SOS Ltd. - Right Between The Eyes
Seeking Alpha Analyst Since 2019
Former WSJ and II ranked sell-side analyst covering special situations and TMT.
Summary
- SOS did an unexpected registered direct yesterday raising $125MM placing 25MM units of common + $5 warrants.
- The deal boosts estimated cash to over $400MM after other offerings conducted since Feb 2021.
- The stock sold off on the news. TBH we were surprised at the deal but it looks like SOS management is pulling out all the stops to position for hyper-growth.
- We look for the imminent receipt of 5,600+ more mining rigs completing its order of 15,600 announced earlier this year to be a catalyst.
- Top down fundamentals for crypto continue to boom. This week alone Visa announced it is using an Ethereum-based network to integrate digital currencies; PayPal will now allow its tens of thousands of merchants to take Bitcoin; and Goldman Sachs will soon allow customers to hold and trade digital assets. This follows on recent news of MasterCard, BNY Mellon and Tesla all integrating, holding, or investing in Bitcoin. The news just keeps getting better. We look for the Coinbase exchange direct listing as early as next week to catalyze crypto desires among the Street. Trading at an enterprise value of sub $400MM with a cash hoard, a core $50MM+ tech/insurance profitable business aimed at crypto growing 50%-100%, and a BTC.X/ETH.X mining operation about to be at scale with a hydropower cost advantage, SOS remains our top pick. We reiterate our STRONG BUY recommendation and $20 target, with substantial upside likely on assumed further rig purchases, an exchange launch, and JV's in banking, supercomputing, and other.
SOS Registered Direct PR and Prospectus Supplement
https://finance.yahoo.com/news/sos-ltd-announces-pricing-125-130000586.html
https://www.sec.gov/Archives/edgar/data/0001346610/000121390021013174/ea136977-424b7_soslimited.htm
Author Comment
Mining pure plays MARA, RIOT and others fetch 10x-20x sales multiples. Given the rising scale of SOS, on that basis alone, SOS should command a $20 price range. Adding in other business lines that are at scale, profitable, disruptive and high growth, and what we predict will be another major purchase of mining rigs to become a world leader in that domain, the stock can trade at 2x or more our price target. Sure it sounds lofty from today's levels, but pull the price action of mining comps and you will see the dream. With four offerings now complete, look for major Wall Street coverage in the coming days. We recommend our followers buy the stock on yesterday's weakness and in advance of a potential large move coming in the stock.
Double Bottom 03-31-2021
Analyst's Disclosure: I am/we are long SOS.
We intend to provide further commentary in our ongoing coverage of SOS.
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