I have written extensively about Visionstate (VIS) in the past, citing a $0.20 price target. I want to update my target, but there are two things I need from the company before that happens. First, an accurate fully diluted share count once this current (and hopefully final) round of financing closes. Second, an updated financial forecast. Until those two things happen, consider this an interim update.
A $0.20 target still seems apt. That would lead to somewhere between a $50 to $100 million market cap, assuming all warrants are exercised. With $5 million in net income projected in a reasonable timeframe, say by the end of 2027. This target will be highly dependent on market sentiment. If the TSXV continues to be in the dumps, VIS will struggle to achieve $0.10. If it goes on a super bull run like in 2020-21 or during the crypto and cannabis craze, VIS has the ingredients and foundation to hit $0.50 or higher.
My investing history could be summed up with a few home runs, some singles and doubles and a whole lot of strikeouts. That's the nature of penny stock investing. You're not looking for a high batting average. The one stock that could be considered my grand slam is Tenet Fintech (PKK). Whatever you want to say about the fumble at the one yard line that led to a 99 yard touchdown the other way since 2021, I called this stock perfectly. Owning a pile of shares at $0.02 ($0.40 split-adjusted) with a $0.20 to $0.50 target ($4 to $10 split-adjusted) and sticking to my guns and selling at those prices. My VIS position is PKK-like, indicating the level of confidence I have with this stock.
Visionstate was brought to my attention by Cathy Hume in 2021. I had previously known the name and based on what I heard from others, had mixed feelings about it and its CEO John Putters. What convinced me to invest was the hiring of Shannon Moore. My instinct has so far been correct, as you can take a look at the financials before she was hired and since, and see the sudden upward trajectory in revenue and reduction in net loss. Before her, VIS was wandering the desert with Bunzl. The new contract in place was the catalyst for the company to finally gain some traction in the market with WANDA. Considering where AI, cleaning robotics and big data is headed, commercial property cleaning protocols post-COVID and the desire to offset inflationary impacts with efficiencies, Visionstate developing an aggressive go-to market strategy led by Shannon came at the right time.
While I had mixed feelings about John Putters, I liked that he was able to recognize a weakness of his and plug it with Shannon. But having talked quite extensively with him over the past year, I realize that I have underestimated him. He knows a lot about the state of small business, particularly in Alberta. His ties to Hockey Canada and similar types of charities could prove to be valuable connections for Visionstate in the future. He also knows a lot more about AI and advancing technologies than I initially thought. A year ago I met a man who I consider to be the smartest person I have ever known in terms of understanding and building internet-based technology in a Web3 environment. When he talks about his business model, most people don't get it. His feedback to me about John is that he definitely understands it more than most after I made the introduction.
John has taken some heat with respect to his family ties to Sol Spaces. As a shareholder of VIS and after John has explained the thought process behind Sol Spaces, I strongly support this initiative. In fact, I am exploring ways to collaborate with Sol Spaces. Nothing concrete has been achieved yet. But I like the business and what it's trying to do. Canada is a big country with a lot of space. There is no reason for people to be living on the streets, neither to the detriment of their own well being nor as nuisances or threats to the larger community. We need creative and cost effective ways to help change struggling people's mindsets and economic situation. The government is clearly out of ideas, so this lands on the shoulders of free enterprise and small business (hopefully with some government dollars backing good businesses). Giving people free drugs beside schools certainly hasn't been working. I think Sol Spaces will be a success. Not only do I support this business, I encourage Visionstate to garner a majority stake so that its financials can be reported under the VIS umbrella and it can take credit for the social good Sol Spaces does.
Visionstate has been shown to be truthful about its financial state over the past year. The latest investor presentation (it makes reference to a December 2023 date, but I think they just forgot to update the webpage header to July 2024) discloses $42,000 in monthly revenue and $50,000 in monthly expenses, for an $8,000 monthly burn rate. Late last year, the company claimed a $35,000 monthly burn rate while six months ago that was down to $20,000. The financials reported for those time frames tracked to those numbers. So there is reason to believe that the $8,000 a month burn rate is accurate. The company is quickly headed towards profitability. Once it does attain profitability, the nature of its SAAS model will ensure that profitability grows unless the company chooses to increase its spending. In a recent interview John made reference to funding growth as opposed to funding losses. So I think spending will increase from internal cash flows, but the goal is to avoid showing net losses once profitability has been achieved.
One weakness that Visionstate has shown so far is an inability to successfully promote the stock to the right people. Stockhouse and other similar garbage platforms have been proven to not work as the mostly 2 cent stock price for the better part of two years tells us. Visionstate needs to be seen by the right people. Investors like asset managers who understand technology and business models that make money, but tend to invest in companies that have larger market caps. Visionstate also needs to start appealing to young, tech-savvy and entrepreneurial people who are more likely to invest in crypto tokens than they are in stocks. I believe the man I mentioned above can assist with that, though that is an initiative for further down the road.
Who is this man I am talking about? His name right now isn't important. You can't find much about him if you look him up. He's a ghost online, but the right people know who he is. This is why I scoff at moronic drivel from people who profess to do due diligence on a stock, but that research is limited to a company's website, or lack thereof. The best people in the world don't seek a lot of fame or a big online profile. A lack of a functional website doesn't mean a thing, unless the website is directly tied to the company's business model or is client-facing. People like Elon Musk, Donald Trump, Warren Buffett, Mark Cuban, Michael Bloomberg and George Soros aren't the best of what the world has to offer. I hope I mentioned enough names across the political spectrum so that people know that's not a political statement.
This leads me into my next comment. I can have whatever target I want on a stock, but the reality is that a penny stock is worth exactly how much some rich person is willing to pay for it. A man named Charles Monte Goble has been investing heavily into VIS. According to the circular, he has 40 million shares along with 18 million warrants. Excluding the impact of the warrants, he has kept just under a 20% ownership stake. Visionstate's AGM is being held on July 31 so that disinterested shareholders can approve of him becoming a control person and therefore no longer being bound by this 20% ownership limit. I have obviously voted in favour of this motion and encourage every other shareholder to do the same.
I'm sure when people read the name Charles Monte Goble, they will ask "who?". And that is exactly what we want in an investor. He has a minimal online footprint. Monte was introduced to me by Cathy Hume, and we have had several conversations over the last year or so. With him willing to forego some privacy in order to facilitate owning a greater stake in this company, I feel comfortable briefly giving my opinion about the man. Monte is a small business owner in Ontario who has garnered wealth by being successful and productive for the economy, i.e. not Sheldon Inwentash type of activities. He is exactly the type of man that the Trudeau government wants to drive out of the country through asinine tax policies and the pursuit of unproductive GDP growth through mass immigration of unskilled labour and propping up of the real estate feudal system. Despite that, Monte stays in Canada and continues to heavily invest in Canadian companies like Visionstate. I know that he invests in other companies from Cathy Hume's basket of clients. But to my knowledge, VIS is the only one that he is willing to invest to such a large extent that he needs to forego some of his privacy in AGM documents and become a control person. That is a very bullish sign for the rest of us shareholders.
The info circular states that VIS has closed on 9 million of the 25 million units in the current private placement. With Monte having purchased 2 million of those units. It doesn't directly allude to him buying any more, but if you read between the lines, it becomes clear that he will:
"The Board of Directors of the Corporation has carefully reviewed the Private Placement and the resulting potential creation of a new Control Person, as well as all other relevant matters, and has unanimously resolved that completion of the Private Placement and the issuance of the Units pursuant to the Private Placement has been and continues to be in the best interests of the Corporation and its shareholders.
Accordingly, upon closing of the Private Placement, Goble will become a new "Control Person" (as defined under the policies of the TSXV) of the Corporation which requires disinterested Shareholder approval."
If the placement is contingent upon him becoming a control person, that means he must be purchasing more of the remaining 16 million units and going beyond the 20% limit. Despite those 16 million units being "open", VIS has stated that the placement has been accounted for. My guess is that Monte will be taking the rest of the placement. If there were other buyers, VIS would have closed that portion of the financing prior to the AGM as it did with the 9 million units.
In addition to that, becoming a control person and no longer being bound by a 20% upper limit means that he can buy shares on the open market. I have no evidence that he will, but considering that he has done so in the past, it remains a distinct possibility. $100,000 to $200,000 worth of open market buying likely takes this stock to $0.05, tripling the value of his current batch of 40 million shares from $0.015. So let's just say he has incentive to make sure the stock price moves up. It will also help ensure that his and everyone else's warrants become in the money. Exercising these warrants will provide a cash injection that can be used to fund for further growth rather than opening another private placement.
It is my opinion that VIS will have a quiet next couple of weeks until Monte secures control person status. The window of opportunity to buy shares at 2 cents before he is able to ravage the ask is closing. August will likely be a quiet month as it generally is for the Canadian penny stock industry. But Visionstate's next set of financials for June quarter end will be due by the end of the month. It will likely build on the last two quarters of reduced net losses and improved financial state.
Then we head into September with:
1. An exciting AI/big data story with a high margin business model that has a valuable and lucrative relationship with one of the largest and longest running commercial cleaning companies in the world.
2. Evidence that it is gaining traction with the ability to attain profitability and cash flow positive results basically at any time going forward.
3. An insider with deep pockets who has clearly shown a willingness to support the company through its capital raising process and who has an incentive and demonstrated willingness to buy on the open market.
4. An ability to leverage the rollup model so that the company can expand into other exciting areas like the Sol Spaces business.
5. The ability to appeal to small cap asset managers who would normally overlook a nanocap like Visionstate, but would see the business model, improving financials and strong backing by a shareholder with deep pockets and make an exception.
Place your bets. I already have. The opportunity to buy shares at 2 cents won't last long.
Disclosure: I am long VIS.V
No comments :
Post a Comment