RumbleOn: Rumbling on to 1$
RumbleOn: Rumbling on to $1.
Summary:
● RumbleOn’s date with bankruptcy
● A look into an incompetent C-suite
● Technical Analysis of RMBL
RumbleOn.. a company that's rumbling right on to $1. A business ran into the ground by a hapless group of posers that don't understand the power sports business, its wonderful riders, or the community that supports it. They turned it into a financially engineered, over leveraged, pig of company. Frankly put, these simpletons dropped the bike, and the whole management team together couldn't pick it back up. Will someone please tell these fan boys to go home already?
This particular C Suite made A DAY ONE mistake of riding a bike that was above their skill level. Have you seen these muppet haired scrubs? All rocking the five o'clock shadow like it gives them street cred. Sipping their milk soy lattes while taking a photo with a bike to prove they still know what one looks like. But hey, don't forget to check out Peter Levy and his "morning coffee" posts on LinkedIn that I'm sure some outsourcing PA does for him.
RumbleOn was one of those companies that came into the marketplace, tried to buy up existing dealerships, and did it almost in precisely the same manner as what LMPX Automotive did! Overpaying for deals was the norm and the path RumbleOn put its gears on.
These were businessmen that made deals for companies they priced to perfection, of course overpaid, and didn't run basic due diligence. I assume they figured they could just outgrow their problem?
"But Mark, why would they over pay?" Common sense points to the fact they structured some seriously buyer friendly stock swap deals on these purchases with sprinkles of cash, knowing lockup periods would expire and the price of shares would later collapse. In 2018, they purchased Wholesale Inc for $23.0 million, which included $16 million in cash and the remaining balance in shares of RumbleOn (Source: BusinessWire). This deal was done when RumbleOn shares were at $219, but RMBL apexed right after the deal, went down 96%, and is now at $8. Imagine getting "stock swapped" right out of your business. Aside from Wholesale Inc, RumbleOn purchased RideNow in September 2021 for assets in exchange for $400.4 million cash and $175 million worth of its stock (insert laughing emoji). Looks like they rinsed and repeat.
You might ask, "But Mark, why would they buy Wholesale Inc in the first place?" I'm glad you asked. Powersports are less expensive than cars and these vagrants wanted to show fast revenue growth, so they bought a wholesale car business, which provides LOTS of top line revenue. They however managed to fail with that as well and announced in latest earnings call that they are winding down the wholesale automotive business.
From last month's balance sheet data,(Source: investing.com) RumbleOn had liabilities of $230m due in 12 months and liabilities of $537m. It has cash and receivables worth $59m and $52m (insert clown emoji lol). This company is neck-deep in debt, tits up, and about to face imminent bankruptcy.
They will have to raise more cash to service the debt that's coming due, diluting the shares even further, if they can even find a buyer in the first place. This company lost its looks, its ride, its girl, and is now standing by its broke down bike looking like the "zombie" company we all see them for.
There is no way that they will be able to pay down their debt even if they could withstand the wind burn from the rise in interest rates as these fools didn't put on protective gear before the ride.
Weakening consumer demand, dried-up consumer savings, and a talentless staff will put pressure on selling units. In addition to servicing their massive pile of jagged debt with money they don't have, they also have to pay interest/curtailment payments on all their floor plan units.
The larger picture is that this dealer and dealers like Carvana (CVNA) don't show unrealized losses in the same manner banks, certain multinationals, or real estate trusts are generally required to. Has anyone even assessed just how underwater they are on their inventory? Has anyone started looking at the banks holding those floor plan lines....(WFC).
They have inventory depreciating in value, while paying the interest carry on the inventory, and covenants that will likely start getting called in. This is a company that put together nefarious deals to be able to purchase dealerships from owners who built great businesses over decades.
In addition, they took out extreme amounts of leveraged debt and are currently unable to service these debts. Not only has RumbleOn tainted the image of the dealerships they bought, but is also a thorn in the flesh of its shareholders, as it is now priced for imminent bankruptcy. They are no longer looking to acquire more dealerships so their growth cycle has long peaked.
What do the charts say?
Personal IB Market Chart
We can see a stock that has crumbled 98% from a 2018 high of $219 all the way to an all-time low of $3.39 and is currently worth $8 per share. After a 98% price collapse from all-time highs, it is very clear this company will not make it through this recession. Their market cap is down to a mere hundred million, so a restructuring is highly likely. Expect shareholders to be wiped out. How much of their inventory is a forced loss sale at auction?
Personal IB Market Chart
Technically....it's about what you'd expect. About as bumpy as riding a Harley Roadster on a dirt road with a 200 pound passenger on the back.
It's below all the moving averages
Zone indicators are not salvageable.
Down 97% and still not an oversold RSI.
Drawing a Fibonacci from its bottom low at $3.39 to its most recent high at $64.13, we can see that price is gradually approaching the 23.6% Fibonacci level at $5 and will likely hover around $5.50 a share with a low of $3. It's clear that this waste of a stock is rumbling to $1.
My fair value assessment of this company is $1 per share, with a 12-month range between $5.50 and $9.50. My 12-month target is $1.
Personal IB Market Chart
Short term support after a short term bounce.
Personal IB Market Chart
No impact data and no ESGscore. It's almost like no analyst cares enough to cover them lol.
Personal IB Market Chart
The stock has no momentum and is beginning to look like a flat-lined EKG.
Personal IB Market Chart
And if you thought Q3 2021 was a hot mess, wait until you see Q1 2023. Due to this stock being completely irrelevant, do not expect any downward guidance or revisions on the analyst side. Basically investors are relying on the “truthfulness” from the C-suite and forward-looking metrics.
Short interest is now breached over 20% (Source: Benzinga), and it is becoming clear that short sellers are descending on this stock, as the prospects of bankruptcy are imminent. Expect short interest to breach above 50% in the coming months, as we see higher probabilities of bankruptcy as the days pass. With a pathetic $130 million market cap, this stock cannot stave off short sellers to save its life once it goes above 40% short interest.
It is clear to any savvy investor that this particular set of C-suite executives “NEVER” had any intention of trying to save this company. It's telegraphed through the stock price.
This company's only hope is restructuring its debt, wiping out common shareholders and allowing the institutions to fight for the scraps. This company will file bankruptcy by 2025.
There have been whispers in the power sports industry that NPA (National Powersports Auctions) lost vast sums of money on their inventory, what is to make an investor think that RumbleOn didn't? There's no real assessment of how underwater they are on their inventory, and the cash offers made to customers have softened so much recently that they haven't been uncompetitive for four months.
"Buying your way out of a problem" is merely being underwater on your inventory, purchasing lower-cost inventory to bring down your dollar cost average and then feathering your way out of the bad inventory over the following six months. They're not buying their way out of the problem because they don't have the ability to, so expect marking losses in the upcoming months against their inventory.
RumbleOn's website has 97,396 listings. Who has accurately evaluated this company's inventory to wholesale auction value? Nobody.
From surface-level investigation, it is clear RumbleOn licenses much of its software, and has little proprietary technology. Their online merchandising is subpar compared to competitors; they have low amounts of inventory utilizing video technology and do not fully embrace online sales.
Their listing site is possibly their only saving grace, but look at CarGurus (CARG) and their stock price destruction. It's clear bots are integrated into their platform, and private-party sellers and dealers are selling garbage out of trailers are now using silly-priced tools like $1 listings to manipulate their algorithms and listing formats. SO much of the RumbleOn listings have no photos, no descriptions, and is poorly merchandised. On their website, you can even see SCOOTERS and bicycles, which are kids' toys. When did thousands of generators become power sports that should be listed on a power sports site (trying to aggregate more listings I see?).
In summary, RumbleOn is an imitator, not an innovator, which is clear to anyone who understands technology. Very easy to identify this executive management as nothing more than dirty scoundrels lining their pockets on the way off the Titanic. This C-Suite thought they were cool, fastened a GoPro to their Fisher Price helmet, turned around, exposing their ass-less chaps as they got onto a scooter they found on their listing site for $600 like Jim Carey in Dumb and Dumber. Do not buy this soggy, sour, urinated on, bike seat that management is leaving behind.