In looking at “things” I am always surprised that nobody seems to be able to find the “worst” companies out there. It seems like that should be an easy task.
I am not talking about companies that fail quickly in their infancy because the market spits the bit on their idea, but companies who fail because their monumental “success” is built on a foundation of feces. [In this instance, we are talking only $250,000,000 in funding, not quite WeWork $$$.]
Case in point? WeWork which was spotted from its genesis (by those who had a smidgen of real world, commercial real estate knowledge) as a horribly bastardized nightmare in an industry that has been around forever — FOREVER.
I wrote about the company, WeWork, some time ago.
We IPO — You Work, I Work, WeWork
I was critical at the time of its Messianic founder and his “real estate as a service” mantra. In retrospect, I could have been more critical and I was pretty damn critical.
OK, Big Red Car, what’s the deal?
I think, dear reader, I have found another WeWork worthy company — a company so certain to fail, fail spectacularly, that it can be smoked out right now. [OK, Big Red Car, that’s a little harsh. Dial it back. Sorry. Just an opinion.]
Let me tell you about the company just a bit, may I?
Of course I can; it’s my blog.
Who is it, Big Red Car? Who? Who?
Gentle on the whips, please. Let me share some characteristics of the company.
Firstly, I wrote about the issue of “Ethical Investing” in mid-September.
The Myth of “Ethical Investing”
Let me give you a run down of some of the big points:
1. The company sits at the Venn (John Venn 1880) diagram confluence of ESG, tree planting, celebrity investors/advisers, and uses the term “. . . as a service.” Whew.
What company doesn’t want Leonardo DiCaprio as an investor along with Orlando Bloom, Robert Downey, Jr., Cindy Crawford, Doc Rivers, and Drake?
Nothing drives ESG — environmental, governance, social — like a bunch of elite celebrities, right?
And, tree planting?
2. The company is fast and loose with its “community of 5 million ‘passionate'” and “purpose-driven members.” [This info comes from various sources including the company’s investor deck.]
To become a “passionate” and “purpose-driven member” one does NOT have to actually use the service. You only have to have signed the company’s terms and conditions (clicked a box and provided an email), like when you wanted to troll their website.
In reality, at the time of the assertion, the company had 361,000 actual customers. If you do the math, something like 18% of the passionate and purpose-driven community is actually a customer.
3. The company is working the public like a rented mule on the last day of the month landing on the Certified B Corporation’s “Best for the World” for the last four years as well as Inc’s “25 Most Disruptive Companies.”
4. The company’s mission statement is a thing of beauty:
X Company is in the business of SUSTAINABILITY — our mission is to empower people and businesses to do well and to do good.
Cat out of the bag, the candidate company is in the sustainability business. Sustainability as a service, y’all? Sounds disruptive to me.
5. The company’s numbers are of such a character that they had to invent/embrace a new metric — EBITDAM.
You may fairly argue that “Earnings Before Interest, Taxes, Depreciation, Amortization, Marketing Expenses” has been mumbled before. Fair play to that, but the way this company throws the term around is breathtaking — well my breath at least is taken.
From the company’s own deck, it will burn $133,000,000 in real cash in 2021 whilst calling itself “EBITDAM profitable.”
Put a little country wit on the notion that the company will spend more than 150% of gross revenue on marketing. Now, you can see why the “M” in EBITDAM is in there, no?
In fairness, the company says that marketing is a customer acquisition expense whilst EBITDAM is a measure of core operational profitability.
Why do we care, Big Red Car?
Maybe you don’t. We’re all OK with that, but in this instance, the company is “aspiring” to go public via a SPAC (special purpose acquisition company).
A SPAC is a pile of money raised publicly by an investor to do exactly this — acquire a company which by means of the acquisition becomes public.
In this instance, our company under the microscope is eye spying a $2,300,000,000 public market capitalization based on $15,000,000 of TTM (trailing twelve months) revenue upon which the company lost gobs of money.
Give us some more, Big Red Car
OK, dear reader, the company is sort of a debit/credit card company, but there is much, much, much more.
1. The company will hold your money in an interest bearing account called “Spend & Save.” Wow, talk about fintech disruption, eh?
2. The company offers a mobile app that scores companies based on 75,000 data points to inform members how these companies impact people and the planet. This will, of course, inform and guide your personal purchasing practices.
You can also get an impact score on yourself. Can you imagine how hot this will be?
3. The company sponsors and runs a mutual fund that is . . . wait for it . . . sustainable. Sustainability as a service, here we come!
4. The company allows customers to set their own checking account and investing fees in an approach they call the “Pay What Is Fair” initiative.
I am not making that up.
5. You can even use the app to plant trees by rounding up your transaction to the next dollar and thereby have the company plant a tree in your honor.
This program is called “Plant Your Change.” Get it? No change, but you get a tree.
Wow, talk about a wave of sustainability, eh? Surf’s up.
In fairness, the company claims they have planted 10,000,000 trees in the time period April 2020 to April 2021. I am not going to speak ugly about tree planting. I personally love to plant trees.
6. Plant Your Change was not enough. Now, the company allows you to receive cash-back rewards on their credit card and to also reduce your individual carbon footprint by turning every purchase you make into a tree.
What is the name of the company, Big Red Car?
Ahhh, we’ve come to the end of the charade now, haven’t we? You want to know the name of the company, but I shall not tell you. I have given you enough hints to find it out for yourself.
The first reader to blurt out the name — the name is Aspiration — gets a wonderful reward: I will plant a tree in your honor.
Bottom line it, Big Red Car
Fine. Dear reader, there is a sucker born every second (or is it minute?). In this case we have a “sustainability as a service,” tree planting, debit/credit card/mutual fund/quasi-bank company, that aspires to an incredible valuation because it is very woke.
It has celebrity advisers/investors, is ESG as Hell, plants trees, and is just woke.
Why would anybody have a problem slapping a $2,300,000,000 valuation on a money losing company with $15,000,000 in TTM revenue?
Leonardo DiCaprio is in the deal. What else do you need to know? Remember it might be EBITAM cash flow positive some time soon.
But, hey, what the Hell do I really know anyway? I’m just a Big Red Car.
Professor Scott Galloway
I admit to being a regular reader of Professor Scott Galloway. He recently had this to say:
To be clear, Aspiration is not WeWork. The story of We is insanity; Aspiration is mere intoxication. Specifically, a market drunk on true disruptors that have delivered unprecedented returns. Aspiration is only crashing a Bombardier Global Express into a mountain every six months, vs. every three days. Yet, the comparison between the two companies is striking. It’s beginning to smell like teen spirit … if teen spirit is bullshit.
Harsh words, Professor. You are definitely not getting a Christmas card from this bunch.