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Mortgage startup in court, problems with logistics and with the real estate market in the United States.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
A cautionary tale Better.com
Former vice president of the company Better.com sales and operations Sarah Pierce sued her former employer, accusing him of deceiving investors. Probably, you've never heard of Better.com, as well as about Pierce herself, but the story itself does not cease to be interesting for investors., because it touches on the painful topic of finding information about companies, emerged through SPAC education.
Better.com is a mortgage startup: the company through its website writes out loans to buyers of apartments. In 2020, for $ 850 million in revenue, she had $ 250 million in total profit., which gives the steepest final margin in 29,41%.
In May 2021, it became known, that the company plans to go public by merging with SPAC Aurora Acquisition (AURC). But the merger process dragged on., in the meantime, the mortgage refinancing boom, driving the company's business, went downhill, and the company ended 2021 with a loss of 304 million.
In winter, the head of the company Vishal Garg held a meeting with investors and promised, that Better.com will return to profit again in 1 quarter 2022. Pierce and the finance department provided Garg with the calculations., according to which the Better.com could not reach self-sufficiency at least until the second half of 2022, but Garg withheld this information.
He also told investors, what 30% of the company's mortgage loans were issued to customers, who came via the Internet. This is a very good indicator., because a company's online channel is cheaper compared to other marketing channels. It was better, than competitors, and too good, to be true: as reported by Pierce, Garg also overestimated the company's performance here - in reality they were at the level of 12%.
Garg fired 900 employees in Zoom call, and Pierce herself was fired "for that, that a lot of bays".
Not known yet, how will the Better.com's management respond to these allegations?, but, in my opinion, the whole story perfectly illustrates the risks of SPAC: they are not so thoroughly checked, like those companies, which go public through IPO.
More precisely, compared to recent SPAC merges are not checked in any way: SPAC acts as the original issuer and in its documentation it is usually not possible to find anything bad simply because, that there is no operating activity.
When the SPAC finds a legal entity to merge, in fact, there is no IPO, but simply a merger or purchase of another legal entity, and all audits remain generally at the discretion of the SPAC's management.
PACs often become a tool for fraud and deception of investors, and that's why any company, which was an SPAC "maiden name", may be suspicious. Although in fairness I will note, that the way to go public through SPAC is more convenient and cheaper for companies compared to a conventional IPO.
Movers are still needed: what is there with warehouses in the USA
Modern Materials Handling Industry Magazine, dedicated to logistics, published a survey among the heads of logistics companies in America. And here's what he found there.:
- 81% Warehouse wants to hire new employees for the next 12 Months;
- the greatest demand is for warehouse workers — 61%, transport and logistics managers — 45% and warehouse managers — 42%;
- less than a third of managers — 32% He said., that their companies are "more than willing to process the existing volume of orders with the existing composition of employees". Most of them are 62% He said., that will be able to cope with this volume "more or less".
In general, this news is rather good., because they show us, that the early panic of investors about the slowdown in the growth of the logistics sector due to the decline in Amazon's investments (NASDAQ: AMZN) in this area it was somewhat premature.. The logistics sector still has enough gunpowder in the powder kegs., and there is no expected drop in activity there.. So,, you can earn on the shares of logistics REITs.
But its own: the U.S. real estate market is at risk of overheating — or not
The National Association of Realtors of the United States has updated its index of home affordability: he fell on 29% compared to the same period a year earlier. This was facilitated by the growth of mortgage rates., and the rise in real estate prices in the United States.
From all this, it is possible and even necessary to draw a conclusion that, that soon the sector will overheat, because potential buyers, probably, will refuse to buy a home. This, basically, a reasonable enough thought.
The authors of the study Housing Demand and Remote Work established, that the most important reason for the growth of real estate prices in the last few years is precisely the transition to remote work: this factor alone has led to an increase in real estate prices for 15,1%.
I see no reason to count, that the transition to remote will stop in the foreseeable future, so what is it, may be, will protect the US real estate market from complete collapse.
Furthermore, the majority of remote workers are representatives of the highest paid professions - so that, may be, they will even begin to invest free money in real estate on the Russian model against the background of the volatility of other asset classes.. And this will already provide the real estate market with significant support and, maybe, will even contribute to its growth.
In connection with these revelations, I would not discount the shares of construction companies.. And what's more, would take a closer look at REIT shares, for renting out residential buildings.
