Whitney Tilson Short K12: Value Investing Congress Presentation ~ market folly

Wednesday, September 18, 2013

Whitney Tilson Short K12: Value Investing Congress Presentation

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


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.

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