Upstart Holdings (Nasdaq: UPST) has given investors quite a wild ride during these past two years.

The consumer loan tech platform went public in December 2020 at $20 per share and immediately skyrocketed twenty-fold to $400 per share within its very first year in the public markets! Yet concerns about how lending might be impacted by a challenging macroeconomic environment have sent shares back down to Earth. Now selling at $21, Upstart is right back to where it traded during its initial IPO.

Yet ignoring its volatile stock price, Upstart the business is making solid progress. It’s ingesting more data with each new loan it approves, which it uses to continually refine its AI algorithms and improve its accuracy. Its two-sided network — serving both borrowing consumers and lending banks — is expanding as it signs on new partners each month.

So where does that leave things for investors? Is Upstart a short-term, unloved stock that is attached to a long-term, outperforming business? Or are there flaws with Upstart’s decision-making process that could lead to even larger problems down the road?

In today’s 7investing podcast, 7investing lead advisors Anirban Mahanti and Simon Erickson take a closer look at what’s up with Upstart. The two dive deep into the business, how it’s deriving its revenue, and why its innovative approach is gaining popularity with banking partners. They also discuss what Upstart’s 41% short interest means, and what its expansion into the auto and mortgage markets could mean for investors.

Anirban and Simon recorded this episode of the 7investing Podcast in front of a live audience on Thursday, September 15th. If you would like to attend future live recordings of our podcast, we invite you to sign up for free on our new 7investing Events page.

Publicly-traded companies mentioned in this interview include Upstart Holdings. 7investing’s advisors or its guests may have positions in the companies mentioned.

Transcript

Simon Erickson  00:00

Let’s try and get started. It’s 3:30 now, 6:30 if you’re in Sydney or 3:30 if you are in Cambodia, as Luke has grinded here and said. We’re gonna continue on, we’re doing a live taping of our 7investing podcast today. This is kind of exciting. We’re doing it live in front of a live audience. If you have questions, please ask them in the chat what you see on the right hand side of the screen.

Simon Erickson  00:21

Welcome to our 7investing podcast where it is our mission to empower you to invest in your future. I’m Simon Erickson. I’m joined by Anirban Mahanti here today from Sydney, Australia. Anirban we just in our last podcast talked about Snap, we talked about previously known as Snapchat now Snap, Incorporated, the company’s woes in digital advertising.

Simon Erickson  00:40

We’re going to talk about another company that’s pretty volatile these days, Upstart Holdings (NASDAQ: UPST), and we’ve called this, “What’s up with Upstart?” This is an AI based company that’s going up and it’s going down. And I think we should really get into the nitty gritty of what should we expect? And what are we seeing? Let me hit it over to you first, what is Upstart as a company? What are they doing? And what are their ambitions?

Anirban Mahanti  01:01

Upscaling is a fascinating company. It’s a fascinating company. Because at a high level, what they’re trying to do is they’re basically saying, so they have got a website, Upstart.com people come there looking for loans, they can fill in some details, and very quickly Upstart can decide whether or not they’re going to get a loan. Right?

Anirban Mahanti  01:23

They don’t look necessarily at FICO scores, the traditional way of measuring people’s credit score, but they look at a bunch of other factors and are able to sort of accurately classify the risk level of a person seeking a loan. Now, the majority of the company has focused on personal lending. So basically, these are people who are taking loans to pay off higher interest debt, or are taking on loans to maybe start a business or something like that. But the personal loans go typically to people who are sort of in the subprime or the low prime or subprime category, right.

Anirban Mahanti  02:02

People with lower credit scores, one of the things that they’re able to do is they’re able to automate a lot of this processes. 70% to 80% of the loans get approved instantaneously of all the loans that they give, right, so not everyone who’s coming in gets a loan, but those people who get a loan, for them they could be approved almost instantaneously. This is all powered by algorithms.

Anirban Mahanti  02:27

And they have shown us data in the disclosures that show how they’re able to better segment the population in terms of the risk profile, right. So there might be people who are, say 720+ in terms of FICO score, but they could still be very high risk of defaulting. There could be people with 500 FICO score, and they could be actually very credit worthy, right. So there’s this, there’s the segmentation that they’re able to do at a much finer granularity.

Anirban Mahanti  02:57

So that’s what the business is. The business is about taking the data that they collect from people on and other orthogonal datasets that they have, and making assessments about the ability of this person to pay back the loan and also the risk level. And based on that, they come up with the interest rate for this individual who’s taking a loan. So that’s what the company has been doing. Now, they’ve sort of tried to diversify itself into also doing auto lending, and also into small business lending. But these are much smaller, and still mostly experimental components of the business.

Anirban Mahanti  03:33

Now, the key thing here is that this is not a bank, so they don’t actually lend. So they’re basically a marketplace in the sense that they bring in people. So they have a funnel, which attracts people to apply for loans, those loan applications come in. And then the basically, the company is saying, Well, I think this is the rate at which we should offer them, that loan needs to be picked up by someone, either a bank, the community bank, or institutional investors, which is basically then routed by a couple of the routing banks, but they’re basically seasoning banks, they’re banks that hold the loan for a few days to make sure there’s no fraud or anything, but then that loan is sold off to investors.

Anirban Mahanti  04:12

So it’s a marketplace where lenders and borrowers meet with the middle place, the the Upstart being the market, and they are facilitating the lending by telling both parties what the rate should be, and getting a cut. So basically, taking a fee for help. It’s almost like brokers and mortgage brokers where basically, I’m getting a loan to happen, and I’m gonna get a small fee for that. They service the loan as well, and there’s some servicing fee that they get along with that. So it’s a fee based business, which at first glance basically tells you that the more loans that you can issue, the more money they can make.

Anirban Mahanti  04:53

If loans are less loans ratio, the less money they make, it’s not recurring revenue in that sense, so they’re not a platform, a company that says, Okay, here’s the platform that I’m making available to the banks and the banks that are participating in this program, they can tailor the algorithms in the sense that they can tailor to their banking needs and their needs, but they don’t charge a fee to the banks in that form, they’re not saying there’s an annual fee that you need to pay for using our platform. It’s basically based on fees.

Anirban Mahanti  05:24

So it’s not recurring revenue, it’s a fee based program. So that’s the business in general. And one of the first things that we can think about here is that how many loans will get issued depends on how much demand is out there from borrowers, and B, whether or not those borrowers that want loans, they have a corresponding buyer, corresponding funder of that loan. So the lender has to be there. So it’s a two sided network, in that sense, the lender has to be willing and the borrower has to be willing.

Anirban Mahanti  05:56

And therefore, it’s susceptible to macroeconomic changes. So that’s the high level structure of the business. It’s very cost efficient with the business, contribution margins are extremely high. So you can think of contribution margins as basically the cost for issuing, or making these loans, and then the revenue they’re getting, and that’s pretty high, because I think it’s very capital light business.

Anirban Mahanti  06:27

You can see that they don’t have much to invest really, other than in technology, AI expertise to sort of keep expanding their lead in how they decipher the credit worthiness of people. And some sales and marketing to basically get that funnel going in terms of bringing in people, whether that is digital advertising, or traditional mails, or social media or SEO or whatever it is, or with other credit partners and things like that. People like Credit Karma, for example that you try to funnel in.

Anirban Mahanti  07:00

So that’s the business and I think it’s a very capital light business. And I think there’s a lot of opportunity here, in the sense that the market for personal lending is pretty big. The market for auto lending is six or seven times that. I think the bigger idea here is, we think of the market today as the market of people who are getting loans, but one of the things that we can see from Upstart’s data is that they’re able to better fragment or segment the market, it means they’re able to find hidden, credit worthy people.

Anirban Mahanti  07:35

In other words, the market should expand is the other thing to realize that there are a lot of people probably who are credit worthy who are today not getting those credit worthy loans, or not even trying, because they think that they’re not going to get it. I think it’s good overall for society. Credit basically is the oil that sort of moves or greases modern society, it’s very important that people get access to credit. So that’s a high level of the company.

Simon Erickson  08:05

Yeah, it’s fantastic. I mean, those markets that you mentioned, are trillion dollar markets, right, just consumer lending. And then you mentioned auto loans, and then even mortgages, so they can kind of expand in to, these are massive. And you’ve got a team here that comes from Google, a lot of the executives are from Google, and they said we can crack this and we can use the right AI algorithms to match up. The lenders with the borrowers.

Simon Erickson  08:26

My next question is that we understand the market opportunity that’s out there. Let’s talk about the business itself. Because, as you mentioned, this is one thats exposed to the macro. It’s a challenging macro. Rates are going up, maybe there’s a recession on the horizon, maybe there’s less ability for people to repay, especially some of those subprime borrowers. We hear about that every single day. I don’t think you can go more than six minutes without saying Jerome Powell. It’s just out there every single minute of the day, but is this impacting Upstart’s business and its actual results?

Anirban Mahanti  08:59

It is. Unfortunately it is impacting them big time in the sense that look, if you can make 3% or 3.5% on a treasury, right, and you want to make a return on your money in terms of yield, that is different from when the return on that treasury was like, 1%. So there’s the gap, right.

Anirban Mahanti  09:28

I think the whole point of interest rate rises is to reduce lending, right. And one would think, and for obvious reasons, one would think that the lending is impacted moreso in the risk area, right. So that’s kind of what is happening at Upstart is that, banks are feeling risk averse, the lenders, the financial institutions that buy these loans are feeling they’re being risk averse.

Anirban Mahanti  09:28

And as the gap widens, the yield that you can get from investing in Upstart’s loans from a financers point of view, decreases the gap. Right? And that makes it less attractive in the sense that you’re not taking on this risk of potential default. And the gap between the treasury and this yield is less so I think that’s almost, and that’s what basically, Jerome Powell is doing, right? I mean, he’s upping the interest rate.

Anirban Mahanti  10:47

Another way to think of this is the older people that are coming in asking for loans that Upstart thinks should get a loan, none of them are actually not getting a loan, because there is no corresponding buyer, or no corresponding funder, or lender for that loan, because they’re saying, Oh, I’m going to pass on that. Right. And the way we can see this is typically Upstart provides a metric called conversion, it provides a metric, which basically says that of all the legitimate queries that came in, what percentage of those got converted to loans? One of the things that we saw is that that number was steadily rising over the past few past few years. Right? That number has plummeted significantly last quarter from like something like 22%, down to like 13%.

Simon Erickson  11:32

No one wants to hold loans right now is what you’re saying?

Anirban Mahanti  11:36

Yes, and it makes sense why that’s happening. And for a company like Upstart when you go from the 22% loan approval, and you probably have fewer inquiries coming in as well, right. So the inbound is ower now. And then the conversion is also lower. So the net net effect is that the total amount of loans that you issued goes down.

Anirban Mahanti  11:58

And to the frustration for Upstart management would be that, oh, there are so many of these loans that we think are not risky, that are not getting picked up. Because our funding institutions think they’re riskier than we think. And that is a frustration that they have. And for that they are going back and forth in terms of should we use our balance sheet, should we not use our balance sheet, and, and things like that, to find those loans?

Simon Erickson  12:28

I want to talk about that. In fact, maybe let’s tie that to the question here. That’s from the audience. Actually, before I get to that, I reminder that we do subscriber calls every month with 7investing, you can actually chat directly with Anirban about his actual recommendations. We won’t disclose what your actual recommendations here for this podcast Anirban, but this is kind of a beautiful segue to what we need to do every month, which is always fun on the the third Thursday of each month.

Simon Erickson  12:57

But let me get to the question here that he that AG is asking is, to your point there about management putting the loans on their own balance sheet Anirban. He says, What’s your view on Upstart’s leadership ability to execute in and navigate through this bear market? They’ve made some decisions, you’ve actually been kind of critical of these last couple of weeks.

Anirban Mahanti  13:14

Yes. So the problem with these things is without having the full story, without being in that board meeting, without being a fly in that board meeting, or in those executive meetings, you got to kind of make some conclusions, you don’t know the full story is what I would say.

Anirban Mahanti  13:37

So here’s the thing. As an outsider, I would think that it’s much smarter this time, because you’re a capital light business to sort of pull back on your costs, keep your absolute minimum costs in terms of investing in the business, which is basically AI algorithms. So keep investing in those things. And we think of consumer lending, or personal lending, they have got a lot of data already. It’s not like they’re running out of data.

Anirban Mahanti  14:03

And maybe they want data from this period of this macro environment where there’s inflation and supply chain issues, and the oil prices and cost of capital is going up. So maybe they need the data to further refine their engine. But they’re getting plenty they did like $2 billion of loans last quarter, it was down from what 4 billion the previous quarter, but it still did 2 billion of loans. There’s a plenty of data points in terms of collecting data.

Anirban Mahanti  14:31

So they could have forgone, they could basically say, Well, we don’t have the money to fund some of those loans so we’re going to let those go, you’re going to cut our costs and advertising to expand our contribution margin. So one of the things that they are saying that they’re able to do, their guidance basically says that revenue goes down, the contribution margin goes up, which is pretty, pretty phenomenal. I mean, revenue goes down, you think the margin will go down but actually doesn’t go down because you can control the costs, in terms of advertising that you do or marketing that you do probably is the right word.

Anirban Mahanti  15:02

So I would personally prefer cutting costs and putting that money into buybacks if you really feel that the future is bright and the opportunity is huge that buying back your stock at these levels probably is the smart thing to do. But management initially took the view that maybe Well, initially, they said, we need to fund some of those loans from our balance sheet. And their logic was that the marketplace kind of gets broken down a marketplace breaks down, if you start turning away people who are legitimate borrowers, right? Because then they might not come back.

Anirban Mahanti  15:39

You give somebody a loan today, they will come back maybe in three years for another loan, right. Whereas if you turn them away, now they might go somewhere else, and that lead kind of vanishes. Right. So from a marketplace point of view, they’re saying, well, we need to need to give some of these loans. And the only way to do this is to use our balance sheet, they’ve got some cash in there, close to a billion or $800M $900 million of cash on the balance sheet that they could use.

Anirban Mahanti  16:03

And then I guess in their mind, they’re probably thinking that if the market becomes better, then instead the market improves on the macro side, sort of stabilizes, then you can sell those loans because people buy loans all the time. So at that point, you can just sell off the loan and you get the cash back. So maybe that’s what they’re thinking to stabilize their market.

Anirban Mahanti  16:22

Now, they initially said they would do this, and then the sort of the stock market gave them a big shellacking. So then they said, No, we’re not going to do this, because you guys said no. And I think that’s a bad way of running a business. Because you don’t want to let the stock market decide how you will run the business. I think that in my mind is just not right. Then they went and thought about it, I guess and then said no, we are going to actually use our balance sheet to do this. And it seems like you know, they’re making these decisions that maybe seem like a little bit knee jerk type of reactionary movements. And I’m not a big fan of that. Because that’s an easy way to destroy a business. So that’s been sort of my big issue with them.

Anirban Mahanti  17:05

Now, the final point I had is if you have $800 million of cash in your balance sheet, you can lever it. So you can become a leveraged balance sheet, and then you can give out maybe $3 billion alone. But their CFO indicated that they’re not going to do that they only want to use couple 100 million dollars to sort of a couple 100 million dollars of lending on a $3 billion of base is not a lot.

Anirban Mahanti  17:28

And tripling in a quarter, right? That’s roughly even if it reduces to 1 billion. That’s like 4 billion in a year. And how much is couple 100 million in debt? It’s not a lot, right? So it’s not really clear to me why, again, they’ve not articulated that decision making process. And then one of the things that they’ve said that makes sense is that they need people in the lending spectrum, those people who are providing the funding, they want people who are going to invest across the cycle. And that makes sense. Those people who invest in junk bonds, they make money by being invested across the cycle, right?

Anirban Mahanti  18:03

And yes, you go in and out at different scales and things like that, but you need to be invested across the cycle. And then so building these long term funding partnerships was important. That to me, though, seems like  now is not the time. Now’s the time when you’re not going to get those good deals, right? You want to make those decisions from a position of strength. Right? So if I was running the business, I would sort of be right now with going into sort of, okay, I just want to survive and get through this.

Anirban Mahanti  18:31

And at some point when the rates stop moving. And one of the problems right now is that the the two year Treasury and the Treasury have wild movements, they’re like the stock market, right? They have VIX on them. If you look at their volatility, and that is really, I think, creating havoc for this business. So yeah, so that’s my take, I think I’m a big fan of the business overall, in terms of their the structure and the opportunity and the algorithms, because these those things seem to be working.

Anirban Mahanti  19:05

What is not clear to me is the decision making process at the management level, they seem to be a lot more driven by the stock price movement. Right? And that just seems to be the wrong thing to do. Right. And, you know, maybe these are all rookie CEO newly public company mistakes that they’re making. And I’m just surprised that they’re not getting better feedback, maybe from the board, or maybe I’m not privy to, as I said we’re not privy to the internal discussions they’re having, thought through this carefully. And then in the fullness of time, we’ll agree that oh, they made the right decisions. Again, that is the uncertainty.

Simon Erickson  19:39

Anirban, we’ll talk about the stock here in just a minute because I do want to chat about all the volatility that we’re seeing. But back to the excellent points you just made about the business itself. You said that kind of inevitably, you have to choose between growth or contribution margin, right. Are you just going to go out there and flood a whole bunch of loans that you want to train your AI algorithms with and get a whole bunch of data from? But you’re kind of sacrificing perhaps if you do that the contribution margin the profitability of the business.

Simon Erickson  20:07

Is in the back of the decision making that Dave and Paul are making of what they want this business to serve, are the low and this is my first question is are they do we know if the loans that they are putting, that they are funding with their own balance sheet that they’re not, they’re not a part of that’s picking them up that say we want those loans. But it’s still flagged as a green flag for Upstart and you say this is a person that should be getting this loan? And we’re going to fund that? Do we know if they are making accurate calls on that? Are these people that really should be getting those loans? Are they coming up delinquent or non performing? Do we know anything about that yet?

Anirban Mahanti  20:39

What we know from past data points is that their loans have performed significantly better than sort of what their baseline predictions have been. Now, the loans to some of the loans made during the tail end of the COVID years are actually underperforming. But you know, other than that, they have traditionally actually over performed. But what they have pointed to is that, in aggregate, their loans are have always done much better than what sort of their baseline projection in the baseline projection for the loans might be they’re looking at 12 1314 15% returns, right? So if you’re looking at a baseline 15% Return on aggregate, that’s pretty solid for a yield investor to be making. Like, I mean, I don’t know, they will not probably make all of it. But I mean, that’s pretty good. Some of that has dropped to 6%. Now, which is below what sort of they had expected their baseline predictions were. And again, I might be off on some of those numbers, but they’re still better than investing in the treasury, for example. Right. So I think they are making the right decisions in terms of the loans. And, again, we would not, we don’t know how much of the they have r&d loans, which are sort of separate from the other loans, right, the marketplace loans. And we don’t know, in the fullness of time, whether, you know, they made the right decisions or not. But I think, as I said, I think what they’re planning on doing is or they think, is that the mega loans, and when the the sort of the macros or when the rates stabilize, they could sell off those loans from the balance sheet and get cash back. And they might get more or less based on the fair value of the loan at that time, because that couldn’t be a function of the ongoing interest rates at that time, and things like that right remaining period, and how much interest you’re gonna make, and all of those things factored into the fair value of that loan. So I think we’ll be able to offload the loans at some point in time. So that’s, I think, what they’re thinking that they’ll be able to offload the loans on the balance sheet.

Simon Erickson  22:32

You know, we’re going to chat about the stock here in just a second. But I think that one last point that I want to make on this point is that if they are showing high accuracy of making a matching the right loans, and you know, high quality people, borrowers that maybe are not, you know, hitting hitting the right boxes, and the FICO score, FICO scores and everything else out there. But they’ve identified them as high quality as shown with their own balance sheet that they still aren’t making very accurate loans, and they’re preserving the contribution margin of the business, like you keep pointing out for us, which is fantastic. Maybe this is just kind of some macro uncertainty, some some speed bumps, you’re hitting along the long term path. And then those markets if they can actually have the borrowers and lenders is still the marketplace. It’s like we said trade and other markets, if they still are best in class, and they show that the AI algorithms work. That still sounds like a valuable company. To me, even if we go through some some rough times in here. Am I reading that correctly? You think the same thing in here.

Anirban Mahanti  23:26

Without specifically selling a stock, but me know what the market cap is like 2 billion plus something, it’s got 800 million in cash. It’s almost like priced at sort of, you know, this thing is never going to grow, it’s gonna probably go bankrupt and things like that, right? I mean, it is, you know, I’m not saying that can’t go lower. You know, but, hey, it is priced as if that nothing’s going to ever happen. And, you know, maybe there’s a price even just repeating with a technology, right, there’s got to be some price for the technology to that they have built which seems to work and the algorithms and all these engineers that they’ve got, so I don’t know, I think I think being patient with this one is worthwhile.

Simon Erickson  24:11

Fantastic, it is, you know, we’re gonna chat here about Upstart’s stock. A reminder before we do that, if you do want to see our stock market recommendations every month seven investing.com/subscribe. To see on your bonds pic. Here in September, you’re here you’ll see my pick to see all seven of our advisors picks. In fact, if you use promo code seven of the checkout page will give you a special deal on the first one. So you go in there at a very reduced rate. Bout 86% Discount I think in Nirvana is what we’re giving for that promo code just to get in and check things out. We really want you to embrace everything that we’re building here with seven investing but let’s talk about the stock here. And everyone let’s talk about I’ll start with talking about the business. We’ve talked about the market stock has gone all over the place. It’s a 20 bagger. At one point last year from its IPO just two years ago. It’s now given up a lot of those it’s still up about 50% from the IPO. I think It went public at about $20 A share was sitting at around $30 A share today. So maybe when you zoom out, that’s still a good return. But I think all of the focus right now has been Upstart’s getting crushed because of the macro economy. What’s your thoughts about Upstart at $30 a share right now?

Anirban Mahanti  25:17

Well, as I said, I think it’s very interesting, because I think like, you know, right now, its valuation is not capturing any of the upside really, right. It’s capturing a lot of the downside, right? I mean, can go bust, you know, loans could freeze completely. The you could have deflation, kind of stagflation, it captures all of that nicely. It captures all the worries that we have got by capturing the upside. So I mean, the risk reward, you know, this is, I mean, this is a risky idea, if you think about as an idea, right, you know, this sort of thing, you know, the things that we’re talking about this on the risk spectrum is very high risk, but I think potentially also very high return. You know, and I’ll leave it to you to talk and if people think about how, you know, one way to know is that, you know, your metric is gonna say the short interest rate. One way to think about how people think about this business is just look at the short interest that tells us something about how these are the investing community, if you if you like, or the investing world thinks about this business.

Simon Erickson  26:19

And let’s chat about that a little bit. The short interest you know, if this is an unfamiliar metric for anyone who’s listening, this is the percentage of the of the free float the the publicly available shares that are available for us to trade, what percentage of those are actually being bought and borrowed for it for a short position for people that are betting against the stock today out of all the shares that are available out there? And everyone from what I see no, kind of a healthy short interest for most stocks is kind of seven, eight 10% Upstart now has got a check that just a moment ago, bear with me, it has a short interest of oh, goodness, 140. Now I’ve lost 41%, your honey recently, in short interest of 41%. That is incredibly high. For a company like this, everyone’s betting against Upstart. You said they’ve got a share buyback in place, you’ve got a competent management team, you’ve got a business that is accurate in the loans that it’s matching. It’s being priced like it’s going out of business. Right? It seems like there’s some cows that we’re always investing for the long term, but just short term catalyst, you can’t ignore some of this stuff. Right? Yeah.

Anirban Mahanti  27:20

I mean, the thing with the short answer still is like, you know, as you just pointed out, so these are this is the percent of shares that have been sold short. In other words, people are born, and then sold it in the market with the expectation that they’re going to buy back at a lower price. But if the price for example, if the business results, for example, next quarter seem to suggest improvement, and suggested that falling quarter is going to be better and macro has stabilized. And now businesses back roaring and back to growth ways, this is going to be what’s known as short covering, people will have to buy back their shares, because the stock will start start going up. And the problem with short covering really is that, you know, when everybody’s scrambling to buy to cover their short end, there are people who are new in initiating new positions as well, at the same time, there’s a lot of buying pressure, right? Now, of course, every stock has a buyer and seller. So it should be all balanced. But you know, you can have a buying pressure and exactly from how the shorting works, right, you know, you sell the stock into the market, sometimes, you know, market makers buy them and things like that. But with this buying pressure, just the unwinding of the short can really, really reset valuations. Right? So you’ve seen that happen previously. Tesla’s a great example where, you know, the short interest at one point was like 38%, or 35%. And, you know, when that short unwinded, it was a ride. It was one of those rides, that if you were sitting on it, and it was going up, it was a very good ride to be on. So yeah, so I’m not saying that that is should be the should be the driver for somebody to own the stock play something keep in mind. And the other thing to basically keep in mind, another way to think about this is that because of the short interest in the pressure of the stock, the stock market capitalization is 2 billion, something right now are the exact number was 2 billion something. And if you think about it, this was a $30 billion, or something $40 billion business not too long ago. So there is a whole spectrum of opportunity here and what this business could do. And if if you think about as Jeff Simon said, through the doors of opportunity, think about the you know, if you add personal lending with auto lending, that’s a trillion dollar, probably opportunity, but even then you stack on, you know, mortgage lending and everything else. That’s the, this is just us only that we are talking about, right. That’s the other thing. There’s no international exposure, there’s nothing that makes you you know, one should think that the algorithms should be tunable. Right, with, of course, the right data sets and things like that to other opportunities over time. So I mean, in a way, there’s a huge market here and the opportunity to disrupt big time so yeah, I mean, it’s nice to Got this additional capitalist on the short interest?

Simon Erickson  30:04

It certainly is interesting. You know, we’re winding up here. And so I do want to close out, but I think it seems like Nirvana that people see a lot of times people will see a stock price that falls. And the assumption is, is dead money, the business as far as falling apart, you know, there’s nuclear bombs going off and their headquarters of the business. But it does seem though that with Upstart, there is still a lot to really like, in this business and the performance of the of the company itself, the accuracy of the loans, the management team, the market opportunity. I mean, just to wrap this all together, is it? Is it accurate for me to say that you’re still bullish about Upstart, even with the stock selling off in the last couple of months or so? Yes, I

Anirban Mahanti  30:44

personally own the own shares in this business, for full disclosure, and I’m happy to continue holding, you know, occasionally, if I have some side money left, I sometimes think, you know, should I help my position a little bit, and it’s a position sizing thing for I think individuals, they need to, you know, size it based on their risk appetite. But yeah, that for me, I hold the stock, and I’m in it, and I’m going to write it. And we’ll watch Of course, I’m gonna watch what’s happening every quarter, as I do. I mean, you don’t know what’s going on. Right? I like to keep this horizon. I bought into this company thinking I’m gonna hold it for a long time. Right. So it’s like that farm that I want to harvest over, you know, decades. So unless there’s something fundamentally completely broken at some point gene is back busy. And I like to stick to it. That’s, you know, and I’m okay with that approach of investing.

Simon Erickson  31:37

And you’re what you just described kind of being in it for the long term is the same thing as Paul Gu right. This is the guy that built the AI algorithms of Upstart as basically foregone a salary. He’s basically taking the minimum amount just to be considered a full time equivalent employee without starting says, No, I’m in this for long term. I want to be long term equity incentives for us hitting milestones and to see somebody that important to this company agreement that because he’s in it for long term, you got to look at kitset and things like that, too. Right. Absolutely. Well, thanks again to Anirban Mahanti. You know, one of our lead advisors here at seven investing. For anyone who’s been listening. This has been our seventh investing podcast, we tried something new this month, we tried to do it live in front of a live audience. A shout out to Luke to Greg to ag and to Ross for posting live chat comments. There’s even some sidebar conversations going on. In the live chat. We’re going to be doing this again, as a lot of fun. We appreciate you here for being with us. If you’re unfamiliar with our company: 7investing.com/subscribe to set up either a monthly or an annual plan. We also give a great rate for students who are interested in looking at stock market opportunities and compounding over long periods of time. My name is Simon Erickson. We are seven investing. We are here to empower you to invest in your future. We’ve enjoyed this episode over seven investing podcasts. We’ll see you again soon. Have a great day.