Broken Business Sold

Qurate Retail dumps money losing Zulily and instantly reduces leverage ratios and improves EBITDA and Free Cash Flow

This is a name that has done pretty poorly since I first covered the stock. It was owned by Michael Burry at one point which got it on my radar. I like to look at 13F filings from investors I respect and attempt to do a reverse analysis of the situation to see why they could have bought the name in the first place.

Since my original write-up, I don’t think much has changed with the thesis besides the valuation getting blown out. The stock has tanked and it is trading like the company could file for bankruptcy. The market valuation has dropped somewhere in the 50% mark since I first covered the name, but the enterprise value hasn’t really budged. This is what happens when you invest in companies with significant debt loads.

Yesterday after the market close the company sold off one of their segments. I highlighted in a prior writeup and also in the Telegram channel that I thought this segment could get sold as it was moved to corporate and hemorrhaging cash. The management team also mentioned they could start selling non-core segments at their investor day presentation, if you were tuning in.

As I mentioned in prior writeups, this is a risky bet. The company is controlled, there is significant debt loads and it is a melting ice cube where the core customer is slowly moving away from the platform. This name could very well go to zero if the new management team doesn’t turn around the company. I have sized this small where if the name goes to zero it doesn’t kill me. But if the team turns it around it can be meaningful given the leverage with the equity compared to the overall debt.

Let’s dig in…