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Regarding price targets, I'm assuming many will pay very close attention to the delta in revenues that we'll get with the 10K.
My view has been and continues to be that Anshu's ability to ramp revenues based on the trade financing component will help the market have some basis for minimal growth expectations and, frankly, provide some ability to give more credence to whatever guidance we get from management. We have to be realistic that there have been a number of misses in terms of timelines and expectations and, for me if for no one else (doubtful), that has driven uncertainty in terms of where we'll actually land revenue-wise. We know the potential PPS based on we've been given, but not actuals and little real prior history on which to understand how long it might take to achieve the backlog or to mentally frame a pessimistic scenario. If the period ended July 31st marks Verus becoming an independent company and something of a starting point, the 10K will demonstrate what management was able to achieve since that time. Real, reasonable expectations versus speculations, I believe, will be very important for the price of the stock in the market.
I've gotten criticism for my approach here, but that's okay. I prefer a realistic approach rather than being overly hopeful that "everything falls into place" to achieve that $20mm. Am I hopeful for that? Absolutely! Some demonstrable progress could allow (at long last) markets to begin to price in some forward revenues. We'll see what happens with the 10K.
"close to... if everything falls into place"
My read on that is and has been a best case for the trade financing piece. The upper bound. I believe the guidance in that based on the above language he gave a clear upper bound on it.
The price target methodology was just fine for an optimistic scenario on that guidance. Again, my original comment was that we do not know the revenues.
My argument...
"Your argument would suggest that trailing revenues are all that matters in valuation"
Totally disagree. What my argument actually suggests is that taking a normal reasonable projections approach for this company is a composition error because the level of uncertainty around a company such as Verus is considerably greater than companies with even, say, 8 quarters of consistent growth and performance. That approach in time with a couple of execution notches on their belt? Sure. But the uncertainty around this early-stage company is so great that it is unclear that even with the trade financing around this potential revenue, that it will all be captured as value in the company. The assumption in that model was that it will all be achieved. Hopefully so, but there has been enough doubt and missed timelines I'm suggesting that the market will not begin to price in forward revs until confidence in management's promises is developed a bit.
And since the results in the most recent 10Q are for the period ending July 31st, we literally have no idea what revenues for nearly 6 month's worth of (hopefully growth) actually are. Which is why I made that original comment. It's a wet finger in the wind.
I'm comfortable with uncertainty. I'm uncomfortable assuming that any team nailed execution 100% under the circumstances Verus faces.
It’s not an approach. It’s a truism.
We know capacity/potential. Since the 10K will present the first numbers since the spin out completion and basically represent half of the year’s progress, I’m assuming things will have changed, but to what degree is anyone’s guess. It could be a very happy surprise or it could be incremental revenue growth. Markets are anticipatory, of course, but we don’t have any substantial history from which to extrapolate. This is a very early stage company with potential, but so far they’ve had some real struggles executing on what their guidance has been. I don’t see a projection based on that as very useful given that execution. Once we see a few quarters of more or less consistent (or hopefully accelerating) growth I think projections are more useful. And I think that’s when markets will begin to reprice the stock accordingly.
If anything, to your point, this month’s price action is indicative that we are both right — the price moved up in advance of news coming in December which IR promised... and as the market started to realize that was less and less likely it walked right back down. Anticipation without confirmation of expectations has no legs.
The one thing we always know for sure about startup projections is that they are wrong.
We do not know current revenues.
Hopefully we get a meaningful bump there in the 10K.
Setting Expectations on Information Flow
Mark communicated with me this week. They have a "goal" to get out "some kind of update this month." From that I personally take that it won't be the final word in updates, but incremental information about the company.
It's important to bring a bit of balance here. There is precious little middle ground between folks who expect the moon tomorrow and folks who are all doom and gloom. I'm personally expecting an update to close the year, based on Mark's communication, and then some additional information next month. If they had really big news, one might make the argument that releasing that during the holiday season in the U.S. could be an execution mistake, much like their failure to do a press release on the symbol change completion. If there is bigger news to announce it would likely hit more radars once people are back in the office after the 1st of the year.
I do expect him to meet that simple goal of an update this month based on his communication.
That’s been sitting there for months - maybe 6 or more.
Ah yes...
I'd forgotten about the "Verus can confirm... very late stage... with two M&A candidates" language. I still don't know what that might mean and it's been a few months. That would make now very, very late stage.
The Merger/Acquisition Story
For several months there has been an increasing amount of speculation on this board that there is some kind of merger or acquisition in play behind the scenes with VRUS. Lately it almost seems that this has become an assumption for some.
Is there any evidence at all that this is the case? I feel like I either missed something or speculation has gone wild. The pieces being put into place Mark keeps alluding to... I've always taken that to mean a bigger line of credit to work through the backlog.
It's interesting...
What is a strong / weak hand here? How recently would you have had to have entered to qualify as weak or impatient? How long would qualify as legitimate impatience?
I personally think management should be feeling some pressure to execute and generate at this point. Anshu is coming up on his 2-year anniversary at the company before long.
And if they don't?
This has been essentially the same message for over 2 months. I think most reasonable investors are okay with executing against the trade financing that we definitely do have, rather than the never-ending push for other sources of financing. If they can get it done, fantastic. I think they've had sufficient time. My perspective is that additional financing on more favorable terms will materialize when those people see solid revenue growth based on what they have in place.
Great point.
I'm willing to give them the benefit of a doubt from, say a quarter plus or minus a month, from the July time period knowing they are getting a lot of things set up after the spin out. At some point (now) they should be mostly over that intensive period and be able to carve out an hour plus perhaps a couple for prep on a quarterly basis. You make a very good point that they've largely done a preparatory exercise already at that point, so it should not be a real burden.
What is the governing rule here?
I know that there is some different treatment for companies of a stage like Verus in terms of reporting and communicating with investors, but — and this is purely a guess because I don't know the applicable rule here — I would imagine there is a bar something higher than just 10Qs and 10Ks. I'd anticipated a call on a quarterly basis, but that hasn't happened since, I believe, September 2017? Annually seems too little to me for what should be a growth period of a couple of years for Verus.
What are they required to do communications-wise? What do you feel would be appropriate and not unduly burdensome on their admittedly small team?
I agree that it is in their best interests with regards to stock price tracking performance they are building, as things will get relatively easier as financiers can see markets responding to their work.
Daily List notice info from IR
Mark communicated with me that it is an automatically generated noticed trailing the corporate action of the symbol change to let markets know that the action is complete.
I found it here on this board. I don't want to post it in case that wasn't supposed to be posted on here originally.
Clarity. Expectations. These things are actually straightforward to achieve, which is why I think it's so frustrating for some of us. Right now I think the market just has no idea what it can expect and with the radio silence from the CEO people are naturally concerned. Quiet period 5 days into the new fiscal year? Hmm
I agree.
I'd shared with him my perspective that, hey look.. Incremental revenue growth against the trade financing that we have in place when he's stated publicly a number of times that he thinks he can get to break-even around $5-6mm in rev. That's not nothing. Anshu wants a grand slam, massive revolving credit line for the backlog, but those credit people are going to feel better about both a greenlight and terms if revenues are moving and the stock is responding a bit.
And also... Communicate. Much more. It's a public company. You can't not communicate -- and to your point actually get on a call -- with your investors. Consistency goes a long way, in my view, and would help to set some reasonable expectations in the market. Right now we've got a new (unannounced) ticker symbol, a CEO who is incommunicado, and a broken record from IR. These things - in my view - seem amateurish and spook people who otherwise want to believe in a multi-year story with Verus.
I sent him an email early this morning and he replied very recently (all of which has come before):
Anshu was gone for two weeks on a rather extensive international business trip, so our timeline got pushed back a bit on pretty much everything. This is a very small company, so there is a lot more hands on and everything takes longer than anticipated. We intend to resume the kind of calls that we used to do as soon as the growth picks up again. I know everyone wants a play-by-play, with a lot of details, but the company is in a self-imposed quiet period while it chops away at the final hurdles. [personal info redacted] This is a very linear story at the moment (my dominoes metaphor is a perfect description), so everyone will have to maintain a bit more patience.
Suffice it to say that the the company is in ongoing talks with many parties in multiple parts of the business, so those kinds of activities take time. Investors should consider this story as a reverse star-up, not a reverse merger, as it includes only parts of a prior business. Due to the difficulties during the early quarters as a public company, the real start date is July 31st, 2018 -- the date of the spin-off that gave Verus true independence. Updates are coming, but dependent upon completion of corporate actions.
yeah seriously though — < 10k shares 21 minutes after markets opened?
Mark and I emailed back and forth end of last week. He told me that some things are in the works in parallel and that we should expect more information soon. From the context my guess would be the symbol change as one part of an announcement that covers a few things, but he noted they are tackling several issues at once and some of those “should reach a decision point very soon.”
This is not investment advice, but my perspective is to be patient with time horizons and to anticipate at least incremental year-over-year earnings improvements as we are near fiscal year end, driven from the trade financing. They could get to break-even on that alone which subsequently could make a revolving line relatively more accessible.
I previously also tried to encourage caution over people behaving like a ticker symbol change alone being anything meaningful in terms of price level, but that was summarily ignored. ¯\_(?)_/¯
Too late for me how, exactly? I've been long this stock for well over a year now and averaged down along the way.
While it's just a symbol change...
This is very welcome because it was starting to look and feel like something material was holding up the symbol change. I even called FINRA last week and asked every question I could (to no avail). Very glad to have that dark cloud lifted from the company.
That said... Show me the financing. Then I'll get excited!
I agree. However, this is not the nature of the big updates we were promised to arrive over the past couple of weeks. They had to put out something. It’s fine news, but not material to their execution on the trade credit they have or the elusive financing they’ve been working on for 19+ months. People are right to criticize this timing. This should have been part of a broader update or part of a call which they’ve not had in over a year now.
Absolutely a revolving credit line is preferable if he can finally manage to get that. The "syndicate" language insight is interesting - we'll see.
Growth rates when there are revenues this low are going to be unsustainably high for some time once things get going. They could probably do a couple of years at a really high growth rate, though.
I really like the scenario you outline that accounts for likely rising interest rates over the next couple of years. I hope he sees your post!
Meanwhile... Over at Nestbuilder...
http://nestbuilder.com/
They did file make some filings in August, but the 90s era "Under Construction" sign kills me.
True.
I think markets would have not reacted this negatively if Anshu would have signaled his readiness to operate on trade credit to get to profitability (stated in the ~$5mm revenue range). That would allow some breathing room to pay off the still outstanding convertible debt, which we've learned not all of it converted even though AS are now maxed out. In that quote you posted, he led with this:
"We are attempting to forge a path that minimizes dilution, but maximizes growth..." What I wanted to hear and I think the market did, too, is that they are going to avoid further dilution altogether. No "minimize" it. This was a hint that back peddled from his statements of the goal to retire convertible debt in 2018. If they add new authorized shares I'm guessing (I have no clue, but adding only a 100mm seems like it wouldn't do much) that number will be in the .5 - 1 billion range. The downward repricing after the 10Q in aggregate was in the ~ 25% range, so maybe the market is guessing similar to my guesswork.
I've felt like trade finance was his best route for a long time now to de-risk for other sources to come in on more favorable terms, but spinning out Nestbuilder has taken longer than I think they anticipated and getting products into shelves and realizing revenues seems to be, as well. The 30-something% YoY rev increase was not impressive in light of all of the talk about new products. In my opinion, a company with the right products and distribution at this stage should be in 100s% YoY growth range. There's no where but up. Perhaps next October we'll see that. I hope so.
You're right. Anshu needs to step up an execute now.
I'm not sure I'm prepared to assume that every logo in this deck are approved. Some were in the context of "opportunities" - like Ritz-Carlton and others. I don't think you can safely assume that these are already customers or suppliers and they've approved it.
I think you'd have to be a BD or MM to have the ability to short this stock, though. I don't know of a brokerage firm that allows their clients to short stocks at this price level.
If you do, that would be very interesting to know about, though.
CCI: only one point lower since early March
I think the final news on the ticker symbol is more demonstrated execution against the stated strategy, which over time builds up confidence in management. That's very good. And frankly there was room for improvement in light of the much longer horizon to unwind the legal disputes and subsequent dilution. It'll set the stock up for big moves out of this range, but the symbol change itself is just structural. It should bring some new retail interest. The bigger moves, in my view, will only happen when revenues move significantly northward. And I think that's coming, albeit maybe more incrementally than we'd like via trade finance from suppliers. And that's okay.
Thanks, Janet. The NASDAQ site makes it difficult to search for institutional purchases of a certain stock, but the other one someone posted helps you see it quicker:
https://fintel.io/
I was mostly asking so I can learn where to find these kinds of things whenever they are happening.
Would you mind sharing the source?
Consolidation
There has been pressure around this level since at least June. Today it looks to trading on gaps as much as 8%, so there's probably more consolidation to go. No big deal. This is a multi-year accumulation stock.
Sheepwolf I was curious if you have an opinion on price targets for RBIZ/VRUS.
At least some positive chatter for once. Nothing has fundamentally changed. We need the financing and this thing is set to go parabolic.
Strategically that sounds like it makes sense. The only problem with it is that this approach creates a quasi-private company, not a public one, and this was not announced as the plan and, thus, what markets were anticipating. They never alluded to this remaining untradeable for an extended period of time. Alex himself said "the long-awaited spin-off of the real estate assets of RealBiz will finally occur" in the most recent PR. Since he agrees it was long-awaited, if there was to be a lag of potentially months while they get things in order he should have given guidance and set expectations. Moreover, they should have had that strategy in place and ready to go, in my view. Finally... the under construction sign? I mean...
I think we're saying the same thing to a degree - you're saying they need a plan and some announcements to grow the product, etc. I'm saying we need more information flow across the board.
Nothing has fundamentally changed
Structurally the spin out is complete. However, Alex at NestBuilder hasn't managed as little as to get the 90s era "under construction" banner of their website, signaling no movement to the market. Also, no filing for a ticker symbol. And it certainly doesn't look to trade any time in the immediate future.
Verus (currently trading as RBIZ, but no symbol filing just yet—not a big concern for me, but a nice-to-have) is trading as it did before the spinout, as one might guess, because other than separating the books and creating the new entity, markets have no new information about the one thing that is inhibiting performance: the elusive financing piece.
Also, there should be more product photos and activity in parallel via PR and Twitter. This stock moves on activity and frankly it doesn't take much work for Verus investors to feel okay with direction. That is given that there is a sense of direction and activity. They go in fits and starts, but markets need consistency.
Let's be more consistent, Anshu. It's not a big ask.
So much resistance around 0.0042
If it cracks through that I have no idea where next resistance level will be, but it could be just above a penny.
NestBuilder shares arrived at Ameritrade
It doesn't have a ticker symbol - some long string of letters and numbers. Not sure when it'll be receiving a ticker or be tradable. Interesting process to observe, though.
Do you have a sense of what the market might do with this new company? I'm sure some will sell, others hold. Curious your thoughts...