TWTR - Valens Credit Report - 2021 10 08
Credit markets are overstating credit risk, with a cash bond YTW of 2.862%, relative to an Intrinsic YTW of 1.382% and an Intrinsic CDS of 42bps. Meanwhile, Moody's is also overstating TWTR's fundamental credit risk, with its Ba2 credit rating four notches below Valens' IG4+ (Baa1) credit ratingIncentives Dictate Behavior™ analysis highlights mixed signals for credit holders. Management has low change-in-control compensation relative to their average annual compensation, indicating they are not incentivized to accept a buyout or pursue a sale of the firm, reducing event risk. Moreover, most management members are material owners of TWTR equity, indicating they are well-aligned with shareholders for long-term value creation
Earnings Call Forensics ™ analysis of the firm's Q2 2021 earnings call (7/22) highlights that management is confident events like the Olympics or the World Cup act as an opportunity to showcase the site's improvements. In addition, they are confident Twitter works to help people find what they are looking for
Twitter provides products and services for people, organizations, advertisers, developers and platform and data partners. The company's product, Twitter, is a global platform for public self-expression and conversation in real time. The company's mobile application, Periscope, lets anyone broadcast and watch video live with others. The company's products and services for advertisers include Promoted Products such as Promoted Tweets, Promoted Accounts, and Promoted Trends. The company's products for developers and data partners provide tools and public application programming interfaces to build applications and other products that utilize Twitter data and syndicate and distribute Twitter content across their properties.
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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