Description

PublicSquare (PSQH) – Memo

Business Overview / Trading Dynamics:

1. 350m July 2023 SPAC. Has traded down substantially in the last 1m
2. Trades 1m/day. Mostly a PA position. Has pretty high borrow cost (~30%) but we believe it is unraveling currently.
3. Right-wing “patriot” pre-revenue business
4. Connects patriots with businesses that have patriot values, and is primarily an app marketplace platform. You can navigate the app to find "patriotic" businesses under XYZ category. You can then click into the businesses that look interesting to you, and head to their website / store. PSQH does not currently monetize the platform in any way.

Elevator Pitch

PublicSquare is a new "patriotic" SPAC that has captured the hearts of retail investors. Similiar to Rumble, we believe this is a broken story with highly overstated and made-up figures used to promote the stock. We do not believe most investor are aware of this yet. Given our research, we see this business likely as a long-term 0, but our conversative valuation suggests ~65% downside at current levels. Given the low float, however, there is a risk of a squeeze. 

Thesis:

1. PSQH claims to have experienced explosive growth, but in actuality are falsifying their metrics
   1. PSQH was founded in June 2021 during COVID-19. It’s actual marketplace platform launched in July 2022, about one year ago.
   2. Yet, PSQH claims to already have amassed 1.4m consumers and 65,000 patriotic businesses.[1]
   3. We scraped the website and found just 33,000 business across all categories, suggesting that the company overstated the number of businesses on their website by ~100%.
   4. Worse, we noticed various duplicates where the same business is listed multiple times in the same category or is cross mentioned in another category. Other times, we question the categorization of certain businesses, which could serve to potentially inflate the gross businesses count for the website.[2]
   5. When excluding duplicate businesses, the total number of unique businesses on PublicSquare sits at just 23,000, suggesting public figures overstate true business listings by nearly 200%.
   6. We hired an investigator to call and verify with 100+ companies listed on the PublicSquare platform.
      1. Of the ~30% that picked up, 30% were not aware they were listed on the PublicSquare platform.
      1. PSQH has experienced nearly ~30% of its downloads in the last two month, and we aren’t sure why.
2. PublicSquare’s management is filled with suspect records and a clear lack of experience.
   1. Omeed Malik – the owner of the SPAC – was a former BoA executive that was let go after severe sexual assault allegations were filed against him in 2018.[3]
   2. Michael Seifert – the founder of PublicSquare is 27. Prior to PublicSquare, he worked on a ranch and worked as a director of marketing for two years at an asset manager.[4]
      1. Within two years of founding the company, PublicSquare went public. We believe Michael Seifert took a fast track to becoming a multi-millionaire, owning ~45m stake in the company.
   3. James Nicholas Ayers, formerly served as Mike Pences’ chief of staff from 2017 to 2019. Nick seems to be riding the anti-woke wave, having invested in startup patriotic bank GloriFi in 2021. The bank shut down in Oct ’22 after struggling to gain traction. Prior to going bankrupt, it had plans to go public via SPAC.[5]
3. Simple valuation with unfalsified metric suggests ~65% downside, even from current levels.
   1. BBG shows that PSQH has -30m in EV. This is wrong. This includes all the proceeds raised from the SPAC, however, of the 170m of cash received, ~140m was redeemed.[6]
   2. They separately raised 25m and are burning cash @ 6m/q. This puts the real EV at ~110m.
   3. Using SMB marketplace comps (ETSY/EBAY) and calculating $ EV / 3P Seller – even using Public Squares overstated figures yields a current EV/3P Seller of ~1,500, higher than both EBAY and ETSY.
   4. Assuming ETSY’s EV/3P Seller & using real business listings (22K instead of 65K) yields ~65% downside from current levels. See appendix.

Catalyst

1. Investors realizing

2. Lockup expire