Staples, Inc.
Thesis
We are long Staples 8.5 2025 Senior Unsecured notes which are trading at 91.7 with a YTM of 10.3%. The market has overreacted to the announcement of Amazon Business Prime, dropping the newly issued bonds from 96 to a low of 85. We believe the bonds offer a compelling investment due to extremely stable cash flows, strong barriers to entry against Amazon, and market overreaction to Amazon Business Prime.
Did it work?
The investment thesis for Staples' bonds was based on the belief that the market had overreacted to competitive threats from Amazon, but the bonds have significantly underperformed, dropping 68.9% since the pitch. This drastic decline indicates that the anticipated stability and cash flow strength did not materialize as expected, leading to a failure of the thesis.
Raw excerpt
No raw excerpt stored.