UPST Update

As pointed out on Saul’s board and by two of my subscription services, UPST clarified - in an entirely reasonable way, as part of the Barclay’s Emerging Payments and FinTech Forum 2022, the issue revolving around the number of; and reasons for, the huge increase in loans they are carrying on their books.

Basically they said it was comprised mostly (75% or so) of Auto Loans and they not only didn’t think it was that big of a deal but it is something they do when they enter a new vertical; however, they said they wouldn’t do it no more: lesson learned.

Here is what CFO Sanjay Datta had to say:

"In Q1, we did take the decision to step in with our balance sheet and support volume when funding became volatile. And it was in a relatively modest amount. We did sort of $4.5 billion in originations in Q1. And I think this sort of amounted to maybe $150 million.

But I think, look, in retrospect, we were a little bit caught off guard with the visceral reaction by the market to this. And I think in retrospect and certainly in the future, I think the decision is just going to be to accept volume volatility and not weight into the platform with our balance sheet as a stabilizing mechanism.

And so I don’t know. I guess, if anything, maybe that’s the lesson learned, if you will. We’re sort of ramping in real time to a pretty fast-moving situation. I think that we would probably react differently had we known all the questions it would raise about the underlying business model, which to our view, has not changed at all."

Mr Datta will never be mistaken for a dynamic motivational speaker or award winning salesman - but, that perhaps adds more to his believability. Just my take on it.

Now the problem for me personally when they reported, was the dichotomy in the investment thesis whereby am I investing in a Technology company or a loan company? All is forgiven!

That said…UPST, while still in the process of overthrowing the FICO King of Lending, still has the three-headed monster of inflation/economy/and the Fed to deal with; all of which is part and parcel of their reduced Guidance and the share price hit that followed.

Will I get back in? Maybe…maybe not; regardless, not just yet, as I’d like to see the share price put a little distance between it and the economic typhoon battering it.

Just my humble opinion.

All the Best,