MTCH - Valens Credit Report - 2023 05 23
Credit markets are overstating MTCH's credit risk with a YTW of 6.657% relative to an Intrinsic YTW of 5.427%, while CDS markets are accurately stating MTCH's credit risk with a CDS of 225bps relative to an Intrinsic CDS of 191bps. Furthermore, Moody's is materially overstating MTCH's fundamental credit risk with its speculative Ba2 credit rating five notches below Valens' IG3- (A3) credit rating.Incentives Dictate Behavior™ analysis highlights mostly positive signals for credit holders. Management's compensation framework should generally drive them to focus on all three value drivers: margins, turns, and growth, which could lead to Uniform ROA expansion and increased cash flows available for obligations. Furthermore, most management members have low change-in-control compensation relative to their annual compensation, indicating they may not be sufficiently incentivized to pursue a takeover or accept a sale of the company, reducing event risk for creditors.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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