Credit Acceptance Corp – The Black Swan Event
Published March 25th, 2020 | Citron Research
Citron Predicts Either Bankruptcy or Down 80% as Subprime Auto is Forever Changed
“There are decades where nothing happens; and there are weeks where decades happen.”- V.I. Lenin
Credit Acceptance Corp (CACC) has been a controversial name for years. We have avoided opining on the stock because while we didn’t feel comfortable with the Company’s business ethics and practices, we couldn’t help but respect the fact that through aggressive and questionably legal measures it successfully became a profitable lender in the subprime auto market.
All that has stopped in a matter of weeks and cannot come back (and the stock still trades well over book value)
The economic effect of the COVID-19 virus has become the black swan to unemployment in the United States at a pace that defies any stress test or model ever conducted by lenders. As you read this thousands of people are defaulting on their deep subprime car loans and there is nothing Credit Acceptance can do about it. The business is in a death spiral.
