TRIP - Valens Credit Report - 2022 03 28
Credit markets are grossly overstating credit risk with a YTW of 6.175% relative to an Intrinsic YTW of 3.365% and an Intrinsic CDS of 125bps. In addition, Moody's is overstating TRIP's fundamental credit risk with its speculative Ba3 credit rating four notches below Valens' IG4 (Baa2) credit rating.Incentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management's compensation framework should drive them to focus heavily on top-line growth and margin expansion over time, which could lead to Uniform ROA expansion and higher cash flows available for servicing debt. Moreover, management members have low change-in-control compensation indicating they are not incentivized to pursue a buyout. Lastly, although most management members do not hold material amounts of TRIP equity relative to their annual compensation, CEO Kaufer's significant ownership indicates he could convince other NEOS to align with shareholders for long-term value creation.
TripAdvisor is an online travel company. The company operates a travel platform that connects the travelers with travel partners through content, price comparison tools, and online reservation and related services for destinations, accommodations, travel activities and experiences, and restaurants. The company manages its business in the following segments: Hotels, Media and Platform, which provides services such as click-based advertising on Tripadvisor-branded websites, subscription-based and display-based advertising, and other services; Experiences and Dining, which provides information and services for consumers to research and book activities, attractions, and restaurants in travel destinations.
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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