Ann: Trading Update, page-91

Nick, the market isn't suddenly bearish the stock because the share price has gone down. Investigations by fund managers and the AFR in early 2024 alleged that consumers were being charged import duties etc, but these were not being passed on by Cettire, but instead going straight to their bottom line. See the March 2024 AFR piece, 'We spent $1300 shopping at Cettire. Here’s what happened.' Note the company was trading at $2B back then. In brief, Cettire was allegedly being cute with how they were classifying their products, minimising the amount of duties paid and (allegedly) keeping the charges themselves. Their 6 March 2024 response to the AFR article basically confirmed that their business model was to estimate the duties/charges when charging the customer, and then bear the risk of what the actual charges would be (so if the actual duties were higher, CTT were on the hook; if they came in lower, CTT got to keep what they had charged). You can probably figure out which outcome occurred more frequently, considering they ran with this model for so long. And by 19 March they had come out and abandoned the 'estimate-the-duties' approach... lol, that says it all.

Once the spotlight shone on this, and some US rule changes flowed through, nek minnut their margins got smashed. Now, combined with a downturn, we have a business doing something like $900M of revenue and making $500K EBITDA at best and basically burning cash. What is it worth? There's no guarantee that $120M is a bargain. They have a chunk of intangibles on the balance sheet; most of this is the capitalised costs of them developing their website. Aside from that their assets were just cash and receivables... and now the cash is rapidly disappearing. Given they're just a marketplace, I don't think the brand is worth much either. People want a luxury bag at a good price, and I doubt they care which platform they get it through, as long as it's authentic and cheap.

This is one to be pretty careful on, I think. CTT have had a number of massive one-day falls over the past years and the market has been right to dump it.