Thanks for the heads up on this one @Seymourbutts
Good listen. I was already on bullish and hold IRL (small holding). A couple of things stood out to me listening to Harley talk about ART. Points I agreed with and part of my thesis:
- Australian business already profitable and the historical development provides a (hopeful) guide to what might be achieved in UK and US
- The Australiand and UK media deals are smart and give optionality on how to fund advertising spend (options to purchase equity back through cash or an equity raise). Likely that a similar deal in the US might follow.
Points which I questioned a little:
- To paraphrase: At HD Capital Partners we invest in profitable businesses with long track record of cashflows etc. I'm surprised to see them so high conviction on a business which is really more at its inflection point than estabilished profitability. If you added in the advertising spend as a cash cost they would not be profitable on a FCF basis I don't think.
- Harley made the point that they value the Australian business at more like 40 - 50 cents/share and that they are therefore getting the US and UK businesses for free. The counterpoint in my mind is that this is one of the biggest risks to the business. If they continue to take FCF from Australia and pour it into non-profitable businesses overseas this might be the bust of the business. So rather than getting them for free, you're anchored to the seabed and eventually sunk by them. Of course the flipside is possible in which case this business goes on to be a multidecade compounder and potential 100 bagger.
Overall to me I like the marketplace model, I am impressed by profitability in Australia, I think the gig economy is just getting started and I think this business has the potential to be massive. It also has solid inside ownership with Tim Fung holding ~10% of the business in shares as per yahoo finance.
As a final point, the SP is down today as is the ASX generally and I'm topping up a little.