Thought I’d take some time to reflect upon some of the latest posts, PR’s and disclosures the CLWD IHUB members/company have submitted recently.
It was encouraging to see three straight trading days to close the week where buys out-numbered sells. That hasn’t happened in what seems like a very long time.
I remember reading an article back in January regarding the WSB’s--GameStop and AMC situation that dealt specifically with the Hedge Fund—Point72 which is run by Steve Cohen who is also the N.Y. Mets owner and whose fund had a large investment in Melvin Capital Management which had a large bet (short position) against GameStop. Anyone following investment news knows what ended up playing out with Melvin Capital experiencing significant losses.
Also in the article, it mentioned that Cohen and Ken Griffin, founder of Citadel (Citadel Hedge Fund and Citadel Securities an electronic Market Maker) were teaming up to invest 2.75B in Melvin Capital in order to bail out its founder Gabe Plotkin, who started his career at Citadel.
When I read the article, I couldn’t help but wonder which investment market entities were going to end up paying the price for the WSB’s GameStop and AMC fiasco because we all know the larger financial conglomerates always win in the end. We also know hindsight is 20/20 and beginning in early February Hedge Funds took a massive interest in OTC securities and as a result during the weeks of February 8th and 16th across the board most OTC equities hit their 52-week highs. Since then, all OTC stocks have been participants in the massive drawdown as the Hedge Funds sold into the momentum coinciding with rotational short positions over the last couple months.
The direct effect in Clwd’s case, resulted in them being in the position of having to adjust the Securities Purchase Agreement with the Institutional Investor from .07 on February 16th to .0454 on March 8th with 28,571,421 common warrants added in order to obtain the 10M in capital funding.
It’s encouraging to see in the last few PR’s the mention of working with new potential clients which should carry over into some contractual agreements resulting in steady incremental revenue growth moving forward. The fact their 2020 4th quarter revenues were down could be directly tied to the transitional phase taking place with the incorporation of Artificial Intelligence into the SWARM Tech Stack transforming it to the point of making the offering available on a test/trial basis to even existing clientele. It’s worth noting a year ago, 1st Qtr revenues were up over 35% from the previous fourth quarter numbers. One would surmise there should be some increase from the previous quarter since many of their articles over the last six months have recognized usage and measurable improvement for both current and existing clients. In the software industry trial periods typically can run anywhere from one to two months.
It was nice to get confirmation in the last article related to the development of SWARM into a fully functional SaaS platform. The advantage CLWD has in regard to a shorter time frame developing full SaaS has to do with the fact they have already developed a (Minimum Viable Product (MVP) in SWARM. Consequently, the average 3–10-month time frame will be significantly reduced. With the share price appreciation in January/February it created a nice opportunity to take advantage of procuring 10M in additional capital through a (SPA) Securities Purchase Agreement with an Institutional Investor which is significantly better than the last couple years when the share price was well below a penny and all that was feasibly available was the dreaded convertible promissory note where hundreds of millions of shares were sacrificed for less than a million dollars worth of funding. Like Andrew Van Noy touched on in the article the amount of capital raised will be plenty to bring SWARM to full SaaS. The development of an (MVP) product into full SaaS at the most should cost under half a million dollars.
I wasn’t surprised to see the Authorized/Share total increased. I figured at some point in the near term based on the disclosures they’ve released specifically dealing with the conversion/exercising of outstanding warrants, common stock options and convertible preferred stock it was going to have to happen sooner rather than later. One of the most critical areas of SaaS development is having skilled staff on board. The highly skilled software engineers are only needed for the most critical stages of the development and are contracted out for the necessary time it takes to complete that particular phase of the project but you’re still going to need staff on hand for the on-going maintenance that will be required once the full SaaS is completed. Trying to recruit the best and the brightest (“TALENT” as Andrew Van Noy referred to in the article) within the Tech Sector is an extreme challenge for a small company and one of the determining factors that can be utilized to land a key hire can be in the form of an attractive employee stock option package.
Also in the article, it refers to possible acquisitions and/or licensing partners which at this stage of their development would be very advantageous. The potential impact of what they’ve been able to develop I would think has certainly raised a lot of attention in their direction. Other Tech entities that have viable products/services complimentary to the existing SWARM platform should be pursued and when incorporated or acquired could ultimately lead to faster organic revenue growth going forward. This should be taken advantage of and the flexibility of additional A/S as a resource can help secure the necessary non-toxic raising of capital through a (SPA) and/or a company common stock equity offering to the owners of a targeted acquisition in order to speed up the accomplishment of longer term objectives.
When you factor in the current 10M annual revenue base with a current price-to-sales ratio of 2.5; 10M in capital to be used in part to develop SWARM into a fully functioning AI driven software-as-a-service (SaaS) platform; new clients across multiple industries over the last six months witnessing the AI-driven SWARM platform exceeding their expectations with the end result being the potential of cutting their advertising campaign costs by as much as 50 percent; the incorporation of AI into SWARM has led to the development of “personas” which were designed specifically to replace Third-party cookies and not only are personas more effective at targeting an audience but their more capable in ensuring a user's privacy; the potential of significant organic revenue growth increase through the signing of new clients after trial periods as well as through acquisitions and licensing partnerships... there’s definitely an abundance of potential catalysts that can play out over the course of the year to create upward share price movement.
