It's interesting reading these comments. I've been lurking here and there for a while. I think when you own something its always good to have bears to force you to rethink things. I think one thing to take into consideration is that reality is always somewhere in between the bear and bull. If all you read is the bears you will never invest in anything. If all you read is the bulls, you would have bought too much at $6.
RE: Russ. If you held past failures against every CEO, there would be no Apple. In fact most VC's like someone who has failed before, numerous times. I agree that maybe some of his decisions haven't been perfect, cash burn was set up on assumptions pre-pandemic. I think they just underestimated the logistical implications of onboarding assets. Is he a good capital allocator? We'll see. What Russ did was raise some money to amalgamate several technologies into one product offering. I think everyone can agree that the offering is really good. So we have a guy who did that well, however the financing was obviously painful. Investments take 3-5 years usually to declare victory or defeat. Is he a burner of capital? I think if you look at any other startup, they are heavy spenders of cash until they can reach that critical point. It helps when you have a high valuation for capital raises to get you past that obviously.
RE: They couldn't sell water in the desert. The bottleneck hasn't been lack of demand, it's been logistics for implementing during Covid. For example, wind assets in China need a bit of logistical support to onboard and work with the drone operators etc. Travel is restricted, so they can't go to China. Buildings may require some modifications from HVAC to install UV lights and some sensors. So to be fair, yes it's not as fast as we would like, but there is a backlog and they keep showing signs of expanding through partners. So I'm in the middle here. If it doesn't start to pick up in the next 2-3 quarters, maybe something worth thinking about. 10,000 assets per quarter gets you to 1/2 their 500,000 five year target, although we should start thinking of 500,000 as a four year target lol.
RE: Financing and Dilution. I agree that this thing would have been way better not in the public market. Retail investors and family offices outside the VC space are finicky. The Canadian Venture exchange is probably the worst place in the world to raise money. Canadians are brutal at VC. If there was no share price and they were in the US, they probably would have increased their valuation raises every offering. Then you list this thing close to cash flow positive on the NASDAQ at 10-20x sales. There is a reason Shopify listed in the US. It would still be at 10x sales if it weren't. Because the market is set by people who aren't VCs and can't handle dilution, emotion sets the price. Dilution is painful, but you can essentially triple the share count from here if you believe in even 1/2 the five year connection target. If the valuation were at 10-15x sales, the dilution wouldn't have been brutal and the share price wouldn't have dropped so bad. This is the valuation dilution spiral. Is that Russ' fault? Yes and no. I think it's a reality of the venture. The sewer of investment markets.
New assets are being brought in at around $140-150/asset. You can do the math on the marginal recurring rev vs new assets. Old contracts are getting renewed as well. BoA was initially onboarded at $3. Clean air is an upsell. So it takes time, but I think in the long run it will eventually pay off.
RE: ESG. I know people find it BS, but there is a reason Brookfield created a bunch of ESG funds. It's to sell the stock and the product. I wouldn't underestimate the power of green bobbleheads with stimi checks.
Is there something else driving the price down? I don't think so. I had a long conversation with the dreaded Wayne Andrews. I didn't feel like he was upselling anything or BS'ing. There were a lot of RSUs from previous acquisitions that matured. The selling essentially happened exactly at the capital raise announcement. I'm just surprised that the seller didn't just find someone to tender the 4M shares at say $2. They could probably have found a buyer from the 9 US institutions who participated in the recent raise. For some reason they decided to dump on the market. Either way, it makes no sense.
So I'm in the camp of objective reason. Share price is brutal. I'm expecting another round of dilution in the future. It's not a negative assumption, but rather a reality. I use 150-300M shares as my 5 year base. However, I think the business itself has really good upside. So betting here makes sense. I'm not as negative as most on Russ. I don't think I could have done any better.
