A Pair of Buyout Offers Leads to Over 100% Upside for Shareholders

Usually investors have to get lucky with buyout offers out of the blue. Today's small cap market is so out of whack that there are two existing proposals on the table that offer significant upside if investors buy in today. Both stocks have gone up since their announcement, but have a lot more room to go and are prime targets for a bidding war. They are Banxa Holdings Inc. (BNXAF) (BNXA.V) and Theratechnologies Inc. (THTX) (TH.TO).  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 1036 followers on here as well as 124 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.  

The first one we are going to talk about is Banxa. We need to mention that Banxa's Founder Dom Carosa is also the President and Chairman of Blockmate Ventures Inc. (MATE.V), a stock that we remain very bullish on with a $5.00 long term target. The implications of buyer interest on Banxa supports a bullish case on MATE too. 

To avoid any confusion, BNXA is most liquid on its Canadian listing and the offer is in Canadian Dollars. So any reference to prices for it is in CAD. THTX is most liquid on its U.S. listing and the offer is in USD. So any reference to prices for it is in USD. 

BNXA spiked as high as $0.84 on Tuesday before settling at $0.72 today after the announcement of a buyout offer from Mr. Khurram Shroff between $1.00 and $2.00 per share. The price level now represents a great entry point as we think it's only a matter of time before the stock trades well over $1.00 as rumors heat up of a bidding war. BNXA already had a buyout offer on the table at $1.69 from Exodus Movement, Inc. (EXOD) before letting it expire as well as a take private offer that was since terminated. We view both of these transactions as opportunistic as the take private offer was at a low price and the Exodus buyout offer had a short deadline to acceptance. This one looks to be more serious and well thought out and should be a winner for investors getting in at these prices. 

The press release from the bidder:

"The company backed by renowned crypto and blockchain investor, Khurram Shroff, announced today that it has submitted a letter to the board of directors of BANXA Holdings Inc. (TSXV: BANXA.V). It expressed intentions to acquire 100% of the issued and outstanding shares of the company. The company proposed a purchase price in the range of $1.00 to $2.00 per share.

This offer represented a 100% to nearly 400% premium over BANXA’s closing share price of CAD 0.51 as of last week.

Acquisition to Benefit Shareholders

The letter signals a serious and friendly offer with the goal of engaging in meaningful discussions with the board and management team of BANXA Holdings. The Khurram Shroff-backed entity believes that the proposed acquisition would unlock significant value for shareholders. It could enhance long-term strategic growth and leverage synergies between its digital asset ecosystem and BANXA’s on-ramp infrastructure.

The investor group, headlined by Khurram Shroff, consists of strategic financial investors based primarily in the Middle East. They are highly reputable investors with a proven track record of successful transactions and value creation in the crypto sector. 

Shroff is a serial entrepreneur and the Advisor to 3iQ, the first Bitcoin ETF in the world. He comes with over a decade of experience in the blockchain industry and always promotes innovative projects.

The group possesses substantial financial resources, strategic insight, and operational expertise. Their collective experience and strong financial backing underscore their ability to execute this transaction efficiently. It can certainly enhance the long-term value of Banxa.

Acquisition to Benefit BANXA?

BANXA Holdings (TSXV: BANXA.V) is a publicly traded company. It provides a leading global payment infrastructure for the crypto economy. The acquisition would position the company within a larger, forward-thinking digital finance ecosystem. It will strengthen BANXA’s long-term outlook through added investment and strategic alignment.

“BANXA has demonstrated strong potential in the digital payments and Web3 infrastructure space. We believe our offer is both generous and in the best interest of BANXA shareholders, and we are eager to enter into constructive discussions with the Board,” said a spokesperson for the acquiring company.

The company currently operates in Australia, Europe, and North America. It is helping crypto enthusiasts buy cryptos and NFTs swiftly. Banxa users can buy cryptos and NFTs directly with fiat currency. The process is straightforward, and therefore, Banxa has drawn admiration from many users and experts. 

The proposed transaction is expected to be financed through a combination of cash and equity. It is not subject to a financing condition.

About Khurram Shroff

Khurram Shroff is one of the earliest and most influential crypto investors in the Middle East, Asia, and Africa. Referred to as the “Arab Whale,” Khurram has been recognized globally for his visionary investments in blockchain, AI, and fintech. 

The UK Parliamentary Review Power100 featured him as one of the most influential Muslims in the world. He is an active supporter of initiatives advancing Web3, decentralized finance, and AI for good."

The bid came with a very wide range between $1.00 to $2.00. It was likely offered with that range to get the conversation started before a more definitive offer is made. This approach makes more sense than the coercive or lowball tactics of the previous bids. Shroff mentioned that this offer is serious and friendly, so we expect the stock price to move up as the market digests it and talks advance. As this is the third offer on the company in a few months, we think it's only a matter of time before there is a bidding war. $2.00 might be the start, not the ending price here. Exodus didn't play by its hardball tactics because it plans on easily giving up. We think it's likely that it enters back into the running with a revised bid and more reasonable timeline. Especially if the more friendly tactics from Shroff leads to a positive response from BNXA. 

That leads us to THTX next. It increased 46% today to $1.94 after the announcement of a buyout offer from Future Pak:

"Future Pak, LLC (“Future Pak”) today announced that it has submitted two formal proposals since January to acquire all outstanding shares of common stock of Theratechnologies Inc. (“Theratechnologies”) (NASDAQ: THTX). The most recent proposal, which remains open for consideration by Theratechnologies and its Board of Directors, offers a cash consideration of $3.51 to $4.50 per share.

The proposal represents a total enterprise value of up to $255 million, comprising:

$205 million in cash at closing, and

Up to $50 million in contingent value right (CVR) payments, including:

50% of the annual EGRIFTA® franchise gross profit (defined as net sales minus cost of goods, per U.S. GAAP) above $30 million annually for three years post-closing.

A $10 million one-time milestone payment if cumulative EGRIFTA gross profit exceeds $125 million over the same three-year period.

This offer implies a 164% to 238% premium to Theratechnologies’ closing stock price of $1.33 as of April 10, 2025.

“To move this process forward efficiently and deliver compelling value to Theratechnologies’ shareholders, we have submitted multiple offers outlining a flexible and attractive framework,” said Nirav Patel, Chief Growth Officer at Future Pak. “We believe this proposal provides significant upside and a solid foundation for constructive dialogue, with the goal of achieving a mutually beneficial transaction.”

Despite repeated outreach and the submission of two detailed proposals—each offering a premium of more than 100% over Theratechnologies’ trading price—Future Pak has received minimal engagement from the company to date.

Future Pak confirms that the transaction would not be subject to a financing contingency and has the full support of its strategic financial partner, Colbeck Capital Management.

Future Pak has engaged Bourne Partners Securities LLC as financial advisor and Honigman LLP as legal advisor. Given access to standard due diligence materials, Future Pak believes it could reach a definitive agreement and announce a transaction within four to six weeks.

By publicly disclosing its interest, Future Pak hopes to encourage Theratechnologies shareholders to engage with the proposal and ensure that the Board fulfills its duty to pursue the highest value outcome available."

Future Pak stated that this was a follow up to a previous offer, but this time around it is going public with it in order to engage shareholders, presumably to try to force the Board into a public response. At $1.94, the bid offers a minimum 81% upside, with another dollar per share tacked onto that should the contingent value rights successfully pay out. 50 million shares traded in the United States and Canada on Friday. That is more than the entire float. If there are investors who want to get this deal done, they can easily buy up shares on the open market and influence the decision. Unlike BNXA, THTX has enough liquidity. THTX adopted a shareholder rights plan many years ago that we believe is still active. But that only prevents an organized group of people from attempting a hostile takeover. Individual activist shareholders are free to buy up shares on the open market and push for the deal to get done. However, based on the quick response from management, they may not need to fight too hard to make money. 

THTX ended up responding to the offer after hours on Friday:

"Theratechnologies Inc. (“Theratechnologies” or the “Company”) (TSX: TH) (NASDAQ: THTX), a commercial-stage biopharmaceutical company, wishes to address its shareholders in response to a press release issued today by Future Pak, LLC (“Future Pak”) regarding its proposals to acquire the Company.

The Company believes its shareholders should be aware of the following:

In August 2024, the Company received a first unsolicited non-binding proposal from Future Pak to acquire the Company. The proposed closing cash consideration of US$100 million was not attractive to the board of directors of the Company (the “Board”) and the proposal was rejected by the Company.

The Company received a second unsolicited non-binding proposal from Future Pak in January 2025, which could not be entertained as the Company was under exclusivity with another potential acquiror (the “Potential Acquiror”).

The Company did not immediately renew its initial exclusivity period with the Potential Acquiror upon its expiry, in an attempt to enter into a customary non-disclosure agreement with Future Pak containing a typical standstill undertaking in order to discuss with Future Pak under normal rules of engagement. Future Pak’s initial position was that it would not sign such an agreement unless they were provided exclusivity. When Future Pak was finally prepared to sign a non-disclosure agreement, the Company had already renewed exclusivity with the Potential Acquiror. At this time, Future Pak was informed that it would have a future opportunity to engage with the Company.

The Future Pak non-binding proposals have been made without Future Pak having completed any due diligence on the Company other than publicly available information.

The Potential Acquiror has performed extensive due diligence on the Company and the parties are negotiating a definitive agreement relating to a potential acquisition of all outstanding shares of the Company. Based on the Company’s discussions to date with the Potential Acquiror, in the event a definitive agreement is entered into with the Potential Acquiror, it will contain a “go shop” provision allowing the Company, for a limited period following signature, to engage with other potential acquirors, including Future Pak."

The stock was up after hours, but we think the real action will be on Monday morning when the market has had time to digest the implications of this response. Future Pak going public with its offer forced THTX to admit that it was already in buyout talks with another suitor. THTX is now in the middle of a bidding war. This is no longer up for debate. If and when the other Potential Acquiror signs an initial deal, that is when Future Pak will have the opportunity to make a move during the go shop provision. Even with the shareholder rights plan, things could get very interesting with respect to open market buys as various suitors maneuver their way in order to be the winner. 

We have three targets on each stock. The low end of the existing bid proposals, the high end of the existing bid proposals and a third target that is our estimate should either company get into a bidding war. 

We think BNXA could fetch $4.00. It has gotten three offers between $1.00 to $2.00 in the last several months. It isn't getting those offers because the buyers think it's worth only $2.00 and aren't willing to pay more. We already mentioned that we don't think Exodus is done here and that this latest bid could entice it back into action.

We think THTX could fetch $7.00 in a bidding war. Future Pak has already substantially increased its offer from $100 million last August to $205 million today plus $50 million in CVR. THTX management has also disclosed that Future Pak continues to sniff around even when it tries to throw its weight around and get THTX to play by its rules. Going public is actually a sign of desperation because it wanted shareholders to be on its side. But now everyone knows there is an alternative bidder who is much further along in the process. A final price tag of around $350 million appears reasonable given that context. Both of these companies offer investors and traders significant near-term upside, so we suggest to watch both of them closely. 

Disclosure: We are long BNXA.V, THTX

Predictmedix AI: The Under-the-Radar AI Healthcare Disruptor Poised for Massive Growth

As our readership has increased, we have gained some attention from companies hoping to leverage our blog as a method to get the word out. We remain picky and seldom say yes to paid coverage. However, after extensive research and connecting with management from Predictmedix AI Inc. (PMEDF) (PMED.CN), we could not pass up this opportunity. 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. Once we explain why we are bullish on PMED, it should make sense to our readers why we couldn't pass up on this unique opportunity. 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 1035 followers on here as well as 124 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.  

PMED is the maker of the SmartHealth AI System, a device similar to the full body scanners you would see at airports or metal detectors. During the height of the COVID-19 pandemic, the company garnered some sales. As one would expect, those sales have dried up as the world moved on from COVID and the stock price has declined as a result. However, just because COVID is no longer perceived as a threat, doesn't mean the market for this technology has abated. It just needed a rebrand and a new focus. That's what PMED has done with the next generation of the technology. It has integrated additional AI-driven features that enhance its effectiveness in health and safety assessments. It now evaluates 19 different parameters in a single scan, covering a broader spectrum of health indicators and enabling impairment detection and fatigue assessment.

PMED hasn't generated any revenue for 2024 and has limited working capital. However, accredited investors are clearly intrigued as it just raised $725,000 in two tranches to try to make this new business model work. This includes participation by German family offices, which shows the international appeal to high net worth individuals despite being a Canadian small cap listing on the CSE. We obviously had some concerns about the company given the recent financial performance and asked management some straightforward questions. We liked what we heard and we will summarize what we learned during that discussion. We think PMED's current valuation compares very favorably against similar type of junior companies listed in Canada. Unlike some of them, PMED actually had a history of selling its product and generating revenue. So it isn't a speculative startup at square one even though it is valued as one. 

The three verticals that PMED will be focusing on are fit-for-duty workplace screening, health management in prisons, and health screening for defense personnel with a focus on the U.S. market. Fatigue and impairment are two of the leading causes of workplace accidents. Couple that with the fact that many manufacturing facilities are unionized. Management of these facilities needs some kind of method to document employee impairment to ensure the safety of the workplace as well as gather evidence in extreme cases that require termination. It's very straightforward to see the market potential here. Health screening for prisons and defense are intuitive when you realize that individuals in these types of settings live in close quarters. COVID-19 spread wreaked havoc on the prison system. Detecting sick prisoners or military personnel early and quarantining them before the virus spreads throughout the community is paramount. Focusing on these two industries is particularly smart during a Trump administration. Defense and prisons might be the only federally funded government programs that receive an increase in spending during his tenure. 

PMED's revamped business model is indicative of a company that knows it must use its cash resources wisely. When looking at a SmartHealth AI unit, one can surmise that it's not that cheap to make or deliver to the customer. PMED has worked to get the per unit manufacturing cost down to $3,000. It operates on a leasing model, where the client commits to a minimum one-year contract at a price of $3,000 to $5,000 per month. So it takes just one month of revenue to recover the cost of the hardware. The lease allows for unlimited number of scans by the client while PMED also provides maintenance support. PMED's operating costs will be minimal. Based on the company's current burn rate of about $60,000 per month, we estimate that if it can lease out approximately 25 units, the $75,000 to $125,000 in monthly revenue should be enough to see it reach breakeven status.  

For comparison, Healwell AI Inc. (AIDX.TO), a subscription-based AI tool for early detection and diagnosis in the healthcare industry, has had excellent growth but last quarter still lost over $11 million on $14 million revenue. AIDX trades at around a $285 million market cap. In addition to AIDX, NetraMark Holdings Inc. (AIAI.CN) is another company looking to leverage AI to improve health care and clinical trial outcomes. It uses AI to analyze past clinical trial data and patient populations to uncover efficacy, toxicity and placebo response. AIAI is a lot closer to PMED than AIDX when it comes to current revenue run rate. It generated about $460,000 in revenue last fiscal year with its Q1 2025 ending in December generating just under $400,000. Excellent growth, with that growth having been rewarded with a market cap of approximately $90 million. 

One thing that we think is being overlooked is that in the process of PMED's operations, it has collected data from over 250,000 scans. PMED does not own client-specific data, but it retains the ability to analyze anonymized and aggregated datasets to identify broader health and behavioral trends. One of the most promising applications of this data is the ability to detect health conditions through multispectral imaging. PMED's AI models have demonstrated the potential to identify elevated blood glucose levels simply by scanning a person’s face. With further refinement, its data could facilitate the early detection of conditions such as dementia, Alzheimer's, and other neurological or metabolic disorders. This opens the door to new revenue streams, including partnerships with healthcare providers, insurance companies, and research institutions seeking to leverage predictive analytics for proactive health management. Light AI Inc. (ALGO.NE) may be the most similar comparable to this portion of PMED's business opportunity, as it applies AI to Smartphone images to identify disease. ALGO is currently valued at around $67 million as a pre-revenue company.

With 192 million shares post-raise, PMED trades at a valuation of CAD $8 million at $0.04, well below these type of peer companies. While AIDX is certainly well ahead of PMED when it comes to revenue generation, AIAI isn't. We also think the nature of PMED's business model allows it to attain profitable operations from a much lower revenue base. PMED has a one month payback period on sales and we have high confidence that the company will be able to secure multiple contracts. In addition to that, we think the data generated from the 250,000 scans is inherently valuable and unique, therefore justifying a valuation similar to that of ALGO for this portion alone. 

In addition to the 192 million shares, there are 42 million warrants with a strike price at $0.05. We think that the stock price will be at a level where those warrants will be exercised, so any price target should consider 234 million fully diluted shares. The exercise of the warrants would bring in $2.1 million in cash, reducing the need for future equity raises. Based on 234 million shares outstanding, we think that a $0.25 target on PMED is fair. This would lead to a $59 million valuation, below that of ALGO which has not yet generated revenue, and less than two-thirds of AIAI. We are prepared to significantly increase that target valuation to $100 million or more should PMED deliver on revenue generating contracts and prove that the business model has a much shorter path to profitability than these more bullishly valued peers. 

Disclosure: We are long PMED.CN

VivoPower: Retail Shorts Who Don't Know How to do Research are About to Get Squeezed

On Wednesday we wrote a bullish blog on VivoPower International PLC (VVPR) as the transaction with Energi Holdings appears to be gaining traction. VVPR updated the market yesterday, with the buyout offer increased to $180 million in enterprise value. The stock initially shot up to over $6.00, but then it was unfairly attacked by retail shorts who think they are smart but really just do poor research. We will detail here how they are wrong, how Energi is a real company and how they are messing with the wrong people. By the tone of our last blog, you can tell that we think there is something a little fishy going on here with respect to the Tembo transaction. But VVPR being fishy doesn't mean that the Energi offering is not legitimate. We think that it's about to tear shorts apart and that VVPR is intentionally behaving a little shady to goad shorts in order to trap them. 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 1033 followers on here as well as 122 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.

This is an example of the poor research we saw on X:

Just because this guy can't do proper research doesn't mean the company isn't real. He claims in his thread on X that he was short. Like any smart investor, we did our research on Energi. As a company based in the UAE and is relatively underground, it is hard to find proper information on it. Our first step was to do a whois look up on their website:

Two men named Mohammad Puri and Muhammad Waqas. Mr. Waqas appears to be an account manager for Energi's webmaster in Pakistan. He is no longer relevant to the analysis. However, Mr. Puri is the Founder and Director of Energi. Once you know this, it's quite easy to go down the rabbit hole of information on Energi.

Here is Mr. Puri's LinkedIn profile. He's not very active because he clearly doesn't care about social media or online presence. But the little bit we do know about him is important:

1. He founded Energi in 2014.

2. He was a commodity trader at Glencore.

3. He was educated at the London Metropolitan University

Energi is presented as a UAE company, and that is likely where the largest operations and offices are held. But Mr. Puri is British, started his business career in Britain and has two registered companies in West Yorkshire, Puri Limited and Energi Europe Limited. Energi is born out of the UK, like VVPR, and this is likely where the two companies became known to each other and friendly. A document filed with the British government on March 25 shows that "The company confirms that its intended future activities are lawful". This interview with Mr. Puri gives further insight into his origins as a business man, his goals in life and business philosophy. Obviously this interview is meant to be friendly, but it portrays someone who is doing business with integrity. This is an important point we will return to later on. 

In addition to Mr. Puri, there are 89 employees of Energi listed on LinkedIn. Most of them are private profiles, but of the people who have public profiles, that includes Abdullah Puri, another long time member of the company who is likely a relative to Mohammad. There is a lady who is a hiring manager in Mozambique. Giving credence that they have growing operations there. An enthusiastic and detailed gentleman in the UAE, an experienced dry commodities trader, an HR executive in Pakistan, another HR leader in Pakistan who is actively recruiting. Among dozens of other people. But we think by now we made our point. Energi is a very real company that has existed for over 10 years in all of the countries it claims to have operations in and by all indications of the aggressive hiring, is quite successful. The claims made on its "AI generated website" appear to have complete merit. 

Funny enough that Blaine Tarr couldn't find a registered business in the UAE, but we had no problem finding Energi's registered business in Switzerland, exactly matching the information on the company website. It wasn't particularly onerous research either. Writing out this paragraph took longer:

We have no problem with bearish research if it's good research. The stuff being pushed by shorts is worthless garbage about Energi using Shutterstock images on its website and then claiming the company is fake because they are too stupid or lazy to find all the easily verifiable information out there. It's clear that Energi Holdings has multiple different subsidiaries and goes by the name Energi Asia, Energi Resources etc. But shorts try to push these off as different companies. If it can be tied back to Mohammad Puri, it's part of the company that we are looking for. 

There is one more thing we would like to say about Energi Resources SA, though it's a bit of speculation on our part. There are two named members of management of this company, one of them being Alejandro Gonzalez. 

This is his LinkedIn profile. Along with his roles at Energi, he used to work at GP Global Group. One thing we noticed on his profile are two profiles viewed most often along with his. Julia Marano and Yannick Lucce. Both high level employees in the finance division at Montfort. Mr. Lucce's hiring as CFO at Montfort was apparently a big enough event that Bloomberg dedicated an article about it.  

Both of them work at Montfort, headquartered in Geneva. Montfort is a global commodity trading and asset investment company, with offices also located in the UAE. Montfort is the company that financed the purchase of Energi's operations in Mozambique. We speculate that Montfort is the entity behind financing the deal between Energi and VVPR. That's why the story can evolve from a $120 million payout to a $180 million payout. This is a rounding error to these people. 

We are currently trying to dig up more information about this web of connections. We encourage other investors to look deeper into Mohammad Puri and Alejandro Gonzalez. Mr. Puri is the connection to the UK and likely knows the members of VVPR. Mr. Gonzalez is the connection to monied interests in Switzerland who have an interest in companies like VVPR. We suspect that either one of these two people are friends or associates of Kevin Chin, CEO of VVPR.

All this research up to now was to point out two things:

1. Energi Holdings and its various similarly named subsidiaries, led by Mohammad Puri, is a entity with substantial operations. It's 100% real, despite its barren website. The claims it makes on its website are easily verifiable by third party sources of data, including those registered with government agencies. Energi has a roster of employees on LinkedIn that is indicative of an international oil/energy and commodities trading business that is likely generating over a billion dollars in revenue. 

2. Energi and Mr. Puri act with integrity. Look, it's an oil trading business. Obviously people in this business aren't saints. However, Mr. Puri legally registered his business in the UK and is subject to its laws. He just filed a form on March 25 with the British Government confirming that Energi's UK subsidiary's planned business activities are lawful. Energi and VivoPower aren't doing this to do an illegal pump and dump. There is no upside to it, especially not to Mr. Puri, to so clearly ruin his reputation. Up until now, few people outside of the oil trading industry and its employees ever heard of Energi. Now when you type Energi Holding into Google, the first thing that comes up is the deal with VivoPower. Do you think they want to turn this into an exposed pump and dump that caught thousands of angry retail shareholders who will call them scammers for the next 50 years? How is that strategy working for Trevor Milton or David Michery? 

Energi MIGHT be acting as a front company for Montfort or someone else interested in VVPR's technology. Energi MIGHT be doing this as a personal favor to an old friend/associate, VVPR's CEO Kevin Chin. To get him out of this mess as VVPR has been an absolute disaster since it became a publicly listed company. Energi MIGHT be doing this as a way to increase publicity for itself or gain access to a NASDAQ-listed company for a future move to the exchange. But it IS NOT doing this to create a pump and dump scam. 

Another X sleuth retail short posted this about Energi lending $600,000 to Cactus Acquisition Corp. 1 Limited (CCTSF), an illiquid SPAC valued at $56 million set to merge with Tembo. That particular short uses false equivalencies to claim that Energi is in on the scam. However, we use this loan as evidence that Energi is friends, associates, or otherwise interested in the success of VVPR, Tembo or Kevin Chin. The assumption that Energi lending money to facilitate the Cactus-Tembo deal as part of a scam does have merit on the surface...it's just wrong. 

The big issue everyone has, including us, with the Tembo deal is how it is portrayed. It's portrayed as a deal that is valued at $838 million, or $904 million, depending on what press release you read about it. It is premised on the idea that CCTSF will issue 83.8 million shares at $10. CCTSF might have a stock price of over $11 right now, but it trades 300 shares a month. There is no liquidity or value in this shell. Anyone with half a brain and the littlest experience with the market knows that as soon as this deal would go through, CCTSF shares would tank from $11 to under $1.00, likely well under $1.00. The "$900 million" deal in practice would be worth $90 million or even $9 million in reality. There is no realism to this $904 million valuation...but it is technically accurate and legal to portray the deal this way. An investor or short may find Kevin Chin and the people associated with CCTSF to be shady when they portray the deal in this way. That's fine. But it is a complete false equivalency to lump in Energi and Mohammad Puri in with this scheme. All Energi did was lend money to keep Cactus functional. Energi wasn't involved in writing the press releases or determining the valuation. 

While portraying Tembo as a nearly billion dollar deal is shady but still legal, there is no line of ambiguity here with the proposed Energi deal. It's still in the early stages and subject to due diligence, so there is still an out. But unlike with the loan, Energi and Mr. Puri have put themselves at the center of this deal. The $600,000 loan actually helps prove our case that Energi and VVPR are in some way friendly and will absolutely want to get this deal done. VVPR isn't just using Energi's name in these press releases without its knowledge or permission. Mr. Puri and his lawyers are just smart enough to know that a press release of this ilk must be written with reasonable clauses in it. With the Tembo deal, Kevin Chin's integrity might be on trial but Mohammad Puri's integrity isn't. However, this time around, Mohammad Puri's integrity IS on trial. That is the main difference here and that is why shorts are wrong to laugh off the deal the same way they laugh off the Tembo deal. We think VVPR may even be baiting the shorts who aren't smart enough to understand the difference between the Tembo and Energi deals and trap them in a squeeze. Judging by the opinions on X and other Fintwit spheres, it's working. 

For all we know, the $120 million number could have been the "initial" number put out into the market, but the true "wink, wink" number was $180 million all along. Or maybe something even higher that will be disclosed down the road. We don't think Kevin Chin is such a brilliant negotiator that he managed to get Energi to increase the offer by 50% in the couple of days of "negotiations". Like we said, no issue with thinking something fishy is going on here, but that fishiness doesn't extend to the very existence of the deal itself. For all we know they just need to dot the i's and cross the t's but are using the wave of press releases and stretched out timelines to toy with market players, particularly shorts. 

Energi is portrayed as a UAE-based company led by someone named Mohammad Puri (obviously of Middle Eastern descent). Some might compare this deal to some Chinese pump and dump where the perpetrators don't have any recourse in America as long as they don't commit fraud against the Chinese government or its citizens. The reality is Mohammad Puri is a UK citizen who registered a subsidiary of Energi in the UK and is currently putting out an offer on VivoPower, another UK registered company. If there is fraud here, it will be prosecuted to the fullest extent of British law. This isn't a deal created by entities and people in some far off land with no extradition treaties with countries in the west. 

Energi is a real company. The deal with VVPR is a real offer presented with a CASH-based valuation of $180 million. The parties involved all appear to want to get this deal done. Since the deal was increased by $60 million from $120 million to $180 million, we need to increase our per share target by $7.85. Our initial estimated range of $9.16 to $15.70 is now increased to $17.00 to $23.50. As the stock price is around $4.00 now, we don't expect it to skyrocket to $17 overnight. But we do expect wild gyrations and trading opportunities, much like the one we saw on Thursday. Just don't be stupid enough to be caught short at the wrong time. The next pump could occur at any moment. We now know that the company likes to halt the stock for news during trading hours. It already happened twice. In order to provide us updates, or "updates" to this (already done?) deal. It feels like a wrestling script where the outcome is already known, but the plot is stretched out to get as many people as possible watching Wrestlemania. 

Disclosure: We are long VVPR

Either Buyout or Short Squeeze, VVPR is Going Up

VivoPower International PLC (VVPR) has been on absolute fire lately, ever since the company first reported that it received a non-binding but friendly takeover offer. The stock rose another 85% today to close at $4.18 after a follow up news release disclosing that talks were advancing and that the company will update the market with clearer terms around the deal before April 2. 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 1033 followers on here as well as 122 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.

Even after the recent run up to $4.18, the deal offers a lot of upside, likely because the market is skeptical given VVPR's history of announcing deals that never seem to get complete and that other than a website, there is not much information available on the proposed buyer, Energi Holdings Limited. Having a follow up date that is so soon is a bold move that is showing the market that VVPR is serious about this. Clear terms will lay out the upside, timing and necessary tasks in order to get the deal done.

What we know so far is that the deal has a proposed valuation for VVPR of $120 million enterprise value. This makes it tricky to come up with an exact stock price target for two reasons. First, we don't know what the buyer defines as "enterprise value". Is it simply market cap plus debt minus cash? Or some other definition that includes other working capital line items or adjustments? Second, the last balance sheet we have on VVPR is dated June 30, 2024. So the numbers we have access to for calculations are quite out of date. 

That balance sheet shows about $30 million in debt with no significant cash. Total shareholder's equity is -$40 million. To be conservative, let's assume this -$40 million number and subtract another $10 million to account for any operating loss since June 30th. Subtract this $50 million number from $120 million and $70 million is the lowest possible number for the market cap. The share count is 7.64 million (not including any potential shares issued with the FAST merger), so that would lead to a payout of $9.16 on the low end. The high end would be calculated by using the full $120 million, which leads to a $15.70 per share payout. This is quite a large range, which is why VVPR's coming update on the details of the terms is so important. 

Understanding what exactly this deal includes would be another major piece of information for shareholders. In addition to the FAST merger, VVPR has also been actively trying to spin out its Tembo subsidiary through the CCTS SPAC and spinout of Caret Digital. Between these three deals, it would imply that VVPR would be worth many, many multiples of its current stock price. This is another reason why we think that the Energi deal was initially looked at with skepticism. VVPR promises these deals with insane valuations, and they never get done. There are two huge differences this time around though. In these stock type of deals, you can claim whatever you want to be the value. The market will determine the real value. For instance, if the Tembo deal were to go through with CCTS, it would value Tembo at a $904 million enterprise value. However, CCTS has very little cash and would probably get redemptions for what little it had. The stock has no liquidity so it would immediately drop from $11 to well less than $1.00 and that alleged $904 million in enterprise value would really be only a few million. In contrast, the Energi deal is offering PURE CASH. Not shares that are going to tank as soon as shareholders have access to sell them. That's the first difference. The second difference is the timing. This is moving a lot more quickly and more seriously than anything VVPR has stated to date. The market is starting to believe it too. Usually the VVPR pump would have already dumped by now, basing it on historical price action when the company announces these deals. With today's news release, everyone is saying "this time it looks serious" and took the stock up another 85% after Tuesday's pullback.

Understand that anyone who claims this deal is fake doesn't know what they are talking about. This is legitimately filed with the SEC. Bears point to the aforementioned deals (that are also filed with the SEC) but keep in mind they never actually fell apart. They are just constantly in delay, a lot of which has to do with the complexities of mergers. The Energi transaction is for pure cash, in a buyout scenario, and that's it. Much simpler to complete from a regulatory point of view. 

Other than price, the other important piece we need to know is what exactly is included as part of the takeover deal. Are existing VVPR shareholders going to get the cash payout and that's it? Or are they going to get a cash payout PLUS an interest in Tembo and/or Caret Digital as per their initial spinout plans? We can safely assume that the Energi deal would negate the FAST merger. There is no possibility that both of these things can occur. 

The final consideration is the massive amount of trading that is occurring with VVPR shares right now. There is a bunch of shorting, flipping and volume spoofing going on. With just 7.6 million shares and a 4.1 million float, VVPR traded a ridiculous 141 million shares today and a total of 279 million over the past four days. Nearly 70 times the float. There are certainly some traders who are honestly buying and sell shares multiple times, but not 70 TIMES over four days. 

Significant short marked volume has been seen. When people talk about synthetic shares, it's hard not to believe the theories when you see something like this. Usually this happens when there is threat of a financing, a recent financing, or outstanding warrants or other convertible securities. This is not the case for VVPR. Shares outstanding have been steady at 7.6 million for 6 months now. This isn't MULN. 

This leads us to our final point. With the amount of shares being traded, the purchaser could buy shares on the open market relatively undetected. Imagine if they purchased the four million float for $16-$20 million to control the vote for the buyout offer. That would be a lot cheaper than offering $120 million for those shares. This would be a GME situation all over again, except sparked by a real buyout transaction rather than the willpower of a million retail traders (that could also come in to VVPR to fuel the fire). If this buyer chooses to buy up the float on the open market then files the appropriate insider transaction filings, the fraudulent nature of the trading on VVPR would be exposed for everyone to see. That would mean all the retail and minority shareholders would hold a 1 to 1 ratio with all the shorts out there. 166,000 in short interest was reported on VVPR as of March 14. 

It's easy to justify a $9 to $15 target based on the proposed buyout price. But if VVPR goes haywire from a short squeeze, the target is technically infinite. This is definitely a stock worth throwing a few dollars at in order to see what happens over the next week. 

Disclosure: We are long VVPR

Visionary Holdings is a Massive Winner if it's the Real Deal

Visionary Holdings Inc. (GV) is one of the most unusual stories we have ever come across. The stock has been on fire starting on March 5th when it announced that it received $1 billion in a financing consent letter from the Alfardan Group for the product research and development and global market development of PEGASUS new energy vehicles. The stock rose from $1.29 to trade as high as $9.60, before closing at $5.96 on Friday. While the stock has risen significantly, it is undervalued by many multiples compared to what this type of deal should entail. The market clearly is skeptical, though follow up releases makes it sound like the company is dead serious about this deal. If this is a real deal, GV will be a massive winner. 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 1033 followers on here as well as 122 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers. 

Since the release on March 5th, the company followed this up with an announcement of an order for 12,000 new energy vehicles in Hong Kong on March 7th. It explained the layout of the new energy vehicle ecosystem in a press release on March 10th. Outlined a roadmap for a battery swap rollout in Hong Kong in a press release on March 12th. This release outlined plans to build out 600 stations in Hong Kong by 2029, including 10 in 2025 with the first one to be launched this month. This initiative will cost approximately $55 million (translated from $420M HKD). Finally, on March 14th, GV announced that the $1 billion loan has been secured. The company said all the right things in the news release, with promises to be transparent about this deal and its corporate updates, and be in compliance with strict disclosure as a U.S.-listed company.

GV said a lot of the right things, because clearly the market has its doubts as this sudden change in business doesn't make a lot of sense. GV started out as an education company and has talked a lot about AI and health care in its business plans. But the truth is that the majority of its revenue comes from rental income (with some from tuition) while its profitability comes from the successful flipping of its various properties in and around Toronto, Canada. Here is a snapshot of its 2024 income statement ended March 31: 

The company earned $0.32 EPS in fiscal 2024. Even after the recent run, that's a respectable 19 P/E multiple. Much like most of Canada, it lives and dies on the price of real estate rather than successfully building a business. However, that may be set to change. GV began its barrage of press releases about a month ago, after tariff talk between the United States and Canada really ramped up. Canadians have been looking to de-integrate their economy from the United States in response, particularly its auto sector which companies like Magna Group rely heavily upon U.S. business. A company like GV does have the connections to make international business happen. A loan from Qatar, a deal in Hong Kong, and leveraging Magna in Canada from a company led by Chinese-Canadians. This is the type of thing that makes sense in Canada right now.

Unlike most small caps, GV isn't some loser company with no connections. The company lists $83.5 million in property assets on its balance sheet. The bulk of that is presumably the book value of the various commercial properties it owns in and around Toronto. That doesn't include the properties that were successfully flipped in the past. So it's plausible that management has developed a trusted relationship with an investor like Alfardan Group which does have significant investments in real estate globally. 

In addition to the unbelievable nature of the company's recent press releases, GV may also be held down due to some financing deals. The company issued a couple of loans that become convertible for shares starting in July. But the bigger is at the end of 2024, the company announced a Securities Purchase Agreement where 21 million shares would be issued at $1.00, for a total of $21 million. This would obviously result in significant dilution. However, that transaction was subject to regulatory approval and clearance and has not yet closed despite promises to by the end of Q1. There is a distinct possibility that the company won't bother to close this transaction given that it is in advanced stages of getting the $1 billion dollar loan. No need to dilute the shares that much under this new reality. If this is the case, anyone who is shorting the stock with the expectation of dilution from this share purchase agreement or others could be in for a shock. We can't discount the opportunity of a short squeeze as cost to borrow rates on the stock increase.

Assuming that all things progress as stated in GV's press releases, it is a company with a $23 million market cap that has:

1. Access to a $1 billion loan.

2. Involvement in the development of PEGASUS with an order for 12,000 vehicles in Hong Kong.

3. The build of 600 battery swap stations in Hong Kong.

4. The real estate and rental business in Toronto that generated a $0.32 EPS last year. That alone supports a $5.96 stock price. Though this business may be subject to wild swings in profits and losses year to year based on the commercial real estate business in Toronto. 

5. Tuition income, plus whatever else it may dabble in other industries. 

GV has 3.8 million shares outstanding. A stock price of $100 leads to a $380 million market cap. Considering the billion dollar loan and the order for 12,000 vehicles, this is a conservative enough valuation if you believe these deals will get done. Even if one doesn't believe that the deals will go through despite the company aggressively stating its intentions to succeed and be honest about it, the existing EPS of $0.32 and the threat of frequent press releases that consistently cause the stock price to spike gives traders likely multiple profitable exit opportunities at a $6.00 buy in point. Given the volatile nature of the stock and unusual situation but also massive upside, we recommend that investors be ready to flip the stock as buy low sell high trading opportunities of $2-$3 in daily variance exist nearly every day. But keep a small portion on the side tightly held for the lottery ticket upside. 

Disclosure: We are long GV

Why IP's $10 Million Announcement is Different Than Deals of the Past

 

On Monday, we wrote a bullish piece about ImagineAR Inc. (IP.CN) (IPNFF) after it announced a $10 million deal that makes it significantly undervalued at current prices and may be just the first step in a new era for the company. Unfortunately, instead of rising to something close to our targets, it has taken a severe drop to $0.075. Legacy shareholders must have taken an opportunity to exit at low prices because they figured this deal will be like the previous ones that have fallen apart. We find this price action unacceptable and did some digging - including with representatives of the company - to assure our readers that this situation is very different from deals of the past.  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 1031 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. 

As we mentioned in our first write up, we have been aware of ImagineAR for a while and know of its past failures. There are good reasons why we never mentioned this company before and treated as more of a small swing trading opportunity than investment until now. Today we are fully invested as the technology looks ready to be adopted by serious players, the business model has been adjusted to a capex and opex light one so financing and dilution is much less of a concern, and we are optimistic that the patent infringement case will land in the company's favour in a reasonable time frame. As we weren't shareholders at the time, we didn't pay for lessons learned in the past. However, these past mistakes are causing an overhang on the stock price today as legacy shareholders who don't recognize the new reality look to exit. While this is frustrating for us in the near term, it presents a good buying opportunity for those willing to wait until that overhang is absorbed by the market. 

The main criticism of this deal comes from its similarities to a deal announced in June 2023. That project was slated to go live in the Q4 2024 which has obviously not happened. It was an ambitious plan to develop a 50,000 square foot immersive entertainment center but unforeseen circumstances regarding the economic landscape caused the project to not proceed as originally envisioned. The business model included a shared capital expenditure and operational expense structure. The model was too broad and presented significant risks for a small company with limited resources, leading to a reevaluation of the company’s direction. We think the company downplayed the challenges of this deal in the press release, which has led to the valid criticism it has received today. But it has since learned some valuable lessons around focusing on its strengths, using its capital wisely and increasing transparency to the market. This included company representatives having a discussion with us to clarify what went wrong in the past and why it won't happen again in the future.

The deal in June 2023 was predicated on IP's participation in acquiring a property on which the immersive entertainment center was to be built. This included Director Gary Panaich and another unnamed individual fronting $250,000 each as a deposit for the acquisition of land (link). They were reimbursed by the company in the form of shares at $0.05. The company was giving it an honest try, but was unable to secure the land and the deal did not proceed. A side note - the progress report dated November 2023 states the company had 264 million shares outstanding. It now has 277 million shares outstanding, 5% dilution in 15 months. Among the lessons that IP has learned, it's to respect shareholders and significantly slow down its rate of share dilution. 

Since then, ImagineAR has refined its strategic approach, transitioning toward a more sustainable and scalable business model. This evolution is exemplified by the company’s new partnership in Niagara Falls, a pivotal step forward in its growth journey. People misunderstood or downplayed the press release from two weeks ago as fluff, but it was outlining the changing strategic direction of the company. The Niagara Falls deal puts these concepts into action. IP is not a builder nor financier of entertainment complexes. It's a tech company that will launch its technology to create engaging and novel experiences for people in buildings that were built and paid for by someone else. 

The Niagara Falls partnership requires no capital investment from IP, significantly reducing financial risk compared to the 2023 deal. Additionally, the company will not bear any operational expenses, allowing it to focus on its core strength - delivering cutting-edge augmented reality technology. Rather than managing the entire facility, ImagineAR’s role is now centered on providing its advanced AR platform and expertise, ensuring the highest quality user experiences. Niagara Falls, one of the world’s top tourist destinations, attracts millions of visitors annually, providing a significant audience for ImagineAR’s innovative AR experiences. This partnership allows the company to showcase its technology in a high-traffic environment, enhancing brand exposure and market recognition.

This new partnership is a testament to ImagineAR’s ability to adapt and thrive in a dynamic market. The company has shifted towards a licensing model, ensuring recurring revenue while mitigating financial risk. ImagineAR has demonstrated agility in refining its business model and learning from past experiences. The new business approach is financially sound, focusing on innovation and reducing operational risk. The Niagara Falls partnership positions ImagineAR for long-term growth and market expansion, with potential for increased valuation by focusing on its core competency - augmented reality technology. 

While the site must be built, the major difference between this situation and the previous one is that the business partner actually owns the land and will bear the costs of development. Not only is IP not responsible to procure the land and build the center, land procurement and development is already settled. The division of responsibility is set and doesn't represent a risk to the project as in the case with the 2023 deal. It's one thing to say that IP isn't responsible for getting the land but "someone else" is and another to say that the "someone else" has already settled the issue. 

The next thing we would like to do is to compare the Niagara Falls press release to the one released in 2023 to show that IP has learned some lessons around transparency and respect for shareholders in garnering a superior deal:

• The Niagara Falls release explicitly stated that J Grewal is the owner of the location for the proposed Immersive Center. The 2023 press release did not make it clear that purchasing land of a suitable size and location for the project was a significant prerequisite to the deal being completed. 
• The Niagara Falls deal came with a $250,000 deposit already paid to the company. The 2023 deal did not. Should for whatever reason this deal fall apart, at least it generated revenue to the point that this would be one of the best quarters the company ever had. 
• The Niagara Falls deal clearly stated that this is a $10 million contract upon completion of the site plus recurring annual future revenue. The 2023 deal made no reference to specific contract amount or revenue opportunity. The ability to even mention a number and get it past regulators shows that this is a far clearer and more robust deal with signed contracts backing it. 
• The 2023 deal was predicated on a $2 million financing raised by the partner plus IP giving up 49% of its FameDays subsidiary. The Niagara Falls deal has no such financing requirement and the business partner is not taking any equity and not diluting shareholders. There is no $2 million financing or any strategic investment needed because the developer is the one responsible for bearing the costs of the build, not IP. Note also that FameDays is still wholly owned by IP as the 2023 deal failed. 
• The Niagara Falls deal makes reference to 2025 rollout as opposed to the 2023 deal that specified a fall/winter 2024 timeline for it to be open to the public. This rollout term is a fairer representation of the timeline as building timelines can be unpredictable. As long as progress has been made during the year in the development of the location, this rollout term is accurate even if it's not quite ready to be opened to the public in 2025.   

In our opinion, the 2023 press release was promotional in nature while the Niagara Falls press release is much more substantive in nature. Naysayers and trolls mock that the company had to release a continuous disclosure review a few weeks ago that required several restatements to IP's financials. Smarter investors know that this is actually a sign that the company is under a microscope and releases will be picked through with a fine-tooth comb by regulators. Not only has the company learned from past mistakes, it MUST learn from those mistakes if it wants to overcome regulator focus. That past press release isn't an indicator of increased risk by investing in IP. It's an indicator of decreased future risk because company management can't afford actions that keep it on the radar of the regulators. 

One final criticism of the release that we find laughable (especially in the context of the paragraph above) but have to address is related to the presentation of IP's business partner, Mr. J Grewal, in the press release. We have been assured that the man is real and has significant real estate assets across Ontario. His name is also very common so it's easy to mix him up with others when doing research. Imagine trying to find information on "John Smith" versus "Jon Smith", for example. The situation is similar here. IP provided sufficient evidence to the regulators to assure them that this is a legitimate deal in order to get the press release approved in the first place. The man is a real estate developer, not a penny stock investor. Leave him in peace so he can focus on developing the project to the benefit of all IP investors. 

P.S. We expect this developer, among others, to be very happy with the expected re-election of Doug Ford in today's Ontario election. For shareholders in that province or who are otherwise familiar with Ontario's politics, they should be able to put two and two together here. For those unfamiliar, there has been controversy about the development of a spa and protected farmland potentially being used for highway and housing development in the province. Developers like Grewal and the Niagara Falls project (as well as future sites) represent the flip side of a government having very pro-development policies. These type of deals are very much aligned with the goals of Ontario's politicians in power. IP has procured the right partnership in the right location at the right time. 

Disclosure: We are long IP.CN

An Under-the-Radar Canadian Microcap Tech Stock that Just Hit a Major Revenue Milestone with One Contract

Artificial intelligence, quantum computing and crypto. Those three industries have been all the rave in the small cap tech stock world over the last several months. Our readers have participated in some of those gains, namely with our bullish call on Blockmate Ventures Inc. (MATE.V)(MATEF). MATE remains a focus of ours and we think that the recent pullback represents a strong buying opportunity. Especially as the development milestones for Hivello remain on track and the node count is nearing 30,000. At this pace, the goal of 100,000 nodes by the end of the year should easily be surpassed. We remain bullish with a $0.50 target for the near-term and longer term $5.00 target when Hivello eventually hits 1 million users. However, we are going to shift gears to focus on another Canadian tech stock. One in the augmented reality industry, an overlooked sector despite being a cousin to AI. One that just signed a $10 million contract, blowing away revenue numbers put up by junior companies in typical "hot" sectors.  That company is ImagineAR Inc. (IP.CN) (IPNFF).  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 1031 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. 

ImagineAR is a name that we are familiar with. The company first got on our radar back in 2022 when it signed a deal with the Baltimore Ravens of the NFL to deliver mobile augmented reality fan experiences. That deal, along with a few others have so far turned out to be not as lucrative as first hoped, and the listing has been one of many Canadian junior tech stocks in the graveyard since the 2021 COVID boom went bust. However, today's announcement is truly impressive and blows everything the company has done to this point out of the water. IP closed at $0.11 on Monday while it touched over $0.60 in March and April of 2021. The news released today lays the ground work to make those losses back and then some: 

Vancouver, British Columbia--(Newsfile Corp. - February 24, 2025) - ImagineAR (CSE: IP) (OTCQB: IPNFF) (FSE: GMS1) an Augmented Reality company that enables organizations, brands and businesses to create their own immersive experiences, announced today the execution of a Design and Project Installation Agreement by its wholly-owned subsidiary FameDays to develop a 25,000-square-foot immersive experience center in Niagara Falls, Ontario. The $10 million agreement, executed with Ontario real estate developer Mr. J Grewal through his holding company on February 21, 2025, will include immersive attractions, AR racing, VR Gaming, Mixed Reality among other attractions. This marks the first implementation of ImagineAR's newly announced AR-AI (Augmented Reality-Artificial Intelligence Integrated Revenue) business model, designed to drive scalable, recurring revenue.

Mr. J Grewal, an Ontario real estate developer and owner of the location for the Immersive Centre at Niagara Falls, paid a non-refundable deposit of $250,000 to the Company upon execution of the Design and Installation contract. Additionally, Mr. Grewal, through his holding company, executed the Master Services Agreement pursuant to which the Company will provide on-site support, software development and support as well as 24/7 mobile app guest support. Apart from the initial $10,000,000 contract, the Company will also receive an annual fee and monthly royalties based on the gross sales of the various attractions at the Immersive Centre once it is built.

Strategic Location: Niagara Falls' Tourism Powerhouse

Niagara Falls attracts over 13 million visitors annually, making it one of North America's most iconic tourist destinations. The immersive center intends to capitalize on this foot traffic, positioning ImagineAR's technology at the intersection of entertainment, education, and next-gen tourism. The location ensures access to a global audience and enhancing visibility for both parties.

2025 Rollout

The Niagara Falls center is the first immersive AR /AI installations slated for 2025. The partnership serves as a blueprint for scaling ImagineAR's technology across high-traffic global destinations, from theme parks to cultural landmarks.

Mr. J Grewal added "An immersive center inside a hotel transforms the guest experience from a simple stay to a journey of discovery, blending technology, culture, and entertainment seamlessly. In Canada, where travelers seek both adventure and authenticity, this innovation allows hotels to offer curated, interactive experiences that not only enhances guest satisfaction but also drives longer stays and repeat visits, making it the future of hospitality. We have already expressed interest to open two more locations, and we are currently in discussions to open our 2nd immersive center in Ontario with much larger square footage."

Alen Paul Silverrstieen, CEO of ImagineAR, stated "This partnership is a transformative milestone. Niagara Falls' tourist base provides the ideal stage to showcase how AR/AI can redefine experiential entertainment. By signing a $10 million contract and a separate agreement securing recurring revenue for our software installation, this accelerates adoption of our AR-AI model. This is just the beginning of our vision to make immersive AR/AI a staple of global tourism."

IP has 277 million shares outstanding with a market cap of approximately $30 million at Monday's $0.11 close. This $10 million contract that by all indications appears to be the tip of the iceberg means IP is trading at just 3x revenue of this one announcement. For longer term investors who may be frustrated with the company's past deals not being as lucrative as hoped, understand that this is different. First off, a $250,000 deposit was already received by IP. More cash received as a deposit than most of their past deals turned out to be in revenue. Second, this is a 25,000 sq ft attraction in one of the largest tourist destinations in the world and appears to be part of a hotel. This is not some obscure AR project on mobile devices that can be dropped at any time with little risk or cost to the client. Grewal is allocating a 25,000 sq ft location for this project, which means the capital already invested and to be invested for the entire project will exceed the $10 million contract with IP. Grewal is betting a fair amount of money and reputation to see this one through. Third, this tourist attraction will be a demonstration and free advertising of IP's technological capabilities to a wide audience. This is a massive step up from the mobile phone experience of the Ravens and similar deals. Almost certainly it will gain mainstream media attention as well as be included in Niagara Falls tourist brochures promoted by industry and government agencies. This is the type of deal that can turn a penny stock start up into a legitimate business. MATE must build up Hivello over time to attain critical mass and mainstream acceptance. There is a chance that IP gets there simply by executing on this deal. 

While the news today alone puts IP at a compelling valuation, the company is actively engaged in a patent infringement case that could result in an upside that is multiples of its current level even before considering revenue opportunities. A few months ago, the company filed a patent infringement suit against Niantic, the publisher of the Pokemon GO mobile game. The case relates to Patent No. 8,777,746 and infringements on character gameplay and touch reactions with the Pokeman GO game, among others. IP has retained global law firm Greenberg Traurig, LLP as its partner in defending the company's intellectual property. GT Law wouldn't take this case if it did not think that it had a good chance of success. While David vs Goliath cases are usually long shots as the smaller plaintiff cannot compete with the legal power and pockets of the larger defendant, a contingency fee arrangement with GT Law means that IP will be able to see the end result of the legal outcome. 

Niantic is in talks to sell its gaming division for $3.5 billion to Scopely, a mobile game company that was purchased by a division of Saudi Arabia’s Public Investment Fund. With IP signing a deal as part of a major tourist attraction, its patent case is strengthened as it can no longer be considered a patent troll. These two events occurring during this patent case could not be better timed. Rather than taking an adversarial approach, this may be an opportunity for IP to showcase the technology at a wider scale to the Saudi fund. Saudi Arabia is smartly looking to diversify its economy from being merely a petrostate. If it's aggressively buying into gaming, larger immersive tourist attractions are likely also on the table. Particularly since its neighbor UAE is known for garish tourist attractions that mask over an otherwise conservative society. IP's technology can be equally applied to Halal experiences as it can to places like Niagara Falls.  

Legal cases can be long and complex drawn out processes. Penny stock investors tend to not have the level of patience required to see a court case through to the end. However, if IP continues to announce revenue-generating deals such as the one today, that will drive interest in the company's day-to-day operations while the court case goes on in the background as a "cherry on top". Keep in mind that Niantic raised funds at a $9 billion valuation back in 2021. The fact that management is willing to talk M&A at a substantially lower valuation than four years ago shows that it feels that the multiple lawsuits against it may be resolved with substantial payouts that it wants to make someone else's problem, including the patent infringement case with IP. Which, in our opinion, appears to be the most serious of the group:

IP's long-term valuation at this stage is a complete wild card. However, we have enough information to at least come up with a reasonably attainable near-term target with some financial basis. One that should ensure strong upside for our readers and purchasers of the stock under $0.20. Then after that it's up to individual investors to figure out when and where they want to take profits. 

When coming up with our targets on MATE, we assumed an 8x revenue multiple. It's difficult to find an AR pureplay as most companies that lead the sector like Microsoft obviously cover a wide range of much more mature sectors. However, AI company C3.ai, Inc. (AI) has a revenue multiple of 10x. With this in mind, we think that an 8x revenue multiple is fair. 

$10 million in revenue should reasonably be achieved within a year based on the timelines outlined in the press release. There is also an annual fee and monthly royalties, though there is no indication how lucrative these will be in comparison to the $10 million upfront payment. Grewal mentioned the opening of at least two more locations, with one in active discussions and with a larger footprint. This potential contract will likely be for at least $10 million given its larger scope, but also has a lesser chance of completion given its early stage. So we are going to apply a 50% discount to this second $10 million, for a total of $15 million in revenue between the two locations. Applying an 8x multiple leads to a $120 million valuation. On a per share basis, this leads to a target of $0.43.

IP's value is less clear over the longer term. Given this contract, the potential to greatly expand this relationship with Grewal, the potential to attain other contracts similar in nature as well as any potential payout from the lawsuit, we think a $500 million valuation is within reach. There are 56 million warrants outstanding so we expect the fully diluted share count to be 333 million when they are exercised. This leads to a long-term price target of $1.50 per share. 

We will continue to monitor the stock closely and increase the targets if and when the situation merits it. Based on the tone of the news release, we think that future releases will show greater clarity and expanded revenue opportunities. For now, we think anything under $0.20 should provide investors with near-term upside. However, nothing is guaranteed. Either way, we suggest readers to watch the stock closely tomorrow. It may be the most interesting and volatile play in Canada. 

Disclosure: We are long IP.CN