IPOs, Contrarian, Long/Short Equity, Long-Term Horizon
Contributor Since 2012
Dallas currently owns and operates as CEO an Austin-based enterprise consulting firm that specializes in private company lifecycle management, up to and including taking companies public, and in helping consult publicly traded companies ranging in market cap from $100 million to $500 million. He has a specialization in deal flow management and is often the referring and closing source of Joint Ventures and broader M&A. Dallas often works directly with management teams and Boards of microcap and stressed equity companies in which he or members of his professional network are heavily invested. This includes helping with overall strategy, helping with capital structure management, helping facilitate liquidity, helping facilitate Joint Ventures and broader M&A, and helping restructure the business segments if necessary. Recently Dallas has been interviewed by The Pittsburgh Business Times, The Banker, Columbus Business First, Houston Business Journal, The Deal, Energy Intelligence, and his tweets have been used by CNBC to highlight hot button issues regarding Carl Icahn, Bill Ackman, Nelson Peltz’s takeover attempts at DuPont, etc. Dallas has also been quoted and sourced to by StreetSweeper.org, Marcellus.com, MarcellusDrilling.com, Bakken.com, OilOnline.com, and other physical and online publications. "One place of great inefficiency is in the stressed equity markets – or the markets in which a company appears as bankruptcy or a breakup is inevitable. As equities become stressed they often sell down to absurd levels of value that present, should there be value to be unlocked, opportunities for “venture level” returns."
BioHiTech Global (BHTG), a microcap I've been tracking from the outside (no position currently), is out with a nice update regarding some serious traction it's seeing for its uniquely positioned food digesters. BioHiTech has announced that it has secured placement for ten of its digesters at Golden Corral restaurants throughout Florida. Even at surface level review that's a big announce in the way of early adoption. This becomes especially true when taking into account that this adoption is from a serious player in what some would call BioHiTech's current "core market". But it wasn't just the placement of digesters that has me excited. I'm also equally as excited about the reasons for placement expressed by the Golden Corral franchise owners. I'll explain.
First, let's backtrack. BioHiTech just placed ten digesters in a highly visible, highly respected, huge restaurant chain. That matters. It matters because this is what is referred to as a "proof of concept" run - not for the concept (the digester) but for the restaurant chain. Realize it or not, what these franchise owners have done is allow BioHiTech to prove the value-prop of the digester in real-time, in a "real-life" environment, taking "live fire". If BioHiTech can move the bottom line at the particular franchise locations of residence you better believe it stands a good chance of acquiring additional locations via word of mouth. That's a big start for a company this small.
Second, and this is the primary focus of this article, it's important to note the reasons BioHiTech digesters were selected (for several reasons). According to the press release issued by BioHiTech its digesters were selected because they were "considering of the environment" and because they "elevated operational performance" (in theory at least). That's big. What's bigger is that the franchise owners noted in particular that the digesters where helpful in, "collecting data and providing real-time reports on the details of what exactly is being wasted…categorizing and quantifying the food waste will help us to measure our sustainability progress and reduce the volume of prepared dishes that do not sell in specific locations", that it, "provides data points that we can use to efficiently staff each individual location specific to its needs". This to me is the big takeaway. I'll explain further.
BioHiTech is a microcap with a new technology. That alone places its odds of failure at extremely high levels. This is the reason I have yet to invest and the reason I've been vocal in the risks inherent. However, usually a microcap and/or new technology company's biggest hurdle is in evidencing and then further proving out its value-prop. You know, the "why should I care?" part of the business. BioHiTech has a path of least resistance to doing this and that's huge. BioHiTech either is or is not going to move the bottom line at these locations. BioHiTech either is or is not going to be prove out as a net positive in a cost-benefit analysis. And it's going to do this in a data-definitive way. That's huge.
BioHiTech, again, is either going to make business sense or it's not. But the good news it, again, it can do that definitively. If BioHiTech management is right, the company seems to think it has a fine product and that it can back this with data when deployed, the business should have no problem in establishing growth. That's a great place to start. Now, how does the company fund this growth and how will that translate to the cap structure? That's all to be decided. But the big takeaway is that the primary hurdle facing most microcaps and/or new technology scenarios should soon be removed. For me, that alone places this at or near the top of my microcap watch list.
I don't want to understate the risks of owning a microcap like BioHiTech. This is a name with risk; sure. But if we're being fair this is also a name with a really resistance free path to widespread adoption. It's also a name with a fairly high visibility path to becoming a staple in the food service industry (for starters). Continue to watch BioHiTech for progress updates. This could be an excellent total return name soon.
Good luck everybody.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.