What should be the pps at this point?
I have said it in the past that the pps could be as high as $0.50 and I could be totally wrong as it is a public company and more so in the great OTC land for now. So keep that aside. Let us try to put a valuation to it.
This is a 7 year old “Digital Media Tech Startup”. So let us keep that in mind.
How Much a VC would Value it.
If you showed this to 100 VC’s and ask them to put a valuation at this stage, you will get 100 different valuations and some maybe an order of magnitude difference. So there is no right and wrong – it boils down to who is willing to write a check - or as in this case, it will come down to supply and demand as it is a publicly traded stock. Startups are valued based on perception, timing and most important of all track record of the founder. Sean Parker got record valuation for Airtime even before a line of code was ever written because he was Sean Parker and the site was launched after more than a year of publicity stunts and TV appearance and no one used it after 7 days.
As such Revenue, Profit or PE are irrelevant when it comes to Startup valuation
Market size, Traction, growth potential and the founders are key. MagicLeap is valued at $4.5 billion with more than $1.3 billion investment with no product to show at all.
What Are Other Companies Valued it?
Snapchat is valued at $25 billion with projected $360M revenue for 2016. That is 69.4X Revenue multiple. That is gross revenue, NOT profit. That is one of the most successful businesses in digital media. I can site another 20 companies but you get the drift. Do as many as you want to your hearts, content. So a safe bet would be between 15X to 50X revenue. That is very wide and feel free to go with the lower numbers or whatever makes you comfortable.
So if the 2017 projected revenue say is $50M, the valuation at 15X is $750M. Divide that by 1.82 billion OS and you have a pps of around $0.40
If the revenue projection is $10M then the pps is still $0.08
Let us shift to a different reasoning.
Why Is the Company doing this
If you are one of the fellows who believes that this is an OTC scam and they will dump shares after the RS, STOP right here and please move to another OTC stock that is not diluting (pun intended).
They will not dump shares after RS. Period! It is suicidal for them. Makes zero sense for anyone with a brain.
Vert and possibly other investors must recoup tens or hundreds of millions of $$ from this. Plus you have potentially 100+ employees with ESO who have been working for years who will have to make millions. Otherwise, they won’t be still working there. Remember, when all said and done, ESO is generally between 15-25% of the entire OS.
So Vert and management must be thinking to take it to that valuation level for all parties to make money. So what valuation would that be? I don’t know but I am thinking at least north of $500 million to start with. Can they do it? Sure they can. After the RS, there will be only 18.2M OS and potentially 4-5 million float. Supply and demand should take care of it and push the price higher.
Worse if the market doesn’t give them the pps they want, they can intervene using another investment bank or themselves. Happens all the time. Whenever a company is taken public, it is the underwriters, responsibility to make sure that the pps stays above the offering price or certain % above it. With a float of 4-5 million they can manipulate the pps at their will and take it to a level, they are comfortable with.
I have a feeling they will go for a full-scale PR blitz immediately after the RS to make sure there is enough liquidity with upward price movement. No rocket science.
So if you go with a $500M valuation after the RS, divide that by 18.2 and you have a pps of around $27.5 that translate to $0.275 before split.
You think that is too high- make it half and you have a pps of $0.1375. Do whatever makes you comfortable. But these prices are not going to last.
Why is it trading below penny?
Because it is in OTC land and there are no investors here. You have small time traders with 3 days as their long term investment range. Plus the MM’s in OTC are not always designated and hence the stocks are on their own. No one to defend the price. That’s why you see sometime, 50% spread between bid and ask or a fall of 50%. These are all OTC specific.
After the RS and up-listing, there will be designated MM’s to defend the pps, and you will not see these level of fluctuations or spread. Plus you will have a new set of investors as most of the OTC traders will eventually leave and come back to other penny’s ? to lose money.
JMHO. No agenda here.
Good Luck.
I have said it in the past that the pps could be as high as $0.50 and I could be totally wrong as it is a public company and more so in the great OTC land for now. So keep that aside. Let us try to put a valuation to it.
This is a 7 year old “Digital Media Tech Startup”. So let us keep that in mind.
How Much a VC would Value it.
If you showed this to 100 VC’s and ask them to put a valuation at this stage, you will get 100 different valuations and some maybe an order of magnitude difference. So there is no right and wrong – it boils down to who is willing to write a check - or as in this case, it will come down to supply and demand as it is a publicly traded stock. Startups are valued based on perception, timing and most important of all track record of the founder. Sean Parker got record valuation for Airtime even before a line of code was ever written because he was Sean Parker and the site was launched after more than a year of publicity stunts and TV appearance and no one used it after 7 days.
As such Revenue, Profit or PE are irrelevant when it comes to Startup valuation
Market size, Traction, growth potential and the founders are key. MagicLeap is valued at $4.5 billion with more than $1.3 billion investment with no product to show at all.
What Are Other Companies Valued it?
Snapchat is valued at $25 billion with projected $360M revenue for 2016. That is 69.4X Revenue multiple. That is gross revenue, NOT profit. That is one of the most successful businesses in digital media. I can site another 20 companies but you get the drift. Do as many as you want to your hearts, content. So a safe bet would be between 15X to 50X revenue. That is very wide and feel free to go with the lower numbers or whatever makes you comfortable.
So if the 2017 projected revenue say is $50M, the valuation at 15X is $750M. Divide that by 1.82 billion OS and you have a pps of around $0.40
If the revenue projection is $10M then the pps is still $0.08
Let us shift to a different reasoning.
Why Is the Company doing this
If you are one of the fellows who believes that this is an OTC scam and they will dump shares after the RS, STOP right here and please move to another OTC stock that is not diluting (pun intended).
They will not dump shares after RS. Period! It is suicidal for them. Makes zero sense for anyone with a brain.
Vert and possibly other investors must recoup tens or hundreds of millions of $$ from this. Plus you have potentially 100+ employees with ESO who have been working for years who will have to make millions. Otherwise, they won’t be still working there. Remember, when all said and done, ESO is generally between 15-25% of the entire OS.
So Vert and management must be thinking to take it to that valuation level for all parties to make money. So what valuation would that be? I don’t know but I am thinking at least north of $500 million to start with. Can they do it? Sure they can. After the RS, there will be only 18.2M OS and potentially 4-5 million float. Supply and demand should take care of it and push the price higher.
Worse if the market doesn’t give them the pps they want, they can intervene using another investment bank or themselves. Happens all the time. Whenever a company is taken public, it is the underwriters, responsibility to make sure that the pps stays above the offering price or certain % above it. With a float of 4-5 million they can manipulate the pps at their will and take it to a level, they are comfortable with.
I have a feeling they will go for a full-scale PR blitz immediately after the RS to make sure there is enough liquidity with upward price movement. No rocket science.
So if you go with a $500M valuation after the RS, divide that by 18.2 and you have a pps of around $27.5 that translate to $0.275 before split.
You think that is too high- make it half and you have a pps of $0.1375. Do whatever makes you comfortable. But these prices are not going to last.
Why is it trading below penny?
Because it is in OTC land and there are no investors here. You have small time traders with 3 days as their long term investment range. Plus the MM’s in OTC are not always designated and hence the stocks are on their own. No one to defend the price. That’s why you see sometime, 50% spread between bid and ask or a fall of 50%. These are all OTC specific.
After the RS and up-listing, there will be designated MM’s to defend the pps, and you will not see these level of fluctuations or spread. Plus you will have a new set of investors as most of the OTC traders will eventually leave and come back to other penny’s ? to lose money.
JMHO. No agenda here.
Good Luck.
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