Probably not going to be the most popular post
But since we go way back and I've enjoyed communicating with you and appreciate your insight, here's my take (in no particular order):
1. General malaise in microcap land. I've seen it with one of my other stocks and if you read my post from over the weekend, the author talks about the LD Microcap index underperforming other segments of the equity markets. There are many possible explanations for that which go beyond the scope of this Board.
2. Aggressive timeline to "uplist" suggested by Anshu has hurt the stock much more than it's helped. The logical conclusion of a RS, in isolation, is an overhang on the stock. I've been advocating for one for a while given the bloated share structure, but there will be some short-term effects that have to be navigated given all of the share issuance at very low prices (not here to debate the necessity of those actions as it's water under the bridge).
3. The investor update communicated a lot of the upside catalysts in one fell swoop, which was a mistake. Not sure why Anshu did that other than to possibly boost the stock price given some frustration (which he exhibited on the last earnings call), but he should have done that on a piecemeal basis IMO.
4. No discussion of margins anymore. One of the differentiating aspects of VRUS was the positive margin outlook communicated up until last summer. They've backtracked from that and now want the markets to reward them exclusively for revenue growth. That doesn't work unless there's at least some understanding of the gross margins and even then, the revenue growth at all costs narrative stopped working when the "unicorns" lost their luster starting last year. Moreover, as I've repeatedly communicated, they need to give a more granular breakdown of revenue. I suspect the vast majority is still coming from the original beef distribution deal, which shouldn't be rewarded with a multiple comparable to the comp group that was shown in the most recent presentation (unless they can deliver EBIT margins in the mid to high single digits at least). If they can show meaningful revenue from BLF, then that will help, but we're probably a couple of quarters away from that.
5. Delayed 10-K. In my opinion, it's highly unlikely that the 10-K comes out on time. I say this for a couple of reasons. First, they changed auditors at a very busy time of year and it's probably unrealistic to think they can get their work done in a short period. Second, as far was we know, they haven't received Nutribrands' audited financials. Given VRUS will be the majority owner, I believe they will have to consolidate Nutribrands (particularly given the deal closed prior to fiscal year end). I have no idea if Nutribrands' accounting was done under US GAAP or IFRS (or perhaps Brazilian GAAP if there is such a thing), but that could create additional complexity if it doesn't conform. Given these factors, I have a hard time believing that Cutchens can get the filing done on time. This probably isn't that big of an overhang, but certainly not a positive either (but it can be overcome quickly if the numbers and outlook are good).
6. Share overhang from a big seller (s). This one has been discussed ad nauseam on the Board, so no need to delve further into it.
I would have suspected that if Anshu had drummed up a lot of investor interest at LD Micro, we'd be seeing that show up in the volume of the stock. It has picked up somewhat recently, but given the share structure, the stock needs to trade in the tens of millions of shares to show demonstrable investor interest from potentially large shareholders and sustained price appreciation IMO. Perhaps new investors are waiting for the results and willing to react rather than be proactive. I'd say that's the prudent approach if the upside is as great as management believes.
AI
