well i posted just before the LiFX deal was announced - that i thought they may do a deal to try and jump the cashflow/narrative chasm while they still have sufficient cash at bank not to be seen as an emergency basket case ie before sp collapse. The organic business is just not cutting the mustard.
and i still see same drivers as i mentioned when it was announced - for BUD it gives 'green shoots' appeal - bring in both new cornerstones plus ability to attract fresh on market bidders - while for LiFX it gave an exit in what from all reports was a private market that had gotten tired not just of LiFX but a host of the 'hoped for unicorns' who's adoption curve hadnt kept burning upward + a liquidity vehicle for LiFXers + potential succession plan for BUD mgt
none of that is a problem in abstract - the problem is only for existing underwater BUD shareholders who get dilution, making it increasingly difficult to ever get back to par. Never generally a problem for insiders as they just issue themselves more shares at lower entry so they reweight their avg price basket and generally have the funds to afford to do so.
The problem to me in both Ohm and potentially LiFX - though i dont feel well versed enough to assess it well - is you;ve got 2 kind of OK products that generate ok sales - but matched against an oppressive cash burn
And the idea of taking on 10% debt 9read that from a post but dont know if thats correct %) is ill considered - based on my experience. if i were inclined to buy or hold i;d be urging mgt to issue scrip. debt in pre positive cash flow stocks is 80% of the time a short term panacea to stockholders and a long term weight on both business and sp.
If it was imply a matter of short term capital injection required to get over a hump before hitting stellar free cash flow generation - its hard to see why existing mgt/oweners wouldnt have done that themselves. though i do agree that the listed liquidity of BUD's vehicle could be a reason for LiFX mgt preferring to go that route.
But i go back to first principles. I was in because mgt said Ohm had adoption rates that indicated it was not bleeding edge but needing edge. But that isnt borne out by any of the subsequent datum I;ve read. theyve had to spend too much to acquire growth - and growth is insufficient.
at some point that may change - but I couldnt invest until I saw it had. I;d hardly jump on for smart bulbs - not anything like the kind of business i was interested in investing in and im sceptical as to synergies.
if synergies were that easy to come by i would have thought for eg BUD could have cross sold a lot of Ohm users into custom DB analysis like Thor and more likely to be high value add
going down the food chain to hardware crosssell seems unattractive to me as well as leading to lower stock multiples
BUD Price at posting:
6.5¢ Sentiment: None Disclosure: Not Held
