The Art Of Short-Selling - Notes From The Conference

Below are some notes from The Art Of Short-selling conference which took place on May 3rd 2018. There were a total of 22? speakers who each pitched a short idea. We have pretty good notes (6147 words right now before a few redactions), but will have more extensive notes soon. Additionally, our full note presentation now and upcoming will only be for Premium Subscribers. Finally, some speakers were off the record we will not be posting notes of that anywhere. See below for more right now.

Also check out our notes from Sohn 2018 NY and the Graham Ivey Conference both from a few weeks ago.

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Ad Fraud, Sahm
Ad Fraud Opportunities
Social good with activism
What is ad fraud
Fraudulently representing online advertisement (bad traffic like computers and bots)
Not actual buyers
More fraud, less likely people will pay for online ads
Why is ad fraud so pervasive?
The intermediaries benefit, the exchanges
They become slow to detect because no incentive for them to improve, they also benefit from the fraud
Click fraud, fake sites, ad stacking (types)
Selling fake impressions
The ultimate loser is buyer of ads
Very difficult to detect if it is seen buy bots or actual humans (preferably the right audience, quality impressions)
Why is this an opportunity?
Many bad actors who are sophisticated to fraud
Longs don’t recognize this opportunity
QuinStreet
Hard to tell where the revenue comes from? What is their business?
Finding exactly where revenue comes from
Insurance branch
Why is insurance branch receiving so much traffic?
Not much presence on google, you have to really search for it, foreign posts  say go there for swagbucks  gaming the system
Phony trafficking because not actual buyers of insurance
Not in disclosures
Where does the referral traffic come from?
Is the traffic from actual buyers rather than from swagbucks kind of people?
Criteo published by gotham city research
Less than 5% of users responsible for 25% clicks
Attractive space
Disclosures are scant on revenue and where the revenue comes from each business line

Social distortion Enrique abeyta

The wave of digitally enabled sruptors that will humble industry giants
BUD short
We are not that deep compared to operators as investors
200 bill market cap
adtv 220 million
20x p/e
ev/ebitda 13x 2018
net debt/ebitda 4.2x 2018
div 4%+
No squeeze on bud
Extremely liquid stock
Bought by 3G in 2008
Stable low growth business, acquire with leverage, cut costs aggressive to generate high equity returns
Was done in newspapers
Reality was not that it was a stable low growth industry
Digitally enabled economy
Contract brewing
Have another brew their beer
Minimal costs to start your own beer, fundamentally lower barriers of entry
Same with video
White label manufacturing
Google, facebook, amazon  figured out distribution for the small players
White label combined with the new digital media allows anyone to make it
Amazon  allows outsource fulfillment, allow us to direct create and make minimal investments on the typical high costs aspects of the business
Unique view of digital world
Amazon allows physical distribution with whole foods
We are in a new technology environment
Growth of Craft brewing  look at association for more info
20% operating profit in north America
Can launch a beer in 50 k investment
Happening in media, products, media and more than beer
Minute as a consumer is very different to the money spent by advertisers
Negative eps revisions, stable ebitda revisions, stock price
There is a disruptive force that not many people recognize
High margin of safety from short perspective
Fundamental reset in earnings power
Rich greenfield

Chris brown Aristides capital

Fermilab vs magic kingdom
Fermilab or Disney world
How much would you pay for this business
Energous corporation a worthless equity hyped to 500 million
Traded 5x float in two days
Low institutional
CEo lies often
Partners who provide validation, apple
Stock promotion – mdb capital group, warrants
Fakenews false and unsketpical media coverage
Why did apple partner with them
Big tech companies like almost free call options
Energous cant compete with apple competitors
Locked up for years
Energous promised rf-based wireless charging at distance
Novel approach
1.5 watts at 30ft, very difficult to do
10k as much power to get 3 meters
Large directional antennas can overcome this limitation (26m transmitting atenna, 17 sq meters receiving)  that is where it is possible
Energous is not using antennas
What is their secret sauce
Pocket forming
Made up the term
Constructive interference  pocket forming
1+1 = 2, wave a + wave b = wave c  cant be done, but that is what they are advertising
Cant cranked up the power because living things will die
FCC approval and false hype and misunderstood
CEO very rosy
How much power did it actually generate
How much energy did the energous product deliver in FCC tests?
The MS 300 did not establish charging signal at any angle when r =95cm
480 mW – 9”
How long would it take your product to charge
If 9” it would take 1 day
This prototype to get FCC approval the can add power right
50 cm it would not work if you are near
Failed FCC safety standards and not been approved
Focused pockets are a lie
Massive energy sent where the device is not is
Microwaves everywhere and tiny amount towards your device
Insider sales up
No viable commercial niche and never will
Powercast is a clone to this company
But at least energous has perfected invisibility
Products never existed, 5 consumer and 1 medical never came to be
The pocket rf energy is constructive interference
Safety limitations, poor efficiency, high costs
Fraud and burning a bunch of cash
Sell long dated calls to play it