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Surprising day. Nothing has changed.
It's frustrating to see the vacillations between highs when people are predicting near-term stock prices like $.30, which is overly optimistic to down days when people who had such get-rich-quick expectations sell because they realize they will make a lot of money, but over a number of quarters. Some of the same people who are on a high one day or talking about manipulation and conspiracy theories the next. The one thing I personally have conviction on with Verus is that they are executing, delivering, growing, and as an investment the future is very, very bright.
A couple of conference call favorites from Chris Cutchens (Verus CFO):
"...suffice it to say that late-stage acquisition activity generates legal fees." I heard that as a significant hint that a lot is happening that will layer on additional revenues.
"We have the infrastructure in place to surpass $50M in sales," speaking about Big League Foods specifically. This is just one line of business that's largely uncaptured in the Q3 10Q revenues.
If a rational investor was happy with Verus last week, s/he ought to be feeling really good this week, since they've confirmed guidance growth 9 ways to Sunday.
I missed it by $.02 million! The upper band differential was due to my being a little aggressive on ice cream and candy ramp up guesstimates.
I’m hoping so. Monday would be pretty tight to digest it before the call Tuesday. We shall see.
My guesstimate: $3.5-4.1mm.
Agree. I’ve literally been saying this for 3 months.
I believe that until we are big enough to get some institutions involved we are likely to see this pennant-shaped formation quarter over quarter due to the tempestuous, mercurial emotions of our retail investor base and OTC speculators trying to get rich overnight.
Just saying...
It seems to be that I educatedly guessed correctly about the pennant formations. Everybody, I'm relaxed as I can be. See this other post, as well:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=150203396
Manipulation or unloading a position?
It's one thing to sell small bites into a little momentum—that's how any rational actor unwinding a bigger position in a down market direction would do it. But the only momentum since July 3rd has been decidedly in one direction.. and that's okay. VRUS is consolidating—just like last quarter. Like I said—and in time we'll see if my hunch is correct—quarter over quarter I think we'll see something quite similar to what we did after the last 2 quarterly peaks.
Regardless, this is all short-term trader mindset thinking. Most people who have been around a year or more have seen the execution and know the fundamentals are there and growing and any "manipulator" is ultimately going to get wrecked. Verus has evolved from speculation to investment. And it's pretty exciting to see unfold (especially with a comfortable cost basis).
PS: This is kind of fun for me to be called "noob" and naïve! It actually gives merit to my general perspective that the board has turned a bit irrational and seeing shadows at the moment (knowing my actual job).
And to the person (who shall remain nameless) who privately messaged me some shade—I won't hold it against ya ;)
(nearly 2 years for me)
I don't personally buy the manipulation narrative. Some people say manipulation, others say short interest. There are relatively few brokers that allow OTC shorting at all and those with inventory of VRUS are few and far between. I looked around about 6 months ago and found like 57,000 available shares for shorting on one broker site, which clearly would not move the needle at all.
As for manipulation, this is just a retail trader base. I predicted this kind of movement would be cyclical quarter over quarter for awhile (just a hunch) and so far that's been correct.
Naked shorting isn't possible for the vast majority of people and the daily volume in absolute dollar terms is just too small to be attractive for "manipulators," in my view. I think it's all just the vagaries of dealing nearly entirely with retail in the OTC at this price level and market cap.
If someone has to clear evidence of manipulation I'd like to see it. For me, I've only ever seen people speculate about this, but phrase it as a factual claim.
Agree. This is all just a function of time and watching revenues grow.
People interested in short pops and that kind of thing might be relatively disappointed - it's not an OTC trade.
Multiples
If you are on board with a 3x multiple of revenues (which seems reasonable to me), $30mm revenue by year end represents a price of 3.9¢/share. ($250mm sales, 10.9¢). Turning inventory - we don't yet know how effective they will be here, but that's an important factor. They are definitely going to need a lot more credit to ramp to that $250mm level, but I think they'll get there.
I think they are laying the groundwork this year (the revolver of only $500m is a huge first step to form the relationship with banks) and will be working out operational challenges that pop up as they scale. Just my belief, but I think they'll really start cranking in 2020 and 2021 will be great.
Not investment advice. Just arithmetic. And a dude with opinions.
Big unknowns that are on my mind:
1. Current growth rate of revenues quarter over quarter
2. Credit growth rate in future quarters
These are the hardest things to model out to me. #2 will be driven by execution on #1 and management of current line (I think Chris has got this). If they can scale this LoC and potentially other revolvers quickly, that's catalyst that will move the growth bottleneck to their ability to effectively put product into channels.
I really like the setup here, to be honest. I just have no idea how to guesstimate their ability to grow #2, but at least we're going to start to see #1 take shape in the near term.
The Value of the Line of Credit
Obviously, the selling is frustrating for the moment—I'm sure very much so for Anshu and Chris. It could be random noise, it could be some just simple portfolio rebalancing or other things. There were 2 days of moves up before the line of credit news came out (curious) and then markets seemed to be disappointed with the revolver. From my perspective, I do not believe it is in any way dilution. And this narrative about "short selling" is a never-ending nothing burger. There just are not enough shortable shares out there on exchanges that will even allow it to move the needle much.
What Matters to Me
Execution. Execution. Execution. While $500k for a revolver is admittedly small— ~1% of market cap—this, in my view, is a much more significant development for Verus than markets are giving credit for (pardon the pun). The terms were favorable, which gives them a great starting point, proximity to, and a developing business relationship with one bank, and it gives other lenders a view toward execution and payment history for their underwriting of additional and larger revolving lines of credit. Banks invest time up front with businesses and hope to expand the relationship as they get a comfort level and better understand the risk of the the borrower companies. So with reasonable execution and a little time, this can accelerate.
It is my opinion that Verus has turned a corner this year in general and securing this first step line of credit is a meaningful win, the significance of which is not at all yet being recognized. When I first accumulated my position it was admittedly speculative and couldn't easily be called "investment," as upside was contingent upon a number of critical and challenging things happening. This first line of credit is a material de-risking factor. I see Verus as an investment now and the Line of Credit's value is that it really is the beginning of a new chapter in the company's history.
Keep on executing, Anshu, and grow those revenues. Markets will figure it out in time.
Danni I'm not too much of a technician. I just use it as one facet to inform a broader, fundamentals-based view. That said, I think some technicians might argue that from 6/7 there was a pretty significant gap up and there hasn't been consolidation in that range. From the previous quarter's tops and resistance area you could make a guess of around 0.165. This is an absolute wild guess, though.
The point to my post was that the fundamentals, in my opinion, are there, and we're set up for several years of real revenue growth, so selling through short-term fluctuations is not something I personally would do. Whenever this thing is in a completely different category and I eventually sell some of my position I want to pay as little tax as possible on (hopefully) a whole lot of money.
As this company de-risks itself...
My opinion (not advice) is that flipping makes almost no sense unless you have personal liquidity needs. They are expanding sales rapidly and should get, in time, additional benefits in these channels as they have more to offer the same venues with pre-existing relationships. If the price wobbles quarter over quarter a bit, but is generally up and to the right, and you're (like me) well past the 1-year capital gains tax threshold (for U.S. investors), what would be the motive to sell? Verus sells in categories that should continue for the most part even if the global macro environment changes for the worse. People gotta eat and they need the occasional treat.
My view is that if you liked the company 6, 12, or 18 months ago, you ought to be feeling even better now and comfortable with some volatility that's bound to come with an almost entirely retail investor trading base. We might hit a few liquidation patches (and might have seen one a week or so ago), but that doesn't worry me at all at the volumes we're seeing.
Quarter-over-Quarter Patience Required
If you take a 9-month historical view on this stock, the chart shows two large humps with run-ups in key periods of retail excitement building during those respective quarters. I'm comfortable with quarterly revenue growth that I believe will continue, with each 10Q leading to new interest in the company and new flows into the stock. Without institutional buyers it could very well be cyclical like this for the next 4-8 quarters until there is broader confidence in management's execution. Of course a revolving line of credit will hopefully get into place and be used to accelerate product turning through their channels... hopefully at an impressive clip for this end of retail.
This is a multi-year story.
Great question. They still haven’t even filed for a ticker symbol as far as I am aware - my shares are sitting in my account with an obscure series of numbers and letters.
TF, my hypothesis is...
That we'll see sharp run-ups in advance of 10Qs and then pennant-shaped consolidation for the first 2ish months or before the next run up. I'm completely okay with this, as I'm officially (as of today, actually) in >1 year cap gains tax land on all my VRUS holdings (US-based). I'm in it for the foreseeable future and will continue to enjoy the story unfolding. It's just a matter of time and execution for Anshu Bhatnagar and Chris Cutchens now.
What he said on the call was...
(my paraphrase) ...that they no longer state backlog numbers, but in their estimation they think they are set up for a bigger backlog than previously stated, yet as always the primary constraint is financing to realize the potential.
I took it as quite a strong statement, as well.
I agree. If anything, it's a sign of a CEO capable of making tough choices deploying scarce resources for better near-term effect.
Use whoever you want. I hear complaints about Etrade to which I say it’s a commodity service that others also provide. No need to cast doubt on VRUS. If there was a problem with the company specifically Etrade would not have some special insight on it or if it came to know something negative they would be required to report it. And I can trade VRUS all I want to.
I would not personally want to use a brokerage which tells me what I can and cannot buy or sell. Just my $0.02.
My View:
We're likely going to see swings in the lead-up to new news, perhaps the quarterlies, et cetera, for the next few years. Why? The float in this stock is largely held by short-term perspective retail traders and investors. In time we'll probably see increasing amounts of institutional ownership and analyst coverage. For now, people will crave a never-ending stream of great news, but in reality it takes weeks and months to get things done in business.
Based on where VRUS is positioned now, I think quarter over quarter, we'll see consistent growth for the next several years and the stock will price itself accordingly, but be subject to widespread retail investor impatience in these interims. I'm just content and sitting on mine which I know would be hard for it to become worth less and I'm okay with a longer time horizon.
I'm no TA expert, but...
Even I can see the pennant.
What a Lovely Close
I was happy with anything about 0.0095, 0.01 for sure. That's a great place to start the weekend.
I wonder: Was today a lag in the dissemination of 10K info or market anticipation of a 10Q? Or maybe a little of both?
Chart's looking better than good.
I'm not sure why, but this came to mind:
Elwood: There's 106 miles to Chicago, we've got a full tank of gas, half a pack of cigarettes, it's dark out, and we're wearing sunglasses.
Joliet Jake: Hit it!
Not worried about 10K
I believe it will come shortly, but my perspective is that above all else the SEC wants 10Ks and reporting to be accurate for investors. The time line here was very tight, and Anshu wants to be thorough. He gave guidance on this in the most recent press release:
"The 10-K will be filed after reviewing sections that may have been impacted by the agreements announced today"
I'd rather it be a couple of days late and correct than filed for the sake of timing and incorrect. I think it'll be out in the next week or so and it will be correct and verified in light of the changes to debt and various anti-dilution provision changes, etc.
Not sure about tomorrow specifically, but based on their history and all of the balls in the air, my educated guess is that you're right - they'll file the 10K late after all. If they end up on time - hey, fantastic. I'm not anticipating that at this point, though.
This point of view falls into the category of "things to address with management if and when they actually do a call." They promised on time or head of the January 31st deadline because of the new CFO. They need to get a better comfort level with not delivering every thing they want, but keeping commitments to be on time. I think doing what you said you're going to do would inspire significant confidence in the investor base, retail though it is.
While I'd agree that Verus could earn that amount or significantly more in 2019, I would argue that it would be a mistake. This company needs to do everything it can to rapidly scale its sales channels and utilize any free cash flows for growth, not profit. We certainly don't want markets to price the stock based on profit, but on growth rates and realizable forward revenues.
“I don’t want to hear about bananas.” —R17
??
Choppy and volatile, right?
Seeing anything beyond that? My assumption is just consolidation figuring itself out in light of Monday's 5x volume.
My gut is that this is incorrect.
I'm a sceptic myself, oftentimes. Here, I think something else is going on. If I'm wrong, well, my money's already where my mouth is.
If give it a 40% chance.
They did right by shareholders to give the weekend to digest, in my opinion. With the teeets, they’ve given quite a it of guidance. It should be on a PR for the rest of the world not on Twitter, but I think it’s reasonable it’s down, but I’d not be totally shocked if it ended the day flat or up a tick.
Point of precision on #7...
The potential reverse split must take place within 12 months. They could always do another corporate action, but this one won’t make it permissible more than a year out. Technically 20 days from Friday + 1 year, if I recall correctly.
Dominoes and Band-Aids
Mark's been harping on a dominoes falling in serial fashion for some time now. There's for sure no way they could proceed without additional shares, the first major reason is that they've been in default with their convertible debt holders since the summer. That needed to be fixed. My gut (for what that's worth) is that Anshu is trying to mitigate dilution while also creating some optionality for the variety of things discussed and speculated on here on the board. My best guess is that any real dilution we see as a result is the outstanding convertible debt converting and being subsequently sold in the open market as we experienced last year. My thoughts there are 1. I think the majority of that has happened and 2. there are good reasons why remaining preferreds could want to hold on rather than convert and sell in any case.
I was pretty surprised as a the scale they chose for the authorized shares. Everything (which was a big jump from my earliest purchases in the ~250M range) that existed in outstanding shares now totals 20% of what's possible fully diluted. That's not super comfortable. I did note the paragraph about thwarting takeover attempts in the filing. That also makes sense, assuming the execution moves into second gear from here. If I were Anshu, I wouldn't want my plan I've invested a couple of years of my life into disrupted when things were about to take off, either. So with the expansion of authorized shares... My view has been for some time it was coming, because it had to come. Rip the Band-Aid off and let's execute.
Domino #1 down. What's next? I sure hope there's a PR domino or 3 in the near future.
Insider Buys
100%. I almost posted about this on Monday because no one seems to have mentioned it recently. It's very important.
I get that at this precise moment it might not be permissible, but Anshu and other insiders should begin to purchase shares at their earliest possible moment, in my humble, demonstrably patient-yet-opinionated view.
Yes.
They have consistently said that it will come on time or early.
If they don't do as promised it's just further erosion of confidence. No one wants that.
I think it'll come on time. Fingers crossed.
right there with you.
They did say that it could come early due to the new CFO. I've been concerned about an extension, too. We'll see.
Interesting!
A self-imposed loud period! haha Seriously, though... Reasonable comms would be very helpful. They've said the plan is to resume normal updates and calls (scripts with Q&A, I believe. was the language).
That sounds reasonable given:
—September statements that they can achieve $20mm through their trade finance arrangements
—New multi-product orders they think they can fulfill at ~$1mm/month (I read this new order as less risky / doubtful, as some backlog has been around for quite some time now)
If I am asking myself what seems to be a reasonable number, to your point, this particular target is simple back-of-the-napkin math: of the $20mm divided by outstanding shares and you're at that price level, assuming that this new contract is joined with some fulfillment of the backlog. That price, though, would not take into account at least two different and important questions: 1. can they service contracts at the level required for utilization of their trade financing capacity? and 2. how quickly can they collect receivables and recycle their trade financing as working capital in a single fiscal year?
Importantly, valuation in my experience (from private markets, not public) is something always discussed and thought about in terms of growth rates. Demonstrated growth, not "trust me bro - it's heading to the moon" promises and pro formas. If/when we get some decent execution against what we've been told I personally believe markets will reprice accordingly.
My point of view is that the 10K will reveal much to the market about their execution to date and give a sense of time horizon to achieve capacity on the trade financing we know about. My hope is that they can move product relatively quickly and turn that financing efficiently, but being essentially a new company, that's more optimism than a scenario I would deem likely just yet. I can concoct all sorts of scenarios where the numbers get really interesting really quickly, but I prefer to think within the confines of what we know for sure. My hypothesis is that the market will price VRUS based on their efficiency of their trade financing to date (and of course any new unknown developments would be in addition to that).
Assuming we start clocking some material increases to revenue and meeting stated goals I'll be much happier to think about reasonable growth expectations for the mid term and what price levels that could bring.
Disclaimer: I'm not an investment advisor. You should not make any financial decision based on my opinions. And probably not anyone else's.