The Good, the Bad, and the Ugly (January 2025)

To learn more about microcap strategies or the Rivemont MicroCap Fund, check out this post and see the disclaimer at the bottom.

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Welcome to your monthly recap of the Canadian microcap market!

The year was off to a great start with the publication of the December trading and financing data from the TMX Group, which was super bullish for the third month in a row.

Trading volume (in $) on the TSX Venture was up 35% compared to the previous year. On the financing side (total financings raised in $), the picture was similar, with an increase of 42% year-over-year. Capital is flowing back in microcaps in a big way!

On another positive note, I haven't seen a single bankruptcy or restructuring announcement in January, unlike previous months. Has the market finally cleansed itself?

Let's now look at some of the main highlights from last month.

The concept is simple for those who recently signed up for this newsletter. I feature the news that caught my attention during the previous month after skimming through all the press releases on the Canadian market. Every press release, every single day!

The Good

1. 2025 started energetically on the M&A front, with three microcap acquisition announcements in the first eight days of the year! Quisitive Technology Solutions (TSX-V: QUIS) is getting acquired by a US private equity firm for a 52% premium. Carebook Technologies (TSX-V: CRBK) is getting privatized by its majority shareholder for a 122% premium. Lastly, Yerbaé Brands (TSX-V: YERB.U) announced an all-share transaction to merge with Safety Shot (Nasdaq: SHOT). The deal represented a 27% premium on the day of the announcement.

2. Financial results from a few companies caught my attention this past month. Velan (TSX: VLN) reported 18% revenue growth and a significant transaction to sell one of its subsidiaries to settle a long-term liability. Investors loved the news, sending shares 53% higher in the days following the announcement. California Nanotechnologies (TSX-V: CNO) reported another blowout quarter, growing revenue by 56% and adjusted EBITDA by 94%. I have highlighted their previous two quarters as well, so this is becoming a trend. Lastly, Cannara Biotech (TSX-V: LOVE) reported 29% revenue growth and a solid EBITDA performance at 24% of revenues. Did you know that cannabis companies could actually be growing and profitable? I’ve been paying more attention to this sector lately.

3. Beyond Oil (CSE: BOIL), a food technology company that sells a better-for-you frying oil alternative, made several announcements in January. Important news includes an order from a large fast-food chain in Europe and distribution deals in Mexico, Australia and the US. These last two deals have minimum purchase commitments totalling US $4.9 million and US $8.3 million, respectively. The stock has been on a tear lately, increasing 59% in January!

The Bad

1. Haivision Systems (TSX: HAI) reported underwhelming fourth-quarter results, with revenue and adjusted EBITDA down 16% and 48%, respectively. After lowering its annual guidance three times throughout the year, the company still missed the lower end of the bracket. Management had also mentioned that the fourth quarter adjusted EBITDA margin would be close to 20%, and they delivered 9.8%. The main explanation was unforeseen delays in getting year-end orders from the US government, a large Haivision client. Even if that doesn't change the long-term investment thesis, those results are certainly uninspiring in the short term. The stock declined as much as 23% the following day.

2. Companies that I consider quite speculative or overvalued are raising capital like it's the easiest thing. Examples include Sol Strategies (CSE: HODL) with a $27.5 million raise, Verses AI (CBOE: VERS) with a $20 million raise, Healwell AI (TSX: AIDX) with a $25.5 million equity financing and $30 million debenture financing, and Plurilock Security (TSX-V: PLUR) with an oversubscribed $5 million raise. While I welcome more financing activity and better liquidity, some pockets of the market are getting frothy, in my opinion.

3. BNN Bloomberg recently reported that Canadian investment dealer Eight Capital was winding down. Many of its top staff are expected to join Stifel Financial. Eight Capital, which was very active in Canadian microcap stocks, has been another victim of the last few years' challenging trading and capital-raising environment.

The Ugly

1. Here is (presumably) your next pump & dump: Light AI (CBOE: ALGO). The company announced the most egregious promotion campaign I have ever seen, signing up twelve (yes, 12!) marketing groups simultaneously for a total spend of ~$3.4 million. I am disgusted by this kind of promotion targeting retail investors…

2. Hank Payments (TSX-V: HANK) is going big on dilution. The company proposes to acquire a private technology company, convert debentures, and settle payables by issuing shares. They're also conducting a private placement at $0.03 per share. When all is said and done, the share count should balloon from 132.7 million to over 350 million, an unfortunate outcome for long-term shareholders.

3. I highlighted Energy Plug Technologies (CSE: PLUG), an energy and battery technology company, a few months ago because of their unexpected entry into the blockchain and cryptocurrency ecosystem. Well, guess what? They can also integrate quantum cybersecurity! Wow, their technology can really PLUG into all these recent trends! (pun intended)

4. In the same vein, Credissential (CSE: WHIP), an AI-powered financial services software developer, announced quantum security initiatives and the adoption of a cryptocurrency acquisition policy. I wouldn't be surprised if they developed the next generation low-cost large language model (LLM) next month. Who knows?

I hope 2025 is off to a great start for you. If you like the content, please help spread the word by sharing it with like-minded investors. I have great content coming your way in the weeks ahead!

Did I miss any important developments last month? Let me know in the comments which news or earnings reports caught your attention!

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Disclaimer

This publication is for informational purposes only. Nothing produced under the Stocks & Stones brand should be construed as investment advice or recommendations. Mathieu Martin, the author, is employed as a Portfolio Manager with Rivemont Investments. This publication only represents Mathieu Martin’s own opinions and not those of Rivemont. Rivemont may own positions and transact on any securities mentioned in this publication at any time without prior notice. At the time of this writing, the Rivemont MicroCap Fund holds shares of Cannara Biotech (TSX-V: LOVE) and warrants of Yerbaé Brands (TSX-V: YERB.U). Always do your own research and consult a professional before making investment decisions.

If you’d like to invest in small public companies, check out this post.