Comtech (CMTL) – NobleCon 18 Presentation Notes

Monday, April 25, 2022

Comtech (CMTL)
NobleCon 18 Presentation Notes

Comtech Telecommunications Corp. engages in the design, development, production, and marketing of products, systems, and services for advanced communications solutions in the United States and internationally. It operates in three segments: Telecommunications Transmission, Mobile Data Communications, and RF Microwave Amplifiers. The Telecommunications Transmission segment provides satellite earth station equipment and systems, over-the-horizon microwave systems, and forward error correction technology, which are used in various commercial and government applications, including backhaul of wireless and cellular traffic, broadcasting (including HDTV), IP-based communications traffic, long distance telephony, and secure defense applications. The Mobile Data Communications segment provides mobile satellite transceivers, and computers and satellite earth station network gateways and associated installation, training, and maintenance services; supplies and operates satellite packet data networks, including arranging and providing satellite capacity; and offers microsatellites and related components. The RF Microwave Amplifiers segment designs, develops, manufactures, and markets satellite earth station traveling wave tube amplifiers (TWTA) and broadband amplifiers. Its amplifiers are used in broadcast and broadband satellite communication; defense applications, such as telecommunications systems and electronic warfare systems; and commercial applications comprising oncology treatment systems, as well as to amplify signals carrying voice, video, or data for air-to-satellite-to-ground communications. The company serves satellite systems integrators, wireless and other communication service providers, broadcasters, defense contractors, military, governments, and oil companies. Comtech markets its products through independent representatives and value-added resellers. The company was founded in 1967 and is headquartered in Melville, New York.

Joe Gomes, Senior Research 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.

    NobleCon18. Comtech Telecommunications VP of Investor Relations Robert Samuel and CFO Michael Bondi presented at NobleCon18. The company’s management highlighted two of its growing markets, the next generation 911 solutions and its satellite ground station equipment. A rebroadcast is available here.

    NG911 Highlights.  In the presentation, the Company showed an emphasis in the growth of its next-gen 911 business, highlighting that it is only one of two companies in the United States that has a 911 routing service. The acquisition pipeline in this segment remains robust according to management, and we would not count out additional acquisitions in the 911 business …


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. 

 

DLH (DLHC) – NobleCon 18 Presentation Notes

Monday, April 25, 2022

DLH (DLHC)
NobleCon 18 Presentation Notes

DLH Holdings Corp is a provider of technology-enabled business process outsourcing and program management solutions in the United States. The company offers services to several government agencies which include the Department of veteran affairs, Department of health and human services, Department of Defense and other government agencies. It operates primarily through prime contracts and also derives its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors.

Joe Gomes, Senior Research 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.

    NobleCon 18. DLH Holding CFO Kathryn Johnbull presented at NobleCon18. The Company highlighted growth of their end markets and potential for expansion in the future, in our view. A rebroadcast is available here.

    Budget Growth.  Continued budget growth in government programs sets up DLH for the future, as their top three customers by revenue-DOD, HHS, and VA-have seen 1.8%, 8,5%, and 9.2% CAGRs, respectively, in their budgets from fiscal year 2019 to the 2022 presidential budget request. DLH’s pipeline exceeds $2 billion, with $800 million of proposals in process …


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. 

 

GABY Inc. (GABLF) – NobleCon 18 Presentation Notes

Monday, April 25, 2022

GABY Inc. (GABLF)
NobleCon 18 Presentation Notes

Gaby Inc is a wellness company that is engaged in the marketing of a variety of cannabis products, including flowers, concentrates, pre-rolls, edibles, topicals, tinctures, and other products. Some of its brands are Mankind, Sonoma Pacific, 2Rise, Lulu’s, and the Kind Republic. The company operates in two segments, namely licensed and unlicensed channels, both of which are in the manufacturing, distribution, and marketing of wellness products to address a variety of dietary and health concerns. All of its revenue comes from the United States.

Joe Gomes, Senior Research 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.

    NobleCon 18. GABY CEO Margot Micallef presented at NobleCon18. The Company highlighted the transformation of the Company in 2021, growth opportunities and potential for expansion in the future. A rebroadcast is available here.

    Mankind-Flagship Retail Dispensary.  The Mankind dispensary is generating over $2 million in monthly revenue, with approximately 40% of monthly sales coming from curbside pickup and delivery. Mankind serves its 700 distinct cannabis products to over 27,000 monthly customers …


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. 

 

Information Services (III) – NobleCon 18 Presentation

Monday, April 25, 2022

Information Services (III)
NobleCon 18 Presentation

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 700 clients, including more than 70 of the top 100 enterprises in the world, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com

Joe Gomes, Senior Research 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.

    NobleCon 18. ISG CEO Michael Connors and CFO Bert Alfonso presented at NobleCon18. The transformation of the Company during COVID, ISG NEXT, and potential for acquisitions were highlighted in the presentation. A rebroadcast is available here.

    A Changing Model.  The COVID environment gave ISG the ability to transform the business towards two different segments, ISG Digital and ISG Enterprise, which gave companies the ability to choose which solution is needed, whether it is for more data analytics and cyber security (Digital) or Human Resources and Accounting (Enterprise). Combined with the iFlex working structure, ISG transformed the …


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. 

 

Item 9 Labs (INLB) – Notes from NobleCon18

Monday, April 25, 2022

Item 9 Labs (INLB)
Notes from NobleCon18

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 by 650,000+ 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.

Joe Gomes, Senior Research 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.

    NobleCon 18. Item 9 Labs CFO Bobby Mikkelsen presented at NobleCon18. The Company’s franchising strategy and expansion were the main focus of the presentation. A rebroadcast is available here.

    Reg.  A Recap. Recall that in March of 2022, Item 9 Labs launched a regulation A offering of 28 million units of one share and one-half warrant, with a maximum proceed of $67.2 million. Management highlighted this offering in their presentation with the purpose of expanding the Unity Rd. franchise national footprint and growing the product into new markets, similarly to their expansion into New …


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. 

 

One Stop Systems (OSS) – Notes from the NobleCon 18 Presentation

Monday, April 25, 2022

One Stop Systems (OSS)
Notes from the NobleCon 18 Presentation

One Stop Systems Inc is US-based company which is principally engaged in designing, manufacturing, marketing high-end systems for high performance computing (HPC) applications. The company offers custom servers, compute accelerators, solid-state storage arrays and system expansion systems. The product line of the company includes GPU Appliances, GPU Expansion, GPUs and co-processors, Flash storage arrays, Flash storage expansion, Servers, Disk Arrays, Desktop computing appliances, accessories and parts. The company delivers high-end technology to customers through the sale of equipment and software for use on their premises or through remote cloud access to secure data centres housing technology.

Joe Gomes, Senior Research 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.

    NobleCon 18. One Stop Systems CEO David Raun and CFO John Morrison were hosted by us at NobleCon18. The major highlight from the presentation was their strategy in edge computing, particularly in AI Transportables. A rebroadcast is available here.

    A Growing Market.  Global Edge Computing is estimated to grow at a 38.4% CAGR to $61.1 billion in 2028 from the reported $6.3 billion in 2021. Alongside this, an estimated 75% of data processed will be through edge computing vs. 10% in 2018. This increase in data will help the Company, in our view, as the ever-growing amount of data in various industries will need to be processed in real-time …


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. 

 

What Is a Tender Offer



Placing a Bid to Own a Public Company

 

A tender offer is a bid to purchase some or all the shares in a corporation. Most often these bids are a public invitation for shareholders to sell their positions to the bidding party, at a specified price, within a set timeframe.  As an inducement, the price offered is generally higher than the current market price. The offer is most often reliant on a minimum number of shares tendered, for example, 51% of outstanding to allow control.

A common variation of this is an exchange offer. This is a non-cash type of tender offer in which securities or other non-cash alternatives are offered in exchange for shares. When one company acquires another, it often does a share exchange in an exchange offer tender.

A publicly-traded company may present a tender offer for its own publicly held shares to either take themselves private or to reduce shares in the public’s hands and increase those in the corporation’s treasury.

Tender offers to acquire a company without the Board of Directors’ approval can be considered a hostile takeover. Hostile takeover acquirers in the past have included hedge funds, private equity firms, management-led investor groups, SPACs, and more recently a wealthy entrepreneur (Elon Musk).

 

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Release – NABs Leadership Foundation Selects Five Gray Television Stations As Finalists for 2022 Service to America Awards



NAB’s Leadership Foundation Selects Five Gray Television Stations As Finalists for 2022 Service to America Awards

Research, News, and Market Data on Gray Television

 

ATLANTA, April 21, 2022 (GLOBE NEWSWIRE) — The National Association of Broadcasters Leadership Foundation (“NABLF”) selected five television stations owned by Gray Television, Inc. (NYSE: GTN) as finalists for this year’s coveted Service to America Awards. The NABLF’s Service to America Awards recognize outstanding community service by local broadcasters and selects local radio and television stations and one group owner each year for their exemplary service to their communities. The winners in each category will be announced at an in-person gala in Washington, DC, on June 7, 2022.

In the Medium Market category, all three of the finalists selected by NABLF are Gray Television stations:

  • WMTV-TV (NBC) in Madison, Wisconsin, for its series “WMTV Diaper Drive Success”
  • WIS-TV (NBC) in Columbia, South Carolina, for its series “Families Helping Families;” and
  • WTOC-TV (CBS) in Savannah, Georgia, for its series “WTOC Tells Smart Women’s Stories and helps raise $139K to Fight Breast Cancer.”

In the Small Market category, two of the three finalists selected by NABLF are Gray Television stations:

  • WBNG-TV (CBS) in Binghamton, New York, for its series “WBNG Southern Tier Tuesdays;” and
  • KWQC-TV (NBC) in Davenport, Iowa, for its series “TV6 Real Conversations.”

“We are very proud of the great journalism across our company and industry that leads to actual results that improve local communities,” said Gray Executive Chairman and CEO Hilton H. Howell Jr. “We salute all of our honorees and especially the Gray Television stations for their continued commitment to quality journalism.”

About Gray:

Gray Television, Inc. is a multimedia company headquartered in Atlanta, Georgia. We are the nation’s largest owner of top-rated local television stations and digital assets in the United States that serve 113 television markets reaching approximately 36 percent of US television households. This portfolio includes 80 markets with the top-rated television station and 100 markets with the first and/or second highest rated television station. We also own video program companies Raycom Sports, Tupelo Honey, and PowerNation Studios, as well as Third Rail Studios.


Contact Data

Gray Contacts:

Website: www.gray.tv
Bob Smith, Chief Operating Officer, 404-266-8333
Kevin P. Latek, Chief Legal and Development Officer, 404-266-8333

The Risky Position Elon Musk is Placing Himself In


Image: Daniel Oberhaus (Flickr)


What Would Failure Look Like to Elon Musk if He Buys Twitter?

 

Elon Musk is a winner. We witness his success daily, after all, he’s the richest person in the world. No one else can say that right now. But the challenges that took the South African-born immigrant from poor college student to his current status were not a straight line. And, taking over Twitter won’t be a sure win either, yet he is betting a lot of his previous financial success on his ability to acquire it and run it successfully.

As innovative, crafty and wealthy as Musk is, this potential acquisition of the social media giant, may put him in a political arena like he has never experienced before. Musk could find himself in a “deathmatch” with those that control the rules – in the ring with some that have been powerful enough to shape the version of Twitter that he is now trying to steer back toward inclusion.


Buying Twitter is not the Win

“Failure is an option here. If things are not failing you are not innovating.” – Elon Musk

The above Elon Musk quote was said prior to 2022. But, it is helpful to understand; he thrives on the challenge of doing things different, trying to do things that are meaningful. While many Elon fans are watching and expecting this larger-than-life person to handily succeed, he’s human and this deal must make him somewhat uncomfortable.

For Elon, success in buying Twitter, a company that had already reached a valuation well above his bid, is not the win. Transforming and re-innovating Twitter, against the wishes of many senior department heads, and against many political interests, is the ultimate goal. This could become a nightmare, after all, successfully sending a reusable rocket round trip into space is just physics, going against the grain of powerful people that want you to fail, goes beyond physics. It may present unseen, non-science challenges.


The Risk

Self-made billionaires don’t reach that category by depositing their paycheck into a JP Morgan Chase bank account to earn .01%. They get it by risking a great deal, by hiring the right team, putting in the necessary work, and maybe getting some breaks along the way. This is the largest acquisition financing ever by one person. It’s not chump change for Elon who is doing it his own unique way. He’s a proven manager, but he’ll be spreading himself thinner if he buys Twitter. And, may not find he is getting too many breaks from those in power positions.

More than two-thirds of the $46.5 billion financing package that Musk unveiled on Thursday (April 21) for his bid for Twitter would come from his own assets, the remainder would come from bank loans secured against Twitter’s assets. Typically, the majority of a buyout of this magnitude is funded by securing most of the debt against the acquired. Elon is taking two-thirds of the “lien” himself.

The banks approached showed concern that the regulators may reprimand them because of the size of the risk they would be putting on their balance sheet. The lack of cash flow from Twitter also created concern. They may have also been troubled that the would-be acquirer said he doesn’t care about the economics of the deal “at all.” Musk said that he was pursuing the acquisition because it was “extremely important to the future of civilization.”

The banks may have also pondered that Musk has suggested that he may move Twitter away from advertising, Twitter relies on ads for the majority of its revenue.

What amplifies the challenge for Tesla’s CEO is he has agreed to take out a $12.5 billion margin loan, secured against his Tesla (TSLA) stock to pay for a portion of the $33.5 billion. Were Tesla’s stock to drop by 40%, he would have to repay that margin loan, according to a regulatory filing.


The Twitter Side

Musk is the world’s richest person, with a net worth listed by Forbes of $270 billion. Yet most of his wealth is tied up in Tesla shares, and the proposed deal structure would dry up most of his available liquidity. Twitter’s board plans to ask Musk to provide more details on the source of the cash he has promised to deliver, according to people familiar with the matter.

Twitter’s board is preparing to reject Musk’s bid as too low by April 28, when the company is scheduled to report first-quarter earnings, sources have said.

Musk, who has amassed a stake in Twitter of 9.2%, said on Wednesday he’d be exploring taking a bid directly to Twitter’s shareholders via a tender
offer
. In that scenario, shareholders would not be able to sell their shares, because of the poison pill Twitter created. The shareholders would however be able to register their support for Musk’s bid.

Paul Hoffman

Managing Editor, Channelchek


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Sources

https://www.chase.com/content/dam/chase-ux/ratesheets/pdfs/rdny1.pdf

https://www.inc.com/alyssa-satara/in-2-sentences-elon-musk-explains-why-key-to-success-is-failure.html.

https://www.reuters.com/business/musk-tears-up-buyout-playbook-with-465-bln-twitter-financing-2022-04-22/

 

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Reading the Metaverses Virtual Fine Print


Image Credit: Duncan Rawlinson (Flickr)


Can You Truly Own Anything in the Metaverse? A Law Professor Explains How Blockchains and NFTs Don’t Protect Virtual Property

 

In 2021, an investment firm bought 2,000 acres of real estate for about US$4 million. Normally this would not make headlines, but in this case the land was virtual. It existed only in a metaverse platform called The Sandbox. By buying 792 non-fungible tokens on the Ethereum blockchain, the firm then owned the equivalent of 1,200 city blocks.

But did it? It turns out that legal ownership in the metaverse is not that simple.

The prevailing but legally problematic narrative among crypto enthusiasts is that NFTs allow true ownership of digital items in the metaverse for two reasons: decentralization and interoperability. These two technological features have led some to claim that tokens provide indisputable proof of ownership, which can be used across various metaverse apps, environments and games. Because of this decentralization, some also claim that buying and selling virtual items can be done on the blockchain itself for whatever price you want, without any person or any company’s permission.

 

This article was republished with permission from The Conversation, a news site dedicated to sharing ideas from academic experts. It was written by and represents the research-based opinions of João Marinotti, Associate Professor of Law, Indiana University.

 

Despite these claims, the legal status of virtual “owners” is significantly more complicated. In fact, the current ownership of metaverse assets is not governed by property law at all, but rather by contract law. As a legal scholar who studies property law, tech policy and legal ownership, I believe that what many companies are calling “ownership” in the metaverse is not the same as ownership in the physical world, and consumers are at risk of being swindled.


Purchasing in the Metaverse

When you buy an item in the metaverse, your purchase is recorded in a transaction on a blockchain, which is a digital ledger under nobody’s control and in which transaction records cannot be deleted or altered. Your purchase assigns you ownership of an NFT, which is simply a unique string of bits. You store the NFT in a crypto wallet that only you can open, and which you “carry” with you wherever you go in the metaverse. Each NFT is linked to a particular virtual item.

It is easy to think that because your NFT is in your crypto wallet, no one can take your NFT-backed virtual apartment, outfit or magic wand away from you without access to your wallet’s private key. Because of this, many people think that the NFT and the digital item are one and the same. Even experts conflate NFTs with their respective digital goods, noting that because NFTs are personal property, they allow you to own digital goods in a virtual world.

However, when you join a metaverse platform you must first agree to the platform’s terms of service, terms of use or end user license agreement. These are legally binding documents that define the rights and duties of the users and the metaverse platform. Unfortunately, and unsurprisingly, almost no one actually reads the terms of service. In one study, only 1.7% of users found and questioned a “child assignment clause” embedded in a terms of service document. Everyone else unwittingly gave away their first-born child to the fictional online service provider.

It is in these lengthy and sometimes incomprehensible documents where metaverse platforms spell out the legal nuances of virtual ownership. Unlike the blockchain itself, the terms of service for each metaverse platform are centralized and are under the complete control of a single company. This is extremely problematic for legal ownership.

Interoperability and portability are defining features of the metaverse, meaning you should be able to carry your non-real-estate virtual property – your avatar, your digital art, your magic wand – from one virtual world to another. But today’s virtual worlds are not connected to one another, and there is nothing in an NFT itself that labels it as, say, a magic wand. As it stands, each platform needs to link NFTs to their own proprietary digital assets.

 

Virtual Fine Print

Under the terms of service, the NFTs purchased and the digital goods received are almost never one and the same. NFTs exist on the blockchain. The land, goods and characters in the metaverse, on the other hand, exist on private servers running proprietary code with secured, inaccessible databases.

This means that all visual and functional aspects of digital assets – the very features that give them any value – are not on the blockchain at all. These features are completely controlled by the private metaverse platforms and are subject to their unilateral control.

Because of their terms of service, platforms can even legally delete or give your items away by delinking the digital assets from their original NFT identification codes. Ultimately, even though you may own the NFT that came with your digital purchase, you do not legally own or possess the digital assets themselves. Instead, the platforms merely grant you access to the digital assets and only for the length of time they want.

For example, on one day you might own a $200,000 digital painting for your apartment in the metaverse, and the next day you may find yourself banned from the metaverse platform, and your painting, which was originally stored in its proprietary databases, deleted. Strictly speaking, you would still own the NFT on the blockchain with its original identification code, but it is now functionally useless and financially worthless.

Virtual
items like this avatar are sold in NFT marketplaces. Nescolet/Flickr

While admittedly jarring, this is not a far-fetched scenario. It might not be a wise business move for the platform company, but there’s nothing in the law to prevent it. Under the terms of use and premium NFT terms of use governing the $4 million’s worth of virtual real estate purchased on The Sandbox, the metaverse company – like many other NFT and metaverse platforms – reserves the right at its sole discretion to terminate your ability to use or even access your purchased digital assets.

If The Sandbox “reasonably believes” you engaged in any of the platform’s prohibited activities, which require subjective judgments about whether you interfered with others’ “enjoyment” of the platform, it may immediately suspend or terminate your user account and delete your NFT’s images and descriptions from its platform. It can do this without any notice or liability to you.

In fact, The Sandbox even claims the right in these cases to immediately confiscate any NFTs it deems you acquired as a result of the prohibited activities. How it would successfully confiscate blockchain-based NFTs is a technological mystery, but this raises further questions about the validity of what it calls virtual ownership.

 

Legally Binding

As if these clauses weren’t alarming enough, many metaverse platforms reserve the right to amend their terms of service at any time with little to no actual notice. This means that users would need to constantly refresh and reread the terms to ensure they do not engage in any recently banned behavior that could result in the deletion of their “purchased” assets or even their entire accounts.

 

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Psychedelic Medicine a Revolution for the Mind


Image Credit: Bridget Samuels (Flickr)


The NobleCon18 Panel of Psilocybin Experts Clearly Demonstrated Potential Medical Benefits

 

The panel discussion on psilocybin at NobleCon18 was led off by one of the most credible people I have heard speaking at any investor conference about the possibilities of their industry. He was a former professional athlete whose brain function, as a result of his career choice, left him a shell of who he had been. On stage with three other CEOs, from different corners of this growing mental health field, the panel provided excitement for both the future of helping people overcome brain health issues and providing investment opportunities in an industry that is sure to mushroom.

The Line-up

Eric Bolling, TV Personality and Host of Eric Bolling The Balance (Moderator)

Daniel Corcillo, CEO, Wesana Health (Panelist)

Evan Levine, CEO, Psybio Therapeutics (Panelist)

Ben Lightburn, CEO, Filament Health (Panelist)

Justin Dye, CEO, Schwazze (Panelist)

 

Expert Thoughts

Daniel Corcillo spoke directly to the audience at the open as someone who has benefitted from psilocybin treatments. Corcillo, who is now the CEO of Wesana Health (WSNAF) had played professional hockey for 12 years. During that time he had suffered seven concussions. This forced Dan’s early retirement. As a husband and dad, he pushed himself to find the cure for his brain fog, depression, and dementia-like symptoms.

After five years of trying all the clinical therapies that modern medicine has to offer, he sought supervised treatment with psilocybin. Dan laid out for the NobleCon investor audience, in the kind of detail that demonstrated that his mind was now extremely sharp, his very short successful treatment. A treatment that he said, after two weeks, had him “feeling the way I should.” And after six months having bloodwork that showed everything had equalized.


From Left to Right: Justin Dye (SHWZ), Ben Lightburn (FLHLF), Evan Levine (PSYBF), Dan Corcillo (WSNAF) and Eric Bolling (Newsmax)

 

It was after Mr. Corcillo shared his story that prompted him to become involved in the business itself to help others, that he was joined by Evan Levine of Psybio Therapeutics (PSYBF), Ben Lightburn of Filament Health (FLHLF), and Justin Dye of Schwazze (SHWZ).

The discussion ventured beyond mushrooms to at times include other psychedelic drugs and highly regulated substances like, MDNA, LSD, and Cannabis. 

Mr. Levine’s company Psybio creates biosynthetic psilocybin in a lab at a fraction of the price of growing mushrooms. From a medical treatment perspective, he and his firm emphasize the benefit of knowing exactly what the measurement is for dosing.

While agreeing that precise dosing measurements are important, Mr. Lightburn expressed that botanicals (not synthetic) allow all the chemicals to make it into the final product. He said this provides what he called the “entourage effect.” Other panelists referred to the interplay between chemicals as the “innate synergy.”                         

We learned from Mr. Dye that he does not expect the “magic mushroom” market to eat into the cannabis market either from a recreational or medicinal standpoint. He explained that it is additive as medical caregivers operating on the West coast now have options as to how to best treat individual patients.

The Industry

The antidepressant industry is $100 billion and growing. SSRIs have been the standard of care since the 1980s and are fraught with problems. Opioid use is a problem that is not going away, and more research should be done concerning this problem.

Having a legal framework under which to operate could allow for faster research on products that don’t have the addictive tendencies of problem drugs, have a history of safety, and are not prone to overdosing.

The industry of providing psilocybin therapeutic centers could create the need for many therapists, as the oversight is hands-on and interactive for about 42 hours.

While most panelists see more decriminalization of magic mushrooms locally, they don’t expect full legalization, especially as it relates to recreational use. One panelist did point out that in Vancouver, un-regulated mushrooms are sold openly and even advertised in store windows.

 

Paul Hoffman

Managing Editor, Channelchek

 

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Evaluating Gold Royalty Companies to Gain Exposure to Precious Metals


Image: James St. John (Flickr)


Adding Precious Metal Exposure to Your Portfolio? Gold Royalty Company Considerations

 

Investors have many options to gain exposure to gold. They may purchase gold bullion, gold coins, gold exchange-traded funds (ETF) and mutual funds, gold mining companies, or gold futures and options. Publicly traded equities of gold producers and royalty companies may offer an attractive way to invest given the disproportionate percentage impact higher commodity prices may have on a company’s bottom line and valuation for a given percentage increase in the commodity itself. While most investors are likely familiar with mining companies and how they operate, royalty companies may be less familiar.


What is a Gold Royalty?

A gold royalty is a contract that gives the owner the right to a percentage of gold production or revenue. Since royalties typically cover the life of a mine, gold royalty companies benefit from the exploration upside that may extend the life of a mine and thus increase the amount of gold or revenue they receive from the mining company at no additional cost.

There are several ways to generate royalties. First, royalty businesses may help finance a development project in exchange for a royalty. Second, a royalty business may purchase existing royalties from third parties, and 3) a royalty company may take a property that they already own, sell it to a mining company, and retain a royalty on the property.

There are several types of royalties. The two most common are NSR and NPI royalties. A net smelter return (NSR) royalty is an agreement where the mining company agrees to pay the royalty owner a percentage of the revenue, less refining and smelting costs. A net profit interest (NPI) royalty entitles the royalty owner to a percentage of the profit from a mine.

A stream is a purchase agreement that provides the owner of the stream, in exchange for an upfront payment, the right to purchase all or a portion of one or more metals produced from a mine at a negotiated price for the life of the agreement. The negotiated price is generally at a significant discount to the spot price.


Royalty Company Advantages

Compared with investing in gold production companies, royalty businesses generally benefit from low overhead costs, geographically diversified asset portfolios, and exposure to multiple operators.  Additionally, they avoid costly exploration expense which is borne by operators while sharing the benefit and upside of exploration investment in properties where they retain a royalty interest.  Like mining companies, royalty businesses offer greater leverage to changes in gold prices than investing in bullion.  Lastly, royalty businesses generally seek to build portfolios of producing royalties that support dividend payments to shareholders. 

Investors in gold royalty companies understand that revenues increase with rising gold prices, increasing production on its royalty properties, and a growing royalty portfolio, while costs remain relatively fixed and stable. These various scenarios position royalty companies to thrive in good markets and weather more challenging sets of circumstances.

As a royalty company grows, it offers the potential for multiple expansion, dividend payments, and the ability to execute larger transactions which could accelerate its growth. Junior royalty companies generally perform well in their early years since they can grow rapidly based on an increasing capacity to transact larger deals. Additionally, junior royalty companies may become attractive acquisition candidates for a larger royalty company seeking to enlarge its royalty portfolio.

Investor Considerations

It is important for investors to keep several factors in mind when conducting due diligence on prospective royalty company investments. These include: 1) management, 2) asset portfolio, 3) asset quality, 4) jurisdiction, and 5) valuation.

Management Should you bet on the horse or the jockey? It is important to evaluate management’s history and track record of creating value for shareholders. Does the management team reflect a balance of technical, financial, legal, and capital markets expertise? Is the board of directors comprised mostly of independent directors who provide a diversity of relevant experience and perspectives? Do they articulate clear objectives, and is their business model sound? Most importantly, do they focus on areas they know and employ a disciplined growth strategy, or are they seeking growth at any price?

Asset Portfolio – How is the company’s asset portfolio balanced between royalties that are producing cash flow streams versus royalties that are expected to produce cash flow within five years and/or longer?

Asset QualityBecause royalty companies have little control over the decisions of the mining companies that control the properties on which the royalty interest is held, it is important for investors to evaluate the operators associated with the properties in the royalty portfolio. Are they well-capitalized major mining companies or small start-ups? Additionally, it is helpful to evaluate mineral resource estimates associated with properties in the portfolio and the operators’ plans for development.     

JurisdictionWhile geographic diversity is a selling point for most royalty companies, it is often helpful to consult the Fraser Institute’s Annual Survey of Mining Companies to check if royalty interests are in favorable mining jurisdictions versus high-risk areas.

ValuationRoyalty companies are often valued based on price to net asset value. Net asset value is the net present value (NPV) or discounted cash flow (DCF) of all future cash flow of a mining asset, less any debt plus cash. Price to net asset value is the company’s market capitalization divided by the net present value of all mining assets minus net debt. For those that pay a dividend, investors may also compare dividend growth rates and yield. Larger companies generally trade at higher valuation multiples which generally increase with scale due to lower perceived risk due to greater asset diversification and a proven track record of growth. As royalty companies grow, they may be able to establish and grow dividends to shareholders, offer greater liquidity due to listings on major exchanges, and benefit from broader research. Some may also benefit from their inclusion in stock indices. For those that pay a dividend, it is important to know whether the dividend is paid from operating cash flow or whether the company is borrowing to pay the dividend.


Take-Away

Just as with other classes of equities, mining royalty company investing has categories and nuances within those categories that separate one from the other. Investors should be mindful of each of these and find respected sources of information on the particular names they are considering. Channelchek can be a goldmine of information when searching for companies, understanding their business, and looking at their numbers.


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Sources

4 Reasons Why We Believe in Royalty Companies

How Precious Metals Royalty and Streaming Companies Create Value

Streaming & Royalty Companies: Mutually Beneficial Arrangements for Everyone, including Investors

 

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What is the Feds Beige Book? (In 500 Words or Less)



Why the Beige Book Takes on Added Importance in Times of Growing Economic Uncertainty

 

The Beige Book, more technically known as the Summary of Commentary on Current Economic Conditions, is a report compiled by the United States Federal Reserve Board (The Fed) eight times each year. The information a review of economic conditions within the Feds 12 banking districts. The information discusses the business activity in the area, the trends, and how tight labor markets are.

Information in the Beige Book is divided by industry, including real estate, tourism, agriculture, financial services, manufacturing, and high-tech. Trends in employment, prices, and wages for each of the 12 districts is also a regular part of the reporting.

Additionally, the districts comment on how the businesses of their region are impacted by national and international trends. The Beige Book will also examine how local businesses are affected by changes in exchange rates, oil prices, and inflation.


Common Beige Book Usage

If the district overall reports show economic activity is slowing, the FOMC may begin to lean toward easing monetary policy, to stimulate economic strength.

The FOMC may also discern from the districts an overheating national economy inflationary risks headed higher than the Fed target. In this case they will discuss at the FOMC meeting hitting the economic brakes with a contractionary strategy. This could include pulling money out of the economy and raising interest rates. 

The Beige Book allows investors and analysts to see a report that the FOMC will use to help guide their hand. Many view it as a lagging indicator as the information is looking in the rearview mirror. Other Fed watchers consider the Beige Book contents a leading economic indicator because it influences the FOMC’s decisions.

The most critical change the Fed may take after reviewing economic detail of the entire country and the business is adjustments to the Fed Funds rate. Surprises in the report has the ability to cause the markets (bond and stock) to suddenly turn.


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