Tenet Fintech Group Inc. (PKK.CN) (PKKFF) started trading again this past week. I was surprised and impressed with this development. That new lawyer Dom Mannella must know what he is doing, and it's probably a good sign for improved corporate behaviour going forward. As part of the process, the company posted some of the agreements it has with its Chinese partners on SEDAR. This is good information for shareholders to read and had PKK been proactive in disclosing such details instead of being forced kicking and screaming by the regulators, Grizzly Research would not have had so much ammunition to write that dumb short report.
I will continue to say that the author of the Grizzly short report was an idiot. He was directionally 100% correct on the stock, but because he did so by alleging fraud, he gets no credit from me. I have written numerous bearish reports on Seeking Alpha, most of them never implying fraud or egregiously incompetent behaviour. Can people not simply say "I think this stock is overvalued and I don't believe management can attain these very aggressive revenue projections"? No, no, no. This Grizzly guy had to make all these empty allegations of fraud to gain attention for himself instead. If PKK continues with opaque behaviour, it will only attract more of these types in the future.
This improved disclosure aside, I think there are a number of problems that must be addressed before PKK can be considered a good investment, especially after this run up. There are certain investors and backers of this company that I do not respect - anyone who has been around this stock long enough can guess who I am talking about and understand why I hold this opinion - and I think the stock will be back at the $0.05 level soon enough. This is where I think the fundamentals justify a fair value and given that the recent financings took place at this level, the check writers appear to agree with me.
Q1 shows improvement but several concerns remain
The Q1 2026 press release can be read here and the financial statements here. These are actually some of the better financials that the company has produced, with $11.5 million in revenue and $9.9 million in cost of service, producing $1.6 million in gross margin, or 14%. This is a substantial improvement over the 1-5% gross margin historically produced. Had the company led with this fact, this would be unambiguous improvement that naysayers could not debate. However, instead of that, the company sullied the narrative by claiming Q1 2026 was its first ever profitable quarter. This is misleading as a one-time win from a lawsuit settlement is the driver for the gain:
When excluding this settlement, that $0.7 million gain is actually a $0.9 million loss. Those hoping for Q2 to be profitable will be disappointed unless PKK nearly doubles its gross margin. Most companies when reporting gains of this fashion segregate them so investors clearly understand the difference between operating profits and these one-time events. I don't believe that this was an oversight. It was intentionally presented this way in order to claim profitability in the headline. Note also that historically PKK reports EBITDA figures in its press releases. It didn't do so in the 2025 and Q1 2026 press releases. Had it reported EBITDA in Q1 2026, it would have showed negative EBITDA and the claims of profitability in the headline would have been exposed. It probably omitted it in 2025 so that it doesn't make it look that obviously inconsistent.
Claims of profitability aside, the other issue arises from the nature of the revenue itself. Most people reading this will know what a healthy revenue trend will look like. Steady growth over time. PKK appears to generate "water tap" revenues, where the business is seemingly turned off and on almost at will. This is the third time now since I have started following the company where revenue has gone from some minuscule amount (well less than $1 million per quarter, sometimes less than $100,000) to some large amount then back to a minuscule amount. It happened in 2016 in the Jiang Wang years, then more gradually in 2018- 2021 before revenues fell off a cliff. Now the taps have been turned on a third time in 2026 for who knows how long. All of that revenue is generated by one customer, leading to more uncertainty as to how long lasting it can be.
Let's assume that the current revenue run rate is $100 million. Margins could be substantially higher than before, but we would want to see a few quarters of that before claiming Q1 as anything more than an anomaly. True profitability feels achievable with these results, but then again we don't know how long they will last given the company's history of the water tap.
Given this, I think $0.05 is fair value. That is approximately a $20 million market cap. That would lead to a 0.2x revenue multiple. That might appear low, but there are no shortage of small cap listings on the NASDAQ with operations in China and SE Asia with similar depressed financial ratios. Add in PKK's low margins (I'm celebrating a 14% gross margin as a big achievement, but that is still very low), revenue concentrated with one client and volatile nature of its revenue and this valuation may be generous, if anything.
Now I know what bulls will say "He's just bashing the stock because he no longer owns it". What this really translates to is "How dare he trash the stock by stating facts before I have a chance to sell it, he's making it harder for me to make a profit". I do own some stock in DRS form from the Cubeler transaction, which I plan to hold to until $0 or $100. But besides that, I believe that I am the most honest Fintwit influencer PKK has, for three reasons:
1. In all those AMF-style documents, my name is nowhere to be found. That is despite the fact that I have been an investor and close to the company since 2014. I haven't engaged in any coordinated efforts on the stock and I haven't been paid a penny for my opinion or write ups on PKK, outside of investment gains and gaining access to be an early PE investor in Cubeler. Every word that I have written about the company, right or wrong, has been my own uninfluenced opinion and analysis regardless of who agrees with me and who I offend. If there was any weakness to it, it was reliant on forecasts and comments from company management, which I will be significantly discounting going forward.
2. I had a $10 target and when PKK hit that target, I sold the majority of my shares and disclosed that. Rather than increasing my target based on the aggressive revenue forecasts, I took a wait and see approach. Most Fintwit influencers will gladly tell you to buy, but will never tell you when to sell. Unless they are wannabe Michael Burrys like our Grizzly friend I mentioned above.
3. My narrative on the company hasn't actually changed. It has remained consistent. When the company fails to make good on promises, that's when my outlook has to change. As an example, this is what I wrote back in 2015:
Let me ask this question, in those 10+ years has PKK behaved in a way conducive to being treated like a large cap? How many years of rope should I give to this company? Back in 2018 when ASFC was starting up until it produced 9-digit revenue, there was still reasonable hope that this could be achieved. Now in 2026 with the company starting from scratch for a third time, I am not going to give the benefit of the doubt.
What PKK must do to justify something higher than a $0.05 price
This is a list of things I wish to see in order to justify a re-rate:
1. Johnson Joseph apologizing to shareholders for past mistakes and taking responsibility for them
I decided to make this my first point, because without this, there is no hope. How can you invest in a company hoping things will be different this time around when company management does not think it has done anything wrong? To my knowledge, I have not seen him accept any responsibility for PKK's struggles and the resulting tanking stock price. Yes, there was some bad luck, but most of PKK's wounds are self-inflicted. Bad luck aside, CEOs are well paid in their high profile position and should be scrutinized. I compared JJ to Trump in the past, and this analogy makes sense with Trump always whining about how he gets blamed when shit hits the fan or how people don't give him credit when something good happens. Whatever happened to "the buck stops here"? A company's failings ultimately lie on the CEO's shoulders. A CEO who does not accept that responsibility and recognizes that he must improve his actions is a CEO of a company to be avoided.
The second part of making this a prerequisite to PKK being an investible stock is that JJ could come out and admit culpability at any time. Unlike the following points which are all dependent on future events and cannot be solved overnight. The only thing stopping him is his own ego. It would also be an easy victory against some bearish arguments around management's incompetence. Longs could easily say "Look the CEO is admitting past mistakes and a road map to do things smarter this time around, PKK is saved". They should want this as much as anybody.
2. Continued revenue growth and expansion of the client base
Having 100% of revenue from one client is not a sustainable business model and will be valued very conservatively like I did above with a $0.05 fair value. PKK needs to find more clients to give assurance to the market that the taps won't turn off again.
3. Sustained and increased gross margin
Should the company achieve $100 million in revenue and maintain 14% margin, $14 million in annualized gross margin should be large enough to cover off operating expenses and R&D on the Cubeler side to eke out a small profit. Obviously we would want to see margins maintain this level or higher. Otherwise the company merely returns to the previous business model that showed a large amount of low quality revenue being pushed through at low margins.
4. Repatriating profits from China, paying dividends and buying back shares, ending the toxic dilution
PKK has nearly 400 million shares outstanding and over 550 million fully diluted. Consider that after the reverse splits it had about 100 million shares back when it was valued at over $1 billion. This high level of dilution is toxic. The two recent financings at 5 cents do not give any assurances to shareholders that this trend of heavy dilution will end any time soon. PKK needs to not only record accounting profits and cash flows, but demonstrate that the operations in China have economic value by repatriating the funds and then using them to pay dividends, buy back shares or at least be an internal source of funding for Cubeler so that the shareholder-destroying level of dilution ends.
5. Get Cubeler and Equity Insider finally up and running and generating revenue
Back when JJ first told me about Cubeler and the idea that would eventually turn into Equity Insider, I was excited. This was back in 2018. Eight years later and still nothing, while the landscape of the fintech and data universe has completely changed. Needless to say, I am no longer excited about this business plan. Think of how many AI startups that didn't even exist in 2018 have taken the market by storm since then. Meanwhile Cubeler has been in stasis, sitting in beta form with the same alleged few hundred SME clients on standby seemingly forever. It's time to prove that this concept can get going with no more excuses, or shelve the project and focus on what can make money.
If these items are addressed, I can see a turnaround for PKK and shareholders. Starting with point #1 which can be done at any time. Until that time, PKK is nothing more than an expensive trading vehicle at this level and will likely eventually sink back to the $0.05 range.
Disclosure: I own some shares in PKK with no plans to buy or sell at this level.
