A competitor - not a Zero to One - bad idea gone terribly wrongPeter Thiel characteized companies as competitors or originators. As a founder of Paypal - a small space that was blank into a large enterprise - he influenced my investment awareness. Carvana is a company that has a different way of trying to sell cars. It is a competitor not in an original space like Facebook as a startup or Google. Carvana isn't working. Investment bankers can sell more stock to institutions as prices rise if - big if - sales are increasing. Now that capital has been raised at high prices there is little or no chance that CVNA can raise more capital in a money losing enterprise. This is how innovative startups in biotech raise money on the come.
The game is over for CVNA. If this was such a great idea why is it losing money every quarter? It is a pumpkin truck business. A man buys a truck and takes pumpkins to market. He gets home and tallys a $1000 loss. when asked about the problem he says he needs more trucks. To wit - will more sales be more losses? Of course it will be more losses. With more cars sold each quarter - rising sales figures in rising markets = more stock sold to the institutions. Not so in declining markets. As the Oracle of Omaha once famouisly said - when the tide goes out we see who is swimming without trunks. Translation - the tide is a declining market. The nakadidity - to quote Radar O'Reilly - is continuing losses with no pivot in sight.
The insiders have seen their values decline as their take out in terms of shares have risen. Watch for risinging insider sale of stock - rats deserting the sinking ship so to speak. This is a competitor in the used car sales business. The local grocery store can deliver your groceries via Dash - another short but don't get me started there either. What to do?
I sell the 30 delta call vertical 45 days to expiiration with a $15 wide strike. I have been able to roll these wide strike call verticals almost weekly.
Innovative but Bad competitor - More sales will not generate a profit.
Pumpkin truck business. Let the declining stock price be your guide. Look at the financials. Cash flow has been from sale of stock and not from earning. Look at the retained earnings losses. More capital will not fix this.
I sell wide strike call verticals the roll them down..
A profitable short.
