Person of interest: Julian Mulcahy
De minimis? de schminimis!
Since Cettire decided to sue a vulnerable person to protect their fragile business model instead of providing a genuine returns function, it is apparent that it is now unconscionable to defend the company. As the first post in a what will become a series, I’ve decided to focus on the enablers, before eventually rounding up the main actors. To paraphrase Paul Keating, let’s do this slowly1.
Pay the piper
Regal feed the street more than any other fund, therefore it would be a brave analyst that came out with a non-consensus bearish call in a stock that Regal were vocally long. Julian at Evans & Partners is not one of those people.
In fact since initiating on the stock in January 2023 he’s only ever increased his target price whilst remaining on a buy call, even as the stock has collapsed.
This probably isn’t a surprise to Julian’s followers, since of the stocks he has written up in the past 6 months, only EOS is not a buy.
For a 3rd tier broker like E&P, this is understandable, you don’t write tickets with hold calls. What is utterly incomprehensible is the attempt at logic in his last note dated 24 May, presumably ironically titled “comparing facts with the story”.
I’ll leave it as an exercise to the reader to point out all the flaws in this Panglossian argument that nothing can possibly harm Cettire, even the things that will quite obviously hurt Cettire. However I will point out one dissonance between the bulls on the US tax changes, which I think may have escaped the attention of the wider market.
There has recently been a bipartisan push to remove the de minimis exemption of $800 per person per day for personal imports, largely driven by representatives’ anathema to Chinese companies such as Shein and Temu. Duties arbitrage has been called out as one of Cettire’s competitive advantages in the past, so how does Julian’s call that it won’t affect Cettire compare to the other bulls on the stock?
The founder’s broker of choice for sell downs has been Barrenjoey. Barrenjoey’s analyst on the stock is Aryan Norozi (overweight, $4.50), who initiated on the stock in August 2023. In that report, he called out the key risks for Cettire. Over to Aryan:
Here Aryan correctly points out that friend of the show Ruslan Kogan’s KGN’s sales fell by more than half after the GST arb was removed, and this is a good case study for CTT. In fact of the 3 scenarios he sees for Cettire, a key feature of the bearish scenario is a removal of the de minimis exemption (along with counterfeit risks!!2)
Indeed if Julian had wanted to work out if a change to the de minimis exemption would likely affect Cettire’s sales, he could have just gone straight to the prospectus, which is really quite clear on this risk to Cettire’s fragile business model:
This absurd refusal to accept the reality that something that is obviously bad for Cettire is bad for Cettire earns Julian the first Person Of Interest Award! Congratulations Julian!
Stripped down and ready to go!
He just wanted a red polo logo