot of weird short stuff that's going on these days that I'm commonly a short seller and I don't understand what some of these short positions are doing and why they're doing it because it doesn't

make any sense to me. But yeah, it's so Upstart, you know, has a 30, 40% borrower rate on something like a $300 million notion of trade. So there's huge amounts of interest being collected there. And I think this is what often people don't give meme stocks credit for, which is, you know, you hold a stock for the present value of its future cash flows. Its future cash flows include the borrow rate. So something like AMC, not to do a huge tangent, the borrow costs that the people have incurred for shorting AMC is basically at or above its market cap at this point in time. So the idea of market AMC shouldn't trade at $6, it's an irrationally high price. It's actually not. It's actually, if you held the stock for the last year, even if the stock went bankrupt

in the next four months, you end up not losing a ton of money kind of thing. And same thing with Upstart. You've got hundreds of four positions. And once again, compared to Pagaya, which has a tiny short position with a high borough rate. Upstart has a huge short position and a huge borough rate, and that's important. So, sorry, taking a couple of quick steps back. Upstart, hopefully Pagaya tries to say multiple as it. I don't think that's the case. I don't think many people would do the long short.

From a fundamentals perspective, right now Pagaya's numbers look way better than upstarts. You could argue that upstarts business model may be superior for certain reasons or maybe worse. I would generally say that at the very least, they're the same. I don't think Upstart has a big edge. I'd like to see Pagaya trade up to Upstart, or at least I'd like to see Pagaya trade up on its own merits, regardless of what Upstart's doing. I've got a bunch of companies where I look at him, like,

it trades for a third of the competitor. I think it's better than competitor. And as you said, I'd love to see a trade with the computer. Let me have something else. So they've got a slide in their deck, and this is Slide 33. I don't know if you got it up or not. I don't have it up right now.

For anyone who's listening, slide 33 in their Q-123 deck. And what it basically shows is for the past two years, their performance has been better than whatever the market benchmark. Their 30-day plus delinquency has been performed better than the market benchmark. And I would say, like, that's actually, I don't know what the benchmark is, but I would guess that's actually really good, not just because, hey, we're better than the market benchmark, but I would guess the market benchmark has some bias where, again, the thing I was skeptical of, allies turning a loan down, how are you funding it?

Like, Pagaya is actually getting the loans other people wouldn't fund and they're performing with better performance than the market benchmark. So that's a point in their favor. I guess my question is they kind of say, hey, we do. I think it's like 30 basis points better in delinquencies over this period than the market benchmark. Is that is 30 base points in improved delinquencies? Is that enough to fund this business?

Does that make sense? Yeah, I know what you're saying, which is, you know, are, are they sharp enough to have enough money to give extra money to their investors and keep money enough for themselves to make it all make sense, right? And fund all the overhead. Exactly. Yeah, yeah, yeah, yeah. I think that maps out basically that three or four percent contribution margin that that they're saying. So they're saying that, you know, we can, if we, if we pull an extra billion dollars in revenues, the fee, the fee, sorry, net fees, less production costs. you know, is three or four percent. So ultimately, my answer is yes. I do think it does.

There, I agree. So I love this chart. I don't use it specifically too much because of what you're saying, which is, you know, charts, you know, you get to pick your own benchmark, all the kind of stuff. I think that this is legit, I do. But you still have that world where there's something under the waters that the company's not disclosing or that they're not aware of or that we're not aware of that that ultimately

hurts us. But yeah, I mean, the numbers are. are kind of explicitly saying that they are doing a better job with their underwriting, that they and that there is enough, as in there is possibly better right now covering all their fixed costs. And also I think one thing to say is that their investors are buying their ABS up, hand in, hand over, head over heels for this stuff. They're not having any problems of funding this stuff. They come to them and say, hey, we want to deploy more. And if I'm an ABS investor, I'm probably going to be pretty sharp looking at Pagaya and say, hey, is this machine,

you know, making, making the loans proper because I'm the one that's actually taking on the balance sheet risk. And the answer to that is they are. And that's a funny, funny thing, which is that the, it's weird that the, or I'll say weird, the debt investors, the ABS investors, you know, arguably if they believe that the AI is great, you know, what are you doing buying the a BAS and picking up your 10% yield? You might as well pick up the stock and pick up a double or a triple kind of thing, you know, because, you know, the two of them should be correlated in terms of the performance. No, look, it is interesting because, as you said, the ABS investors are funding it and they've got stuff in their deck that shows how oversubscribed their ABS is. I think they're the number

one personal loan ABS two or three years in a row at this point. You know, it is interesting because if we have been talking 18 months ago, I think a question would have been, hey, can the, are these guys a product of a zero interest rate environment? Can they really get deals done as interest rates rise? And the answer to that is has been proven absolutely yes, right? Like Q1. I believe was their, 2020 was their largest ABS year ever. And I think Q1 was kind of their largest supporter ever. I can't remember specifically. But it was among them at least.

So they definitely can do it in rising interest rates environment. The last thing for them to kind of prove is, hey, that 2022 loan book you did, is that going to perform well enough where investors are going to come back and say, yes, this outperforms through a recession. Like, you know, in 2025, we're eager to give you more money. But so far, the early signs are, as you're saying, yes, because the ABS investors are signing up for it again and again and again, and they don't appear to have a problem funding the ABS loans.

Yep, yeah, exactly. So I think it goes back to, you know, most of what we've said before, maybe other than the offering, all of the numbers paint a great story, but you're still like, I'm skeptical. I don't know. Like, it doesn't pass a sniff test to me. Is that a fair characterization of what you're saying? Yeah, I just, you know, to me, I know you're saying, but like, let's put us, I really focus on the auto loans and let's put those aside.

Sure. You know, like even something like Klarna or these buy now paylators that they're doing, like they're getting the rejects from Klarna and the buy now pay laders. And I just look at it and I say like, how can these like Klarna and them are those are founded later, later than Pagaya was, right? Like these are newer companies. They're allegedly completely data and tech focus. And I just look at them. I say, how can how can Pagaya have a consistent ability to fund loans that these guys can't? because I don't believe there's any data moat that Pagaya could have that these guys,

these guys don't have or something. So I just look at that. I'm skeptical. But, you know, as you're saying, the proof is in the numbers and also everything is risk adjusted, right? Like if the stock was $20 per share, it would be a much different story. Then, hey, the stock right now is trading for a 30% premium to liquidation value, as you said.

So you're kind of, let me apply that same logic to upstart, which is they are trading at $20, $25 per share and have the same problems that Epigaya has kind of thing. I hear you, but, you know, that would argue for a pair's trade, and I don't think either of us are like, as you said, I don't think either of us like, I'm not starting up to start anything. Yeah, I don't know, because it's just, it's so interesting to me. I increasingly over time, I'm just really attracted, probably because I'm too stupid to find modes at this point, but I'm just really attracted to things with like hard asset value,

balance sheet value, assets in the ground, whatever. And this has that, right? This has 75 cents per share of hard asset value against the $1.20 share price and all these other things as you're saying. And I love things with high intrinsic, high implied volatility because those are the things where you can make it generally because people are saying, hey, this is either a 3x or a zero. So if you do a lot of work, you can maybe get a view one way or the other. Right.

And I think there's alpha. But then I look at like the stock issuance and I just keep thinking like, man, it's just, it's really hard for me to believe a data advantage exists in this business. Sure. Yeah, I don't have much to say on that side of things. I will say I share the same thing. I have met with management, but at the same time, they're going to say, we have AI. It's amazing.

We have so many smart PhDs over in Israel doing the work. I mean, the outbound interviews on Glassdoor, despite how bad some of them are, most them say at the end of the day, the actual core structure is good. Now, Glassdoor interviews aren't really valuable, I will say, for many, many, many different reasons, but it is notable that they are saying, hey, you know, I hated the company when I was working there. I got fired. But you know what? They had some pretty pretty sharp tech there. Quick pivot because we're running at a time, but someone asked about Darwin and that recent acquisition. And also I want to give a bit more characterization.

Although they do auto loans, I would say personal loans are a much bigger portion of their world in the auto loan business. And this goes down to some communication, which is myself and so I had to dig to really get more data on this. Recently, I got a list of all their ABSs. And so you can kind of see their ABS issuances and how big they are, and that's effectively, you know, how they're deploying. And what I would think I don't think any real, I don't think many or any investors know that, you know, in the single family rental space, they did $250 million last August. So they raised $2.50 million of investment capital from investors last August to deploy into single family residences. So ultimately what they did was they went and spent that money buying up a whole bunch of houses in America on behalf of the investors. The capital appreciation of those houses up or down goes to the original investors, so they don't have any exposure there.

However, they are applying their AI in selecting those houses. What they're saying is we have a huge, huge set of data on all these loans. We know which people are paying back, which people aren't. And so we can, for example, pick zip codes where, hey, look, turns out that these people in the zip code are suddenly paying back more likely than they normally would. because that is an area that is up-and-coming, it's gentrifying or whatever, right? So they're using that AI to help pick these houses on behalf of the investors, hopefully with an intent of giving them capital return. But more importantly, once you have one of these houses, you want to manage it and get yield.

And so they manage these houses on behalf of these investors and collect rents for them, and they collect fees on that whole process. Now, historically, with these $250 million of homes, you know, you have individual renters that are needing to, A, send them, their monthly checks in and B, fill out forms to say, I need a plumber to come fix something or C, or all this kind of all this prop tech stuff, right? And Pagaya used a smattering of third party vendors

that were outsourced in order to sort of put that together. Darwin brings it all home into a single thing. So instead of paying millions of fees to all these are in platforms that manage their, their single family home, single family rental business, Darwin brings it all in-house. Darwin is apparently, I've looked in detail, best in class at what they do.

And so now Pagaya has its own, you know, proprietary platform where if you end up renting a house through Pagaya, which you don't know it's through Pagaya, but if you rented a house through this platform, everything is sort of one-stop shop there, which ultimately leads to, in theory, you know, Pagaya is able to pick better renters because they're able to, you know, look at your credit worthiness, you know, in a different way because of the AI, you know, and once you're using this platform, you treat the house better because asset value, the bare asset value in that rental business is very different than the car business and very different than personal loan, which obviously is unsecured.

So if you are an investor and you want to, you know, buy residential real estate and collect yield on it, you want to pick someone who is, A, being thoughtful about what they're buying. Then you want someone who is also very good at managing it and see who's good at picking the right, you know, tenants to take on the place and Pagai is trying to do that. It's not a big part of their business, but it's not trivial. As I said, $250 million last, $250 million last year, $2005 million. million dollars the year before that. This year and August, they'll probably do another one of these deals. And now, a quick word from our sponsor. Are traditional expert calls in the investment

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process and increase ROI on investment research spend, Stream has the solution for you. Head over to their website at streamrg.com to learn more. Thanks for listening, and we'll catch you next time. So that's it. I was misunderstanding what the single family home rental. I thought they were just doing personal loans to people who were like they were partnering with like Blackson single family rental unit and doing personal loans to the renters there. But obviously it's saying, you know, but it does just, it comes back to like it sounds great,

but it comes back to like the everything you're saying it has been death for any equity investor who tried to do it, right? Like this is what, this is one of the open door arguments. Now, they tried to buy not to do rentals, but right, they were like, hey, we're going to apply AI to buy homes sharper and we're going to, and like, you know, single family rental homes. There's a reason so many big people have struggled with it because it is very much a local market game.

You need boots on the ground, as you said, like all this sort of stuff. And you just look at Pagai like, hey, we're just, we're yoloing in here and we're going to do it. Like, it does sound great, but it also sounds like, hey, I've seen this story before and it ends in death like every time. Sure. I mean, at the end of the day, this single family home business, it's a small one. They're putting their toe into it.

They don't have balance sheet risk on it. So if they buy every house by a mistake at the wrong price because the algorithms don't work, like some of the competitors, that's not going to be left with them holding the bag. And yeah, so I could see this either being a really big business in the next five years or I could see it shutting down. And so I look at it as aside from management distraction, which is non-trivial, I see. it as a good sort of free upside thing. And they're really trying to say, we have all this data and we're applying this to these spaces that are tangential, that makes sense, which is, you know, the consumer. We, in theory, have a good view on the consumer. We know what a consumer can and can't

afford. We can pick good consumers and be a sort of full, full-fledged offering for those people. Two more quick questions before we wrap this up. Number one, just Oak H.C, who just did the $75 million dollars in crafts at $1.20 that that will convert to common. What do you, do you have any thoughts on them and their investment in in Pagaya? Yeah, I, I talked to Matt Streisberg there. He's the guy who runs their investment. I mean, they started in the B round and they've come back to the trough multiple times, participating multiple rounds coming back here right now with this $50 million, $75 million recently. He's at his favorite investment and he's made quite a few of them. And it is, You know, every VC says this is my favorite investment, but I mean, he has putting the money behind it himself.

They did recently raise a new fund, and so probably allocating out of that fund, but that's also one of those exposure things. I don't honestly have the highest regard to most VCs that I've spoken with, and I wasn't expecting a ton from Matt. Matt really knows his stuff. He's really, really, really sharp in terms of knowing how fintech works, how all the rails work, how all the connections work. I'm trying to furiously keep up with some of the stuff he's talking about taking notes. And I'm understanding maybe 25% of what he's saying. But yeah, and so I would arguably say as well, you also have an anchor investor there, which is if things are problematic or if they need more capital, there is a world where he can

help or help or maybe help arrange for another round or something like that if that were to come about kind of thing. And just like this question. So management here owns a decent amount of stock, right? I think each of the kind of founders own, what is it, like 120 to 170 million shares, even at a dollar per share. That's a pretty nice, pretty nice chunk of change. I wish I owned 100 million shares of anything at a dollar. But just, you know, if they see, they're very bullish on the company, right?

They've painted the picture. Here's our path to 700 million EBITDA, all this type of stuff. Obviously, the company can't buy back shares because they are, as you said, capital intensive. though, you know, I do think there is an argument for you. You should weigh the opportunity cost and everything. But we seem like just mass insider buying here, just taking advantage of a really depressed share price. That's a great question.

I mean, that's something that I should probably ask them. I haven't, that hasn't come up for me. But I agree with you, which is if they are really, you know, behind it, then they should put some money behind it. Yeah, it just, you know, they, as I said, I haven't looked through if they cashed out in the SPAC deal or not. I didn't go that far back into the background. But I just look at this.

The Spact deal, I'm fairly certain, was all proceeds directly to the company. That does make sense because they've got tons of cash on their balance sheet and stuff. But I just look at it and say, hey, and it's easy for me to say it, right? I don't have $150 million of exposure. Like, that is generational training wealth, even if it's down from a billion or something. But I look at them, like, saying we're petting on the company. You've got all these great things. And I'm like, hey, it doesn't really make a lot of sense for it to be public in general, I would say, at this point.

Sure. Yeah, it's a very funny, interesting question, which is, like, if I were them, I wouldn't be doing it. And it's not because of not the alpha, but it's because of concentration risk, right? But, I mean, from a signaling value, it would have obviously a lot of value. But, you know, anyone that holds that much wealth,

concentrated in any company, whether they run it or not, I think it's crazy. So that's, and all of the academic literature back set up as well. So, yeah. We have a few minutes left. I'll just do a quick control or plug it on it on. myself. Just so people know, I am a head fund manager, but at the same time, I'm on the faculty at Stanford. I teach a course called Financial Trading Strategy at Stanford. That's actually

sort of my primary gig. Running my own fund is a secondary one. What I do and how I do it is basically I teach these live cases in my classes. And so every year I bring a new group of Stanford GSB students into the classroom. We talk about markets, and then I bring up three or four or five different companies and names, explain what's going on with it. Everything I do is sort of special sit situations, a special sits trading or investment. So we're always looking at something weird or quirky or different. And then we just run through all of the gamut of how it all comes together and the pieces. And then that's what makes my course unique is because I'm one of the few who use live cases where we don't know what's going to happen. And I get emails, you know,

three months, six months after students graduate being like, hey, we've talked about this for a lot and, you know, now it's going to see it come out versus, you know, taking a case from 10 years ago, dusting it off and talking about, oh, had you done this 10 years ago with the with the, with the knowledge of hindsight or the benefit of hindsight, let's say you should have done this. Obviously, we know in the investment world, it's way more. It's so easy. Like, every trade I make with the benefit of hindsight always works out. I just don't know why I invest in anything that I don't have a 90% hit back for for some reason.

Well, this is, look, this has been great. And there's a, you say quirky situations. I mean, we've stumbled on some pretty quirky situations together, though. You know, it is funny. Like, the quirky situations, they can. work out really big, but sometimes you've got to have like much faster trading fingers than I have for them. And I'm sure you can think of the two I've got in mind that we've talked about offline that I don't really feel like mentioning here. Cool. But Kevin, this has been great. I really enjoyed

this. I'll include a link to both the seeking out of the show notes. If people can go see kind of written how you're thinking about the company there, include a link to your Twitter in case anybody wants to, I mean, under $100, Kevin, my gosh. I just started like six weeks ago. So it's one of those things. I can use some of your 30,000 or $50,000. What's the number now? I don't like 80,000. I'm sure the 100 numbers going up. But look, I really appreciate it. Really appreciate you coming on and looking forward to having you on again. All right. Thanks. See you. Bye. A quick disclaimer. Nothing on this podcast should be considered investment advice.

Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.