Upstart Thoughts

Upstart is still my largest position so I have though a bit about what I believe poses the largest risk to next quarters report based on what I know at this point in time. For me it comes down to two things. First their growth slows. They have given positive guidance for the next quarter so I’m not overly concerned about that at this time. The second is fraudulent activity impacting them again. I decided to write to their investor relations and asked if they could give me anymore insight into the “large coordinated effort” to obtain loans fraudulently from Upstart. I stated that I assumed a small number of fraudulent loans got through and asked what happened to these loans.

With in a few hours I got a response from Jason and he gave me permission to paraphrase his email and use the quote from Dave so here goes - I learned that Upstarts fraud rates are extremely low for their industry, 0.4% of volume per their last earnings report. This is Dave’s quote “we’re pretty happy that we have not suffered significant losses from fraud in our history and feel very good about where our fraud rates are and have been.” I also learned that occasionally Upstart will repurchase fraudulent loans from their partner banks. I really like learning this because to me it builds faith in their product and should make it so much easier for their sales team. I came away feeling some what reassured. If Upstart either misses on their guidance or if fraudulent activity is an issue again next quarter then I will lose some faith in management and reduce my position. For now they have earned my respect and have decided to hold my current allocation.

That said be warned that I am just an average investor with no where near the level of skill of many on this awesome board.

Kindest Regards,