Archive for September, 2017

Remark Media – Kan Kan Update

1) The significance of yesterday’s press release should not be missed or underestimated. With just this single application of the company’s Artificial Intelligence technology, Remark Media appears to be the leader in a niche that would allow the company to generate a very high margin revenue stream that exceeds the parent company’s current $86 million market cap and that is if it only achieves a 2.5% share of the addressable market in China.

2) The core recognition technology can be used in many other applications including traffic monitoring technologies needed by agencies and other state owned enterprises, monitoring blogs and other websites for illegal content (pornography is illegal in China) and many other areas where maintaining compliance with government regulations is crucial for companies to be able to continue to operate. We have good reason to believe that Remark may soon announce deals of similar import that address these and other niche markets in China.

3) Remark’s Kan Kan social data platform is being used to produce a credit scoring product that began being employed by banks and other lenders in China’s burgeoning consumer loan market over the last few months. This product addresses a market that could grow to be much larger than the US market consumer loan market where 95% of consumers already have a FICO or other credit score that can be used in the lending process.

Prior to the open of trading yesterday Remark Media announced has been awarded a seven-figure contract by one of the largest state-owned enterprises in China to provide a facial and object recognition technology to a Shanghai municipal health agency. This agency will use Remark’s Artificial deep learning artificial intelligence application to ensure that restaurants comply with local food safety laws. The deal is enormously significant in several ways and is a game changer in terms of how we believe that Remark stock should be valued. The implications of the contract itself should not be underestimated:

1) for the first time we have hard evidence (7 figure contract) that the company’s Kan Kan subsidiary’s Artificial Intelligence can not only be monetized, but produce significant revenue.

2) the deal’s terms provide the technology for 200 restaurants and this will eventually expand to over 2,000 locations.

3) this product automates monitoring for food handling and safety law violations that are applicable to 8 million restaurants throughout China

4) Landing one of the largest state-owned enterprises in the largest city in China suggests that Remark has already taken a strong foothold in a niche that offers the very real possibility of expansion to service a significant portion of an addressable market that includes 8 million restaurants.

5) If providing the service to 2,000 restaurants allows for a 7 figure revenue contract, it would follow that servicing 20,000 restaurants would produce and 8 figure revenue stream and 200,000 restaurants would produce a 9 figure ($100m+) revenue stream.

6) The service is largely automated which allows for a very high margin revenue stream

 

With just this single application of the commpany’s Artificial Intelligence technology, Remark Media appears to be the leader in a niche that would allow the company to generate a very high margin revenue stream that exceeds the parent company’s current $86 million market cap and that is if it only achieves a 2.5% share (200,000 restaurants would equal a 9 figure revenue stream or $100m+) of the addressable market in China. The core recognition technology can be used in many other applications including traffic monitoring technologies needed by agencies and other state owned enterprises, monitoring blogs and other websites for illegal or (pornography is illegal in China) or pirated content and many other areas where maintaining compliance with government regulations is crucial for companies to be able to continue to operate. We have good reason to believe that Remark may soon announce deals of similar import that address these and other niche markets in China. We note that the company has been posting images to its Twitter account of several instances of its technology being used in different ways, very similar to how they did with the restaurant application in the weeks prior to yesterday’s announcement.

The bottom line here is that Remark Media’s China based Kan Kan subsidiary is a company within a company, a 2-3 year old start up that is now starting to generate revenue whose valuation (if independent) based on current prospects and revenue generation might allow it to achieve a marketplace valuation that exceeds the current market cap of its parent company Remark Media. We believe that Remark Media’s stock price is in no way reflective of the value of the assets the company now owns and suspect that hedge funds and other sophisticated investors are heavily involved in the day to day trading (note yesterday’s 4 million+ shares traded) of Remark shares now and that much of the recent volatility may be related to those firms attempting to increase the percentage of Remark shares they own. This should not be surprising considering:

1) Remark’s 5% stake in Sharecare will likely prove to be worth nearly $100 million in either an IPO or an acquisition scenario. We note Sharecare’s recent deal for sponsorship of the NBA’s Atlanta Hawks as an indicator of attempts to gain a broader mainstream brand awareness and that plus recent hires leads us to believe that the IPO process may be soon to follow.

2) Remark’s Vegas.com subsidiary continues to grow its top and bottom lines and take market share in the booking of lodging and ticketing and appears to be growing at a double digit rate that could allow it to produce substantial gains in revenue next year with improving margins.

3) Remark still owns a very valuable high revenue producing domains/businesses that include IRS.com, Banks.com and the Bikini.com business that may be worth $10m+.

Remark Media arguably owns operating assets that would be worth over $50 million even in a fire sale scenario, a 5% stake in Sharecare worth +/- $100 million and a rapidly growing Kan Kan business that may prove to be worth more than the rest of the company combined. Investors can currently gain a share of this $150 million + Kan Kan company for a share price ($3.85) that values the entire company at only $85 million. At the risk of understatement, Remark Media shares are quite cheap anywhere under $5 per share and it represents among the greatest downside risk vs. upside reward setups we have seen in many years.

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September 28, 2017 at 9:25 am Leave a comment

Remark Media – Buying The Sell Off

Last week when we updated the community on the happenings with Remark Media we suggested participants consider taking profits on half of their Remark Media stake given the near term boost in the stock to $4+. In the days since then, the stock has traded very high volumes each day and as high as the $4.50 range. We hope that you took our advice to take advantage of that opportunity to take some profits, as the stock has since pulled back to the $3.50 range as of this morning. While we typically advocate for a long term investing mindset vs. day trading or swing trading, we would be remiss not to point out two things here –

#1 our recommendation to sell MARK was 100% based on a price ($4.40+) we thought might not be sustainable in the near term and

#2 our belief was due to the fact that the company needed to shore up its balance sheet and management commentary in recent filings led us to believe that a stock offering was in the works.

Within the last 48 hours Remark has filed an 8k indicating that it amended a stock purchase agreement it has with a big institutional investor that allows Remark to raise capital in a way that is much less likely to have a negative impact on its share price. With a traditional stock offering, we would expect the price to be significantly below the trading price and that the announcement of the offering would drive the shares even lower. With the amended terms indicated in the 8k, the company can now raise the necessary capital without the disruption or dilution we previously expected. Bottom line, our non-trading price related reasons for suggesting that consideration be given to taking profits are now moot. With the stock pulling back to the $3.50 range, we think our investors would do well to buy back the shares they sold and consider adding even more. We are seeing a significantly higher level of interest in the Remark Media story among investors since the recent presentation at the Liolios Gateway conference in San Francisco. In that presentation, management made it very clear that Remark Media’s Artificial Intelligence assets are not only starting to generate material revenue (recently upped to $10m+ annual run rate that recent intel suggests will be very, very conservative), but they are starting to gain traction at a time when investors are beating the bushes to find the next high potential AI stock. With so much investor attention and capital flowing to the smaller players in the AI space (See Veritone’s 700% rise over the last 30 days), we believe that Remark Media’s positioning as a burgeoning leader among AI application providers in China (see below) will soon be “discovered” by investors and this could cause a significant increase in its share price – well beyond the $4.50 range we previously thought to be a good place to take profits. We note that VERI is trading up $7 from yesterday’s close today and just over a month ago it was trading at just over $7.  We think Remark Media shares may attract that kind of attention when investors realize the impact that AI products/services will soon have on the Remark Media income statement and ultimately on its balance sheet.  In the meantime, we expect to see MARK shares trading in a much higher range and we strongly discourage our participants from taking a short term trading mindset, as we think another move to the $4.50 range may be just the start of a move much higher.

Click here to see Remark owned AI application developed to assist with Chinese municipalities’ traffic issues

Click here to see Remark owned AI application developed to assist with Chinese Food Service industry regulation live at work in Shaghai

Click here for a link to a big picture presentation given by management that shows the other lines of business in addition to its AI holdings

 

September 21, 2017 at 2:31 pm Leave a comment

RAVE Update – Time to Buy

Summary – RAVE has been trading below $2 due to the risk of being removed from the Nasdaq and this has created a tremendous opportunity for investors as the stock will likely trade back to $2+ when the dark cloud of delisting risk officially goes away. We believe Groove participants would do well to buy as many RAVE shares as possible at these levels.

Late last week Rave management announced that its $5m stock offering had been completed in full with all 3,571,429 shares being purchased by existing shareholders. Additionally, the company announced that an additional $2.1 million had been submitted by existing shareholders who hoped to buy any shares that were not purchased by the holders of those rights. Thus, the company’s $5 million stock offering generated demand for over $7 million worth of shares. We are not surprised by this announcement as the consensus among Groove participants was that the opportunity to buy RAVE shares in this price range was more than a great opportunity – it was a gift. Management set the terms of this deal to benefit current shareholders by allowing them to maintain their percentage stake in the company by granting rights that allowed each shareholder to maintain their ownership stake in the company by buying that same percentage of the new shares offered. There has been some negative commentary (message board, etc. type chatter) about the offering being highly dilutive, but that was clearly not the case for long term shareholders given the rights offered to each through the terms of this placement. While some may have chosen not to participate, all RAVE owning Groove investors that we are aware of not only participated, but submitted additional funds to oversubscribe and take down as many shares as possible.

RAVE shares traded above $2 until an 8k was filed indicating that the Nasdaq had declined RAVE’s request for an extension of the time allowed for the company to regain compliance with its minimum equity rule. RAVE had recently fallen below the $2.5 million minimum equity that is required and there was intially an extension granted while the company pursued the stock offering. However, an additional extension request was denied due to the fact that management did not complete the offering in the original time frame (August 8, 2017) it had indicated. It appears that there was a 30 day delay as the company entertained interest from several third parties who were in discussions with Newcastle about either buying a very large stake in the company or possibly even buying the company in its entirety. Since that time, RAVE shares have traded in a price range ($1.40-$1.70) that essentially prices in delisting and the liquidity discount that would be expected with a move to the Pink Sheets or OTCBB. RAVE filed a Hearing Request Form to appeal the delisting, which effectively acts as a stay of the delisting proceedings and during this stay the company (as of this past week) completed the $5m offering discussed above. Due to the $5 million raise, Rave is now well above the minimum shareholder equity requirement of $2.5 million.

We believe the completion of the company’s $5 million equity raise will be sufficient and that the company will remain listed on the NASDAQ. We also believe that the stock has been trading below $2 due to the risk of delisting and that this has created a tremendous opportunity for investors as the stock will likely trade back to $2+ when the dark cloud of delisting risk officially goes away. In the meantime, we think Groove participants would do well to “back up the truck” and load as many RAVE shares as possible at these levels.

September 18, 2017 at 9:17 am Leave a comment

Remark Media Update – Time to Book A Profit

The recent surge in trading volume and price indicate that the marketplace is finally starting to take notice of the extreme valuation discount with Remark, where we believe that the sum of the parts is much higher than the current market cap. Even with the price increase we have seen over the last week, we still believe that a fire sale of Remark’s assets would produce significantly more than $3.79 per share (the trading price as of the close yesterday). However, we do note that the company’s most recent filings indicate a near term cash crunch that will likely result in additional dilution for existing holders. As such, we think Groove community holders would do well to sell half of their Remark holdings today as the stock is currently trading up over $4. While we think the stock will prove to be worth more over the long term, we think there may be a near term shake out related to the sale of additional shares which may be the catalyst for the exit of the momentum players and a 35% gain since our last buy suggestion is a nice profit for such a brief time frame.

September 13, 2017 at 11:48 am Leave a comment


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