P10 Industries Inc. (PX)

[chemist72]

Is PIOE risky? Yes, but worth the risk imho.

Let me be clear about a few things. ALL stocks are risky. By risky I mean no stock investment comes with a guarantee that the investor will not lose money. However, there are various degrees of risk in the investment world. Each investor needs to understand how much risk they can tolerate and must decide whether or not ANY stock they purchase is within their risk tolerance.

This is NOT a simple or easy task. For example, I would say that almost all stocks on the NASDAQ and NYSE exchanges are less risky than Pink OTC stocks. In recent years, OTCMarkets (OTCM) has tried to make their PINK listings less risky by more strictly enforcing their listing requirements. But still, as a general statement, I think its fair to say that most, if not all, Pink stocks and even the more restrictive OTC levels of OTCQB and OTCQX, are more risky than the true exchange listed stocks.

That being said, how “risky” is PIOE? Imho, PIOE is less risky than most other Pink stocks for the following reasons. First let me acknowledge that PIOE has been rated as “Pink Limited Information” by OTCM. Why? Probably because PIOE has not given all the information required by OTCM on their listing questionnaire. Doesn’t this make PIOE more risky than other Pink sheet stocks? Not necessarily as I will argue below.

1) PIOE has provided AUDITED financial information for the past two years (and before that under a different ticker symbol as well). That alone separates PIOE from many other Pink stocks. I should add that these annual filings have all been within the 90 day filing period required by the SEC for their 10-K reports. Similarly, PIOE has filed regular quarterly financial reports approximately 30 days after the end of each quarter ever since becoming PIOE back in May 2017.

http://ir.p10industries.com/news-releases/news-release-details/p10-industries-inc-gives-update-status-trading-its-stock

2) PIOE turned their first profit in Q4 2018. They have now turned profits for 2 consecutive quarters thru Q1 2019. How many other Pink companies are turning profits consistently?

3) PIOE’s cash position has been increasing constantly since Q2 2018. How many other Pink companies have positive cash flows for the past 3 quarters??

4) PIOE has a GUARANTEED income stream for the next several years.

Are there any down sides? Yes, of course.

Here are the major downsides of PIOE imho:

1) Without going into the details, PIOE has a significant debt load due to the acquisitions of RCP2 in Oct. 2017 and RCP3 in Jan. 2018. Prior to those acquisitions, PIOE had no operations of significance and was classified as a “shell” as of their last 10-K filed with the SEC in March 2017. The bottom line is that as of 12/31/18, PIOE had $148.8M in debt. This debt is secured with a $130M senior secured credit facility with HPS Investment Partners, LLC. More details on PIOE’s debt can be found in Note 9 of their 2018 Annual Report.

http://ir.p10industries.com/static-files/ebbf0d9a-ade3-4b50-b080-63dcc02d4ad2

2) PIOE has significant assets listed under goodwill and intangibles. Briefly, goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized related to the acquisitions noted above. This is explained in more detail in Note 2 of the 2018 Annual Report. Intangibles include $53.6M in management fund contracts which is definitely an asset imho. This is partly where their guaranteed revenue stream comes from (AUM management fees). More details on intangibles can be found in Note 6 of the 2018 Annual Report.

So that’s my review of PIOE's financial risk in a nutshell. I leave it to the reader to delve more deeply into PIOE’s history and their 2018 Annual report which contains a wealth of information on the current financial status of PIOE. Each reader must decide for themselves whether the risks in investing in PIOE are worth the potential rewards. I will conclude by saying that for me, the rewards thus far, have been well worth the risk I took in purchasing PIOE shares in the past and currently.