2021 | 2022 | ||||||
Price: | 39.00 | EPS | 0 | 0 | |||
Shares Out. (in M): | 6 | P/E | 0 | 0 | |||
Market Cap (in $M): | 240 | P/FCF | 0 | 0 | |||
Net Debt (in $M): | 0 | EBIT | 0 | 0 | |||
TEV (in $M): | 240 | TEV/EBIT | 0 | 0 |
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I wrote up CRSS three years ago. While I still believe in that fundamental thesis here is what's going on now. I had to Jack the ticker to let VIC let me post this.
I believe CRSS is worth between $100 -$200 a share.
Exhibit I
https://www.sba.gov/sites/default/files/2021-04/PPP_Report_Public_210411-508.pdf
Please sage Page 7
Exhibit II
It’s real simple. PPP I went to big bad private equity guys. Maxine Waters and AOC didn’t like that. PPP 2 enlisted Credit Unions and CDFI (CRSS is a CDFI) to get $$$ into LMI (Low to Moderate Income Communities) communities, and to real “small biz”
CRSS teamed with a tech company Blue Acorn to process applications. Treasury gave CDFI a headstart.
Per the above report CRSS, via their sub Capital Plus Financial, has originated 360K loans through 4/11/2021
Using Exhibit II that will generate $2,500 * 360K = 900 million dollars in fees. Assume they keep 2/3, that means 600m in fees, oh and they have a $100 m NOL.
6m shares out. 600/6 = $100/shares + $20 for business = $120/share + ?
I think SBA is very happy because Capital Plus financial has the smallest average loan and likely the highest LMI penetration. F**** U JPM, and BAC
BTW there is still 60 days left in the PPP program.
BTW Insiders own 80% of the shares outstanding
BTW I own a lot of what’s left.
BTW I still think there core biz is worth $20 a share today and $50 in a few years
BTW. They are about to close on a bank deal
BTW Even though the stock was $10 buck on Monday and $40 today, it still a 3-5X from here.
BTW My wife asked if we could get the EPIC Season Passes for next year, and she said they were expensive. I said lets get them! :)
What am I missing?
PPP II
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# | AUTHOR DATE SUBJECT |
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108 | |
Looking at the Q3 financials at period end 7/31/21 (post-dividend), it looks like equity is $44 million. So that $120 million cash from windfall that the company referred to and that people have been referring to here seems to be vastly overstated as a measure of value. I.e. it's not book value or excess cash value, but offset by a bunch of liabilities and/or is just liquidity in the sense of money they can borrow. http://www.crossroads.com/wp-content/uploads/2021/09/CRSS_Q3-2021-OTC-Disclosure-Statement.pdf http://www.crossroads.com/wp-content/uploads/2021/07/CRSS-FQ2-2021-Shareholder-Letter.pdf Is that missing anything? Is there some windfall from Q4 earnings (Q end 10/31/21) that will be coming through? This is a very unusual situation. I can't recall ever seeing a few quarters of windfall earnings like this (non-litigation) relative to the company's size. Thanks. | |
106 | |
The risk, as I understand it (not a lawyer, not legal advice, etc.), would be from the AML requirements of the Bank Secrecy Act which can be pursued via the False Claims Act at the level of "reckless disregard". If the paper is accurate and on the order of 50% of the loans issued by Capital Plus were fraudulent it seems hard to imagine that Capital Plus made much of an effort to check whether the loans they were issuing were fraudulent or not. I don't think saying - well the borrowers told us it wasn't fraud - is going to do much for them if the DoJ comes knocking. Given the incentives and reality of what appears to have occured, at some level of fraudulent activity by customers the bank is culpable and at some (possibly other) level someone is going to care. I don't know if we've breached both those levels but it seems like a real risk. | |
103 | |
It seems to me this stock is trading way too cheap again? The company stated that they would be keeping $120mm of cash from their windfall, which works out to $20/share. The business was trading at ~$10/share before the PPP windfall was on the radar at all. That gets you to $30/share alone. I think they should be earning $12/share in interest at an annualized rate until the PPP loans are forgiven and from what I can gather the smaller the loan the less likely it is to be forgiven at all. It's anyone's guess to but to make the numbers nice and round lets just say they'll get $5 in interest total. That gets you to a $35 stock, which is ~50% higher from the current bid? Anyone disagree with this math? | |
102 | |
did they say that anywhere? I didnt see it. If they dont have enough paid up capital then it cant be a return of capital. But im no tax expert. I sold pre-distribution because of the negative effects of receiving a divy vs cap gain (in canada so short term/long term rules dont apply). | |
101 | |
Isn't the $40 a return of capital/tax free distribution? If so, your cost base would adjust from $60 to $20 ($60-$40 dividend) so if you just sold at $20 following the dividend you would have no gain or loss. And then any long term vs short term would just be based on how long you held from initial purchase.
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97 | |
Due bill date is the 28th which effectively becomes the new record date per Schwab. The ex-date is the 27th (late ex date). In general this happens when a dividend is over 25% of value of the parent security. | |
94 | |
My god, BBG has the ex date as the pay date (7/27) This thing should be down $40. Everyone long should sell it right here!!!!!!!! | |
92 | |
might be trading ex-divy right now. shareholders of record July 19th. T+2 means it went ex last night if I read that correctly. wouldnt want to be the guy buying at 53 if im right | |
88 | |
From the shareholder letter they published last night: | |
85 | |
Trying to frame risk/reward. I see upside to ~$75 based on $20 of core business value post-acquisition (of Rice Bancshares) + ~$50/sh of PPP windfall + ~$6/sh of EPS (1 year of earnings at 65bps spread on PPP loans). For downside I could see $26 of BV as of 2Q + $26 of additional PPP windfall + $6 of EPS (again, 1 year's worth) = $58 per share, then apply 0.75x book to get to $44/sh. Could anyone see this trading at a larger discount to book? I like the alignment here and am willing to bet that the team continues to do smart and shareholder friendly things, so I wouldn't think a large discount is warranted. Overall I think the market was pretty efficient to price this in the $50s ahead of yesterday's news. A lot has been de-risked, but the $100/sh+ upside case has also seemingly been taken off the table. | |
83 | |
Here is a link to CRSS' OTC quarterly report which provides more detail than the press release: https://www.otcmarkets.com/stock/CRSS/disclosure - It looks to me like they earn ~750 of OP per PPP loan (150m divided by 200k loans), equivalent to 30% of the $2,500 PPP fee from SBA. - The 200k figure was disclosed in the quarterly - $750 of OP per PPP loan on the remaining 272k loans works out to ~204m of OP - At 25% tax, this is an incremental 153m NOPAT or ~25.6 per share.
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79 | |
https://www.sba.gov/sites/default/files/2021-05/PPP_Report_Public_210523-508.pdf
ill add that per reddit loans are flowing and complaints about operational flow have largely subsided. | |
78 | |
Looks like the new PPP data is out and there was a big jump for Capital Plus, by about 90k. Prestamos also had a jump of about 88k new loans. Maybe more importantly is that most of the other top 15 banks have been flattish the last couple of weeks. CPF & Prestamos accounted for about 30% of the loan $ allocated this week. There is approximately 19B left in the program to be approved. Seems like a good chance that CPF and Prestamos could hoover up a meaningful percentage of this. | |
77 | |
Posts on reddit confirm the partnership between Womply and CPF. https://www.reddit.com/r/EIDLPPP/comments/nftarj/guess_what_guys_capital_plus_got_another_deal/ Did Womply partner with any listed banks which will give us some clues wrt how the $2500 was split?
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71 | |
That guy is quoting my post below, but that is not my Twitter account. Just for the record. | |
69 | |
Can anybody ask CUBE how it works? I still need to work through their results but I got the impression that they were making a lot more money originating their own loans. Also, I dont think it can be 1% given the amount actually earned by CUBE. | |
68 | |
If I am reading this document correctly, and I may not be, I think the 1% SBA cap is mandated by the act. i.e. they are not allowed to pay more than 1% I'd love help here. Bottom of Page 72. It looks like this document is based on the law that was signed on Dec 27, 2020. Also there was lots of litigation on PPP Agent fees under the first draw. https://www.sullcrom.com/files/upload/SC-Publication-Another-Court-Dismisses-PPP-Agent-Fee-Action.pdf | |
67 | |
Wow. Great news. Plus, if Bafana's information is correct and prestamo started with blue acorn "after" 4/27 and you have them as pausing on 4/30 (at 9am no less!), then prestamos only had 3 days (or possibly even 2.5 days?) of operating as a sort-of overflow for CPF. Let's assume "over" 500,000 and "over" means 520,000 and $8.3B. Could Prestamos have gotten 140,000 worth 1.7B in loans in 2-3 days? Seems unlikely if it took CPF 2-3 months to get 380,000 and $6.6b. Seems like good chance CPF got some piece of this. This, plus the fact that Prestamos is paused and blue acorn is still touting that there is $8B left (i.e., that they are still encouraging folks to apply now, and almost certainly have been accepting applications since the prestamo pause on 4/30), suggests to me that the probability of the 380,000 num going higher has increased. | |
60 | |
Thanks for the update on this. While the PPP is closed, the "league tables" as you call them, only have $258b approved, not the full $292B. Is it likely there is just a lag with the published weekly reports? If so, there is still about $34B left to be allocated to the "league tables", though I’m not sure if the $8B which would go exclusively to CDFIs from the news article is included in that number or not? Regardless, there seems to be an opportunity for the 380,000 num to go higher, perhaps significantly so. I agree with your interpretation that the fact it went up 20,000 on the last report is a significant positive. What we hope doesn’t happen is an “Itria type” decline, so every week that goes by with the num staying flat or goes up is a big positive. Can you provide an updated viewpoint on where you think the windfall ultimately lands? Or some parameters? for example, if we assume the following "worst case" scenario, with 1) the base business is only worth $10, rather than $20 (as you suggest), 2) we get an "Itria-like" decline from 380,000 to 250,000 loans and 3) the split is similar to what CUBI outlined with only about $1176 per loan net to CRSS, by my math, that should work out to a value for CRSS of $52.50 as a "worst case", still above current quote. But, even a "middling case" where the base business is worth $15 (rather than your estimate of $20), we stay at 380,000 loans and CRSS gets a 66.5%split of the $2500 fee (even though you seem to have done enough research to say you expect it to be more than 2/3rds), that would work out to $15+ $87.33= $102/share. The upside case would be $20 for the base business + loans going higher than 380,000, plus splits being even better than 2/3rds net to CRSS? (In my calculations, I am assuming the 100m NOL and a 20% tax rate on anything above a $100m windfall). Your thoughts on the above? Plus, when do you expect the bank acquisition to close and is this the primary driver for the base business value going from $10 to $20? Lastly, when do they collect the $2500 fee - upon apporval or upon the SBA funding the loan? | |
50 | |
its EBT basically but they're including net interest income for the life of the loan, and the projected fee from second draws before end of May in that number I believe. | |
44 | |
Banks are odd. I always got a kick out of the bank that everyone sends their Coinbase wires to
N/b about Cross River from wikipedia (dated for sure)
Maybe we should incorporate a Cross Rock bank | |
40 | |
Numbers not out officially, but, use this link to see them now https://www.sba.gov/sites/default/files/2021-04/PPP_Report_Public_210425-508.pdf
- No new loans approved for Capital Plus. - Total 411k loans written, 111k by top 12.
What is happening? Lots of complaints on reddit?
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31 | |
Great collaborative effort. On the revenue share, CUBI addressed it on their 4Q call. For the current PPP round 3: - Basically, CUBI expects to collect 8/17th of the $2,500 gross origination fee, which works out to $1,176 per sub-$50k loan - CUBI states that $2,500 gross origination fee represents 17% of the average loan size (for their portfolio of sub-$50k loans) - This implies an average "sub-$50k" loan size of $14.7k - CUBI will split the origination 50/50 after taking out a 1% agent commission: i.e. CUBI will take 8% of the loan value (17% - 1% agent fee)/2 = 8% - $1,176 is 8% of CUBI's average loan size; equivalently it is 8/17th of the $2,500 gross origination fee
Starting with the PPP. I'm just kind of curious, a couple of things here. Maybe, one, do we think -- how do we think about the revenue sharing this time around? Is it going to be similar to the prior model? And then I know this round should be smaller, but you guys seem to have more partners. And so just kind of curious as to how you're thinking about maybe sizing this one up versus the rounds last spring? Sam, do you want to take that? Sure. Absolutely. Steve, so from a revenue share perspective, we're at or above where we were last round in terms of shares with partners and partners can also include servicing, et cetera. And as we think about the originations going forward to give you a perspective, I think I mentioned 80,000 loans we earned about just under 2 percent on those loans that were below $50,000. The gross origination fee would have been 17 percent on those loans using the $2,500 minimum structure. And our share would have been 8 percent after a 1 percent agent's fee -- agent fee and a 50 percent split. | |
28 | |
Does anyone know if the company is thinking about uplisting? Considering the windfall the company is about to experience in concert with the merger, it may not make sense for the company to be OTC traded anymore? Anyone talk to the company about this? | |
27 | |
Looks like the parent company is this Qualytics or it associated (if you go to Qualytics.io it redirects to blueacorn). Here are some linkedin results: https://www.linkedin.com/search/results/people/?currentCompany=%5B%2211797062%22%5D https://www.linkedin.com/in/michaelcota/ | |
26 | |
Chuplin - thanks for the interesting idea. Spent the weekend and early today doing some digging here and wanted to share the takeaways as it may be helpful to others here and I still have some missing pieces someone may be able to help with.
Based on the below, my math is currently 360k loans (assume no more loans) * $2,500/loans * 30 - 50% fee = $270mm - $450mm of fee proceeds to CRSS. If you apply the NOL and then take that number net of taxes I get $40 - $65 /share from PPP loans. Plus the $10/share of the core business and you end up with $50 - $75/share of value today. There is also probably another $5+ of upide from NIM, but harder to quantify so I am excluding that. So it seems like a decent investment today from here and a potential home run if Blueacorn can find another partnership to bring in another 200k+ applications.
Call #1 - Anonymous person associated with Blueacorn lead gen
Call #2 - CRSS IR
Call #3 - Call with the President of a local community bank
Anyone have any ideas on tracking down blueacorn?
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25 | |
disappointing, but not clear whether it kills the thesis or not. One thing I noticed is that "Harvest Small business" seems to have come out of nowhere and is now on the list. This suggests that maybe the SBA counts these in large batches and/or the banks like Capital Plus and Harvest submit these in large batches. Would be nice if we didnt just have the top 15, but actually had the full list. Anyone knowif full list is avialable? That way we could see how much of the $7B in total which was added this week came just from Harvest. It must be at least 900m since Harvest is now at 3.4b and the most it could have been at last week is 2.5B (the cutoff for making the top 15 last week). | |
18 | |
Otto, Thank you for putting a point on this. I had not figured that piece out. But I will share an ancedote that supports your thesis. I had google alerts set up for Blue Acorn and got one that referenced the Real Estate Agents. I sent to a broker friend of mine in Austin. He got on the site and applied, and so did his wife, and to his suprise, 10 minutes after my text said the process was simple. He was tentatively approved for $10Kish I think in PPP loans. (I don't know if he was approved), but he then pushed the link over to the Austin List Serve for Real Estate agents, and like 3K agents probably applied with the next 24 hours (I am making up numbers), but to illustrate this must have grown like wildfire in that same way across other cities, and then across DoorDaash, Truck Driver, and Gig workers as you allude. Let's see what Monday's report holds! | |
17 | |
I did a little bit of digging on this today and while I did not find slam-dunk evidence to validate Chuplin’s thesis that the 360,000 number is real, I did find what I think may be some interesting incremental information that likely validates that this number is way more valid than the 18,800 number across 8 institutions on slide 4 and that this is very likely going to be a very large windfall for CRSS. I am triangulating between three different pieces of information: the most important is a significant change that took place in the PPP program on March 5th, 2021, a change that likely explains why CRSS’s sub has come out of nowhere to the #4 position on the list over the last 6 weeks; 2) a press release in which blueacorn (this is CRSS’s PPP loan processing partner) partnered with two orgs to funnel PPP loans from up to 1 million real estate agents to Blue Acorn/Capital Plus Financial and 3) some information on the blueacorn site itself.
First, Perhaps most importantly, the reason I find the 360,000 number credible is that the PPP program changed on March 5th in a way that I think plays right into Blue Acorn and CRSS’s wheelhouse. Take a look at these press releases (you can find many others as well): https://www.pymnts.com/loans/2021/ppp-gets-around-to-gig-workers-more-smbs/
https://helloskip.com/blog/independent-contractors-will-get-higher-ppp-loans-with-new-rules/
Basically you will see that on March 5th, the Biden Administration made it much less confusing and much easier for independent contractors such as gig workers and self-employed people to file for PPP loans. There are approximately 50-60 million gig workers in the united states. There are 1.5 -2.0 million rideshare drivers alone. There are over 10 million people classified as “independent contractors.” I think what is going on is that beginning March 5th, there has been a tsunami of gig workers and self-employed, sole proprietors, independent contractors etc. (you can find articles speaking to truck drivers, "sexual health" workers and others being told they can qualify as independent contractors for PPP loans at aorund this time - early March). Many (most?) of these loan applicants are from low income and disadvantaged communities who have learned about this essentially free money from the press coverage around the biden admin changes and from FB advertising by blue acorn (some of the testimonials on the blueacorn website mention blueacorn’s Facebook ads) and they have flooded blueacorn and CRSS with loan applications. That is why we didn’t see CRSS in the top 15 list until early April: things got rolling in early march, snowballed through the month. cuple that with an approx 10-14 day processing period for approval, suggets to me that the timing of all this makes a whole lot more sense. Here's also a press release from march 8th which speaks to two trade orgs funneling PPP loan applicants from the real estate industry to Blueacorn/Capital Plus (CRSS): https://rismedia.com/2021/03/08/mooveguru-partners-with-blue-acorn-to-provide-ppp-loans/. This likely added an additional source of up to one million loan applicants, at about the same time (early/mid-march). Lastly, take a look at the blueacorn site, which is CRSS’s partner in the PPP program. It is pretty clear that CRSS is the ONLY bank partner that blueacorn has, so I think it’s fair to say that all the loans that blueacorn is processing are going to CRSS. The reason I say this is because if you go to this page (https://blueacornreviews.com/) and you click the icons under “our backing banks”, blueacorn lists its four partners. Click on any of those four partners and you are redirected to Capital Plus. Blueacorn touts that it has helped more than 100,000 customers in 2021. While this does not say “360,000+” (the number from the SBA), I am guessing it just has not been updated recently, but having a number like that (100,000+) casts a lot of doubt on the notion that there have only been 18,800 loans across 8 CDFIs. It seems much more likely that many of Capital Plus’s 360,000 loans is being categorized under one of the other categories by the SBA. [I tried to use the wayback machine to see if this number was the same or lower a few weeks back, but the wayback machine didn’t capture this webpage].
So, in short, I think there is good qualitative evidence for why there was a dramatic surge of applications post march 5th in the populations targeted by Blue Acorn and CRSS and given that the PPP will continue through 5/31 (with continued processing of applications through the end of June), and given the (likely) out-of-date, but still large number cited on the blue acorn website for the number of customers it has processed, I think this all likely gives some further evidence for why CRSS could have vaulted into the number 4 position so rapidly, why the 360,000 number is real, and why it could very well go meaningfully higher. | |
16 | |
https://en.m.wikipedia.org/wiki/Cross_River_Bank also in league tables |
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