The Wrap: Uni-corns | Stake

Harvard belongs in the Fortune 500, Volkswagen’s loss leader is its proudest achievement, and the infamous tale of WeWork retold.

5 Most Traded Education Stocks On Stake

      • 2U (TWOU) +18.9% in the last week
      • Chegg (CHGG) +4.8%
      • Pearson (PSO) +4.4%
      • Hailiang Education Group (HLG) -0.3%
      • Tal Education (TAL) -3.0%

Uni-corns

Billions on the balance sheet, thousands of customers paying tens of thousands to a subscription-like model annually, zero tax obligations. Where do I invest?

US universities are some of the most efficient money-generating machines around. While they operate under a ‘not-for-profit’ label, and comparing universities to listed companies is not realistic, it does show the sheer wealth of the sandstone institutions.

Unsurprisingly, Harvard has the biggest balance sheet (endowment) of any institute. US$40b sits in their endowment fund. In 2019, before the pandemic affected operations, the college did US$5.5b in revenue, 35% of which was generated from returns on the endowment. This revenue is greater than companies like Western Union, Hilton Hotels, and Harley Davidson generate. Their balance sheet assets sit just short of McDonalds, and Hewlett Packard while eclipsing Mastercard.

Yale, Stanford, Princeton, and MIT unsurprisingly round out the top 5. The King Abdullah University in Saudi Arabia holds a US$20b in its endowment fund, the largest of any non-US university. The institution only has ~1000 postgraduate students enrolled and is the first mixed-gender university in the country.

Bugatti

A new age arms race. Volkswagen’s Bugatti Veyron was every 12-year old’s first crush for over a decade. One of the world’s fastest road cars, it reaches speeds of 407km/h. A record at the time.

An engineering masterpiece. A US$2.6m price tag. Priceless free marketing that comes with the ‘world’s fastest’ achievement. You’d think the car was a licence to a money printer.  In reality, each unit is estimated to cost US$6m to produce and was sold for less than half of that. Despite being discontinued in 2015, why was the Veyron produced in the first place?

Volkswagen is a public company with a responsibility to their shareholders. It can be argued that they are.

The Bugatti provides value in two ways. Firstly, it is a marketing machine. For foreseeable history, a generation will remember VW’s Veyron as an engineering marvel. People are obsessed with speed and action. When Felix Baumgartner jumped from the edge of space, it is estimated that Red Bull gained billions in free publicity for the US$30m they poured into the project. The Veyron could have had similar benefits for VW and any future Bugatti projects.

Secondly, the intense research and development that goes into developing such a car can trickle down to their more common vehicles. Every component in the modern Golf was once a high-end, expensive and advanced piece of technology from ABS braking, which was first reserved for aircraft, to automatic gear shifting.

Loss leaders are no new concept. We have written about Costco’s model in the past. The wholesaler barely breaks even on products like its rotisserie chickens while it routinely sells petrol at a 20% discount to competitors all in an effort to drive subscriptions to its store.

Top 5 Gainers

  • Vaxart Inc (VXRT) +49.82% in the last week
  • The Aaron’s Co (AAN) +32.51%
  • Proofpoint (PFPT) +30.70%
  • TrueBlue Inc (TBI) +25.00%
  • Novavax (NVAX) +24.11%

Top 5 Fallers

  • Fortuna Silver Mines (FSM) -26.01%
  • Medpace Holdings (MEDP) -12.80%
  • PQ Group Holdings (PQG) -12.55%
  • Dorman Products (DORM) -11.98%
  • Amkor Technology (AMKR) -11.59%

Trade Teaser

5 siblings are given $100 from their grandmother to share amongst themselves. Each sibling gets $5 more than their younger sibling, except for the youngest. How much did you gest receive? Answer to last week – do not trade. Only trade if you have a 2. Explanation here.  

What We’re Listening To: WeCrashed 

If you live in a big city, chances are a lifeless WeWork office is sitting relatively empty in your downtown precinct. What was once meant to be a US$50b IPO is now a billion-dollar loss machine as the company regroups and plans its future.

WeCrashed tells the story of the trendy co-working spaces as they soared to unicorn status and before the illusion swiftly wore off. Great content from the BusinessWars team.

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