Neil Mehta
speaker
321 appearances
2 recordings
2 series
first heard Apr 2025
last heard 4 May
Neil Mehta’s voice in public audio — every appearance, attributed to the second.
Trend
recordings per month · last 12 monthsRecordings per month over the last 12 months — 1 in all, peaking in May 2026 with 1.
Appearances
Whenever you talk to customers about Carvana, they would talk about how much they like Carvana at a differential rate to CarMax. It makes sense. You could buy and sell a car easily. You get it delivered to your door. There's much larger selection.
Yeah. Yeah, a little bit of hard work operationally, hard work technically, doing it out in the middle of nowhere on behalf of customers that you want to serve differentially well. Similar dynamic in Carvana's case, you have all these local competitors that have a limited selection. Usually they're wearing leather jackets. It's not a great experience to buy from them.
Carvana was making that a much better experience. Only got to know Ernie when COVID came. The stock was maybe $100 stock. During COVID, it went down to the 30s. I called Ernie. We're like, Ernie, now's the time to take some money from us. He's like, great. Love to do it. We got very close.
For Green Oak's reasons, we ended up not proceeding and investing, I think it was going to be about $500 million in the business at the time. It would have been a great investment. I would have talked about it as one of our big mistakes. It went from maybe $35, $40 a share up to $300 a share, whatever it was, over 2020 and 2021.
We have these moments at Green Oaks where you're like, ah, now it is well-recognized as this amazing used car experience. It's going to be dominant. People understand it's the Amazon of cars. And it was maybe at 450,000 units being sold each year. And Ernie did this big acquisition, which is Adessa, ramping up. He used quite a bit of debt to do that. I think he financed all of it with debt.
And so added a bunch of debt to the balance sheet. When things started to slow in 22... Everybody's excitement about the fact that he was building infrastructure to go to a million or two million cars. But the other way, people became very nervous about the business surviving. And the stock went from $300 a share, $338 to eventually went down to five.
How many companies can you name that went from $70 billion market cap to one and weren't like a fraud? Zero. After you and I had this conversation, we actually looked it up. The answer is none. is none. As it started to go from $70 billion or $300 plus a share down to $50 a share, actually, and $100 a share, we started to become very interested in it. And there was two questions.
The first question was the market was getting killed. I think it was one of the largest peak to trough drops in used cars in the last 30, 40 years. Was this a one-time thing? Was this going to reverse? The second is his unit economics were terrible. I don't think he'd mind me saying that. He was losing $3,000 a unit on an EBITDA basis.
If that wasn't enough, he had about $2,000 of interest payments per unit. So he had $5,000 per unit of costs. So the question was not if, but when is this company going to go bankrupt? And so the stock went from 100 to 50. We started to buy around then. Of course, we started to buy all the way down to about five.
My partner, Ben, it doesn't feel great when you start to buy at 50 and then at 30 and then at 20. And then the 20 goes down to five. Ben has a great line, which is, what's the difference between being down 95% and 97.5%? Just halfs. And so that was a tough moment at Greed Oaks. We invested a substantial amount, became one of our largest investments in our fund. And we had a view.
Our view was that Ernie had a decent amount of runway. There was things he could do operationally to fix the business fairly quickly. And we did what any investor might do at the time. We went line item by line item. We said, here's where he needs to cut. Here's what he needs to change. And much to our chagrin at the time, Ernie didn't do any of those things.
And it wasn't until later, I'll come to a couple of stories. It wasn't until later that I realized there's certain CEOs that might react immediately in order to placate the market. What he was doing was doing a bunch of AB tests internally to figure out what were the right things to cut and make sure that he could manage the company through it and grow on the other side.
It takes a lot of intestinal fortitude. Yeah. There's a bunch of really good stories about Carbon. As the stock started to drop and we started to buy more, not everybody was thrilled with us, but we thought we fundamentally understood that he would be able to reverse the unit economics on a per unit basis.
There are things he could do to not just stave off bankruptcy, but be an ongoing concern with a strong capital structure. And then the second part of that is the debt side was really reflexive. If you're right on the first part, you're kind of right on the second part. So it's a two-part investment for us. One was the company won't go bankrupt. Second, is this a business that could go from
400, 500,000 units to 2 million, 3 million, 5 million units over time. Used cars are about 40 million units a year or something like that. And I remember this was a big debate for us, but it really also comes back to founders. I went out to Phoenix, sat down with them for dinner. I got on the plane. I was reading the papers and four of the articles were about earning and how terrible earning was.
It was like, he's a crook. He's awful. The company's terrible. They can't pay their bills. It's about to go bankrupt. Employees are leaving in droves. It was like left for the dead. I remember. You remember this, and I remember getting out there, and I remember sitting down with him. We talked about the business, we talked about all the things, but I remember the first thing I did is I said,
And the paper's a lot nowadays. How does it feel? How do you feel? And he didn't talk at all about himself. It was just like down to tears. He was talking about his team. He was talking about what it's like for employees of his who have been on the company for a long time to have their kids go to school and hear that their parents' company is going bankrupt.
And he was going into enormous detail about this and you could feel the pain. It wasn't on the articles about him. It wasn't even on Billy Did Manage Cuts. It was that he was trying to balance getting through this with making sure that his team felt good about how he got through this. There's very few CEOs. In the fog of war, when things speed up, people start to make snap decisions very quickly.
What impressed me most about Ernie at that moment in time was how he just slowed everything down. I remember at the dinner, the waitress came by and she's like, would you like to use your Marriott gift certificate card? And he's like, oh yeah. He searched 10 minutes to find his gift certificate card.
I was like, wow, you're supposed to be in a hurry, but you really care about this gift certificate. Points off or something like that. When we went through operational step by operational step, it was so clear to me that there was a spread between where the market thought he was. And that happens all the time in our industry.
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