More downside to come...
Even in the most optimistic attempt to value Neomedia, all else remaining equal, the company is still grossly overvalued.
The company records 19 million in current assets - 16 million of which is recorded as assets held for sale (Micropaint and Triton).
Normally, when assessing the intrinsic value of a company you would discount the 16 million dollar figure associated with the assets held for sale by about 2/3 and likely even more considering the assets do not operate at a profit (ie they are an operational liability). However, this is the most optimistic approach so we will recognize them at the full reported value and stick with 19 million.
+$19,000,000
The company reports about $14 million in long term assets - a little over $10 million of which is attributable to goodwill, capitalized patents and proprietary software. Similar to the current assets - you would normally apply a discount to this value but we are being optimistic so..
19,000,000
14,000,000
----------
33,000,000 in assets.
That was easy, huh? $33 million in combined assets.
Now normally we'd begin to reflect the liabilities to ascertain a intrinsic value - about $85 million currently - but we're remaining optimistic, so we'll ignore them.
Okay, $33 million in assets and a market capitalization of $36 million. The market is apparently doing the same optimistic equation in valuing NEOM at this time. The market has decided to ignore the 85 million in outstanding debt, the historical pattern of operating and net losses and the typical discounts applied to the value of assets carried on the balance sheet.
Basically, all else remaining the same, NEOM is priced to perfection. Considering NEOM burns through about $1.8 million in cash per quarter -- the market capitalization, in the most optimistic scenario where we do not include debt or discounts to reported assets, should drop another 20% by year's end. It will likely be much much more -- the market will only ignore the white elephant in the living room for so long -- probably to the tune of another 33%-50% barring a miraculous fundamental turnaround or a successful pump and dump campaign.
