Arkados Just Grew Up!
Acquisition of SolBright Puts Them on Path to NASDAQ
One of the more transformative events that can happen to a public company is moving from the OTC, up to the NASDAQ. While there are many fine companies that trade on the OTC, more investors will take a company seriously when they have those magic six letters in front of their stock ticker.
Arkados Group, Inc., AKDS has recently announced their own transformative transaction that could put the company on the path to a National Exchange and significant growth in earnings in the very near future as well.
The acquisition to uplist strategy is really resonating with investors. One example is New Age Beverages Corporation NBEV, they recently completed the move from the OTC to the NASDAQ. They completed several acquisitions in order to get there. New Age Beverages Corporation started off several years ago as a microbrewery with $1M in sales, and slightly unprofitable. The company plodded along trying to grow their original craft beer business, and went nowhere. In September 2015, they bought the bùcha™ live Kombucha brand which had several millions in sales. After the new CEO Brett D. Willis took over in early 2016, the company went on to purchase additional brands, including brands XingTea®, XingEnergy®, and Aspen Pure®, which on a combined basis brought additional $7M in sales.
The company has continued to acquire and has recently made the move to NASDAQ. Today, the market capitalization is $133M, and the company has $15M+ in revenue and the stock has moved from the .20's to over $4.00 in just over 2 years. They are now a leading functional beverage producer, and have attracted more investors than ever.
Another lesser known example is Consumer Capital Group Inc., OTCQB:CCGN. They announced a $23 million acquisition in early December and in a February S1, revealed their intention of moving to NASDAQ. Investors have embraced the stock since December, it trades fairly lightly, but it has seen a rise from $.50 before the acquisition announcement to $4.50 today.
Is Arkados the next NBEV or CCGN? It may be too early tell but the today's acquisition announcement certainly looks like it will be. They announced a Letter of Intent to Acquire SolBright Renewable Energy a renewable energy design and development company based in Charleston, SC. Arkados and will pay $15 million in a combination of cash, debt and stock for the company, and it includes a current backlog of approximately $40 million in distributed generation EPC projects and a large and growing pipeline of additional projects throughout the Eastern United States.
One of the more attractive things about this deal are the synergies. This transaction also will allow Arkados to significantly expand its Arkados Energy Solutions business into the rapidly growing renewable energy industry and open many new customer opportunities for its cutting-edge Internet of Things solutions.
This new acquisition is a big deal, but it is just one of the latest things that are going right for Arkados. Since May 2015, the company's revenues are up 264% to $1.8M. The company continues to announce new contracts with numerous new and existing clients, and they recently launched the latest version of their IoT software.
Once they complete this transaction of SolBright at the end of March, they may well be looking to uplist to a national exchange, as they are going to be very close to qualifying. The Company could just be at the beginning stages of a national roll-up as well. I liked Arkados before the announcement, solely based on the explosive growth of IoT, now the stock looks even better. A high growth industry coupled with a potential uplist should make for a nice ride. In December, I put a $2.10 price target on AKDS, based on their revenue growth, it's too soon to speculate on price until more details emerge but with the facts available I feel comfortable saying the price target is significantly higher than $2.10. The stock is still under followed, it closed up 23% to $1.17 on a paltry 93,000 shares today. I would expect much more activity in the stock in the coming weeks as the market fully digests the news. I believe that now is the time to accumulate before the mainstream figures it out.
Disclosure: I am/we are long NBEV, AKDS, CCGN.