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UBER Valens Credit Analysis – No Traded CDS, Base Case iCDS 64bps, Negative Case iCDS 72bps, 2025 7.500% Bond YTW of 6.904%, iYTW of 0.984%, B2 Rating from Moody’s, XO (equivalent to Baa3) Rating from Valens, Moderate Refinancing Need

June 24, 2020

  • Credit markets are grossly overstating credit risk with a cash bond YTW of 6.904% relative to an Intrinsic YTW of 0.984% and an Intrinsic CDS of 64bps. Meanwhile, Moody’s is materially overstating UBER’s fundamental credit risk with its highly speculative B2 credit rating five notches below Valens’ XO (Baa3) credit rating

  • Incentives Dictate Behavior™ analysis highlights mostly positive signals for investors. UBER’s compensation framework should drive management to focus largely on margin expansion and top-line growth, which should lead to Uniform ROA improvement. Meanwhile, management members hold material amounts of UBER equity relative to their annual compensation, indicating that they are likely well-aligned with shareholders for long-term value creation

  • Earnings Call Forensics™ analysis of the firm’s Q1 2020 earnings call (5/7) highlights that management is confident their actions have resulted in a $1bn+ reduction in annualized fixed costs, that their Eats business should continue to grow due to the coronavirus pandemic, and that they put transit options on their app

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