Scott Kennedy's Response to Ready Capital Short Article
By Scott Kennedy
Hi subscribers, I had a chance to read over a recent RC “short” article that was provided on Seeking Alpha. I have a handful of thoughts in relation to this article/contributor.
Disclosure: Scott Kennedy and Michael VanLoon (Colorado Wealth Management Fund) are long Ready Capital (RC).
History and Position
1) If you take a look at this contributor’s history, he/she is notably negative/a “short” author. In particular, it would appear a short REIT author. So, I would just consider this notion before even reading the analysis.
2) This contributor currently has a short position on RC. As such, again, I would consider this notion prior to reading this analysis. Simply put, NOT an unbiased opinion. Even though I personally have a position in RC, I ALWAYS provide both positive and negative aspects to a company’s operations. This clearly was not the case within this article.
Low Probability Outcomes
3) This contributor is using assumptions that are biased/overly negative in my professional opinion. Sure, as continuously stated, RC isn’t “perfect” (to be honest a good deal away from perfect). Remember, one of the main objections of RC is to invest in distressed investments so there’s always going to be performance/credit issues. However, the underlying assumptions this contributor is using, especially in their assumed/projected BV projection, is overly bombastic/have a very low probability of actually occurring in my opinion. Again, there’s a reason for this. This contributor is trying to “shock” readers to prove their opinion/narrative.
Blending Data with Personal Assumptions
4) In my opinion, the contributor “blends in” factual data/tables with data based on that contributor’s personal forward assumptions without clearly identifying between the two. Simply put, I believe this is done, at least partially, on purpose to confuse readers; especially more novice readers. I always try to distinguish between the 2 (factual data and forward modeling). There is really nothing factually “new” provided by this contributor when compared to prior, historical analysis. There was also nothing new that was brought to light that has deviated my forward modeling of RC. Again, RC will very rarely look “pristine” simply based on the assets/investments management makes. Outside ordinary originations and SBA activity, RC continues to actively look for distressed investments and advantageous pricing.
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