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Change My Mind: Why I Believe Tesoro/HUMBL Is

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al19 Member Level  Thursday, 02/18/21 09:33:23 PM
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Change My Mind: Why I Believe Tesoro/HUMBL Is The Next Big Thing In Fintech

Feb. 18, 2021 3:50 PM ETTesoro Enterprises, Inc. (TSNP)40 Comments39 Likes
Josh J Kim profile picture.
Josh J Kim
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Summary

HUMBL's meteoric rise has brought many skeptics to the forefront.
I have identified six major questions and risks that surround HUMBL and answer them.
By addressing the major skepticisms and the potential risks, we maintain that HUMBL is well positioned to disrupt the Fintech industry.
There are inherent risks with a Fintech startup in a crowded space. Researching demystifies the risks to uncover the next "Big Thing."
Editor's note: Seeking Alpha is proud to welcome Josh J Kim as a new contributor. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Active contributors also get free access to SA Premium. Click here to find out more »

I wrote about Tesoro Enterprises/HUMBL (OTCPK:TSNP), soon to be (HMBL) here.

Here is the story of her birth- if Alibaba (BABA) and PayPal (PYPL) got married and had a girl named Venmo (PYPL) and she grew up and married a strapping young lad named #Blockchain (DGB), she would be called HUMBL.

Its fairy tale-like claims and share price gains (+800% in one month!) brought many skeptics out of the woodwork with their bear thesis. The theses are very fair and quite frankly, I had the same questions! This article lists and addresses the skepticisms and defend that HUMBL is the next big thing to disrupt the Fintech industry.

List of Skepticisms and Questions

PayPal, Venmo, Square (NYSE:SQ), Western Union (WU), Cash App (SQ), Alipay can nip HUMBL in the buds.
What about Google Pay (GOOGL) and Apple Pay (AAPL)?
Is this a pump and dump scheme fueled by Reddit?
HUMBL Financial’s ETX is nothing new. Crypto ETFs have been denied by the SEC in the past.
The float is too large. 3.9 billion Shares outstanding!
The market cap is already over $5 Billion!
1: PayPal, Venmo, Square, Alipay, and Western Union can nip HUMBL in the bud.

Short Answer: Global mobile payment space is vast, it’s too early to crown a winner. HUMBL is already out pacing the incumbents in the global stage. HUMBL’s product offering is technologically on a different level than the incumbent.


Long Answer: What does a business traveler, ex-pat, deployed military, and a Mexican immigrant have in common? They need a convenient, fast, and cheap means to transact money to and from overseas. This ‘need’ is known as demand in the school of Economy.

Now, let’s define the supply side of the equation.

PayPal, Venmo, Cash App, Square, Alipay, Western Union, and MoneyGram currently represent the “supply” side of this equation. The “old kids on the block”- Western Union and MoneyGram- can’t do what the “new kids on the block” can do. But interestingly enough, neither can Venmo, Cash App, and Alipay. Venmo and Cash App are stymied by geographic limitations which have been detailed here. Hence the reason why both "old" and the "new" continue to co-exist in the global payment ecosphere. They both have the same end goal of transacting money but they go about it differently to different target audience. The companies above represent the “supply” side of the digital wallet/payment equation.

According to NFCW, a leading mobile payment technology and trend research firm:

The number of digital wallet users globally will increase from 2.3bn in 2019 to 4bn in 2024 and global non-cash transactions will grow to nearly 1.1tn in 2023 from 708.5bn in 2019, according to the World Payments Report 2020.

World Payments Report 2020 graph showing growth in mobile payments

Source: NFCW

Venmo and Cash App have 52 million and 30 million respective monthly users. Then there is Alipay’s who claims to have 1.3 billion users but is largely inconsequential as its hegemony is limited to Sino sphere of influence. With the global demand being at over 4 billion and supply falling short at 1.4 billion, the gap of epic proportions is incontestably obvious. This gap demonstrates that we are still VERY early. To say that Venmo, Cash App, and Alipay have already won is like saying that AOL won the internet, Netscape won the browser race, and Yahoo won the search war, and... You get the drift.


Internationally speaking, HUMBL already has a solid ground game. Partnerships with India, Pan-Asia, Mexico, Latin America, Africa, and foreign governments strategically align perfectly with the global growth projections above. HUMBL is deep into Mexico, established strategic alliances with India, and is running its Financial division out of the Crypto center of the universe in Asia (Singapore).

Technology is an enabler. Enabled by blockchain, HUMBL offers same day settlement of funds as successfully demonstrated. Speaking of technology, if the banks were built on the PVC pipes and Venmo/Cash App were built on steel piping, HUMBL is the house that was built on copper piping. Venmo and Cash App built their infrastructure on legacy Fiat pipeline, whereas HUMBL built their house on the blockchain technology.

The following chart demonstrates the inertial forces at work that hold back the incumbents. They have to 'unbuild and rebuild' in order to put in the new copper piping.

https://ark-invest.com/wp-content/uploads/2020/10/242-chart-1-690x494.jpg

Source: ARK Invest

HUMBL, powered by blockchain (DGB- Digibyte), is days faster than Fiat and 40 times faster than BTC with nearly fee free. If you’ve ever tried to send/receive Bitcoin, you’ll wonder why anyone would prefer it over a Visa (V) credit card (takes days to settle but gives illusion that it settles instantly). DGB is the UTXO blockchain you thought were getting when you were buying the BTC (Bitcoin). It is faster, 1,000x more plentiful, and costs nearly nothing to transact. Fair value for DGB is 1/1000th of BTC (21 million BTC vs 21 billion DGB), which at the time of this writing is about $50. You can purchase the DGB for about $0.07 as of today. You do the math. Deep value is there for the taking. In the future, the BTC will become the gold as a long term storage of value, whereas the DGB will be the everyday digital currency.

2: Google Pay, Apple Pay, Samsung Pay. It’s a crowded field.


Short Answer: HUMBL offers far more value added services, embodies Web 3.0 and decentralization of finances.

Long Answer: Apple is closing in on 230 million worldwide users. Google Pay and Samsung Pay are on track to cross 100 million users globally. That’s nice, but there are three things to consider:

First, the "AOL" argument applies here as well. Mobile wallet space is far from being settled. There are billions of users up for grabs whereas Apple, Google, and Samsung combined account for less than 500 million users. The Fat Lady hasn’t even left her house yet.

Second, Apple, Google, and Samsung are NOT the actual payment processors. They merely store your credit/bank card information and provide a digital & mobile interface. They are neither custodians nor facilitators of your money. They are just digital manifestations of your plastic credit/debit cards. HUMBL is fundamentally different. They go beyond being a mobile digital projection. They are facilitators of true peer-to-peer financial transaction with near instant settlement of funds built on Web 3.0. They enable you to be your own bank and wallet powered by Web 3.0 services. You can read about Web 3.0 here, which is a good primer for how HUMBL will usher in Web 3.0 with its product offerings. President and CEO Brian Foote is eloquent and provides insightful overview.



Source: HUMBL Investor Call: December 9, 2020

Third, decentralization. Apple Pay, Samsung Pay, and Google Pay amalgamate all of your credit/debit card and spending habits. Our spending behaviors are needlessly tracked and most likely monetized- directly or indirectly. In exchange for convenience, our data is centralized in someone's server. Blockchain is the opposite of centralization. It decentralizes financial transactions by eliminating the need for a middleman. Foote is on record to say that HUMBL is NOT custodians of your money but facilitators of true peer-to-peer transactions. Blockchain enables everyone to be their own bank and wallet at the same time.


3: HUMBL is a Reddit fueled pump and dump.

Short Answer: HMBL price action does not correlate with the social media activity.

Long Answer: There are two articles titled “Why HUMBL does not deserve to be a Unicorn” followed up by “Revisiting Tesoro/HUMBL- It’s Got Electrolytes”. Most, if not all, of the skepticisms in the two articles are answered by Foote in the two investor relation videos. Here are couple of points that are worth highlighting.

First. The author suggests that “I read a theory on Reddit that this is a pump by a person posting under the name Yates investing on Twitter”. The author a provides couple of links. We can verify and validate to see if it is similar to /r/wallstreetbets level of frenzy.



Source: Reddit



Source: Twitter

Four up votes and three retweets.

Hardly a progenitor for a pump. I regularly scout the HUMBL groups in Reddit, Discord, and Twitter. All of these groups are only about a month old with relatively small number of followers. As of February 12, 2021, there are 521 Discord members and 3,562 members in Reddit. Most of the member growth has been in the past couple of weeks as HUMBL raced past the $1 mark.

Second, the company's share price is correlated to material progress of the company rather than randomized social media fueled pump. See for below. The stock runs up on steady release of material news of HUMBL’s execution and consolidates nicely until the next leg up.



Source: Author

For a penny stock that’s run 13,000% since November, you’d expect it to go back to the pennyland. Instead, you can witness heavy accumulation, healthy pull back, and steady consolidation. At the present time, the stock has pulled back and is undulating around the dollar mark. It is likely filling the necessary gaps for the next level up.

4: Crypto ETF (ETX) is nothing new and have been denied by the SEC before

Short Answer: That was 2018 and this is 2021. Crypto is more mainstream and other countries have already approved crypto ETF.

Long Answer: While it is true that the crypto ETF products are not available in the US and failed to clear the SEC hurdle before, there are two points to consider.

First, the center of the crypto/blockchain universe is Asia, not USA. Crypto does not need USA to flourish. In February 2nd, HUMBL Financial launched in over 140 countries with their blockchain/crypto ETF. Already, the Twitter is full of customer testimonials profiting from HUMBL's ETX products (Block 3, 5, 10, Gov, Etc…). For $5 a month, HUMBL will actively invest for you through Bittrex. For millions of people that cannot stomach the crypto volatility, ETX is the perfect product. HUMBL does not hold your money. HUMBL's AI invests on your behalf as your assets reside in Bittrex. True decentralized investing, true to their philosophy.




Source: Twitter @RudyBouwman



Source: Twitter Marc "@80inchestall"


Source: Twitter Marc "@80inchestall"

Second, it is true that the SEC has rejected bitcoin “ETF” in the past. As always, the devil is in the details. In 2018 ruling, the SEC concluded that the self regulated Bats BZX Exchange and Gemini Exchange- seeking to list shares of the Winklevoss Bitcoin Trust are not “uniquely resistant to manipulation”. SEC emphasized that the disapproval was not a direct rejection of the blockchain technology as an investment vehicle.


Source: SEC Release No. 34-83723

It was a flawed strategy to prematurely launch bitcoin trust as a crypto ETF. It never had a chance, especially in 2018.

Thirdly, this is 2021. Tesla has bought $1.5 billion in BTC, JP Morgan’s $150 billion investment arm is mulling crypto investment, and Canada has already approved Bitcoin ETF. To borrow the words of my favorite super villain, Blockchain/Crypto is inevitable.

Bittrex is not regulated by the SEC and it retains its prerogative to list anything they see fit. Although unregulated, Bittrex is openly committed to adhering to the US Securities Laws. Therefore, as soon as HUMBL, Bittrex, and SEC develop an “understanding”, we may have access to HUMBL ETX in the U.S. Since HUMBL's product is live all over the world today, there seems to be no reason not to have ETX in the USA shortly. There's your precedence.

5: The float is too large. 3.9 B shares outstanding!

Short Answer: HUMBL is actively reining in shares (Over 1 billion shares- reduction of 21%, since November) but more importantly, remaining float can be leveraged to build moat

Long Answer: First, HUMBL started out with 5 billion shares back in November. Since then, this is how the company reined the shares back in.

551 million shares retired- November 13, 2020
318 million shares ($10 million) purchased and converted into preferred shares- Nov 17, 2020
100 million shares retired- December 2, 2020
89 million shares retired by- December 9, 2020
11 million shares retired by certain parties Dec 30, 2020
Source: Twitter @GeorgeASharp

It is well publicized that Foote has made it his goal to reduce the number of shares float by purchasing them out right and/or converting it to restricted shares. According to the November 17, 2020 press release,

President Brian Foote has agreed to convert over 318 million shares recently purchased by him out of the retail market to a new class of Preferred shares. Upon completion of the conversion, Tesoro’s issued and outstanding number of common shares will have been reduced by over 860 million shares since Mr. Foote became President of Tesoro. The company does not anticipate that the number of common shares outstanding will increase during the remainder of 2020 and throughout 2021.

Through the press release, Foote clearly demonstrates his desire to lower the float. It is worth noting that there are no plans to dilute its shares through 2021. Why lower the float? To provide more value per share to the investors. This is typically done through dividends and share price growth. With the dividend payout unlikely in the near term, it is obvious that increasing the share price is their main objective in lowering the float.

In parallel, HUMBL plans to release an audited company financials by Q2, 2021. They are an OTC Pink Sheet company, audited results are not a requirement. Then, why such an aggressive timeline?


Source: HUMBL Investor Call Jan 22, 2021

This can mean only one thing. NASDAQ up listing.

Playing in the major league draws in new class of investors. Nasdaq up listing may be able to draw lot of interest from different hedge funds and larger institutions.

Two key requirement for up listing are Audited Financials and minimum share price of $4.00. At the time of this writing, the company sits at ~$1 per share. With plenty of catalysts and Foote's track record of delivering on time, HUMBL should be trading in the NASDAQ by the end of Q3 2021. This is my speculation.

Second, Foote commits to put the 'shares to use' in his first investor call. Foote kept his promise. HUMBL completed a revenue generating acquisition with Block 30 which is now HUMBL Financial. He's not done. He on record in saying that he is actively pursuing more. All those shares will come in handy.

MoneyGram could be a potential candidate. With a market cap of $600 million, it can be purchased in all stock transaction to the tune of ~600 million HUMBL shares. MoneyGram acquisition gives instant access to 350,000 worldwide locations with 2 billion accounts. Alibaba has tried this unsuccessfully in 2017 when MoneyGram was a $1B+ company.

Remitly is another possible candidate as Brian has stated that he’s actively looking into Fintech acquisitions.

Any acquisitions will create a positive feedback loop. Number of tradeable shares go down while the company is leverages those shares to create a revenue generating/strategic moat. This will drive up the demand for the shares and the share prices will follow. Healthy number of shares work to HUMBL's advantage. Everybody wins.

6: HUMBL market cap is over $5 B (as of February 17, 2021)

Short answer: Once you understand the served market and HUMBL’s value proposition, the sky is the limit.

Long answer: This thesis is a very fair one. Is HUMBL overvalued @ $5 billion?

At a time when Airbnb’s (ABNB) $125 B market cap outweighs Marriott (MAR) $42 B AND Hilton (HLT) $31 B COMBINED, it’s difficult to assign a fair price on a disruptor. Moreover, without the audited financials, we can’t apply the traditional valuation methods such as DCF (Discounted Cash Flow), comparable PE, book value multiples, and etc.

HUMBL is a Disruptor. In order to value a Disruptor, you need to size up the Disrupted. So here we go.

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