Mental Models discussed in this podcast:
- Confirmation Bias
- Skin in the Game
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Show Outline
mCloud Technologies – $MCLDF
- SaaS company
- Trading at just 1x expected revenue
- Energy efficiency (Oil and Gas Plant efficiency)
- Green Energy (Wind Turbines, HVAC efficiency)
- Uses AI
Problems:
- Cash flow negative (Presumably in the name of growth)
- Regular ongoing stock issuance and dilution
- Both shares and warrants
- “An assumption that this is the last time.”
- Very promotional management (with skin-in-the-game?!?)
- “Uplisting to the NASDAQ” talk
- A lot of examples of SaaS names going from 1-2x revenue while on the Canadian TSX market to 10x+ revenue on the NASDAQ in the US
- Still hasn’t occurred many years later
- Mergers and acquisitions using stock (Not cash, because they don’t have any)
- Growth targets include non-organic growth (REALLY BAD)
- Dilution is required, but it makes it impossible to model per share returns
- Exit: Liquidity event needed for the payoff (Either sell to another company or an uplisting)
Lessons Learned:
- Don’t buy promotional companies
- Don’t buy companies that dilute
- Don’t buy companies that can’t self-fund growth
- Insider ownership does not equal skin-in-the-game
- Be wary of ‘uplisting’ as a catalyst
Summary:
Investors need to constantly be wary of confirmation bias and stay alert for possible red flags. mCloud Technologies stock $MCLDF taught me this lesson. Don’t buy promotional companies that dilute shareholders and can’t self-fund growth.
