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Walnut Ave Value Profile picture
@walnutavevalue
Apr 8, 2021 • 23 tweets • 8 min read • Read on X
Scrolly
Long $MVBF:

At the surface, this is a small W. Va. bank trading around 1.7x TBV.

But a deeper looks shows that it's a fintech play with exposure to Credit Karma, crypto (Kraken) and most importantly igaming (Draftkings, Fanduel, etc)

Gaming deposits grew 70% from Q3 to Q4! Image
Around 2014-15, MVB was growing loan portfolio at 20% CAGR, but the deposits were not growing.

So CEO Larry Mazza and team went towards fintech as a way to get low cost deposits.
Larry: "We get deposits nationally but still loan locally”...

They are the bank for U.S. operations of Tipico, Score (tie up with Penn National gaming), and Betfred. MVB also has clients in FanDuel, DraftKings and Credit Karma.

Total 22 gaming client as of now
They are now the 21st bank in the US in terms of number of accounts... all acquired through partners with low CAC. Image
So there's fast growth at cheap price here.

There's optionality on the tech side - MVB has invested in fintech startups as well as bought startups (GRAND app, Flexia).

If these startup investments work out, that's great for investors. If they don't, MVB can acqui-hire Image
MVB has an entire Fintech division which is growing fast - added 140 FTE to 400 existing last year. Allows full remote work.

Job postings give some hint -- GRAND app & Flexia payment for integrated online/offline payments for gaming to transfer money across gaming apps ImageImage
There are deals here with payment processors, and referrals from existing igaming customers to get new customers Image
There are unknowns here on fintech side because MVB hasn't actively promoted it and some things are still cooking.

But Larry (CEO) has a definite view of the future and is creating it. While doing so, he's betting big - owns 6% of stock. Even borrowed money to exercise options Image
Larry lives in West Virginia. Makes $1-$2M a year and has $22M in MVBF stock. I'd say he's got half of his net worth in it. Big bet!
In December, he plunked $2.5M to exercise options in December, while MVBF was trying to buy back ~20% of stock through dutch auction Image
When asked about what fintech banking-as-a-service co. he admires, Larry said Live Oak Bank and nCino (nCino is 7-8x Live Oak size). He hinted that it's the reason the Fintech division is separate from MVB the bank

h/t to @hareng_rouge for bringing this to my notice and for discussions
Here's Credit Karma GM talking about savings account opened with MVB bank Image
Based on the Flexia payments team, seems that MVB bought this company with existing business they do with Mexican casinos.. So the solution exists, it's applying it to US casinos and online gaming customers. Image
"Acquisition of Trabian will significantly enhance our expanding Fintech vertical" - Larry

Trabian CEO: "We’ll also play a role in MVB’s developing venture space, an area on which I’ll be particularly (but not exclusively) focused."

Trabian customer is BillGo (Larry is on BoD) Image
Sold 4 bank centers and their associated high cost deposits.

Larry: "latest in a series of opportunistic activities undertaken by MVB"

businesswire.com/news/home/2021…
Lot of moving pieces at MVB:
1. deposits from gaming apps, ramping commercial & govt lending
2. igaming / crypto play with GRAND app to transfer money
3. tech for banks with Trabian acquisition + Victor startup
4. Casino play w/ Flexia card
5. other fintech investments ImageImage
Interesting bits from latest 10-Q:
1. Flexia is about getting team & exclusive license for US/ Canada for product that already sells in Mexico (integrates with casino Win systems)
2. Reading between the lines- paid mostly cash to acquire Trabian
(Larry doesn’t want to give stock) Image
The future is about getting more fees (treasury services, debit card partnerships, etc) Image
30 igaming customers
Chartwell: 50 ppl compliance
Paladin: fraud consulting

Fintech now called "Edge ventures"
1. GRAND: bank app for gaming, crypto & cannabis
2. Flexia: cashless casinos
3. Victor: BaaS, Credit Karma (4M accounts in 1.5 yr)
4. payments

Credit Karma, thru MVBF, has 3.8 million accounts. They don’t break out how many of 110 million accounts are US based... but MVBF + Credir Karma accounts have room to grow Image
Credit Karma + Intuit TurboTax are using tax refunds to acquire more users for their bank accounts (powered by MVBF). So MVBF is going to have a pop in deposits

businesswire.com/news/home/2021…
mvbbanking.com/mvb-edge-ventu… Image
👀 Image

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More from @walnutavevalue

Walnut Ave Value Profile picture
Dec 25, 2020
I was still in high school in 2000, so obviously wasn't investing.
But the more I read, the more I realize it wasn't just a using "eyeballs" for valuation problem.

Thread below:
First up Xilinx

They were the leaders (and still are) with ~40% share in FPGAs. The end market was growing. They were growing fast as shown in this chart for fiscal year 2001 ending in March 2001
The CAGR was lot higher in closer to 2000 - it was growing 50%+. Until 2001 that is. That's when revenues dropped 30% due to market correction.

Xilinx - an innovator and leader in FPGAs - did not reach same stock price until 2018!
Read 22 tweets
Walnut Ave Value Profile picture
Sep 7, 2020
I am long Nintendo.

It's fascinating setup because it's a great product, but it's an open question if it will be a good investment.

A thread on both sides here:
First, the long side

@aaronvalue does a great job highlighting the bull thesis here. tl;DR: Nintendo has great IP and they could monetize it in various ways.

mindsetvalue.substack.com/p/mama-mia-nin…
Second, culture of Nintendo limits what path they're likely to take in the future.

@ballmatthew: "some are driven by perfecting their specific process. Not scaling it."

Nintendo is likely to continue to be themselves, not what investors expect

matthewball.vc/all/onnintendo
Read 15 tweets
Walnut Ave Value Profile picture
Mar 26, 2020
No one knows the impact of COVID yet because it's unknown and unknowable.

Reading Zeckhauser and @AnnieDuke is a better preparation for investing in this scenario than the predictions of economists.

Also, focusing on analyzing a single business at a time helps a bit.
" In the fog of pandemic, action must come before perfect information"
Most Buffett-fans don't talk about it, neither does Buffett talk about.

Zeckhauser does: Buffett is a master player when it comes to investing in the unknown and unknowable. One example is Earthquake reinsurance Image
Read 12 tweets
Walnut Ave Value Profile picture
Feb 15, 2020
$EVI

Quick summary of last QTR results:
GM% down due to initiatives to gain market share
Higher SG&A as they try to modernize their subsidiary operations

CEO called it "short term tradeoff for longer term growth"

/1 Image
Why can they make these short term tradeoffs?
1. Because the majority owners are insiders
2. Most stock options for employees vest at retirement

Folks on fintwit say they are looking for management with long term focus, but lot of digs at $EVI results

/2
The one legitimate criticism is "Where is the cash flow or EBITDA?"

It's hard to tell with so much "buy" activity.

So we have to look back before the buy activity started. Distributors are mid-single digit businesses as seen in Steiner Atlantic statements below

/3 Image
Read 11 tweets
Walnut Ave Value Profile picture
Dec 29, 2019
Shipping thread:

There's been a long bear market in shipping rates. And new ship building activity dropped post 2010. And more than half of the shipyards close

/1
If we look at the sub-segment of tankers, and specifically clean tankers, in the last 5 years supply has gone up in terms of dead weight tons. In 2019, the deadweight tons went up by another 6 million, but the TCE rates have still gone up a lot.

/2
Further, demolition activity for tankers dropped in 2019 because it was high in 2018 (181 tankers) and the TCE rates for both dirty and clean tankers was high in 2019.

What this all mean? There's inflection now where supply is (finally) constrained

/3

hellenicshippingnews.com/just-4-vlccs-s…
Read 15 tweets
Walnut Ave Value Profile picture
Apr 14, 2019
Thread - examples of steep drops in wealth from not managing risks esp. in business with operating leverage

Reichmann wealth collapsed 90% due to the huge bet on Canary Wharf when real estate demand / pricing dropped and credit was hard to get /1
Next up: flashy salesguy Erik Bautista who lost 90%+ of his wealth in one year. His investors also lost it all because he lied about OGX offshore oil potential. Here's an article from 2013 that talks about it. /2
Perhaps the craziest saga is of Sean Quinn - who went from being the richest in Ireland to filing for bankruptcy. He used leveraged instrument to bet on 25% shares of Anglo Irish bank - the bank with really loose lending standards- prior to 2008 housing crisis. /3
Read 7 tweets

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