We're posting up notes from the 2013 Value Investing Congress in New York. Next up is Whitney Tilson of Kase Capital. He presented a short of K12 (LRN).
Whitney Tilson's Value Investing Congress Presentation
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Short K12 (LRN)
His largest short position.
Near its all-time high.
Says shorts have cost him
and his investors "a fortune" over the past 4 1/2 years.
Online learning in 33
states.
Bull case: 32% revenue growth over last decade,
expected to grow another 16% revenue and 32% eps over next year. Ave rev/student
rising. High parental and student
satisfaction. He admits online education
can be an excellent option for some students. Product is fine, not a fraud.
Valuation short,
basically. Trades at 50x earnings,
but growth is now slowing, and EBITDA margins are under pressure. (Looks
seasonal though?). Asks why
they don't use a big accounting firm.
Aggressive accounting to capitalize its software and curriculum
development costs. Says shift is
to a growth at any cost mentality. Says their pass rates are
getting worst, because they are taking more at-risk kids.
Embedded below is the .pdf of Tilson's slideshow on K12 (LRN):
Be sure to check out the other presentations from the New York VIC here.
