It's been a while since I posted an update on Ackroo (AKR.V), so I thought now would be a great time to briefly take a look at the company while we are in the midst of a large $2M open private placement. Simply stated, the market is ignoring Ackroo and likely will continue to do so until they are capitalized once again. But once they are capitalized, whether thru the open private placement or by other means, watch out!
Rewind to January 2015 when Ackroo announced closing a sizeable private placement...the stock soared roughly 300% in a matter of a week or two. Since that time, despite the business progressing very nicely and revenues significantly growing 40%+, it has been nothing but a downward trend for the stock. Yes, the microcap market was brutal the majority of 2015 and early 2016, but the fact that Ackroo finds itself in dire need of cash in order to scale its business is the ONLY thing the market is focused on. Thus, it is my opinion that the stock will continue to remain at these levels until plans are unveiled that show a recapitalized Ackroo.
Those that fully understand the company and the business model know that the company is a cash infusion away from scaling its model and exponentially growing. Steve Levely has turned around a company that was in dire straights several years ago to a company that is now, for all practical purposes, cash flow positive and basically breakeven. What is most amazing to me about Steve and Ackroo...think back to the Jan 2015 private placement; over $1.2M was raised (and the stock soared on the news). I believe it netted out to something like $800k. A few months later came the Dealer Rewards acquisition, which I believe he paid $350k immediately for, with payments still ongoing. So, basically, Steve has made $450k ($800k-$350k) go quite a long way since the DealerRewards acqusition, has grown revenues from roughly $1.4M to roughly $2M (approx 40%) during that time (both organically and inorganically), and has been able to creatively acquire smaller businesses (Onetab and D3) to move the overall business model of Ackroo forward. And, in reality, the $450k was even less as licensing fees were paid to DealerRewards; so truly Ackroo has stretched out around $300k in operating capital over the past 15 months, and been successful in moving the business forward quite a bit! Impressive!
It is very frustrating for Ackroo, and it's investors, to hear about companies such as Slyce that continue to be able to raise large sums of money, and trade at such a premium to Ackroo, despite losing millions and millions each and every quarter. Let's take a look at Slyce to illustrate this point; for Q1 2016 Slyce generated $660k in revenues, and had a $3.4M loss! When we learn of Ackroo's Q1 2016 numbers later this month I suspect revenues will be similar to Slyce with a near breakeven, and hopefully positive cash flow. On a simple Price/Sales ratio, Slyce is trading at 9x sales while Ackroo is trading only at roughly 2x. Crazy!
Slyce was able to raise $4.5M in a recent PP. They apparently have a few lead investors who continue to be the lifeblood of the company. While Slyce isn't a perfect comparison to Ackroo, I cannot figure out why it would be difficult for Steve to attract significant investor interest in the current PP given what a cash runway could do to the company. Maybe we will be surprised and learn that it wasn't difficult at all. I want him to be able to pay off the DealerRewards debt quickly so that the $130k per month or so he is spending to pay for that acquisition can be pumped right back into the business to fuel organic growth. Any cash over and beyond I hope he can acquire an accretive business...I know he has a robust pipeline of targets he wants to go after...targets that are unprofitable that he can purchase for a heck of a price that he can then make profitable by transitioning them over to Ackroo's platform.
In conclusion, when Ackroo is able to get fresh capital I believe we will see the stock price quickly catch up to the real progress made on the business side, and close the gap in valuations between itself and companies such as Slyce. The company is a large investor away from being able to embark on its next leg of growth that will allow Steve to very quickly scale the business, that in turn will quickly fuel profitability and demand a significant multiple.
In situations like these, you have to trust in the CEO and the business model...and I fully trust in both.