Vroom Inc.

▲ Bull Case

• ◆Cyclical Normalization Optionality (30% probability): Subprime 60+ DPD delinquencies at 32-year high of 6.9%; historical peaks followed by 18–30 months of mean-reversion. If UACC loss rate falls from current 8–10% to normalized 5–7%, adj. net loss swings to profit ($10–20M annually), supporting 1.3–1.5x TBVPS re-rating to $21–25/sh.
• ◆Mudrick Monetization Event (20% probability): Mudrick's 76% stake and board control enable strategic sale of UACC or full-company take-private at 1.5–2.0x TBVPS within 2–4 years, offering 50–100% upside to $24–33/sh.
• ◆CarStory Monetization / Licensing Upside (40% probability): CarStory's AI/patent portfolio and 18-year automotive data worth $10–25M if sold to larger data/analytics player. Outright sale adds $15–30M cash to parent balance sheet, extending runway.

▼ Bear Case

• ◆Continued Credit Cycle Deterioration (40% probability): If subprime delinquencies remain elevated through 2026–2027, UACC loss rate widens to 10–12% annualized. Adj. net loss pushes to ($50–75M) annually, consuming $13–19M/quarter of parent liquidity and exhausting $70–80M bridge within 4–6 quarters.
• ◆ABS Refinancing Stress / Covenant Breach Risk (25% probability): Severe ABS spread widening (150–200bps) or market closure forces UACC into amortization waterfalls stalling originations. Material securitization miss or covenant breach triggers parent guarantees or distressed asset sales.
• ◆Tangible Book Value Erosion to Equity Impairment (20% probability): Current $18M/quarter burn rate erodes TBVPS by $1–1.5/sh quarterly. TBVPS falls to $13–14/sh by mid-2027 and $8–10/sh by 2028, risking equity impairment if ABS debt reprices downward.

“Core disagreement centers on timing and magnitude of subprime auto credit-cycle normalization. Bull side (Mudrick, distressed specialists): Peak is in; mean-reversion underway; loss rates visibly decline by Q4 2026; UACC positive adjusted earnings re-emerge by 2027; 1.2–1.5x TBVPS target $22–25/sh; Mudrick monetization option worth 15–20% odds. Bear side (Traditional long-only, credit analysts): Cycle still early; used-car prices and unemployment lead delinquencies; loss rates hold 8–10% through 2027; equity bleeds TBVPS; Mudrick exit at low price or forces unwilling restructuring; 0.9–1.0x TBVPS fair value with 0.6–0.7x downside. Base case (40% probability): Gradual stabilization Q3 2026; loss rates fall to 7–8% year-end; FY2026 guide misses by $10–15M; equity drifts $14–18/sh then recovers to $17–20/sh by end-2027 as cycle improves.”

• ◆Q2 2026 Earnings Credibility Test (August 2026): FY2026 adjusted NL guide of ($25–30M) tested vs. Q1 annualized run-rate of (~$73M). Miss >$5M or downward guide revision triggers 10–15% repricing lower; beat and reaffirmance supports 5–10% upside.
• ◆June 2026 Convertible Exchange (6 weeks): Terms announcement signals confidence or distress. Generous premium (>30%) and extended maturity (5–7 years) = +5% upside; tight premium (<15%) and short maturity (2–3 years) = –5% downside.
• ◆Q3 2026 ABS Securitization #19 Execution (August–September 2026): Execution spreads ≤+150bps vs. February deal supports funding stability; +200bps wider or failed deal indicates market stress, triggers 5–10% downside.
• ◆Mudrick Capital 13D/A Disclosure Activity (Continuous): Any change in stake, strategic financing involvement, or board resolutions. Monetization announcement at 1.3x+ TBVPS or exit timeline validates optionality; stake reduction below 70% signals distribution intent.
• ◆Credit-Cycle Inflection Data Releases (Monthly/Quarterly): Subprime 60+ DPD delinquencies currently 6.9%. Move to 6.5% or below signals inflection (+5–10% upside); move to 7.2%+ signals deterioration (–8–12% downside).
• ◆Equity Capital Raise Announcement: Emergency raise at $12–14/sh triggers 20–30% dilution and near-term price pressure.

• ◆Credit Losses Exceed Guidance (HIGH severity, 50% probability): Adjusted NL swings from ($25–30M) guide to ($50–75M) actual; equity downside 15–25%; TBVPS erosion accelerates.
• ◆ABS Refinancing Stress or Securitization Miss (HIGH severity, 25% probability): Spreads widen >200bps or deal fails; UACC forced into amortization mode; parent liquidity bridge shortens to 12–18 months; covenant breach risk rises.
• ◆Tangible Book Value Erosion Below $12/sh (HIGH severity, 20% probability): Cumulative losses and burn rate erode equity to impairment zone; reprices to 0.6–0.7x book by 2027.
• ◆Mudrick Monetization at Unfavorable Terms (MEDIUM severity, 30% probability): Exit at 1.0–1.2x TBVPS or forced minority restructuring caps upside at $17–20 vs. bull case $24–28.
• ◆ABS Covenant Breach at Subsidiary Level (MEDIUM severity, 15% probability): UACC breaches minimum-equity-capital or loan-loss-reserve covenant; triggers amortization waterfall; parent equity subordinated to ABS debt claims.
• ◆Dilutive Equity Capital Raise (MEDIUM severity, 35% probability): Emergency financing at $12–14/sh causes 20–30% shareholder dilution.
• ◆CFPB or State AG Enforcement Action (MEDIUM severity, 10% probability): Material fines (>$10M) or operational constraints reduce UACC origination capacity >20%, materially altering earnings path.