Markets remain at a crossroads. After seemingly poised to set new highs Tuesday, major indexes pulled back Friday. Dow Jones closed the week marginally down, S&P 500 lost 0.1%, Nasdaq composite lost 0.7%. Telegram is nearing profitability and is considering a IPO, according to the company’s founder. Stripe is in “no rush” to go public after the US$65 billion payments company returned to positive cash flow and raised its private market valuation. Technology start-ups have slashed equity packages for new hires as they weather a prolonged downturn, according to new data from Carta. Nvidia could be worth US$6 trillion if it follows Cisco’s dot-com trajectory, says Jeremy Siegel. Salesforce invested in Nvidia server reseller, Together AI at a US$1.25 billion valuation. Bitcoin’s record high boosted Coinbase, Microstrategy shares, as short sellers have lost US$3.3 billion betting against MicroStrategy this year.

Despite inflation headlines everywhere, Canadian tech companies appear to be on sale. Three take outs were announced just last week, highlighting a key issue capital markets participants have long articulated – a lack of innovation focused risk capital in the country. TrueContext announced a definitive agreement to be acquired by Battery Ventures in an all-cash transaction. mdf commerce entered a definitive agreement to be acquired by KKR, some investors suggested they may vote against the transaction based on valuation. Apple earlier this year acquired DarwinAI, a Canadian startup developing AI software to visually inspect components during manufacturing. Even though the stock of Sophic Capital client Kraken Robotics has surged over 150% in the past six months, it still appears undervalued when compared to its peers. We published a report highlighting if Kraken were to trade inline with defense technology peers, the stock would be worth $1.85 per share or 68% upside from the closing price on March 12, 2024, of $1.10.

Canadian Technology Capital Markets & Company News

TrueContext (TCXT-TSXV) announces definitive agreement to be acquired by Battery Ventures in an all-cash transaction.

The Company and an entity controlled by Battery Ventures have entered into an arrangement agreement whereby the Buyer will acquire all of the issued and outstanding common shares of the Company for $1.07 per share in cash by way of a statutory plan of arrangement under the Business Corporations Act (Ontario). Upon completion of the Transaction, TrueContext will become a privately held company. The Transaction values the Company’s total equity at approximately $150 million on a fully diluted basis. The Consideration represents a 39.9% premium to the closing price of the Shares on the TSX Venture Exchange prior to the Company’s announcement of the Transaction and a premium of approximately 40.1% to the 20-day, and 52.1% to the 60-day volume-weighted average trading prices of the Shares. The Company is subject to non-solicitation provisions which, in certain circumstances, allow the Board to terminate the Arrangement Agreement in favour of a superior proposal, subject to the payment of a termination fee of approximately $6.3 million, in certain circumstances, and a right of the Buyer to match such superior proposal. https://tinyurl.com/2jawuyfk

mdf commerce (MDF-TSX) enters definitive agreement to be acquired by KKR.

The Company has entered into an arrangement agreement to be acquired by funds managed by KKR, a leading global investment firm, in an all-cash transaction. Upon completion of the Transaction, mdf commerce will become a privately held company. Consideration of $5.80 per issued and outstanding common share of the Company, payable entirely in cash, representing $255 million in total equity value and a premium of approximately 58% to the closing price of the Common Shares on the Toronto Stock Exchange on March 8, 2024 of $3.68 per Common Share, a premium of approximately 59% to the 20-day volume-weighted average share price on the TSX for the period ending on March 8, 2024 of $3.65 per Common Share, and a 30% premium to the 52-week high price on the TSX of $4.45 per Common Share achieved on December 8, 2023. Long Path Partners and each of the directors and executive officers of the Company, who currently collectively own approximately 12.4% of the outstanding Common Shares, have entered into support and voting agreements pursuant to which they have agreed to vote their Common Shares in favour of the Transaction. The Arrangement Agreement contains customary non-solicitation covenants on the part of the Company, subject to customary “fiduciary out” provisions, as well as “right to match” provisions in favor of KKR. A termination fee of approximately $7.7 million would be payable by the Company to KKR in certain circumstances, including in the context of a superior proposal supported by the Company. https://tinyurl.com/yva5pa9f

Apple acquired a Canadian AI startup.

Apple earlier this year acquired DarwinAI, a Canadian startup developing AI software to visually inspect components during manufacturing, as the iPhone maker tries to catch up in the generative artificial intelligence race, Bloomberg reported. DarwinAI was founded in 2018 and has raised more than US$15 million in funding. Its work involved making AI models smaller and faster. That could become useful to Apple as it develops conversational AI for personal devices. The iPhone maker is adding AI-powered features to its iOS 18 software, and could announce them at its annual conference for app developers in June. Apple has trailed behind other big tech companies like Microsoft, Google and Amazon in releasing conversational AI. https://tinyurl.com/mtzvh6tv

Yamaha Motors leads Joyride’s $7 million Series A as startup sets sights on enterprises and OEMs.

Toronto-based software startup Joyride has closed $7 million (US$5.2 million) in Series A funding as it looks to sell its mobility software to larger customers. The round was led by mobility giant Yamaha Motors, with participation from Export Development Canada, and returning investors Urban Innovation Fund, Proeza Ventures, and Two Small Fish Ventures. Joyride’s Series A comes almost three years after its last seed financing round, which totalled $4.6 million (US$3.7 million). To date, the startup has raised approximately US$10 million. Founded in 2014, Joyride began with a bicycle-tracking system that has evolved into a white-label software solution that allows operators to launch, manage, and grow public or private fleets of scooters, bikes, e-bikes, and other connected, keyless, and sustainable vehicles. https://tinyurl.com/5hc75jfn

MarineLabs looks to bring safety to oceans following $4.5 million seed round. Victoria-based ocean tech startup MarineLabs has closed $4.5 million in seed funding. The round was led by BDC Capital’s Sustainability Venture Fund with participation from Seaspan Shipyards, which operates shipyards in Vancouver and Victoria. One wave tracked by Marine Labs was claimed to be the most extreme rogue wave ever recorded. MarineLabs is a coastal intelligence startup founded in 2017. MarineLabs offers hardware and software that provides real-time wind, wave, and weather data to port operators, vessel pilots, and coastal engineers. https://tinyurl.com/yj39yv9e

DevOps platform Codezero raises $3.5 million seed round. Vancouver-based developer operations platform Codezero has secured $3.5 million in seed funding. Codezero fits into Ballistic’s investment themes with its “Shift-Left” and zero trust approach to the cloud development process. The round was led by Silicon Valley venture capital firm Ballistic Ventures. https://tinyurl.com/585tza6e

Music collaboration startup BeatConnect raises $2.25 million.

Montréal-based music-tech software startup BeatConnect has closed $2.25 million (US$1.86 million) in funding as it gears up to launch the latest iteration of its music collaboration platform. The funding round, which closed in the first quarter of this year, was led by immersive tech investment firm Sfermion, with participation from returning investors Québec’s Fonds d’investissement de la culture et des communications, Anges Québec, and Triptyq Capital. https://tinyurl.com/ytjbvz3h

Teachers’ Venture Growth mints new unicorn in Indian fintech Perfios.

Teachers’ Venture Growth, the late-stage venture and growth investment arm of Ontario Teachers’ Pension Plan, is investing US$80 million in Perfios, an Indian fintech that provides real-time credit underwriting solutions to banks and other financial institutions. The new investment values Perfios at over US$1 billion. Fifteen-year-old Perfios, which raised a US$229 million funding round in September, said it will use the fresh capital to strengthen its business outside of India and to explore inorganic growth opportunities. The startup, which is operational in nearly two dozen markets and has raised $464 million in primary and secondary transactions to date, plans to go public by next year, it said earlier. Perfios said it delivers 8.2 billion data points to banks and other financial institutions every year to facilitate faster decisioning, and processes 1.7 billion transactions a year with an AUM of US$36 billion. Perfios is the second unicorn from India this year. The startup, whose customers include HDFC and Kotak Bank, generated a revenue of US$49.1 million in the financial year ending March last year. Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds, has ramped up its interest in India in recent years. The fund, which also backed logistics unicorn XpressBees last year, has invested more than US$3 billion in India and plans to deploy a significant amount in the country by 2030 as part of its broader goal to deploy US$300 billion in certain key markets. https://tinyurl.com/fep2mkud

SingTel looking to sell significant Optus stake to Brookfield, source says.

Singapore Telecommunications (SingTel)is looking to sell a significant stake in its wholly owned Australian unit Optus to Canadian private equity giant Brookfield, a source with direct knowledge of the matter said on Wednesday. Southeast Asia’s largest telco operator is in advanced talks with Brookfield over the stake sale, the source said, declining to be named as the information is not public yet. https://tinyurl.com/y2xwvncs

Global Markets: IPOs, Venture Capital, M&A

Telegram nearing profitability and considering IPO, founder says.

Telegram, a messaging app, hopes to be profitable next year and is exploring an initial public offering, its founder Pavel Durov said in an interview with the Financial Times published Monday. The company has made “hundreds of millions of dollars” since adding advertising and subscriptions to its apps two years ago, he added. “The main reason why we started to monetize is because we wanted to remain independent,” Durov told the Financial Times in his first interview since 2017. “Generally speaking, we see value in [an IPO] as a means to democratize access to Telegram’s value.” Telegram has 900 million monthly active users, up from 500 million at the beginning of 2021, Durov said. In an IPO, the company would consider selling some stock to loyal users, he added. The move would follow Reddit, which is reserving shares for some of its users as part of its plans to go public this month. https://tinyurl.com/3y2eda7r

Stripe in ‘no rush’ to go public as cash flow turns positive.

Stripe is in “no rush” to go public after the US$65 billion payments company returned to positive cash flow and raised its private market valuation. The company, a Silicon Valley bellwether, told its investors on Wednesday that it had processed more than US$1 trillion in payments last year, up 25 per cent from 2022, helping it rebound from a bruising period during which its valuation was cut in half. The San Francisco- and Dublin-headquartered company is among the most valuable private businesses in the US, alongside Elon Musk’s SpaceX and artificial intelligence company OpenAI. Stripe has been emblematic of venture-backed companies’ boom and bust in recent years — soaring to a UD$95 billion valuation during what Collison describes as “the peak of the madness in 2021” before cutting its valuation to US$50 billion last year. Last month, Stripe’s private market valuation increased to US$65 billion. https://archive.is/00MDh

Tech start-ups are giving new hires fewer shares as valuations cool.

Technology start-ups have slashed equity packages for new hires as they weather a prolonged downturn, according to new data from San Francisco-based software company Carta. People going to work at start-ups are receiving 37 per cent less equity in their companies on average compared with 18 months ago, the figures showed. Average salaries have barely changed during that time, shrinking by 0.2 per cent since November 2022, according to Carta, which mines information from the 43,000 early-stage US tech groups that use its platform to manage their investors. Around 20 per cent of investments in start-ups tracked by Carta last year were “down rounds”, meaning the financing was at a lower valuation than the last time the company raised funds — the highest rate of down rounds since early 2018. A drop in valuation means the shares held by start-up employees are less valuable than before, even for those who received a larger slice of the pie. Start-up equity packages have shrunk even as headcount has fallen on average, according to Carta. Last year marked the first annual net contraction in start-up employment in at least five years, with more total job departures than new hires. As valuations have fallen, some start-ups have rushed to reprice employees’ stock options, lowering the price of the grants in order to increase the financial upside for the employees who hold them. The past six quarters have been the busiest period for repricing share options since the start of 2019, according to Carta. https://archive.is/4NxvF

Nvidia could be worth US$6 trillion if it follows Cisco’s dot-com trajectory, says Jeremy Siegel.

Nvidia could triple in value to become the world’s first US$6 trillion-plus company if it follows Cisco’s trajectory during the dot-com bubble, Jeremy Siegel said. The microchip maker’s stock has surged by more than 500% since the start of 2023, including a near-90% jump in the past 10 weeks alone. It’s now worth US$2.3 trillion, propelling it past Amazon and Alphabet and leaving only Microsoft (US$3.1 trillion) and Apple (US$2.7 trillion) ahead. “The big question for Nvidia, and tech more broadly, is: are we in a 1996-97 hype cycle where these stocks are still going to get even crazier as we did 24 years ago during the internet mania?” Siegel wrote in his WisdomTree commentary this week. The retired Wharton finance professor and author of “Stocks for the Long Run” gave the example of Cisco. The networking giant’s stock skyrocketed 1,000-fold in the decade between its IPO and its dot-com peak in March 2000, making it briefly the world’s most valuable company with a market cap of US$569 billion. “There could be 2-3x more upside in Nvidia if it follows Cisco’s valuation path to its peak,” Siegel said. “To be clear — this is not my prediction of what will happen — just to note as to what is possible in a mega bubble.” Siegel’s comment suggests that if Nvidia is indeed the new Cisco, its stock could rocket above US$2,500, valuing the company as high as US$6.4 trillion. A market cap of that size would make it worth roughly two Microsofts, 12 Teslas, or 42 Nikes. “Now we emphatically do not have 1999-2000 levels of speculation in the markets or tech,” Siegel said. Growth stocks are trading around 30 times forward earnings — half their multiple in 2000 — and there are many more proven, profitable businesses with sensible valuations now versus 25 years ago, he noted. Nvidia’s stock has skyrocketed because there’s insatiable demand for its graphics chips from artificial-intelligence companies such as Meta and Tesla. Booming sales sent its revenue up 265% year-on-year last quarter to US$22.1 billion, raising its operating income by nearly 1,000% to US$13.6 billion. The chipmaker has also benefited from a broader rally in stocks, which has lifted the benchmark S&P 500 index to record highs this year. Investors are betting the Federal Reserve will begin cutting interest rates this year, boosting corporate profits and bolstering the appeal of stocks as yields on bonds and savings accounts fall. https://tinyurl.com/4dztrba9

Salesforce invests in Nvidia server reseller at US$1.25 billion valuation.

Salesforce led a US$106 funding round in Together AI, which provides cloud servers to developers of generative artificial intelligence applications, the startup said. The Information broke news about the investment a month ago. Salesforce, which has been among the most active corporate funders of AI startups, valued Together at US$1.25 billion after the investment, or more than 36 times its annualized revenue as of February. The startup has raised more than US$200 million, underscoring the rising investor interest in inference-server startups that help developers find specialized servers—including those powered by Nvidia’s AI chips—to run large language models more efficiently. That market is due for a shakeout. Together plans on using the funding to rent more computing capacity from cloud providers, expand its team and build new features, the company’s blog post said. https://tinyurl.com/yzn3tfvm

Bitcoin record high boosts Coinbase, Microstrategy shares.

Coinbase shares fell 1% Monday to US$254 but are still up 10% in the past week and 62% year-to-date, as investors anticipate the crypto exchange will benefit from a rise in the value of digital currency assets like Bitcoin. The gains have driven Coinbase shares higher than its US$250 reference price when it went public through a direct listing in April 2021. Bitcoin, which represented 34% of Coinbase’s 2023 trading volume and revenue, reached a record high past US$72,000 on Monday. Shares of Block, which operates Cash App used for Bitcoin trading, and Microstrategy, a business analytics company that moved its treasury assets into crypto starting in 2020, have rallied 26% and 116%, respectively, since mid-February. https://tinyurl.com/2p9nswfh

Short sellers have lost US$3.3 billion betting against MicroStrategy this year as bitcoin’s record streak has sent shares spiking 180%.

Bitcoin’s blockbuster rally means it’s been a great year so far for MicroStrategy — and a tough one for those betting against the company. Short sellers have lost around US$3.3 billion year-to-date as Microstrategy’s stock has soared roughly 180%, according to data compiled by S3 Partners. Microstrategy — a software company that pivoted in 2020 to amassing one of the world’s biggest stashes of bitcoin — has been regularly adding to its pile. The red-hot cryptocurrency has surged more than 1,000% over the period. The company now owns 205,000 tokens worth more than US$14 billion, after buying an additional 12,000 bitcoin this week, one of its largest single purchases on record. More gains in MicroStrategy stock could squeeze short sellers further, if they’re forced to buy back shares in order to cover their losses, something that would push the price even higher. Optimism around bitcoin is currently being driven by the strong demand and inflows seen from recently approved ETFs, as well as a long-awaited halving event scheduled for April. https://tinyurl.com/yszpayjw

Oracle stock jumps 14% on cloud demand.

Oracle’s stock jumped 14% in after hours trading after the company said for the second quarter in a row that customer demand, including from artificial intelligence companies, exceeds its cloud server capacity. CEO Safra Catz said the company is still working to increase its data center capacity, adding that the current bottleneck is finding enough power for data centers, versus not having access to enough Nvidia AI chips. In the quarter ended Feb. 29, revenue from Oracle’s cloud server rental unit surged 49% to US$1.8 billion in revenue compared to the year-earlier period. That growth rate was down slightly from the previous quarter. Overall, Oracle’s revenue grew 7% year-over-year to US$13.3 billion, up from the 5% growth in the prior quarter. Catz said that Oracle’s backlog of revenue—which represents services that it has contracted to fill but hasn’t yet—totals more than US$80 billion, up from US$65 billion in the previous quarter. Catz said the company expects to recognize 43% of that demand in the next 12 months, representing around US$8.5 billion per quarter. https://tinyurl.com/2wvz5hsn

Adobe shares slip 10% on soft sales forecast.

Adobe shares tumbled as much as 11% in extended trading Thursday after the design software maker issued strong fiscal first-quarter results but came up slightly short on quarterly revenue guidance. Adobe’s revenue grew 11% year over year in the quarter, which ended March 1, according to a statement. Net income decreased to US$620 million, or US$1.36 per share, from US$1.25 billion, or US$2.71 per share, in the same quarter a year ago. During the quarter, Adobe abandoned its US$20 billion acquisition of design software startup Figma after U.K. regulators found competitive concerns. The company paid Figma a US$1 billion termination fee. Adobe recently announced an early version of an artificial intelligence assistant for its Reader and Acrobat apps. Meanwhile, in February, OpenAI announced Sora, which can generate a video based on a person’s written description. Adobe will work with OpenAI around Sora, David Wadhwani, president of Adobe’s digital media business, said on the earnings call. “You’re going to see us obviously developing our own model,” he said. “You’re going to see others developing a model. All that creates a tailwind, because the more people generate video clips, the more they need to edit that content.” https://tinyurl.com/ymey79fs

Emerging Technologies

SpaceX’s Starship goes on hour long journey in third test flight.

Elon Musk’s SpaceX launched its Starship and Super Heavy booster rocket for the third time on Thursday, sending Starship on an hour-long suborbital journey before it re-entered Earth’s atmosphere and broke up over the Indian Ocean. Earlier in the flight, the rocket’s Super Heavy booster separated from Starship as planned, falling into the Gulf of Mexico. The launch, which was part of on-going testing, will aid SpaceX in fine tuning the design for the rocket, which SpaceX plans to use to launch larger second generation Starlink internet satellites and transport NASA astronauts to the moon. SpaceX achieved three major objectives in Thursday’s test flight, which was its longest and most successful since Starship first got off the ground in April 2023 in a test flight that ended in an explosion. The first test on Thursday was to transfer rocket propellant within the rocket, which will aid the company in developing the rocket-to-rocket refueling capabilities required for Starship to reach the moon. The second test was to relight one of its engines while in space. And the third was to open and close the payload door, which will allow the rocket to release satellites into space in the future. https://tinyurl.com/25v3n46f

Mining helium-3 on the Moon has been talked about forever—now a company will try.

Two of Blue Origin’s earliest employees, former President Rob Meyerson and Chief Architect Gary Lai, have started a company that seeks to extract helium-3 from the lunar surface, return it to Earth, and sell it for applications here. The company has been operating in stealth since its founding in 2022, but it emerged on Wednesday by announcing it has raised US$15 million, adding to previous rounds of angel investments. This is a notable announcement because, while the funding is small, the implications are potentially large. Lately, there has been a lot of discussion of a ‘lunar economy’ in spaceflight but precious little clarity on what that means. Most firms that have announced business plans to launch rockets to the Moon, land on the Moon, or perform other activities there have been doing so with the intent of selling services or lunar water to NASA or other parties fulfilling government contracts. Put another way, there has been no wealth creation, and ultimately, NASA is the customer. The present lunar rush is rather like a California gold rush without the gold. By harvesting helium-3, which is rare and limited in supply on Earth, Interlune could help change that calculus by deriving value from resources on the Moon. But many questions about the approach remain. First of all, the company must devise a means of extracting the gas from the lunar regolith, the abrasive, rocky, and dirt-like material on the surface of the Moon. Then it must return the helium-3 to the Earth. There is currently no means of doing so. Finally, it must prove that there will be a large and sustained market for the stable isotope on Earth to support its business. https://tinyurl.com/3vs77x2x

Media, Streaming, Gaming & Sports Betting

X to launch TV app.

Elon Musk’s X is planning to launch an app to watch longform videos on Amazon and Samsung smart TVs as soon as next week, Fortune reported and Musk confirmed on Saturday. The app will be similar to YouTube’s, Fortune reported. The launch comes as X seeks to pivot to video and after the company has signed deals with former TV hosts like Don Lemon and Tucker Carlson. Since Musk’s takeover in 2022, X’s advertising revenue has plummeted as Musk’s rhetoric scared away the large brand advertisers that traditionally made up the bulk of Twitter’s revenue. More recently, amid the pivot to video, X has added more video advertising products, including ads in front of videos from popular creators like MrBeast. https://tinyurl.com/3de4mmtn

Adtech, Privacy & Regulatory

Former Treasury Secretary Mnuchin wants to buy TikTok.

Former Treasury Secretary Steven Mnuchin said he was putting together a group to try and buy TikTok, adding that the bill to force the app to cut ties with its Chinese parent ByteDance or be banned “should pass,” CNBC reported. Despite Mnuchin’s interest, which he revealed in a CNBC interview, the chances that TikTok will be available for purchase are low, as the Chinese government isn’t expected to allow a sale of the business even if the bill is passed. In the near term, TikTok is expected to challenge any legislation in court. Mnuchin was Treasury Secretary under Donald Trump, who initiated the ban-TikTok movement but who has now switched sides. https://tinyurl.com/58ac3myk

Former Activision CEO Bobby Kotick considering buying TikTok.

With the fate of TikTok in the United States up in the air, former Activision CEO Bobby Kotick is reportedly considering buying the social network, The Wall Street Journal reports. Kotick floated the idea at a dinner at an Allen & Co. conference earlier this week with a group of potential partners, including OpenAI CEO Sam Altman, the Journal says. Kotick left Activision in late December after more than 30 years following the approval of the Microsoft merger and a tumultuous period that included a damaging discrimination lawsuit. And while he got a hefty golden parachute, it’s probably not enough to buy TikTok, so he’ll need partners with deep pockets. Legislation is headed toward a vote in the House that would require TikTok to be sold or banned in the United States. The bill, dubbed the Protecting Americans from Foreign Adversary Controlled Applications Act, would ban ByteDance-owned sites and apps and would also give the president the ability to ban other apps in the future if the apps pose a “national security risk.” https://tinyurl.com/42yrpyfa

Apple to pay US$490 million to settle investor lawsuit.

Apple has agreed to pay US$490 million to settle an investor lawsuit that accused CEO Tim Cook of misleading shareholders when he said in late 2019 that the company was not seeing a decline in the Chinese smartphone market. Days after Cook made the statement, a series of news reports began appearing, suggesting that Apple was cutting back production. Those reports appeared to fuel a drop in Apple’s stock price. In early January, Apple revealed its quarterly earnings would fall short of its guidance because of a decline in China it hadn’t foreseen. Years of litigation, by several different pension funds, began later in 2019. Apple repeatedly denied that Cook had misled investors but failed to get the case thrown out. A court filing on Friday, outlining the proposed settlement, said Apple had decided that “further litigation will be protracted, overly burdensome, expensive and distracting,” and therefore wanted to settle. A court still has to approve the settlement. https://tinyurl.com/49sfc556


Amazon to deliver Eli Lilly prescriptions, including weight-loss drug Zepbound.

Amazon said Wednesday that it will start making deliveries of drugs, including the weight-loss pen Zepbound, for drugmaker Eli Lilly’s direct-to-consumer service. Eli Lilly’s service, LillyDirect, pairs patients with outside telehealth companies, which can then write prescriptions for some popular Lilly medicines. Once a patient receives a prescription, their drugs can be delivered by Amazon Pharmacy or by Truepill, a Y Combinator and Mark Cuban-backed pharmacy fulfillment startup. For Amazon, the Eli Lilly partnership helps boost its ambitions to be a bigger player in healthcare. But Amazon shoppers who want to access the Eli Lilly drugs will still have to go through LillyDirect rather than Amazon’s own Amazon Clinic service, which also pairs patients with telehealth providers. Amazon Clinic currently offers appointments for common ailments like dandruff and high blood pressure, but does not offer treatment for diabetes or weight loss. https://tinyurl.com/yzxa297w


Fisker plunges 55%, drags EV stocks lower as it reportedly mulls bankruptcy.

Fisker stock plunged as much as 55% on Thursday after The Wall Street Journal reported that the company is considering filing for bankruptcy. Fisker has been one of many electric vehicle startups that have yet to find the type of success that their biggest competitor, Tesla, has managed to find. The company, which operates an asset-light model in which it designs vehicles and then outsources the manufacturing of them to OEMs, has struggled with meager sales amid a broader slump in demand for EV vehicles. In 2023, the company produced 10,142 units of its flagship Ocean vehicle, and it delivered just 4,700 of them to customers. Fisker stock is down 92% year-to-date. According to The Wall Street Journal, a cash crunch led the EV company to hire a financial adviser and law firm to help navigate a potential bankruptcy filing. Fisker lost US$762 million last year on US$273 million in sales, and held more than US$1 billion in debt. Slower than expected growth in the US EV market has extended the multi-year decline in the EV sector, which peaked in late 2021 when Rivian went public at a valuation that was briefly north of US$150 billion. Today, Rivian is worth just US$10 billion. The US-based EV companies not only have to compete with China’s BYD, which has been flooding the global market with low-cost electric sedans, but also with hybrid vehicles, which have seen a marked jump in sales in the US as consumers continue to deal with EV range anxiety. https://tinyurl.com/mvudahdz

EV euphoria is dead.

Automakers are scaling back or delaying their electric vehicle plans. Automakers from Ford Motor and General Motors to Mercedes-Benz, Volkswagen, Jaguar Land Rover and Aston Martin are scaling back or delaying their electric vehicle plans. Though consumer demand for EVs hasn’t shown up in the way executives had expected, sales of the vehicles are still predicted to increase in the years to come. A broad return to a more mixed offering of vehicles — with lineups of gas-powered vehicles alongside hybrids and fully electric options — assumes an all-electric future at a much slower pace, and it calls attention to ambitious EV targets set for the years ahead. https://tinyurl.com/4b28x68u

Standard Solar acquires 18 MW Vermont solar project portfolio.

Standard Solar has acquired an 18.5 MW, six project solar portfolio in Vermont from local developer MHG Solar that is slated to provide clean energy to the state’s electric utilities under the Standard Offer Program. The portfolio projects, spread across Vermont, are: the 2.9 MW Evergreen Solar in Fair Haven, the 3.3 MW Halladay Solar in Middlebury, the 3.3. MW Midway Solar in Berlin, the 3.3 MW Steinberg Solar in Brandon, the 2.8 MW Stone Mill Solar in Castleton and the 2.8 MW Trolley Tracks Sola in Poultney. All projects are expected to be completed by the end of this year. The portfolio has a PPA with VEPP, the Standard Offer Facilitator for existing and new Standard Offer Projects. VEPP acquires electric power from Vermont renewable resources and then distributes it to the state’s 17 utilities on a pro-rata basis. https://tinyurl.com/2p9j474k

Sophic Capital Client Insights

Sophic Insights – Rising to the Surface with Sophic Client Kraken Robotics (PNG-TSXV, KRKNF-OTC).

Even though the stock of Sophic Capital client Kraken Robotics has surged over 150% in the past six months, it still appears undervalued when compared to its peers. In this report, we outline that even though Kraken Robotics is out-executing the competition both operationally and financially, the stock still trades below the peer average on an enterprise value to forward Adjusted EBITDA basis. We also compare the Company’s revenue growth and EBITDA margins to those peers, illustrating that Kraken should potentially trade at a premium to the group. We look at where the stock is currently trading and then provide some sensitivity to the valuation if the stock were to trade closer to or above peer valuations. Spoiler alert if Kraken were to trade inline with the defense technology peer group at 18.5x the mid-point of the Company’s 2024 EBITDA guidance of $21 million, the stock would be worth $1.85 per share or 68% upside from the closing price on March 12, 2024, of $1.10. Based on the consensus analyst estimates of 2024 Kraken’s stock currently trades at 10.5x EV/Adjusted EBITDA, while peer defense technology companies are trading at 18.5x 2024 EV/Adjusted EBITDA and large defense contractors trade at 14.1x. In both peer groups, Kraken is out-performing on all financial metrics, which generally can lead to higher multiples. We provide some different scenarios of what the stock could be worth under different multiples to illustrate potential future stock values. If the Company can continue to execute and illustrate similar growth opportunities in 2025 then at some point later this year the market could start looking at 2025 Adjusted EBITDA, which could have the potential to lead to another re-rating of the stock. We will leave it to you to make your own assumptions around multiples you are comfortable using and where you think the stock should be trading and where it could be trading a year from now. https://bit.ly/3Tjr0eD


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