Analyst Read: $FUBO Bear Case

Kerrisdale's bear case.
(II Studio)
(II Studio)
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Today, let’s look at the bear case for fuboTV ($FUBO) as told by Kerrisdale Capital. 

  • Kerrisdale announced that they are short the stock at $38.00 per share, which valued the company at about $6.0 billion. 
  • As of today’s stock price of $28.00 per share, $FUBO is valued at $4.3 billion.

Kerrisdale’s data shows that app downloads have collapsed in late Q4 2020. 

  • Their data shows a steep drop off in app downloads in December, which emphasizes fuboTV’s reliance on live sports and that it has no contracts. 
  • They believe that Q3 2020 was an unusually good quarter for fuboTV because, because of pandemic delays, this was around the start of the NFL, MLB, college football seasons and the NHL Stanley Cup and NBA playoffs.
  • Kerrisdale believes this shows that their normalized growth is not inflecting to a higher level.
  • Beth Kindig doesn’t see as many “red flags” in her data.

They believe there are red flags everywhere with $FUBO’s reverse merger with FaceBank and capital raises.

  • They point to the litany of actions to fund their deep losses, such as raising preferred stock, merging with FaceBank and then selling it back to its former owner, getting a secured revolver, taking a PPP loan, and aggressively selling common stock and warrants.
  • Kerrisdale also believes they will sell more equity and dilute shareholders once their lockup expires tomorrow (Jan 7).

They believe that fuboTV’s core subscription business is unprofitable and will not grow advertising.

  • They point to $FUBO having negative gross margins and that their content costs are highly variable and don’t scale the more subscribers join the platform.
  • The media conglomerates dominate sports rights and make it so fuboTV can’t offer materially different packages from competitors like YouTube TV.

The only way for fuboTV to become profitable is to sell a lot of advertising at higher rates or launch a profitable sports book.

fuboTV is undifferentiated from other MVPDs and won’t be able to see any advertising advantages over other players. 

  • A source at Trade Desk sees no reason to be optimistic about fuboTV’s ability to increase advertising rates.
  • fuboTV is too small and has no content in order to command higher levels of advertising inventory.

They do not believe fuboTV will ever run a sports book.

  • fuboTV’s deal with FanDuel was terminated after a year for unknown reasons.
  • Kerrisdale believes fuboTV’s acquisition of Balto sports is a PR stunt, as Balto has 3 employees and a failed test product.
  • In order to develop sports betting capabilities, fuboTV would need to raise and spend hundreds of million of dollars. 
  • Furthermore, they believe the TAM for attaching sports betting to, let’s say, 2 million subscribers is immaterial (sub $50 million in annual revenue).

Lastly, they believe that the valuation is absurd.

  • They believe fuboTV will keep growing and assume 1.5 million subscribers by 2025. 
  • They also assume ad revenue increases ARPU by $11 per subscriber, and I believe they are assuming subscription business is still breakeven.
  • If this happens, the company would have $175 million in EBITDA, which discounted back today should give fuboTV a fair value of $10.00 per share.
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