#41 - Casper and the Dangers of Yogababble

Be Careful when Words and Numbers Diverge

Like a third martini, some things are best avoided. When it comes to investing, its best to disregard yogababble-heavy pitches.

NYU professor and fellow Chipotle enthusiast Scott Galloway coined the phrase yogababble to describe the flowery, aspirational language that some companies use to dress up their brands. When Casper dreams of becoming the Nike of Sleep or WeWork aims to elevate the world's consciousness, this is yogababble. Galloway writes that:

When firms are still searching for a viable business model, the temptation to go full yogababble gets stronger, as the truth (numbers, business model, EBITDA) needs concealer.

Bed-in-box monger Casper’s recent investor presentation is jam-packed with good examples. Exhibit A:

Source:  Casper Investor Presentation August 2020. Emphasis added. 

Try imagining Jamie Dimon presenting a what makes JPMorgan Chase special slide. You can’t. 

Here’s another example from Casper:

Source:  Casper Investor Presentation August 2020. 

Lastly, this comes from Casper’s annual report: 

As the wellness equation increasingly evolves to include sleep, the business of sleep is growing and evolving into what we call the Sleep Economy. We are helping to accelerate this transformation. Our mission is to awaken the potential of a well-rested world.

Sure sounds good, but what does it mean? 

Casper sells a bed-in-a-box. So do 175 other companies. Despite acting, looking, and talking differently, Casper sells a commodity product. Winning in a commodity market typically requires being the low cost producer. Economies of scale or vertical integration are how you win. Not words. With cash balances dwindling and the business likely to operate at a loss into the foreseeable future, Casper is likely to learn this lesson the hard way. 

Source: Casper, The Economic Times, and Microsoft Paint. 

Tech news site The Information recently reported on a few of Casper’s struggles. The most interesting part of the article were details surrounding Casper’s acquisition talks with Target:

According to one person with direct knowledge of the acquisition talks, Target—not Casper—walked away from the deal. Target executives were uncertain about what precisely they would be buying through an acquisition of Casper. Its skills seemed to be more in marketing than in manufacturing products, most of which it relied on contractors to build. 

That's a damning admission from a company that’s had a good look under the covers. While passing on the acquisition, Target did invest in Casper at a valuation around $750 million. Casper, now public, currently has a market cap of $330 million. 

When words and numbers tell different stories, listen to the numbers.

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