Acquisition expected to establish Item 9 Labs Corp. as the largest cannabis franchisor in North America & among the top 10 cannabis retailers
Sessions currently generates over CA$80 million in annual systemwide sales across more than 45 dispensaries in Ontario, with an Adjusted EBITDA* margin of approximately 65%
Item 9 Labs Corp. (OTCQX: INLB ) (the “Company”), a vertically integrated U.S. cannabis dispensary franchisor and operator that produces premium, award-winning products, shared that it has secured the necessary financing to complete the previously announced acquisition of Sessions Cannabis (“Sessions”), one of Canada’s largest cannabis retail franchisors. The total cash purchase price of the transaction is $12.8 million, which is being fully funded through an Acquisition Line of Credit with a 5-year term from a commercial lender.
“Our highly anticipated acquisition of Sessions is on track to close in March. We have completed the due diligence process, received all required approvals, and now, secured the financing to bring this transformative acquisition across the finish line and create the largest international cannabis retail franchiser and publicly traded cannabis franchise company in North America,” said CEO of Item 9 Labs Corp. Mike Weinberger.
The Canadian cannabis market is expected to reach upwards of $6.3 billion by 2026, according to data research firm BDSA . Most of the growth is projected to be produced from Ontario, Canada’s most populous province, as it contributes nearly $1.3 billion of legal sales alone.
Sessions currently generates more than CA$80 million in annual systemwide sales with over 45 locations open throughout Ontario, up from 40 earlier in 2022, and is continuing to grow rapidly. The franchise network consists of 15-plus franchisees, with over 10 who are multi-unit owner-operators. The franchise anticipates maintaining strong performance with multiple openings in prime retail shopping centers surrounded by well-known grocers, quick service restaurants, and more, already slated for the coming months.
The franchise business model will become fundamental to accommodate the shifts in the Canadian cannabis landscape and allow the future joint company to aid both existing independent dispensaries and prospective franchisees as part of its international growth strategy. By joining the greater combined North American franchise network of more than 50 dispensaries, they gain the ongoing, dedicated support and buying power needed to excel in highly competitive markets.
“Franchising is the key vehicle to unlocking untapped market potential and significantly increasing brand penetration,” Weinberger continued. “Sessions stores are strategically placed in prime retail locations and have not seen the same impact others have experienced in competitive Canadian cannabis markets. Their dispensaries are thriving, and we anticipate with our unified team that we will be able to scale quickly across the country.”
The closing of the acquisition is subject to customary closing conditions, details of which can be found in the Company’s 8-K filing on May 24, 2022 .
For more information about Item 9 Labs Corp. and its brands, visit item9labscorp.com . For potential merger and acquisition opportunities, contact Mark Busch at acquisitions@item9labs.com .
*Adjusted EBITDA is a non-GAAP financial measure of earnings. Adjusted EBITDA represents EBITDA plus stock-based compensation and non-recurring revenue and expenses.
ABOUT ITEM 9 LABS CORP.
Item 9 Labs Corp. (OTCQX: INLB) is a vertically integrated cannabis operator and dispensary franchisor delivering premium products from its large-scale cultivation and production facilities in the United States. The award-winning Item 9 Labs brand specializes in best-in-class products and user experience across several cannabis categories. The company also offers a unique dispensary franchise model through the national Unity Rd. retail brand. Easing barriers to entry, the franchise provides an opportunity for both new and existing dispensary owners to leverage the knowledge, resources and ongoing support needed to thrive in their state compliantly and successfully. Item 9 Labs brings the best industry practices to markets nationwide through distinctive retail experience, cultivation capabilities and product innovation. The veteran management team combines a diverse skill set with deep experience in the cannabis sector, franchising and the capital markets to lead a new generation of public cannabis companies that provide transparency, consistency and well-being. Headquartered in Arizona, the company is currently expanding its operations space up to 640,000-plus square feet on its 50-acre site, one of the largest properties in Arizona zoned to grow and cultivate flower. For additional information, visit item9labscorp.com .
ABOUT SESSIONS CANNABIS
Sessions Cannabis is a community focused retailer selling safe, Health Canada regulated cannabis. Sessions is one of Ontario’s first brick and mortar cannabis retailers with multiple locations in Ontario. The company’s mission is to bring people together by providing a retail experience that is inviting, comfortable and educational. More information can be found at sessions.ca .
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including, but not limited to, risks and effects of legal and administrative proceedings and governmental regulation, especially in a foreign country, future financial and operational results, competition, general economic conditions, proposed transactions that are not legally binding obligations of the company and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include the introduction of new technology, market conditions and those set forth in reports or documents we file from time to time with the SEC. We undertake no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Sale provides Energy Fuels with significant non-dilutive funding for expansion of industry-leading US uranium production and completion of ‘Phase 1’ rare earth separation circuit.
LAKEWOOD, Colo., Feb. 15, 2023 /CNW/ – Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) (“Energy Fuels” or the “Company”) is pleased to announce that it has completed the sale (the “Closing“) of three (3) wholly-owned subsidiaries that together hold Energy Fuels’ Alta Mesa ISR Project (“Alta Mesa“) to enCore Energy Corp. (“enCore“) for total consideration of $120 million (the “Transaction“). Unless otherwise indicated, all references to dollar amounts in this press release are references to US$.
The consideration is comprised of:
$60 million cash at or prior to Closing; and
$60 million in a secured convertible note (the “Note“), payable in two (2) years from the Closing, bearing annual interest of eight percent (8%). The Note will be convertible at Energy Fuels’ election into enCore common shares at a conversion price of $2.9103 per share, being a 20% premium to the 10-day volume-weighted average price of enCore shares ending the day before the Closing. enCore was recently listed on the NYSE American and also trades on the TSX Venture Exchange. The Note is guaranteed by enCore and is fully secured by Alta Mesa. Unless a block trade or similar distribution is executed by Energy Fuels to sell enCore shares received upon conversion of the Note, Energy Fuels will be limited to converting the Note into a maximum of $10 million principal amount per thirty (30) day period.
In addition, enCore is required to replace the existing reclamation bonds for the Alta Mesa project shortly after the Closing, which will result in Energy Fuels receiving an additional $3.6 million cash as a return of collateral from those bonds. The Transaction also reduces the Company’s holding costs related to Alta Mesa by approximately $2 million per year.
The Transaction provides Energy Fuels with significant additional cash and working capital, enabling the Company to ramp-up its US industry-leading uranium and rare earth element (“REE“) production, while avoiding dilution to shareholders. In addition, the Note provides Energy Fuels with significant exposure to uranium market upside through potential conversion into enCore common shares.
Boosting Industry-Leading US Uranium Production:
Energy Fuels plans to invest a portion of the proceeds from the Transaction into increasing its US industry-leading uranium production. At the current time, the Company’s White Mesa Mill (the “Mill“) is the only US uranium facility producing material quantities of uranium, having produced 162,000 pounds of U3O8 in Q4-2022. The Company is also preparing four (4) of its conventional uranium and uranium/vanadium mines to be ready to resume uranium ore production, including significant workforce expansion and performing needed rehabilitation of surface and underground infrastructure. The exact timing for resumption of ore production from each of these projects will be subject to current and future uranium sales and inventory requirements.
Energy Fuels’ 2022 uranium production of 162,000 pounds exceeded its previously announced guidance of 130,000 to 140,000 pounds of U3O8. In addition, over the past several months, the Company has invested in additional uranium inventories, having purchased approximately 301,000 pounds of US-origin U3O8 at a weighted average price of $50.08 per pound. In addition, in January 2023, the Company sold 300,000 pounds of U3O8 to the US government for the establishment of the strategic Uranium Reserve, earning total gross proceeds of $18.5 million, or $61.57 per pound.
As a result of 2022 production, recent purchases, and the sale to the US government, Energy Fuels currently holds approximately 847,000 pounds of U3O8 in inventory at a book value of $29.19 per pound (worth about $42.5 million at the current weekly uranium spot price as reported by TradeTech). In combination with future uranium production, the Company expects to utilize this inventory to fulfill its delivery obligations under its supply contracts with US nuclear utilities. Energy Fuels is also actively seeking additional uranium sales contracts with nuclear utilities at increasingly higher uranium prices bolstered by improving market fundamentals, including the global energy transition toward less carbon intensive sources of energy, including nuclear, efforts to move away from Russian uranium and nuclear fuel supply, and other factors related to transportation and security of supply. As a result of the Company’s strategic moves in the uranium space, the Company believes it is creating significant flexibility by growing and managing its existing inventories and preparing several of its US assets for near-term production.
Investing in Production of Advanced Rare Earth Materials in the US:
In a February 13, 2023 news release, the Company announced that it had achieved several milestones related to its expanding REE supply chain, including completion of the acquisition of the Bahia Project in Brazil and continued progress on procuring natural monazite sand concentrate. Today, the Company is producing the most advanced REE material in the US and is currently performing modifications and enhancements to the existing solvent extraction (“SX“) circuits at the Mill (“Phase 1“) that are expected to enable Energy Fuels to annually produce up to 5,000 metric tons (“MT“) of total REE oxides (“TREO“), including up to 1,000 MT of neodymium-praseodymium (“NdPr“) oxide (or oxalate), subject to receipt of sufficient REE-bearing monazite sand supply and successful commissioning. The “Phase 1” circuit will be in the same SX building where uranium and vanadium is produced at the Mill. If these milestones are achieved, Energy Fuels believes it will be the ‘first to market’ among US companies with commercial quantities of separated NdPr available to electric vehicle (“EV“), renewable energy, and other companies for offtake, while fully maintaining our uranium and vanadium recovery capabilities. Energy Fuels’ “Phase 1” “light” separation circuit is expected to produce commercial quantities of separated NdPr oxide (or oxalate) by later this year or early 2024, followed by planned further enhancements to expand NdPr production capability (“Phase 2“) and to produce separated “heavy” REEs, including Dy, Tb, and potentially other REE materials, in the future (“Phase 3“) from monazite and potentially other REE-bearing process streams.
Mark S. Chalmers, President and CEO of Energy Fuels stated: “Energy Fuels’ sale of the Alta Mesa project for $120 million of total consideration is highly strategic for a variety of reasons. When combined with our already strong balance sheet, the proceeds from this sale are expected to fully fund our current uranium, vanadium and rare earth business plans through approximately 2024 without the dilution to shareholders one might normally expect, nor depletion of working capital. On the uranium front, this sale provides Energy Fuels with the ability to make the focused investments in infrastructure and human capital required to resume production at our lowest-cost and nearest-term uranium mines and facilities. We believe Energy Fuels will be among the quickest to market with significant new US uranium production and retain our position as the leading US uranium producer for many years to come.
“Of the four (4) conventional mines we are currently preparing for production, three (3) produce both uranium and vanadium. Vanadium prices are currently on the move, having risen from $7.50 per pound of V2O5 in October 2022 to $10.80 per pound today. Vanadium is important to our uranium business, as strong vanadium prices contribute to the economics of these mines, making them a more attractive option for us as we evaluate which mines to place back into production. Due to today’s strong vanadium markets, we are also evaluating the sale of more of our existing vanadium inventory which currently sits at 987,000 pounds of V2O5.
“Even though uranium is Energy Fuels’ core business, we expect to invest some of the proceeds from the sale of Alta Mesa into our rapidly expanding rare earths business. We have started the modifications and enhancements at our White Mesa Mill in Utah that are expected to produce commercial quantities (500 – 1,000 MT) of NdPr oxide (or oxalate) by later this year or early in 2024, while maintaining our uranium and vanadium capabilities. NdPr oxide is a high-demand advanced material needed in the EV, renewable energy and defense industries. We are not aware of any other US company that will get this far down the US rare earth supply chain as quickly as Energy Fuels. It is also virtually unheard of anywhere else in the world to produce uranium, vanadium and separated rare earths in the same building, which demonstrates the creativity and resourcefulness of the team at the Mill.
“We also expect to invest some of the proceeds from Alta Mesa into advancing our Bahia Project in Brazil, where we plan to continue our comprehensive sonic drill program in 2023 to better define and delineate the titanium (ilmenite and rutile), zirconium (zircon), and of course rare earths (monazite) resources. We believe the Bahia Project has the potential to produce 3,000 to 10,000 MT per year of monazite concentrate for our Mill as soon as 2025 and for decades to come. Bahia, combined with other Company-owned and third-party monazite sources, is expected to supply the feed for ‘Phase 1’ and ‘Phase 2’ ‘light’ rare earth separation, and ‘Phase 3’ ‘heavy’ rare earth separation at the Mill.
“We see our rapidly developing REE business as highly complementary to our primary uranium business. We can utilize our existing facilities to recover uranium and REEs from monazite, which increases our uranium production and also allows us to generate margins from multiple commodities. No other US uranium producer has the ability to complement its primary uranium business in this manner.
“Finally, the $60 million secured convertible note Energy Fuels received from enCore at closing provides the Company with additional uranium market upside through the potential conversion of the Note into enCore Energy shares at an attractive conversion price.”
ABOUT ENERGY FUELS
Energy Fuels is a leading US-based critical minerals company. The Company mines uranium and produces natural uranium concentrates that are sold to major nuclear utilities for the production of carbon-free nuclear energy. Energy Fuels recently began production of advanced rare earth element (“REE“) materials, including mixed REE carbonate, and plans to produce commercial quantities of separated REE oxides in the future. Energy Fuels also produces vanadium from certain of its projects, as market conditions warrant, and is evaluating the recovery of radionuclides needed for emerging cancer treatments. Its corporate offices are in Lakewood, Colorado, near Denver, and substantially all its assets and employees are in the United States. Energy Fuels holds two of America’s key uranium production centers: the White Mesa Mill in Utah and the Nichols Ranch in-situ recovery (“ISR“) Project in Wyoming. The White Mesa Mill is the only conventional uranium mill operating in the US today, has a licensed capacity of over 8 million pounds of U3O8 per year, has the ability to produce vanadium when market conditions warrant, as well as REE products, from various uranium-bearing ores. The Nichols Ranch ISR Project is on standby and has a licensed capacity of 2 million pounds of U3O8 per year. The Company recently acquired the Bahia Project in Brazil, which is believed to have significant quantities of titanium (ilmenite and rutile), zirconium (zircon) and REE (monazite) minerals. In addition to the above production facilities, Energy Fuels also has one of the largest NI 43-101 compliant uranium resource portfolios in the US and several uranium and uranium/vanadium mining projects on standby and in various stages of permitting and development. The primary trading market for Energy Fuels’ common shares is the NYSE American under the trading symbol “UUUU,” and the Company’s common shares are also listed on the Toronto Stock Exchange under the trading symbol “EFR.” Energy Fuels’ website is www.energyfuels.com.
This news release contains “forward-looking information” within the meaning of applicable securities laws in the United States and Canada. Forward-looking information may relate to future events or future performance of Energy Fuels. All statements in this release, other than statements of historical facts, with respect to Energy Fuels’ objectives and goals, as well as statements with respect to its beliefs, plans, objectives, expectations, anticipations, estimates, and intentions, are forward-looking information. Specific forward-looking statements in this discussion include, but are not limited to, the following: any expectation that the Company will receive an additional $3.6 million cash as a return of collateral from the Alta Mesa reclamation bonds; any expectation that the conversion price of the Note may be attractive or that the Company will convert all or any portion of the Note; any expectation that the proceeds from the sale of Alta Mesa will fully fund the Company’s current uranium, vanadium and REE business plans through approximately 2024 without dilution to shareholders or depletion of working capital; any expectation that the Company will invest a portion of the proceeds of the Transaction into its uranium production; any expectation that the Company will successfully prepare any of its mines to resume ore production or that any of its mines will enter into production in the near term or at all; any expectation that the Company will utilize any of its inventories to fulfill delivery obligations under its existing supply contracts or will be successful in obtaining any additional supply contracts; any expectation as to the quantities of uranium and heavy minerals, including monazite, NdPr, Dy and Tb contained in the Bahia Project; any expectation as to the potential annual supply of monazite sands from the Bahia Project to the Mill, the contained MT of TREO per year, or the number of years or decades of such potential supply; any expectation as to the timing of mining at the Bahia Project; any expectation that the Company will complete its Phase 1, Phase 2 and/or Phase 3 separation facilities on the time frames indicated, if at all; any expectation as to the expected throughput rates, production capability, and REEs to be produced; any expectation that the Company will be the first to market among US companies with commercial quantities of separated NdPr available to EV, renewable energy and other companies for offtake; any expectation that the Company will retain its position as the leading US uranium producer for many years to come; any expectations as to vanadium or other commodity prices; any expectation that the Company will sell any of existing inventory at attractive prices or at all; any expectation that the Company will be able to utilize the Mill to generate margins from recovering uranium and REEs from monazite sands and other ores independent of the price of uranium; any expectation that the Company’s REE business may become a profitable stand-alone business for the Company, or provide commodity price diversification for the Company; and any expectation that the Mill is a unique and highly strategic asset in the US. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates” or “believes”, or variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. This information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements include risks associated with: technical difficulties; mining or processing difficulties and upsets;licensing, permitting and regulatory delays; litigation risks; competition from others; political actions or instability in foreign countries; and market factors, including future demand for and prices realized from the sale of uranium, vanadium and REEs. Forward-looking statements contained herein are made as of the date of this news release, and Energy Fuels disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management’s estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. Energy Fuels assumes no obligation to update the information in this communication, except as otherwise required by law.
SOURCE Energy Fuels Inc.
For further information: ENERGY FUELS, Curtis Moore – VP of Marketing & Corporate Development, (303) 974-2154; CONTACT: ENERGY FUELS, Curtis Moore – SVP of Marketing & Corporate Development, (303) 974-2154
One Stop Systems, Inc. (OSS) designs and manufactures innovative AI Transportable edge computing modules and systems, including ruggedized servers, compute accelerators, expansion systems, flash storage arrays, and Ion Accelerator™ SAN, NAS, and data recording software for AI workflows. These products are used for AI data set capture, training, and large-scale inference in the defense, oil and gas, mining, autonomous vehicles, and rugged entertainment applications. OSS utilizes the power of PCI Express, the latest GPU accelerators and NVMe storage to build award-winning systems, including many industry firsts, for industrial OEMs and government customers. The company enables AI on the Fly® by bringing AI datacenter performance to ‘the edge,’ especially on mobile platforms, and by addressing the entire AI workflow, from high-speed data acquisition to deep learning, training, and inference. OSS products are available directly or through global distributors. For more information, go to www.onestopsystems.com.
Joe Gomes, Managing Director – Generalist Analyst, Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Getting More Work. Yesterday, One Stop Systems announced the Company has received a $1.3 million contract from the U.S. Army to develop vehicle visualization systems. OSS will be working closely with the Army to deliver prototypes later in 2023. The announcement comes on the heels of the $3 million order last month, and further signifies the Company’s capabilities in military applications.
Details. The contract from the U.S. Army is for the design, development, and prototypes for a ruggedized compute visualization system. Using OSS PCIe Gen 4 switched fabric technology and NVIDIA Jetson AGX Orin system-on-modules, the system will be used to support 360-degree visualization for U.S. Army ground vehicles.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Gregory Aurand, Senior Research Analyst, Healthcare Services & Medical Devices, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Proof of concept confirmed. ChitogenX announced yesterday that in the meniscus tear repair study, the ORTHO-R biopolymer showed residency on the tissue more than 24 hours after surgery. In addition, PRP regenerative cells were recruited and aggregated at the surgery site. PRP alone disperses quickly, but the “sticky” PRP/chitosan biopolymer matrix showed extended tissue adherence.
Meniscus tear repair study in sheep. This pre-clinical study, composed of 22 sheep, tested the subjects’ menisci with sutures alone vs. platelet rich plasma (PRP) alone vs. PRP delivered by ORTHO-R biopolymer. This study represents the Company’s second proof of concept for their ORTHO-R drug/biologic in an orthopedic indication.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
How Dangerous Was the Ohio Chemical Train Derailment? An Environmental Engineer Assesses the Long-Term Risks
State officials offered more details of the cleanup process and a timeline of the environmental disaster during a news conference on Feb. 14, 2023. Nearly a dozen cars carrying chemicals, including vinyl chloride, a carcinogen, derailed on the evening of Feb. 3, and fire from the site sent up acrid black smoke. Officials said they were testing over 400 nearby homes for contamination and tracking a plume of spilled chemicals that had killed 3,500 fish in streams and reached the Ohio River.
However, the slow release of information after the derailment has left many questions unanswered about the risks and longer-term impact. We discussed the chemical release with Andrew Whelton, an environmental engineer who investigates chemical risks during disasters.
This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It represents the research-based findings and thoughts of, Andrew J. Whelton, Professor of Civil, Environmental & Ecological Engineering, Director of the Healthy Plumbing Consortium and Center for Plumbing Safety, Purdue University.
Let’s start with what was in the train cars. What are the most concerning chemicals for human health and the environment long term, and what’s known so far about the impact?
The main concerns now are the contamination of homes, soil and water, primarily from volatile organic compounds and semivolatile organic compounds, known as VOCs and SVOCs.
The train had nearly a dozen cars with vinyl chloride and other materials, such as ethylhexyl acrylate and butyl acrylate. These chemicals have varying levels of toxicity and different fates in soil and groundwater. Officials have detected some of those chemicals in the nearby waterway and particulate matter in the air from the fire. But so far, the fate of many of the chemicals is not known. A variety of other materials were also released, but discussion about those chemicals has been limited.
State officials disclosed that a plume of contamination released into the nearby creek had made its way into the Ohio River. Other cities get their drinking water from the river, and were warned about the risk. The farther this plume moves downstream, the less concentrated the chemical will be in water, posing less of a risk.
Long term, the greatest risk is closest to the derailment location. And again, there’s limited information about what chemicals are present – or were created through chemical reactions during the fire.
It isn’t clear yet how much went into storm drains, was flushed down the streams or may have settled to the bottom of waterways.
There was also a lot of combusted particulate matter. The black smoke is a clear indication. It’s unclear how much was diluted in the air or fell to the ground.
How long can these chemicals linger in soil and water, and what’s their potential long-term risk to humans and wildlife?
The heavier the chemical, often the slower it degrades and the more likely it is to stick to soil. These compounds can remain for years if left unaddressed.
After the Kalamazoo River oil pipeline break in Michigan in 2010, the U.S. Environmental Protection Agency excavated a tributary where the oil settled. We’ve also seen from oil spills on the coasts of Alaska and Alabama that oil chemicals can find their way into soil if it isn’t remediated.
The long-term impact in Ohio will depend in part on how fast – and thoroughly – cleanup occurs.
If the heavily contaminated soils and liquids are excavated and removed, the long-term impacts can be reduced. But the longer removal takes, the farther the contamination can spread. It’s in everyone’s best interest to clean this up as soon as possible and before the region gets rain.
Air-stripping devices, like this one used after the derailment, can help separate chemicals from water. U.S. EPA
Booms in a nearby stream have been deployed to capture chemicals. Air-stripping devices have been deployed to remove chemicals from the waterways. Air stripping causes the light chemicals to leave the water and enter air. This is a common treatment technique and was used after an 2015 oil spill in the Yellowstone River near Glendive, Montana.
At the derailment site in Ohio, workers are already removing contaminated soil as deep as 7 feet (about 2 meters) near where the rail cars burned.
Some of the train cars were intentionally drained and the chemicals set on fire to eliminate them. That fire had thick black smoke. What does that tell you about the chemicals and longer-term risks?
Incineration is one way we dispose of hazardous chemicals, but incomplete chemical destruction creates a host of byproducts. Chemicals can be destroyed when heated to extremely high temperatures so they burn thoroughly.
The black smoke plume you saw on TV was incomplete combustion. A number of other chemicals were created. Officials don’t necessarily know what these were or where they went until they test for them.
We know ash can post health risks, which is why we test inside homes after wildfires where structures burn. This is one reason the state’s health director told residents with private wells near and downwind of the derailment to use bottled water until they can have their wells tested.
The EPA has been screening homes near the derailment for indoor air-quality concerns. How do these chemicals get into homes and what happens to them in enclosed spaces?
Homes are not airtight, and sometimes dust and other materials get in. It might be through an open door or a window sill. Sometimes people track it in.
So far, the U.S. EPA has reported no evidence of high levels of vinyl chloride or hydrogen chloride in the 400 or so homes tested. But full transparency has been lacking. Just because an agency is doing testing doesn’t mean it is testing for what it needs to test for. Media reports talk about four or five chemicals, but the manifest from Norfolk Southern also listed a bunch of other materials in tanks that burned. All those materials create potentially hundreds to thousands of VOCs and SVOCs.
Are Government Officials Testing for Everything they Should?
People in the community have reported headaches, which can be caused by VOCs and other chemicals. They’re understandably concerned.
Ohio and federal officials need to better communicate what they’re doing, why, and what they plan to do. It’s unclear what questions they are trying to answer. For a disaster this serious, little testing information has been shared.
In the absence of this transparency, misinformation is filling that void. From a homeowner’s perspective, it’s hard to understand the true risk if the data is not shared.
Getting to Know ChatGPT: A Shallow Dip into Its Current Functionality and Future Potential
ChatGPT and the underlying AI technology are, as near as anyone can tell, the next-level toolkit for research, communication, idea generation, and a million other uses. If you haven’t introduced yourself to it yet, leave plenty of time – getting started is easy, but getting yourself to stop may not be. Those of us that were around pre-internet may liken the first-time experience to the first time we gained access to the world wide web. The Sudden, much easier access to a world of information, puts one in a place where you don’t know what to try first.
Over the past couple of months, the now-familiar name, ChatGPT has made headlines. It quickly captivated the worlds imagination as an AI product that is likely to disrupt or destroy some industries while enhancing others. Obviously, this is of particular interest to investors. With this in mind, I sat down for an interview with ChatGPT; below are answers to questions that many investors are asking.
Channelchek (PH) – Am I able to interview Chatgpt?
ChatGPT – Hello! As an AI language model, I’m happy to answer any questions you may have. However, it’s important to keep in mind that I don’t have personal experiences or opinions like a human, and I can only provide information based on my training data. So feel free to ask me anything!
Channelchek (PH) – What do most users have ChatGPT to do for them?
ChatGPT – As an AI language model, ChatGPT can be used for a wide range of tasks, including:
Language translation: ChatGPT can be used to translate text from one language to another.
Content creation: ChatGPT can generate text for various types of content, such as articles, blog posts, and product descriptions.
Chatbot development: ChatGPT can be used to develop chatbots that can interact with users and provide information.
Sentiment analysis: ChatGPT can be used to analyze the sentiment of a piece of text, such as a social media post or a product review.
Question-answering: ChatGPT can be used to answer questions on a wide range of topics.
Text summarization: ChatGPT can be used to summarize long pieces of text into shorter, more manageable summaries.
Language modeling: ChatGPT can be used to train new models for specific domains, such as medical or legal language.
These are just a few examples of what ChatGPT can be used for. Its versatility and flexibility make it a powerful tool for many different applications.
Channelchek (PH) – From where do you pull your answers ChatGPT?
ChatGPT – As an AI language model, I don’t have pre-programmed answers. Instead, I generate responses to questions by analyzing patterns in large amounts of text data that I was trained on. Specifically, I was trained on a dataset of billions of words from various sources, including books, articles, websites, and other textual sources. During my training, I was exposed to a wide range of topics and writing styles, which helps me generate responses to many different types of questions.
When you ask me a question, I use natural language processing (NLP) techniques to analyze the question and generate a response based on patterns in the text data that I was trained on. I then use statistical models to determine the most likely response based on the context of the question and the patterns in the training data.
It’s important to note that my responses are only as accurate and reliable as the patterns that I learned during my training. While I strive to provide accurate and helpful information, I may not always get it right, and my responses may not reflect the views or opinions of OpenAI.
Channelchek (PH) – Are you at risk of having the response you generate slanted or biased based on users feedback adjusting your training ChatGPT?
ChatGPT – As an AI language model, I am designed to learn from the data that I am trained on, including the feedback that users provide to adjust my training. However, it’s important to be aware that the feedback that users provide can sometimes introduce biases into my training.
If the feedback is consistently biased in a particular direction, this could affect the accuracy and fairness of my responses. This is why it’s important to carefully monitor and evaluate any feedback that is used to adjust my training, and to ensure that it is representative of a wide range of perspectives.
To address this issue, OpenAI has implemented a number of safeguards to prevent bias and ensure that my training data is as accurate and diverse as possible. For example, the training data is carefully curated to include a wide range of sources and perspectives, and the training process is carefully monitored to ensure that biases are not introduced.
Additionally, OpenAI has implemented a number of techniques to help identify and mitigate any biases that may be present in the training data or feedback. For example, I am periodically evaluated to ensure that my responses are accurate and unbiased, and any issues that are identified are addressed through additional training or other adjustments to the model.
Channelchek (PH) – As an editor I write for Channelchek about stocks, the financial markets, the economy and business climate. Are you a good resource for current events related to these topics ChatGPT?
ChatGPT – As an AI language model, I can certainly provide you with information on current events related to stocks, financial markets, the economy, and the business climate. I have been trained on a vast amount of text data, including news articles and other sources related to these topics, so I can provide you with up-to-date information and insights on current events.
When asking me questions related to these topics, it’s important to provide me with as much context and specificity as possible so that I can provide you with the most accurate and relevant information. For example, if you are looking for information on a particular company or sector, you could provide me with the name of the company or sector, as well as any other relevant details or questions you may have.
However, it’s important to note that my responses are generated based on patterns in the text data that I was trained on, and may not reflect the views or opinions of OpenAI. Additionally, while I can provide you with information on current events and trends, I cannot provide investment advice or make predictions about future market performance. It’s always important to carefully evaluate information and seek the advice of a qualified financial professional before making investment decisions.
Channelchek (PH) – Do users ask you to forecast the stock market direction?
ChatGPT – Yes, users sometimes ask me to forecast the direction of the stock market. However, as an AI language model, I cannot make accurate predictions about future market performance. While I can provide information on current market trends and historical data, predicting the future direction of the stock market is a highly complex task that involves a range of economic, political, and social factors.
It’s important to note that investing in the stock market involves a certain degree of risk, and investors should always carefully evaluate market conditions and seek the advice of a qualified financial professional before making investment decisions. While I can provide general information and insights related to stocks and financial markets, I cannot provide investment advice or predict the future performance of individual stocks or the overall market.
Channelchek (PH) – Are you familiar with Channelchek?
ChatGPT – While I am not specifically programmed to be familiar with individual websites, I may have come across content from Channelchek during my training.
That being said, I can still provide you with general information on what Channelchek is. From my understanding, Channelchek is a financial information platform that provides independent research, analysis, and market commentary on publicly traded companies. It offers a range of tools and resources for investors and financial professionals, including market data, stock quotes, and research reports.
Channelchek’s focus is on providing unbiased and independent information to help investors make informed investment decisions.
Channelchek (PH) – Does your AI technology pose a risk to traditional internet search engines?
ChatGPT – My purpose is not to compete with traditional search engines like Google or Bing, but rather to complement them by providing an additional source of information and assistance to users. While I am capable of providing answers to a wide range of questions and generating responses to open-ended queries, I am not designed to replace traditional search engines or web browsing.
Search engines like Google and Bing are still the primary means by which users navigate the internet and find information, and they use a range of sophisticated algorithms and machine learning techniques to index and rank content on the web. While I am capable of processing natural language queries and generating responses, my training data is based on pre-existing content, which means that my responses are generated based on patterns in the text data that I was trained on, rather than direct access to the vast amounts of data on the internet.
Early Boolean Phrase Search Tool
Overall, AI language models like me are part of a larger ecosystem of tools and technologies that are designed to help users access and navigate the vast amount of information available online. While there may be some overlap between the capabilities of traditional search engines and AI language models, both serve different purposes and can work together to provide users with the most comprehensive and accurate information possible.
Channelchek (PH) – What industries are you likely to disrupt and which are you likely to augment or help build?
ChatGPT – As an AI language model, my capabilities are quite broad, and I have the potential to impact a wide range of industries and areas of society. Here are a few ways in which I could potentially disrupt or augment various industries:
Industries that could be disrupted:
Customer service: AI language models like me are already being used by many companies to automate and improve customer service interactions, and this trend is likely to continue. As AI technology improves, it could potentially replace many human customer service jobs.
Content creation: AI language models have the potential to automate certain types of content creation, such as news articles, product descriptions, and even social media posts. This could have a significant impact on the journalism and writing industries.
Education: AI language models could potentially disrupt the traditional education model by providing personalized learning experiences and automating certain types of teaching and grading.
Industries that could be augmented:
Healthcare: AI language models could help augment healthcare by providing more accurate and personalized diagnoses, and by automating certain types of administrative tasks.
Finance: AI language models could help augment finance by providing more accurate and data-driven investment advice, and by automating certain types of financial analysis.
Research: AI language models could help augment research by processing and analyzing vast amounts of data, and by identifying patterns and insights that might be difficult for humans to spot on their own.
Overall, the impact of AI language models like me on various industries will depend on a wide range of factors, including the development of the technology, the regulatory environment, and societal attitudes toward automation and AI. While there may be some industries that are more susceptible to disruption or augmentation than others, it’s important to approach these developments with a nuanced understanding of the potential benefits and risks.
Channelchek (PH) – Are users using ChatGPT to create social media bots to respond without human intervention likely to flood the internet?
ChatGPT – While it is technically possible for users to use AI language models like ChatGPT to create social media bots that can respond to messages without human intervention, I cannot speculate on whether this is likely to flood the internet.
The use of AI language models like ChatGPT could potentially make it easier and more accessible for users to create more sophisticated chatbots that can mimic human conversation more convincingly.
It’s also important to consider the potential impact of widespread use of social media bots on the quality and authenticity of online interactions. While chatbots can be useful in certain contexts, they can also be used to spread misinformation and propaganda or to manipulate public opinion. As with any technology, it’s important to approach the use of AI language models and chatbots in a responsible and ethical way, and to consider the potential risks and benefits of their use.
Channelchek (PH) – What do you call one that uses ChatGPT?
ChatGPT – There is no specific term for a person who uses ChatGPT or other AI language models, as these tools are designed to be accessible and usable by anyone with an internet connection.
However, a person who uses ChatGPT to create chatbots or other automated tools could be referred to as an AI developer or AI engineer. Similarly, a person who uses ChatGPT to conduct research or analysis in a specific field could be referred to as an AI researcher or analyst.
Channelchek (PH) – How much do you cost?
As an AI language model, I do not have a specific cost as I am not a commercial product. My purpose is to provide information and assistance to users like you, and I am freely accessible through various platforms that integrate my technology, including chatbots, voice assistants, and search engines.
Channelchek (PH) – Should I throw out the encyclopedias on my book shelf and rely instead on ChatGPT?
ChatGPT – Ultimately, whether or not to keep your encyclopedias depends on your personal preferences and how you prefer to access information. While AI language models like ChatGPT are convenient and accessible, they may not always provide the level of detail or accuracy that you require for a specific question or topic. So, it’s always a good idea to consult multiple sources of information to ensure that you have a well-rounded understanding of a given topic.
Channelchek (PH) – How does one get started using ChatGPT for research?
ChatGPT – Getting started with using ChatGPT for research can involve several steps. Here are a few basic steps you can follow:
Identify your research question or topic: Start by identifying the research question or topic you want to investigate. This will help you to focus your search and make the best use of ChatGPT.
Choose a ChatGPT platform: There are several platforms that integrate ChatGPT, including chatbots, voice assistants, and search engines. Choose a platform that best fits your needs and preferences.
Familiarize yourself with the platform: Once you have chosen a platform, take some time to explore and familiarize yourself with its features and capabilities. Many platforms offer tutorials and guides to help you get started.
Start asking questions: Once you are comfortable with the platform, start asking questions related to your research topic. Try to ask open-ended questions that will allow ChatGPT to provide more detailed and relevant answers.
Evaluate the results: As you receive answers from ChatGPT, evaluate the accuracy and relevance of the information. Keep in mind that ChatGPT is not perfect and may not always provide the most accurate or comprehensive information. Be sure to double-check any information you receive with other sources to ensure its accuracy.
Refine your search: If you are not finding the information you need, try refining your search by using more specific keywords or phrases.
Overall, using ChatGPT for research can be a valuable tool for gathering information and conducting preliminary investigations. However, it’s important to keep in mind that it is just one tool in the research process, and should be used in conjunction with other sources of information and research methods.
Wrap Up
It’s easy to comprehend how this technology, which will likely see stronger competition in the coming year, will quickly become something that is used every day to help streamline how we do our jobs, and find information in our personal lives. Unlike an internet search engine, queries produce individual results tailored to the individual question. The same question will recieve different phraseology if asked a minute later. Whereas Google or DuckDuckGo list websites that may provide the answer, ChatGPT responds using its own answer using artificial intelligence.
Getting started is as easy as going to OpenAI.com and navigating to Chat.OpenAI.com and providing an email and verification phone number. Click on my name below and write me, I’d love to hear what you are using it for.
VANCOUVER, BC, Feb. 14, 2023 /CNW/ – Defense Metals Corp. (“Defense Metals” or the “Company“) (TSXV: DEFN) (OTCQB: DFMTF) (FSE:35D) announces the completion of flotation tests on variability samples and a master composite (“Master Composite” or “MC”) prepared from drill core obtained from its 100% owned Wicheeda Rare Earth Element (REE) deposit located in British Columbia, Canada.
John Goode, Defense Metals’ metallurgical advisor, stated:
“Flotation tests on variability samples from the dominant lithological unit of the Wicheeda REE deposit gave an average of 81% recovery to a concentrate assaying 45% rare earth oxide. Wicheeda is one of the few rare earth deposits under development from which a high-grade mineral flotation concentrate can be produced at recovery rates similar to those obtained by current rare earth producers. High-grade concentrates at high recoveries are a critical requirement for positive production economics. These successful flotation results help to position Defense Metals’ Wicheeda deposit as one of the best in North America.”
Defense Metals completed flotation tests on variability samples that are representative of the three key REE-bearing lithologies in the Wicheeda deposit: 1) the higher-grade dolomite carbonatite (“DC”) which makes up 73% of the deposit, 2) the xenolithic carbonatite (“XE”) that represents 24%; and 3) the syenite (“SYN”). The primary rare earths minerals are monazite, bastnäsite and synchysite/parisite. Figure 1 shows the mine plan as presented in the Independent Preliminary Economic Assessment issued in 20221.
Figure 1. Wicheeda REE Deposit Lithologies During Mine Life
Key Highlights:
Table 1 results show that if the flotation plant is fed DC material at an average grade of 3.3% Total Rare Earth Oxide (“TREO”) and is operated to produce a flotation concentrate containing 45% TREO, an average 81% recovery will be observed. If 50% TREO were targeted, recovery would be expected to be 77%. The DC mineralized material will be essentially the only lithology fed to the flotation plant in the first eight years as shown in Figure 1.
Table 1:Recovery rates at concentrates of specified grades – DC samples
Note to Table 1: DC Comp is a blend of all DC variability samples.
If the flotation plant is fed DC material mixed with other lithological types, as planned for later in the mine life, recoveries at different target concentrate grades will be as shown in Table 2. Of the four blends tested, when producing a 40% TREO flotation concentrate the recovery rate averaged 80% with higher recoveries when the DC content was higher.
Table 2: Recovery rates at concentrates of specified grades – DC blends
Notes to Table 2: DC-XE2 and DC-XE3 are 1:2 and 2:1 blends of DC and XE Comp, respectively. DC-SYN2 is 2:1 blend of DC Comp and SYN2. MC is a blend of DC (73.4%), XE (22.5%), and SYN (3.8%).
Table 3 shows the testwork results for the variability samples comprising pure XE and SYN lithologies. The flotation plant is expected to only see such lithologies when they are blended with DC. However, the data show that if the lower grade XE and SYN material are processed alone, at a target flotation concentrate grade of 40% TREO, the average recovery rate will be 59%.
Table 3: Recovery rates at concentrates of specified grades – SYN and XE samples
Notes to Table 3: SYN Comp and XE Comp are composites of respective variability samples. DC01 was mis-identified as being DC, but assays and mineralogy showed it to be XE and it was treated as such. N/A indicates insufficient data for meaningful average.
As noted above, in the first 8 years of the mine life, over 90% of the flotation plant feed will be DC material, with higher rare earth grade, with the later years being mostly DC and XE material at relatively lower grades (see Figure 1).
The grade-recovery-concentrate data provided above will support the upcoming preliminary feasibility study (PFS) and allow the development of an updated and enhanced mine plan incorporating drilling completed following the PEA that identifies lithology and feed grades to arrive at estimates of the concentrate and REO production rates in each year.
Methodology and QA/QC
Defense Metals prepared 17 variability samples covering different lithologies, areas of the deposit, and head grades using drill core material. The average mass of each sample was 31 kg, with the Total Rare Earth Oxide (“TREO”) assays ranging from 1.07% to 4.52% with an average of 2.34% TREO. Drill core material was also used to make a 260 kg Master Composite sample containing each of the three lithologies in their respective life-of-mine proportions. The MC sample had a head grade assay of 2.49% TREO.
All variability samples and the MC sample were shipped to SGS, Lakefield, Ontario where they were checked, crushed, and composited. A total of 87 flotation tests were completed to investigate the impact of collector type and dosage, depressant type and dosage, pulp temperature, pulp density, pulp pH, and flotation feed size.
Bulk flotation and other operations continue at SGS in order to prepare concentrate samples for continuing hydrometallurgical test work and planned hydrometallurgical pilot plant testing.
Feed samples were analyzed by Inductively coupled plasma mass spectrometry (ICP-MS) and flotation products were analyzed by SGS using wavelength dispersive X-ray fluorescence (WD-XRF) following lithium borate fusion of the sample. The SGS analyses included a quality assurance / quality control (QA/QC) program including the insertion of rare earth element standard and blank samples.
Defense Metals detected no significant QA/QC issues during review of the data. Defense Metals is not aware of any sampling, recovery or other factors that could materially affect the accuracy or reliability of the data referred to herein. SGS Lakefield is an ISO/IEC 17025 and ISO9001:2015 accredited laboratory. SGS is independent of Defense Metals Corp.
Qualified Person
The scientific and technical information contained in this news release, as it relates to the Wicheeda Rare Earth Element Project, has been reviewed and approved by John Goode, P. Eng., who is a Qualified Person as defined by National Instrument 43-101 and has provided the technical information relating to metallurgy in this news release. Kristopher J. Raffle, P.Geo. (BC), a director of the Company, is the Qualified Person as defined in National Instrument 43-101 for the information relating to resources in this news release.
About the Wicheeda REE Project
Defense Metals 100% owned, 4,262-hectare (~10,532-acre) Wicheeda REE property is located approximately 80 km northeast of the city of Prince George, British Columbia; population 77,000. The Wicheeda REE Project is readily accessible by all-weather gravel roads and is near infrastructure, including hydro power transmission lines and gas pipelines. The nearby Canadian National Railway and major highways allow easy access to the port facilities at Prince Rupert, the closest major North American port to Asia.
The 2021 Wicheeda REE Project Preliminary Economic Assessment technical report (“PEA”) outlined a robust after-tax net present value (NPV@8%) of $517 million and an 18% IRR1. This PEA contemplated an open pit mining operation with a 1.75:1 (waste:mill feed) strip ratio providing a 1.8 Mtpa (“million tonnes per year”) mill throughput producing an average of 25,423 tonnes REO annually over a 16 year mine life. A Phase 1 initial pit strip ratio of 0.63:1 (waste:mill feed) would yield rapid access to higher grade surface mineralization in year 1 and payback of $440 million initial capital within 5 years.
About Defense Metals Corp.
Defense Metals Corp. is a company focused on the development of its 100% owned Wicheeda Rare Earth Element mineral deposit, located near Prince George, British Columbia, Canada, that contains metals and elements commonly used in in green energy, aerospace, automotive and defense technologies. Rare earth elements are especially important in the production of magnets used in wind turbines and in permanent magnet motors for electric vehicles. Defense Metals Corp. trades in Canada under the symbol “DEFN” on the TSX Venture Exchange, in the United States, under “DFMTF” on the OTCQB and in Germany on the Frankfurt Exchange under “35D”.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Cautionary Statement Regarding “Forward-Looking” Information
This news release contains “forward–looking information or statements” within the meaning of applicable securities laws, which may include, without limitation, statements relating to advancing the Wicheeda REE Project, the continuing hydrometallurgical test work and planned hydrometallurgical pilot plant testing, completing the planned PFS, the Company’s plans for its Wicheeda REE Project, the expected results and outcomes, the technical, financial and business prospects of the Company, its project and other matters. All statements in this news release, other than statements of historical facts, that address events or developments that the Company expects to occur, are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the price of rare earth elements, the anticipated costs and expenditures, the ability to achieve its goals, that general business and economic conditions will not change in a material adverse manner, that financing will be available if and when needed and on reasonable terms. Such forward-looking information reflects the Company’s views with respect to future events and is subject to risks, uncertainties and assumptions, including the risks and uncertainties relating to the interpretation of exploration and metallurgy results, risks related to the inherent uncertainty of exploration and cost estimates, the potential for unexpected costs and expenses and those other risks filed under the Company’s profile on SEDAR at www.sedar.com. While such estimates and assumptions are considered reasonable by the management of the Company, they are inherently subject to significant business, economic, competitive and regulatory uncertainties and risks. Factors that could cause actual results to differ materially from those in forward looking statements include, but are not limited to, continued availability of capital and financing and general economic, market or business conditions, adverse weather and climate conditions, failure to maintain or obtain all necessary government permits, approvals and authorizations, failure to maintain community acceptance (including First Nations), risks relating to unanticipated operational difficulties (including failure of equipment or processes to operate in accordance with specifications or expectations, cost escalation, unavailability of personnel, materials and equipment, government action or delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), risks relating to inaccurate geological, metallurgical and engineering assumptions, decrease in the price of rare earth elements, the impact of Covid-19 or other viruses and diseases on the Company’s ability to operate, an inability to predict and counteract the effects of COVID-19 on the business of the Company, including but not limited to, the effects of COVID-19 on the price of commodities, capital market conditions, restriction on labour and international travel and supply chains, loss of key employees, consultants, or directors, increase in costs, delayed drilling results, litigation, and failure of counterparties to perform their contractual obligations. The Company does not undertake to update forward–looking statements or forward–looking information, except as required by law.
Nearly 90% of Diverse / Multicultural Consumers Report Taking Positive Action as a Result of a Marketer Purposefully Investing in Their Communities, Including Switching Brands
Majority Cite More Favorable Feelings About Brands That Advertise in Diverse / Multicultural Media; 4 in 10 More Likely to Notice Ads on Those Properties Compared with Mainstream Media
HOUSTON, Feb. 14, 2023 /PRNewswire/ — Direct Digital Holdings, Inc. (Nasdaq: DRCT) (“Direct Digital Holdings” or the “Company”), a leading advertising and marketing technology platform operating through its companies Colossus Media, LLC (“Colossus SSP”), Huddled Masses LLC (“Huddled Masses”) and Orange142, LLC (“Orange142”), today released a new whitepaper, Dollars & DEI: Multicultural Consumers’ Insights on Brands’ Media Buying and Marketing Practices. The findings reveal that brands, at a time of economic uncertainty, are currently missing out on significant revenue and market share growth opportunities – and jeopardizing future growth – due to a lack of appropriate and purposeful focus on the Black, Hispanic / Latin, AAPI and LGBTQIA+ communities.
The whitepaper centers on exclusive research, commissioned by Direct Digital Holdings and conducted by Horowitz Research. An in-depth survey, the results spotlight the perspectives of diverse / multicultural consumers, a group that comprises two-fifths of the American consumer market, yet has not had proportionate attention from the advertising business.
The research tapped 1,342 U.S. adults 18+ from the Black, Hispanic / Latin, AAPI and LGBTQIA+ communities to share their attitudes and behaviors in light of the marketing world’s scattershot diversity efforts.
According to the findings, almost 90 percent of diverse / multicultural consumers report taking action because of a company investing in their community, including telling others about the brand, sharing their support on social media – or even switching to a brand, away from a competitor that does not invest in their community.
Other takeaways have major implications and offer guidance to brands, including:
8 out of 10 diverse consumers said they feel more positively about brands that live up to promises to make a concerted effort of support to their communities, and alternatively, 8 in 10 say they feel negatively about brands that don’t live up to their promises.
The large majority of diverse consumers, about 8 in 10, feel more positively about brands that advertise in targeted diverse/multicultural media.
Nearly 7 out of 10 said that purposely investing ad dollars with media that is owned or focused on their respective communities strongly demonstrates support.
4 out of 10 of respondents said they notice ads more when they appear on targeted diverse / multicultural media channels versus mainstream media.
In addition, while ad spending was found to be one of the most impactful ways for marketers to demonstrate a commitment to these audiences, creating ads and content that are inclusive of diverse communities was cited as another strong demonstration of support. To put the findings into sharper focus, both came out ahead of simply sharing social posts.
“Given this compelling data for a growing U.S. economic market segment, there should be no more reason for brands to move slowly in diversifying their media allocations,” said Mark D. Walker, CEO and Co-Founder of Direct Digital Holdings, who penned the introduction to the whitepaper. “If we put aside all the rhetoric and platitudes, this is an industry that has always been and should still be about reaching customers and driving revenue.”
Alongside the survey findings, the paper includes insights from brand leaders from HP, McDonald’s and Visa; media and marketing agency executives from Mediahub Worldwide and One50One; publishers of diverse properties such as Black Enterprise, Glitter Magazine, ODK Media, NGL Collective and Pink Media; the architect behind the new DEI trade group BRIDGE; the chairman and CEO of MediaLink; and the head of Colossus SSP.
“Siloing multicultural and diverse audiences into a separate line item in marketing plans needs to be a thing of the past,” added Alejandro Clabiorne, EVP, Executive Director, New York, Mediahub Worldwide. “This whitepaper not only makes clear that these groups are critical to marketers’ bottom lines, but also provides the types of insights that will show brands how to effectively reach and resonate with these prospective customers, building traction and brand loyalty that can fuel growth.”
“The research demonstrates that across the board, diverse and multicultural consumers recognize, appreciate and have the disposable income to spend on brands that target their communities either through authentic ad messages or media,” said Lashawnda Goffin, CEO, Colossus SSP, the sell-side technology company within Direct Digital Holdings. “Brands that have intentionally and sincerely engaged with these audiences have seen the benefit – and those looking to grow their customer base need to follow suit.”
“Making the right consumer connections is about to take on factorial proportions and while values and outlook may hold groups of targets together, beliefs and aspirations will splinter them, requiring, as the research confirms, much deeper considerations for message tone, creative and of course media placement,” said Sheryl Daija, Founder and CEO, BRIDGE. “It’s time for our industry to move from DEI as a philosophy to inclusion as a core business practice and growth driver.”
To download the whitepaper: Dollars & DEI: Multicultural Consumers’ Insights on Brands’ Media Buying and Marketing Practices, go to https://directdigitalholdings.com/whitepaper.
Methodology This study included qualitative and quantitative research conducted by Horowitz Research (www.horowitzresearch.com). The online surveys were conducted September – December 2022 among 1,342 U.S. adults 18+, including over 300 respondents each from the Black, Hispanic / Latin, AAPI and LGBTQIA+ communities.
About Direct Digital Holdings Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings’ sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The company’s subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings’ sell- and buy-side solutions manage approximately 90,000 clients monthly, generating over 100 billion impressions per month across display, CTV, in-app, and other media channels. Direct Digital Holdings is the ninth Black-owned company to go public in the U.S and was named a top minority-owned business by The Houston Business Journal.
Forward-Looking Statements This press release may contain forward-looking statements within the meaning of federal securities laws, including the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and which are subject to certain risks, trends and uncertainties.
As used below, “we,” “us,” and “our” refer to Direct Digital Holdings. We use words such as “could,” “would,” “may,” “might,” “will,” “expect,” “likely,” “believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,” “project” and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All statements contained in this release that do not relate to matters of historical fact should be considered forward-looking statements.
All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Our forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Although we believe that these forward-looking statements are based on reasonable assumptions, many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements, including, but not limited to: our dependence on the overall demand for advertising, which could be influenced by economic downturns; any slow-down or unanticipated development in the market for programmatic advertising campaigns; the effects of health epidemics, such as the ongoing global COVID-19 pandemic; operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems; any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers’, suppliers’ or other partners’ computer systems; any unavailability or non-performance of the non-proprietary technology, software, products and services that we use; unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry’s technology and practices, and any perceived failure to comply with laws and industry self-regulation; restrictions on the use of third-party “cookies,” mobile device IDs or other tracking technologies, which could diminish our platform’s effectiveness; any inability to compete in our intensely competitive market; any significant fluctuations caused by our high customer concentration; any violation of legal and regulatory requirements or any misconduct by our employees, subcontractors, agents or business partners; any strain on our resources, diversion of our management’s attention or impact on our ability to attract and retain qualified board members as a result of being a public company; our dependence, as a holding company, of receiving distributions from Direct Digital Holdings, LLC to pay our taxes, expenses and dividends; and other factors and assumptions discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and other sections of our filings with the SEC that we make from time to time. Should one or more of these risks or uncertainties materialize or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
SAN DIEGO, Feb. 14, 2023 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a leading National Security Solutions provider, announced today that it will publish financial results for the fourth quarter and Fiscal Year End of 2022 after the close of market on Thursday, February 23rd. Management will discuss the Company’s operations and financial results in a conference call beginning at 2:00 p.m. Pacific (5:00 p.m. Eastern).
The call will be available at www.kratosdefense.com. Participants may register for the call using this Online Form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN that can be used to access the call. For those who cannot access the live broadcast, a replay will be available on Kratos’ website.
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.KratosDefense.com.
Michael Kupinski, Director of Research, Noble Capital Markets, Inc.
Patrick McCann, Research Associate, Noble Capital Markets, Inc.
Jacob Mutchler, Research Associate, Noble Capital Markets, Inc.
Refer to the bottom of the report for important disclosures
Overview: Entertainment and Leisure stocks have had a good start to the New Year, but the better performance has not erased the disaster that was 2022. We believe that stocks appear to be baking in a mild economic downturn, a soft landing, so to speak. Given that we are skeptic of the conventional thought, we take a cautious stance regarding the recent lift in valuations and encourage investors to take an accumulation approach.
Entertainment:Bowlero on a roll. The Noble Entertainment Index performed well, up 1.5% in the last 12 months, compared with negative returns for the S&P 500 (-7.1%). Although there were broad economic challenges over the past year, entertainment companies benefited from the general public’s return to “normal” following the COVID pandemic. We believe that in-person experiential entertainment recovery is still in its early stage and should continue into 2024.
Gaming: Looking for value in the rubble.The Noble Gaming Index is down 53.1% in the past year, well below the S&P 500, down 7.1%. But, recently, the Noble Gaming Index increased 12.9% in the last quarter, outperforming the 3.2% increase in the general market, as measured by the S&P 500 Index. A reflex bounce? Short squeeze? Or, were the shares oversold? We encourage investors to play it safe.
Esports: Motorsport Games revs its engine. The company was full steam ahead in investing in its new product launches in 2023, but it was running out of cash. Fortunately, a couple of favorable moves to add liquidity set the stock soaring, up 1,600% in one day, creating further opportunities to raise cash. Now, flush with cash, investors look toward the product rollouts.
Leisure: Travel to new heights. The U.S. Travel Association updated its 2023 outlook, projecting a resilient domestic leisure travel market. Consumers appear eager to splurge on travel, in spite of the economic headwinds. We focus on one of our favorite internet media plays, Travelzoo. The company recently updated Fourth Quarter 2022 guidance with revenues expected to be roughly $18.5 million, a strong 31% increase year over year.
Overview
Have economic prospects improved?
The Entertainment & Leisure industries performed better since the beginning of the year, providing some relief to the downturn that investors suffered in 2022. As Figure #1 Entertainment 12 Month Trailing Stock Performance highlights, the Entertainment and Leisure Indices are still recovering and many have yet to offset the 2022 declines, except for the Entertainment stocks. The Entertainment stocks not only have performed well in the first quarter, but have beat the general market as measured by the S&P 500 Index over the past year. The Noble Entertainment Index is up a modest 1.5% in the past year, better than the general market’s 7.1% decline. It is important to note that the Noble Indices are market cap weighted. As such, not all stocks reflected the favorable relative performance.
What is driving the improved stock performance in the latest quarter? We believe that investors have become more positive about the economic outlook, with conventional wisdom now anticipating a soft economic landing or a mild economic recession. This is a shift toward an optimistic tone from one that anticipated a severe economic recession. The Federal Reserve caused the dire outlook. The Fed signaled that it will continue to raise interest rates until inflation is arrested, in spite of the adverse impact on the economy and jobs. But, since then, conventional wisdom on the economy has brightened as inflation seems to have subsided. The more favorable economic outlook is exemplified by a Wall Street firm that decreased the risk of an economic recession in 2023 by a sizable 25%.
We tend to be skeptics and conservative. As such, we tend not to buy into strength. Our view is that the stocks were oversold and reflected recessionary type valuations. But, have the economic prospects really improved that much? We encourage investors to take an accumulation approach, focusing on some of our favorite stocks highlighted in this report, including Bowlero, Codere Online Luxembourg, Engine Gaming and Media, and Travelzoo.
Figure #1 Entertainment 12 Month Trailing Stock Performance
Source: Capital IQ
Entertainment
Bowlero on a roll
The Noble Entertainment Index performed well, up 1.5% in the last 12 months, compared with negative returns for the S&P 500 down 7.1%. Although there were broad economic challenges over the past year, entertainment companies benefited from the general public’s return to “normal” following the COVID pandemic. We believe that the trend toward social gathering and in-person activities are helping to offset broader macroeconomic headwinds. While some industries received a boost during late 2020 and 2021 when consumers were spending stimulus checks on online shopping, the recovery for in-person entertainment has been more recent. In our view, the recovery in experiential, in-person entertainment appears to be gaining traction and the recovery could continue into 2024.
As Figure #2 Entertainment Revenue Growth illustrates, virtually all of the experiential entertainment companies reported strong revenue growth in the latest reported quarter, (the calendar third quarter end September 2022). One of the examples of the in-person recovery is in bowling centers, in general, and Bowlero, specifically. The company recently announced that it eclipsed $1 billion in Trailing Twelve Month (TTM) revenue as of December 31, 2022, which included 48% same store sales growth over the prior year. Additionally, Bowlero added 40 bowling centers over the past 18 months as it continues to successfully execute on its roll-up strategy. As revenues have improved, so too have margins. As Figure #3 Entertainment EBITDA Marginsillustrates, Bowlero delivered industry leading margins in the latest reported quarter at 24.8%.
Bowlero is on a roll. With the BOWL shares up roughly 50% in the past 12 months, the shares have outperformed both the Noble Entertainment Index up 1.5%, as well as the broader market, as measured by the S&P 500, which decreased -7.1%. In spite of the favorable fundamental tailwind, the shares trade in line with its experiential entertainment peers. Figure #4 Entertainment Comparables illustrates that the BOWL shares trade at 9.7 times Enterprise Value to our estimated 2023 adj. EBITDA, below the peer average of 10.7 times, despite the company’s industry leading fundamentals. Given its favorable fundamental outlook, prospects for enhanced revenue and cash flow growth through acquisitions and favorable internal growth, and compelling stock valuation, the BOWL shares lead our list for favorites in the Entertainment industry.
Figure #2 Entertainment Revenue Growth
Source: Company 10Qs
Figure #3 Entertainment EBITDA Margins
Source: Company 10Qs
Figure #4 Entertainment Comparables
Source: Company filings and Noble estimates
Gaming
Looking for value in the rubble
The Noble Gaming Index is down 53.1% in the past year, well below the S&P 500, down 7.1%. In our view, the poor performance of Gaming stocks was the result of investors trying to take risk off the table. Many Gaming companies are still in developmental stages, with high marketing and customer acquisition costs. As such, many in the industry are unprofitable and rely on the balance sheets to fund operations. Before Covid, these companies benefited from the easy money policies and favorable capital markets, which many relied on for funding. But, with the recent sharp rise in interest rates and difficult general market conditions to raise capital, the music has stopped. Gaming stock valuations are now more scrutinized, in an environment of increasing cost of capital. As such, we believe industry players that are already profitable, and those with little to no debt and ample cash on the balance sheet are best positioned for to lead the industry.
Our focus is on the shares of Codere Online Luxembourg, CDRO. The CDRO shares are down 42.4% in the last year, underperforming the S&P 500’s -7.1% return. However, despite a tough 12-month period, the CDRO shares outperformed the Noble Gaming Index, which dropped 53.1%. We believe that the relative outperformance of the CDRO shares over the past year reflects its better financial position than most of its peers. Most recently, the Noble Gaming Index improved, as illustrated in Figure #5 Three Month Stock Performance. The Noble Gaming Index increased 12.9%, outperforming the 3.2% increase in the general market, as measured by the S&P 500 Index. A reflex bounce? Short squeeze? Or, were the shares oversold? It appears to be all the above for many of the stocks in the index. The largest gains were from companies that appeared to be struggling and had favorable news. We believe that investing in struggling companies with limited access to capital is a dangerous place to be.
In terms of Codere Online Luxembourg, the fundamentals of the company appear favorable. Codere Online’s cash burn has been within expectations and the company had a strong cash balance of €72 million and virtually no long-term debt as of September 30, 2022. As such, the company appears positioned to continue executing its growth strategy in Latin America, which for the time being consists of broadening its presence in key markets such as Mexico and Columbia, and aggressively expanding in Argentina.
The company’s growth could be bolstered if Brazil begins regulating sports betting in 2023. Importantly, Entain CEO Jette Nygaard-Anderson, recently stated that she expects Brazil to complete process of regulating sports betting in 2023, citing new administration of President Lula. In summary, Codere Online is distinguished from many of its peers, with an established foothold in key Latin American markets, flush with cash to penetrate existing markets and enter new ones. It has the ability to become the industry leader in many of its markets.
Near current levels, the iGaming industry peer group is trading at 5.0 times Enterprise Value to 2023 revenues, illustrated in Figure #6 Gaming Comparables. Codere Online Luxemburg (CDRO) is one of our favorite plays in the iGaming industry due to several factors. As mentioned above, the company has virtually no long-term debt and €72 million in cash, as of September 30, 2022. We believe that the company has a favorable runway to reach cash flow breakeven while continuing to fund its expansion in the meantime. Furthermore, in our view, given its ability to invest in its developing markets, the company appears to have the ability to become the preeminent online gambling leader in many Latin American markets. Finally, the CDRO shares appear compelling, trading near 2.6 times expected 2023 revenue, well below peers. As a result, we view the CDRO shares as among our favorite online gambling plays, with the shares rated Outperform with $9 price target.
Figure #5 Three Month Stock Performance
Source: Capital IQ
Figure #6 Gaming Comparables
Source: Company filings and Noble estimates
Esports
Motorsport revs its engine
The Noble Esports Index was down 53% over the past year, underperforming the broader market, which was down 7%, as as measured by the S&P 500 Index. Not unlike many other emerging industries, Esports has been battered by macroeconomic headwinds over the past year. Investors are placing more importance on companies that are generating positive cash flow, rather than speculating on future profitability, given recessionary concerns and elevated interest rates. While the Esports industry has shown favorable trends in the number of viewers and hours watched, many companies are still burning cash and may need to raise additional capital. Total hours watched of esports content was up 40% in Q3 of 2022, illustrated in Figure #7 Esports Viewership.
The best performing stock in the Esports index was HUYA, which only declined by 9.7% on a TTM basis. Huya is the largest Esports live streaming platform in China and recently expanded into a variety of real-time events. Huya benefits from the favorable growth trends of the Esports and live streaming industries, as it does not rely on the popularity of a single game or tournament. The worst performing stock in the Esports index is Esports Entertainment Group (GMBL), which declined 97.2% on a TTM basis. The company burned through its cash and had limited access to additional capital.
In the latest quarter, however, the Noble Esports Index rebounded, up a strong 47.9%, as depicted in the earlier in Figure #5 Three Month Stock Performance. The strength in the quarter was due to a relatively few number of stocks, including HUYA (up 135.8%) and two of our favorite plays, Motorsport Games (MSGM) and Engine Gaming and Media (GAME), which increased 68.9% and 149.8%, respectively. In fact, Motorsport Games increased a stunning 1,618.8% with a trading day following news of a debt for equity swap.
Motorsport Games revs its engine
Motorsport Games is a publisher of motorsport video games, with the rights to iconic racing franchises such as NASCAR and 24 Hour of LeMans. The company recently completed a debt for equity swap which led to a surprisingly strong increase in the stock valuation. This allowed the company to complete several direct offerings, eliminating all company debt and raising over $11 million in cash. The capital raise alleviated liquidity concerns, allowing the company to continue developing games. In our view, the launch of several games in 2023 should allow the company to swing toward cash flow break even. We have moved our rating to Market Perform given that the shares blew through our $9 price target. Our rating is under review as the company updates investors on its product rollout roadmap and the level of cash burn until it launches its upcoming products.
Engine Gaming & Media
Another one of our favorites is Engine Gaming & Media (GAME). Engine Gaming & Media is a multi-platform media company engaged in most aspects of the Esports industry. The company’s media division coordinates video access and advertising, data analytics, and connects advertisers to social influencers in the gaming industry. Figure #7 Esports Viewership and Figure #8 Esports Live Streaming are from Stream Hatchet, the company’s live streaming data and Esports analytics business.
The company reported its fiscal first quarter results on January 17, 2023, which beat our expectations. Notably, the company’s influencer and gaming analytics software as a service revenue, a key growth vehicle, grew revenue by a strong 34.6% on a year over year basis. In addition, the company plans to merge with GameSquare Esports, which it expects will provide scale and provide cost synergies. Management indicated that the combination should accelerate the new company’s path toward profitability. We plan to update our models as more details emerge regarding the upcoming merger.
Figure #9 Esports Comparables highlight the stock valuations in the Esports industry. The valuations of many of the stocks, including Motorsport Games and Engine Gaming and Media are in flux. As mentioned, Motorsport Games significantly improved its financial position with recent equity raises and debt for equity swaps. Engine Gaming and Media’s fundamentals likely will change with a planned merger. In our view, the latest quarter has been a watershed moment for these companies. We look forward toward reevaluating our models, ratings and price targets upon more details on the developments from the respective companies.
Figure #7 Esports Viewership
Source: Stream Hatchet
Figure #8 Esports Live Streaming
Source: Stream Hatchet
Figure #9 Esports Comparables
Source: Company filings and Noble estimates
Leisure
Travel to new heights
Once again, we focus on the travel industry in our Leisure section due to some favorable developments and outlook. Notably, the U.S. Travel Foundation forecasts an increase in travel spending in 2023 above both 2022 and 2019 levels. This would indicate that the travel industry has fully recovered from the depressed Covid impacted levels. Airline flights are full and there is high demand for hotels, even though pricing for those rooms are significantly higher. What is driving the demand and will it continue?
For the U.S., there are three factors influencing the relatively favorable outlook for the U.S. travel industry. The domestic leisure travel has been resilient in spite of higher gas prices, hotel rooms and airline tickets. A recent article from Forbes suggests that U.S. leisure travel is rebounding despite inflation as it is one area where people are willing to splurge. A second contributing factor to the favorable outlook is Business travel. Business travel is expected to be somewhat weaker in 2023 given the prospect of a mild economic recession in 2023. But, the business travel outlook is improved as a severe economic downturn appears less likely. The weak area has been international inbound travel to the U.S. We believe that this is a function of the strong U.S. dollar relative to other major currencies. On the flip side, international travel from the U.S. appears to be favorable given the U.S. dollar strength.
We believe that the inflationary trends, higher airline fares and hotel rates, as well as sluggish international travel, all have prompted travelers to seek travel deals. Consequently, one of our favorite plays on the travel industry, Travelzoo, has seen fundamental improvement. As an internet media company, its business is derived from its advertisers and travel partners to offer travel deals to its customers. This is different from travel suppliers and online travel agencies that rely on travel demand. Notably, Travelzoo recently updated its fourth quarter revenue guidance to be roughly $18.5 million, an increase of a strong 31% year over year, in line with our forecast.
Travelzoo is one of our favorite plays for the recovering travel industry. The shares are down roughly 46% in the past year, which we believe could present an attractive entry point for investors. Since reaching lows in December near $4.11 per share, the TZOO shares have rallied, up roughly 25% since that time. In our view, the shares may have reacted to a recent merger involving its founder, Ralph Bartel. The merger brought with it an influx of cash, but increased Mr. Bartels ownership of the company from slightly over 50% to over 60%. We view the move favorably as it provides increase liquidity for the company. Given the prospect for a favorable environment for travel deals, we view Travelzoo as among our favored ways to play the travel industry and the subsequent improved advertising from its travel partners. We rate the shares Outperform with a $9 price target.
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Senior Equity Analyst focusing on Basic Materials & Mining. 20 years of experience in equity research. BA in Business Administration from Westminster College. MBA with a Finance concentration from the University of Missouri. MA in International Affairs from Washington University in St. Louis. Named WSJ ‘Best on the Street’ Analyst and Forbes/StarMine’s “Best Brokerage Analyst.” FINRA licenses 7, 24, 63, 87
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EuroDry Ltd. was formed on January 8, 2018 under the laws of the Republic of the Marshall Islands to consolidate the drybulk fleet of Euroseas Ltd. into a separate listed public company. EuroDry was spun-off from Euroseas Ltd. on May 30, 2018; it trades on the NASDAQ Capital Market under the ticker EDRY. EuroDry operates in the dry cargo, drybulk shipping market. EuroDry’s operations are managed by Eurobulk Ltd., an ISO 9001:2008 and ISO 14001:2004 certified affiliated ship management company and Eurobulk (Far East) Ltd. Inc., which are responsible for the day- to-day commercial and technical management and operations of the vessels. EuroDry employs its vessels on spot and period charters and under pool agreements.
Michael Heim, CFA, Senior Research Analyst, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Lower shipping rates hurting results. Eurodry reported 2022-4Q revenues, net, of $15.1 million versus $22.3 million and below our projection of $19.9 million. Average TCE rates for the quarter were $16,689 versus $29,157 and our $18,982 estimate. Lower shipping rates led to a a 54% decline in adj. ebitda and a 78% decrease in adjusted net income. The sharp declines demonstrate Eurodry’s extreme sensitivity to shipping rates.
Shipping rate sensitivity will only increase in upcoming months. Fleet rate coverage drops off dramatically after the 2023-1Q. In fact, all 11 ships will be exposed to spot or indexed prices. This, combined with a further drop in shipping rates in February, could result in a difficult upcoming quarter for the company. Management estimates it would need rates above $12,700 to be cash flow breakeven while noting current prices in the $6,000-$7,000 range.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Scion’s Michael Burry Owns Online Retailers, Tech Firms, a Mortgage Servicer, and a Detention Provider
GEO Group (GEO), the publicly held prison company organized as a REIT, again tops Michael Burry’s public market holdings as of the end of last year. This is one of nine holdings; a few are on-again, off-again favorites of the revered hedge fund manager. If there is one theme in his positions, it is that of select online retail merchants. While the overall size of the positions as of quarter-end is known, these positions may not represent all investments, just those that are public and reportable to the SEC on form 13F. Burry famous for his portrayal in the movie “The Big Short” was not short any publicly traded securities as 2022 drew to a close.
Below are the nine holdings, in size order, copied directy from the 13F-HR filing. GEO, Alibaba, and JD.com are familiar to followers of Dr. Burry’s holdings as this is not the first time they have appeared in his portfolio.
Geo Group (GEO) runs private detention systems. As shown below, at the end of the second quarter of 2022, it represented 100% of Scion Asset Management’s public market positions. The current holding is roughly half the dollar amount of what it was three months prior.
Black Knight (BKI) is making its first appearance in the Scion portfolio. The mid-cap company provides mortgage and loan servicing products.
Coherent Corporation (COHR) has not been in the hedge fund manager’s portfolio prior to the last quarter. The small-cap technology company is involved in communications networks for aerospace, automotive, life sciences, and various other electronics and systems.
Alibaba (BABA) is often described as the “Chinese Amazon.com”. The only other time Scion held this well-known online retailer was during the second quarter of 2019.
JD.com (JD) is China’s largest online retailer and largest internet company by revenue. Burry owned shares once before during the first quarter of 2019.
Wolverine Worldwide (WWW) makes active footwear and apparel. Brands include Sperry, Saucony, and Hush Puppies. The small-cap company has not been in the Scion portfolio previously.
MGM Resorts (MGM) is a mid-cap company that owns and manages hotels and casinos worldwide. This is the first time Michael Burry has owned this name.
Qurante (QRTEA), formerly Liberty Interactive Corporation, is yet another direct marketer through the internet and video. The small-cap company is headquartered in Colorado.
Skywest Inc. (SKYW) is Burry’s smallest holding but still represents 4.4%. The airline has scheduled flights, including international, and also leases equipment for non-commercial flights. This is the first time the small-cap company has made an appearance in the Scion portfolio.
Take Away
Four times each year the SEC requires asset managers above a certain size to make a public filling of its portfolio.
Scion Asset Management is not exempt, but may, in addition to transacting in public securities, be creating positions in assets that are not required to be reported here. The reputation of Michael Burry has at times caused a lot of interest around less followed stocks.
Investors Receiving a 5% Yield are Losing to Inflation
The CPI inflation report and the Fed’s relentless increases in Fed funds levels have pushed the six-month US Treasury Bill (T-Bill) above 5%. This is the first time since 2007 that this low-risk investment has topped 5%. Last year on this date, the six-month T-Bill was 0.76%. While the stock market is concerned that higher borrowing costs will have the Fed’s intended effect of slowing demand, rates are reaching a point where another concern creeps in. The concern is will traditional stock investors lay back and be satisfied getting paid interest.
More likely, the high cash position represents “dry powder” waiting for an opportunity.
Short Term Rates
Money Market fund assets were $4.81 trillion for the week ended Wednesday, February 8, according to the Investment Company Institute. Just shy of the record MF balances reported in January. Higher than average cash levels have often been thought of as a bullish sign as it represents potential to drive stock prices up when flows toward equities increase.
This may be part of the situation as we come off a dismal 2022 for equities, but there is likely something else incentivizing the retreat to safety. The higher interest rates are in the short end of the curve, investors are getting paid to retreat. High-yielding cash equivalents with six-month T-Bills now at 5% (10-year Treasuries are only 3.75%) may be more than a parking place. It may represent an alternative investment with a much more assured return.
With inflation at 6.4%, the answer is no. But it is definitely preferable to seven of the periods on the 10-year chart above. And with January’s consumer price index (CPI) report revealing signs of sticky to reaccelerating inflation, the Federal Reserve is more likely to be hiking rates for longer than expected.
For investors looking to invest for longer periods, the stock market handily beats inflation. In other words, for the various time frames below, S&P 500 investors did not see their assets erode due to inflation.
Beating inflation is foundational to investing. Far exceeding it is the goal of many. Investors are not doing this choosing cash, in fact they are choosing to lose buying power rather than risk that the market doesn’t perform as it has historically.
Data released on Tuesday February 14 showed the inflation rate (CPI) slowed to 6.4% in January. The cost of goods and services rose 0.5% during the month. The half percentage is the largest one month erosion of purchasing power in three months.
Investors content with 4%-5% returns should consider that they are losing ground to persistent inflation.
Investors with a five-year time horizon or longer should weigh the risks of earning yields below the inflation rate to the ups and downs of stocks. In fact, as more do, the 4-5 trillion in cash can make or quite a bull market.
