By Tom Winnifrith | Wednesday 28 April 2021
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
To be fair, I never said that my target for this fraud was 4.3p, I just explained how, if you made wildly optimistic assumptions about current year sales then on a read-across from Love Hemp, 4.3p was fair value. I actually think 0p is fairer as Zoetic International (ZOE) is a fraud which will eventually run out of other people’s money. But a corporate deal in the US suggests yesterday that, maybe, fair value is 0.5p.
Canadian listed Valens has bought Green Roads, a privately owned Florida company which was seen as a pioneer of US CBD products. It has a diverse portfolio of products (far broader than Zoetic), has not lied to consumers, investors and regulators, it is EBITDA profitable and its goods are sold in 7,000 US stores. There are plans to increase that rapidly. It also makes its own product and supplies raw material to others. It has invested heavily in creating brand awareness unlike Zoetic whose products have zero brand awareness.
The run rate revenues are £16 million a year. Zoetic’s run rate is something of a mystery as, for some reason which I am sure you can guess, it neglected to include any sales numbers in its FY trading statement. But let’s be charitable – given H1 sales were just £54,000 and say the annualised run rate is £500,000.
What did Valens pay to buy a quality operator? In a cash and shares deal, £29 million or 1.8 times run rate. Zoetic, even at 61.5p (and falling fast), is capitalised at £121 million yet it has zero brand awareness, sod all sales, says it will be in 3,500 stores by July but there is no proof of this, is drowning in red flags.
On my uber-generous assumption about its current sales run rate, it should be valued on a read-across at £900,000 or c0.5p per share.
So that is your valuation range:
0p – my target as this is a fraud
0.5p – based on the latest corporate activity
4.3p – based on a Love Hemp read-across and optimistic sales assumptions
Take your pick. At 61.5p the shares are a monumental sell especially given how leveraged the bulls are on this one. This could be GameStop in reverse as those margin calls kick in.
Never miss a story.
This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Search ShareProphets |
Stock market news |
Recent Comments |
Site by Everywhen