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Been invested since .05; averaged down to .02
IEVM will hopefully be my last expensive lesson. Should have sold when the red flags became obvious.
On to the next opportunity.
CXRX bonds getting crushed, and yet the equity is still worth a few hundred million? This stock is a big, fat, zero at >6x leveraged lol
I scheduled a call through LinkedIn
Hope so too. Maybe downside is protected via a strategic sale. We'll see
I don't like their lack of direct ownership, their inability to retain employees, their recent high salaries. I spoke with Alvin Fund's portfolio manager (owns 6%), and he said that management has been operating without a sense of urgency.
Maybe the salary cut and the shitty financing will make them "urgent."
That's true. I just don't like management any more. Not very trustworthy imo
In the 8-K it says that if the company hits EBITDA break even for 1 quarter then management gets the rest of their salary, because they recently had their salary cut in half.
3 things bother me:
1. Director Kubacki resigned a couple days ago. He was a 2% shareholder.
2. Financing they received was horrible.
3. Management seems to be targeting EBITDA break even rather than operating cash flow break even.
Offers by who? Larger oil service providers?
I'm also concerned, but if it makes anyone feel any better, the board of directors is getting fed up with management and has chopped their salaries in half. The last 10-Q indicated that IEVM had around 2 months worth of cash to burn. It's been 2 months now and there has been no press release indicating a material financing, so we can only speculate that they've grown revenue to cover costs.
I'm disappointed as well, but to be fair, their competitor ENSERVCO (uses HydroFLOW) also indicated that the first half will be tough and that they will grow revenue in the second.
Hey markt, where did you hear about the customer?
Where's the volume coming from?
Yeah the acquisition price would be interesting because IEVM raised around $24 million in invested capital. I sure hope the company can sell for at least this amount in a worst case scenario! At $24 million this is a $.066 stock, assuming IEVM has to raise $2m in more debt financing.
Right now I worry about the kind of financing they can receive. Let's hope KC Capital and other large shareholders continue to support the company! Management has just begun accruing their own salaries, so they obviously believe in the opportunity here
That's true with the operating costs, I didn't account for that
I think break even is around $9-12 million in sales, so using an average price for Excelyte you can get the implied well count of around 2,000. Is this around your estimate of break-even?
While this is looking backwards, these are some of the negatives surrounding IEVM. The company has lost two of its sales and marketing guys over the passed two years: Bradley Rockman and Chad Crady; it is insanely difficult for new products to be accepted by O&G companies; Excelyte has been around for 8 years without a successful rollout in any industry, even though Wayne Kinsey (IEVM's largest shareholder) touts it as the greatest biocide ever.
I've been told that Excelyte works well, and there is a Benchmark white paper on Excelyte that shows the product's efficacy, so I don't have issue with the product.
It's great that the company has focused on a direction fairly recently and has been executing and building out infrastructure to support growth. IEVM is not alone in this opportunity, as other water service companies have started pursuing similar opportunities recently. Lux Research has written about this opportunity as well, and the consulting firm states that companies who can weather the oil price storm will be successful.
There seems to have been some consolidation in the water frac space, and I think IEVM will be acquired by a turn-key provider of water services. According to a VIC report, IEVM's management wants to sell to a larger company. If the company can't break even and fund its operations with internally generated cash soon, they will probably end up selling regardless.
How much could IEVM go for in a bearish scenario? HII Technologies sold its water assets for a meager $4 million to ENSERVCO. IEVM has raised around $24 million in capital, so receiving a bid of $4 million seems unlikely, but in a scenario where IEVM cannot break-even, the company would be more of a price-taker IMO.
Maybe IEVM can break-even. Management thinks it's realistic, investor relations thinks it's realistic. Management mentioned that customers are buying the product outright now instead of testing, so that is positive. IEVM needs around 2,000 oil wells to break even, and their listed customers have a lot more than 2,000.
I wish I had client level details, so I can't provide any granular insights other than what I've mentioned in the past.
The product works well, it seems like a good amount of their financing comes from other shareholders.
If worst comes to worst, the company will be sold at a price that is probably higher than what we paid for it. I don't think this scenario will happen, but it's good to keep in mind.
I imagine the dilution will come from debt holders converting their debt to equity. That depends on the exercise price given to creditors
A larger shareholder whom I communicate with has talked with Yvonne. The company seems confident in break-even by December, and they are in the middle of reaching out to shareholders for fundraising
From another shareholder who spoke with the company
I don't know why you think I'm bearish on the company...
1. Attractive industry
2. Highly incentivized management
3. Shareholder friendly financing from equity holders
4. Very fragmented competitive landscape
And apparently Chad didn't do shit at IEVM. He was a bad worker. So I was worried for nothing
I'm not short. IEVM is my largest investment...
Have you seen my other posts?
Chad had a good track record of growing sales at his old company $0 to $2 million in a couple years, so losing him was worrisome.
If my understanding is correct, LaVance went from getting paid around $500k at Hologic, to getting paid $0 at IEVM
I was also told that management has been accruing their compensation. They don't receive any salary; anything that they receive will be through stock price appreciation.
Was just told that Chad wasn't a good fit and didn't produce anything, haha
Okay, thanks. A month and a half ago oil was at around $30 I believe, and yet you noticed things looked busy in there? Unfortunately, Chad Crady left IEVM in late March, and I don't know why. Chad said product is great, but that he doesn't work there any more. I wonder if he was too expensive and didn't add as much value as previously thought.
Was Nick positive about the future of IEVM? Saying things like gaining momentum, etc?
poonch1ne, when did you visit the company?
The debt does not have any liens against the assets, and from my understanding the debt is owned by some of the institutional shareholders. These shareholders obviously have a direct alignment with us, as they cannot own any of the assets if the company somehow goes through a bankruptcy restructuring.
IEVM has gone into default on its convertible debt before. Check out the debt owed to Mcadoo Capital.
As long as "lienless" debt continues to be provided by aligned equity investors, I don't see IEVM going to $0.
All 50-100x investments are extremely volatile and uncertain. If I sell now I will likely regret my decision in the future if the stock reached the dollars.
I wonder why the company hasn't released any news regarding growth. This is the longest period in which a press release has not been filed. I'm uncertain as to the company's prospects in the near term, but optimistic longer term.
There seems to be a secular trend towards water recycling technologies, and IET hasn't been alone in pursuing this opportunity (HII Tech, Vivione bioscience, ENSERVCO, Clean Chemistry, and others).
IEVM makes sense as part of a larger integrated frac-water service company, as well-operators would rather work with turn-key providers of water solutions. Maybe IEVM will be picked up by Benchmark (merged with Rockwater), as Wayne Kinsey's brother(?) Mark, is the President of Benchmark according to a Rockwater press release.
I will stick out the ensuing volatility as a long-term shareholder. As long as the opportunity is there, and as long as management continues their efforts in creating value for shareholders, I don't have a reason to sell. IEVM has a fairly strong balance sheet (debt has no liens against any of the company's assets), and I don't see how this company can logically be a zero.
As long as downside is protected, upside will take care of itself.
A while ago when I spoke with the CFO, I mentioned a competitor called Envirolyte. He said that Envirolyte didn't have the infrastructure in place to compete. My guess is that this industry is spread out with smaller competitors.
Interesting article: http://cen.acs.org/articles/93/i15/Better-Chemistry-Flows-Oil-Gas.html
From the article: "Owing to the current dip in energy prices, it’s difficult to get oil and gas operators to replace familiar chemistry with something new, Solvay’s Pu acknowledges. 'Once the market stabilizes, in the next 12 to 24 months, the trend of removing many of the nasty components will accelerate again; it’s a trend that has already started.'"
Some positive evidence here for Permian well maintenance providers: http://www.ugcenter.com/routine-well-maintenance-gains-share-operators-adjust-lower-oil-prices-788541#p=full
Think it has to do with EP Energy selling assets to a private equity company. Not sure, though.
Ah, okay. Thanks
Any thoughts as to why they only have 12 employees? The company has 4 depots with targets of 15 machines per depot. If up to 8 people manage one machine, then how do they only have 12 employees?
Many part time employees? Are they just extremely early in the rollout process still?
CFO has not answered my email. I doubt he will.
It seems like the industry for water frac' services is undergoing some major growth, with integrated service providers starting to pop up recently (Select Energy's spin off of non-water frac segments; Rock Water Energy Solutions' formation in 2011; HII Tech's acquisition of water frac' services in 2012; Lux Research's estimate of a 15 X growth in water frac spending between now and early 2020s).
IEVM has a niche in the water-frac industry, and to me it looks like Excelyte could make a good addition to an integrated service provider's portfolio. According to a valueinvestorsclub report, IEVM's management claimed that could potentially sell the company for a $200m+ valuation to a larger service provider.
Other things: the CFO said that IEVM is not running into any competition during the Excelyte roll-out; IEVM's VP of Sales and Ops said that the company is gaining "tremendous" momentum right now (he was the president of Sage Power Solutions - a start-up that had around $2m in sales by the 2nd year of operation before the parent company - HII Tech - filed for bankruptcy); Casey Capital has continued to add to its position over the years, even though the fund's ownership has been diluted through secondary offerings; the portfolio manager of Casey Capital also lists his wife and child as shareholders.
And according to the CFO, the company is not facing any competition as they market Excelyte.
I'm approaching the release of the 10-K with very mild enthusiasm. The financial results that the company achieved in 2015 were way below the mark that IEVM shareholders had placed. Hopefully, the management's discussion section will impart some good qualitative info, though.
While I am happy with the prices that I've paid for IEVM, I don't think the stock will shoot up until closer to 2017, as that is when production in the oil and gas industry is supposed to kick in.
When production ramps up, Excelyte will be used to treat frac water, which is one of the main focuses of LaVance (he has a piece written in the Huffington Post). When that happens IEVM will look a lot like HIIT's stock before it went bankrupt.
It's interesting to note that LaVance joined Hologic in 2002 when the stock was trading around $1. Under his tenure, the stock went up like 3,000%. That's pretty good