RMBL pitch:
– The largest powersports dealership group in US.
– COVID benefiting retailer of highly discretionary products whose customers are largely dependent on financing their purchases.
– Overearning and overleveraged – expected to trip financial covenants in 2023.
– The industry is returning to a normal state where there is plenty of supply.
– Sales and margins are expected to contract.
– Customers are pressured by increasing financing costs (monthly payments on powersports unit have doubled or more).
– With deteriorating financials, RMBL is set to bust Oaktree loan covenants.
– Oaktree is an experienced distressed for control lender making it more likely that if RMBL were to bust its covenants that the Company would be pushed into bankruptcy.
RMBL valuation:
– Powersports have historically traded at 4-5x EBITDA.
– At base case fwd EBITDA of $70m, equity is worth zero.
Exp. gain: Not specified.
Full write-up (free guest account required):
https://www.valueinvestorsclub.com/idea/RUMBLEON_INC/8029372107