The Good, the Bad, and the Ugly (September 2024)
To learn more about microcap strategies or the Rivemont MicroCap Fund, check out this post and see the disclaimer at the bottom.
Welcome to your monthly recap of the Canadian microcap market.
Last month was quite busy on my end. I travelled for three weeks, spending two weeks on vacation (French Riviera) and one week in Vancouver for the Planet MicroCap Showcase / Smallcap Discoveries conference.
I will have some great content coming your way in the coming weeks. I plan to recap some of the most interesting meetings I had in Vancouver. I will also share some more insights on Canadian microcap M&A activity, a topic I covered during my keynote speech at the conference. Stay tuned for that!
Let's now look at some of the main highlights from last month!
For those who signed up for this newsletter recently, the concept is simple. 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!
(Shoutout to Philippe Lapointe, my analyst at Rivemont, for keeping me up to date during my vacation!)
The Good
Haivision (TSX: HAI), a global networking and visual collaboration solutions provider, announced a massive $82 million 5-year contract from the US Navy. The stock had already run up 46% in the month leading up to the news, so investors were anticipating positive developments out of Haivision. The stock gained another 19% in the days following the news before giving back most of the gains (presumably due to underwhelming financial results later in September).
Simply Solventless Concentrates (TSX-V: HASH) has been on fire lately. In September alone, the company completed the strategic acquisition of CannMart from Lifeist Wellness (TSX-V: LFST), provided solid guidance for its third-quarter financial results, and announced another significant acquisition (ANC). Over a few months, HASH increased its annualized net income run rate from $3 million (Q2 2024) to a projected $10 million by the end of the year without crazy dilution. The stock was up 35% in September and 340% this year.
Simply Better Brands (TSX-V: SBBC) made several announcements during the month, notably the addition of four US distributors for Trubar and product rollouts in CVS and Walmart stores. The market didn't seem to care, but the company is heading in the right direction over the medium to long term.
A few more acquisitions were announced in September. Altius Renewable Royalties (TSX: ARR) will be acquired by a private equity firm for a 28% premium, and Armada Data Corp (TSX-V: ARD) will be taken private by its management team for a 60% premium. Meanwhile, Environmental Waste International (TSX-V: EWS) announced a take-under by a strategic buyer. The $0.0035 per share offer (yes, 0.35 cents) is a steep discount to the $0.015 share price before the announcement. I wonder if this one will go through.
The Bad
Cipher Pharmaceuticals (TSX: CPH) announced that its partner Moberg Pharma AB had released underwhelming clinical trial results in a subset of patients for its MOB-015 phase 3 study. Cipher owns Canadian rights to the product, representing one of the significant growth opportunities Cipher is looking for going forward. The market didn't like the news and sent the shares 37% lower the next day, followed by a mild recovery over the next few weeks.
Cematrix (TSX: CEMX), a manufacturer and supplier of cellular concrete, announced unforeseen delays on some of the projects in its backlog. The delays will cause 2024 revenues to be lower than expected, while 2025 should be stronger. It's not the first time Cematrix has experienced project delays, and investors didn't like it. The stock went down 25% following the news.
Microcaps will do anything to catch investors' attention. Realbotix (TSX-V: XBOT), a creator of humanoid robots powered by AI, announced the appointment of one of its AI robots as an adviser to its board of directors. I'm all for using AI to assist in better decision-making, but formally appointing a robot as a non-executive board adviser… really? They got me to write about it, so I guess the PR stunt worked.
The Ugly
Payfare (TSX: PAY), an international earned wage access (EWA) platform, announced that DoorDash, its largest customer, would not renew its agreement beyond the current term in early 2025. While not disclosed, I've seen estimates that DoorDash represented 60% to 80% of Payfare's revenues. The stock was taken to the woodshed, losing 75% of its value the next day. It now trades at the cash value on its balance sheet (essentially assigning zero value to the operating business). Payfare announced a strategic review process to enhance shareholder value a few days later.
Scope Technologies (CSE: SCPE), a pre-revenue quantum security company, is betting big on marketing. After raising $2 million in a private placement in late July, the company is hiring an investor relations and marketing services firm to promote the company and its platform. An initial payment of $997,100 was made for three months of services, which is half of what the company just raised. I suspect we'll see another financing announcement shortly…
That's all for this month, everyone. I hope you enjoyed it!
Did I miss anything? Let me know in the comments which news or earnings reports caught your attention!
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 and warrants of Simply Solventless Concentrates (TSX-V: HASH). Always do your own research and consult a professional before making investment decisions.
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