Blockmate Shareholders Should Look Into Energy Plug

 

Investing in small caps and startup companies is risky business. We have taken pride in providing independent and unsolicited research in this tricky and sometimes scammy field. However, our reporting on Blockmate Ventures Inc. (MATE.V) (MATEF) has impressed some people to the point that we were approached by shareholders of the company to provide coverage on another stock that they promised we would find equally as interesting. That is Energy Plug Technologies Corp. (PLUG.CN) (PLGGF). We have a history of saying no to paid research, however, this time we said yes. We believe that there is something special here and could not say no to this opportunity. But we need to provide full transparency to our readers. In addition to being paid, we have bought shares on the open market, in greater dollar amounts than the compensation. So we are true investors. The contract started a couple of weeks ago, but we laid off mentioning the stock at that time because it ran too fast and too hard to $0.26. Having had a pullback and settling in at just under $0.20, we think this is the right time to open a position on the stock. If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1027 followers on here as well as 121 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.  

First we will start off with an update on MATE. We plan to write reports solely focused on PLUG in the near future, but this introduction needs to be done in conjunction with MATE. While the two companies have no apparent connection on the surface, the overlapping shareholder base is something that shareholders of either company need to understand. If one goes up, the other will follow. If profits are taken on the leader, at least some of those profits will be allocated to buying the relative laggard. If one has news that attracts a lot of attention, there might be temporary selling pressure on the other as people chase the mover. But the laggard effect will take place sooner than later and erase any selling pressure. If you like these two stocks, it's best not to try to flip either at these prices. Wait for higher prices, higher volume and greater volatility. 

MATE has been slowly moving upward, but has met a lot of resistance between the $0.35 and $0.40 mark over the last few days. Short interest has increased to over 19%. We think this is financial engineering and arbitrage related to the outstanding warrants rather than a true short position. There are approximately 34 million warrants outstanding according to the last set of financials. As the share count has increased from 125 million to 134 million since Tony G's investment and RSU grant, we think 9 million warrants have been exercised. The 19% in short interest would account for the rest of the 25 million warrants outstanding. Who would have the ability or dare to short MATE to the tune of 25 million shares otherwise? 

If all the short interest is related to warrant exercises, this is good news. That means the warrants will be off the books, the company will have received $2.5 million in cash and shareholders would no longer have to worry about the warrants creating selling pressure on the stock in the future as it's already happened through the short selling. Warrant exercises, along with Tony G's investment, would bring in $4 million to the company, ensuring that there will be no need for a financing in the foreseeable future.

Ultimately day-to-day price fluctuations are meaningless to everyone except flippers. There are huge catalysts upcoming for MATE in the next few weeks, namely the token launch. Once that occurs, there will be greater hype and transparency around the earning power of Hivello. That will drive user growth as people will leverage the new referral program to onboard their friends. Right now you can't tell people about Hivello if most users are earning $1 a month. It'll make you look dumb. But even with the handicap of low apparent earnings at this time, there is enough increased activity on Hivello's social media to show that a growing amount of people get it. It's not about the earnings today, it's about the potential post token launch and favored position of being an early adopter. If the token takes off in price, the $20 worth of tokens you earned in December could be worth $200 or even $2,000 down the road. Shareholders benefit twice as an increase in the price of the token will likely correlate to an increase in the stock price of MATE. 

We have a long-term target of $5 on MATE, and have explained in the past how the company can get there. While we think PLUG can get to $0.50 on hype alone, it's a very different business model than MATE. There are a lot of moving pieces and we will have to have a discussion with management before suggesting a longer term price target. We will explain where we think these moving pieces can lead to in future reports, but the general sense we get about PLUG's mission is to democratize and decentralize the energy grid system as an energy storage company. We see the current state of the world in terms of geopolitics, economics and weather. Centralized energy grid systems are vulnerable to threats from terrorism - cyber attacks or physical, weather events (think of the deep freeze in Texas or fires in California or Hawaii), lack of generating power (rolling blackouts, worry over supply from increased EV adoption) and high cost of delivery. PLUG isn't the first energy storage company out there but it doesn't need to be. We need it and dozens more running at full capacity to secure a successful energy future for this continent.  

PLUG's biggest point of pride right now is the partnership with the Malahat First Nation in British Columbia to launch a 56,000 square foot Gigafactory that is scheduled to open in Q4 2025. This is important because in Canada, First Nations communities tend to be at the epicenter of economic hardship. Even ignoring past government interference on their culture, they are often isolated from the rest of the country where it's expensive to deliver basic services. It's necessary to make these communities as self-sufficient as possible. Decentralized grid solutions, power generation and growing their manufacturing industry are great ways to make it happen. If this Gigafactory goes well, PLUG will likely have an inside track on opening more of these factories across the country. Then it turns into a favored political play as well as an economic one. If Canadians want Donald Trump to stop sniffing around with annexation suggestions, they are going to have to find ways to increase their energy independence, production and manufacturing capacity. Instead of worrying about who can get their real estate licenses and who can work for minimum wage at Tim Horton's.  

If you look at the last set of financials on PLUG, they look like the typical start-up with no revenue and minimal working capital. The company has completed a $1.2 million raise at $0.07, quelling any concern over working capital issues in the near term. That raise added 17 million shares to the float, so the 80 million shares you see quoted on various data providers is old. It's actually 98 million. This is where our challenge lies on determining a long-term target. The company is pre-revenue, but that is about to change. PLUG has booked purchase orders for its battery storage systems, with installations having started in October. The total value of the four purchase orders will be $91,000, but that is barely scratching the surface as it has a sales pipeline of $700 million. With sales pipeline being defined as "the total forecasted dollar amount of those future projects that the Company has either contacted or has been contracted by renewable developers, engineering firms, owners, or contractors for consultative assistance (which could include BESS), a quote, or both". If 10% of this pipeline converts to sales over the next two years, a minimum of a $100 million market cap is justified. It's all a matter of understanding the company's margins, ability to scale at that aggressive rate and increased need for working capital and therefore financing (either through equity or debt) that will help to determine a longer term target.

That being said, there is one path that can throw any sort of "optimistic but still grounded in reality" price target based on mid-term financial expectations out the window. Yesterday, the company announced the development of an inverter that enables quantum cybersecurity integration into energy infrastructure. Remember when we mentioned terrorism being a potential threat against large scale grid systems? This is what is needed to protect against any vulnerability to cyber attacks. While the press release is laced with words like "exploration" and "investigating", it's our understanding that on PLUG's end, it has a viable product. It's hardware that is waiting for the right partner with the right software. 

PLUG has officially become a quantum security play. Just like how IBM needed Microsoft for an operating system and Microsoft needed IBM as a platform to distribute its software to consumers, PLUG will now have a symbiotic relationship with the quantum security industry. At this stage, quantum remains a science project until it has a clearly defined business model and path to revenue. PLUG has opened one of many possible paths for the quantum industry with the inverter technology. We have previously mentioned Quantum eMotion Corp. (QNC.V) (QNCCF) as a comparable for MATE. If QNC can reach a $300 million market cap before achieving a penny in revenue, why can't MATE do the same with a currently revenue-generating product? The same idea applies to PLUG. With the difference being instead of comparing two unrelated growth sectors in DePIN and quantum, PLUG actually has a direct connection to the quantum industry. 

The quantum bubble has deflated since its peak hype, but even after the pullback, QNC is still valued at a $150 million market cap. An equivalent market cap for PLUG puts it at $1.50. This is where a complete wild card exists on PLUG. Can it reach $1.50 on hype? How about $5.00? If not on hype, can it reach those targets on financials one day? Perhaps. But we have reasonable optimism that it can at least reach $0.50 in the near term on hype. That makes any buy under $0.20 a good opportunity in our opinion. So we are getting the initial report out now and worrying about more detailed analysis later. 

Disclosure: We are long MATE.V, PLUG.CN