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On August 25th, we sent out our notes on why we thought, and continue to think, that WW, in a slimmed-down post-bankruptcy version of its former self, could be worth double what it was trading for at the time.
Our thesis was built on several important points.
An >40 year track record in proven weight loss programs (legitimacy + trust).
Acceptance of medication as part of a holistic weight loss approach (GLP-1s).
Playing the weight loss game correctly by not playing in the compounded space, thus removing regulatory and litigation risk.
The extinguishment of ~$1.15 billion of debt, allowing for breathing room to deploy capital in constructive ways instead of paying the interest on debt.
In that post, we outlined why an evidence-based case (EBC) model is a critical component for an insurance, value-based care (VBC) approach to GLP-1 coverage, which we believe is the future of weight loss coverage. While we laid out fundamentally why the business makes sense, the real overlooked value is in the credit agreement, which was first embedded in the bankruptcy documents that made this trade attractive to begin with.
In our opinion, it seems that not many people understand what the opportunity is, and why the credit agreement, combined with the post-bankruptcy guidance, leads to a deleveraged company potentially worth >3x what it’s currently trading at.
Let us explain.
As we mentioned in our previous post, WW was able to extinguish ~$1.15 billion of debt when creditors took over, but at the expense of giving them 91% of the new common shares in WW (10 million shares outstanding).
The recent drawdown in the stock can most likely be attributed to these credit funds needing to force sell their positions since they aren’t allowed to hold volatile equity as part of their exposure.
Despite them selling, it’s continued to become “cheaper” since we first wrote about it, contracting its multiple from 4.6x FY’26E to ~4.4x. But, again, the “value” here is in the credit agreement.
Quick note. If you didn’t know before, we shorted WW into bankruptcy which we outlined our thesis here (for free), so coming from us, now, as bulls, should mean something when it comes to how things have changed and the way we see them as an FYI.
Explaining the Credit Agreement
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