When a crypto-meltdown collides with earnings reports.
By Wolf Richter for WOLF STREET.
Upstart Holdings, an AI lending marketplace, reported a debacle afterhours on Tuesday. Revenues plunged 31% to $157 million, even as operating expenses jumped, producing a net loss of $56 million, compared to a profit a year ago. The company partners with lenders to use its AI software to make consumer lending decisions, and it originates consumer loans, and the loans on its balance sheet nearly tripled year-over-year to $700 million. The company slashed its forecast for Q4. Earlier this month, it laid off about 140 employees who processed loan applications.
The funny thing – the reason we’re even paying attention – is that after its IPO in December 2020, at $20 a share, it became a meme stock and spiked by 1,900% to $401 intraday on October 15, 2021. On May 9, 2022, it entered into my pantheon of Imploded Stocks when the stock [UPST] collapsed by 45% in afterhours trading, to $42, down 90% from the high. Torpedoes be damned, dip buyers jumped in and drove the shares up again over the pivot summer, before it all came apart.
Today, shares plunged 24% in afterhours trading to $14.47, down 96% from the high. Of course, after the preceding collapse, that last 24% dip can barely be seen. These are truly spectacular free-money bubbles and busts (data via YCharts):
CarGurus, a new and used vehicle shopping website, was inducted into my pantheon of Imploded Stocks on Tuesday afterhours when it plunged 23.7%, after having already dropped 3.2% during the day, to an all-time low of $10.50, down by 79% from its recent high in February 2022.
The company had gone public via IPO in October 2017 at $16 a share. Even after the plunge, the company still had a market cap of $1.2 billion. Unlike nearly all of our heroes here, the company did make net profits in the years through 2020, but then started booking some losses. Today it reported a 91% jump in revenues, as the company switched from a listings website to a “transaction-enabled” site. It reported net income of $19 million.
But results missed expectations for the quarter, and it slashed guidance for Q4 revenues to $300 million at the top end, when analysts on average expected $468 million. And its guidance for adjusted earnings per share was about half of expectations (data via YCharts):
Affirm Holdings, the most hyped Buy Now Pay Later (BNPL) lender, reported earnings – you know what I mean – and in afterhours trading on Tuesday, its shares plunged 15.1% today, to $13.28 at the moment, a new all-time low, and down 92% from its high in November 2021.
It reported that it lost $278 million in the quarter, on $361 million in revenues. “As you will see in our numbers, we posted another strong quarter,” the company said with perfect cynicism in its shareholder letter.
The company went public via IPO in January 2021 at $49 a share amid immense hoopla. By October 2021, shares hit $176.65 after which they plunged. The company has lost gobs of money every year. Over the last four fiscal years, plus its first fiscal quarter ended September 30, it lost $1.66 billion. Revenues jumped, on the Silicon Valley model: the more you sell, the more you lose.
It lowered its full-year forecast and revenue guidance and disappointed with its guidance for its second fiscal quarter, blaming “the continued and pronounced slowdown with a particular large merchant partner,” likely Peloton. And shares plunged further. Even after this 92%-off discount, Affirm [AFRM] still has a market cap of about $4 billion (data via YCharts):
During the day…
Lyft, reported earnings – you know what I mean – Monday afterhours, and on Tuesday shares kathoomphed 22.9% to $10.90, a new all-time low.
On the first day of trading following its IPO, the shares opened at $87.24, and then spent the day plunging 10%. “IPO investors tried to unload while they could,” I mused at the time. At today’s closing price, shares have collapsed by 87%.
It reported a loss for Q3 of $422 million. This brought its cumulative net loss since 2017 to $8.0 billion. That a taxi enterprise could lose that much money is just mind-blowing. That anyone would have ever bought this misbegotten stock is even more mind-blowing, because the losses aren’t a secret. But like I said before, the free-money virus that has been circulating since 2009 has turned investors’ brains to mush:
The Binance-FTX-takeover drama following the 80% plunge of the FTX token in 24 hours, and the liquidity crisis at FTX and its affiliate Alameda Research because the value of the FTX token had collapsed and turns out suddenly that Alameda Research had a huge position in it, the plunge in cryptos generally with Bitcoin down about $2,000 at $18,100 currently, and the plunge in everything related to cryptos, such as stocks of crypto miners and crypto exchanges – all of it provided for a lot of drama during the day.
This was peppered with headlines, for example, about the CEO and founder of FTX: “Crypto billionaire Sam Bankman-Fried’s net worth could shrink by over $13 billion,” which apparently would still leave him with a couple of billion, down from the crypto miracle peak of $26 billion. This stuff just vanished when the cryptos plunged. Truly big numbers, but it’s just cryptos they’re playing with, and so fine.
There are other investors in FTX that are looking at a wipeout too, the usual suspects, “including Softbank Vision Fund, Singapore wealth fund Temasek, and Ontario Teachers’ Pension Plan, who sunk $400 million into the exchange at a $32 billion valuation in January,” according to Bloomberg.
Neither Binance nor FTX nor FTX’s affiliate Alameda Research are publicly traded companies, so there isn’t much disclosure, outside of a tweeted bailout-takeover announcement between Binance and FTX to “help cover the liquidity crunch” at FTX.
But it had a big impact on related stocks.
Robinhood Markets got sucked in because there had been rumors since June that FTX, with its limitless crypto super-powers, was exploring a possible acquisition of Robinhood. Sam Bankman-Fried already owned about 8% of Robinhood. But with FTX collapsing, those dreams are gone.
Shares [HOOD] plunged 19% during the day to $9.74, wiping out some of the dip-buyer frenzy since the FTX buyout rumor started in June. Shares are down 88% from the peak in August 2021:
MicroStrategy, the dotcom-bust survivor and enterprise-software-provider-turned-into-leveraged-bitcoin bet, plunged 20.5% on Tuesday, to $211.84, down 84% from the peak:
Coinbase Global [COIN], a crypto exchange, plunged 11% during the day and afterhours to $50.45, down 88% from its high in April 2021, as the FTX collapse was threatening the entire crypto space, and exposing how fragile, interconnected, and concentrated the whole thing is.
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