CRWV is bearish: revenue grows but profitability is terrible; $640 million interest and $1.44 billion depreciation are excluded from adjusted EBITDA. It is overleveraged: about $10 billion net debt due within a year, so it must raise debt or dilute; insiders sell; 10 times sales is above Meta while losing money.

Cororeweave is down 33% over just the past month. And at the time of recording this video, it is down another 12% on the day just today.

let's start off by discussing Coreweave because Cororeweave has kind of started a waterfall of selling across the AI sector.

And what specifically started the sell-off is that Coreweave's bond yields have been spiking significantly and are reportedly hitting 15% now. Now, for those of you who may not know, bond yields rise as they're sold off or demand for them declines.

And what this means is that investors are wanting a higher return or yield for buying and holding Core's debt. This suggests that debt investors are not optimistic about Cororeweave's availability to pay its debts on its bonds and are worried about the business's finances and cash flows and profitability going forward.

So, I went through Cororeweave's financials and its most recent investor presentation. And I have some highlights here that I want to show you. In this first screenshot, we can see that Core's revenue is growing very quickly, and it more than doubled on a year-over-year basis.

However, operating income is negative and interest expenses are about 25% of overall revenue, sitting at $640 million in interest expenses just last quarter alone. Again, versus about $2.6 billion of total revenue.

At the bottom of this table, though, Cororeweave says that their adjusted operating income is positive. But this still doesn't factor in the $640 million of interest payments since operating income is earnings before interest and taxes.

So even on an adjusted basis, Cororeweave is losing hundreds of millions of dollars per quarter.

Moving on to the next screenshot, this one is Cororee's cash flow statement. And year to date, the company has done $3.6 6 billion in operating cash flow, which is good to see because it means the operations of the business are actually producing cash.

However, its capex has been $14.1 billion year to date and $6.4 billion in the second quarter alone. This means that Cororeweave is spending significantly more than it earns on capex.

And it's able to do this because it's selling a lot of debt and diluting. It has raised $16.5 billion in debt so far this year and issued $3 billion worth of shares. This is the cash flow statement of a business that is leveraging up hard and rapidly.

And I think that this is partly why Core's bond yields are continuing to go up.

This next screenshot shows us Core's balance sheet. And here we can see that they have current assets of 9.5 billion versus current liabilities of over 20 billion. So within the next year, Cororeweave has about $10 billion of net debt that is coming due that it needs to deal with and it is currently losing a significant amount of money.

This is not a profitable business. So for Coree to pay off this $10 billion of net debt over the next year, it's going to have to keep raising money through debt and leveraging up its balance sheet or it is going to have to dilute its shareholders even more to deal with that net $10 billion over the next year.

This is not a company in a very strong financial position, especially again considering that it is losing a significant amount of money too.

Now, over in Core's investor presentation, right near the beginning of it, they promote that they have positive $1.5 billion of adjusted EBITDA in the second quarter with a 59% adjusted EBITDA margin, which is also what a lot of the NEOClouds are doing.

They are largely promoting their adjusted EBITDA metric. Now, as I have shared on my channel, whenever a company highlights one of their adjusted metrics, I like to go and take a look at, okay, what are these adjustments and how large are they?

And Cororeweave does have this slide near the end of their investor presentation where they show you all of the adjustments to get their adjusted IBITA metric. So, near the top for the second quarter, we can see that they added back $1.4 4 billion of depreciation, which is one of the main expenses of the business, and then also that $640 million of interest payments.

These two costs alone are over $2 billion, and these are real and recurring costs for Cororeweave's business going forward. But if you do what Cororeweave does and you simply don't look at these numbers, which are very real costs, then the business has $1.5 billion worth of adjusted IBITA and that 59% adjusted IBITA margin.

Now, this number to me is completely meaningless because it's not even close to a reflection of the business's profit potential since its largest and recurring expenses are being removed and in reality, Corweave is losing a ton of money.

So, what we have learned so far in this video is that Cororeweave's revenue is growing strong, but every profitability metric is terrible and it's leveraging up its balance sheet significantly and rapidly.

Cororeweave is making a huge and risky bet that eventually all of its capex will pay for its ever growing debt load. But it's at the point now where the business is so leveraged that it's dangerous and it could go sideways very quickly if the profitability does not start coming in.

They also have just over $10 billion of net debt expiring over the next year and no profits coming in to handle it.

Pile that on with the fact that they have a net of $5 billion of a deficit on their balance sheet over the next year suggests to me that they're going to have to raise a lot more debt to handle their current debt or they're going to have to dilute shareholders significantly to raise money to pay off this debt.

So when you have a company that is losing a significant amount of money, it's free cash flow negative deep in the red and it also has significantly more current liabilities than current assets.

It means that the company is in a very financially stressed position. its finances are not good and it's going to have to find more money quick and that's what I'm seeing with Cororeweave.

Now, also they do not show the balance sheet or the cash flow statement on their quarterly investor presentation that they put out in their Q3 update to investors. They intentionally left out the cash flow statement and the balance sheet.

That was a decision on the management. They only showed their income statement which also showed their adjusted IBITA. And then later on at the bottom of that that presentation they showed their calculations to get adjusted EBITDA.

Now my question is why did the management deliberately not put in the balance sheet and the cash flow statement? Something for you to think about. In my opinion, it's because when you take a look at the balance sheet and the cash flow statement, it is very very clear that this business is overleveraged and they're going to have to raise more money within the next like 6 months or they're literally going to run out of cash.

It's in a very financially bad position. It's a a major major major major red flag for me.

Now, on top of all of this, we can see that insiders have been selling a ridiculous amount of shares. Let me show you this on Stock Unlock. So, take a look at all of this selling.

Okay, all of this selling. There is so so so much selling going on. And these are sells in the tens of millions of dollars. This is a hund00 million sale right there. There's tens of millions of dollars of sales from the co-founder.

You know, you think that these people would be bullish on their own company, but they are all selling so many freaking shares. And all of the sales that you just saw on your screen are just over the past or are are just since October 22nd of this year.

So over the past two weeks, there has been this much insider selling going on in the hundreds of millions of dollars, even in the billions of dollars. So, it seems like the insiders are trying to offload as many shares as they possibly can.

And you know what? I can't even blame them because this company has a $43 billion valuation, is trading for 10 times sales, which is a higher multiple than Meta right now, even though this company is pretty much losing money.

They are not producing any profits, and I would be shocked if long-term they actually have a profit margin of 5 to 10%. So, valuing this company at 10 times sales is ridiculous.

I think that it is significantly overvalued and all around this company screams red flags to me.

From this clip, you can see that I was very bearish towards the company. I pointed out how leveraged it was even back then and how insiders were selling as many shares as they possibly could.

And now it seems like the market is starting to see the same things and catch on to how risky this business is and just how many red flags there are. My opinion and my views ultimately remain, but they are even elevated.

And I continue to believe that Cororeweave is a very risky business that is again full of red flags. And the insiders are even continuing to sell as many shares as they possibly can.