Consensual Hallucination wiped out investors, but Wall Street got the fees.
By Wolf Richter for WOLF STREET.
During the biggest vacation boom ever that gave rise to terms such as “revenge travel,” vacation rental company Vacasa, which had gone public via merger with a SPAC in December 2021 at a market cap of $2 billion, miraculously kept generating bigger and bigger losses, the more its revenues grew.
So now, the revenge travel boom is maybe reverting to something slightly more normal, and vacation rentals have sprouted up everywhere in thick numbers, and so there’s lots of competition for vacationers.
In its earnings report last night, Vacasa disclosed a loss of $141 million, including an impairment charge of $84 million. For 2023, it had booked a loss of $299 million, up by 68% from the $177 million loss in 2022. For the period 2020 through Q1 2024, its total losses reached $851 million.
In its letter to employees last night, it said: “The industry continues to adjust to softening demand for domestic non-urban vacation rentals, as well as increases in the supply of short term rental units. We believed the headwinds we were experiencing were beginning to ease, and kept a close eye on our targets. As the year has progressed, it has become increasingly apparent this is unlikely to be the case and we are in for another difficult year.”
So there’s more competition out there, and travelers that during the pandemic piled into rentals in rural vacation spots – a Vacasa specialty – have reverted to piling into big-city units; and when they do book a rental at Vacasa, the price per night is less than the company forecast, it said. And it’s concerned about declining bookings going into the peak vacation season.
Revenues in Q1 plunged by 18% to $209 million. For the year 2023, revenues had dropped 6% from the record year 2022, to $1.12 billion.
Revenue declines aren’t the end of the world. But they are the end of the world for a hype-and-hoopla company that had roped in private and public investors with promises of endless massive growth that would somehow whitewash over its ballooning losses. They’re the end of the world, because now, there won’t be anymore investor funding to provide fuel for the cash-burn machine.
So the company is running low on cash and doesn’t have much runway left: As per its financial statement last night, it had cash of $109 million and “restricted cash” of $202 million as of March 31.
In its shareholder letter last night, it announced more restructuring steps, including laying off 13% of its remaining workforce, or about 800 people; this includes laying off 40% of its corporate and central operations folks, and about 6% of its field staff. It hopes that the reorganization will reduce its “cost structure by over $50 million in 2024,” which will still not be enough to contain the losses.
The company had already cut 320 jobs in February, and 1,300 jobs in 2023. As of December 31, 2022, it had approximately 7,900 employees globally, according to its annual report. By December 31, 2023, it was down to 6,400 employees. After the layoffs so far this year, it will be down to about 5,300 employees.
The stock is a classic SPAC joke. The company had announced in July 2021 that it would go public via merger with the already publicly traded blank-check company, TPG Pace Solutions.
The merger was completed on December 6, 2021 and raised $340 million for the company to burn – or as the company put it at the time, to “enable us to help accelerate our execution on our long-term business plan of further enhancing our technology capabilities and products, adding more homes to our platform, and improving the vacation rental experience for all stakeholders.”
At the time of the SPAC merger, the stock [VCSA] was trading just a little above the SPAC price of $10 a share. But Consensual Hallucination, as we have come to call this phenomenon, had already begun to fade, and within days, the shares kathoomphed.
On October 3, 2023, with shares trading below 50 cents, and under threat to get delisted, Vacasa engineered a 1-for-20 reverse stock split, where each 20 shares became 1 share, and the price multiplied by 20, so to around $9. This way, the original SPAC price of $10 in December 2021 became $200.
The idea is to get the share price above the $1 minimum listing requirements and keep the stock listed for a while longer. Vacasa wasn’t the only one. There has been a magnificent boom in reverse stock splits in 2022 (288 reverse splits) and in 2023 (494 reverse splits), for a combined total of 782 stocks, many of them recent SPAC and IPO stocks. They have joined the other heroes in our increasingly packed pantheon of Imploded Stocks.
Since then, the share price continued to collapse. Today, the reverse split adjusted shares dropped another 10%, to $5.89, having lost about 97% of their value since the SPAC merger two-and-a-half years ago. Note the 30% kathoomph a few days after the completion of the SPAC merger in December 2021:
Wall Street doesn’t care how quickly these true believers get cleaned out – the faster the better? But they do care about the fees in the runup to the SPAC merger. And the firms that got to collect the fees on the SPAC deal were:
For Vacasa:
- P. Morgan Securities (as lead financial advisor)
- PJT Partners LP (as financial advisor)
- KeyBanc Capital Markets (as capital market advisors)
For the pre-merger SPAC TPG Pace Solutions, as capital markets advisors:
- Deutsche Bank Securities
- TPG Capital BD
- BTIG
- JMP Securities
- Needham & Company
- Oppenheimer & Co.
- Northland Securities
For the PIPE (Private Investments in Public Equity where institutions plow money into the deal), as capital markets advisors and placement agents:
- Deutsche Bank Securities
- P. Morgan Securities
- Goldman Sachs
- TPG Capital BD
In addition, various law firms also got their slice of the pie. Only investors got cleaned out.
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I used to get all sorts of Vacasa mailings about turning my house into a vacation rental.
Ummm, Vacasa, I live here. I’m not about to rent this house to a bunch of vacationers I don’t know.
So, cue up the world’s tiniest violin. I don’t feel the least bit sorry for this company.
AZ Slim
I’d bring my own bike if you’d rent me a room.
Vacasa wasted postage on multiple letters to us for our 6 month rental minimum Hoa community townhouse.
Thanks WR for this report.
It is sad to see how these STRs are destroying the fabric of family and kid oriented neighborhoods.
Priced out the young families/workers by turning single family neighborhoods into hotels…
And destroyed the quality of life there.
Beach neighborhoods in FL are the current battleground.
Looks like Hawaii is about to ban AirBNB entirely.
jon/Caveman – an irony of the AirBnB economic impact on our tourist-heavy (Sonoma Coast) area over the last decade has been the slow, but relentless, closing of many of the restaurants and small businesses that served that tourist trade (and fortunate locals) due to the loss of proximal, previously-affordable, housing for their employees, thanks to the many long-to-short-term rental conversions…
may we all find a better day.
The solution is to zone specific areas for STR and other areas for residential only.
I don’t think STR s are necessarily a bad thing because it filled a void
ru82 – …around here, at least, those horses slipped far away before anyone realized they were gone (locking the barn door effect…and just whose barn doors are subject to locking, at that?).
may we all find a better day.
I use Vacasa to manage a property and have been very satisfied with their service and the volume of bookings. Perhaps my experience is an outlier, but it’s odd to me, from my very limited perspective, they are burning so much cash.
Could be the concept is great but they suck at managing their money.
having rented a couple times using airbnb, vtro
we end up trying to bypass
given their high fees
now we’re pretty much out of airbnb market given everyone does it
getting ready for summer vacay
revving up 5th wheel – my mobile office
Seems Vacasa might be increasing its management fees to stay alive. Lots of Airbnb properties are managed by Vacasa and owners are paying fees to them, I think.
My fee hasn’t changed, but others may have a different experience. I pay Vacasa 27% to advertise and manage the property. Vacasa advertises in many ways, including on their own site. If the property rents through a third party, like Airbnb, then Airbnb collects a ” channel fee”. The fee varies by the advertiser, something like 3%.
The thing I like the most is Vacasa manages the listing in multiple platforms and ensures it doesn’t get double booked, etc. They also constantly adjust the price throughout the year based on demand.
Self managed hosts can use software to manage housekeeping, avoid double bookings, take reservations, handle deposits, automate door codes, and automate dynamic pricing. All for less than $100/months.
But it does require work to manage your own guests.
There should be nice margins for vacasa at 28%, and their software and flow was excellent when I used them on a trip to Hawaii. But you can’t maintain a local office and staff everywhere in a growth mode and not grow.
ChS, Duke,
Well, either method is hard earned money, unlike those lazy slobs in the tents or cars.
I should maybe give this “shelter business” some more thought, yes?
most local property managers do everything that Vacasa does, including everything that you mentioned with lower booking fees charged to the guest, higher average daily rates on average and a personal relationship.
“The thing you like most” is table stakes for any decent professional vacation property manager.
Do people really think that people want to spend $5,000 a night to rent a vacation cottage when a few years ago an acre of land in that area was selling for that price?
Let hotels be hotels. I’ve seen Newfoundland cottages being rented for C$20,000 a month during the early 2022 heydays. A house used to sell for that a decade ago…
Like Arizona Slim, I used to get regular Vacasa mailings to my mountain town residence. And like Arizona Slim, I’m not interested in renting my house.
My very residential neighborhood has many vacation rental; I’d estimate somewhere between 10 and 20 percent. The town started restricting these about two years ago so no more. During COVID most were rented out on a regular basis but in the last 12 months most sit empty for weeks or even months at a time. Most of these houses are priced at $450+ per night (plus fees, taxes, and cleaning) so renting a house for even a few days isn’t a cheap proposition.
While it hasn’t happened yet, it’s beginning to feel here like the vacation house rental has run its course.
About time…u play u pay..
Just when you thought it was safe to go out at night.
“Who robbed you,” It was a SPACK. !!
Even the savy investors get taken down by the SPACK.
friend pointed out that last minute bookings are getting better on airbnb/etc.
gotta be flexible and ready to go on minutes notice
More American exceptionalism?
I usually don’t rent STR as the price you see on the screen is deceptive. They add lot of extra fees on top of nightly price.
Unless, you are a big family needing few bedrooms,,, I don’t see any reason to rent STR.
Hotels for me.
I like the way you solve these tough problems……wish I was better at it.
Speaking of RE, will any realtors out there explain how a home owner can eliminate prior years listing history from view. Im looking at a home that was marketed last year show up as a new listing this week. The sale and listing history on both Redfin and Zillow omit any mention of last year’s listing.
3020 18th avenue CT, Gig Harbor, WA.
Good question!
I also noticed Redfin would eagerly list page views and market stats at the top of the search results page. Now you have to dig for it.
I get the sense sime sellers and realtors are trying to hide demand weakness.
This type of deception is just going to make buyers more suspicious and careful. When you can’t trust the stats, it’s time to take a step back.
Two follow on questions / observations:
1) In my mountain town in California I’ve noticed that many on the market properties no longer have “For Sale” signs in front. Anyone else notice this and have any idea why?
2) I’ve mentioned that I follow a few areas in Montana; the state recently decided that the last selling price is no longer public information. The last list price is shown however. Anyone see this elsewhere?
Regarding #2, I believe Utah is the same.
Texas restricts house selling prices to only licensed brokers.
MT has always been that way (I don’t know exactly when that started, but it’s been that same way for well over a decade – the entire time I’ve been keeping tabs.)
Arizona has every sale recorded with affidavit of value
it’s how they assess property taxes
I’ve noticed more missing price and property tax records missing too, all over. I assume the recent pandemic flippers are especially vested in you not knowing their house price is double what they paid in 2022.
I wonder if the recent agent commission changes are providing some incentive to hide more.
I look in one non-disclosure state. There are many states that do not consider prices public record. It works to the advantage of realtors, sellers, and shady commercial interests. It requires state law changes.
I sold my house in Olympic peninsula two years ago. Dude fixed it some, listed it about 40 days ago, then cancelled the sale, apparently because of too many lowball offers.
All that comes up on ant search engine, is my old pictures and listing details. I ran across a small story that said a person can request all their MLS data to be taken down by listing sites.
I don’t think the realtor does that but maybe an owner has that option. It’s a mystery and also potentially misleading, because it is in public domain and should be part of a property history.
I’m fairly sure a property has to wait a certain period before being re-listed.
I’m curious about this too, and I was also surprised the new guy used my old yard pixs, that was sketchy.
Very fascinating what tricks these slimeball RE types try to pull. I see a lot of that when they can’t unload a house for above top dollar, and then they don’t want people to realize no one wanted it before when they try to relist at the same price.
I have a not-as-good-as-a-realtor-would-have-but-better-than-most real estate account where I can still see all the prices that Redfin, etc. have removed. So that stuff doesn’t disappear, it’s just hidden. Also, in MD, you can search tax records to find lots of that information as well, but not all of it.
You can get a property transaction record from any title company. In pulled it but can’t upload to this post. BTW – property records are public information.
IIRC, removing pricing, etc., is an option in the MLS listing GUI on the realtor/agent side. You can also have the listing picture history removed on request. I’ve done the picture removal as no one needs to get a blueprint of the floorplan of my house purely by stitching the pictures together.
do you know how to remove your house from google earth?
Not sure why it doesn’t show there.
If you want to see it, Realtor.com shows it under property history.
Date Event Price Price/Sqft Source
05/09/2024 Listed $875,000 $307 NWMLS
03/04/2024 Listing Removed – – NWMLS
02/01/2024 Price Changed $899,900 $316 NWMLS
11/22/2023 Relisted $931,510 $327 NWMLS
11/09/2023 Listing Removed – – NWMLS
10/23/2023 Listed $899,000 $315 NWMLS
But, if you put the address in your browser and scroll down – caldwell banker has $950,000 for 7-28-23. What happened to that?
People remove listings for all sorts of reasons. A Windermere mansion was listed May 8, but that very same day the owner was arrested (floridapolitics + ucf vice chair arrested) and the listing disappeared May 11. Hmmm. In his mugshot mr. mills looks . . . broken. Did they leave his tesla at the park? How do those operations work? Why do these things keep happening? Same old story – Things are often not as they appear. Either that site will get a lot more business or in a week it will have a new name. Whack -a-mole.
I’m fascinated by inflection points, primarily what causes mass hallucinating, social excessive exuberance to run itself into the ground.
I’ve not familiar with Vacasa, but it’s a fine example of a dumb idea, or at least an idea that could only have been exploited during a period of extreme loose financial conditions, and a tsunami of highly gullible morons.
The dotcom era obviously was fueled by the same type of magic hype –making claims to be connected to the newest cool thing. Seems as if AI has learned from that playbook… Tons of hype, no revenue and promising the moon to anyone with excess cash.
I think this bubble was different, in the wide spectrum of everything being insane, including, vacation rentals.
Maybe this time is different — and instead of a mass crash, related to an inflection point, we see the state of resilient consumers using their brains to restrain themselves. Nah …. not gonna happen, where’s the next Vacasa?
I used Vacasa to rent a home for a week in western NC. It was a terrible experience. The pictures showed a hot tub and a full size pool table. The hot tub was broken and the pool table did not exist. In addition, the flat screen TV and the gas fire place did not work. Customer service with Vacasa was a joke. They basically told me, it was not their problem. And refused to lower the $1600 weekly rental fee. Not a well run company.
Same here. Rented a place in far northern Vermont, and the house was poorly maintained. Customer service said they’d send someone out to resolve issues and never did. We decided we wouldn’t rent with them again.
I had an issue w Vacasa as well. Listed the place as a bungalow but it was an apt above a garage. They didn’t disclose it and refused to refund my money within 2 days of paying for it and 3 mos before I planned on being there. That was in 2021 and haven’t used a vacation rental since
So much human suffering here.
NBay – my grandson refers to his (bit-of-drama-queen) older sister’s issues as: ‘…first-world problems…’. Best.
may we all find a better day.
Thanks for educating us on the ridiculous investment thesis of the SPAC concept and the lack of transparency for the banks PE and other financial institutions that sold these. I wish the investments were limited to accredited institutions and investors. But alas they are sold to the sheep in the public. Thanks again .
It’s not a loss if you don’t sell. I’d imagine a lot of “investors” who got burned are chanting that timeless coping mechanism as we speak.
These apac companies. The people who create and run these spacs usually do quite well even when their spacs go under, maybe true? Here’s 340 million to upgrade/ expand and help grow your bank account.
It’s the frenzied investors who take the loss.
Knowing how to create a spac and getting the funding for start up then the same characters arrive for further spac fleecing of the bug eyed gambler.
For Home Toad. I had never heard of Vacasa, and got curious about the CEO pay. Not bad. It only took him 2 years to earn many multiples of what I did from my 54 years in the workforce. A google search found the following:
“Vacasa’s CEO is Rob Greyber, appointed in Sep 2022, has a tenure of 1.67 years. total yearly compensation is $2.63M, comprised of 22.8% salary and 77.2% bonuses, including company stock and options. directly owns 0.36% of the company’s shares, worth $555.29K.’
“Robert Greyber Chief Executive Officer Total Compensation $13,384,472” (I assume that is total compensation to date).
This is the American capitalist/Wall Street business model. How can anyone here be surprised.
Start a company, get three or four rounds of funding from VC’s or investment banks at higher and higher valuations regardless of nonexistent profits or potential profits.
Take the dying company public so the founders and VC’s walk away with many multiples of their investments and advisers/bankers/lawyers get big fat fees.
Then unload stock to lazy, fomo investors who are really gamblers in disguise. Maybe sell a few hundred million in stock to pension funds and to other hedge funds (quid pro quo).
While the company is burning up and self destructing, the vultures move on to the next deal and get ready for a new group of suckers and victims.
I still wonder how many are index fund investors and helplessly along for the ride?
Also, the pros have to have the fund’s “balancing” time dialed in.
But some workers don’t have many choices in their mandatory “gamble for your retirement” plan.
At least interest is up, but also in a fund, managed by fund managers.
Nice tight wealth extraction game we have going here.
But then that’s what this website is about……winners and losers.
Good, although depressing, article and comments.
Someone is being fleeced here, is it the public or is it the pensions, index funds and other institutions (ultimately in many cases on behalf of the public)
Ultimately, it’s the general society that gets fleeced. We, the taxpayers, have to provide the social safety net for the knuckleheads. I’d rather see much stricter financial regulation, early in the game, rather than wipe the bottoms and pay for the medical care and shelter of the stupidisimos down the road.
Most funds like stock and pension funds seem to make “honest” mistakes, lots: e.g., read news about a fund called black boned or black heart or black pox or black puck or something similar. Tip: ask for the lubricant before letting them service you. LOL
For many years I went to a hardware store in NE Portland that had these guys as tenants in the office space above it. They had their own parking lot but it was never big enough, so their employees were always filling up the street spaces and parking in the tiny hardware store lot. They had a constant stream of tow-trucks towing them away but they were too lazy to park a few blocks away, and never seemed to learn. Good thing I always rode my bike to pick up hardware. These guys deserve what they get for years of bad behavior.
“These guys deserve what they get for years of bad behavior.”
If you get hundreds of millions of dollars of free money from investors, and your job is to burn this money as fast as possible, and so you overpay everyone who works there, including with stock-based compensation plans, you’re promoting “bad behavior.” There was a lot of this.
So, obviously, except for the lucky few, most retail investors get crushed by speculating on SPACs and other such crap.
Note that Trump wants Government employees to be able to invest their retirement savings in SPACS. So they can lose it and he can gain?
Is that you Joe?