Greg Miller

Long/short equity, special situations, long-term horizon
Greg Miller
Long/short equity, special situations, long-term horizon
Contributor since: 2012
Thanks for reading. Turned out well.
The information in my article is correct. The $264,804 figure you mention is merely the 'accumulated deficit since inception'- an obligatory accounting item but mostly meaningless because it is not debt. It merely means the company has not made a profit and has taken on investment etc., not that the company owes $264,804 to anyone. Remember that companies can report accumulated deficits in the millions yet $0 in debt and plenty of cash in the bank.
The Going Concern statement is also a boilerplated accounting item that auditors must include for this type of business. The vast majority of small public companies' financial statements include an auditor's going concern paragraph. I included a detailed discussion of the risks of the business plan in the article.
Anyway, I have already taken profits given the strong performance of shares. Thanks for reading.
I posted a blog today on Seeking Alpha about my thoughts on "the new BZNE":
The number of shares being registered was substantial on a relative basis. In the article I wrote that the current 9,459,373 o/s would rise to 15,792,708 any day (whenever the S1 receives approval), a 67% increase.
S1, not the news.
Most of its assets are intangible (patents, approvals, etc). If manufacturers wait until the last minute to buy the chips, as they are wont to do, Veriteq will need to raise capital to bridge itself until 2015, which will probably be a nominally small offering (dilutive) of $3 million if I had to guess. Unfortunately, this is a large percentage of its market cap. However, I think it will try to price the offering closer to the low $1s, as the recent dip is due to the pending S1, and I personally think this dip is temporary... which is why I bought for the rebound.
I only have invested half of what I ultimately plan to purchase, however, becase shares have been so volatile. I might get lucky and fill some of my bids at lower prices.
Regardless, this is not a stock to bet the farm on, that is for sure. It could return 100% or more, or this could be a big loser. I am only playing with a small portion of my portfolio here.
Thanks for reading.
Thanks. It all depends on whether it accomplishes its goal or not. You do the math from today's market capitalization to a P/E multiple from its projections- the numbers are incredible. But again, it is all about Veriteq convincing the industry that they need to use RFID instead of antiquated paper documentation. Having something like what happened to patients in France is a horrible thought, so obviously I believe RFID will sell, but that is the key unknown.
Nice to see a Seeking Alpha alert on MARA today in my inbox. A revenue forecast appears in the most recent corporate presentation. "We believe that over the next 3 to 5 years our current patent asset base may generate aggregate revenue in excess of $100 million."
Unfortunately, I cannot comment on the valuation of Cocrystal Discovery Inc. as it is a private company, other than to say I have heard rumors far above $200 million, even above $1 billion. Until someone publishes a private company valuation, all I can repeat are rumors and that it is up to investors to look at Teva and Opko Health filings to make their own judgments, or wait a few weeks to see if Biozone voluntarily discloses terms once the deal finalizes. Cocrystal Discovery raised its first $10 million financing of over a half decade ago... Teva has already invested millions...
I'm holding long term, unrealized losses for now but this low volume trading is mostly warrant holders and financing parties cashing in for their services getting the company cleaned up from its MedicSight days. It is really unfortunate that they seem to have no concern for the long term prospects of the company, but that is how it goes sometimes. If MGT settles for anything over $10 million from any of the defendants the stock could double... if their daily fantasy sports website did even a few million in revenue the stock could double... if the company fails entirely, there are a lot of debt-free assets backing shareholder equity to soften the blow. I think there are plenty of shots on goal here. Overall, from my gains earlier in the year and my unrealized losses now, I am slightly negative overall. I think football season should produce some nice results by the holidays.
The party(ies) holding the warrants at $3 seem to be pretty ruthless. Ultimately it is good for this company to churn through that overhang of investors who seem to not care about the company and just want to cash in for their financing services (from the time when MGT's MedicSight division was divested and the capital structure cleaned up). I have written about the warrant issues before, and until MGT announces some good revenue from its daily fantasy sports division or a settlement, it will be hard to sustain a rally, especially with such low average volume. However, if MGT does announce something, it would be a very, very quick spike up. I am still long with realized gains from earlier this year and holding paper losses now.
All of that is public info, I think it is around $5M currently. The burn rate is not as high as Yahoo Finance shows, read the "Supplemental disclosures of non-cash" on the last 10Q detailing the reclassifications of derivative liabilities (which was previously disclosed
Also, there are still warrants at $3.00 per share, which probably explains the horrible price action this week. If it goes too much lower, this stock will be backed 100% by assets. The fully diluted valuation is down almost 50%, as most warrants are out-of-the-money here below $3. (Fully diluted valuation goes up at a faster rate as price increases but also goes down at a faster rate as price falls- specifically, as the price falls below specific strike prices, and a big strike price was $3 for MGT.)
WMS (now SGMS) is the top defendant. Aruze is the second. I don't think the other three defendants are very substantial. To continue the analogy, they are just facility operators that may or may not have known that the machines on their floor were infringing.
By the way, before I get to your questions, I do not think my article has much to do with the slight decline on Friday. Remember that there are still a few warrant holders who are happy to lock in a couple percentage points and who have no long term interest in the company. Anyway, as to your questions-
1. There is only one lawsuit at the moment against WMS and Aruze with stayed action against the other three slot machine operators. I assume the scheduling order and press announcement by MGT still stands and nothing has changed about the June 5 Markman Hearing date.
2. If the single lawsuit progresses positively for MGT such that the court allows resumption of legal action against the three slot machine operators, then one or twenty lawsuits, I do not think shareholders from these levels will have anything to worry about at that time... the stock will probably have doubled or more by that point. If the courts say, "Infringement in the machines has occurred, so let's talk about the reponsibility of the operators." shareholders could care less if their responsibility is 0.1% or 3% or 10%. By that point, shareholders would know that MGT is likely to receive payment from the main defendants WMS and Aruze, and it does not take much to move today's $20 million market cap.
3. MGT's corporate presentation details the overall infringing market and its potential payouts (going into the hundreds of millions on the high end). All the machines are manufactured by WMS and Aruze. WMS and Aruze are the first two defendants in the lawsuit and their motions to stay legal action were denied.
Thanks for your comments.
(Also, the actions against the slot machine operators are pretty inconsequential anyway. WMS and Aruze are the 800lb gorillas. Even if the courts had dismissed all actions against all three slot machine operators, the economics of MGT's potential would barely have shifted. The slot machine manufacturers, WMS and Aruze, will clearly be the responsible parties if patent infringement has occurred. Just as a gas station operating a lottery machine infringing on some patent is not really a major target for an inventor seeking monetary damages, the manufacturer is the real target, not the gas station.)
Of course, most people are hoping for a settlement long before the Markman. (I could care less, but for the IP investors, that is.) I am not a legal expert, but I believe the schedule still stands as the court previously ordered.
December 6, 2013: Parties exchange claim terms
January 10, 2014: Parties exchange constructions of terms
January 17, 2014: Meet-and-confer to limit claims and claim terms
February 14, 2014: Claim construction discovery ends
February 28, 2014: File opening claim construction briefs
March 28, 2014: Responsive claim construction briefs
June 5, 2014: Markman Hearing aka Claims Construction Hearing, 9am CT/10am ET
Mrothbard, agreed, and management has been quiet so far in terms of numbers. We might have more clarity soon, at least I expect so now that football season is underway and numbers have started to return to seasonal highs.
Ukawuba, thanks for the comment. I hyperlinked the ranking in the article to Daily Fantasy Radio, which was also cited by Zacks Investment Research in their analysis.
Thanks. It certainly offers plenty of opportunities. I am very happy with my partial returns so far from earlier in the year, as you rememer, but I am holding my full position long term now. Management has been very quiet on the daily fantasy sports business, so I am getting anxious for an update...
For a while, Prospect Global had 5-10x the market capitalization of Passport. Everyone thought their Chinese deal was great. It fell apart. I think Passport ultimately emerges as the winner in the basin, but they will cooperate with Hunt and Prospect Global. This is a five year investment for me. I expect a very painful ride with a big return near the end, but there will be a lot of dilution along the way.
Yep, right back to $5.60. I still think this will easily hit $6.50 this year. Next year should be a very good year.
Not later than April 2013, Spherix announced its 1,488,152 shares of series D convertible 1-for-10 into common. It was effectively a $100 million or more company from that point forward.
This is a $3 million market cap company that traded zero shares yesterday. I will mark any further comment about WPCS company as spam and stock promotion.
As clearly promised, I have no plans to initiate a position in Spherix until next week.
Thanks. I think CEO Joshua Bleak and investors like Dr. Phillip Frost have the rare business connections and family relationships needed. Their Indian connection is also a golden ticket if they play the game well. Lots of risk, lots of potential.
This is mostly from May. Just registering with SEC.
Common stock outstanding after the offering: 5,913,601
Market cap after the offering: $35.5 million
"On May 31, 2013, we sold an aggregate of 1,153,844 units representing gross proceeds of $6,000,000 to certain accredited investors... The number of shares after the offering is based on 5,333,824 shares outstanding as of September 12, 2013, assuming all the warrants for which the underlying shares of common stock being offered (579,777) have been exercised... As of September 12, 2013, there are 88 record holders of 5,333,824 shares of our common stock."
I have not invested yet, but I am actively looking to invest and will very soon (probably in 1-2 weeks once I look at all of my options). Passport Potash has no operations in Nevada. It is listed in Canada and has land in Arizona.
Passport Potash trades in Canada. The nominal value of the potash in the Holbrook Basin is $1 trillion. A small fraction of that will actually be mined, and the mine(s) will be valued at a fraction of that. Passport Potash's mine will cost $2 billion just to build, not to mention all of the other expenses along the way. It has a long way to go to secure that financing, and the likelihood of failure along the way is high. I think it has the rare mix of personal and business relationships to succeed, as I describe above, but I am comfortable with a total loss.
CapEx for the mine is an estimated $1.95 billion. As you note, the market capitalization is a tiny fraction of that total. The company will also need more cash along the way for land payments and many other corporate expenses. If this leaves you scratching your head (How can such a small company be trying to build such a costly mine at so many multiples of its valuation?), then you might not be familiar with small-cap investing and it is probably best to pass. All potash exploration-stage companies are in the same boat. Potash mines are extremely expensive to build. However, I have little doubt that the potash in the Holbrook Basin will be mined, and there are three companies in the final race (Passport Potash, Prospect Global and Hunt NZ). A year ago, when Prospect Global was trading 70% higher than today, everyone thought it would win the face. Its Chinese deal fell through, its share price fell, and now the race is tied again. Ultimately, the lion's share of the financing will come over the next 2-3 years, the majority of which will be a billion-dollar, project-level round from a large-cap mining giant.
If you are not familiar with how a company with a market capitalization in the millions can build a mine costing billions, I understand that it sounds counterintuitive. Allied Nevada used to be a pinksheet company and now trades on NYSE with a half billion market capitalization. Yet the success stories are very, very rare. It is likely that Passport Potash will fail from a statistical perspective. I happen to think that the 10-20x return possibility outweighs the likelihood of failure, but I would only allocate a very small percentage of my portfolio and be comfortable with a total loss. For me, it is a five year investment.
I am sticking to local operations. Personally, I do not want any geopolitical risk given what has been happening with Pascua Lama, Syria, etc. Brazil is also not a part of the cartel homelands. Potash is run by cartels in Russia/Belarus and Canada/U.S., and so I do not want to invest anywhere else.
Remember, this is not about building a mine. It is about having good relationships and doing right by everyone in the clan. Potash mines cost billions. The mine is secondary to the story I described above. I tried to communicate this in my article, maybe I missed it. On Seeking Alpha we tend to focus on fundamentals, but commodities are not really fundamentally driven; the entire precious metals markets are based on belief that relatively useless metals have absolutely astronomical value. In the potash market, if the cartels do not like you, personally, it does not matter what your mine is. Look what happened when Uralkali defected. Arrested instantly. Smaller guys with less press attention would have been squashed.
I can take a drive to see Passport Potash operations, call local reporters and police officers myself. I can talk to the Bleak family and figure out their century+ of family history in the mining community. Everything in foreign languages is selectively translated (filtered). I have no way of doing primary research in Brazil without hiring a translator.