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Adjusting Enterprise Value for Cash, Cash Equivalents, and Venereal Disease

Charlie Munger, Buffett’s long-time partner, and chairman of Daily Journal Corporation (DJCO) was answering shareholder questions today when the subject of crypto came up. On being asked whether he was wrong about buying crypto, Charlie said, “I’m proud that I never invested in Crypto. It’s like venereal disease”. That’s nice Charlie. That’s real nice. But where does that leave us Charlie? Us folks who actually have to calculate the enterprise value of companies like Tesla and Microstrategy - companies that have large amounts of venereal disease Crypto on their balance sheets.

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Hertz: 0-60 in 100 years. 60-0 in 0.5

The following three statements are all true: In November 2019, Hertz went out to investors asking for $750M. Investors, impressed with what they saw, gave the company $900M instead. In April 2020, four billion dollars of Hertz's debt was rated triple-A, the same rating that the US government gets for its debt. Triple-A is as money good as it gets in this world. One month later Hertz went bankrupt. What happened?

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Neiman Marcus' last call

Neiman Marcus is the latest to join a list of growing retailers filing for bankruptcy and they both have something in common – enormous debt burdens from leveraged buyouts led by private equity firms.   As the government rolls out trillions of dollars in stimulus funds, a push by the private equity industry, i.e. some of the same firms that own the likes of Neiman Marcus and J. Crew, to shape the stimulus in their favor has met with only modest success. Why?

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Kraft: A fallen angel

Last week, Kraft Heinz bonds were downgraded to junk status, making it one of the largest “fallen angels” to enter the junk-bond market since 2005! Here are some key points…

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