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I wouldn't classify myself as an internet bully.
I'm sitting here trying to have intelligent discourse and exchange ideas about a company I'm invested in. The lions share of the content is just asinine commentary with justifications that don't pass the sniff test.
You claim you have 2M+ plus shares and as far as I can tell have not offered a single well reasoned thought about why you actually like the company and what you think it is worth. Do you have a plan and expectations for the company? Or did you get lucky and now you're continuing to YOLO it hoping for the best?
Prove it. Let's take a page out of WSB's book. Let's see the positions.
What in the world are you talking about? The 10-K was audited. No organization gets their quarterlies audited.
Furthermore - Your statement shows a severe lack of understanding about what audited financials actually represent.
The auditors aren't stepping through every transaction and saying "yep no fraud here."
Taken right from our audited 10-K.
How do you get more verifiable than filing your information with the SEC?
So why waste my time with the below instead of asking the question you actually wanted to ask?
So if you believe in the company this is a big discount. I don't understand what the problem is.
Do you honestly believe what you just wrote?
Trying to assess the enterprise value of the company has nothing to do with the share price or the number of shares in the wild. You can look at book value, EPS, whatever you want and then assign a P/E or "blue sky" to the number you arrive at.
I posted the following back in early January.
Sure.
Maybe the hope was that a media blitz would get the share price they needed for NASDAQ. If that was the thinking they miscalculated and now they revert to the R/S backup plan.
Personally I would have much rather had strong quarters be the catalyst.
I'll concede you may be onto something.
Mike Long wrote the article on InsiderFinancial. He also wrote two additional articles where KAVL was mentioned. The earliest of which appears to have been posted on January 18th, 2021. Maybe there is some tangential link to TrendingEquities or Inflection Partners but all we can do is speculate.
Inflection partners hosted the conference KAVL attended back in January. I assumed it was a pay for play conference like those "40 under 40's" you probably see for regional business magazines. Inflection partners also took over investor relations and a handful of other things as evidenced below.
https://www.yahoo.com/entertainment/kaival-brands-innovations-group-inc-142000603.html
The bigger point here is what in the insiderfinancial piece can you actually tie back to the company? Nothing. It was an article built off of the publicly available information with a healthy dose of optimism and speculation. Just weeks before the company released a dismal 4Q, estimates for Q1 and reaffirmed their belief in the $400M projection. The writer took some serious liberties to make the $!B statement.
What gets filed with the SEC is the only thing that is gospel. Everything else is subject to spin and puffery.
How bout churning out profitable quarters? I think it's poor timing coming off two quarters that I have perceived as "off." If they did $60M in Q4 and $100M for Q1 I don't think anyone would have a bad word to say.
Why do they need a separate catalyst when executing their current plan is probably good enough?
You aren't a fan of the stock at the moment. Exit your position and wait until you see changes you like. At the moment people are believing in what has been stated for yearly revenue and I'm sure assuming some revenue growth for 2022. It is a calculated risk just the same as it was when stock was trading below $.50. Maybe people holding win and maybe they lose.
What well reasoned thought are you going to provide against the company? I'll pose the same question to you as I posed to Berd. What $ value do you assign to the company and how did you arrive there?
I take it this is the statement you are disappointed with?
This was a speculative piece someone put together. It isn't bonafide company information.
What specifically in the article do you think is a fault of KAVL? I read the article when it came out and their $!B number was very optimistic.
My original response did make sense.....
You asked about Quarter on Quarter. They were reporting a year ago so how could they have made a projection re: Q4 or Q1 growth QoQ?
I erroneously thought you had asked about quarter over quarter.
RLX earnings are growing..... They stated they expect to do ~$400M in Q1 FY21. I'm hopeful we are about 12-18 months behind them in our progression.
Can you supply the article you are referencing?
Edit - Removed boneheaded statement.
Probably tough to find a worthy comp..... It's an interesting arrangement to be certain. Unlike other distribution companies we don't have the overhead of logistics and warehousing.
Best I can tell even though KAVL is responsible for order fulfillment everything is getting drop shipped from BIDI's warehouse in FL.
That's just not true. We have revenue projections, income statements, CAGR for our market segment, share of that market segment.
Do blind spots exist? Absolutely.
You should have the information necessary come up with some sort of perceived value for the company. Otherwise you are at the table with nothing more than a hope and a prayer.
So step away from the share price and R/S for a moment and work backwards.
How do YOU value this stock? Based on all of the fundamentals and gripes/concerns you are aware of what do you think is a fair market valuation for the company?
I think this speaks to the point Daiello is trying to make.....
Think bigger. We want 70, 80, 90% institutional ownership. We want to be part of funds not in John Smith from down the block's portfolio.
Institutions don't give a shit what the price is. They are looking at opportunity and risk. The only reason they care about share price is if it affects their ability to move in and out of a position. Jeff Bezos is against ANY splits because he wants an astronomical share price. He believes it lends itself to a more stable share price because it limits day trading.
Berkshire Hathaway has 640k shares.........
Currently trading at $340K/share. If the enterprise value is there people will buy no matter the share price.
I just wish I had some dry powder. WAAAHHHHHHH
If we were already on NASDAQ I could be buying on margin right now.
I like to think I'm pretty pragmatic about the stock.
Let me preface this by saying in the worst case scenario I do not envision an outcome where I don't walk away up 100%. With this outlook I'm more than happy to "see what happens." I am also biding time to get long term cap gains status.
This obviously colors my (and anyone else who finds themselves in a similar positions) opinion of the future. You need to make decisions based on your cost basis and risk tolerance.
Does KAVL have problems? Sure. What company doesn't?
My big list of gripes:
1) - Niraj and Eric playing both sides. I posted about my discontent with their compensation structure when their base salaries were raised. We have no idea what the margins are on the BIDI side of the equation. We have no idea if KAVL is getting a fair deal in negotiations or if BIDI receives an unfair advantage due to the arrangement. Due to this I believe they should be taking a $1 salary, growing the business, and benefiting from increased share price. I do not believe they should get a salary, RSUs and a cash payment for every $25M in gross revenue.
Solution: become more transparent about the relationship. The independent directors should hopefully alleviate some of these concerns as well.
2) - KAVL != BIDI - We do not know how the NASDAQ will respond to the current setup. KAVL is currently a middle man to a related party. One thing finance people look at is QUALITY of EARNINGS. While KAVL's revenue is generated from various different entities we only sell a single product currently. While our forecasts for revenue growth are fantastic there is real world risk associated with our revenue being earned in such a consolidated fashion. The abysmal 4Q is a self inflicted example of this. What if other supply chain issues occur outside of BIDI's control? NOTE: I have some real concerns about a label swap impacting production in such a significant manner but I don't care to speculate on this point.
Solution: Diversify our portfolio
3) - Class A Shares - Niaraj and Eric have what is essentially equivalent to 100% of KAVL's outstanding shares sitting in a different vehicle. Conversion is possible in 2023 or more likely when they hit $1B in gross revenues.
Solution: Retire the preferred shares to remove concerns about massive dilution. Convert them to another vehicle that retains voting power or put more concrete limitations in place on the Class A shares.
4) - Patent Purchase - The patents that we agreed to purchase appear to be utility/process patents around the manufacture/distillation of R/S nicotine. Niraj has made some pretty bold claims about modulating the ratios of the stereo isomers (R/S) and the resultant effect on addictive properties. I have not located any science to back this claim up.
Solution: None at the moment. Assuming Niraj is correct that addictive properties can be modulated.... a product that is "less addictive" or can be directly linked to aiding cessation will likely require FDA approval and take 5-10 years before we start to see revenue.
5) - $50M Public Offering - This was buried in the patent agreement. They may raise up to $50M at some point in the near future. They are cash positive so I would certainly like to know what $50M in capital will be used for. Maybe it is for R&D and maybe it is for M&A activity. Who knows. This isn't the end of the world. $50M @ $500M or $1B market cap is 10% and 5% respectively. It's not a huge diluting event. The possibility also exists for Kaival Holdings to do a private placement where the $50M in shares comes out of their piggy bank. I'm sure this option would cause plenty of grumblings but it wouldn't dilute us.....pick your poison.
6) - Reverse Split - Given where we are at I *think* I would like to let us bleed/suffer for a couple months and see where the price winds up. They have chosen another option. As others have said maybe they know something is coming down the pike that is dependent upon NASDAQ listing. I don't agree with the decision to force NASDAQ after 2 off quarters. I think we would be in a much stronger position if we did a R/S because we could only get to $3.50 after two strong quarters.
Even with all of the above gripes I still think the stock has room to run. I think $5-6 in today's price is still possible by the end of the year. Shit.... Based on the net income and revenue projections I had us pegged at $2.50 for end of 2021 during late fall/winter. It should be noted that I was extremely conservative when making this projection. As I mentioned on Stocktwits..... I think the run to $3+ got us all way to excited that we were going to reach the promised land much sooner than we anticipated. Now that we are coming back to reality it stings a little.
Hindsight is 20/20.
I don't understand the "limiting future" gains mentality everyone is espousing.
If the market cap of the company 10x's it's still a 10 bagger irrespective of a $3-->$30 PPS movement or $15-->$150 movement. Tesla went from $85 to $880 in a year on pure speculation that Papa Musk was our savior. Share price is immaterial, imo. % returned is the only metric that matters for your portfolio at the end of the day.
Class A and options (directors) will be affected equally. This was one of my concerns based on the wording. The below is from the actual 14C filed with SEC rather than a description of it. I am finding that going straight to the source (EDGAR) is always more beneficial than reading the releases.
100% agree.
It would be another thing if $KAVL was positioned as a distribution company. Outwardly KAVL and BIDI are one and the same in most peoples eyes which they are not.
I would love to see Niraj and Eric gift Bidi to KAVL but I'm hard pressed on that one happening either. They had a reason for this setup which none of us have the slightest insight into.... Hopefully it was just for liability sake. However if that were the case BIDI could have been a subsidiary of KAVL to keep the liability at arms length.
While I agree with a lot of what you said I do not believe the sale of BIDI to be likely.
I could foresee A LOT of legal headaches that would span decades if they were to pull the rug out from under $KAVL like that.
Also - Why go the public route if that was something you were interested in? They obviously have the connections. They could have built a wildly successful private business if that's the route they wanted to go. I'm sure they felt having a publicly traded company was their path to earn much greater riches long term.
I still believe there is plenty of upside so long I shall remain.
What are your thoughts on RLX as a comp? I oscillate between it being a good one and a poor one. I always have this nagging voice in the back of my head that the market won't treat us the same because KAVL doesn't hold the IP.
Alternatively - US based, similar revenues, better net income, less overhead (excluding cost of goods sold)..... So maybe the market likes us more after uplisting.
I get the thought process but I think we may already suffer from liquidity issues. If they do a 1:5 the float shrinks to ~10M shares.
I think I'd rather see them bleed for the next handful of months until better earnings are in hand.
My pessimistic take is 1:5 R/S, boost share price to $5-7, then turn around and dilute us with $50M offering.
It's all in the 10k/q and PR's. I think Jan/Feb vendors got close to 1 million shares. Sorry I can't dig up the specifics at the moment.
Certainly a possibility. I believe employee shares are RSUs so they may be less likely to wind up being sold at the moment. The vendors on the other hand.....those shares were also issued as compensation so 0 cost basis for the vendor.
RLX in free-fall on regulation fears.
Here's to hoping that Mgmt's forward thinking on regulation here in US will pay dividends for us.
Good look.
Either that bit wasn't in the 8-k or I overlooked it when skimming through. So we're covered on the c-store side and we've got some big tobacco experience as well. I like it. I like it aaaa-lot
They are doling out shares but they are not free.
Based on my reading they are getting options to purchase shares @ approximately $2.16 with tranches vesting over the next couple of years.
They are incentivized to see the stock price rise if they want to make significant money off their involvement with KAVL.
They are also getting an approximately $50k/year stipend for their involvement on the board. This should not be surprising as people's time is worth money.
Yes indeedy!
Also happy to see these individuals appear to be truly independent and have industry experience.
Brooks seems like an interesting choice based on his background since he doesn't have tobacco or c-store experience like the other two. I wonder if his background foreshadows something in KAVL's future or if he is just a qualified individual that could provide a "non-industry" viewpoint?
My brain hurts trying to read it.
I've got a floor of $66/67M for Q2.
They said in the PR for 10-K that Q2 looked like it was shaping up for a 300% increase YoY. I am choosing to trust the estimate is going to fall in line with reality rather than get hyped about what could be until they have a record of under promising and over delivering. At the moment they appear to shoot everything straight which is a good thing. People would be wise to remember this and not get hyped about "possibilities."
Part of my unease is also attributed to the opacity of the relationship.
In a typical B2B relationship you can have faith in each party negotiating to get the best possible outcome for their organization. They sit on both sides of the fence and we will never know if a truly equitable arrangement was made between KAVL and BIDI. BIDI may enjoy benefits they otherwise wouldn't if they dealt with an unaffiliated distributor.
I get it.
Also - I went and looked at US Foods.... It's probably not the best comp but they were one of the first "distributors" that came to mind. Their Gross Margin is ~16.5% so my 20% hopes may be a little off the mark.