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My Worst Trade: PLBY Group $PLBY
Company
PLBY Group $PLBY is a leading pleasure and leisure lifestyle company and owner of the Playboy brand.
In February 2021, the company went public for a second time through a SPAC merger.
Source: BBC
Thesis
I made my investment one month after the company went public on the back of the following rationale - Playboy was ranked 17th most powerful licencing brand, $400 of already contracted future CFs (80% GM), existing shareholder base plus management will own c. 66% of the combined entity and there will be no warrants outstanding.
Valuation
The EV of the company was $413m and it was trading at 10.3x EV/ 2021 Est. EBITDA (25%-42% discount to similar companies).
Developments post-investing
The last 2 years the Execs have made numerous adverse decisions - shareholder dilution and asset write-offs.
Source: Koyfin
Lessons learned
The ‘Hail Marry’ option has been triggered to try and challenge the extremely profitable OnlyFans model with an alternative creators’ platform.
What lessons I have learned? As Stanley Druckenmiller (featured in “The New Market Wizards”) said regarding one of his worst trades in the days of the 2000s Tech bubble:
“You asked me what I learned. I didn’t learn anything. I already knew that I wasn’t supposed to do that … So, maybe I learned not to do it again, but I already knew that. “
Source: Amazon
Disclosure: This is not an investment advice and the author is not an investment advisor. All statements express personal opinions based on own financial and business analysis. The content is for informational purposes only. No statement of opinion is an offer or solicitation to buy or sell the financial instruments mentioned. Securities trading involve risk and you might lose your capital and/or incur other damages. Investors should make their own research and consult their registered investment advisor or financial advisor before taking any investment decision. Any unauthorized copy of this post or its contents is illegal.
Right there with you, I got suckered into this one. In fairness, I did tell myself at the outset this was a speculative position, so thankfully I never doubled down.
@investmenttalk Sizing the position is a double line not be crossed with such type of companies. And also its all about management, management, management ... nothing wrong with the brand.
@kostofff Yep agreed! Sizing could have made it considerably worse...
@investmenttalk Yes.
@kostofff 100% you hit the nail about why it failed to execute.
@joeyhirendernath There is always a weak link somewhere.
I love the “what did I learn” part…
Nothing. I already knew I wasn’t supposed to do that.
I guess if we try and go even more meta… one thing I have learned is that I should account for mistakes I will make. Prepare with more of a buffer, because you will do what you shouldn’t on a regular basis.
@nathanworden Correct and it's all about experience (personal and from other people). Mistakes will be made by everyone in the future but they should never be such that will affect someone's future lifestyle.
Great post Todor. Lessons learned. Don’t speculate :)
@stockopine Correct. It's all about the risk/reward proposition.
@kostofff exactly.
I followed the company for a while and can see why the discussion of a change was promising. Would you mind sharing the % of your portfolio your position was?
@joeyhirendernath Sure, 0.2%. With such type of investments you always have to keep sizing to a minimum and it always relates to the risk/reward profile.
@kostofff Agreed, that's exactly the reasoning of a prudent investor
When the multiple seems low around the IPO it is probably because the company over earned -> great moment to sell company shares.
Great post, thanks for sharing your experience!
@arny_trezzi Sure. There are always ways to find excuses. I think it's a weak management team.
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