InterCloud Systems Inc. (ICLD)

[hollygoodhd]

Here is why you buy NOW.:
"When declines like this happen it’s important for investors to look at asset valuations. At the end of Q1 2017 they had current assets of over $15.3 million including AR of $11.6 million. They had $14.0 million in revenue for the quarter on pace with a $56.0 million annual run rate. The company’s cash flow is slightly negative in operations and under pressure but any sizeable contract awards would be profitable. The interesting point about their cash flow is that their receivables do not seem to be fully pledged which may allow them to get a factoring facility in the future allowing them to take on more business. This company is likely to produce over $50 mil in sales and has 24% gross margin so any improvement in margin or sales could tip the company toward profitability. As an investor you have to ask does it make sense if a company with $50 million in annual sales in an industry with above average growth that is in merger and acquisition mode will stay at a $3.28 million valuation very long. Trading at .06 sales while its peers are trading a multiples to sales seem a little unvalued in such a hot market sector.

When company’s do reverse stock splits nothing fundamentally has changed in the company. The market capitalization remains the same and the share count decreases. In this particular scenario one party with a convertible note seemed to be anxious to liquidate their position but could not do so because the company was at its maximum authorized share count. Once the split was completed and the authorized shares reduced the transfer agent was able to issue more shares pursuant to the convertible note. If you were an existing shareholder of ICLDD on the date of the reverse the only way to sell your shares would have been to call it in to your broker. Electronic access would have been denied until the reorganization work was completed. Once the stock opened for trading on July 12, 2017 there was almost an immediate free fall in price. The only party with stock to sell right after the bell would have been a convertible noteholder that had been waiting months to convert his stock. So when a stock loses $10 million in market capitalization in 7 days and nothing fundamentally has changed with the company and the selling shareholder seems to be done it might be time for value investors to step up and scoop up shares at extremely discounted valuations."