|Shares Out. (in M):||5||P/E||0||0|
|Market Cap (in $M):||46||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
|Borrow Cost:||Tight 15-50% cost|
This is a very simple idea. A failed biotech acquisition with insider in-fighting "pivoted" into blockchain venture investing with a warchest of ~$6 million post special dividend. After the announcement of the name change from Bioptix to "Riot Blockchain", Mr. Market is offering the opportunity to buy into this business for $46 million.
We recommend shorting the shares with a target valuation of something less than cash value. There is no competitive advantage in blockchain tech present in this enterprise. This is simply a pump and dump scheme capitalizing on the latest craze. This follows the playbook of many dot-com busts (Zapata) that changed their name to capture retail interest.
Please size the position accordingly as more press releases and capital raises are likely to follow. The immediate catalyst will be the ex-dividend date ($1 per share special dividend on 10/12/2017) which will likely lead to downside pressure from sellers.
The short thesis rests on these pillars:
Does this sound like blockchain venture expertise?
The Company holds an exclusive license from the University of Washington in St. Louis ("UW") focusing on animal healthcare and owns important intellectual property rights related to veterinary products and has granted a license relating to single chain reproductive hormone technology for use in non-human mammals which is under active development by the licensee (bovine rFSH). The Company had been involved in developing blood-based testing for diagnosis and treatment of acute appendicitis until a negative response from the FDA in 2015. The Company acquired BiOptix Diagnostics, Inc in 2016 and following a decision in 2017 to exit that business has been reviewing possible strategic alternatives for that business, including a possible sale. The Company has been reviewing other strategic alternatives, including shifting its focus to new technologies in unrelated markets.
What about the "investment" in Coinsquare ltd?
According to Coinmarketcap.com, Coinsquare traded $433,852 of cyrpto in the past 24 hours - https://coinmarketcap.com/exchanges/coinsquare/. Assuming 0.5% fee to trade then that is $2,169 of fees in one day or roughly $791,800 in annual fee revenue. Assuming 20x revenue multiple then Coinsquare could be worth $15.8 million. And since Riot Blockchain did not acquire the entire business ("made a strategic investment in"), it's safe to assume that they own less than half of Coinsquare. At most, generously, the investment is worth $7.5 million. If you assume they paid nothing for the Coinsquare investment and add cash, post-dividend, BIOP could be worth $12-13 million or roughly 75% less than the current price. More or less where it traded 1 month ago with the same fact pattern for the business.
For more background, here is a series of links:
|Subject||Saw the press release flash across my BBG feed this morning|
|Entry||10/04/2017 01:33 PM|
Printed out 10 copies, one to store in my pile of hilarious stories i come across and the other 9 to pass out to the rest of the floor. As expected, responses were highly entertaining but unfit for print in polite society
|Subject||Re: Saw the press release flash across my BBG feed this morning|
|Entry||10/04/2017 02:51 PM|
"Assuming 20x revenue multiple" sign of the top indeed!
|Entry||11/01/2017 04:56 PM|
Yes, slide 27 looks like the intro to Silicon Valley. Take that for what it's worth.
|Entry||11/26/2017 11:16 PM|
With current surge in price, do you have an update or any current thoughts?
|Entry||11/27/2017 01:18 PM|
Nothing has changed fundamentally. We were early and wrong. Ultimately this will settle below $4, but that may be before it hits $100.
|Subject||Re: Re: Update?|
|Entry||12/19/2017 08:18 PM|
Are borrow costs still feasible? This is complete madness