The most important question for View Inc (NASDAQ:VIEW) now is: Will they survive without raising capital long enough to make it to the end of an accounting restatement?
Q2 2021 hedge fund letters, conferences and more
VIEW's 10-Q Filing Delayed
VIEW just filed notice with the SEC that it would not be able to file its 10-Q by the required deadline, due to an internal investigation into its accounting practices. Specifically, its policy for warranty accrual is being looked at by its board's audit committee. While this may result in a restatement for the company, VIEW is deeply unprofitable to begin with, so we believe that the main issue for the market is not with reported financials. For VIEW, this accounting blowup actually creates a much larger problem related to its balance sheet.
Accounting investigations take a long time to resolve. In many cases especially when a delayed 10-Q is involved, these investigations lead boards and auditors to conclude that financial restatements are needed. Restating financials is a surprisingly difficult task that, even for well-staffed companies with robust accounting teams can often take upwards of a year. Some examples include WAGE (whose restatement took approximately one year to complete), SMCI (took longer than one year and resulted in a delisting from the exchange), and GVA (restatement took nearly one year).
In our experience, when a company gets to the point where it is unable to provide its earnings and has to delay its 10-Q due to an investigation into past accounting practices, there is a solid - we would say greater than 50% chance, speaking unscientifically - that it will end up needing to restate earnings. Some companies do get this finished more quickly - EFII required smaller accounting adjustments that took only a matter of months, for instance. Unfortunately, we would note the June 2021 departure of VIEW's controller as one sign that VIEW might not be in a position to have a particularly easy path ahead. Another, as we detail exhaustively in our report, is the fact that VIEW is built on a culture of misrepresentation and hyperbolic promises. Accounting malfeasance is often borne of situations like this, and such malfeasance doesn't hold up well under heightened scrutiny by auditors.
However, all of this is mostly academic until we consider that VIEW burns hundreds of millions of dollars in cash each year. Per our report - detailed on our website at jehoshaphatresearch.com - VIEW has very ambitious plans ahead to deploy capital and grow its (money-losing) sales, plans which we believe will greatly accelerate the rate at which cash flows out the door.
Stuck In Accounting Hell
Should VIEW find itself stuck in "accounting hell" for the next year, it will be effectively prohibited from raising capital (who would invest money in a company that doesn't have current financials?). We think that lack of access to the capital markets would kill this company, as its only basis for survival over the past 15 years has been an unending supply of increasingly naive investors available to show up and dilute the prior ones.
We urge investors to sharpen their pencils on VIEW's cash burn, spending plans, gross margins, and revenue estimates, and then consider what happens if returning to the capital markets is foreclosed upon for the foreseeable future. We also urge investors to review other situations involving public companies who delayed their 10-Q filings due to accounting investigations and see how long those usually take. And of course, we encourage everyone to read our short report on VIEW, available at our website, www.jehoshaphatresearch.com, where we explain why this is one of the worst businesses in the world to begin with.
Article by Jehoshaphat Research
