That quote from Copart's CFO is something you rarely hear in a public business. The discipline to not simply splurge cash into pet projects is something other businesses can learn from. Well done Copart
What I find interesting is that their investment into Purple wave was funded by raising equity. At that point Copart had billions on the balance sheet. Copart is still a small part of my portfolio, so I'm hoping that we'll see attractive prices at some point and honestly it's going into the right direction. I'd love to own more of this fantastic business.
Great point! And I'm sad I failed to mention that curious capital raise. The 10-K for that year says Copart issued 2.5 million shares to acquire a "controlling ownership interest" in Purple Wave, which is an 80% given the company stated the redeemable noncontrolling interests on their balance are related to the 20% noncontrolling ownership in Purple Wave.
You're right in that Copart had ample cash, which is why its strange.
If Copart does have as high of a standard as they claim, perhaps they felt raising more cash by taking advantage of their seemingly overvalued equity was the best risk-adjusted play?
Honestly it's the ideal capital allocation. Dilution isn't always bad, it can be good at high valuations. They just need to do special dividends and I'd be happy with their capital allocation. 5b is not necessary. Veeva systems is a similar situation where cash just piles in a high quality business.
That quote from Copart's CFO is something you rarely hear in a public business. The discipline to not simply splurge cash into pet projects is something other businesses can learn from. Well done Copart
What I find interesting is that their investment into Purple wave was funded by raising equity. At that point Copart had billions on the balance sheet. Copart is still a small part of my portfolio, so I'm hoping that we'll see attractive prices at some point and honestly it's going into the right direction. I'd love to own more of this fantastic business.
https://dallasexpress.com/business-markets/copart-raises-108-million-in-equity/
Great point! And I'm sad I failed to mention that curious capital raise. The 10-K for that year says Copart issued 2.5 million shares to acquire a "controlling ownership interest" in Purple Wave, which is an 80% given the company stated the redeemable noncontrolling interests on their balance are related to the 20% noncontrolling ownership in Purple Wave.
You're right in that Copart had ample cash, which is why its strange.
If Copart does have as high of a standard as they claim, perhaps they felt raising more cash by taking advantage of their seemingly overvalued equity was the best risk-adjusted play?
Honestly it's the ideal capital allocation. Dilution isn't always bad, it can be good at high valuations. They just need to do special dividends and I'd be happy with their capital allocation. 5b is not necessary. Veeva systems is a similar situation where cash just piles in a high quality business.
I love the management team from this company. I am not owner yet just due to valuation.