Logiq Inc (LGIQ)

[indytech64]

Non sequitur. Conclusion of rinse and repeat doesn't logically follow because the company today is completely different - different leadership, different share structure, different revenues, completely different business. I look at the current and future state of affairs not the past, and I have done a lot of DD. When one looks at a company, it's the future that counts, not the past.

Does everyone know that Nintendo started as a playing card company, set up a taxi company, a hotel chain, a TV network, and a food company before ever entering video games? They entered the video game biz in 1974. 3M started as a mining company. IBM sold typewriters. No one judges their current business on these past businesses. Looking at the past misses the future.

First things first, I keep seeing this narrative about dilution, and the use of the word dilution, which really needs to be corrected.

Reverse splits, and forward splits are completely non-economic events. They are not dilutive! If you own 1% of the company, and there is a reverse or forward split, the amount of shares you own changes, but so does everyone else's. If you own 1% pre-split, you own 1% post-split. No dilution. Share dilution only happens when the company issues additional stock.

Let me reference a good article for educational purposes:
https://www.investopedia.com/articles/stocks/11/dangers-of-stock-dilution.asp

Let's take private and public companies separately and take the simple cases:

Private company dilution:
Raising capital: Companies raise money in rounds. Additional share issuance for cash dilutes existing shareholders - meaning that they have the same number of shares but they own less of a percentage of the company. However, the company just raised the cash. So if the company is worth $10 MM pre-money, they raise $5 MM, then the company is worth $15 MM post-money.

The only way raising money really hurts existing shareholders short term is if the raise was what is known as a "down round", or at a price less than the prior round that the investor came in. That may hurt existing shareholders return because they bought in at too high a price. But that's not necessarily a bad thing long term. Maybe the company is expanding or introducing a new product. So a slight down round can be a blessing long term.

Conversion of options: When employees exercise options, that boosts the share count. But every company does this. In private companies, you need a 10-20% pool to attract good employees to grow the business, which may need to be refreshed every couple rounds.

Offering new shares for a merger: Companies issue shares for a merger but again, it's dilutive but can be accretive. Initially, Instagram was bought with cash and stock. But wow, that was accretive to Facebook. So is dilution necessarily bad? nope.

Offering shares for services: Similar to employees, companies offer shares to service providers. Why? For the companies, it is to conserve cash. But why would service providers elect to get shares that are restricted from resell, rather than cash? Because they believe the shares are going to be worth more later down the road. And service providers typically ask for a greater number of shares than the cash equivalent to make up for the inability to sell the shares short term. This is exactly what Bill Shatner did with Priceline.

Public companies: So public companies issue shares for the same reason private companies do. One difference is that if a business isn't working, the private company just folds. But with a public company, there is value in the public vehicle. But the share structure can be a mess at that point. New management or new money comes in to restructure the company into a new business line. And the exchanges have price minimums to uplist. If you have 1 Billion shares, you'd need to be worth $1 B just to have a $1/share price. That is not attractive to institutional investors, and you can't uplist on the exchange.

So the company was worthless before new management, and it should have gone under. But the public vehicle is worth a fair amount. So what does management do? They reverse the shares to get less in the system to reflect a higher per share price for institutions and to raise new money. It's a non-economic event when the reverse actually happens. Not dilutive. If new money is raised? Dilutive, but you have the money which is good.

To rebuild the company, to change into more promising business lines, the company and management has to issue new shares to raise money to build products, make acquisitions, and incentivize employees.

So who is affected most during any reorganization? The existing shareholders. They should have lost everything. But with new management and a new business, it'a a fresh start, and it's better to get 1% of something than 100% of nothing.

Let's look at Logiq:
Name changes: It's standard to change a name to reflect the nature of the new business. If Joe's Gardening found oil on their property, they would change their name to something like J's Exploration and Production. That's never a big deal.

Reverse splits: Ok, so I think we covered this. On the rise and repeat claim, DD shows that Brent Suen became CEO on November 19, 2014. I see nothing to indicate he had any executive power before then, any decision making power at all, so any corporate actions cannot be logically attributed to him although it looks like he assisted in a business development role back in 2009/2010 although was neither officer or director. So everything before that date, it's not him or anyone with the company today:

Reverse Splits:

8/4/11: Not current management
12/17/13: Not current management

Sitoa: Not current management
Sinobiomed: Not current management
CDoor: Not current management

All of those were completely different companies with different management. As explained above, all those shareholders in those companies should have lost everything. The only thing that associates them with the current company is the public corporate form.

Investors today need to decide on current management and the current business, not the past which is irrelevant. Rinse and repeat is a nice sound bite but not reflective of this company today, and sophisticated investors understand that. The public form is a vehicle, nothing more.

I think the discussion needs to move forward on the business itself - which is where differences of opinion can be real - because it is about the future. Revenues and profits drive share price which is in turn driven by the desirability and uniqueness of the product.

The company can theoretically issue all the employees a 50% option pool tomorrow - but guess what - the price and liquidity will tank and those options will be worthless. And realistically, that cannot happen. Why? Aside from state laws requiring certain actions to need shareholder approval, as well as Board approval, market realities dictate what a company can do. Management can't just issue a non-market standard bunch of shares to themselves (a dilutive action) and expect the market to not see it for what that is - a transfer of wealth to management. The price would adjust and management wouldn't get rich at all.

That's why option pools and share issuance is pretty market standard. Share issuance and option pools are an incentive. And any outsized issuances are quickly punished by the market.

I see no evidence of outsized issuance here. None at all. I see no risk of that either, given the bylaws and market realities and the professionalism of the management and the Board. So, rinse and repeat - sounds nice but in the US, evidence is needed to back anything up. And I'm always open to facts. But no one has provided any specifics against this team and business - which includes the independent directors, the corporate bylaws, the corporate charter, corporate financials, or their business model that validates any unsubstantiated claims against them.

Investors really need understand the reality of corporate governance, the difference of how public and private companies change business lines, how dilution occurs, and how corporate actions really work. Then maybe this message board can move on to discuss the merits and opportunities of the current business, which to me looks incredibly promising with great traction.

It's easy to sit around and throw rocks at how things are done or should be done. There's too much of a focus on brief statements with twisted facts or no facts at all. To actually add some value, let's see some posts on the company's market opportunity or how they compare to the competition. That's a good discussion. If someone has a great idea and can add value, then reach out to the company to offer advice instead of making claims of ‘scam’ or ‘fake’ with no evidence.