Monday, 30 January 2017

Analysis of Keek's Q3 results

Keek (KEEKF) (KEK.V) posted its financial results and MD&A on SEDAR. Here are my thoughts and/or highlights of what I find to be the most important issues:

  • There is a line in the MD&A which states: "The Offer Box is currently in development and deployment to the Peeks service is now expected during the 2018 fiscal year." At first I had a WTF moment, until I realized that fiscal 2017 ends this February. Fiscal 2018 runs from March 2017 to February 2018. My best guess is that we're probably looking at a March-April timeline, but Mark Itwaru is keeping his cards close to him this time, and not giving us a more definite timeline.
  • The iOS disruption details are as follows: "On January 16, 2016, the iOS version of the Peeks app was removed from the App Store by Apple. The iOS app was deemed to be non-compliant with Apple’s App Review Guidelines, specifically in that it required improvements to control the display of user generated content of a mature nature, and the addition of in-app purchase capabilities. The removal of the iOS version from the App Store has caused a significant negative impact on new registrations and the general growth of the platform. The Company expects the iOS version to be available again in the very near future. The Company expects that growth rates across all metrics will be restrained until such time as a new iOS version can be released to the public. Should that require an extended period of time, the Peeks service may see a period of decline in user activity. However, in the week following Apple’s decision, it is estimated that transactions on the service had still increased approximately 40% as compared to the last week of December 2016."  
  • The bad news - the company is non-committal over the timing that the iOS issue will be resolved. There is also some ambiguity around the "in-app purchase" capabilities. One shareholder and I have been discussing Apple's TOS for developers and if paid streams constitute an in-app purchase and are therefore subject to going through Apple's payment systems. The good news - even without Apple the disruption was temporary. Transactions are still up 40% versus the last week of December.
  • Revenue was $6,810, split evenly between ad revenue and tipping revenue. This covers only the first few weeks of Peeks being live in November, so this low amount doesn't worry me.
  • Total opex was $1,520K. This includes $850K of stock compensation expense. Excluding this number, as well as the gain on disposal of a long lived asset (-$67K), FX impact ($26K) and amortization ($20K) leads to $691K in cash costs for the quarter. This is $230K a month, or slightly over the $150-$175K the company has previously forecasted. It's not egregiously over budget, but I think with the growth of the app, we can expect hiring so I don't think this forecast is applicable any more. However, I expect revenue to more that offset that in the future. 
  • The company made excellent progress in paying down its trade payables, as evidenced by a gain on the settlement of debts of $592K. In the subsequent events section, the company settled another $449K of payables for $161K, netting a gain of $288K. 501K of options and warrants with a strike price of $0.30 were exercised since November 30th, improving the balance sheet some more going forward. This is a smaller amount than I would have expected, so selling pressure hasn't come from warrant exercises.
  • No ARPU number, but I really like this paragraph in the MD&A: "Through December 2016 and into January 2017 the Peeks service saw significant growth across all aspects of the service including in the percent of transacting users and the number of transactions. On November 30, 2016, approximately 1.4% of registered Peeks users had a credit card associated with their Peeks account. By December 31, 2016, this number had increased to approximately 3.4%, and by January 15, 2016, had increased to approximately 6.0%. Similarly, the estimated daily average aggregate dollar amount of user transactions on the Peeks service (tipping and purchasing of paid broadcasts) in the last week of December was approximately 1,000% of the daily average in November 2016."
  • Revenue share to Peeks was 45% of all tips. Keek is entitled to 30% of that, or 13.5% of all tips generated in November. If Keek earned $3,400 in tips, the gross amount of tips on the Peeks platform for the period ending November was $25,000.
  • Using the above as a guide, if total tips were $25,000 for the month of November and by the end of December the run rate was 10 times that, that's $250,000 in tips generated on the platform. Judging by anecdotal evidence and observations collected by shareholders from a couple of weeks ago (~$20K tips/day), third party app usage stats and the credit card information presented above (6.0% vs. 3.4%), it looks like mid-January was 2-3x more active than the end of December. Note that the $250,000 run rate I calculate at the end of December ($8,000 a day) is quite aligned to anecdotal observations made by KEK investors on the Facebook investor group around that time ($5,000-$6.000 a day). However, this was prior to the Apple issue. The company claims that by the end of January that transactions were still up 40% over December. That would mean the run rate would be $350,000 without Apple. Probably around $700,000 with Apple once it does get back online.
  • If Peeks has averaged $300,000 in tips a month for December and January and if the revenue share stays steady at 13.5%, that would mean KEK earned $80,000 in total revenue for the two months. The run-rate of $350,000 means that KEK is at a $47,000 monthly revenue run rate heading into February. 
These are my observations after a quick look at the MD&A and financial statements. I may have more observations after reading this material again and letting it sink in. 

Monday, 16 January 2017

KEK Shareholders Can Sleep Well Tonight: Peeks Was Pulled Off The Apple Store By Keek

After a strong start to the day, Keek (KEK.V) ended down 7% as people noticed that the app was no longer available for download on the Apple store and people were fearing the worst - that Apple stopped supporting the app thanks to the amount of nudie shows taking place.

Keek shareholders can sleep well tonight. The app was pulled down by the developer (Keek), per the messages that a fellow shareholder posted in the Keek Facebook Investor Group that I am posting below. Does this mean that the new UI is coming any day now? Possibly. But what it does confirm is that Peeks Social is not in the line of fire from Apple. If anything, I would take a guess that this was a proactive move from the company to ensure that it doesn't become a stench to Apple while it figures out how to hide the porn as adeptly as possible while still protecting freedom of speech and expression for its users.

For those who aren't in the group already, I really recommend that you join so you can stay in the loop with important developments such as this:

https://www.facebook.com/groups/190918448004346/










How Much Money Is Peeks Making? A Lot More Than It Did A Month Ago

How much money is Peeks making? A lot more than it did a month ago if you've been paying attention to the activity on the app over that period of time. For those who don't know, Peeks is the social commerce app essentially 30% owned by Keek (OTCQB:KEEKF)(KEK.V). If you don't know what I mean by "essentially", read the company's MD&A or my blogs on Seeking Alpha for background.

Us shareholders have been patiently waiting for the update to the new UI for a few weeks now which would officially mark the start of Peeks' active promotion. But in the meantime we have been witnessing tremendous organic growth, even if that growth is mostly in the form of pornographic content. For those of you who haven't already, join the Peeks/Keek Investor Group at this link:

https://www.facebook.com/groups/190918448004346/

Here is a screenshot of some work done by one of the members of the group who has been tracking the money earned by the streams that have required a payment to watch. This is done by multiplying the entry fee by the number of viewers for each stream. He came up with $21,398 earned in the 24 hour period leading up to his post on the evening of January 14th:



This analysis does have one hole in that streams can go from free to paid mid-stream and there is no way to track who exactly paid after the fact when it does happen. However, this is offset as voluntary tips aren't counted, so I would lean to it underestimating tips on the platform rather than overestimating them. Also, regardless of the actual number, we see that the daily enforced tips has tripled from the $6,000 to $8,000 he calculated just three weeks ago using the exact same methodology. So Peeks is definitely making more money.

If Peeks generated $20,000 in tips a day going forward and collected 35% revenue share, that would lead to a daily revenue of $7,000 or $630,000 per quarter. KEK would be entitled to 30% of that, or $189,000. And this is just 2.5 months since the app went live. Even if the new UI and offer box were to be complete duds, Peeks would justify a bullish thesis going forward just as a porn app. The bulk of the tips are being generated by a couple dozen very active content providers. Imagine if that was multiplied by 1,000.

How many strippers and similar type of workers are there across North America? Maybe 500,000? Those people would have two choices:

Livestream on Peeks from the comfort and safety of their own home. The app takes a 30-50% cut and they get cat-called by a bunch of seedy guys.

Or

Work at a strip club. Have a bunch of seedy guys groping them in addition to the cat-calling. Their employer takes a 30-50% cut or more, depending on the place they work for, and they get to deal with catty co-worker drama.

Peeks has the ability to turn the web cam industry into something mainstream. Porn without the Pornhub stigma. Naysayers can deny or question it all they want, but it is clearly working. The people who are on Peeks night-in and night-out wouldn't be on there if they weren't making good money. The proof of concept is there, now Peeks just needs scale. And remember, this is without considering the offer box or that the new UI should allow Peeks management and the public relations firm to market this app to the mainstream as it hides the porn into its own room behind a curtain like bricks and mortar video stores use to do.

Daily ranks on App Annie have continued to trend upward. You can view Peeks App Annie stats at this link, but you will have to sign up for an account. Here's a screen capture of some of the top rankings by country:



Notice that there are now 29 countries that have Peeks in their top 500 most downloaded social apps. In a previous article, I showed that Peeks has improved from the #398 ranked social app in the United States on December 11 to #72 on January 10. On January 14, Peeks hit a new high in the United States, now ranked at #66. Canada has also been steadily rising to #133. I find the rest of the countries to be too volatile in the 200-500 ranks; some are up or down over 100 points in a day. But Peeks is definitely trending in the right direction.










Sunday, 15 January 2017

First Global Data Passes 100,000 Subscribers

In a recent interview, First Global Data (OTC:FGBDF)(FGD.V) CEO Andre Itwaru estimated that the company could earn $140 million in revenue and $90 million in EBITDA upon reaching one million subscribers. According to the Google Play app store, VPayQwik, which is FGD's app in conjunction with Vijaya Bank in India, has just surpassed 100,000 installs. Assuming one install per subscriber, FGD is already 10% of the way to its one million subscriber goal. The app surpassed 100,000 installs at 840 ratings so now we have a reasonable estimate of installs going forward based on the growth of ratings as a proxy. I would expect the app to surpass 500,000 installs (the next category on the Google Play store) somewhere around 4,000-4,500 ratings.

Given that the company has achieved 100,000 subscribers two weeks into January, is it fair to estimate that from this one deal alone $14 million in revenue and $9 million in EBITDA can be generated in 2017 even with no further growth? That alone would already justify a market cap in excess of $100 million.

Keep in mind that the VPayQwik app has surpassed 100,000 installs without iOS availability. The CEO has mentioned to me that he expects VPayQwik to become available for iOS shortly.

If you haven't already, you can join the First Global Data Investor Group at the following link:

https://www.facebook.com/groups/377851355894645/

It was a member of that group who alerted me to VPayQwik's graduation from the 50,000-100,000 category to the 100,000-500,000 category, so as you can tell we share good due diligence and real conversation about our investment in that group.

Growth in popularity of the VPayQwik app can be tracked using App Annie. The direct link is here, but you will need to create an account to access it. In the meantime, here is a screenshot of the app's history of growth since its debut on September 19th to today. It debuted at spot #202 in the shopping category within India and has steadily grown to spot #91, reaching as high as #55 in early December at the peak of holiday shopping season (as I write this, I realize that the spike couldn't really be due to the holiday shopping season since ALL apps under the shopping category should see a spike in activity around this time). I had erroneously assumed that VPayQwik went live in November when the company first told us about it in a press release, but this does not change my previous analysis where I assumed this app would drive record Q4 revenue and profits for the company. The app was available for only two weeks in Q3 and didn't really take off until mid-October.



Thursday, 5 January 2017

Spackman Finally Moves To Fair Value; PKK To Follow?

For those who followed my blog for a while, you'll probably remember when I recommended Spackman Equities Group (SQG) about a year ago. It was highly undervalued, about a 50% to 75% discount to NAV on any given day so I thought it was a good buy despite being part of a complicated web of Spackman companies which ensured the management team was handsomely compensated.

I sold Spackman a while ago to buy KEK. I didn't want to sell but when having limited funds I need to make tough decisions like that, and it ended up working out well for me so I have no complaints even as I see SQG spike to 12 cents today.

For those new to SQG, I don't think it is such a strong buy anymore. 40E (the underlying - look at my old post if you're clueless as to what that is) is 19 cents. So at 12 cents, SQG is still trading at around a 33% discount to its NAV. But historically it's always traded at around a 50% discount or more. Given the management compensation plan, I think it is at a fair discount now.

I was wrong in my estimate of how well Black Priests (Spackman's box office hit from last year) would do for 40E's bottom line. So investors need to be prepared that the latest blockbuster movie might not result in big profits. If 40E moves above 25 cents I think SQG can hold at 12 cents or higher. But right now the risk-reward wouldn't make sense to me, and if I had any shares left I would have sold them today.

What I can say is that after many months, my call of SQG being undervalued was finally vindicated, even if I didn't participate in those gains. So I'll twist this into a story that will hopefully benefit me. If one of my previous highly undervalued Asian-focused stock picks finally moved, perhaps its time for Peak Positioning Technologies (PKK) to move next. Have a look through my blogs here and on Seeking Alpha to get an idea of what that story is all about. PKK is forecasting $16.5 million to $27.5 million in EBITDA in 2017. With 700 fully diluted shares, that's a EBITDA multiple of around 2 at a 6 cent stock price. I missed out on Spackman's run. I won't be missing out on PKK's run.

Monday, 21 November 2016

The Social Commerce Unicorn That Could Ignite Facebook's Global ARPU Growth




Summary:

  • Facebook has had outstanding financial results in 2016, however the stock has pulled back since Q3 results.

  • Despite recent performance, investors may be wary of future growth prospects given the size of the company and ARPU challenges lying ahead.
  • Facebook has been an aggressive acquirer and I believe it will be again in order to capitalize on the trend of monetized livestreaming.
  • Peeks is a newly-released ecommerce enabled livestreaming platform that claims to be the only one of its kind with 100% in-house payment processing.
  • After just three weeks of going live, Peeks has demonstrated the strength of its livestreaming and payment processing capabilities and has signed several agreements with large firms.


Facebook, Inc. (FB) has had a strong 2016 by all accounts. Revenue is up 56% from the first nine months of 2015 and EPS has nearly tripled from $0.75 to $2.05 during that same time frame. Despite that, the stock has pulled back about 10% from the start of the month when Q3 financials were released. The bearish case on FB is that despite still being the leader in social media after all these years, despite the strong growth and despite an ARPU that is the envy of its rivals, its valuation metrics are stretched and user penetration is reaching the point of saturation.

Facebook has a trailing Price to Earnings ratio of 45 and forward P/E of 22 which are justified by a PEG Ratio of 0.83 based on analyst expectations of a 35% average annual EPS growth rate over the next five years. For a company with an over $330 billion market cap, this is going to be a very challenging expectation to meet. Facebook must continue to acquire and innovate in order to maximize the monetization value of its massive user base and justify its valuation.

ARPU: Excellent growth, but more can and needs to be done

Any investor should recognize Facebook's marvelous achievement of growing ARPU from $2.40 per quarter in Q3 2014 to $4.01 per quarter in Q3 2016. That, along with user base growth, has powered a more than doubling of revenue in a two year time span. Impressive, since we are talking about numbers that grew from a little over $3 billion a quarter to $7 billion a quarter solely on the strength of ad revenue.

Source: Facebook's Q3 10-Q

While everyone can respect Facebook's outstanding growth, there are a couple of areas of concern of which investors should be aware. First, ARPU strength has been highly regionalized. The United States and Canada, which comprise roughly 5% of the world's population, make up about half of Facebook's revenue. ARPU in this region was $15.65 in Q3 2016, over four times higher than the rest of the world. Monthly active users in this region were 229 million for Q3 2016 and have consistently growth 2 to 3 million a quarter since 2014. The combined population of the U.S. and Canada is 360 million, meaning MAU penetration is already 63.6%. Pretty much everyone in these two countries who are going to use Facebook are already using it (outside of teenagers who will soon gain their independence), and I wouldn't put money on the extreme laggards being positive drivers of ARPU.

Other than population growth in North America, Facebook's growth is going to have to be driven by users outside of its hot zone. Looking at the ARPU outside of North America and Europe, it resembles a lot more like Snapchat's ARPU metrics than something that would resemble Facebook:



As North America will make up a shrinking part of Facebook's revenue pie going forward, that will put pressure on global ARPU metrics. However, it also opens up a world of potential for the company to pull levers to increase its ARPU in these low-ARPU regions.

The second obvious issue when analyzing Facebook's revenue growth is its lack of success in monetizing anything outside of ad revenue. Its payments and other fees category is defined as:

"We enable Payments from people to purchase virtual and digital goods from our developers. People can transact and make payments on the Facebook website by using debit and credit cards, PayPal, mobile phone payments, gift cards, or other methods. We receive a fee from developers when people make purchases in these applications using our Payments infrastructure. We recognize revenue net of amounts remitted to our developers. We have mandated the use of our Payments infrastructure for game applications on Facebook, and fees related to Payments are generated almost exclusively from games. Our other fees revenue, which has not been significant in recent periods, consists primarily of revenue from the delivery of virtual reality platform devices and related platform sales, and our ad serving and measurement products."

Worldwide payments revenue has dropped from 7.7% of overall revenue in Q3 2014 to 2.8% of overall revenue in Q3 2016. Payments ARPU has dropped from an already paltry 18 cents in Q3 2014 to just 11 cents in the past quarter. The extremely heavy reliance on advertising revenue and the to-date failure to monetize outside of that could be troublesome as users may eventually tire of the inundation of ads on their news feeds and other areas of the site. A purchase like Oculus VR (a deal that I supported) may have seemed out of the blue at the time, but the company is right to try to diversify its revenue stream while also capitalizing on being the hardware and content platform of a speculative future trend like virtual reality.

While payments revenue has been pathetic, the flip side to this is that not one of Facebook's 1.8 billion monthly active users are earning a penny for spending time on the site. Facebook has an absolute monster opportunity to monetize and pay its base for the massive amount of content and traffic that they generate. This is an opportunity that the company recognizes as it has started to explore new ways for users to profit from their posts on its network. There is one such opportunity that I think could lead to explosive revenue growth if it is pursued.

Peeks: The platform that could ignite a new source of revenue for Facebook and its 1.8 billion users

Facebook is certainly not shy to the acquisition method of growth, having purchased Instagram, Oculus and WhatsApp in multi-billion dollar deals over the past four years, along with LiveRail, a publisher monetization platform for about half a billion, and several dozen other companies. With the emergence of Facebook Live and Smartphone-based livestreaming in general, I believe that the company will be aggressive in this burgeoning industry, particularly with apps that have demonstrated successful monetization. Mark Zuckerberg has tipped his hand with this important insight as to where he thinks augmented reality, a sensation that would rely on livestreaming, is headed:

"The biggest thing that I think we can take away from this as we invest in augmented reality in addition to virtual reality is that the phone is probably going to be the mainstream consumer platform [where] a lot of these AR features first become mainstream, rather than a glasses form factor that people will wear on their face."

YouNow was the first social network that enabled users to broadcast live and has since introduced its partner program for eligible users. Viewers buy bars which can then be used to buy in-app gifts to "tip" content providers that they like. Those content generators are then able to redeem those gifts for real money. There are several platforms that run on this same basic premise, though YouNow appears to be the largest, claiming over 100 million monthly users. Busker is a platform that allows musicians to broadcast and viewers to tip them, with a recent feature addition that allows musicians to sell their merchandise to their fans as well. Both of these platforms, along with similar ones, charge a fee that usually ranges between 30% to 50% of the tips generated. Some of them may have advertising while others will not, but the main source of revenue for all of them is the fee generated from their cut of the tips. Not advertising revenue.

Peeks, an ecommerce enabled livestreaming platform that is essentially 30% owned by Keek Inc. (KEEKF) (KEK.V) may be the best target of them all. What makes Peeks so special and why might Facebook be interested in the platform? First, I recommend that interested investors go to Peeks.com and download the app for themselves. As it has just been released to the world three weeks ago, the content generated by users so far might not yet be too stimulating, but the point is to get familiar with the technology that powers the high-quality live streams and built-in payment technology. It debuted on October 31 with a Halloween party. The party mostly featured B through Z-list celebrities babbling to each other for the first three hours before musical guests finally made it interesting for the final two, but the CEO was ecstatic that on the first night of going live, the app managed to handle a five-hour long, high-quality livestream from multiple cameras with no glitches. The purpose of the party was to prove the virility of the technology. The CEO of Peeks (as well as Keek and his private holding company Riavera and its subsidiary Personas), Mark Itwaru, has built a career in the payments processing industry and has spent nearly $20 million into the patented and patent-pending technology behind Peeks.

What differentiates Peeks from YouNow (which uses Google or Apple to process its layered system of payments) and Busker (which uses Stripe), is that Peeks does not use a third party payment processor. The CEO has claimed that Peeks is the only app of its kind that handles all of its own transactions. That means 100% of the revenue is shared between Peeks and the individual users. Avoiding a third party payment processor would save hundreds of millions annually in charges for a company the size of Facebook that could generate billions in tips.

Peeks also has a more liberal revenue sharing policy when compared to similar livestreaming platforms. For instance, while YouNow users must apply for eligibility into the partnership program, anyone using Peeks can start earning tips and cashing out as long as they have provided legitimate banking information. I believe that this is a huge policy advantage that will attract users from around the world, but particularly from developing nations. Individuals posing as journalists may risk their lives to broadcast political unrest in their countries. When broadcasting on Facebook Live, Periscope or a monetized app in which the user is not an eligible partner, they don't get paid. They can always direct their users to a GoFundMe page using those other platforms, but this is not nearly as effective or efficient as Peeks' built-in tipping capability that is up to the viewers' discretion and saves the content provider the indignity of openly begging.

Keek's legacy app had a very strong presence in the Middle East. Now that it has merged with Peeks, Peeks has inherited that presence. Keek.com redirects to k.to which features Peeks Video. According to its Alexa rankings, k.to is already in the top 5,000 of most visited sites in Saudi Arabia after just three weeks of existence. The second strongest ranking country is Egypt, ranking just outside of the top 30,000 sites. So coupling the efficient tipping method with Keek's popularity makes Peeks very appealing to people in developing nations, an area of the world where Facebook's revenue badly lags and will continue to badly lag if it relies solely on advertising revenue. Advertising in these regions earn a much lower rate than in North America.

With all that being said, Facebook could develop its own "tipping jar" and apply it to Facebook Live. It could also have developed its own Instagram or in-house VR headset if it wanted to. The company is not afraid to throw around billions for a company when it believes it can either monetize its large user base or leverage its technology. The question then becomes would Facebook be more compelled to look at something like YouNow which has a significant user base already, or something like Peeks where the user base is small at the moment (though growing at 6,000 users a day) but has the built-in payment technology?

I believe the latter would be the wiser choice. Under the buyout scenario, Facebook could redirect any livestreaming traffic to Peeks that would be driven by the incentive to generate tips. A YouNow acquisition would likely go in the opposite direction where Facebook tries to integrate it with its own payment processing system. Given Facebook's large and growing network of advertisers and diverse mediums in which to display ads compared to its relatively small and stagnant payments division, I am not so sure that the company has fostered the culture where monetization of livestreams would be an easy task to complete internally. Much of the company's best resources would have gone to maximizing ad revenue so far, and for good reason. But a mind like Mark Itwaru's might be exactly what the company needs to kickstart a massive growth in content-generated revenue.

Keek: The investment opportunity for speculative investors betting on the social commerce revolution

As I mentioned above, Peeks is essentially 30% owned by Keek through a Technology Platform Licensing Agreement between itself and Personas, the private holding company of CEO Mark Itwaru who owns the intellectual property behind Peeks. I have written several blogs on Keek since September 22 on Seeking Alpha that which I recommend investors who are unfamiliar with Keek read.

Trading in OTC and TSX Venture-listed stocks like KEEKF will be volatile and risky, but I believe that I have captured the major risks and opportunities in my post titled "Peeks: A Summary Of My Expectations, Opportunities And Risks", which includes an assessment of the state of the company's financials. I held an interview with Keek's CEO in my post titled "Twelve Questions With Peeks Creator And CEO Mark Itwaru" along with a short follow up interview in my post titled "Two Additional Questions With Peeks Creator And CEO Mark Itwaru". I strongly recommend that interested investors at least read these three posts if not my entire library of posts on the company.

As I mentioned above, Peeks went live with its full version on Halloween night. In the three weeks since then, it has already signed an agreement with Warner Bros. Records where it will showcase emerging artists. It has procured the broadcasting and monetization rights to over 500,000 short form videos and over 1,000 daily videos including content from media industry leaders such as National Geographic, Reuters, CBC, Road & Track, HollyScoop, CelebWire, Seventeen, Esquire and MakerStudios. After those two deals were already announced, Peeks engaged Los Angeles based PMBC Group to lead its product marketing and media initiatives, so investors can expect the agreements made with large players to continue.

While my hypothesis in this article is that Peeks, and thus Keek by extension, is a buyout target of Facebook, I am actually in no rush to see it happen. Management has forecasted only a $150,000 to $175,000 monthly burn rate on Keek as Personas has taken on three times as much of the costs. So if Keek is taking 30% of the revenue and only 25% of the cost, Keek shareholders benefit from having the company stay public for as long as possible. Keek will actually be profitable thanks to its stake in Peeks before Personas' stake in Peeks becomes profitable. And considering that the monetization model has been in place since day one, I don't expect it to be too long before profits are had.

Why would the CEO do this? As he stated in my follow up interview with him, he wants the public listing to do well because it is a reflection of his overall value. If Keek, and its 30% stake in Peeks is valued at a $300 million market cap, for instance, that would imply a total valuation of $1 billion for Peeks and Personas' 70% stake would be worth $700 million. In addition to being the CEO, Mark Itwaru owns about 35% of Keek on a fully diluted basis.

I believe that I have stated a fair case for an investment thesis in which risk-tolerant investors can use as a basis for their own due diligence on Keek. I remain confident that Keek will continue to run and I believe that anyone interested in a growing social media play that has had a proven monetization model from day one will agree with me. Whether that results in Facebook sniffing around in order to enhance its ARPU, another company kicking the tires or Peeks going at it alone, all scenarios should lead to a lucrative outcome for Keek shareholders.

As for Facebook shareholders, I think it is prudent to expect the company to start diversifying revenues. A tipping jar on its livestream and post content that is then shared between the company and the users that generate the content is very low-hanging fruit that the company absolutely needs to be taking advantage of if it wants to continue its high growth trajectory. Expect an acquisition in order to facilitate this opportunity.

Disclaimer: The author is long KEK on the Toronto Venture Exchange and retains the right to buy or sell Keek securities at any time. This article is for informational purposes only and the author does not guarantee its accuracy or completeness. It is not meant to be a recommendation to buy or to sell securities nor an offer to buy or sell securities. The author is not a broker, dealer or registered investment advisor and is not attempting nor intending to influence the purchase or sale of any security.

Thursday, 4 August 2016

Mobio Gets a New CEO: Mike Edwards Comments

There was some big news on one of my old plays, Mobio Technologies. Mike Edwards has stepped down as CEO, to be replaced by Laurie Baggio. While I still hold the stock at a substantial loss, PKK has more than made up for it so I consider it to be a sunk cost lottery ticket.

I asked Mike some questions regarding this deal, and got a fairly quick response back. I asked:

"Will the new CEO be continuing with Strutta? Resurrecting Mobio Insider? Or going in a totally different direction? Maybe more than one of those options?"

His response:


Mike Edwards made some pretty bold statements given how MBO has performed, speaking of building for retirement and parking some alpha in this stock. I appreciate his frankness about this being a LONG term play. It will probably take 5-7 years for MBO to see its split-adjusted high again, and that is assuming execution as planned. Laurie Baggio appears to be the right person to try to grow Strutta. The major issue is that there is substantial dilution associated with this deal. However, I think this will be like what has happened with Keek, where the new investors/management team will take control of a majority stake in the company. And good things appear to be happening with KEK with an app launch today. Mike Edwards is down a lot on this investment, as much as anyone else, and I think he is stubborn enough to participate in the private placement along with Baggio and any of his business associates.

MBO went up a bit today so this news has been received positively. However, with such a small float and thin trading, it likely doesn't mean too much until they lay out a new plan. Calling this a long-term play shouldn't excuse the company from communicating with shareholders. I continue to hold MBO. At such a low price there's nothing much to lose while the CEO change could be the turning point for the company.