FinTech Company Takes Major Position in Nano-Cap

$0.20 cent stock gets a strategic bidder, activist is angry at collapsed stock and negative enterprise value stock gets a 13D filer.

Good morning everyone.

We had a pretty nice and eventful start to 2023. A company I have been a long-term bull on announced a large dividend program. Oil stocks keep going up. And tech continues to collapse. 2023 will be a wild year and we are only six days in.

Yesterday I ran a screener for the activist stock monitor. I scrounged through dozens of freshly minted 13D filings and have a few interesting ideas that might make sense to do additional research on.

Remember, the goal of 2023 is to find off the beaten path investment opportunities. So that means scrounging through thousands of filings, peeling back hundreds of financials and putting in a ton of work. Running these actionable screeners will help provide an initial research list for us all to dig into.

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Activist Screener

There were a handful of 13Ds filed over the past couple of weeks. Most of the names were CEOs adding to their position. One was a Chinese filer that I would just avoid. There was an interesting filer on a FinTech company trading at $0.20 and another filer who sent a letter to the board of the directors of a $4 million dollar company. One interesting filing was from a CEO who recently passed away and his shares were transferred into a trust. And one from an institutional investor who takes large positions in debt and equity securities.

Let’s dig in…

I won’t go through all of these as some of the filings are pointless and/or invested in companies I would never invest in. But the following names are the ones that looked most interesting to me.

• QuoteMedia (QMCI): A nano-cap with only a share price of $0.20. The company has developed financial content tools including stock quotes, charts, analytics, news, filings, fundamentals and investor relations. The balance sheet is pretty clean and there is only a preferred stock, which is pretty rare for a nano-cap. Revenues are growing rapidly (15% this quarter) and the company is profitable too. What is interesting here is the filer acquired 6 million shares in late December and runs a FinTech startup. Here is his LinkedIn profile and also Tweet he threw out of an interview he was in. It looks like he is building a clearing and custody business for US financial markets and the acquisition of QuoteMedia shares could be strategic. The market cap is only $20 million so this name could get pretty interesting.

• VirenetX Holdings (VHC): I don’t this name well but the filer said they acquired the shares because they think the name is undervalued. The market cap is $108 million and they have $159 million of cash and investment securities on the balance sheet with zero debt, resulting in a negative $50 million enterprise value. They are burning $5 million per quarter so you are essentially investing in a startup. Might be worth digging into to see what the plans are for the business and if they can do something with the cash.

• Innovative Solutions & Support (ISSC): The filer is the late CEO’s trust who recently passed away. After the CEO passed away his shares were converted into a Trust, which subsequently had to file a 13D for regulation purposes. There is a new CEO now but the late CEO owned 20% of the company. A strategic buyer could come in and shake up some things at this company. The business looks pretty strong. The balance sheet is strong with $17 million of cash and zero debt. Market cap is $140 million and the company generated $7.2 million of operating income for the fiscal year. This might be a good one to dig into.

• Neptune Wellness Solutions (NEPT): This might be one of the most interesting names. The acquirer bought 600,000 shares for an aggregate purchase price of $3 million, implying an average cost basis of $5 bucks per share. The company now has a $0.48 share price and a market cap of only $5.6 million. The filer, Shohaib Kassam Sumar, filed a strongly written letter expressing his frustrations with the company and the CEO who is unwilling to speak to him. The company looks like a dud to me. They were a former cannabis company and listed their assets for sale and sold them (price not disclosed). Burning like $15 million per quarter with only $1.3 million of cash and $14.6 million of debt. There is $22.9 million of payables and $4.9 million of accounts receivables. It appears like they can’t pay their bills. They are projecting positive EBITDA by 2025, which seems pretty meaningless. I think there are better things to put your money in, but might be worth looking at incase this investor stirs up some trouble.

That is it for this week on the activist monitor. Monday we will get back to the insider buying tracker. Also, I’ll have another writeup on an interesting little company whose share price has collapsed over the weekend. A famous investor recently took a stake in the name and I don’t think many investors have realized this. Keep an eye out for the note.

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